sbk-brooks investment corp.

NEW ISSUE – BOOK ENTRY ONLY
Rating: Moody’s: Aaa
Ambac Insured
Underlying Rating: Moody’s: A2
See Ratings, Bond Insurance and Appendix C
In the opinion of Roetzel & Andress, Bond Counsel, under existing law (i) assuming compliance with certain covenants and the accuracy of
certain representations, interest on the Series 2005 Bonds is excluded from gross income for federal income tax purposes and is not an item of tax
preference for purposes of the alternative minimum tax imposed on individuals and corporations under the Internal Revenue Code of 1986, as amended (the
Code), and (ii) that interest, and any profit made on the sale, exchange or other disposition of the Series 2005 Bonds, are exempt from the Ohio personal
income tax, Ohio commercial activity taxes, the net income base of the Ohio corporate franchise tax, and municipal and school district income taxes in
Ohio. The interest may be subject to certain federal taxes imposed on certain corporations, including imposition of corporate alternative minimum taxes on
a portion of that interest. (For a more complete discussion of tax aspects, see Tax Matters.)
OFFICIAL STATEMENT
$21,295,000
THE UNIVERSITY OF AKRON
(A State University of Ohio)
GENERAL RECEIPTS REFUNDING BONDS, SERIES 2005
Dated: December 14, 2005
The Series 2005 Bonds are special obligations issued by the University under the Trust Indenture, as amended, and a Sixth
Supplemental Trust Indenture (collectively, the Indenture), each between the University and U.S. Bank National Association (the Trustee)
to pay costs of the Project. See Plan of Financing. Principal, interest and any premium payable on the Series 2005 Bonds, and on other
Parity Obligations, are payable solely from the General Receipts of the University and the Special Funds, as defined in and subject to the
provisions of the Indenture. See Security and Sources of Payment.
The Series 2005 Bonds are not obligations of the State of Ohio, are not general obligations of the University, and the full faith
and credit of the University are not pledged to their payment. The owners of the Series 2005 Bonds have no right to have any excises or
taxes levied by the Ohio General Assembly for the payment of the Series 2005 Bonds.
Payment of the regularly scheduled principal of and interest on the Series 2005 Bonds (but not premium) when due will be
insured by a Financial Guaranty Insurance Policy (the “Policy”) to be issued by Ambac Assurance Corporation (the “Bond Insurer”)
simultaneously with the delivery of the Series 2005 Bonds. See Bond Insurance and Appendix C.
The Series 2005 Bonds will be initially issued only as fully registered bonds under a book entry system, registered initially in the
name of The Depository Trust Company or its nominee (DTC). The Series 2005 Bonds will be available to purchasers in denominations of
$5,000 and integral multiples of $5,000. There will be no distribution of bond certificates to the ultimate purchasers. The Series 2005
Bonds in certificated form as such will not be transferable or exchange able, except for transfer to another nominee of DTC or as otherwise
described in this Official Statement. See Book Entry Method.
Principal and any premium will be payable to the registered owner upon presentation and surrender at the designated office of the
Trustee, and interest will be transmitted by the Trustee on each Interest Payment Date (January 1 and July 1 of each year, beginning
January 1, 2006) to the registered owner (DTC), as of the 15th day of the month preceding the Interest Payment Date.
PRINCIPAL MATURITY SCHEDULE
ON JANUARY 1
Year
Amount
2007
2008
2009
2010
2011
2012
2013
2014
2015
$ 140,000
145,000
1,645,000
1,710,000
1,765,000
1,840,000
1,290,000
1,340,000
1,220,000
Interest
Rate
3.500%
3.500
3.625
3.750
3.750
3.875
4.000
4.250
4.250
Price
CUSIP
No.
100.243%
100.352
100.817
101.122
101.007
101.372
101.658
102.743
102.414
914023EW2
914023EX0
914023EY8
914023EZ5
914023FA9
914023FB7
914023FC5
914023FD3
914023FE1
Year
Amount
2016
2017
2017
2018
2019
2020
2021
2022
$ 1,275,000
500,000
825,000
1,395,000
1,445,000
1,520,000
1,585,000
1,655,000
Interest
Rate
4.250%
4.250
5.000
4.000
5.000
4.250
4.250
4.250
Price
CUSIP
No.
102.049%
101.305
108.033
97.937
106.500
98.130
97.821
97.162
914023FF8
914023FG6
914023EV4
914023FH4
914023FJ0
914023FK7
914023FL5
914023FM3
The Series 2005 Bonds are offered when, as and if issued, and accepted by the Underwriters, subject to the opinion on certain legal matters
relating to their issuance by Roetzel & Andress, Bond Counsel. The Series 2005 Bonds are expected to be available for delivery to DTC or its agent on
December 14, 2005.
SBK-BROOKS INVESTMENT CORP.
This Official Statement has been prepared by the University in connection with its original offering for sale of the Series 2005 Bonds. The date
of this Official Statement is November 30, 2005, and the information speaks only as of that date.
REGARDING USE OF THIS OFFICIAL STATEMENT
This Official Statement does not constitute an offering of any security other than the original
offering of the Series 2005 Bonds identified on the cover. No person has been authorized by the
University or the Underwriters to give any information or to make any representation, other than as
contained in this Official Statement and, if given or made, such other information or representations must
not be relied upon as having been given or authorized by the University or the Underwriters. This
Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, and there shall
be no sale of the Series 2005 Bonds by any person, in any jurisdiction in which it is unlawful to make
such offer, solicitation or sale.
The information and descriptions in this Official Statement do not purport to be comprehensive or
definitive. Statements regarding specific documents, including the Series 2005 Bonds, are summaries and
subject to the detailed provisions of those documents and are qualified in their entirety by reference to the
appropriate document, copies of which will be made available, upon request, for examination in the
offices of the Underwriters during the initial offering of the Series 2005 Bonds and thereafter in the
designated corporate trust office of the Trustee.
Certain information contained in this Official Statement has been obtained from the Bond Insurer,
The Depository Trust Company and other sources believed by the University to be reliable, but is not
guaranteed as to accuracy or completeness and is not to be construed as a representation of the University
or the Underwriters.
CUSIP numbers have been assigned by an independent company not affiliated with the
University and are included solely for the convenience of the holders of the Series 2005 Bonds. The
University is not responsible for the selection or uses of these CUSIP numbers, and no representation is
made as to their correctness on the Series 2005 Bonds or as indicated on the cover page of this Official
Statement. The CUSIP number for a specific maturity is subject to being changed after the issuance of
the Series 2005 Bonds as a result of various subsequent actions including, but not limited to, a refunding
in whole or in part of that maturity or as a result of the procurement of secondary market portfolio
insurance or other similar enhancement by investors that is applicable to all or a portion of certain
maturities of the Series 2005 Bonds.
The information and expressions of opinion in this Official Statement are subject to change
without notice and neither the delivery of this Official Statement nor any sale of the Series 2005 Bonds
shall, under any circumstances, create any implication that there has been no change in the affairs of the
University or of the other parties referred to since its date.
Upon issuance, the Series 2005 Bonds will not be registered by the University under the
Securities Act of 1933, as amended, or any state securities law, and will not be listed on any stock or
other securities exchange. Neither the Securities and Exchange Commission nor any other federal, state
or other governmental entity or agency, except the University, will have at the request of the University
passed upon the accuracy or adequacy of this Official Statement or approved the Series 2005 Bonds for
sale.
The cover page contains certain information for quick reference only. It is not a summary of this
issue. An investor must read the entire Official Statement to obtain information essential to the making of
an informed investment decision.
TABLE OF CONTENTS
Page
INTRODUCTORY STATEMENT......................................................................................................1
General..................................................................................................................................1
General Receipts Obligations ..................................................................................................1
Constitutional and Statutory Authorization...............................................................................3
PLAN OF FINANCING.....................................................................................................................3
Sources and Uses of Funds......................................................................................................4
DETAILS OF SERIES 2005 BONDS..................................................................................................4
General..................................................................................................................................4
Prior Redemption ...................................................................................................................4
Optional Redemption..................................................................................................4
Notice of Call for Redemption; Effect..........................................................................5
Partial Redemption.................................................................................................................5
BOND INSURANCE.........................................................................................................................6
SECURITY AND SOURCES OF PAYMENT.....................................................................................7
Introductio n ...........................................................................................................................7
General Receipts Pledged to the Bonds ....................................................................................8
Annual Debt Service Charges and Coverage ................................................................9
Covenant as to Sufficiency of General Receipts.......................................................... 10
BOOK ENTRY METHOD............................................................................................................... 10
Revision of Book Entry System; Replacement Bonds ................................................. 13
THE INDENTURE .......................................................................................................................... 13
Issuance and Payment of Obligations ..................................................................................... 13
Security for Obligations ........................................................................................................ 13
Lien on General Receipts .......................................................................................... 13
Further Pledges of General Receipts .......................................................................... 14
Additional Covenants of the University.................................................................................. 14
Payment of Debt Service Charges.............................................................................. 14
Rate Covenant.......................................................................................................... 14
Financial Statements and Other Information ............................................................... 14
Federal Tax Status of Obligations .............................................................................. 14
Additional Indebtedness........................................................................................................ 15
Creation of Funds ................................................................................................................. 16
Debt Service Fund.................................................................................................... 16
Rebate Fund............................................................................................................. 16
General Receipts Fund .............................................................................................. 17
Investment of Funds ............................................................................................................. 17
Events of Default.................................................................................................................. 17
Acceleration and Other Rights and Remedies ......................................................................... 17
i
Acceleration............................................................................................................. 17
Other Remedies........................................................................................................ 17
Rights of Holders to Direct Proceeding ...................................................................... 18
Rights and Remedies of Holders................................................................................ 18
Application of Money............................................................................................... 18
Waivers ................................................................................................................... 18
Supplemental Indentures....................................................................................................... 19
Not Requiring Holder Consent .................................................................................. 19
Requiring Holder Consent......................................................................................... 19
Defeasance .......................................................................................................................... 20
Trustee ................................................................................................................................ 20
Bond Insurers....................................................................................................................... 21
TRUSTEE AND PAYING AGENT .................................................................................................. 21
TAX MATTERS.............................................................................................................................. 21
TRANSCRIPT AND CLOSING DOCUMENTS................................................................................ 22
FINANCIAL STATEMENTS........................................................................................................... 23
LEGAL MATTERS ......................................................................................................................... 23
LITIGATION .................................................................................................................................. 23
RATINGS ....................................................................................................................................... 24
CONTINUING DISCLOSURE AGREEMENT ................................................................................. 24
UNDERWRITING........................................................................................................................... 26
ELIGIBILITY FOR INVESTMENT AND AS PUBLIC MONEYS SECURITY.................................. 26
CONCLUDING STATEMENT ........................................................................................................ 26
APPENDIX A
APPENDIX B
-
APPENDIX C
APPENDIX D
-
The University of Akron
Audited Financial Statements of the University for the Fiscal Year ended June
30, 2004
Bond Insurance and Financial Guaranty Insurance Policy Specimen
Proposed Legal Opinion of Bond Counsel
ii
INTRODUCTORY STATEMENT
General
This Official Statement has been prepared by The University of Akron (the University), a state
university of Ohio, in connection with the University’s original issuance and sale of its General Receipts
Bonds, Series 2005 (the Series 2005 Bonds). The Series 2005 Bonds are being issued to pay costs of a
new student residence hall. See Plan of Financing.
The Series 2005 Bonds are being issued pursuant to Sections 3345.11 and 3345.12 of the Revised
Code (the Act), Resolution No. 11-2-05 adopted by the Board of Trustees of the University (the Board)
on November 1, 2005 (the Serie s Resolution), and the Trust Indenture dated June 1, 1997, as amended
and supplemented by the First Supplemental Trust Indenture dated August 1, 1999 (the Trust Indenture),
and as supplemented by the Sixth Supplemental Trust Indenture dated as of November 1, 2005 (the Sixth
Supplemental Indenture and, together with the Trust Indenture, the Indenture), each between the
University and the Trustee.
Under the Act, the University is authorized to construct “facilities” (as defined in the Act), and to
pay all or part of the costs of those facilities, and to refund, fund or retire prior obligations issued for that
purpose, by the issuance of obligations payable from General Receipts of the University. The Trust
Indenture authorizes the issuance of obligations of the University to finance costs of those authorized
facilities and to refund outstanding obligations, and the Sixth Supplemental Indenture specifically
authorizes the issuance of the Series 2005 Bonds.
References to provisions of Ohio law, whether codified in the Ohio Revised Code (Revised Code)
or uncodified, or the Ohio Constitution are references to those current provisions. Those provisions may
be amended, repealed or supplemented.
As used in this Official Statement, “Obligations ” means the Series 2005 Bonds and all other
Parity Obligations issued and outstanding under the Trust Indenture and any additional Parity Obligations
that may be issued in the future; “Debt Service Charges” means principal (including any mandatory
sinking fund requirements) and interest and any redemption premium payable on Obligations; and “Fiscal
Year” means the University’s fiscal year, currently the 12 month period from July 1 to June 30.
Reference to a particular fiscal year means the fiscal year that ends on June 30 in the indicated year: for
example, “Fiscal Year 2005” refers to the Fiscal Year ended June 30, 2005.
General Receipts Obligations
The Series 2005 Bonds are the seventh series of Obligations to be issued by the University under
the Trust Indenture. Assuming issuance of the Series 2005 Bonds in the principal amount of $21,295,000
and the refunding of all of the outstanding General Receipts Bonds of the University issued in 1997, there
will be $246,120,000 aggregate principal amount of General Receipts Bonds outstanding under the Trust
Indenture: $131,320,000 of Bonds were issued in 1999 (all but $13,455,000 refunded by the Series 2004
Bonds), $45,815,000 of Bonds were issued in 2003 ($43,260,000 currently outstanding), $130,405,000 of
Bonds were issued in March 2004 ($130,405,000 currently outstanding) , and $34,375,000 of Bonds were
issued in November 2004 (all outstanding). In 2003 the University delivered its $42,720,000 Series
2003A Note as an Obligation secured by General Receipts on a parity with General Receipts Bonds for
the purpose of guaranteeing its obligation to pay rent under a lease with a private developer (Akron
Student Housing Associates, LLC.) relating to student housing being constructed on the University’s
campus. Those outstanding General Receipts Bonds and that Obligation are referred to in this Official
Statement as the Outstanding Obligations. The University has no other outstanding bonds or notes; it has
leases and certain other obligations (see Appendix A – Outstanding Indebtedness).
The University’s Obligations represent a type of financing of facilities by state universities of
Ohio authorized by an amendment to the Ohio Constitution as implemented by the Act. Significant
elements of the General Receipts Obligations financing are the broad scope and gross pledge character of
the security afforded to the Obligations, and the simplicity and flexibility provided by permitting all
authorized types of auxiliary facilities to be financed under one open end indenture.
Security provisions include the pledge to the Obligations, on a gross pledge and first lien basis, of
the General Receipts of the University, which include the full amount of every type and character of
receipts, excepting only those specifically excluded (such as State appropria tions). For Fiscal Year 2004,
the pledged General Receipts amounted to approximately $208 million and for Fiscal Year 2005, the
pledged General Receipts amounted to approximately $231 million. (See Security and Sources of
Payment – General Receipts.)
The Trust Indenture provides for the University’s mandatory budgeting of amounts from its
General Receipts sufficient to pay Debt Service Charges when due each Fiscal Year. Payments are to be
made by the University to the Trustee, not later than five business days preceding each payment date for
the Obligations, for deposit into the Debt Service Fund, a special trust fund held in the custody of the
Trustee. This procedure for budgeting and setting aside General Receipts has assured and is intended to
assure timely availability of required moneys, but does not limit or modify the first pledge of and lien on
all General Receipts. Amounts in the Debt Service Fund are to be applied by the Trustee to pay Debt
Service Charges when due. (See The Indenture – Creation of Funds.)
In addition, the University has covenanted to fix, make, adjust and collect items of General
Receipts to produce at all times General Receipts at least sufficient to pay Debt Service Charges and to
satisfy other requirements with respect to its Obligations and, together with other moneys available, to
pay all costs and expenses necessary for the proper maintenance and successful and continuous operation
of the University. (See Security and Sources of Payment – Covenant as to Sufficiency of Ge neral
Receipts .)
The Trust Indenture is the basic document pertaining to all General Receipts Obligations and
prescribes the conditions for the issuance of additional Indebtedness. For each issue of Obligations an
authorizing resolution, setting forth detailed provisions for that issue, is adopted and a Supplemental
Indenture is delivered. For coverage requirements, see The Indenture – Additional Indebtedness. The
Series 2005 Bonds are to be specifically authorized by the Series Resolution and the Sixth Supplemental
Indenture.
The proceeds of all General Receipts Bonds are to be applied solely to pay costs of Facilities, and
to refund, fund or retire obligations issued for that purpose, as specifically provided and allocated in the
applicable authorizing resolution.
Facilities are defined in the Trust Indenture as any facilities at any time authorized by the Act to
be financed by the issuance of obligations. The Act defines “facilities” to include “auxiliary facilities”
(student activity or student servic e facilities, housing and dining facilities, dining halls or other food
service and preparation facilities, vehicular parking facilities, bookstores, athletic and recreational
facilities, faculty centers, auditoriums, assembly and exhibition halls, hospita ls, infirmaries and other
medical and health facilities, research and continuing education facilities); “educational facilities”
(classrooms, or other instructional facilities, libraries, administrative and office facilities, and other
facilities, other than auxiliary facilities, to be used directly or indirectly for or in connection with the
2
conduct of the institution of higher education); and “housing and dining facilities” (dormitories or other
living quarters and accommodations, or related dining halls or other food service and preparation
facilities, for students, members of the faculty, officers, or employees of the institution of higher
education, and their spouses and families); and includes any one, part of or any combination of those
facilities.
Constitutional and Statutory Authorization
The Series 2005 Bonds are authorized pursuant to the Act, enacted under authority of Section 2i
of Article VIII of the Ohio Constitution which provides in relevant part that the General Assembly of the
State may authorize the issuance of revenue obligations and other obligations for capital improvements
for state supported and state assisted institutions of higher education, which obligations may be secured
by a pledge under law of all or such portion of receipts of those institutions as the General Assembly
authorizes. Section 2i further provides that the owners or holders of those obligations, such as the
Bonds, are not given the right to have excises or taxes levied by the General Assembly for the
payment of principal or interest.
The Act authorizes the issuance by the University of “obligations” to pay all or part of the cost of
“facilities” and to refund and retire obligations previously issued for such purpose; authorizes the pledge
to the obligations of all or such part of the “available receipts” of the University as the University
determines (being the “General Receipts”); and provides that the pledge of and lien on General Receipts
may, as provided for in the Trust Indenture, be made prior to all other expenses, claims or payments.
PLAN OF FINANCING
The Series 2005 Bonds are being issued to advance refund all of the University’s outstanding
General Receipts Bonds, Series 1997 in the currently outstanding principal amount of $20,865,000 and
consisting of the following maturities (collectively, the Refunded Bonds):
Maturity Date
(January 1)
2009
2010
2011
2012
2017
2022
Interest Rate
5.000%
5.125
5.125
5.125
5.250
5.250
Par Amount
CUSIP
$ 1,495,000
1,575,000
1,645,000
1,740,000
6,145,000
7,525,000
914023AM8
914023AN6
914023AP1
914023AQ9
914023AT3
914023AU0
The Refunded Bonds will be called for prior redemption on January 1, 2007 at a redemption price
of 102% of the principal amount redeemed.
The proceeds of from the sale of the Serie s 2005 Bonds that will be used to refund the Refunded
Bonds will be deposited in escrow with the Trustee, as Escrow Agent, and will be (a) held in cash to the
extent not need to make the investments described in (b) below, and (b) invested indirect obligations of,
or obligations guaranteed as to the payment by, the United States that mature or are subject to redemption
by and at the option of the holder, in amounts sufficient, together with any uninvested cash in the account
but without further investment or reinvestment, for the payment of the principal and interest on the
Refunded Bonds on each January 1 and July 1, beginning January 1, 2006 and ending January 1, 2007
and the payment of the principal of and two percent (2%) premium on the Refunded Bonds that will be
redeemed prior to maturity on January 1, 2007.
3
The University will provide notice to the Trustee directing an irrevocable call for the optional
redemption on January 1, 2007 of all of the Refunded Bonds at a redemption price of 102% of the
principal amount redeemed.
Sources and Uses of Funds
The proceeds of the Series 2005 Bonds (excluding accrued interest) are expected to be applied as
follows:
Sources of Funds:
Series 2005 Bonds ................................................................................... $ 21,295,000.00
Plus net original issue premium................................................................
218,228.10
Total Sources.......................................................................................... $ 21,513,228.10
Uses of Funds:
Deposit to Escrow Fund........................................................................... $ 21,203,116.43
Bond Insurance premium and issuance expenses.......................................
160,183.92
Underwriters’ discount ............................................................................
149,927.75
Total Uses .............................................................................................. $ 21,513,228.10
DETAILS OF SERIES 2005 BONDS
General
The Series 2005 Bonds will be dated, will be payable in the amounts and on the dates, will bear
interest (computed on the basis of a 360-day year and twelve 30-day months) at the rates and payable on
the dates, and will be payable at the place and in the manner, described on the cover page.
The Trustee will keep all books and records necessary for registration, exchange and transfer of
the Series 2005 Bonds.
The authorized denominations of the Series 2005 Bonds are $5,000 or any multiple of $5,000.
Principal and any premium is payable only to the registered owner (initially The Depository Trust
Company or its nominee) at the principal corporate trust office of the Trustee. Except as otherwise
provided in the agreement between DTC and the Trustee, interest will be paid by check, mailed or
otherwise transmitted on each Interest Payment Date to the registered owner of a Series 2005 Bond as
shown on the registration book (the Register) maintained by the Trustee at the address then appearing on
the Register on the 15th day before each Interest Payment Date.
Prior Redemption
The Series 2005 Bonds are subject to mandatory and optional redemption as follows.
Optional Redemption
The Series 2005 Bonds maturing on or after January 1, 2017 will be subject to prior redemption
by and at the sole option of the University, in integral multiples of $5,000, in whole or in part on any date
4
on or after January 1, 2016 at a redemption price equal to 100% of the principal amount redeemed plus
any accrued interest to the redemption date.
Notice of Call for Redemption; Effect
The Trustee will cause notice of any redemption of Series 2005 Bonds to be (i) mailed by first
class mail to the Holders of all Series 2005 Bonds to be redeemed at the registered addresses appearing in
the Register kept for such purpose, to the Bond Insurer and the Depository, and to the nationally
recognized municipal securities information repositories and to the Ohio information depository. Each
such notice will (i) be sent at least 30 calendar days prior to the redemption date, (ii) identify the Bonds to
be redeemed (specifying the CUSIP numbers assigned to the Series 2005 Bonds), (iii) specify the
redemption date and the redemption price, and (iv) state that on the redemption date the Series 2005
Bonds called for redemption will be payable at the designated office of the Trustee, and that from that
date interest will cease to accrue. No defect affecting any Series 2005 Bond, whether in the notice of
redemption or the delivery thereof (including any failure to mail such notice), will affect the validity of
the redemption proceedings for any other Series 2005 Bonds.
On the date designated for redemption, Series 2005 Bonds or portions of Series 2005 Bonds
called for redemption will become due and payable. If the Trustee holds sufficient moneys for payment
of debt service on that redemption date, interest on each Series 2005 Bond (or portion of a Series 2005
Bond) so called for redemption will cease to accrue on that date.
So long as all Series 2005 Bonds are held under a book entry system by a securities depository
(such as DTC), call notice is sent by the Trustee only to the depository or its nominee. Selection of book
entry interests in the applicable series of Series 2005 Bonds called, and giving notice of the call to the
owners of those interests called, is the sole responsibility of the depository and of its Participants and
Indirect Participants. Any failure of the depository to advise any Participant, or of any Participant or any
Indirect Participant to notify the book entry interest owners, of any such notice and in its content or effect
will not affect the validity of any proceedings for the redemption of any Series 2005 Bonds or portions of
Series 2005 Bonds. See Book Entry Method.
Partial Redemption
If fewer than all outstanding Series 2005 Bonds are called for redemption at one time, the Series
2005 Bonds to be called will be called as selected by, and selected in a manner as determined by, the
University.
If less than all of an outstanding Series 2005 Bond of one maturity under a book entry system is
to be called for redemption (in the amount of $5,000 or any integral multiple), the Trustee will give notice
of redemption only to DTC as registered owner. If bond certificates are issued to the ultimate owners,
and if fewer than all of the Series 2005 Bonds of a single maturity are to be redeemed, the selection of
Series 2005 Bonds (or portions of Series 2005 Bonds in amounts of $5,000 or any integral multiples) to
be redeemed will be made by lot in a manner determined by the Trustee.
In the case of a partial redemption by lot when Series 2005 Bonds of denominations greater than
$5,000 are then outstanding, each $5,000 unit of principal will be treated as if it were a separate Series
2005 Bond of the denomination of $5,000.
5
BOND INSURANCE
Reference is made to Appendix C for a specimen of the Financial Guaranty Insurance Policy (the
“Policy”) issued by Ambac Assurance Corporation (the “Bond Insurer”) and further information about the
Bond Insurer.
So long as the Policy remains in full force and effect, the Bond Insurer is not in default under the
Policy and the Bond Insurer is not bankrupt, insolvent or in receivership, the following provisions will
apply to the Series 2005 Bonds as incorporated in the Sixth Supplemental Indenture.
•
Any provisions of the Sixth Supplemental Indenture recognizing or granting rights in or
to the Bond Insurer may not be amended in any manner that affects the rights of the Bond
Insurer without the prior written consent of the Bond Insurer.
•
The Bond Insurer’s consent is required for initiation or approval of any action that
requires consent of the Holders of the Series 2005 Bonds, and the Bond Insurer’s consent
is required in lieu of consent of the Holders of Series 2005 Bonds for the following
purposes: (i) signing and delivery of any amendment, supplement or change to or
modification of the Sixth Supplemental Indenture and (ii) removal of the Trustee and
selection and appointment of any successor trustee.
•
To the extent that the Sixth Supplemental Indenture confers upon or gives or grants to the
Bond Insurer any right, remedy or claim under or by reason of the Sixth Supplemental
Indenture, the Bond Insurer is explicitly recognized as being a third party beneficiary
thereunder and may enforce any such right, remedy or claim conferred, given or granted
thereunder. Nothing in the Sixth Supplement, expressed or implied, is intended or shall
be construed to confer upon, or to give or grant to, any person or entity, other than the
University, the Trustee, the Bond Insurer, any Paying Agent, and the registered owners of
the Series 2005 Bonds, any right, remedy or claim under or by reason of the Sixth
Supplemental Indenture or any covenant, condition or stipulation thereof, and all
covenants, stipulations, promises and agreements in the Sixth Supplemental Indenture
contained by and on behalf of the University shall be for the sole and exclusive benefit of
the University, the Trustee, the Bond Insurer, any Paying Agent and the registered
owners of the Series 2005 Bonds.
•
In the event that the principal and/or interest due on the Series 2005 Bonds is paid by the
Bond Insurer pursuant to the Policy, the Series 2005 Bonds will remain outstanding for
all purposes, not be defeased or otherwise satisfie d and not be considered paid by the
University, and the assignment and pledge of the General Receipts and all covenants,
agreements and other obligations of the University to the registered owners shall continue
to exist and shall run to the benefit of the Bond Insurer, and the Bond Insurer shall be
subrogated to the rights of such registered owners.
•
Upon the occurrence and continuance of an event of default, the Bond Insurer will be
entitled to control and direct the enforcement of all rights and remedies granted to the
Holders of the Series 2005 Bonds or the Trustee for the benefit of those Holders under
the Sixth Supplemental Indenture, including, without limitation: (i) the right to accelerate
the principal of the Series 2005 Bonds as described in the Sixth Supplemental Indenture,
and (ii) the right to annul any declaration of acceleration, and the Bond Insurer will also
be entitled to approve all waivers of events of default.
6
•
Upon the occurrence of an event of default, the Trustee may, with the consent of the
Bond Insurer, and will, at the direction of the Bond Insurer or 25% of the Holders of the
Series 2005 Bonds with the consent of the Bond Insurer, by written notice to the
University and the Bond Insurer, declare the principal of the Series 2005 Bonds to be
immediately due and payable, whereupon that portion of the principal of the Series 2005
Bonds thereby coming due and the interest thereon accrued to the date of the payment
will, without further action, become and be immediately due and payable, anything to the
contrary notwithstanding.
•
The University will furnish to the Bond Insurer fiscal year budgets, financial statements
of the University, audits, annual reports, disclosure documents, notice of litigation, notice
of non-appropriation, any notice to be given to the Holders of Series 2005 Bonds,
including ,without limitation, notice of any redemption of or defeasance of Series 2005
Bonds, and notice to nationally recognized municipal securities information repositories
or state depositories pursuant to Rule 15c2-12(b)(5), and such additional information the
Bond Insurer may reasonably request.
•
The Trustee will notify the Bond Insurer of any failure of the University to provide any
relevant notices, certificates or other documents, and to immediately notify the Bond
Insurer if at any time there is insufficient money to make any payments of principal and
or interest as required and immediately upon the occurrence of any Event of Default.
•
The Trustee may be removed by the University at any time, at the request of the Bond
Insurer, for any breach of its obligation under the Sixth Supplemental Trust Indenture.
•
In determining whether the rights of Holders of the Series 2005 Bonds will be adversely
affected by any action taken pursuant to the terms and provisions of the Sixth
Supplemental Trust Indenture, the Trustee will consider the effect on the Holders of
Series 2005 Bonds as if there were no Policy.
SECURITY AND SOURCES OF PAYMENT
Introduction
The Series 2005 Bonds are being issued under, and will be secured by, the Indenture. All
Obligations, including the Outstanding Obligations, the Series 2005 Bonds and any Additional
Obligations, are and will be payable from and secured by a first pledge of and lien on the General
Receipts of the University.
The University covenants in the Trust Indenture to include in its budget for each Fiscal Year
amounts from its General Receipts at least sufficient to pay the Debt Service Charges on Obligations
when due and satisfy other requirements with respect to Obligations (see The Indenture – Additional
Covenants of the University).
The Trust Indenture establishes the Debt Service Fund, a special fund held by the Trustee, for the
payment of Debt Service Charges on the Bonds. The University is to make payments to the Debt Service
Fund at least five business days prior to each date Debt Service Charges are payable.
The University may provide for bond insurance or other credit support instrument, or a reserve
fund or account, with respect to any one or more Obligations or series of Obligations that does not secure
7
any other Obligations or series of Obligations. See Bond Insurance and Appendix C for information
concerning the Bond Insurer and the Policy to be delivered with respect to the Series 2005 Bonds.
General Receipts Ple dged to the Bonds
The General Receipts consist of all gross fees, deposits, charges, receipts and income from all or
any part of the students of the University, whether designated as tuition, instructional fees, tuition
surcharges, general fees, activity fees, health fees or other special purpose fees or otherwise designated;
all gross income, revenues and receipts from the operation, ownership, or control of Facilities; all grants,
gifts, donations and pledges and receipts therefrom; the proceeds of the sale of obligations, including
proceeds of obligations issued to refund obligations previously issued, to the extent and as allocated to the
payment of Debt Service Charges under the proceedings authorizing those obligations; and all other
money received by the University except those described below.
The exclusions from the General Receipts consist of: moneys raised by taxation and State
appropriations (amounting to approximately 28% of the University’s revenues in Fiscal Year 2003 and
26% in Fiscal Year 2004) until and unless their pledge to Debt Service Charges is authorized by law and
is made by a supplemental indenture approved by the Board; any grants, gifts, donations and pledges, and
receipts therefrom, which under restrictions imposed in the grant or promise or as a condition of the
receipt are not available for payment of Debt Service Charges; any special fee charged pursuant to
Section 154.21(D) of the Revised Code and receipts therefrom (that fee, relating to bonds of the State
issued by the Ohio Public Facilities Commission, has never been required to be imposed and is not
anticipated to be required to be imposed).
Pursuant to the Act, upon their receipt by the University the General Receipts are immediately
subject to the lien of the pledge made by the Trust Indenture, and the lien of that pledge is valid against all
parties having claims of any kind, regardless of notice, and creates a perfected security interest without
necessity for prior separation, physical delivery, filing or recording or further act by the University.
General Receipts for the five most recent Fiscal Years were as follows:
(Dollars in Thousands)
2000
Tuition, fees and other
student charges
Local grants and contracts
Private gifts, grants and
contracts
Endowment income
Sales and services
Other sources
Total
Sources:
2001
2002
2003
2004
$93,187
$98,884
$117,302
$136,761
$151,883
631
17,704
523
19,634
304
20,853
540
18,645
551
22,273
1,687
36,778
3,171
2,333
39,620
5,015
2,860
43,521
2,739
3,128
46,563
2,591
2,875
51,967
1,619
$153,158
$166,009
$187,579
$208,228
$231,168
Audited financial statements of the University for Fiscal Years 2000 and 2001. Amounts for Fiscal Years 2002,
2003 and 2004 were derived from the audited financial statements for those years. In order to have comparability,
those amounts are presented in a fund basis format and not in accordance with GASB Statement No. 35. See
Appendix B for the audited financial statements of the University for Fiscal Year 2004 prepared in accordance with
GASB Statement No. 35.
(Balance of page intentionally left blank)
8
Annual Debt Service Charges and Coverage
The following table presents the estimated Debt Service Charges payable each Fiscal Year on the
Series 2005 Bonds and the outstanding General Receipts Bonds , assuming the Refunded Bonds are no
longer outstanding, consisting of the Series 1999 Bonds not refunded by the Series 2004 Bonds, the
Series 2003 Bonds, the Series 2004 Bonds and the Series 2004B Bonds. Not included in the total Debt
Service Charges is the Series 2003A Note issued to guarantee certain lease obligations of the University.
See Appendix A – Outstanding Indebtedness.
(a)
(b)
Fiscal
Year
Outstanding
Bonds
Principal (a)
Outstanding
Bonds
Interest (b)
Series 2005
Bonds
Principal (a)
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
$ 1,537,929.84
5,332,929.84
6,137,929.84
5,472,929.84
5,767,929.84
6,057,929.84
5,777,929.84
6,052,929.84
6,332,929.84
6,627,929.84
6,917,929.84
7,267,929.84
7,597,929.84
7,932,929.84
8,277,929.84
8,637,929.84
9,017,929.84
9,412,929.84
9,832,929.84
10,252,929.84
10,697,929.84
11,162,929.84
11,682,929.84
12,333,447.36
4,080,000.00
4,315,000.00
4,270,000.00
3,480,000.00
1,940,000.00
2,035,000.00
$ 9,112,382.20
8,976,147.57
8,729,092.44
8,468,756.44
8,468,756.44
7,951,423.56
7,728,066.68
7,501,604.68
7,263,234.69
7,016,295.93
6,745,640.16
6,448,502.16
6,138,907.29
5,824,164.42
5,496,126.17
5,147,417.54
4,784,092.04
4,405,466.54
4,012,918.66
3,604,508.16
3,177,556.41
2,730,898.16
2,268,437.70
1,635,961.27
828,403.13
647,946.88
457,862.50
279,637.50
150,250.00
50,975.00
$
0.00
140,000.00
145,000.00
1,645,000.00
1,710,000.00
1,765,000.00
1,840,000.00
1,290,000.00
1,340,000.00
1,220,000.00
1,275,000.00
1,325,000.00
1,395,000.00
1,445,000.00
1,520,000.00
1,585,000.00
1,655,000.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Series 2005
Bonds
Interest
Total Debt
Service
$ 41,492.10
878,656.26
873,756.26
868,681.26
809,050.00
744,925.00
678,737.50
607,437.50
555,837.50
498,887.50
447,037.50
392,850.00
330,350.00
274,550.00
202,300.00
137,700.00
70,337.50
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
$10,693,810.14
15,329,740.67
15,887,786.54
16,457,376.54
16,757,746.28
16,521,289.40
16,026,746.02
15,453,985.02
15,494,016.03
15,365,128.27
15,387,623.50
15,436,299.00
15,464,205.13
15,478,663.26
15,498,376.01
15,510,068.38
15,529,381.38
13,820,419.38
13,847,872.50
13,859,463.00
13,877,512.25
13,895,855.00
13,953,395.54
13,971,437.63
4,910,433.13
4,964,977.88
4,729,894.50
3,761,670.50
2,092,284.00
2,088,010.00
Includes mandatory sinking fund redemption requirements.
Calculated for the variable rate Series 2004 Bonds at an assumed rate of interest of 3.465%, based on the fixed rate paid
by the University under an interest rate exchange agreement and assuming certain fees for liquidity and remarketing for
the Series 2004 Bonds.
Assuming issuance of the Series 2005 Bonds and assuming maximum annual Debt Service
Charges on all General Receipts Bonds to be outstanding after issuance of the Series 2005 Bonds of
$16,757,746.28 (in fiscal year 2010) , the General Receipts for Fiscal Year 2004 ($231,168,000) were over
9
13 times those maximum annual Debt Service Charges. In addition, the University issued its Series
2003A Note as a Parity Obligation secured by General Receipts to guarantee its obligation to pay rent
under a lease with a private developer. The maximum annual rental payment so guaranteed is $1,725,000
and the final rental payment is due in 2034.
Covenant as to Sufficiency of General Receipts
The Series 2005 Bonds are further secured by the University’s covenant in the Trust Indenture
that the University will fix, make, adjust and collect fees, rates, rentals and charges and other items of
General Receipts as will produce at all times General Receipts at least sufficient to pay Debt Service
Charges when due, and, together with other moneys lawfully available, to pay all costs and expenses
required to be paid under the Bond proceedings and all other costs and expenses for the proper
maintenance and successful and continuous operation of the University. For a discussion of student fees
and charges see Appendix A – Student Fees and Charges.
BOOK ENTRY METHOD
The Depository Trust Company, New York, New York (DTC), will act as securities depository
for the Series 2005 Bonds. The Series 2005 Bonds will be initially issued as fully registered securities
registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be
requested by an authorized representative of DTC. One fully registered Series 2005 Bond certificate will
be issued for each maturity of the Series 2005 Bonds, each in the aggregate principal amount of such
maturity, and will be deposited with DTC.
For ease of reference in this and other discussions, reference to “DTC” includes when applicable
any successor securities depository and the nominee of the depository.
For all purposes under the Indenture DTC will be and will be considered by the University and
the Trustee to be the owner or holder of the Series 2005 Bonds.
Owners of book entry interests in the Series 2005 Bonds (book entry interest owners) will not
receive or have the right to receive physical delivery of the Series 2005 Bond and will not be or be
considered by the University and the Trustee to be, and will not have any rights as, owners or holders of
the Series 2005 Bonds under the Indenture.
The following information about the book entry method has been supplied by DTC.
Neither the University nor the Underwriters make any re presentation as to its accuracy.
DTC, the world’s largest depository, is a limited-purpose trust company organized under the New
York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York
Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A
of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 2 million issues
of U.S. and non-U.S. equity, corporate and municipal debt issues, and money market instruments from
over 85 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates
the post-trade settlement among Direct Participants of sales and other securities transactions, in deposited
securities through electronic computerized book entry transfers and pledges between Direct Participants’
accounts. This eliminates the need for physical movement of securities certificates. Direct Participants
include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing
corporations, and certain other organizations. DTC is a wholly owned subsidiary of The Depository Trust
& Clearing Corporation (“DTCC”). DTCC, in turn, is owned by a number of Direct Participants of DTC
10
and Members of the National Securities Clearing Corporation, Government Securities Clearing
Corporation, MBS Clearing Corporation, and Emerging Markets Clearing Corporation (NSCC, GSCC,
MBSCC, and EMCC, also subsidiaries of DTCC), as well as by the New York Stock Exchange, Inc., the
American Stock Exchange, LLC, and the National Association of Securities Dealers, Inc. Access to the
DTC system is also available to others such as U.S. and non-U.S. securities brokers and dealers, banks,
and trust companies that clear through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly (“Indirect Participants”). DTC has Standard & Poor’s highest rating: AAA. The
DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More
information about DTC can be found at www.dtcc.com.
Purchases of Series 2005 Bonds under the DTC system must be made by or through Direct
Participants, which will receive a credit for the Series 2005 Bonds on DTC’s records. The ownership
interest of each actual purchaser of each Series 2005 Bond (“Beneficial Owner”) is in turn to be recorded
on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their holdings, from the Direct or
Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of
ownership interests in the Series 2005 Bonds are to be accomplished by entries made on the books of
Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not
receive certificates representing their ownership interests in the Series 2005 Bonds, except in the event
that use of the book entry system for the Series 2005 Bonds is discontinued. (See Revision of Book
Entry System; Replacement Bonds ).
To facilitate subsequent transfers, all Series 2005 Bonds deposited by Direct Participants with
DTC are registered in the name of DTC’s partnership nominee, Cede & Co or such other name as may be
requested by an authorized representative of DTC. The deposit of Series 2005 Bonds with DTC and their
registration in the name of Cede & Co. or such other nominee do not effect any change in beneficial
ownership. DTC has no knowledge of the actual Beneficial Owners of the Series 2005 Bonds; DTC’s
records reflect only the identity of the Direct Participants to whose accounts such Series 2005 Bonds are
credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will
remain responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants, by Direct
Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial
Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of Series 2005 Bonds may wish to
take certain steps to augment transmission to them of notices of significant events with respect to the
Series 2005 Bonds, such as redemptions, tenders, defaults, and proposed amendments to the security
documents. For example, Beneficial Owners of Series 2005 Bonds may wish to ascertain that the
nominee holding the Series 2005 Bonds for their benefit has agreed to obtain and transmit notices to
Beneficial Owners, or in the alternative, Beneficial Owners may wish to provide their names and
addresses to the Trustee as registrar and request that copies of the notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Series 2005 Bonds within a
maturity are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each
Direct Participant in such issue to be redeemed.
Neither DTC nor DTC’s nominee will consent or vote with respect to the Series 2005 Bonds.
Under its usual procedures, DTC mails an Omnibus Proxy to the University as soon as possible after the
record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct
11
Participants to whose accounts the Series 2005 Bonds are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
Payments of Debt Service Charges on the Series 2005 Bonds will be made to Cede & Co. or such
other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit
Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from the
University or the Trustee on the payable date in accordance with their respective holdings shown on
DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as is the case with securities held for the accounts of customers in bearer form or
registered in “street name,” and will be the responsibility of such Participant and not of DTC, the Trustee
or the University, subject to any statutory or regulatory requirements as may be in effect from time to
time. Payments of Debt Service Charges to Cede & Co. (or such other nominee as may be requested by
an authorized representative of DTC) is the responsibility of the University or the Trustee, disbursement
of such payments to Direct Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Series
2005 Bonds at any time by giving reasonable notice to the University or the Trustee. Under such
circumstances, in the event that a successor securities depository is not obtained, Series 2005 Bond
certificates are required to be printed and delivered.
The University may decide to discontinue use of the system of book entry transfers through DTC
(or a successor securities depository). In that event, Series 2005 Bond certificates will be printed and
delivered. See Revision of Book Entry System; Replacement Bonds .
The information in this section concerning DTC and DTC’s book entry system has been obtained
from sources that the University believes to be reliable, but the University takes no responsibility for the
accuracy thereof.
Direct Participants and Indirect Participants may impose service charges on book entry
interest owners in certain cases. Purchasers of book entry interests should discuss that possibility with
their brokers.
The University and the Trustee have no role in the purchases, transfers or sales of book entry
interests. The rights of book entry interest owners to transfer or pledge their interests, and the manner of
transferring or pledging those interests, may be subject to applicable state law. Book entry interest
owners may want to discuss with their legal advisers the manner of transferring or pledging their book
entry interests.
The University and Trustee have no responsibility or liability for any aspects of the records or
notices relating to, or payments made on account of, book entry interest ownership, or for maintaining,
supervising or reviewing any records relating to that ownership.
The University cannot and does not give any assurances that DTC, Direct Participants, Indirect
Participants or others will distribute to the book entry interest owners payments of debt service on the
Series 2005 Bonds made to DTC as the registered owner, or any redemption or other notices, or that they
will do so on a timely basis, or that DTC will serve and act in a manner described in this Official
Statement.
12
Revision of Book Entry System; Replacement Bonds
The Bond proceedings provide for issuance of fully registered Series 2005 Bonds (Replacement
Bonds) directly to owners of Series 2005 Bonds other than DTC only in the event that DTC (or a
successor securities depository) determines not to continue to act as securities depository for the Series
2005 Bonds. Upon occurrence of this event, the University may in its discretion attempt to have
established a securities depository book entry relationship with another securities depository. If the
University does not do so, or is unable to do so, and after the Trustee has made provision for notification
of the owners of book entry interests in the Series 2005 Bonds by appropriate notice to DTC, the
University and the Trustee will authenticate and deliver Replacement Bonds in authorized denominations
to or at the direction of any persons requesting such issuance (and, if the event is not the result of
University action or inaction, at the expense – including printing costs – of such persons).
Debt Service Charges on Replacement Bonds will be payable when due without deduction for the
services of the Trustee as paying agent. Principal and any premium will be payable to the registered
owner upon presentation and surrender at the designated office of the Trustee. Interest will be payable on
the interest payment dates by the Trustee by check, mailed to the registered owner of record on the Bond
Register as of the Regular Record Date preceding the interest payment dates.
Replacement Bonds will be exchangeable for Replacement Bonds of authorized denominations,
and transferable, at the office of the Trustee without charge (except taxes or governmental fees).
Exchange or transfer of then redeemable Replacement Bonds is not required to be made (i) between the
15th day preceding the mailing of notice of redemption of Replacement Bonds and the date of that
mailing, or (ii) of a particular Replacement Bond selected for redemption (in whole or part).
THE INDENTURE
Reference is made to the Indenture for the definitions of capitalized words and phrases used in the
following summary.
Issuance and Payment of Obligations
The Indenture provides for the issuance by the University of Obligations. The Series 2005 Bonds
are one series of Obligations issued under the Indenture. The University agrees in the Indenture to pay to
the Trustee the principal and interest due on Obligations. That payment to the Trustee is due on or before
the fifth day before each date principal or interest is due on the Obligatio ns.
Security for Obligations
Under the Indenture, the University pledges and assigns to the Trustee and creates a security
interest in favor of the Trustee in the General Receipts and the Special Funds. The trust created under the
Indenture is for the equal and proportionate benefit of all Holders of Obligations. The pledge, assignment
and security interest also secures Payment Requirements, but that pledge is subordinate to the pledge to
secure Obligations.
Lien on General Receipts
The pledge of General Receipts under the Indenture is a first priority lien. The University has
agreed to maintain the priority of that lien and not to permit other liens to exist against the General
13
Receipts, except liens created under the Indenture, liens securing Subordinated Indebtedness, or liens
arising by operation of law.
Further Pledges of General Receipts
The Indenture permits the extension of the pledge of General Receipts securing the Obligations to
also secure Payment Requirements. That pledge will be subordinate to the pledge securing the
Obligations. The Indenture further permits a pledge of the General Receipts to secure Subordinated
Indebtedness, but that pledge will be subordinate to the pledge of General Receipts to the Obligations and
the Payment Requirements.
Additional Covenants of the University
The University has made the following additional covenants in the Indenture for the benefit of
Holders of the Obligations.
Payment of Debt Service Charges
The University will pay the Debt Service Charges on the Obligations when due. The obligation
of the University to pay those Debt Service Charges is absolute and unconditional and will not be affected
by any cause, including failure of consideration, damage or destruction of property, commercial
frustration of purpose, any change in tax laws or administrative actions of the United States or the State.
Rate Covenant
The University covenants that in each Fiscal Year it will make, fix, adjust, collect and apply such
charges, rates, fees, rentals and other items included in General Receipts, to the extent permitted by law,
so that Available Receipts will be sufficient to pay the operation and maintenance expenses of the
University and to pay principal, interest and any premium requirements on the Obligations, any reserve
requirements for the Obligations and any other requirements provided for in the University Financing
Documents. As used in this paragraph, the term “Available Receipts” means, for a particular Fiscal Year,
the General Receipts received in that Fiscal Year plus all other money legally available to the University
for those purposes in that Fiscal Year.
Financial Statements and Other Information
The University will file with the Trustee, within nine months after the end of each fiscal year, (i)
audited financial statements of the University and a supplemental balance sheet, statement of revenues
and expenses and statement of changes in fund balances, and (ii) a certificate as to whether the University
is in default under the Indenture and, if so, describing any action proposed to be taken. If an Event of
Default has occurred and is continuing under the Indenture, the University will file with the Trustee such
additional financial statements and other information as the Trustee may request and will provide the
Trustee access to the facilities of the University for the purpose of inspection.
Federal Tax Status of Obligations
The University will take the actions necessary to maintain the Federal Tax Status of each series of
Obligations and will not take any action to adversely affect that Federal Tax Status.
14
Additional Indebtedness
The University may incur additional Indebtedness, whether or not secured by a pledge of the
General Receipts, only as and to the extent permitted by the Indenture and only if, at the time of
incurrence of such Indebtedness and after giving effect to the issuance of the Indebtedness, no Event of
Default or event that with notice or lapse of time, or both, would constitute an Event of Default, has
occurred and is continuing.
Parity Obligations. The University may incur Parity Obligations secured on parity with the
Series 1999 Bonds, the Series 2003A Note, the Series 2003 Bonds, the Series 2004 Bonds, the Series
2004B Bonds, the Series 2005 Bonds and any other Parity Obligations issued under the Indenture. Parity
Obligations may be issued if the General Receipts for each of the two preceding Fiscal Years were at least
two times the maximum annual principal and interest required to be paid in any subsequent Fiscal Year
on all Parity Obligations to be Outstanding after the issuance of the Parity Obligations, including the
Parity Obligations to be issued.
Other Indebtedness. The University may incur Indebtedness other than Parity Obligations if the
General Receipts for each of the two preceding Fiscal Years were at least 110% of the maximum annual
principal and interest required to be paid in any subsequent Fiscal Year on all Indebtedness – including
Parity Obligations and including the Indebtedness to be incurred – to be Outstanding after incurring the
Indebtedness.
Calculating General Receipts. In calculating General Receipts for purposes of incurring
additional Indebtedness, the amount of grants, gifts, donations and pledges to be included in General
Receipts in a Fiscal Year shall be the average of unrestricted grants, gifts, donations and pledges for the
three year period ending at the end of that Fiscal Year.
Calculating Principal and Interest. In calculating principal and interest requirements on
Indebtedness, the following calculations must be used:
(a)
A Balloon Maturity must be recalculated as though it were amortized over the remaining
life of the Indebtedness, using equal annual payments of principal and interest, at the interest rate borne
by the Indebtedness.
(b)
Interim Debt must be recalculated as though it were refinanced by Indebtedness maturing
over a 20 year term beginning on the date the Interim Debt was incurred, with equal annual payments of
principal and interest and an interest rate determined by and independent consultant to be the market rate
of interest that would be borne by that 20 year refinancing Indebtedness if incurred on the date of
determination. The independent consultant must be appointed by the Authorized University
Representative, must be acceptable to the Trustee and must be experienced in higher education finance.
(c)
So long as the 1999 Bond Insurance Policy is in effect, the interest requirement on
Variable Rate Indebtedness must be calculated using the average of The Bond Market Association
Municipal Swap Index for the five-year period preceding the date of calculation, as the interest rate. So
long as such Policy is in effect, however, the interest rate on Variable Rate Indebtedness must be
calculated using the following rates: (1) for tax exempt Variable Rate Indebtedness, the most recently
published Bond Buyer “Revenue Bond Index” (or comparable index if no longer published), and (2) for
taxable Variable Rate Indebtedness, the interest rate on U.S. Treasury obligations with comparable
maturities.
15
(d)
If the 1999 Bond Insurance Policy is not in effect and so long as the 2004 Bond Insurance
Policy is in effect, the interest requirements on Variable Rate Indebtedness must be calculated using the
highest of the following rates: (1) the actual rate on the date of calculation, or if the Variable Rate
Indebtedness is not yet outstanding, the initial rate; (2) the average rate over the most recent 12 months, or
if the Variable Rate Indebtedness has not been outstanding for at least 12 months, the average rate of a
comparable index; and (3) (A) for tax-exempt Variable Rate Indebtedness, the most recently published
Bond Buyer “Revenue Bond Index” (or comparable index if no longer published), or (B) for taxable
Variable Rate Indebtedness, the interest rate on direct U.S. Treasury Obligations with comparable
maturities.
(e)
If an interest rate swap has been used to synthetically fix the interest rate on Variable
Rate Indebtedness, the University may use the synthetic rate in calculating financial covenant compliance
if the swap satisfies the 2004 Bond Insurer guidelines.
Deliveries. The following items must be filed with the Trustee before a series of Obligations may
be issued: (i) the necessary amendments or supplements to the University Financing Documents, (ii) a
certified copy of the resolution of the University Board of Trustees authorizing the Obligations, (iii) the
University’s request and authorization to the Trustee to authenticate and deliver the Obligations, (iv) an
opinion of counsel to the University as to compliance with the Indenture and an opinion of nationally
recognized bond counsel that the Obligations will be legal and valid special obligations of the University
and will be on a parity with other Obligations under the Indenture, (v) a nondefault certificate of the
University, and (vi) a certificate of the University demonstrating compliance with the additional
Indebtedness test described above.
Creation of Funds
The following funds are created by the Indenture: Debt Service Fund, Rebate Fund, and General
Receipts Fund. The Indenture requires the University to create one or more Project Funds. The term
“Special Funds” means the Debt Service Fund, the Project Funds and the General Receipts Fund but does
not include the Rebate Fund.
Debt Service Fund
Money in the Debt Service Fund will be used to pay Debt Service Charges on the Obligations.
The University will pay to the Trustee for deposit into the Debt Service Fund, the amounts necessary to
pay principal and interest on the Obligations when due, whether at maturity or by mandatory sinking fund
redemption. The University is required to make that payment to the Trustee five days before the due date,
of principal and interest.
Rebate Fund
The Rebate Fund is for the deposit of any money to be paid to the United States of America as
arbitrage rebate payments. The Tax Regulatory Agreement requires the University to deposit money in
the Rebate Fund before the time that any arbitrage rebate payments are required, to be made, in amounts
sufficient to make those payments. The Trustee is required to use money in the Rebate Fund, at the
direction of the University, to make those payments. The Rebate Fund is not a Special Fund and is not
subject to the lien of the Indenture.
16
General Receipts Fund
The General Receipts Fund is not expected to be funded unless and until there is an Event of
Default under the Indenture. If an Event of Default occurs and the Trustee exercises remedies under the
Indenture, any money received by the Trustee as a result of those remedies is deposited in the General
Receipts Fund and used as described below under Acceleration and Other Rights and Remedies –
Application of Money.
Investment of Funds
Money held in any Special Fund (except the Project Funds) and in the Rebate Fund will be
invested in Eligible Investments by the Trustee at the direction of the University. Money held in the
Project Funds will be invested in Eligible Investments by the University. Income from any investment
made from money in a Special Fund or the Rebate Fund shall be credited to that fund. Any investment
may be purchased from the Trustee.
Events of Default
Each of the following constitutes an Event of Default under the Indenture: (a) failure in the
payment of interest on any Obligation when due and payable, (b) failure in the payment of principal on
any Obligation when due and payable, whether at maturity or by acceleration or redemption, and (c)
failure by the University to perform any other agreement in the Indenture or the Obligations if the failure
continues for 60 days after notice to the University by the Trustee. In determining whether a failure in
payment of principal or interest on Bonds has occurred, no effect is given to payment by a Bond Insurer
under a Policy. The Trustee may give that notice in its discretion and is required to give that notice if
requested to by Holders of at least 25% in principal amount of outstanding Obligations.
Acceleration and Other Rights and Remedies
Acceleration
If an Event of Default occurs under clauses (a) or (b) of the immediately preceding paragraph (a
Payment Default), the Trustee is required to accelerate the maturity of the Obligations by declaring the
principal amount of all Obligations then outstanding to be immediately due and payable. If an Event of
Default occurs under clause (c) of the immediately preceding paragraph (a Nonmonetary Default), the
Trustee may accelerate the Obligations in its discretion, but is required to accelerate the Obligations if
requested in writing by the Holders of at least 25% in principal amount of outstanding Obligations. Any
acceleration of the Series 2005 Bonds is subject to the prior written consent of the Bond Insurer, if it has
not failed to comply with its payment obligations under the Policy.
The Trustee will give notice of the acceleration of the Obligations in the same manner as
provided for notice of optional redemption. That notice shall set a date for the payment of principal and
interest on the Obligations. Interest on the Obligations shall accrue to that payment date or to the actual
payment date, if later.
Other Remedies
Upon an Event of Default, the Trustee may pursue any other available remedy to enforce the
payment of Debt Service Charges or the observance and performance of any other agreement of the
17
University under the University Financing Documents. The Trustee may pursue those other remedies
whether or not it has accelerated the Obligations. The Trustee is required to pursue those other remedies
if requested by the Holders of at least 25% in principal amount of Obligations outstanding and if
indemnified against liability (except liability resulting from its gross negligence or willful misconduct).
Rights of Holders to Direct Proceeding
The Holders of a majority in principal amount of Obligations outstanding have the right to direct,
in writing, the method and place of conducting proceedings for enforcing the Indenture. The direction
must be in accordance with law and with the Indenture, the Trustee must be indemnified against liability
(except liability resulting from its gross negligence or willful misconduct), and the Trustee may take any
other action it deems proper and not inconsistent with the Indenture.
Rights and Remedies of Holders
Only the Trustee may enforce the Indenture, unless the following three conditions occur: (1) a
default under the Indenture has occurred of which the Trustee has been notified or is deemed to have
notice, (2) the Holders of at least 25% in principal amount of Obligations outstanding have requested the
Trustee to enforce the Indenture and exercise its remedies and have offered the Trustee indemnity against
liability (except liability resulting from its gross negligence or willful misconduct), and (3) the Trustee
has failed or refused to act. If those conditions occur, the Holders of Obligations have the right to
institute actions to enforce the Indenture or for any remedy under the Indenture. Any such action will be
for the benefit of the Holders of all Obligations outstanding.
Application of Money
During the continuance of an Event of Default, any General Receipts received by the Trustee and
any other money received by it upon the exercise of remedies will be deposited in the General Receipts
Fund. Certain money for the payment of particular Obligations not presented for payment at maturity or
upon redemption is required by the Indenture to be held by the Trustee for the benefit of the Holders of
those nonpresented Obligations. Except for that money, all money deposited in the General Receipts
Fund and any other money in the Special Funds available for the purpose, will be applied first to the
payment of costs of collection and then to the pro rata payment of principal and interest on the
Obligations as specified in the Indenture.
Waivers
If, after a declaration of acceleration the University pays or provides for payment of all amounts
payable under the Indenture – other than principal and interest on Obligations due solely by reason of the
acceleration – and cures all Events of Default under the Indenture, then the Trustee is required to waive
all Events of Default and rescind and annul the declaration of acceleration.
In addition, the Trustee may waive any Event of Default and may rescind and annul any
acceleration of the Obligations. A Payment Default, however, may only be waived and the related
acceleration rescinded and annulled if all Holders of outstanding Obligations consent in writing. The
Trustee is required to waive a Nonmonetary Default if requested in writing by the Holders of 50% in
principal amount of outstanding Obligations.
No waiver or rescission will extend to any other Event of Default or impair any right in
connection with another Event of Default. Any annulment of acceleration of the Series 2005 Bonds is
18
subject to the prior written consent of the Bond Insurer, if it has not failed to comply with its payment
obligations under the Policy.
Supplemental Indentures
Not Requiring Holder Consent
The University and the Trustee may, without the consent of, or notice to, any of the Holders,
enter into supple mental indentures, not inconsistent with the Indenture for any of the following purposes:
(a) to cure any ambiguity, inconsistency or formal defect or omission in the Indenture; (b) to grant to or
confer upon the Trustee for the benefit of the Holders any additional rights, remedies, powers, or
authority that may lawfully be granted to or conferred upon the Holders’ or the Trustee; (c) to subject
additional revenues or property or both to the lien and pledge of the Indenture; (d) to accept additional
security and instruments of further assurance; (e) to add additional covenants and agreements of the
University for the protection of the Holders, or to surrender or limit any right, power or authority reserved
to or conferred upon the University in the Indenture, including the limitation of rights of redemption so
that in certain instances Obligations of different series will be redeemed in some prescribed relationship
to one another; (f) to evidence any succession to the University and the assumption by the successor of
the covenants and agreements of the University contained in the University Financing Documents and the
Obligations; (g) in connection with the issuance of Parity Obligations; (h) to provide for the issuance of
Parity Obligations in coupon or book entry form, or for the exchange of registered Obligations for
Obligations in coupon or book entry form, if the Trustee receives an opinion of nationally recognized
bond counsel that the issuance or exchange will not adversely affect the Federal Tax Status of the interest
on the Obligations; (i) to permit the Trustee to comply with any obligations imposed upon it by law; (j) to
specify further the duties and responsibilities of, and to define further the relationship among, the Trustee,
the Registrar, and any authenticating agent or paying agent; (k) to comply with any applicable federal or
state securities or tax law; (1) to permit any other amendment which, in the judgment of the Trustee, is
not to the prejudice of the Trustee or the Holders including, but not limited to, changes required in order
to obtain or maintain a rating on any series of Obligations from a Rating Agency; and (m) to accept a
Credit Facility.
Requiring Holder Consent
Except for supplemental indentures described above, the University and the Trustee may only
enter into supplemental indentures with the consent of the Holders of at least 66 2/3% in aggregate
principal amount of the Obligations then outstanding. No supplemental indenture, however, may permit:
(a) without the consent of the Holder of each Obligation so affected (i) an extension of the maturity of the
principal of or the interest on any Obligation; (ii) a reduction in the principal amount of any Obligation or
the rate of interest or redemption premium on any Obligation; (iii) a reduction in the amount or extension
of the time of payment of any mandatory sinking fund requirements; and (iv) any modification of any
mandatory redemption provision affecting the Obligations, or (b) without the consent of the Holders of all
Obligatio ns then outstanding: (i) the creation of a privilege or priority of any Obligation or Obligations
over any other Obligation or Obligations; or (ii) a reduction in the aggregate principal amount of the
Obligations required for consent to a supplemental indenture.
The Bond Insurer of the Series 2005 Bonds shall be deemed to be the sole Holder of Series
2005 Bonds for purposes of giving consent to any amendment of the Indenture.]
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Defeasance
When the University has paid and discharged all outstanding Obligations and has made provision
for payment of all sums due under the University Financing Documents then the Indenture will terminate,
and the obligations of the University under the Indenture will be satisfied. Certain provisions of the
Indenture, however, which need to remain operative, such as those relating to the holding of funds for the
benefit of particular Holders or for the University and those relating to payment of Obligations deemed
discharged as described below, will survive the termination of the Indenture.
All or any part of the Obligations will be deemed to have been paid and discharged within the
meaning of the Indenture if: (a) the Trustee and any other paying agent hold, in trust for and irrevocably
committed for the purpose, sufficient money; or (b) the Trustee has, received, in trust for and irrevocably
committed for the purpose, Government Obligations which are certified by an independent public
accounting firm to be of such maturities or redemption dates, and to bear such interest, as will be
sufficient, together with money referred to in clause (a), without further investment or reinvestment of
either the principal amount or the interest earnings, for the payment of all Debt Service Charges on the
Obligations, at their maturity or redemption dates, as the case may be, or if a default in payment has
occurred on any maturity or redemption date, then to the date of the tender of payment.
Trustee
The Trustee, before the occurrence of an Event of Default under the Indenture and after the cure
of any Event of Default, undertakes to perform only the duties that are specifically set forth in the
Indenture. In case an Event of Default under the Indenture has occurred and is continuing, the Trustee
must exercise the rights and powers vested in it by the Indenture as an ordinarily prudent corporate trustee
would exercise under similar circumstances. The Indenture provides that the Trustee will be entitled to
rely conclusively as to the facts and circumstances expressed in certificates, opinions and other
instruments provided for in the Indenture. The Indenture provides that the Trustee will be liable for its
own gross negligence or willful misconduct.
The Trustee is authorized by the Indenture to advance funds (a) to pay taxes, assessments and
other governmental charges with respect to the Facilities, (b) for the discharge of mechanics’ and other
liens relating to the Facilities, (c) to obtain and maintain insurance for the Facilities and pay the
premiums, and (d) generally, to make payments and incur expenses in the event that the University fails
to do so. The Trustee is required to make such advances if requested to do so by the Holders of at least
25%, in principal amount of the outstanding Obligations and if the Trustee has been provided with
adequate funds for the purpose of making the advance.
Any amounts so paid at any time, with interest as determined in the Indenture from the date of
payment, (a) will be an additional obligation secured by the Indenture, (b) will be given a preference in
payment over any Debt Service Charges, and (c) will be paid out of the General Receipts, if not caused
otherwise to be paid.
The Trustee may resign upon 60 days notice. The Trustee may be removed by the Holders of a
majority in principal amount of outstanding Obligations. A successor Trustee may be appointed by the
University, but if not appointed within 10 days of removal or resignation, may be appointed by Holders of
a majority in principal amount of outstanding Obligations. A successor Trustee must have an unimpaired
reported capital and surplus of at least $75,000,000.
20
Bond Insurers
Subject to certain conditions, each bond insurer insuring Obligations will have the right, upon the
occurrence of an Event of Default, to enforce the rights of the Holders of the series of Obligations it
insures and to direct remedies to be taken upon default.
Each bond insurer’s consent is required for amendments to the Indenture, and each bond insurer
is entitled to notices under the Indenture. The consent of certain bond insurers is required for the removal
of the Trustee and selection and appointment of any successor trustee, and for the initiation or approval of
any other matter requiring bondholder consent.
The Indenture contains additional provisions that are operative as to certain bond insurers. Those
provisions, among other things, prohibit defeasance of the Indenture while Debt Service Charges on the
applicable series of Bonds are being paid by the bond insurer, require removal of the Trustee at the
direction of the bond insurer for breach of trust, and require the consent of the bond insurer to any
reorganization or liquidation plan with respect to the University.
TRUSTEE AND PAYING AGENT
U.S. Bank National Association, St. Paul, Minnesota, is a national bank organized and existing
under the laws of the United States, and is authorized to exercise corporate trust powers in the State of
Ohio. U.S. Bank National Association will provide trustee and paying agent services under the Indenture
through its Cincinnati, Ohio corporate trust office.
The Trustee may be removed at any time by an instrument or concurrent instruments in writing
delivered to the Trustee and to the University and signed by or on behalf of the holders of not less than a
majority in aggregate principal amount of Bonds then outstanding.
TAX MATTERS
In the opinion of Roetzel & Andress, Bond Counsel, under existing law:
(a)
The interest on the Series 2005 Bonds is excluded from gross income for federal
income tax purposes under Section 103 of the Internal Revenue Code of 1986, as
amended (the “Code”), and is not an item of tax preference under Code Section
57 for purposes of the alternative minimum tax imposed on individuals and
corporations, and
(b)
The interest on the Series 2005 Bonds, and any profit made on their sale,
exchange or other disposition, are exempt from the Ohio personal income tax,
Ohio commercial activity taxes, the net income base of the Ohio corporate
franchise tax, and municipal and school district income taxes in Ohio.
An opinion to those effects will be included in the legal opinion of Bond Counsel. Bond Counsel
will express no opinion as to any other tax consequences regarding the Series 2005 Bonds.
The opinions on federal tax matters will be based on and will assume the accuracy of certain
representations and certifications, and compliance with certain covenants, of the University that will be
contained in the transcript of proceedings and that are intended to evidence and assure the foregoing,
including that the Series 2005 Bonds are and will remain obligations the interest on which is excluded
21
from gross income for federal income tax purposes. Bond Counsel will not independently verify the
accuracy of the certifications and representations made by the University.
The Series 2005 Bonds do not meet the requirements to be, and are not, designated or treated as
“qualified tax-exempt obligations” under Code Section 265(b).
The Code prescribes a number of qualifications and conditions for the interest on state and local
government obligations to be and to remain excluded from gross income for federal income tax purposes,
some of which, including provisions for potential payments by the issuer to the federal government,
require future or continued compliance after issuance in order for the interest to be and continue to be so
excluded from the date of issuance. Noncompliance with these requirements could cause the interest on
the Series 2005 Bonds to be included in gross income for federal income tax purposes and thus to be
subject to federal income tax retroactively to the date of their issuance. The University has covenanted to
take actions required of it for the interest on the Series 2005 Bonds to be and to remain excluded from
gross income for federal income tax purposes, and not to take any actions that would adversely affect that
exclusion.
Under Code provisions applicable only to certain corporations (as defined for federal income tax
purposes), 75% of the excess of adjusted current earnings (which includes interest on all tax-exempt
bonds, including the Series 2005 Bonds) over other alternative minimum taxable income is included in
alternative minimum taxable income that may be subject to a corporate alternative minimum tax. In
addition, interest on the Series 2005 Bonds may be subje ct to a branch profits tax imposed on certain
foreign corporations doing business in the United States and to a tax imposed on excess net passive
income of certain S corporations.
Under the Code, the exclusion of interest from gross income for federal income tax purposes can
have certain adverse federal income tax consequences on items of income, deductions, or credits for
certain taxpayers, including financial institutions, certain insurance companies, recipients of Social
Security and Railroad Retirement benefits, those that are deemed to incur or continue indebtedness to
acquire or carry tax-exempt obligations, and individuals otherwise eligible for the earned income credit.
The applicability and extent of these and other tax consequences will depend upon the particular tax status
or other tax items of the owner of the Series 2005 Bonds or of book entry interests. Bond Counsel
expresses no opinion regarding those consequences.
From time to time, there are legislative proposals in Congress that, if enacted, could alter or
amend the federal tax matters referred to or adversely affect the market value of the Series 2005 Bonds. It
cannot be predicted whether or in what form any proposal might be enacted or whether, if enacted, it
would apply to obligations (such as the Series 2005 Bonds and book entry interests in them) issued before
enactment.
The discussion of tax matters in this Official Statement applies only in the case of purchasers of
the Series 2005 Bonds at their original issuance and at the price in dicated on the cover. It does not
address any other tax consequences, including, among others, the consequence of the existence of any
market discount to subsequent purchasers of the Series 2005 Bonds.
TRANSCRIPT AND CLOSING DOCUMENTS
A complete transcript of proceedings and a certificate (described under Litigation) relating to
litigation will be delivered by the University when the Series 2005 Bonds are delivered by the University
to the Underwriters.
22
FINANCIAL STATEMENTS
The audited financial statements of the University for the Fiscal Year ended June 30, 2004,
included in this Official Statement as Appendix B, have been audited by PricewaterhouseCoopers LLP,
independent auditors, as stated in their report appearing therein.
LEGAL MATTERS
Legal matters incident to the issuance of the Series 2005 Bonds and with regard to the tax-exempt
status of the interest on the Series 2005 Bonds (see Tax Matters ) are subject to the legal opinion of
Roetzel & Andress, A Legal Professional Association, whose legal services as Bond Counsel have been
retained by the University. The legal opinion, dated and premised on law in effect as of the date of
original delivery of the Series 2005 Bonds, will be delivered to the Underwriters at the time of original
delivery, and the text of the opinion will be printed on the Series 2005 Bonds. The opinion will speak
only as of its date, and subsequent distribution of it by recirculation of this Official Statement or
otherwise will create no implication that Bond Counsel has reviewed, or expresses any opinion
concerning, any of the matters referred to in the opinion after its date.
The proposed text of Bond Counsel’s legal opinion is set forth as Appendix D. The legal opinion
to be delivered may vary from that text if necessary to reflect facts and law on the date of delivery. In
addition to rendering the legal opinion, Bond Counsel will assist in the preparation of and advise the
University concerning documents for the transcript of proceedings for the Series 2005 Bonds.
In its capacity as Bond Counsel, Roetzel & Andress, A Legal Professional Association, has
participated in the preparation of, and has reviewed those portions of, this Official Statement under the
headings Introductory Statement, Details of Series 2005 Bonds, Security and Sources of Payment,
The Indenture, Tax Matters, Legal Matters, Continuing Disclosure Agreement, and Eligibility for
Investment and as Public Moneys Security. Bond Counsel has not been retained to, and will not, pass
on any other information in this Official Statement or in any other reports, financial information, offering
or disclosure documents, or other information pertaining to the University or the Series 2005 Bonds that
may be prepared or made available by the University or others to the Underwriters, purchasers or holders
of the Series 2005 Bonds, or others.
Certain legal matters will be passed upon for the University by Ted A. Mallo, Vice President and
General Counsel and an Assistant State Attorney General.
LITIGATION
There is no litigation or administrative action or proceeding pending or threatened to restrain or
enjoin, or seeking to restrain or enjoin, the issuance and delivery of the Series 2005 Bonds, or to contest
or question the proceedings and authority under which the Series 2005 Bonds are authorized and are to be
issued, sold, executed or delivered, or the validity of the Series 2005 Bonds. A no litigation certificate to
that effect will be delivered by the University at the time of original delivery of the Series 2005 Bonds.
The University is a party to various legal proceedings seeking damages or injunctive relief and
generally incidental to its operations but unrelated to the Bonds, including the Series 2005 Bonds. The
ultimate disposition of those proceedings is not presently determinable, but will not, in the opinion of the
appropriate University officials, have a material adverse effect on the Bonds or the security for the Bonds.
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RATINGS
Moody’s Investors Service is expected to assign a rating of “Aaa” to the Series 2005 Bonds, upon
the understanding that the Financial Guaranty Insurance Policy of the Bond Insurer, insuring the timely
payment of principal of and interest on the Series 2005 Bonds, will be issued by Ambac Assurance
Corporation upon delivery of the Series 2005 Bonds. See Bond Insurance and Appendix C. The
purchase of the Series 2005 Bonds by the Underwriters is conditioned upon the receipt of that rating.
Moody’s Investor Service has assigned an underlying rating (without regard to the Bond Insurance) of
“A2” to the Series 2005 Bonds. No application for a rating has been made by the University to any other
rating service.
The ratings reflect only the views of the rating agency, and any explanation of the meaning or
significance of the ratings may only be obtained from the rating service. There can be no assurance that a
rating when assigned will continue for any given period of time or that it will not be lowered or
withdrawn entirely by a rating service if in its judgment circumstances so warrant. Any lowering or
withdrawal of a rating may have an adverse effect on the marketability or market price of the Series 2005
Bonds.
CONTINUING DISCLOSURE AGREEMENT
The University has agreed, for the benefit of the holders and beneficial owners of the Series 2005
Bonds, in accordance with SEC Rule 15c2-12 (the Rule) to provide or cause to be provided such financial
information and operating data (Annual Information), audited financial statements and notices, in such
manner, as may be required for purposes of paragraph (b)(5)(i) of the Rule (Continuing Disclosure
Agreement), including specifically the following:
•
To each SEC-designated nationally recognized municipal securities information repository
(NRMSIR) and to the Ohio state information depository (SID):
•
Annual Information for each Fiscal Year (beginning with Fiscal Year 2006) not later than
the 270th day following the end of the Fiscal Year (or, if that is not a University business
day, the next University business day), consisting of annual financial information and
operating data of the type included in this Official Statement under the caption “Security
and Sources of Payment -- General Receipts Pledged to the Bonds ” and in Appendix
A under the captions Enrollment, Degrees Granted, Student Fees and Charges, under
the following subcaptions under the caption Financial Operations and Results:
Summary of Current Revenues, Expenditures and Mandatory Transfers – Main
Campus and Wayne College, Auxiliary Enterprises and State Appropriations to the
University and under the caption Outstanding Indebtedness. The University expects
that Annual Information will be provided directly by it and in part by cross-reference to
other documents, such as its Annual Financial Statements and subsequent final official
statements relating to the Bonds.
•
When and if available, audited general purpose financial statements of the University for
each Fiscal Year. The University expects such financial statements to be prepared, that
they will be available separately from the Annual Information, and that the accounting
principles to be applied in their preparation will be as described in Appendix A under
Financial Operations and Results .
24
•
To each NRMSIR or to the Municipal Securities Rulemaking Board (MSRB), and to the SID, in a
timely manner, notice of:
•
The occurrence of any of the following events, within the meaning of the Rule, with
respect to the Series 2005 Bonds, if material* : principal and interest payment
delinquencies; non payment related defaults; unscheduled draws on any debt service
reserve s or credit enhancements reflecting financial difficulties; substitution of credit or
liquidity providers, or their failure to perform; adverse tax opinions or events affecting
the tax-exempt status of the Series 2005 Bonds; modifications to rights of holders or
beneficial owners; Bond calls; defeasances; release, substitution, or sale of property
securing repayment of the Series 2005 Bonds; and rating changes.
•
The failure to provide the Annual Information within the time specified above.
•
Any change in the accounting principles applied in the preparation of the annual financial
statements, any change in Fiscal Year, any failure of the Board to appropriate moneys for
the purpose of paying costs to be incurred by the University to perform the Continuing
Disclosure Agreement for the applicable fiscal period, and termination of the Agreement.
The University reserves the right to amend the Continuing Disclosure Agreement, and to obtain
the waiver of noncompliance with any provision of the Agreement, as may be necessary or appropriate to
achieve its compliance with any applicable federal securities law or rules, to cure any ambiguity,
inconsistency or formal defect or omission, and to address any change in circumstances arising from a
change in legal requirements, change in law, or change in the identity, nature, or status of the University.
Any such amendment or waiver will not be effective unless the agreement (as amended or taking into
account such waiver) would have complied with the requirements of the Rule at the time of the primary
offering of the Series 2005 Bonds, after taking into account any applicable amendments to or official
interpretations of the Rule, as well as any change in circumstances, and until the University shall have
received either (i) a written opinion of bond or other qualified independent special counsel selected by the
University that the amendment or waiver would not materially impair the interest of holders or beneficial
owners of the Series 2005 Bonds, or (ii) the written consent to the amendment, or waiver, by the holders
of at least a majority of the aggregate outstanding principal amount of the Series 2005 Bonds.
The Continuing Disclosure Agreement will be solely for the benefit of the holders and beneficial
owners of the Series 2005 Bonds including holders of book entry interests in them. The right to enforce
the provisions of that Continuing Disclosure Agreement may be limited to a right of the holders or
beneficial owners to enforce to the extent permitted by law (by mandamus, or other suit, action or
proceedings at law or in equity) the obligations and duties under it.
Any noncompliance with the Continuing Disclosure Agreement will not be a default or failure to
comply for purposes of the default provisions of the Trust Agreement. The Trustee has no responsibility
for monitoring compliance with that Agreement.
The performance by the University, as the only obligated person with respect to the Series 2005
Bonds, of the Continuing Disclosure Agreement will be subject to the annual appropriation by the Board
of moneys for the applicable purposes.
*
The University has not obtained or provided, and does not expect to obtain or provide, any debt service reserves,
credit enhancements or credit or liquidity providers for the Series 2005 Bonds except for the bond insurance
described in Exhibit C, and repayment of the Series 2005 Bonds is not secured by a lien on any property capable of
release or sale or for which other property may be substituted.
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The Continuing Disclosure Agreement will remain in effect only for such period that the Series
2005 Bonds are outstanding in accordance with their terms and the University remains an obligated
person with respect to those Bonds within the meaning of the Rule.
There have not been any instances in which the University failed to comply, in all material
respects, with the previous continuing disclosure agreement made by the University for purposes of the
Rule.
UNDERWRITING
SBK-Brooks Investment Corp. (the Underwriter) has agreed to purchase all of the Series 2005
Bonds, subject to certain conditions precedent, at a purchase price of $21,363,300.35, which represents
the par amount, less $149,927.75 of Underwriter’s discount and plus $218,228.10 of net original issue
premium. The Underwriter may offer the Series 2005 Bonds to certain dealers (including dealers
depositing the Bonds into unit investment trusts, certain of which may be sponsored or managed by the
Underwriter) and others at a price lower than that offered to the public. The initial public offering prices
may be changed from time to time by the Underwriter.
In connection with the offering of the Series 2005 Bonds, the Underwriter may overallot or effect
transactions which stabilize or maintain the market prices of those bonds at levels above those which
might otherwise prevail in the open market. Such stabilizing, if commenced, may be discontinued at any
time.
ELIGIBILITY FOR INVESTMENT AND AS PUBLIC MONEYS SECURITY
To the extent that the matter as to the particular investor is governed by Ohio law, and subject to
any applicable limitations under other provisions of Ohio law, under the Act the Series 2005 Bonds are
lawful investments for banks, societies for savings, savings and loan associations, deposit guarantee
associations, trust companies, trustees, fiduciaries, insurance companies (including domestic life and
domestic not for life), trustees or other officers having charge of sinking and bond retirement or other
special funds of political subdivisions and taxing districts of the State, the Commissioners of the Sinking
Fund, the Administrator of Workers’ Compensation, and State retirement systems (Teachers, Public
Employees, Public School Employees, and Police and Firemen’s), notwithstanding any other provisions
of the Revised Code with respect to investments by them.
The Act provides that the Series 2005 Bonds are acceptable under Ohio law as security for the
deposit of public moneys.
Owners of book entry interests in the Series 2005 Bonds should make their own determination as
to such matters as legality of investment in or pledgeability of book entry interests.
CONCLUDING STATEMENT
Quotations in this Official Statement from, and summaries and explanations of, the provisions of
the Ohio Constitution, the Revised Code and other laws, the Series 2005 Resolution, the Trust Indenture
and the Sixth Supplemental Indenture, do not purport to be complete, and reference is made to the
pertinent provisions of the Constitution, Revised Code and other laws and those documents for all
complete statements of their provisions. Those documents are available for review at the University
during regular business hours at the office of the Vice President for Business and Finance. During the
initial offering period, copies of those documents will also be available for review at the offices of the
Underwriter.
26
To the extent that any statements in this Official Statement involve matters of estimate or opinion,
whether or not expressly stated to be such, those statements are made as such and not as representations
of fact or certainty, and no representation is made that any of those statements will be realized.
Information in this Official Statement has been derived by the University from official and other sources
and is believed by the University to be reliable, but information other than that obtained from official
records of the University has not been independently confirmed or verified by the University and its
accuracy is not guaranteed.
This Official Statement is not to be construed as or as part of a contract or agreement with the
original purchasers or holders of the Series 2005 Bonds.
This Official Statement has been prepared, approved and delivered by the University, and
executed for and on its behalf and in his official capacity by the officer indicated below.
THE UNIVERSITY OF AKRON
/s/ Roy L. Ray
By: Vice President for Business
and Finance/CFO
1308379.1
APPENDIX A
The University of Akron
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APPENDIX A
TABLE OF CONTENTS
History ...................................................................................................................
General...................................................................................................................
The University and the Community........................................................................
Governance and Administration.............................................................................
Board of Trustees ............................................................................................
Administrative Officers ...................................................................................
Academic Programs and Accreditations .................................................................
Faculty and Employees...........................................................................................
Enrollment ..............................................................................................................
General............................................................................................................
Student Admissions .........................................................................................
Degrees Granted .....................................................................................................
Student Fees and Charges .......................................................................................
Student Financial Aid ......................................................................................
Physical Plant .........................................................................................................
Master Plan.....................................................................................................
EJ Thomas Performing Arts Hall ....................................................................
Libraries..........................................................................................................
Housing and Dining ........................................................................................
Student Activity and Service Facilities ............................................................
Athletic Facilities ............................................................................................
Other Facilities ................................................................................................
Branch Campus ...............................................................................................
Other Institutions; Ohio Board of Regents ..............................................................
Financial Operations and Results............................................................................
General............................................................................................................
Financial Reports and Audits ..........................................................................
General Budgeting Procedures ........................................................................
Operating Budgets...........................................................................................
State Appropriations to the University....................................................................
State Budgets and Appropriations Generally ..........................................................
Grants and Contracts ..............................................................................................
Endowment and Foundation...................................................................................
The University of Akron Research Foundation.......................................................
Insurance Coverage ................................................................................................
Outstanding Indebtedness .......................................................................................
Retirement Plans ....................................................................................................
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The University of Akron
History
The University was founded in 1870 by the Ohio Unive rsalist Convention as Buchtel
College, a private, liberal arts institution named for its chief benefactor, farm machinery
manufacturer John R. Buchtel. Buchtel College was renamed The University of Akron when it
became a municipal university in 1913. The University first received state assistance in 1963
and became a state university in 1967.
General
The University is one of 13 state universities in Ohio and one of the 60 largest
universities in the nation. Fall 2005 enrollment at the main campus in Akron was 21,049 while
enrollment at the Wayne County branch campus in Orrville was 1,587 for a total University
enrollment of 22,636 students.
The makeup of the student body by degree program in Fall 2004 was: 78%
undergraduate students pursuing associates or bachelors degrees; 14% graduate students
pursuing masters or doctoral degrees; 2.5% professional students pursuing law degrees; and
5.5% non-degree seeking. Ohio residents represent 97.8% of all undergraduates, 78.1% of all
graduate students and 86.9% of all professional students. The University also enrolls students
from 44 other states and 76 foreign countries.
Through ten degree-granting colleges, the University offers more than 200
undergraduate majors and courses of study leading to 49 associates, 171 bachelors, 118 masters,
17 doctoral and the juris doctor degrees. At the beginning of the Fall 2004 semester, based on
headcount, faculty and instructional staff numbered 1,598; non- instructional staff numbered
1,568; and other part-time staff, including graduate assistants, numbered 1,671.
The University is a comprehensive teaching and research university well known for
its work in chemistry, engineering, history, industrial and organizational psychology, law,
political science and polymer science and polymer engineering, among others. The University
ranks 1st in Ohio and 2nd in the nation in the number of inventions generated per dollar of
research (Association of University Technology Managers, as reported in the Chronicle of
Higher Education, July 19, 2002). The University’s polymer science and polymer engineering
program is consistently ranked in the top two in the country in the US News and World Report
rankings of “America’s Best Graduate Schools.”
The University and the Community
The main campus of the University is located 30 miles south of Cleveland in Akron,
Ohio. With a 2000 population of 217,074, Akron is Ohio’s fifth largest city. The 2000
population of Summit County was 542,899 and the 2000 population of the Akron Primary
Metropolitan Statistical Area (comprised of Summit and Portage Counties) was 694,960. The
University is one of the largest employers in the City and in Summit County.
The University is a leader in collaborative efforts that link schools, governmental
agencies and the private sector in innovative projects which benefit the entire metropolitan area.
Some of these projects have become national models.
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The Medina Project established a fiber optic link between the University and nine
high schools in Medina County. Designed for optimal learning, the linkage allows simultaneous
instruction to and interaction between, more than 26,000 public school students through twoway, real-time voice, audio/video and data transmission. The state-of-the-art linkage with the
University provides the only local access to higher education for residents of one of the fastest
growing counties in Ohio. To accomplish this, the University joined with two school systems,
various governmental agencies at different levels and private businesses.
The Central Hower Initiative is a collaboration between the University, the Akron
City School District, the Ohio Department of Education and the Ohio Board of Regents to
explore innovative joint programs with Central Hower High School. This initia tive is one
example of several efforts by the University to improve public education through the entire
continuum, from kindergarten through college.
The University also serves the cultural needs of Northeast Ohio. The EJ Thomas
Performing Arts Hall hosts operas, ballets, theater productions, lectures and concerts of all types.
The 3,000-seat landmark is a masterpiece of architecture, acoustics and creative mechanisms. It
serves as the home of the acclaimed Ohio Ballet and the Akron Symphony Orchestra.
As a member of Northeastern Education Television of Ohio, Inc., the University
provides educational and public affairs programming to area residents. The University also
operates WZIP-FM, one of the highest-rated student-run college radio stations in the United
States (Arbitron Radio Ratings Data for Fall 2003, weeks of September 18 to December 10, as
reported by The Radio Research Consortium).
Governance and Administration
Board of Trustees
The University is currently governed by a nine voting member Board of Trustees
which, under Ohio law, is directed and granted authority to do all things necessary for the proper
maintenance and successful and continuous operation of the University. The Trustees are
appointed by the Governor, with the advice and consent of the State Senate, for overlapping
nine-year terms.
The current voting members and officers of the Board and the years (on July 1) in
which their respective terms expire are as follows:
John A. Fink, M.D., Chair (2006)
Robert W. Pogue (2007)
William F. Demas, M.D., Vice Chair (2008)
Diane C. Fisher (2009)
Philip S. Kaufmann, J.D., Vice Chair (2010)
Edward L. Bittle (2011)
Ann Amer Brennan, J.D. (2012)
Chander Mohan, M.D. (2013)
Jack Morrison, Jr. (2014)
There are two non-voting student member positions, appointed for two-year terms by
the Governor to serve on the boards of trustees of state universities. Elizabeth M. Kovac’s term
will expire in 2006, and a new appointment to the second student trustee position is expected to
be named soon.
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Administrative Officers
The administration of the University has been delegated by the Board of Trustees to
the President and administrative staff. The administrative staff is appointed by the President,
subject to Board approval.
The current administrative officers are:
Dr. Luis M. Proenza
President
Dr. Elizabeth J. Stroble
Senior Vice President and Provost, Chief Operating
Officer
Mr. Roy L. Ray
Vice President for Business and Finance, Chief
Financial Officer
Ted A. Mallo, J.D.
Vice President and General Counsel
Dr. George R. Newkome
Vice President for Research & Graduate School
Mr. John A. LaGuardia
Vice President for Public Affairs and Development
Mr. Theodore Curtis
Vice President for Capital Planning and Facilities
Management
Dr. Sharon L. Johnson
Vice President for Student Affairs
Mr. Thomas R. Beitl
Interim Director of Communication Services,
Hardware Operations and Operating System
Services
and Enterprise Application Services
Mr. Brian E. Davis
Associate Vice President for Business and Finance;
Operations and Fiscal Planning
Mr. Brett Riebau
Interim Controller
Luis M. Proenza was appointed the University’s 15th President effective January 1,
1999. Prior to coming to The University of Akron, Dr. Proenza served as Vice President for
Research and Dean of the Graduate School at Purdue University (1994-98) and as Vice President
for Academic Affairs and Research for the University of Alaska System (1992-94). He also
served as Vice-Chairman and Commissioner of the United States Arctic Research Commission
(1992-96) in addition to various other administrative, academic and community appointments
throughout his distinguished career. Dr. Proenza earned a bachelors degree from Emory
University, a masters from The Ohio State University and a doctorate from The University of
Minnesota.
Elizabeth J. Stroble was named Senior Vice President and Provost/COO in
June 2003, after having served as Dean of the College of Education for two years. Before
joining the University, Dr. Stroble served for five years as the associate dean and a professor of
the school of education at the University of Louisville in Kentucky. Dr. Stroble holds a
bachelors (history and English) degree from Augustana College, two masters (history and
American and English literature) degrees from Southern Illinois University, and a doctorate
(curriculum and instruction) from the University of Virginia in Charlottesville.
Roy L. Ray was appointed Vice President for Business and Finance/CFO in
September 2002. Prior to coming to The University of Akron, Mr. Ray served as Vice President
for Finance and Administration at Cleveland State University. Mr. Ray’s service in higher
education was preceded by a distinguished public service career during which he served as a
state senator for 16 years, mayor of the city of Akron for 4 years, and for 10 years held other city
positions including budget director and finance director. While representing Ohio’s 27th district
in the state senate, Mr. Ray served for six years as chairman of the Senate Finance Committee.
Mr. Ray earned a bachelors degree from The University of Akron.
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Ted A. Mallo, J.D. has served as Vice President and General Counsel since July
1996. He taught in high school before coming to the University as an Adviser of Students in
1969. He also has served as Director of Student Legal Programs, Director of Legal Affairs and
-- concurrently with a University appointment as General Counsel -- as Assistant Attorney
General of the State of Ohio. Mr. Mallo holds bachelors, masters and juris doctorate degrees
from The University of Akron.
Thomas R. Beitl was appointed Liaison to the Vice President for Business and
Finance and Interim Director of Communication Services, Hardware Operations and Operating
System Services and Enterprise Application Services in February 2004. Mr. Beitl has served as
Director, Hardware Operations and Operating Systems Services since joining the University in
December 2000. Prior to coming to the University, Mr. Beitl was employed by Consolidated
Natural Gas/Dominion Resources, Inc., in a variety of information technology positions for 25
years. He holds a masters (business administration) degree from Robert Morris College and a
bachelors (business management) degree from Baldwin-Wallace College.
George R. Newkome was appointed Vice President for Research and Dean of the
Graduate School in January 2001. Dr. Newkome came to The University of Akron from the
University of South Florida, where he served as Vice President for Research. During his tenure
at USF, Dr. Newkome was also an honorary professor at the University of Bordeaux, France
(1998) and a visiting professor at Louis Pasteur University’s Le Bel Institute in Strasbourg,
France (1996, 1992 and 1991). Prior to his appointments at USF, Dr. Newkome held academic
posts at Louisiana State University, Emory University, National University of Mexico, Stanford
University, and The University of Bonn. Dr. Newkome earned bachelors and doctorate degrees
from Kent State University and completed postdoctoral work at Princeton University.
John A. LaGuardia has served as Vice President for Public Affairs and
Development since March 1997. He joined the University in 1971 as Associate Director of
Alumni Relations. He then served as Director of Alumni Re lations from 1979 to 1985, before
holding a series of sales and management positions in the private sector. Mr. LaGuardia returned
to the University in 1994. He holds bachelors and masters degrees from The University of
Akron.
Theodore Curtis was appointed Vice President for Capital Planning and Facilities
Management in June 1999. He joined the University in August 1998 as Executive Director of
Architectural Services. Prior to coming to the University, Mr. Curtis was a founding partner in
the Akron-based architectural firm of Curtis & Rasmussen. During his career with the firm, Mr.
Curtis also served as architect for the Kent State University in Ohio.
Sharon L. Johnson joined the University in April 2003 as Associate Vice President
and Dean of Student Life and was then appointed Vice President for Student Affairs in May
2004. Prior to coming to the University, Dr. Johnson was the Associate Director of the Institute
for Higher Education Management and Senior lecturer in the School of Education at the
University of Pittsburgh. Her administrative experience also includes being Vice Provost and
Dean of Students at the University of Pittsburgh, Vice President for Student Affairs and Dean of
Students at Slippery Rock University, and Assistant Vice President for Student Affairs at
Wichita State University. Dr. Johnson holds bachelors (social work) and masters (student
personnel services) degrees from the University of Wisconsin LaCrosse.
Brian E. Davis was appointed Associate Vice President for Business and Finance;
Operations and Fiscal Planning, in 2000. He began his career with the University in 1985 as a
staff auditor. Prior to coming to the University, Mr. Davis was employed for two years with a
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local bank. He holds bachelor’s (accounting) and master’s (taxation) degrees from the
University and also holds a non-practicing CPA license.
Brett Riebau was appointed Interim Controller in July 2002. He joined the
University in 1999 as an accountant and became Assistant Controller in 2001. Mr. Riebau ho lds
a bachelors degree in accounting from The University of Akron. Prior to coming to the
University, he was employed for three years with a local CPA firm which specialized in
governmental accounting and auditing, and he also worked in the private sector.
Academic Programs and Accreditations
Over 200 academic departments at the University offer 49 associate, 118
baccalaureate, 118 masters, the juris doctor and 17 doctoral degree programs. The University’s
academic programs are administered by the ten colleges described below:
1.
The Buchtel College of Arts and Sciences has many academic, research and
service programs which have earned state-wide and national distinction (U.S.
News & World Report, 2001), including industrial and organizational psychology,
chemistry, history and political science.
2.
The College of Engineering has one of the top-rated (U.S. News & World
Report, 2001) undergraduate programs in Ohio and one of the oldest and largest
cooperative education programs in the nation. Graduate and research programs
also are strong, with selective excellence in computational mechanics, process and
reaction engineering and control systems.
3.
The College of Education is fully accredited by the National Council for
Accreditation of Teacher Education and holds special accreditation in counseling,
marriage and family therapy and counseling psychology. It collaborates with area
schools and agencies and is in the process of implementing an innovative teacher
education program.
4.
The College of Business Administration enjoys full American Assembly of
Collegiate Schools of Business accreditation, which places it among a select
group of fewer than 100 business schools in the U.S. It is committed to selective,
high-quality education for undergraduate and MBA students and to the highestquality applied research for its faculty.
5.
The College of Fine and Applied Arts provides diverse programs ranging from
visual and performing arts to the practical delivery of human services through its
various schools: art, communication, communicative disorders, dance, music,
social work and theater arts. The EJ Thomas Performing Arts Hall – serving the
University and community – is a major cultural resource for the region.
6.
The College of Nursing offers accredited programs of instruction at the
undergraduate and masters levels. As a result of the college’s growing base of
externally funded research and scholarships, a cooperative doctoral program in
nursing with Kent State University was established in the fall of 2000.
7.
The College of Polymer Science and Polymer Engineering has evolved from
the University’s long tradition as a pioneer in polymer-related fields to become
the nation’s largest – as well as one of the world’s leading – institutions in
graduate education and research in these disciplines.
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8.
The School of Law offers many academic advantages, including small classes, a
cooperative learning environment and readily accessible faculty members. Its
academic program is an eclectic blend of tradition and innovation combining
concentrated studies with intensive training in practical skills.
9.
Summit College (formerly the Community and Technical College) offers 24
associate’s and 7 bachelor’s degree programs to serve the educational needs of a
diverse student body. Through its Division of Workforce Development and
Continuing Education, Summit College also provides training and re-training for
area industry, business, government, health care and other organizations.
10.
Wayne College is a comprehensive, degree-granting, two- year branch campus of
the University. The college provides credit and non-credit programming for a
population base exceeding 200,000. It is located in Orrville, 30 minutes
southwest of Akron.
Other divisions within the University include the Graduate School, University
College, University Libraries and Student Affairs.
Another of the University’s hallmarks is its extensive collaboration with other
colleges and universities (both public and private), schools, government agencies and other
organizations. The University, for example, is a partner with Kent State University and
Youngstown State University in the Northeastern Ohio Universities College of Medicine
(NEOUCOM), as well as in the Northeastern Educational Television of Ohio, Inc.
As a member of NEOUCOM, the University offers students the opportunity to earn a
combined Bachelor of Science and Doctor of Medicine degree in six years. The University is
not fiscally responsible for NEOUCOM, and NEOUCOM’s revenues are not included in the
General Receipts.
The University is accredited by the North Central Association of Colleges and
Schools (NCA), with the most recent accreditation granted in 2003 for a 10- year period. The
University has a broad range of special accreditations for particular programs.
Faculty and Employees
At the beginning of the Fall 2004 semester, the University had 4,837 employees
(2,301 full-time, and 2,536 part-time), as follows:
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Full-time Employees:
Part-time Employees:
Teaching Faculty
Administrative Faculty w/Rank
Library Faculty w/Rank
733
45
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Total Full-time Faculty
803
Contract Professionals
Staff
432
1,066
Total Full-time Employees
2,301
Teaching Faculty (Credit)
Teaching Faculty (Non-Credit)
Staff
Administrators
Graduate Assistants
865
67
410
31
1,163
Total Part-time Employees
2,536
Total Employees
4,837
Of the full- time regular faculty, 88% are tenured (or on tenure track) and
approximately 69.2% hold terminal/doctoral degrees. Members of the faculty are active in the
University setting and in community programs, research projects and the publication of
professional articles and textbooks.
A state–wide public employee collective bargaining law applies generally to public
employee relations and collective bargaining. The University is a party to a collective
bargaining agreement with the Commercial Workers of America (CWA), Local 4302, which
represents approximately 190 craft, maintenance and food service employees. That agreement
expired on June 30, 2003; negotiations are ongoing. The terms and conditions of the expired
contract govern until such time as an agreement is reached on a new contract. The American
Association of University Professors (AAUP) has been certified as the exclusive bargaining
agent to represent the University’s tenured faculty. Negotiations to develop the first contract
have been on- going since the fall of 2003.
Enrollment
General
The University attracts students from a variety of backgrounds and geographical
locations, with Fall semester 2004 representation from 42 states and 79 foreign countries. Ohio
residents represented 97% of all students, while 2% were from other states and 1% were
international students. Among the Ohio residents, 80% were from Medina, Portage, Stark,
Summit and Wayne Counties. The University’s main campus is located in Summit County, and
its branch location is in Wayne County. Medina, Portage and Stark Counties are all contiguous
with Summit County.
Of the undergraduates enrolled in the Fall 2003 semester, approximately 74% were
full-time and 26% were part-time. Of the graduate students, approximately 48% were full-time
and 52% were part-time. Of the professional students, approximately 95% were full-time and
5% were part-time. Those distributions of full- and part-time enrollments were consistent with
prior years.
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The University’s Fall semester headcount enrollment (full-time and part-time
students) and FTE enrollment for recent academic years are shown below:
Fall
Semester
2001
2002
2003
2004
2005
Undergraduate
19,973
20,117
20,111
19,246
18,723
Graduate
3,545
3,577
3,597
3,458
3,379
Professional
583
610
627
579
534
Total
24,101
24,304
24,335
23,283
22,636
FTE
17,523.8
17,872.2
18,063.9
17,467.0
17,122.0
Student Admissions
The table below shows – for the academic years indicated – the total number of new
freshman applications received, the number and percentage of those applicants accepted for
admission, the number of new freshmen enrolled and the percentage of the accepted applicants
that became enrollees.
Fall
Semester
Applications
Received
2001
2002
2003
2004
2005
8,035
7,945
8,715
9,304
9,214
Applications
Accepted
Percent
Accepted
Applicants
Enrolled
Percent
Enrolled
7,039
6,724
7,653
8,022
7,656
87.6
84.6
87.8
86.2
83.1
3,504
3,382
3,512
3,289
3,395
50.0
50.0
45.9
41.0
44.3
For the Fall 2005 semester, the average University freshman composite score on the
American College Test (ACT) was 20.4, compared to the national average of 20.9.
Degrees Granted
A measure of the University’s education activity and stability is the number of
degrees granted, as shown in the following table:
Academic
Year
Associates
Bachelors
Masters
Doctorate
Professional
2000-01
2001-02
2002-03
2003-04
2004-05
580
593
536
525
554
1,814
2,072
2,057
2,151
2,271
945
963
940
811
1,012
121
80
82
100
114
144
157
133
190
189
Student Fees and Charges
The per- full- time student instructional and general fees for recent regular (two
semesters) academic years are as follows:
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Fiscal Year
2002
2003
2004
2005
2006
Ohio Resident:
Undergraduate
Graduate
$ 4,930
7,239
$ 6,098
8,395
$ 6,809
8,803
$ 7,510
9,691
$ 7,958
10,256
Non-Resident:
Undergraduate
Graduate
$11,132
12,169
$12,912
13,812
$ 14,298
15,203
$ 15,741
16,721
$ 16,682
17,191
The Board on June 22, 2005 approved a 6% fee increase for the 2005-06 academic year.
The State appropriations act for the biennium that began July 1, 2005 limits increases in certain fees
that may be imposed by boards of trustees of State universities for State residents for an academic
year over amounts charged in a prior academic year to no more than 6.0% (instructional and general
fee limitation). The appropriations act did not cap or limit increases in special fees, graduate
instructional fees, nonresident tuition surcharges, or room and board charges. Amo ng other
exceptions to the statutory limitation on fee increases are provisions that the limitation does not
apply to an institution’s covenants related to its obligations, such as the University’s covenant to
charge sufficient fees and other items compris ing the General Receipts to pay debt service, or to
prior binding commitments to which an institution had identified fee increases as a source of funds.
Set forth below is comparative information concerning instructional and general fees
charged Ohio residents by the University and the other State universities, as well as room and
board charges, as of Fall 2005.
Institution
The University of Akron
Bowling Green State University
Central State University
University of Cincinnati
Cleveland State University
Kent State University
Miami University
The Ohio State University
Ohio University
Shawnee State University
University of Toledo
Wright State University
Youngstown State University
Instructional and General Fees* Room
Undergraduate
Graduate and Board**
$
7,958
8,560
4,994
8,877
7,394
7,954
21,410
8,082
8,235
5,508
7,478
6,864
6,333
*
$10,256
10,808
0
10,773
10,073
8,460
10,104
8,832
8,931
N/A
9,880
9,171
7,765
$7,208***
6,434
6,982
7,890
6,680
6,640
7,610
7,275
7,686
5,967
7,472
6,642
6,280
Based on full-time charges for 15 credit hours for an academic year and the higher tuition rate assessed to new
students.
** Average double-occupancy room rates and from 10 - 21 meals per week.
*** Room rate and 19-meal traditional board plan for Brown Street, Bulger, Gallucci, Sisler McFawn and Spanton
Halls.
Source: Ohio Board of Regents Fall 2005 Survey of Student Charges.
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For the 2005-06 academic year, total instructional and general fees for a full-time
student who is an Ohio resident averaged $3,416 at the public community colleges and technical
colleges. Annual non-resident tuition surcharges for undergraduates at the state universities
ranged from $2,582 to $13,752. These fee amounts do not include special purpose fees.
The following student budget represents estimated average undergraduate student
costs at the University for a full-time, in-state undergraduate living in a dormitory for the regular
2004-05 academic year. This is based on estimates currently used by the Office of Student
Financial Aid. Fees and charges that are the basis for these estimates are subject to change by
action of the Board of Trustees.
Tuition and Fees
Room and Board (Avg.)
Books
Personal Expenses
Transportation
Miscellaneous Fees
Total
$ 7,958*
7,186
900
1,520
984
846
$19,394
* Full-time, in-state undergraduate. Undergraduate, out-of-state residents are charged an additional $7,689 tuition
surcharge.
The room and board charge of $7,186 for the 2005-06 academic year represents the
average cost for a multiple occupancy room and the average board contract (15 meals per week).
See Physical Plant--Housing and Dining for additional information concerning the University’s
residence and dining halls.
Student Financial Aid
Approximately 70% of the University’s students receive some form of financial aid.
The primary responsibility for this function is placed with the Office of Student Financial Aid.
During Fiscal Year 2004, students received total assistance amounting to approximately $180
million. The primary sources included Stafford Student Loans, Pell Grants, Perkins Loans,
College Work Study, Supplemental Education Opportunity Grants, Ohio Instructional Grants and
University scholarships, loans, graduate student waivers and graduate assistant stipends.
The following table summarizes the amounts of financial aid provided to University
students for recent fiscal years. All programs assisted by the federal and State governments are
subject to appropriation and funding by those governments.
(Balance of page intentionally left blank)
A-12
Fiscal Year
2002
2003
2004
Dollars
Awarded
No. of
Awards
Dollars
Awarded
No. of
Awards
$78,146,019
26,833
$91,656,887
28,960
$107,629,453
31,914
7,531,287
7,573
8,197,395
6,676
8,562,633
6,538
University
Funds
44,984,007
8,002
58,622,658
11,624
48,949,164
10,554
Externally
Funded
6,811,274
2,705
8,532,351
3,910
14,881,186
4,465
$154,256,370
48,880
$167,009,291
51,170
$180,022,436
53,471
Source
Federal
Funds
State
Funds
TOTAL
Dollars
Awarded
No. of
Awards
Federal reports for federal fiscal year 2003 show a Guaranteed Student Loan default
rate of University students of 5.9% compared to a national average of 5.4%, and an equivalent
University administered Perkins loan default rate of 12.8% compared to a national average of
12.0%.
Physical Plant
Physical property owned by or otherwise available to and utilized by the University
on the main campus consists of 81 buildings and over 218 acres of land. The University has
approximately 6.4 million gross square feet of space in main campus buildings. The physical
plant is estimated by the University to have a replacement value of approximately $691.3
million, with a current contents value of an additional $194.8 million (as of 7/1/04).
Master Plan
The University has substantially completed the Landscape for Learning, its master
plan for the campus. Designed to create a more residential campus in an urban setting, this
master plan included the construction of nine buildings, the reno vation of 14 structures and the
addition of 30 acres of green space. The University has expended approximately $300 million to
date.
Phase I costs amounted to approximately $200 million and were supported through an
issue of $131,200,000 of General Receipts Bonds, Series 1999 (refunded in substantial part by
the Series 2004 Bonds), State capital appropriations in excess of $50 million and various local
sources. Phase I included the construction of six new buildings, renovation of 14 existing
structures, the closing of two streets through campus, and the addition of 30 acres of green space.
Emphasis was on the improvement of student life, as evidenced by certain of the facilities
included in Phase I: a new Student Union, a new Student Recreation Center, new educational
facilities and parking facilities, and renovations to existing educational facilities, parking
facilities and residence halls.
A-13
In June 2003, the University issued $45,815,000 of General Receipts Bonds to fund a
portion of Phase II of the Master Plan, including: renovations to three existing parking decks;
construction of a new parking deck (on the site of an existing surface parking lot); buildout of
retail space in the new Student Union (primarily for food vendors); construction of a new field
house adjacent to the new Student Recreation Center, including a 100-yard varsity football
practice field with artificial turf, a six- lane varsity indoor track, and support facilities; acquisition
of land; and various telecommunications improveme nts.
The University has secured State capital funds in the amount of $7,784,808 for an
addition to Guzzetta Hall that will enable the University to consolidate all of its dance programs
at this site, provide a 675-seat theatre with a full proscenium stage with fly tower wings, and
support the renovation of the existing building to conform with the new addition. In addition to
the State capital funds, the University has identified additional funding needs of $2.5 million.
The University is currently securing donations to support the related debt service on this portion
of the project. The University currently expects to complete this project in August 2005. Other
future projects included in the Landscape for Learning plan include renovations to Leigh Hall
(distance education center) and Whitby Hall (chemistry classes), and new and renovated parking
facilities.
EJ Thomas Performing Arts Hall
EJ Thomas Hall, which opened in October 1973, is owned and operated by the
University on a not- for-profit basis for use by students and faculty of the University and by the
community and civic organizations active in the performing arts. The $13.9 million total cost of
the original building program was funded from a combination of local fundraising, the sale of
revenue bonds and a federal grant. The Hall, named in honor of the late Edwin J. Thomas
(retired chairman and chief executive officer of Goodyear Tire & Rubber Company), was
designed to create a performance space adaptable enough to suit many art disciplines. To
accomplish this task, a movable ceiling run by a computer counterweight system was installed.
The ceiling can be lowered to alter the Hall’s seating capacity from 2,956 to 874 seats. Parking
for patrons is available in the adjoining parking deck and in the many lots surrounding the
building. Included in the facilities financed by the Series 1999 Bonds was a $4.5 million
renovation to the Hall.
Libraries
The University libraries have more than 1,746,500 volumes of classified books,
bound periodicals and government publications. In addition, the collections include 1,614,000
microforms, 20,000 maps and 43,938 non-book materials.
Housing and Dining
The University provides housing for approximately 9% of its students. Most of the
other non-commuting students live in off-campus housing in the City of Akron. In the Fall 2003
semester, the twelve residence halls on campus housed 2,009 students, representing an average
occupancy rate of 97.3%. All rooms are furnished and the majority of the buildings are wired for
both cable television and internet access. Room charges include local telephone service in each
room.
The main student dining facility is located in a residence hall. The new Student
Union houses both University-owned and outside food service operations. The Student Union
includes the “Union Market,” a large student/faculty/staff dining facility offering a wide variety
of food concepts. The goal of the University- managed dining halls is to provide a high standard
of dining servic e at a reasonable cost.
A-14
The University last constructed a new residence hall in the late 1960s. The Facilities
financed with the Series 1997 Bonds included renovations to three residence halls: SislerMcFawn, Orr and Bulger Halls. Proceeds from the Series 1999 Bonds were used to finance the
renovation of Spanton and Ritchie Halls.
A private developer, Akron Student Housing Associates, LLC., completed
construction in August 2004 of a 300-bed residence hall located in the heart of the University’s
campus. The 12,000 square foot Honors Complex serves the University’s ever-growing
population of “honors” students and is a combination living and learning center, including a
large classroom, three seminar rooms, a computer room, a social lounge and two stud y lounges
on each floor. The University pledged its General Receipts to secure its rental obligations under
leases with the developer of the facility.
Student Activity and Service Facilities
The new Student Union opened in January 2003. It is comprised of over 100,000
square feet and houses three food service operations, dining areas, large assembly rooms,
conference/meeting rooms, a 323-seat theatre, lounges, a copy center, an automated banking
services center, an information center, Ticketmaster/film/fax service, and a bookstore. It also
houses the administrative offices for various University staff and student organizations, including
Student Union Administration, University Dining Services, University Program Board,
Buchtelite (student newspaper) and Tel-Buch (student yearbook). The second phase of the new
Student Union project was completed in August of 2004. It added approximately 98,000 square
feet and includes the Union Market dining facility, student and faculty dining areas, a Starbucks
coffeehouse, study lounges, a student organization complex, the Office of Student Development,
an office complex for the Board of Trustees, a DVD/CD store, a copy and post office center, and
a game room, including bowling lanes, billiard tables, and a video arcade room.
Construction of Simmons Hall, a new 94,000 square foot student administrative
services building, was completed in August 2004. This $15 million State- funded project is the
administrative hub for Student Affairs, providing students with a one-stop-shop for everything
from admissions to registration to financial aid and career counseling.
Athletic Facilities
The University has a 35,482-seat stadium (the Rubber Bowl, located off campus), an
athletic center with 7,016 seats, an on-campus practice football field, an all-weather track, a
soccer field, a softball diamond and a baseball diamond. Other athletic and physical education
facilities include indoor basketball and tennis courts, handball courts, a natatorium and a variety
of outdoor facilities. Construction of a Student Recreation Center/Athletic Field House/Varsity
Golf Practice Facility, attached to the existing Ocasek Natatorium, was completed in August
2004. The 140,000 square foot Student Recreation Center includes a three-court gymnasium, a
two-court multi-sport area, a rock climbing wall area, a free weights and strength training area,
an aerobics/dance studio, a running/walking track and a wellness center shell. The 155,000
square foot Athletic Field House portion of the building includes a 100- yard indoor football
practice field with artificial turf surrounded by a 300-meter six- lane varsity track/field, men’s
and women’s locker rooms, and other sports-related features and support facilities. The Indoor
Golf Practice Facility includes a practice analysis area, lockers, and equipment storage areas.
Total gross square footage of the entire Student Recreation Center complex is 295,000.
The University competes in 18 sports at the NCAA Division I level and all sports
compete in the Mid-American Conference (MAC), the sixth oldest conference in the United
States.
A-15
Other Facilities
Other University facilities include the heating plant, physical facilities operations
center, WZIP-FM radio station and an electrical substation.
Branch Campus
The Wayne College branch campus in Orrville, Ohio, has four buildings (including a
maintenance building) on a 151-acre site.
Other Institutions; Ohio Board of Regents
Other public institutions of higher education in the University’s geographic region
include Kent State University, Cleveland State University and Youngstown State University. All
three are urban universities, and Cleveland and Youngstown both have student populations
primarily composed of commuters. Northeastern Ohio Universities College of Medicine
(NEOUCOM) in Rootstown is a state-supported medical school which offers a combined
program with the University that allows students to earn the combined degrees of Bachelor of
Science in Integrated Life Sciences and Doctor of Medicine. In addition to the two-year degree
programs offered by the University at its branch campus, other two- year schools in the region
include Cuyahoga Community College (with three campuses in the Cleveland area), Lorain
County Community College in Elyria and Lakeland Community College in Lake County.
Nearby private institutions include Case Western Reserve University, John Carroll
University, Baldwin-Wallace College and Ursuline College in Cleveland; Oberlin College in
Oberlin; Hiram College in Hiram; Malone College and Walsh University in Canton; and Mount
Union College in Alliance.
Public higher education institutions in Ohio now include 13 state universities (with a
total of 23 branches); two medical colleges (in addition to four at state universities); five
community colleges operated by local community college districts and supported in substantial
part by locally voted property taxes; five state community colleges; 13 technical colleges; and
the Agricultural Research and Development Center. Those institutions all receive State
assistance and conduct full- time educational programs in permanent facilities.
The Ohio Board of Regents is an 11 member public body created by the State in 1963
to provide higher education policy advice to the Governor and General Assembly; map strategies
involving the state’s colleges and universities; advocate for and manage distribution of state
support for public colleges and universities; and implement statewide legislative mandates.
The Governor appoints the nine voting members of the Board who serve 9-year
terms. The chairs of the General Assembly’s Education Committees serve as non-voting ex
officio members of the Board. The Regents appoint a Chancellor to serve as their chief
administrative officer.
The Regents have a direct, non- governing relationship with public and private
colleges and universities. Working in partnership with Ohio’s higher education community, they
approve new degree programs, administer state- funded financial aid programs supporting
eligible students, and distribute all state funds appropriated to support higher education’s capital
and operating costs.
A-16
Financial Operations and Results
General
University financial records are maintained in accordance with the standards
prescribed by the American Institute of Certified Public Accountants, Government Accounting
Standards Board (GASB) and the National Association of College and University Business
Officers.
In June 1999, the Governmental Accounting Standards Board (GASB) issued
Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis for
State and Local Governments, which established a new reporting format for annual financial
statements. In November 1999, the GASB released Statement No. 35, Basic Financial
Statements and Management’s Discussion and Analysis for Public Colleges and Universities,
which applies the new reporting standards to public colleges and universities.
These new accounting standards first applied to the University for its Fiscal Year
2002 since the University, as a component unit of the State, is required to adopt the standards in
the year the State adopts them. As required by the newly adopted accounting principles, the
annual report now consists of three basic financial statements that provide information on the
University as a whole: the Statement of Net Assets, the Statement of Revenues, Expenses and
Changes in Net Assets; and the Statement of Cash Flows. In addition, Management’s Discussion
and Analysis is required. Due to this change in reporting format, State subsidies and other items
such as interest income are shown as non-operating revenues. Revenues are required to be
shown net of discounts and allowances. As a result, certain amounts previously reported as
scholarship expenses are reported as an allowance against tuition and related revenues. Another
change is that all capital assets, with the exception of land, are required to be depreciated.
Prior to Fiscal Year 2002, generally accepted accounting principles required that
financial transactions be recorded within separate funds and that similar funds be grouped into
fund groups for purposes of accounting and financial reporting. The University accounted for its
financial resources in accordance with the then accepted practice for educational institutions
through the use of five separately balanced fund groups: Current Funds, Loan Funds,
Endowment and Similar Funds, Plant Funds and Agency Funds.
The following tables, prepared by University financial staff, summarize the
University’s unrestricted and restricted current funds revenues, expenditures and mandatory
transfers for recent fiscal years, and year-end fund balances for those fiscal years. In order to
have comparability to years prior to Fiscal Year 2002, the financial information presented below
has been presented in a fund basis format. See the audited financial statements of the University
for the Fiscal Year ended June 30, 2004 included as Appendix B of this Official Statement for
financial information prepared in accordance with GASB Statement No. 35.
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A-17
Summary of Current Revenues, Expenditures and Mandatory Transfers
Main Campus and Wayne College
(Dollars in Thousands)
Fiscal Year
Revenues:
Tuition, fees and other student charges
State appropriations
Federal grants and contracts
State grants and contracts
Local grants and contracts
Private gifts, grants and contracts
Endowment income
Sales and services
Other sources
Total Revenues
2001
2002*
2003*
2004*
$ 93,187
98,816
18,469
5,281
631
17,704
1,687
36,778
3,171
$ 275,724
$ 98,884
102,935
20,555
4,128
523
19,634
2,333
39,620
5,015
$ 293,627
$ 117,302
97,095
25,077
5,980
304
20,853
2,860
43,521
2,739
$ 315,731
$13761
93,993
27,864
5,871
540
18,645
3,128
46,563
2,591
$ 335,956
$151,883
95,045
30,681
5,757
551
23,369
2,903
51,252
1,619
$363,060
Expenditures and Mandatory Transfers
Educational and General:
Instruction and departmental research
Separately budgeted research
Public service
Academic support
Student services
Institutional support
Operation and maintenance of plant
Scholarships and fellowships
Early retirement incentive program
Total Educational and General
Expenditures
$ 99,047
14,316
9,824
28,527
12,065
28,881
18,687
30,782
5,093
$ 101,089
16,193
10,598
29,164
12,626
31,973
18,702
32,955
(125)
$ 104,204
19,815
11,636
27,888
12,803
36,835
19,186
37,092
–
$ 110,861
18,494
12,661
28,008
11,711
44,094
20,329
41,387
–
$109,565
19,507
15,237
28,297
11,595
45,801
19,925
42,813
–
$ 247,222
$ 253,175
$ 269,459
$ 287,545
$ 292,740
Auxiliary Enterprises
$
29,297
$
32,206
$
32,974
$ 35,416
$ 39,089
$
4,477
88
4,565
$
6,567
87
6,654
$
9,079
78
9,157
$ 11,425
78
$ 11,503
$ 16,632
78
$ 16,710
$ 292,035
$ 311,590
$ 334,464
$ 348,539
$
(580)
(776)
(24,388)
24,190
_
(190)
5
(116)
(568)
60
1,895
5,078
(3,015)
(49)
$
(515)
(1,391)
_
_
_
(100)
134
_
–
_
_
5,616
(3,494)
(7)
$
1,038
(2,431)
_
(68)
_
(145)
_
_
–
_
_
7,397
(3,406)
(82)
$(11,410)
(3,733)
_
(70)
_
(650)
_
_
_
_
_
3,047
(3,487)
(27)
$
3,138
4,384
$
3,795
$ (1,809)
Mandatory Transfers for:
Principal and interest
Loan fund matching grant
Total Mandatory Transfers
Total Expenditures & Mandatory
Transfers
Non-Mandatory Transfers and
Additions/(Deductions)
Non-Mandatory Transfers for:
Current allocated fund balance – net
Capital Improvements
Allocated early retirement incentive plan**
Allocated internal financing
Allocated sick leave
Unrestricted to endowment
Restricted to endowment – net
Unrestricted plant
Restricted plant
Loans to restricted
Endowment income transfer to other funds
Excess of restricted receipts over transfers to
revenue
Indirect costs recovered
Refunded to grantors
Net Increase/(Decrease) in Unallocated Fund
Balance
*
2000
$
$
$ 281,084
$ 7,294
(850)
(905)
-(165)
(200)
_
_
_
1,611
4,958
(2,654)
--
$
3,729
$
$
For comparison purposes, Fiscal Years 2002, 2003 and 2004 amounts have been prepared on a basis consistent with the prior years presented
and not in accordance with GASB Statement No. 35. See Appendix B for the audited financial statements of the University for the Fiscal Year
ended June 30, 2004 prepared in accordance with GASB Statement No. 35.
A-18
Fund Balances
The following table summarizes the University’s year-end fund balances with respect
to main campus operations for the last five fiscal years.
(Dollars in Thousands)
Fiscal Year
2000
Current Education and General Fund
Current Auxiliary Enterprise Funds
Current Restricted Funds
Loan Funds
Endowment and Similar Funds
Unexpended Plant Fund
Retirement of Indebtedness Fund
Investment in Plant Funds
*
$
500
2,078
19,082
10,834
43,427
5,079
(35)
473,118
2002*
2001
$
500
2,833
22,633
11,121
59,008
3,583
22
500,640
$
500
5,020
24,832
11,493
57,382
7,999
31
528,207
2003*
$
500
4,946
28,685
11,984
51,389
13,088
0
540,618
2004**
$
500
5,270
28,244
12,317
51,016
13,752
719
543,365
For comparison purposes, Fiscal Years 2002, 2003 and 2004 amounts have been prepared on a basis
consistent with the prior years presented and not in accordance with GASB Statement No. 35. See
Appendix B for the audited financial statements of the University for the Fiscal Year ended June 30,
2004 prepared in accordance with GASB Statement No. 35.
(Balance of page intentionally left blank.)
A-19
Auxiliary Enterprises
The Auxiliary Enterprises are comp rised of the University’s housing, dining and
parking facilities, the Rubber Bowl, EJ Thomas Performing Arts Hall and telecommunications.
Operations of the Auxiliary Enterprises for the last five Fiscal Years are as follows:
Fiscal Year
2000
2001
2002*
2003*
2004*
REVENUES:
Residence Halls
Dining Facilities
Student Union
Intercollegiate Athletics
Parking Services
Rubber Bowl
EJ Thomas Performing Arts Hall
Telecommunications
$ 5,220,144
6,418,965
1,339,831
7,805,753
3,774,037
95,119
2,256,046
2,934,024
$ 6,069,989
6,908,359
1,235,483
7,864,057
3,786,105
100,569
4,353,369
2,950,496
$ 7,084,642
7,434,553
1,308,924
9,383,685
4,023,016
97,569
3,931,209
3,231,036
$ 7,273,941
7,464,794
1,125,041
10,734,417
3,981,541
93,217
3,511,118
3,173,881
$ 8,060,675
7,920,048
1,137,617
11,809,698
5,009,566
264,095
3,953,421
3,139,022
$29,843,919
$33,268,427
$36,494,634
$37,357,950
$41,294,142
$ 4,186,758
6,299,973
1,583,930
7,968,628
1,862,738
340,165
2,859,197
3,101,060
--
$ 4,510,819
6,934,007
1,356,757
8,322,630
1,827,759
401,155
4,800,787
2,800,224
--
$ 4,698,273
7,211,097
1,508,380
9,248,688
1,945,410
354,052
4,192,388
2,550,934
--
$ 5,052,801
7,280,135
1,984,256
10,306,408
1,992,209
507,287
4,323,707
2,534,559
--
$ 5,528,857
6,906,344
1,961,333
11,870,888
2,126,882
609,995
4,388,458
3,016,352
1,235,886
$28,202,449
$30,954,138
$31,709.222
$33,981,362
$37,644,995
$ 1,641,470
$ 2,314,289
$ 4,785,412
$ 3,376,588
$ 3,649,147
$(4,006,298)
1,871,334
$(4,182,993)
2,594,478
$(4,195,035)
1,601,248
$(4,294,992)
797,514
$(6,680,780)
3,278,882
$(2,134,964)
$(1,588,515)
$(2,593,787)
$(3,497,478)
$(3,401,898)
Net Increase/(Decrease) for the year
$ (493,494)
$ 725,774
$ 2,191,625
$ (120,890)
$ 247,249
Unallocated Fund Balance, July 1
Adjustments
Adjusted Unallocated Fund Balance,
July 1
Unallocated Fund Balance, June 30
2,098,535
--
1,605,041
5,669
2,336,484
--
4,528,109
--
4,407,219
--
$ 2,098,535
$ 1,605,041
$ 1,610,710
$ 2,336,484
$ 2,336,484
$ 4,528,109
$ 4,528,109
$ 4,407,219
$ 4,407,219
$ 4,654,468
Total Revenues
EXPENDITURES:
Residence Halls
Dining Services
Student Union
Intercollegiate Athletics
Parking Services
Rubber Bowl
EJ Thomas Performing Arts Hall
Telecommunications
Recreation Center
Total Expenditures
Operating Surplus/(Deficit)
Transfers: Additions/(Deductions)
Mandatory
Non-Mandatory
Net Transfers
* For comparison purposes, Fiscal Years 2002, 2003 and 2004 amounts have been prepared on a basis consistent with the
prior years presented and not in accordance with GASB Statement No. 35. See Appendix B for the audited financial
statements of the University for the Fiscal Year ended June 30, 2004 prepared in accordance with GASB Statement No. 35.
A-20
Financial Reports and Audits
The State Auditor is charged by law with the responsibility of inspecting and
supervising the accounts and records of most public agencies and institutions, including the
University.
Audits are made by the State Auditor, or by CPAs at the direction of that officer,
pursuant to Ohio law, and examinations or audits are made under certain federal program
requirements.
Annual financial reports are prepared by the University, and filed as required by law
with the State Auditor after the close of each Fiscal Year.
The audited financial statements of the University for the Fiscal Year ended June 30,
2004, included as Appendix B, have been audited by PricewaterhouseCoopers LLP, independent
auditors, as stated in their report appearing in Appendix B. That audit report is subject to review
and acceptance by the Auditor of State’s office, and the requirements of Revised Code Section
117.25 (concerning what constitutes an audit report of a public office) are not met until the
Auditor of State certifies that report. Reports are subject to change if the Auditor of State
determines that modification of a report is necessary to comply with required accounting or
auditing standards. The audited financial statements are public records, no consent to their
inclusion is required, and no bring-down procedures have been undertaken by the State Auditor
or PricewaterhouseCoopers LLP subsequent to the date of the audit report.
Under the State’s “fiscal watch” rules (Senate Bill 6), the University’s Treasurer is
required to certify and file reports quarterly with the Ohio Board of Regents attesting to the
accuracy of the University’s financial results, as well as to indicate that there are no “reportable
events” that could negatively impact the University’s financial condition. The University has
been and is in complete compliance with the State’s “fiscal watch” rules.
General Budgeting Procedures
The University’s budgeting process begins in November with the calculation of
current year revenue based on student credit hour projections, full-time equivalency projections,
assumed fee increases, anticipated state support, and inflationary factors, including proposed
salary increases for faculty and staff. The Budget Office inputs the new revenue and expense
assumptions and prepares a preliminary budget. The preliminary budget is then submitted to the
Vice President for Business and Finance/CFO, the Senior Vice President and Provost/COO, the
President, the Council of Deans and the University’s vice presidents for review. The President
then develops a final budget which is presented for approval to the Board of Trustees (in April or
June). During this planning period, fee and rate recommendations are presented to the Board for
approval (at the April Board meeting).
In February, a mid-year budget review is performed by the Vice President for
Business and Finance. If it is determined that budget revisions are needed, the Vice President for
Business and Finance submits these recommendations to the President for eventual submission to
the Board of Trustees for approval.
Every other year, the University prepares and updates its six-year capital
improvement program. Finance administrators work with individual departmental requests and
other central offices to prioritize capital needs. This provides the basis for a State capital
appropriation request which is submitted to the Ohio Board of Regents. The request identifies
the projects proposed to be financed with State appropriations by the General Assembly and the
A-21
purpose, priority, amount and source of funds for those projects. The Ohio Board of Regents and
the General Assembly may approve, modify or decline aspects of the University’s capital
appropriation programs.
Operating Budgets
The University divides its current fund budget into an unrestricted fund (main campus
and, separately, the branch campus), a designated fund, an auxiliary fund and a restricted fund.
The general fund budget includes instruction and departmental research, separately budgeted
research, public service, student services, general administration, plant operation and
maintena nce, student aid and reserves. The designated fund is essentially self- funding but is
combined with other current unrestricted funds for reporting purposes. The auxiliary fund
budget includes all expenditures supported mainly by student-generated revenues, including
room and board, parking, bookstore, intercollegiate athletics and related income. The restricted
fund budget includes all expenditures supported by revenues from grants, contracts, gifts and
donations.
The Board of Trustees adopts annual operating budgets for the general fund and
auxiliary fund.
The President and other administrative officers review revenues and
expenditures monthly and inform the Board of Trustees periodically of the budget position.
Appropriate action is taken by the President and other administrative officers to adjust
expenditures should revenues fall short of projections and the Board of Trustees is informed of
these actions.
On June 22, 2005, the Board approved an unrestricted current fund general fund
budget of $270.4 million for Fiscal Year 2006, consisting of $88.6 million in State
appropriations, $163.2 million in net student fees and $16.7 million in other income. Also
approved was an auxiliary fund budget of $55.3 million.
State Appropriations to the University
All state universities in Ohio receive State financial assistance for both operations and
designated capital improvements through appropriations by the General Assembly. These
appropriations contribute substantially to the successful maintenance and operation of the
University. Amounts received in the form of State appropriations are not included in General
Receipts.
The University receives State appropriations for most operating purposes on the basis
of FTE students (excluding undergraduates who are not Ohio residents) multiplied by legislated
allowances that vary by program. For this purpose, an FTE represents one full-time student (30
hours for semester systems, and 45 hours for quarter systems). The SSI (State Share of
Instruction) formula counts all credit hours of instruction for all regular terms plus summer.
(Balance of page intentionally left blank)
A-22
The following table shows State operating (State support of instruction and challenge)
appropriations to the University (main campus only) fo r recent Fiscal Years:
Fiscal
Year
State Operating
Appropriations
2000
2001
2002
2003
2004
2005
2006 (est.)
$ 94,277,746
95,800,001
90,214,738
87,224,888
87,986,817
86,090,578
84,748,484
The University also receives State capital improvement appropriations. For the six
fiscal years ended June 30, 2003, the total allocation was approximately $75 million for land,
buildings and renovations. For the 2002-2004 capital biennium, appropriations include funds for
Auburn West Tower Rehabilitation (Phase I) and an addition to Guzzetta Hall.
Under the State’s capital funding model, the allocation for each institution is
determined by formula. In its computation, the formula considers enrollments, age of space and
the level of non- instructional activity of each institution. Once calculated, the formula amount is
compared to the amount requested by the institution. If the request exceeds the formula
allocation and is approved, the institution will receive the full amount requested, but 10% of the
difference is deducted from the institution’s instructional subsidy allocation for each of the next
15 years. If, on the other hand, the formula allocation should exceed the amount requested, 10%
of the difference will be received by the institution for 15 years in the form of “excess capital”
component allocations.
The following table sets forth – for the bienniums indicated – the appropriations
received by the University, the total of appropriations for funded institutions state-wide, and the
percentage of the total appropriations that were received by the University.
Capital
Biennium
House/Senate
Bill
University’s
Appropriation
1997-98
1999-00
2001-02
2003-04
2005-06
TOTALS
HB 748
HB 850
HB640
HB675
HB16
$4,001,034
6,627,925
3,407,206
6,085,026
4,673,967
$ 24,795,158
*
Formula
Allocation
$19,867,940
18,499,650
18,798,500
18,449,633
17,082,815
$92,648,538
University’s
Total
Appropriations
Total System
Appropriations*
University’s %
of Total
$23,863,974
25,127,575
22,205,706
24,534,659
21,756,782
$117,488,696
$447,161,476
441,381,915
354,009,050
307,512,382
326,150,000
$1,876,214,823
5.34%
5.69
6.27
7.98
6.67
6.26%
Total appropriations include allocations to universities, branches and centers, community colleges and technical colleges.
State Budgets and Appropriations Generally
The Ohio economy continues to be negatively affected by the national economic
downturn and national and international events.
In Fiscal Years 2002 and 2003, the Governor ordered reduced appropriations
spending by most State agencies and limits in hiring and on major purchases. These reductions
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in State appropriations resulted in an aggregate reduction of approximately $6 million and $7.4
million, respectively, of State instructional allocations to the University from amounts initially
budgeted for Fiscal Years 2002 and 2003. The State used nearly 100% of its reserve funds to
balance the budget in the operating budget biennium that ended June 30, 2003.
For the State operating budget biennium of July 1, 2003 through June 30, 2005, the
State enacted a temporary one-cent increase in the State sales tax (to 6% from 5%). However, on
March 8, 2004 the Governor ordered budget cuts of 4% for most State agencies for the remainder
of Fiscal Year 2004, and on July 1, 2004 the Governor ordered budget cuts of 6% for most State
agencies for Fiscal Year 2005. The State’s share of instruction to State-assisted institutions of
higher education and student financial aid were among those exempted from those cuts for Fiscal
Years 2004 and 2005.
There can be no assurance that State appropriated funds for operating or capital
improvement purposes will be made available in the amounts from time to time requested or
required by the University. The General Assembly has the responsibility of determining such
appropriations biennially. State income and budget constraints have compelled and may from
time to time in the future compel a stabilization or reduction of the level of State assistance and
support for higher education in general and the University in particular. In addition, subsidy
appropriations (and other similar appropriations) are subject to subsequent limitation pursuant to
a law, implemented by the Governor from time to time in the past, including Fiscal Years 1991,
1992 and 1993 and in Fiscal Years 2002 and 2003, which provides in part that if the Governor
ascertains that the available revenue receipts and balances for the current fiscal year will in all
probability be less than the appropriations for the year, he shall issue such orders to State
agencies as will prevent their expenditures and incurred obligations from exceeding those
revenue receipts and balances.
Litigation, similar to that in other states, has been pending in Ohio courts since 1991
questioning the constitutionality of Ohio’s system of funding education for grades K through 12
and compliance with the constitutional requirement that the State provide a “thorough and
efficient system of common schools.” On December 11, 2002, the Ohio Supreme Court, in a 4-3
decision on a motion to reconsider its own decision rendered in September 2001, concluded (as it
had in 1997 and 2000) that the State did not comply with that requirement, even after again
noting and crediting significant State steps in recent years. The Court directed the General
Assembly “to enact a school- funding scheme that is thorough and efficient, as explained in its
prior decisions in 1997 and 2000, and the accompanying concurrences.” The Court also
relinquished jurisdiction and, on May 16, 2003, prohibited the Court of Common Pleas that
heard the initial action from exercising any further jurisdiction in the matters.
In its prior decisions, the Court had stated as general base threshold requirements that
every school district ha ve: enough funds to operate, an ample number of teachers, sound and
safe buildings, and equipment sufficient for all students to be afforded an educational
opportunity. With particular respect to funding sources, the Supreme Court had concluded in its
1997 and 2000 decisions, and one concurring Justice stated again in the recent decision, that
property taxes no longer may be the primary means of school funding in Ohio.
It is not possible at this time to state what or when the General Assembly’s responses
will be. The University cannot predict the amount or sources of any increase funding for public
schools, or whether there will be pressures or efforts to reduce funding to higher education
institutions or how the University will respond to any reductions.
A-24
Grants and Contracts
The following table shows grants, contracts and awards to the University from
various programs:
(Dollars in Thousands)
Fiscal Year
Federal Sources
State of Ohio
Local Government
Other Non-Governmental Agencies
Total All Sources
2001
2002
2003
2004
2005
$18,964
$23,143
$25,719
$30,862
31,495
3,988
5,779
5,661
6,477
4,768
489
262
493
811
771
19,362
21,210
20,374
21,791
22,487
$42,803
$50,394
$52,247
$59,941
59,521
Endowment and Foundation
Gifts for current operations and endowment purposes are received by both The
University of Akron Endowment Fund (the Endowment Fund) and The University of Akron
Foundation (the Foundation) and cons ist of gifts and bequests of cash, securities, real estate,
tangible and intangible property, life insurance and life income programs such as charitable
remainder annuity trusts or charitable remainder unitrusts.
The market values of the Endowment Fund and Foundation assets in recent Fiscal
Years were as follows:
Fiscal
Year
2001
2002
2003
2004
2005
Market Value
Endowment
Fund
Foundation
54,909,741
125,108,874
45,103,302
107,330,095
43,452,181
103,340,933
47,698,022
117,376,362
50,455,163
125,669,691
As of June 30, 2004, the Endowment Fund portfolio was comprised of approximately
77.3% equity securities and 22.7% fixed income securities and the Foundation portfolio was
comprised of 78.0% equity securities and 22.0% fixed income securities.
The Foundation is a separate non-profit organization, exempt from federal income
tax, formed in 1967 to assist in developing and increasing the facilities of the University. Certain
services are performed for the University without charge. The Foundation leases buildings, land
for parking and a residence hall facility to the University under various lease agreements. A
significant portion of the leased property is carried by the Foundation and title to these properties
is currently retained by the Foundation, with title transfer to the University expected in the
future.
A-25
Non-endowed gifts and contributions for specific departments or programs, which are
usually expended over periods from six months to a few years, are invested in short-term
securities such as commercial paper, United States Treasuries and bank certificates of deposit.
Because these funds must remain liquid and are short term, the investment objectives emphasize
the safety and preservation of capital. Foundation funds are invested to maximize total return on
a long-term basis.
Investments of the University’s Endowment Fund are made in compliance with the
written policy adopted by the Board of Trustees in September 1994 and most recently revised in
December 2003. The Finance and Fiscal Policy Committee receives quarterly reports disclosing
portfolio valuation and composition, asset allocation, gifts, earnings and market appreciation and
performance of investment managers.
Non-endowed gifts and contributions for specific departments or programs, which are
usually expended over periods from six months to a few years, are invested through the
University’s operating program. Because of the nature of these assets, the investment objectives
emphasize safety and preservation of capital. The Endowment Fund is invested to maximize
total return on a long-term basis.
The University of Akron Research Foundation
The University of Akron Research Foundation is a legally separate non-profit
organization, exempt from federal income tax, formed in 2001 to assist in furthering the
University’s research activities. The Research Foundation maintains a self-appointing board of
directors. It has been determined that the Research Foundation is not a component of the
University as defined by GASB Statement No. 14 and, therefore, the Foundation’s financial
activities are not included in The University of Akron’s financial statements.
Insurance Coverage
The University is insured for damage to all real and personal property at replacement
value. Coverage is of an “all risk” format that includes direct damage resulting from fire, flood,
tornado or earthquake, as well as indirect damage from chain of causation or consequential
reduction in value. The maximum amount recoverable for property damage per occurrence is
$500 million limited to replacement value and subject to a $100,000 deductible. Separate
coverage exists for money and securities ($5,000,000 limit, $25,000 deductible).
The University carries the following liability insurance: Educators Legal Liability
(Trustees, Directors and Officers); Vehicle Liability; General Liability; Foreign Liability; and
Non-Owned Aviation Liability. Current coverages include $5,000,000 for Educators Legal
Liability; $1,000,000 primary and $4,000,000 excess limit for Vehicle, General Liability and
Foreign Liability; and $25,000,000 for Non-Owned Aviation.
The University maintains excess liability coverage of $55,000 (a shared limit), excess
of $5,000,000 (the underlying primary coverage). This excess layer is shared among the
members of the Ohio Inter-University Council Consortium. The Consortium currently consists
of state-assisted universities and colleges. Thirteen state-assisted universities currently
participate in the liability program. Additionally, it has the availability of $1,000,000 in State
funds to pay defense and legal costs approved by the Attorney General of Ohio. In addition, the
Revised Code limits the liability of state universities and colleges in certain cases.
A-26
For Ohio workers’ compensation purposes, the University is covered by the State
Insurance Fund.
In addition to the insurance described above, the University maintains insurance
coverage for employee health and life insurance plans, comprehensive crime, intercollegiate
sports and employee group travel.
Outstanding Indebtedness
The University is authorized to issue bonds for the purposes of financing “facilities”
(as defined in the Act), including education facilities, housing and dining facilities and auxiliary
facilities (such as student unions, athletic facilities, residence halls and student facilities) and for
refunding bonds or other evidences of indebtedness issued for those purposes. The University
has never failed to pay punctually and in full all amounts due for principal and interest on any
indebtedness.
Assuming the issuance of the Series 2005 Bonds in the principal amount of
$21,295,000 and the refunding of all of the outstanding Series 1997 Bonds, the outstanding
principal amount of General Receipts Bonds of the University totals $242,790,000 and consists
of the following:
Series 1999
Series 2003
Series 2004
Series 2004B
Series 2005
Year
Issued
1999
2003
2004
2004
2005
Original
Amount Issued
$ 131,320,000
45,815,000
130,405,000
34,375,000
21,295,000
Principal
Amount
Outstanding
$ 13,455,000
43,260,000
130,405,000
34,375,000
21,295,000
Final
Maturity
2010
2033
2029
2035
2022
The University pledged its General Receipts to secure its rental obligations under
certain leases for a student residence hall with Akron Student Housing Associates, LLC, which
issued taxable lease revenue bonds in the respective principal amounts of $16,885,000 and
$5,115,000 to fund construction of the residence hall. The University’s annual rental payments
to Akron Student Housing Associates LLC provide funds to pay the debt service on those bonds.
The maximum annual rental payments guaranteed under these arrangements amount to $1.725
million per year, with the final rental payment due in 2034. The University issued General
Receipts Rental Notes to evidence it guarantees of its rental obligations in the amount of
$42,720,000 (secured by a pledge of General Receipts on a parity with the pledge securing
General Receipts Bonds) and $9,030,000 (secured by a pledge of General Receipts subordinate
to the pledge securing General Receipts Bonds). The aggregate principal amount of those notes
is equal to the sum of the payments of rent the University is required to make under the leases.
The University has entered into other capital leases and operating leases and may
enter into additional arrangements. The maximum aggregate obligation of the University under
those leases is approximately $6,379,812. The maximum annual obligations of the University
under those capital lease and lease-purchase arrangements (the last of which terminates in 2013)
is approximately $3.7 million in 2010.
Retirement Plans
The University participates in State contributory retirement plans administered by the
State Teachers Retirement System (STRS), the School Employees Retirement System (SERS)
A-27
and the Public Employees Retirement System - Law Enforcement (PERS-LE). STRS (faculty),
SERS (non-teaching staff) and PERS-LE (police officers) are funded from both employer and
employee contributions. In addition, several optional tax-deferred annuity programs are
available to employees for which the University provides administrative services only.
Federal law requires University employees hired after March 1986 to participate in
the federal Medicare program, which requires matching employer and employee contributions,
currently 1.45% of the employee’s wage base. Otherwise, University employees covered by a
State retirement system are not currently covered under the federal Social Security Act.
At the beginning of the Fall 2005 semester, SERS provided coverage for
approximately 2,015 employees of the University, STRS for approximately 1,943 and PERS-LE
for approximately 32. Currently, employees contribute at a statutory rate of 10.0% (SERS), 10%
(STRS) and 9.0% (PERS-LE) of gross salary, and the University contributes 14% (SERS), 14%
(STRS) and 16.6% (PERS-LE), actuarially established, of the same base.
SERS, STRS and PERS-LE are not now subject to the funding and vesting
requirements of the federal Employee Retirement Income Security Act of 1974.
All three retirement systems are created and operate pursuant to State law. The
General Assembly could determine to amend the format of any of the funds and could revise
rates or methods of contributions to be made by the University into the pension funds and revise
benefits or benefit levels. STRS reports that as of June 30, 2004 its total unfunded actuarial
liability (both State and local employees), which is currently being funded by a portion of the
contributions, was approximately $17.614 billion. The total unfunded actuarial liability of SERS
as of June 30, 2004 was reported to be $2.584 billion, and of PERS as of December 31, 2004 was
reported to be $7.166 billion.
In 1997 the State approved an Alternative Re tirement Plan (ARP) for full- time faculty
and administrative employees which allows new employees and those with less than five years of
service to opt out of STRS, SERS, and PERS-LE and contribute to one of seven ARPs formed as
Sec. 401(a) defined contribution plans. The legislation requires employees to contribute at the
same rates as stated above, while the employer continues to contribute to the State funds at the
rate of 3.5% (STRS) and 0.0% (SERS) and to the ARPs at the rate of 10% (STRS) and 13.5%
(SERS). The University holds one- half of one percent for administrative expenses.
Effective August 1, 2005, the ARP was expanded to include all full-time staff
employees with less than five years of service and all new full-time employees. The University
is no longer allowed to keep administrative fees and is required to contribute an equal amount to
the ARP as it would to SERS, STRS, or PERS-LE, minus the state retirement unfunded liability
contribution. The ARP contribution rates as of August 1, 2005, are as follows: employees hired
prior to August 1, 2005, 10.5% (STRS) and 14.0% (SERS); employees hired after August 1,
2005, 10.5% (STRS) and 8.0% (SERS). The required state retirement unfunded liability
contributions are 3.5% (STRS); 0% (SERS employees hired prior to August 1, 2005); 6% (SERS
employees hired after August 1, 2005). As of October 2005, there are 323 employees
participating in the ARP.
A-28
APPENDIX B
Audited Financial Statements
for the
Fiscal Year Ended June 30, 2004
B-1
THE UNIVERSITY OF AKRON
SUMMIT COUNTY
JULY 1, 2003 TO JUNE 30, 2004
PREPARED BY: PRICEWATERHOUSE COOPERS LLP.
Board of Trustees
The University of Akron
We have reviewed the Independent Auditor's Report of The University of Akron, Summit County,
prepared by PricewaterhouseCoopers LLP for the audit period July 1, 2003 through June 30, 2004.
Based upon this review, we have accepted these reports in lieu of the audit required by Section
117.11, Revised Code. The Auditor of State did not audit the accompanying financial statements
and, accordingly, we are unable to express, and do not express an opinion on them.
Our review was made in reference to the applicable sections of legislative criteria, as reflected by
the Ohio Constitution, and the Revised Code, policies, procedures and guidelines of the Auditor of
State, regulations and grant requirements. The University of Akron is responsible for compliance
with these laws and regulations.
BETTY MONTGOMERY
Auditor of State
January 7, 2005
This Page is Intentionally Left Blank.
The University of Akron
Report on Federal Awards
In Accordance with OMB Circular A-133
For the Year Ended June 30, 2004
Part 1 FINANCIAL STATEMENTS AND SUPPLEMENTAL FINANCIAL
INFORMATION
Pages
Management's Discussion and Analysis (Unaudited) ........................................................................ 1 - 8
Financial Statements
Report of Independent Auditors ....................................................................................................... 9 - 10
Statement of Net Assets ...................................................................................................................... 11
Statement of Revenues, Expenses, and Changes in Net Assets ........................................................... 12
Statement of Cash Flows ................................................................................................................. 13 - 14
Notes to the Financial Statements ................................................................................................... 15 - 32
Supplemental Financial Information
Schedule of Expenditures of Federal Awards ................................................................................. 33 - 38
Notes to Schedule of Expenditures of Federal Awards ................................................................... 39 - 40
Part 2 REPORTS ON COMPLIANCE AND ON THE INTERNAL CONTROL
STRUCTURE
Report of Independent Auditors on Compliance and on
Internal Control Over Financial Reporting Based on an
Audit of Financial Statements Performed in Accordance
with Government Auditing Standards ............................................................................... 41 - 42
Report of Independent Auditors on Compliance with
Requirements Applicable to Each Major Program and
Internal Control Over Compliance in Accordance with
OMB Circular A-133 ........................................................................................................ 43 - 44
Part 3 SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Section I – Summary of Auditor’s Results .......................................................................................... 45
Section II – Financial Statement Findings ........................................................................................... 46
Section III – Summary of Current Year Findings and Questioned Costs ............................................ 46
Section IV – Summary of Prior Year Findings .................................................................................... 47
The University of Akron
Management's Discussion and Analysis
June 30, 2004
The discussion and analysis of The University of Akron’s (The University) annual financial
performance provides an overall review of The University’s financial activities for the fiscal year
ended June 30, 2004. This discussion and analysis views The University’s financial performance
as a whole; readers should also review the financial statements and related notes to the financial
statements to enhance their understanding of The University’s financial performance.
Using the Annual Financial Report
The annual report consists of this Management’s Discussion and Analysis, three separate but
interrelated financial statements prepared in accordance with Governmental Accounting
Standards Board (GASB) Statement No. 34, Basic Financial Statements and Management’s
Discussion and Analysis for State and Local Governments, as amended by GASB Statement No.
35, Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges
and Universities, and the Report of Independent Auditors. The financial statements are prepared
using the accrual basis of accounting, which is similar to the accounting method used by many
private-sector companies. Under the accrual basis of accounting, revenues are recognized when
earned while expenses are recognized when incurred.
The University’s financial statements include the Statements of Net Assets; Revenues, Expenses
and Changes in Net Assets; and Cash Flows. The financial statements focus on the financial
condition, results of operations, and cash flows of The University, as a whole.
The Statement of Net Assets includes all assets and liabilities, with the difference between the
two reported as net assets. The assets and liabilities are presented in the order of relative
liquidity while net assets are categorized as Invested in capital assets, net of related debt;
Restricted; or Unrestricted. Over time, increases or decreases in net assets are an indicator of the
improvement or erosion of The University’s financial health.
The Statement of Revenues, Expenses, and Changes in Net Assets presents revenues earned and
expenses incurred during the year. The revenues and expenses are classified as either operating
or nonoperating. The State of Ohio (State) provides significant operating and capital financial
resources to The University, which are classified as Nonoperating revenues; therefore,
substantial Operating losses are not uncommon for public colleges and universities across Ohio.
For the fiscal years ended June 30, 2004, 2003, and 2002, the State provided approximately $117
million, $108 million, and $113 million for operating and capital purposes while The
University’s operating losses were approximately $102 million, $121 million, and $112 million
for each of those years.
The Statement of Cash Flows presents information related to cash inflows and outflows
summarized within the activities of operating, noncapital financing, capital and related
financing, and investing activities. Cash flows from operating activities generally result from the
provision of goods or services in the normal course of doing business and are generally the cash
effects of transactions that determine operating income. Meanwhile, noncapital financing
activities typically include borrowing and repaying money for purposes other than acquiring,
constructing, or improving capital assets.
1
The University of Akron
Management's Discussion and Analysis – Continued
June 30, 2004
Conversely, Capital and related financing activities generally include acquiring and disposing of
capital assets, borrowing and repaying money for acquiring, constructing, or improving capital
assets, and paying for capital assets obtained from vendors on credit. The investing activities
generally relate to making and collecting loans and acquiring and disposing of debt or equity
instruments.
The University is considered a discretely presented unit of the State of Ohio as such, the
University’s financial activity is also included within the State of Ohio’s Comprehensive Annual
Financial Report.
The University has two discretely presented component units that are reported in a separate
column on The University’s financial statements to emphasize that they are legally separate from
The University. The University of Akron Foundation (Foundation) and The University of Akron
Research Foundation (Research Foundation) are not-for-profit organizations supporting The
University. Since the focus of this discussion is on The University, these component units are not
included in the amounts below. These component units are described in greater detail in the
financial statements and notes to the financial statements.
Due to changes relating to the addition of the component units, certain prior year amounts have
been reclassified to conform to current year presentations.
Table 1 summarizes The University’s Net Assets at June 30, 2004, 2003, and 2002.
Table 1
Net Assets (In Thousands)
2004
Assets:
Current assets
Restricted current assets
Noncurrent assets:
Capital
Other
$
Total assets
Liabilities:
Current liabilities
Noncurrent liabilities
Total liabilities
Net assets:
Invested in capital assets, net of related debt
Restricted:
Nonexpendable
Expendable
Unrestricted
Total net assets
$
2
70,332
56,425
2003
$
72,933
76,118
2002
$
140,756
17,325
484,406
62,368
414,135
58,431
373,550
59,324
673,531
621,617
590,955
63,460
239,273
68,895
218,219
84,198
178,395
302,733
287,114
262,593
273,560
254,984
255,084
36,414
32,691
28,134
32,851
31,236
15,432
34,305
24,888
14,085
370,799
$
334,503
$
328,362
The University of Akron
Management's Discussion and Analysis – Continued
June 30, 2004
Current assets include those more highly liquid assets including cash, cash equivalents, and
investments; accounts, pledges, student notes, and accrued interest receivable; inventories; and
prepaid expenses and deferred charges. Current assets decreased $2.6 million during 2004, and
decreased $67.8 million during 2003. There were variations among many of the current asset
categories, but the principal cause of the decreases are from a $10.2 million decrease in 2004 and
a $69.4 million decrease in 2003 within Investments held in trust by others. Specifically, The
University temporarily invested the proceeds of debt issues until the proceeds were needed to
pay for construction costs. During 2004 and 2003, The University continued its progress
towards, and paid costs related to, the Landscape for Learning initiative. A New Landscape for
Learning is a $200 million blueprint, which includes new academic, student services, and student
living buildings plus renovations to several other buildings; improved campus access; and the
creation of inviting, park-like open spaces.
Restricted current assets consist of cash, cash equivalents, and investments, which resulted from
gifts from friends of The University. In these cases, the donors required that the gifts be used for
some particular purpose. Restricted current assets decreased $19.7 million during 2004 and
increased $58.8 million during 2003. The changes are largely attributable to the near-term
payment demands of the Landscape for Learning initiative discussed above.
Noncurrent assets consist of endowment investments; pledges and student notes receivable; and
capital assets. Noncurrent assets increased $74.2 million during 2004, and $39.7 million during
2003. While there were variations among the categories, the increase is largely attributable to a
$70.3 million and $40.6 million increase within Capital assets during 2004 and 2003,
respectively, which principally resulted from The University’s significant capital project
initiative.
Current liabilities are those items that mature within one year. The current liabilities include
accounts payable; accrued liabilities; deferred revenue; deposits; and the short-term portion of
long-term liabilities. Current liabilities decreased $5.4 million during 2004, and $15.3 million
during 2003. There were variations among many of the current liability categories, but the
principal cause of the decreases was a $5.1 million and $17.9 million decrease within the shortterm portion of long-term liabilities during 2004 and 2003, respectively. Specifically, during
2004, the General receipts bonds issued in 1999 were refinanced to take advantage of current
lower interest rates. Due to the lower rates, the current portion of the refinanced bonds has a
lower payment in the next fiscal year. During 2003, a $20 million Bond Anticipation Note
(BAN) was retired. The BAN was issued during 2002 to help fund The University’s ongoing
$200 million capital projects initiative. The $20 million decrease was partially offset since $1.4
million of the $45.8 million 2003 General receipts bonds were considered short-term in 2003.
Noncurrent liabilities consist of Refundable federal student loans; long-term debt including
capital leases and the sick leave liability. The most notable change occurred within the longterm liabilities. During 2004, The University entered into a $22 million agreement to lease a
new dorm for the Honors program. Rental payments will be made to a third party for the next 30
years. The University issued $45.8 million General receipts bond issue during 2003, which
resulted in an overall increase from $165.4 million to $206 million. As reflected above, the
proceeds paid-off the $20 million BAN and are helping fund the ongoing capital projects
initiative.
3
The University of Akron
Management's Discussion and Analysis – Continued
June 30, 2004
Additionally, the Auditor of State and the Office of Budget and Management reexamined the
accounting treatment related to the workers’ compensation liability. Since 2003, Ohio’s General
Revenue Fund recognizes the liability related to workers' compensation claims for the State,
including The University. Therefore, The University’s liability decreased $2.6 million to $0
from June 30, 2002 as compared with June 30, 2004 and 2003. The current- and long-term
portions decreased from $300,000 and $2.3 million, respectively.
As reflected above, Net assets represent the difference between assets and liabilities and over
time is one indicator of improving or eroding financial health. Net assets are categorized as
Invested in capital assets, net of related debt; Restricted; or Unrestricted. Restricted net assets
include both expendable and nonexpendable components. During 2004 and 2003, net assets
increased approximately 10.8% and 1.8%, respectively, or $36.3 million and $6.1 million,
respectively.
Table 2 summarizes The University’s Changes in Net Assets for the years ended June 30, 2004,
2003 and 2002.
Table 2
Changes in Net Assets (In Thousands)
2004
Operating revenues:
Tuition and fees
Grants and contracts
Sales and services
Auxiliary enterprises
Other operating revenues
Total operating revenues
$
Total operating expenses
119,394)
43,987)
9,047)
41,370)
401)
214,199)
2003
$
105,913)
37,879)
7,707)
37,125)
558)
189,181)
2002
$
91,761)
39,424)
6,326)
37,195)
397)
175,103)
315,729)
310,473)
287,074)
(101,530)
(121,292)
(111,971)
97,343)
19,021)
116,364)
96,421)
17,792)
114,213)
99,493)
(622)
98,871)
Gain (loss) before other changes
14,834)
(7,079)
(13,100)
Other changes:
Capital appropriations
Capital gifts and grants
Additions to permanent endowments
Total other changes
19,397)
1,297)
768)
21,462)
11,246)
1,041)
932)
13,219)
12,957)
7,781)
1,161)
21,898)
Increase in net assets
36,296)
6,141)
8,799)
334,503)
328,362)
319,563)
Operating loss
Nonoperating revenues (expenses)
State appropriations
Other nonoperating revenues, net
Net nonoperating revenues
Net assets:
Net assets - beginning of year
Net assets - end of year
$
4
370,799)
$
334,503)
$
328,362)
The University of Akron
Management's Discussion and Analysis – Continued
June 30, 2004
The Student tuition and fees increased approximately $13.5 million or 12.7% during 2004, and
$14.1 million or 15.4% during 2003. The University’s student headcount and student
enrollments remained largely unchanged between the years; however, The University enacted
tuition and fee increases for 2004 and 2003 of 9.9% in each year, along with additional fees and
surcharges, which largely created the observed increase in tuition and fees.
The State Appropriations represent the other most significant revenue source for The University.
Together, the State Appropriations and Student tuition and fees are the predominant resources
used to fund The University’s daily operations. The State Appropriations increased $0.9 million
in 2004, and decreased $3.1 million in 2003. The changes are part of a continued trend over the
past few years and are largely attributable to State-level fiscal challenges. While the instructional
appropriations have decreased $0.3 million in 2004 and $2.9 million in 2003, the increase during
2004 is due to additional funding in other areas such as challenge funding for continuing
education.
The State of Ohio also provides capital appropriations to The University. Unlike the operating
resources reflected previously, these resources are provided to help with The University’s capital
needs. The funding is provided through the Ohio Board of Regents (OBR) based upon certain
formulas and a capital plan provided by The University. The capital appropriations increased
$8.1 million in 2004, and decreased $1.7 million for 2003.
The combined Federal, State, Local, and Private Grants and Contracts revenue levels represent
The University’s continued pursuit of federal, state, local, and private funding for research
related activities. Federal revenues represented the largest component of these revenues at $30.8
million in 2004 and $27.8 million in 2003, followed by private revenues at $8.7 million in 2004
and $7.7 million in 2003. The combined state and local revenues were $4.5 million in 2004 and
$4.0 million in 2003.
The largest federal source was related to the Office of Education, with the awards for Pell grants
the largest area within this source. This source provided nearly $21.3 million during 2004 and
$19.9 million during 2003. Meanwhile, the largest private source for 2004 and 2003 was The
Robert Woods Johnson Foundation which provided approximately $2 million in each year. The
efforts of this grant are directed towards evaluating the results of the national D.A.R.E. program.
The state and local revenues consisted of multiple smaller dollar awards.
Auxiliary Enterprises revenues are generated from operations which predominantly exist to
furnish goods or services to students, faculty, staff, or the general public. These types of
activities are intended to be self-supporting in that the revenues generated are intended to cover
the costs of providing the services. The University’s auxiliary services include the residence
halls, Student Union, intercollegiate athletics, parking services, Rubber Bowl, E.J. Thomas
Performing Arts Hall, telecommunications, dining facilities, and Wayne College bookstore.
5
The University of Akron
Management's Discussion and Analysis – Continued
June 30, 2004
Auxiliary Enterprises revenues increased $4.2 million in 2004, and remained unchanged from
2002 to 2003. The intercollegiate athletics, dining facilities, residence halls, and E.J. Thomas
Performing Arts Hall individually provided the predominant revenues within this area. During
2004, the revenues generated from those four areas represented $11.8 million, $7.9 million, $8.0
million, and $3.9 million, respectively, or 76.3% of the total $41.3 million revenues. During
2003, the revenues generated from those four areas represented $10.7 million, $7.5 million, $7.3
million, and $3.5 million, respectively, or 78.1% of the total $37.1 million revenues.
Sales and services revenue are from certain operations, which provide services to both students
and other departments within The University campus. The most significant of these operations
was Computer Solutions, which generated sales totaling $3.9 million for 2004 and $2.5 million
for 2003.
Investment income, including the unrealized change in fair value of investments totaled $8.1
million and $5.0 million during 2004 and 2003, respectively. Investment income increased $3.5
million in 2004 and decreased $5 million in 2003, which was due to overall change in returns on
all investments. During 2002, certain University investments experienced substantial declines in
value. Those investments were not redeemed; nevertheless, GASB Statement No. 31 requires
those investments be reported at fair value for financial statement reporting purposes.
Meanwhile, the $3.8 and $4.3 million net increase within unrealized appreciation/depreciation
during 2004 and 2003, respectively, occurred because of improved market conditions and the fair
value of the investments improved substantially. Once again, those investments were not
redeemed, but were adjusted to fair value for financial statement reporting purposes. The
University reviewed its investment policies over the past two years and modified its strategies to
reduce the portfolio’s vulnerability to significant market fluctuations while maintaining certain
returns.
The University views continued donor support as a vital ingredient to our continued success.
Many student scholarships, capital construction costs, and endowed positions are a result of our
very generous contributors. The University receives gifts from a wide array of friends including
alumni, the business community, and foundations. Oftentimes, gifts and awards are
accompanied by donor restrictions. In those cases, The University maintains a system of internal
controls to ensure the gifts are used solely in accordance with the grantor’s requirements. For
2004 and 2003, Gifts and grants and additions to permanent endowments totaled $19.6 million
and $17.9 million, respectively while capital related contributions totaled $1.3 million and $1.0
million. Other sources remained stable in terms of dollars between 2002 and 2003.
The Educational and general expenses category is the single largest category of expenses and
includes all academic and administrative support salary and benefit related costs. Overall, these
expenses increased nearly 1.9% and 7.8% during 2004 and 2003, respectively. During 2004, the
most notable increases occurred within Separately budgeted research and Public service,
collectively increasing approximately $4.2 million. Those increases were largely due to
increased expenditures in the sponsored research area. During 2003, the most notable increases
occurred within Instruction and departmental research and Operation and maintenance of plant,
collectively increasing approximately $10.9 million. Those increases were largely due to rate
increases for utilities and additional costs associated with the opening of new buildings on
campus.
6
The University of Akron
Management's Discussion and Analysis – Continued
June 30, 2004
Auxiliary Enterprises expenses result from those operations, which as previously reflected,
predominantly furnish goods or services to students, faculty, staff, or the general public.
Auxiliary Services increased $2.4 million in 2004 and $2.1 million during 2003. The largest
increase during 2004 occurred with the new Recreation Center and the related operating
expenses before it opened to the public. The largest increase during 2003 occurred within the
Intercollegiate Athletics area and related to Athletic External Relations and the Football
program.
Unlike many items that are expensed when purchased, The University capitalizes most long-term
assets. The assets are then expensed over estimated useful lives ranging from 5 years for certain
equipment to 40 years for buildings. Generally, Depreciation expense is predictable from year to
year taking into account items, which become fully depreciated during the prior year and capital
asset additions and deletions for the current year. Depreciation expense increased approximately
$1.3 million in 2004 and 2003 due to increasing levels of capital asset purchases.
The University periodically sells or disposes of obsolete capital assets. Unlike many revenue
and expense areas, which tend to be predictable among years, the gains or losses from the
disposition of capital assets is often a result of management discretion. The University realized
losses totaling $0.6 million during 2004, while the losses were $3.8 million during 2003. The
2004 losses occurred with the removal and sale of equipment. The 2003 losses resulted from the
demolition of Gardner Student Center and the Central Stores building.
Interest on debt includes the interest incurred during the fiscal year on all debt and capital leases
less capitalized interest. During 2003, interest expense decreased $2.7 million to $6.6 million
and decreased $0.3 million to $6.3 million in 2004.
Capital Assets and Long-Term Debt Activity
As previously reflected, The University is in the midst of a major capital expansion. The
University uses State capital appropriations, internal resources including the proceeds from debt
issues, and gifts and other grants for capital asset expansion throughout the campus. During
2004 and 2003, additions to capital assets approximated $49.5 million and $69.5 million,
respectively, net of Construction in progress additions. The capital asset activity is reflected in
more thorough detail within Note 5 of the financial statements.
The University’s long-term debt principally consists of its general receipts bonds, which totaled
$198.4 million in 2004 and $202.4 million in 2003. During 2004, The University entered into a
lease agreement for $22 million for a new housing complex for the Honors program and
refinanced the 1999 General receipts bonds to take advantage of lower interest rates. The
University continued to make payments on other outstanding debt for a total of $5.5 million.
During 2003, The University issued General receipts bonds in the amount of $45.8 million,
retired a $20 million Bond Anticipation Note, and paid down general receipts bonds by $2.8
million. The long-term debt activity is reflected in more thorough detail within Note 7 of the
financial statements.
7
The University of Akron
Management's Discussion and Analysis – Continued
June 30, 2004
Factors Impacting Future Periods
The Student Tuition and Fees and State Appropriations are the principal revenue sources, which
support The University’s annual operations. For both 2004 and 2003, those two revenue sources
alone represented $216.7 million and $202.3 million, respectively, of our total operating and
nonoperating revenues while the aggregate remaining operating and non operating revenues,
excluding the change in the fair value of investments, totaled $139.3 and $114.1 million.
The University’s ability to maintain or expand existing academic programs and to pursue other
initiatives will be directly impacted by these two very important revenue sources plus our ability
to manage the dramatically increasing employee benefit and energy costs.
8
PricewaterhouseCoopers LLP
BP Tower, 27th Floor
200 Public Square
Cleveland OH 44114-2301
Telephone (216) 875 3000
Facsimile (216) 566 7846
www.pwc.com
Report of Independent Auditors
To the Board of Trustees of
The University of Akron:
In our opinion, the accompanying statements of net assets and the related statements of
revenues, expenses and changes in net assets and cash flows present fairly, in all material
respects, the financial position of The University of Akron (“The University”) at June 30,
2004 and 2003, and the revenues, expenses and changes in net assets and cash flows for the
year then ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of The University’s
management. Our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with auditing
standards generally accepted in the United States of America and the standards applicable to
financial audits contained in Government Auditing Standards, issued by the Comptroller
General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1, The University adopted the provision of Governmental Accounting
Standards Board (“GASB”) Statement No. 39, Determining Whether Certain Organization
Are Component Units as of July 1, 2003.
The Management’s Discussion and Analysis (“MD&A”) on pages 1 to 8 is not a required part
of the financial statements but is supplemental information required by GASB. The MD&A
has been reviewed in accordance with standards established by the American Institute of
Certified Public Accountants. Such a review, however, is substantially less in scope than an
audit in accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion on the MD&A
information.
In accordance with Government Auditing Standards, we have also issued our report dated
October 15, 2004 on our consideration of The University’s internal control over financial
reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts and grant agreements and other matters for the year ended June 30, 2004. The
purpose of that report is to describe the scope of our testing of internal control over financial
reporting and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance. That report is an integral part of an
audit performed in accordance with Government Auditing Standards and should be considered
in assessing the results of our audit.
The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of
additional analysis as required by U.S. Office of Management and Budget Circular A-133,
Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part
of the financial statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all
material respects, in relation to the financial statements taken as a whole.
October 15, 2004
Cleveland, Ohio
The University of Akron
Statement of Net Assets
June 30, 2004 and 2003
ASSETS
Current assets:
Cash and cash equivalents
Pooled investments
Investments held in trust by others
Accounts receivable, net
Pledges receivable, net
Notes receivable, net
Accrued interest receivable
Inventories
Prepaid expenses and deferred charges
Total current assets
Restricted current assets:
Cash and cash equivalents
Pooled investments
Total restricted current assets
Noncurrent assets:
Endowment investments
Pledges receivable, net
Notes receivable, net
Prepaid expenses and deferred charges
Capital assets, net
Total assets
LIABILITIES
Current liabilities:
Accounts payable
Accrued liabilities
Accrued interest payable
Deferred revenue
Deposits
Current portion of long-term liabilities
Total current liabilities
Noncurrent liabilities:
Refundable federal student loans
Deferred revenue
Actuarial liability for annuity/unitrust agreements
Long-term liabilities
Total liabilities
NET ASSETS
Invested in capital assets, net of related debt
Restricted:
Nonexpenable:
Endowment
Expendable:
Current operations
Loans
Capital projects
Debt service
Unrestricted
Total net assets
See accompanying notes to financial statements
The University of Akron
2004
2003
$
218,236
32,773,669
2,279,376
20,761,942
3,107,229
1,772,096
193,379
1,100,007
8,126,228
$
196,975
24,056,207
12,487,658
23,760,645
2,600,086
1,395,440
303
1,053,216
7,382,726
Component Units
2004
2003
$
36,980
1,650,995
1,224,591
114,985
$
34,165
187,285
1,988,535
112,500
70,332,162
72,933,256
3,027,551
2,322,485
21,663,965
34,760,894
52,443,245
23,674,389
1,808,536
159,000
989,973
-
56,424,859
76,117,634
1,967,536
989,973
46,998,772
3,642,482
9,753,010
1,974,138
484,406,054
43,133,021
5,135,667
8,547,673
1,614,717
414,134,520
122,634,134
1,020,114
416,055
109,045,562
1,961,529
335,056
673,531,477
621,616,488
129,065,390
114,654,605
10,884,271
13,101,690
3,340,747
31,570,793
1,093,289
3,468,975
8,552,488
13,653,793
4,409,961
32,704,932
981,727
8,591,536
542,534
159,465
990,408
-
647,623
184,845
525,999
-
63,459,765
68,894,437
1,692,407
1,358,467
11,497,614
1,064,174
226,711,261
11,170,961
1,064,174
205,984,150
10,318,336
-
10,803,710
-
302,732,814
287,113,722
12,010,743
12,162,177
273,559,805
254,983,802
416,055
335,056
36,413,681
32,851,261
69,324,110
62,536,029
17,517,595
801,927
13,652,453
719,396
28,133,806
17,296,581
827,626
13,111,789
303
15,431,404
40,975,798
6,338,684
33,530,832
6,090,511
$ 370,798,663
$ 334,502,766
$ 117,054,647
$ 102,492,428
11
The University of Akron
Statement of Revenues, Expenses, and Changes in Net Assets
For the Years Ended June 30, 2004 and 2003
REVENUES
Operating revenues:
Student tuition and fees (net of scholarship allowance
of $32,488,885 and $30,848,331)
Federal grants and contracts
State grants and contracts
Local grants and contracts
Private grants and contracts
Gifts and contributions
Sales and services
Auxiliary enterprises
Other sources
The University of Akron
2004
2003
Component Units
2004
2003
$ 119,394,285
30,812,891
3,535,893
972,538
8,665,314
9,046,889
41,369,913
401,368
$ 105,912,648
27,772,997
3,509,414
535,231
6,123,047
7,705,425
37,064,976
557,816
214,199,091
189,181,554
5,710,400
6,065,843
106,091,697
18,209,969
14,898,222
25,388,276
11,282,220
41,487,118
20,083,384
16,850,869
34,843,911
25,973,831
619,905
107,925,344
16,676,995
12,259,995
25,004,944
11,416,778
39,442,293
20,926,974
15,949,699
32,454,880
24,609,438
3,806,096
486,314
503,435
-
311,659
727,065
3,209
-
Total operating expenses
315,729,402
310,473,436
989,749
1,041,933
Operating income (loss)
(101,530,311)
(121,291,882)
4,720,651
5,023,910
97,342,555
8,715,805
96,421,139
6,497,743
-
-
4,246,341
3,804,957
(6,341,770)
10,089,692
(1,493,684)
755,107
4,315,750
(6,583,705)
2,635,620
10,477,492
(305,930)
Total operating revenues
EXPENSES
Operating expenses:
Educational and general:
Instruction and departmental research
Separately budgeted research
Public service
Academic support
Student services
Institutional support
Operation and maintenance of plant
Scholarships and fellowships
Auxiliary enterprises
Depreciation
Loss on disposal of property
NONOPERATING REVENUES (EXPENSES)
State appropriations
Gifts and grants
Investment income (net of investment expense of $1,395,383
and $1,838,698 for The University, $1,977,258 and
$1,735,849 for the Component Units)
Unrealized appreciation (depreciation) on investments, net
Interest on debt
Transfer of workers' compensation liability to State of Ohio
Distributions to the university
Distributions on behalf of the university
Other nonoperating revenues (expenses)
Net nonoperating revenues (expenses)
116,363,896
114,213,216
$
14,921
28,524
1,735,416
3,828,597
102,942
$
48,957
1,006,323
5,010,563
-
1,849,176
14,461,952
(10,089,692)
(246,072)
137,540
2,003,237
(2,793,460)
(10,477,492)
(393,490)
90,369
6,112,904
(11,570,836)
Income (loss) before other changes
14,833,585
(7,078,666)
10,833,555
(6,546,926)
OTHER CHANGES
State capital appropriations
Capital gifts and grants
Additions to permanent endowments
19,397,671
1,296,908
767,733
11,246,153
1,041,386
932,054
3,728,665
3,611,420
Total other changes
21,462,312
13,219,593
3,728,665
3,611,420
Increase (decrease) in net assets
36,295,897
6,140,927
14,562,220
(2,935,506)
334,502,766
328,361,839
102,492,428
105,427,934
$ 370,798,663
$ 334,502,766
$ 117,054,648
$ 102,492,428
NET ASSETS
Net assets - beginning of year
Net assets - end of year
See accompanying notes to financial statements
12
The University of Akron
Statement of Cash Flows
June 30, 2004 and 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Tuition and fees
Grants and contracts
Auxiliary enterprises
Sales and service of educational activities
Payments to suppliers
Payments for compensation and benefits
Payments for scholarships and fellowships
Loans issued to students
Collection of loans to students
Other payments
2004
2003
$ 119,822,169
44,432,710
41,172,030
9,046,889
(77,897,262)
(196,027,750)
(9,575,582)
(2,214,061)
1,711,178
(3,081,950)
$ 105,744,743
42,943,390
36,989,955
7,705,425
(75,554,872)
(192,199,386)
(9,352,433)
(1,221,261)
1,665,549
(4,309,468)
(72,611,629)
(87,588,358)
97,342,555
15,469,543
700,352
(1,493,684)
96,421,139
13,689,559
1,401,491
-
Net cash used in operating activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES
State appropriations
Gifts for other than capital purposes
Private gifts for endowment purposes
Other payments
Net cash provided by noncapital financing activites
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES
Proceeds from capital debt
Capital appropriations
Capital grants and gifts received
Purchases of capital assets
Principal paid on capital debt and leases
Interest paid on capital debt and leases
Loans issued for capital purposes
Collection of loans issued for capital purposes
Net cash used in capital financing activites
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales and maturities of investments
Interest on investments
Purchase of investments
Net cash provided by (used in) investing activites
Net increase (decrease) in cash
Cash and cash equivalents - beginning of the year
112,018,766
111,512,189
112,990,000
18,277,129
4,174,941
(68,598,592)
(121,634,952)
(5,272,556)
(1,097,643)
18,533
46,453,294
11,246,153
5,225,517
(63,719,303)
(25,790,398)
(6,616,813)
-
(61,143,140)
(33,201,550)
487,357,019
4,439,417
(500,818,452)
339,291,891
754,788
(278,406,000)
(9,022,016)
61,640,679
(30,758,019)
52,362,960
52,640,220
$
Cash and cash equivalents - end of the year
21,882,201
277,260
$
52,640,220
(continued)
See accompanying notes to financial statements
13
The University of Akron
Statement of Cash Flows
June 30, 2004 and 2003
RECONCILIATION OF NET OPERATING REVENUES (EXPENSES) TO
NET CASH USED IN OPERATING ACTIVITIES:
Operating loss
Adjustments to reconcile net operating loss to net cash used in
operating activities:
Depreciation expense
Loss on disposal of property
Changes in assets and liabilities:
Accounts receivable, net
Notes receivable, net
Inventories
Prepaid expenses and deferred charges
Accounts payable
Accrued liabilties
Deferred revenue
Deposits held for others
Sick leave liability
Refundable federal student loans
Net cash used in operating activities
See accompanying notes to financial statements
2004
2003
$ (101,530,311)
$ (121,291,882)
$
14
25,973,831
619,905
24,609,438
3,806,096
2,805,815
(502,883)
(46,791)
(2,812)
1,238,392
(552,103)
(1,134,139)
111,562
83,581
324,324
24,368
444,288
62,138
526,659
(1,577,726)
1,523,409
4,219,453
(536,254)
283,105
318,550
(72,611,629)
$
(87,588,358)
The University of Akron
Notes to Financial Statements
June 30, 2004 and 2003
1. Summary of Significant Accounting and Reporting Policies
Organization
The University of Akron (The University) is a coeducational, degree granting state university
which was established by the General Assembly of the State of Ohio (the State) in 1967 by
statutory act under Chapter 3359 of the Revised Code of the State of Ohio. The University offers
degrees at the undergraduate, masters, and doctoral levels. In 1972, the Wayne College branch
was established in Orrville, Ohio. The University is exempt from federal income taxes under
Section 115 of the Internal Revenue Code, except for unrelated business income.
The University, together with Kent State University and Youngstown State University, created a
consortium to establish and govern Northeastern Educational Television of Ohio, Inc. (NETO),
Channels 45 and 49, Kent, Ohio, and Northeastern Ohio Universities College of Medicine
(NEOUCOM), Rootstown, Ohio. These organizations are legally separate from The University;
accordingly, their financial activity is not included within the accompanying financial
statements, and The University bears no financial liability for these organizations.
In accordance with Governmental Accounting Standards Board (GASB) Statement No. 14, The
Reporting Entity, as amended by Statement No. 39, Determining Whether Certain Organizations
Are Component Units, The University’s financial statements are included, as a discretely
presented component unit within the State of Ohio’s Consolidated Annual Financial Report.
Transactions with the State relate primarily to appropriations, grants from various state agencies,
and payments to the State retirement programs for certain University employees.
Furthermore, in accordance with GASB Statement No. 39, two discretely presented component
units are reported in a separate column on The University’s financial statements to emphasize
that they are legally separate from The University. The University of Akron Foundation
(Foundation) and The University of Akron Research Foundation (Research Foundation) are notfor-profit organizations supporting The University. The Foundation acts primarily as a fundraising organization to supplement the resources that are available to The University in support
of its programs. The Research Foundation promotes, encourages, and provides assistance to the
research activities of The University. Although the University does not control the timing or
amount of receipts from the Foundation and the Research Foundation, the majority of resources,
or income thereon, which they hold and invest are restricted to support the activities of The
University. Because these restricted resources held by the Foundation and Research Foundation
can only be used by, or for the benefit of, the University, they are considered component units of
The University. Financial statements for the Foundation, may be obtained by writing to The
University of Akron Foundation, 302 Buchtel Common, Akron, Ohio 44325-6220. Financial
statements for the Research Foundation may be obtained by writing to The University of Akron
Research Foundation, Goodyear Polymer Center, 170 University Circle, Akron, Ohio 443256220. These component units are described in greater detail in Note 11.
15
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
1. Summary of Significant Accounting and Reporting Policies - Continued
Basis of Accounting
The financial statements of The University have been prepared on the accrual basis whereby all
revenues are recorded when earned and all expenses are recorded when they have been reduced
to a legal or contractual obligation to pay.
Pursuant to GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds
and Other Governmental Entities That Use Proprietary Fund Accounting, The University has
elected not to apply the provisions of all relevant pronouncements of the Financial Accounting
Standards Board (FASB), statements and interpretations issued after November 30, 1989, which
do not conflict or contradict GASB pronouncements.
Measurement Focus and Financial Statement Presentation
Operating revenues and expenses generally result from providing educational and instructional
services in connection with The University’s principal ongoing operations. The principal
operating revenues include student tuition. The University also recognizes as operating revenue
grants classified as exchange transactions and auxiliary activities. Operating expenses include
educational costs, administrative expenses and depreciation on capital assets. All revenues and
expenses not meeting this definition including State share of instruction are reported as
nonoperating revenues and expenses.
The Foundation and the Research Foundation are not-for-profit organizations that report under
FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-Profit
Organizations. As such, certain revenue recognition criteria and presentation features are
different from GASB revenue recognition criteria and presentation features. With the exception
of necessary presentation adjustments, no modifications have been made to the Foundation's or
the Research Foundation’s financial information in The University's financial report for these
differences.
Cash and Cash Equivalents
Cash and cash equivalents are defined as highly liquid investments with an initial maturity of
three months or less when purchased.
Investments
Investments are stated at fair value based on quoted market prices in accordance with GASB
Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External
Investment Pools. The University does not invest in derivatives. Unrealized gains and losses on
investments are recorded as a nonoperating revenue or expense on the Statement of Revenues,
Expenses, and Changes in Net Assets.
16
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
1. Summary of Significant Accounting and Reporting Policies - Continued
Inventories
Inventories are stated at the lower of cost or market. Cost is determined on the average cost
basis.
Pledges Receivable
The University records pledges and unconditional promises to give as receivables and revenue in
the year the pledge is made. Those that are expected to be collected within one year are recorded
at net realizable value. Unconditional promises to give that are expected to be collected in future
years are recorded at the present value of their estimated future cash flows. The discounts on
those amounts are computed using risk-free interest rates applicable to the years in which the
promises are made. Amortization of the discounts is included in contribution revenue.
Conditional promises to give are not included as revenue until the conditions are substantially
met.
Capital Assets
Capital assets greater than $1,500 are recorded at cost or, if acquired by gift, at an appraised
value at the date of gift. Infrastructure assets are included in the financial statements and are
depreciated. Expenditures for construction in progress are capitalized as incurred and depreciated
when put into service. Historical collections, including assets that are held for public exhibition,
education, or research in furtherance of public service, which are protected and preserved, are
not depreciated. Depreciation is computed using the straight-line method, half-year convention,
over the estimated useful life of the asset. When capital assets are sold, or otherwise disposed of,
the carrying value of such assets and any accumulated depreciation are removed from the asset
accounts and any gain or loss on disposal is recognized. The costs of normal maintenance and
repairs that do not add to the value of the capital asset or materially extend the capital asset’s life
are expensed.
Estimated useful lives are as follows:
Classification
Estimated Life
Land improvements
Buildings
Infrastructure
Equipment and furniture
Library books
17
25
40
20
5 to 15
10
years
years
years
years
years
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
1. Summary of Significant Accounting and Reporting Policies - Continued
Capitalization of Interest
The University capitalizes interest on construction projects until substantial completion of the
project. Capitalized interest is amortized on the straight-line basis over the estimated useful lives
of such assets. The University applies Statement of Financial Accounting Standards No. 62,
Capitalization of Interest Cost in Situations Involving Certain Tax-Exempt Borrowings and
Certain Gifts and Grants, for its General Receipts Bonds, Series 1999 and Bond Anticipation
Notes, Series 2002A. This statement requires capitalization of interest cost of the borrowings less
interest earned on investment of the bond proceeds from the date of the borrowing until the
assets constructed from the bond proceeds are ready for their intended use.
Deferred Tuition and Fees Revenue
Deferred revenue includes tuition and fees for summer sessions. Tuition and fees revenue
received or expenses incurred for summer sessions completed and graded after June 30 of each
year are deferred and recognized in the following fiscal year.
Compensated Absences
Staff employees earn vacation at rates specified under State law and upon termination are
entitled to a maximum payout of the amount earned in the last three years. Full-time
administrators and twelve-month faculty earn vacation leave at a rate of 22 days per year, which
can be carried over to a maximum accumulation of 44 days with the maximum payable upon
termination of employment of 22 days. The University accrued a vacation liability equal to the
number of days accrued by each eligible employee up to the maximum allowed by the respective
employee group.
All University employees are entitled to a sick leave credit equal to 10 hours for each month of
service (earned on a pro rata basis for less than full-time employees). This sick leave will either
be absorbed by time off due to illness or injury or, within certain limitations, be paid to the
employee upon retirement. The amount paid to an employee, with 10 or more years of service
upon retirement, is limited to one-quarter of the accumulated sick leave with a maximum of 240
hours.
Endowment and Quasi Endowments
The University’s Board of Trustees established an investment policy with the objectives of
protecting principal and maximizing total investment return without assuming extraordinary
risks. It is the goal of The University to provide spendable income levels that are reasonably
stable and sufficient to meet budgetary requirements and to maintain a spending rate, currently
established at 5%, which ensures a proper balance between the preservation of corpus and
enhancement of the purchasing power of investment earnings.
18
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
1. Summary of Significant Accounting and Reporting Policies - Continued
Scholarship Allowances and Student Aid
Financial aid to students is reported under the alternative method as prescribed by the National
Association of College and University Business Officers (NACUBO). Certain aid such as loans,
funds provided to students as awarded by third parties, and Federal Direct Lending is accounted
for as a third party payment (credited to the student’s account as if the student made the
payment). All other aid is reflected as operating expenses, or scholarship allowances, which
reduce revenues. The amount reported as operating expense represents the portion of aid that
was provided to the student in the form of cash. Scholarship allowances represent the portion of
aid provided to the student in the form of reduced tuition. Under the alternative method followed
by The University, scholarships allowances are computed by allocating the cash payments to
students, excluding payments for services, on the ratio of using aid not considered to be third
party aid to total aid.
Federal grants and contracts revenue
Federal grants and contracts operating revenue consists of sponsored program revenue from
federal sources along with student-related grants such as Pell, College Work Study, and
Supplemental Educational Opportunity Grant programs. For the years ended June 30, 2004 and
2003, student-related grants amount to approximately $19.7 million and $17.4 million,
respectively, with the balance of $11.1 million and $10.4 million, respectively, related to
sponsored programs.
Net Assets
Net assets are classified according to external donor restrictions or availability of assets for
satisfaction of University obligations. Nonexpendable restricted net assets are gifts that have
been received for endowment purposes. The resources are invested with only the investment
income available for purposes established by the donor or, in the case of funds functioning as
endowment, by The University. These purposes include loans, scholarships, and departmental
support. Expendable restricted net assets represent funds that have been awarded or gifted for
specific purposes, funds used for capital projects and debt service, and funds held in federal loan
programs.
Reclassifications
Certain prior year amounts have been reclassified to conform to current year presentations.
Accounting Standards
In March 2003, the GASB issued Statement No. 40, Deposit and Investment Risk Disclosures.
This statement requires certain disclosures of investments that have fair values that are highly
sensitive to changes in interest rate risk. The provisions of this statement are effective for
financial statements for periods beginning after June 15, 2004. The University does not expect
the adoption of this statement to have a material effect on its financial statements.
19
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
2. Cash and Investments
Cash
At June 30, 2004 and 2003, the carrying amounts of The University’s bank deposits and interest
bearing cash equivalents were $21,882,201 and $52,640,220 as compared to bank balances of
$22,408,679 and $53,092,202, respectively. The differences between carrying amounts and bank
balances were caused by items in-transit. Of the June 30, 2004 and 2003 bank balances,
$383,538 and $388,306, respectively, was covered by federal deposit insurance; $22,025,141 and
$52,703,896, respectively, was uninsured but collateralized with securities held by the Federal
Reserve Bank of Cleveland in the depository bank’s and The University’s name.
Investments
In accordance with the Policies of the Board of Trustees of The University, the types of
investments which may be purchased include United States government securities, federal
agency securities, common and preferred stocks, obligations of commercial banks including
certificates of deposit, repurchase agreements, notes, debentures, banker’s acceptances and
commercial paper, obligations of corporations, municipal notes and bonds, investment programs
offered by The Commonfund and shares of the State Treasury Asset Reserve (STAR Ohio).
University policy requires that depository banks pledge collateral for funds on deposit, including
certificates of deposit, with a market value at all times at least equal to the uninsured amount of
the deposit or instrument. The fair value of investments represents published market quotations.
2004
Cost
Pooled investments:
Repurchase agreement
STAR Ohio
Mutual Funds
U.S. agencies
Total
Endowment investments:
Marketable securities:
U.S. Treasury
U.S. agencies
Common stocks
Preferred stocks
U.S. and corporate bonds
The Commonfund:
Private & Small Cap. Equity
Cash surrender value of life insurance
Real estate:
The Commonfund:
Endowment Realty
Total
Investments held in trust by others:
STAR Ohio
U.S. agencies
Total
Total investments
$
2003
Fair
Value
1,917,000
41,285,813
--25,050,192
$
1,917,000
41,285,813
--24,331,750
Fair
Value
Cost
$
2,244,000
24,143,522
21,005,082
---
$
2,244,000
24,143,522
21,343,074
---
68,253,005
67,534,563
47,392,604
47,730,596
2,929,627
971,161
33,962,919
55,400
7,620,071
2,937,683
971,161
35,121,090
52,630
7,543,146
2,648,645
1,249,785
34,552,477
55,400
7,765,108
2,762,558
1,249,785
30,659,348
47,644
7,840,586
168,149
216,242
271,545
255,847
3,332
3,332
5,169
5,169
179,303
153,488
320,303
312,084
45,889,962
46,998,772
46,868,432
43,133,021
--2,279,376
--2,279,376
8,173,810
4,313,848
8,173,810
4,313,848
2,279,376
2,279,376
12,487,658
12,487,658
$ 116,422,343
$ 116,812,711
$ 106,748,694
$ 103,351,275
20
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
2. Cash and Investments - Continued
GASB Statement No. 3 requires The University to categorize investments to give an indication
of the level of custodial credit risk assumed. Category 1 includes investments that are insured or
registered for which securities are held by The University or its agent in the name of The
University. Category 2 includes uninsured and unregistered investments for which securities are
held by the broker’s or dealer’s trust department or agent in the name of The University.
Category 3 includes uninsured and unregistered investments for which the securities are held by
the broker or dealer or by its trust department or agent but not in The University’s name.
The U. S. Treasury and agencies securities and corporate bonds were invested through banks that
keep the securities in their names in safekeeping accounts at the Federal Reserve Bank and are
therefore Category 3 investments. The Government Securities Act of 1986 requires banks to
segregate these securities from the bank assets and keep them free of any lien, charge or claim of
any third party. The cost value of these investments was $40,767,427 and $39,226,468 and the
fair value of these investments was $39,980,116 and $39,753,851 at June 30, 2004 and 2003,
respectively. The preferred and common stocks were handled by investment managers, and were
held in The University’s name and are, therefore, Category 1 investments. The cost value of
these investments was $34,018,319 and $34,607,877 and the fair value of these investments was
$35,173,720 and $30,706,992 at June 30, 2004 and 2003, respectively.
The Commonfund (The Fund) is a nonprofit membership corporation which provides investment
management services for its member colleges, universities and independent schools and offers a
series of pooled investment funds. The Fund invests in funds with off balance sheet risk
strategies. The University does not have available information to determine their exposure to
credit, market or legal risk. STAR Ohio is an investment pool created pursuant to Ohio Statutes
and managed by the Treasurer of the State of Ohio. STAR Ohio is not registered with the
Securities and Exchange Commission as an investment company, but does operate in a manner
consistent with Rule 2a7 of the Investment Company Act of 1940. Investments in STAR Ohio
are valued at STAR Ohio’s share price, which is the price the investment could be sold for on
June 30, 2004 and 2003. The deposits held in The Fund and STAR Ohio are not classified by
risk category because they are not evidenced by securities that exist in physical or book entry
form. The cost value of these funds was $41,633,265 and $32,909,180 and the fair value of these
funds was $41,655,543 and $32,885,263 at June 30, 2004 and 2003, respectively. The cash
surrender value of life insurance also is not classified by risk category and both its cost and fair
value were $3,332 and $5,169 at June 30, 2004 and 2003, respectively.
21
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
3. Accounts and Notes Receivable
Accounts and notes receivable at June 30, 2004 and 2003 consisted of the following:
2004
Accounts receivable, net:
Federal, state, local and governments, foundations,
and companies, net of allowance for doubtful
accounts of $1,630,792 and $966,420, respectively
$
8,013,683
Student receivables, net of allowance for doubtful
accounts of $11,165,721 and $7,785,412, respectively
9,414,286
12,295,183
1,780,386
2,051,176
20,761,942
23,760,645
10,445,995
9,943,113
1,079,111
---
11,525,106
9,943,113
$ 32,287,048
$ 33,703,758
Total accounts receivable, net
Notes receivable, net:
Student notes receivables, net of allowance for doubtful
notes of $885,080 and $800,321, respectively
Other notes receivable
Accounts and notes receivable, net
$
10,967,873
Other, net of allowance for doubtful accounts of
$295,572 and $275,505, respectively
Total notes receivable, net
2003
4. Pledges Receivable
Unconditional promises to give to The University recorded as pledges receivable at June 30,
2004 and 2003 were as follows:
2004
Pledges
Receivable
Total pledges receivable
$
Less: amount estimated to be uncollectible
Less: unamortized discount
Pledges receivable, net
Less: current portion
Pledges receivable, noncurrent portion
$
7,661,020) $
2003
Current
Portion
Pledges
Receivable
3,426,519) $
(769,484)
(141,825)
(319,290)
6,749,711) $
(3,107,229)
3,107,229)
3,642,482)
---
$
8,814,447) $
Current
Portion
2,877,257)
(847,801)
(230,893)
(277,171)
7,735,753) $
(2,600,086)
2,600,086)
---
5,135,667)
As of June 30, 2004 and 2003, The University has approximately $2,479,000 and $1,419,000,
respectively, in numerous outstanding pledges, which are considered to be intentions to give and
are contingent upon future events. These pledges are not recorded as pledges receivable because
they do not represent unconditional promises to give.
22
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
5. Capital Assets
Changes in capital assets during fiscal 2004 were as follows:
Balance
July 1, 2003
Nondepreciable capital assets:
Land
Historical collections
Construction in progress
$
Total nondepreciable capital assets
18,856,794
2,784,837
53,541,901
Additions/
Transfers
$
401,988
1,374,911
85,302,937
Reductions/
Transfers
$
----39,267,357
Balance
June 30, 2004
$
19,258,782
4,159,748
99,577,481
75,183,532
87,079,836
39,267,357
122,996,011
Depreciable capital assets:
Land improvements
Buildings
Infrastructure
Equipment, furniture and books
38,977,063
403,418,308
7,661,230
172,618,717
388,500
34,162,611
1,463,002
13,186,366
3,378,347
----37,281,847
35,987,216
437,580,919
9,124,232
148,523,236
Total depreciable capital assets
622,675,318
49,200,479
40,660,194
631,215,603
697,858,850
136,280,315
79,927,551
754,211,614
Less accumulated depreciation:
Land improvements
Buildings
Infrastructure
Equipment, furniture and books
17,308,603
147,406,371
2,771,544
116,237,812
1,420,046
12,874,580
390,130
11,289,075
3,378,347
----36,514,254
15,350,302
160,280,951
3,161,674
91,012,633
Total accumulated depreciation
283,724,330
25,973,831
39,892,601
269,805,560
$ 414,134,520
$ 110,306,484
40,034,950
$ 484,406,054
Total capital assets
Capital assets, net
$
6. Workers’ Compensation Liability
The University participates in the State’s self-insured worker’s compensation plan (the Plan),
which pays workers’ compensation benefits to beneficiaries who have been injured on the job.
Losses from asserted and unasserted claims for the participating State agencies and universities
in the Plan are accrued by the Ohio Bureau of Worker’s Compensation (the Bureau) based on
estimates that incorporate past experience, as well as other considerations including the nature of
each claim or incident and relevant trend factors. Participants in the State’s Plan annually fund
the worker’s compensation liability based on rates set by the Bureau to collect the cash needed in
subsequent fiscal years to pay the worker’s compensation claims of participating State agencies
and universities. The State required that The University carry an allocation of unfunded liabilities
at June 30, 2002. The elimination of the allocation of state unfunded workers’ compensation is a
result of the State assuming this liability as of June 30, 2003.
23
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
7. Long-term Liabilities
Changes in long-term liabilities during fiscal 2004 were as follows:
Balance
July 1, 2003
Notes payable:
General receipts rental note Series 2003A, 6.628% (imputed),
due serially through 2034
$
---)
Additions
$
42,720,000)
Reductions
$
---)
Balance
June 30, 2004
$
42,720,000)
Current Portion
$
1,080,000)
General receipts rental note Series 2003B, 8.923% (imputed),
due serially through 2018
---)
9,030,000)
---)
9,030,000)
645,000)
Unamortized discount, Series 2003A
---)
(25,835,000)
---)
(25,835,000)
(1,080,000)
Unamortized discount, Series 2003B
---)
(3,915,000)
---)
(3,915,000)
(645,000)
---)
22,000,000)
---)
22,000,000)
---)
27,395,000)
---)
1,350,000)
26,045,000)
1,420,000)
129,155,000)
---)
115,700,000)
13,455,000)
---)
45,815,000)
---)
1,445,000)
44,370,000)
1,110,000)
---)
130,405,000)
---)
130,405,000)
---)
---)
(16,051,754)
(160,518)
(15,891,236)
(642,070)
9,635)
---)
4,817)
4,818)
4,818)
202,374,635)
114,353,246)
118,339,299)
198,388,582)
1,892,748)
Capitalized lease obligations
8,833,911)
65,259)
2,558,236)
6,340,934)
921,917)
Sick leave liability
3,367,140)
89,664)
6,084)
3,450,720)
654,310)
$ 214,575,686)
$ 136,508,169)
$ 120,903,619)
230,180,236)
Total notes payable
Bonds payable:
General receipts bonds Series 1997A, 3.65% to 6.0%, due
serially through 2022
General receipts bonds Series 1999, 4.8 to 5.125%, due
serially through 2010
General receipts bonds Series 2003A, 1.5% to 5.0%, due
serially through 2033
General receipts refunding bonds Series 2004, 3.465%, due serially
through 2029
Series 2004 bond premium
Capital improvements, 5.668% to
7%, due serially through 2005
Total bonds payable
Totals
Less: current portion
3,468,975)
Long-term liabilities
$ 226,711,261)
$
3,468,975)
The general receipts bonds, Series 1997A, Series 1999, Series 2003A, and Series 2004, and the
General receipts rental notes, Series 2003A and 2003B, are payable from and secured by a first
pledge and lien on the general receipts of The University, excluding State appropriations.
24
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
7. Long-term Liabilities - continued
On September 1, 2003, The University issued $51.75 million of General Receipts Rental Notes,
Series 2003A and Series 2003B. These notes guarantee The University’s obligation to pay rent
under a master lease to Akron Student Housing Associates, LLC (ASHA) for a student residence
hall. The aggregate principal amount of these notes is equal to the sum of the payments of rent
The University is required to make under the master lease. The unamortized discount and
imputed interest rate are based on the payment schedules used by ASHA for their financing of
the project.
On March 10, 2004, The University issued $130.4 million of General Receipts Refunding Bonds,
Series 2004 to refund $113.0 million of outstanding General Receipts Bonds, Series 1999. The
University entered into an interest rate exchange agreement (swap agreement) with a swap
counterparty on a notional amount equal to the aggregate principal amount of the Series 2004
Bonds. This was for the purpose of hedging the exposure of The University against interest rate
fluctuations arising from the variable rates borne by the Series 2004 Bonds. Under the swap
agreement, The University will be the fixed rate payor, and the swap counterparty will be the
floating rate payor, paying a floating rate based on the USD-LIBOR-BBA Index, which may
vary from the actual rate payable by The University on the Series 2004 Bonds. With proper
notice, The University can convert the existing variable rate computation mode from/to a daily,
weekly, or monthly rate. Additionally, The University can convert the outstanding debt from
variable to fixed. The fair value of the swap agreement is ($400,474) at June 30, 2004. There was
no agreement at June 30, 2003.
During fiscal year 1997, The University defeased certain bonds and Certificates of Participation
(COP’s) by placing the proceeds of new bonds in an irrevocable trust to provide for all future
debt service payments on the old bonds. Accordingly, the trust account assets and the liability
for the defeased bonds are not included in The University’s financial statements. On June 30,
2004 and 2003, $2,075,000 and $2,230,000, respectively, of bonds and COP’s outstanding are
considered defeased.
Interest expense, net of interest income, related to the borrowings was capitalized as part of the
cost of construction. At June 30, 2004 and 2003, interest on borrowings for the Series 1999 and
Series 2004A bonds was $5,506,979 and $7,220,585, respectively, while the interest earnings on
the proceeds were $175,919 and $4,105,437, respectively. Substantial completion on outstanding
projects was determined to be 63.0% and 39.9%, respectively, resulting in net capitalized interest
of $1,972,492 and $2,803,738, respectively. At June 30, 2004, interest on borrowings for the
Series 2003A bonds was $1,865,881 and earnings on the proceeds were $264,701. Substantial
completion on outstanding projects was determined to be 46.0% resulting in net capitalized
interest of $864,638. There was no capitalized interest for the Series 2003A bonds in fiscal year
2003. At June 30, 2003, interest on borrowings for the Series 2002A notes was $387,883 and
earnings on the construction funds were $208,057, resulting in net capitalized interest of
$179,826.
25
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
7. Long-term Liabilities - continued
The aggregate annual principal maturities for the general receipt rental notes, general receipt
bonds, general receipt refunding bonds, and capital improvements for fiscal years subsequent to
June 30, 2004 are as follows:
Fiscal year:
Principal
2005
2006
2007
2008
2009
2010-2014
2015-2019
2020-2024
2025-2029
2030-2034
Interest
Total
$
1,892,747
2,542,930
6,547,930
7,192,930
6,607,930
35,669,649
41,054,649
48,154,649
54,320,167
16,405,000
$
10,703,241
10,454,263
10,103,379
9,767,149
9,431,488
42,248,123
34,068,654
24,054,952
13,319,455
2,184,194
$
12,595,988
12,997,193
16,651,309
16,960,079
16,039,418
77,917,772
75,123,303
72,209,601
67,639,622
18,589,194
$
220,388,581
$
166,334,898
$
386,723,479
The University leases certain office facilities and computer and duplicating equipment under
operating leases. Total rental expense under operating leases during the years ended June 30,
2004 and 2003 amounted to $1,104,450 and $892,981, respectively.
The University’s capital leased assets consist of a student residence hall, educational facilities
and computer, duplicating, telecommunications, and other equipment. Capital leased assets by
major classes at June 30, 2004 are as follows:
Land
Building
Movable equipment
$
140,000
3,572,366
4,983,274
$
8,695,640
Future minimum lease payments as of June 30, 2004 under all capital leases with an initial or
remaining noncancelable lease term in excess of one year, along with the present value of net
minimum capital lease payments, are as follows:
Fiscal Year:
2005
2006
2007
2008
2009
2010-2013
Total minimum lease payments
$
1,157,032
880,424
746,741
460,169
195,223
3,882,740
$
7,322,329
Less amount representing interest
Present value of net minimum
capital lease payments
26
981,395
$
6,340,934
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
7. Long-term Liabilities - continued
The University’s bookstore facilities and operations are leased to an outside operator. The lease
provides for annual rental receipts of approximately $500,000 and contingent rentals based upon
gross sales. There were no contingent rentals earned in fiscal 2004 or 2003. During fiscal 2004
and 2003, The University also received rental receipts approximating $192,000 and $288,000,
respectively, from renting various other campus facilities under the terms of operating lease
agreements.
8. State Support
The University is a State-assisted institution of higher education, which receives a student-based
State share of instruction (appropriation) from the State. This State share of instruction is
determined annually based upon a formula devised by the State. In addition to the State share of
instruction, the State also provides certain capital funding and assistance for major academic
facilities. The capital funding is provided through the Ohio Board of Regents (OBR) from
revenue bond proceeds issued by the Ohio Public Facilities Commission (OPFC). The capital
assets are transferred from the OBR to The University upon completion. Costs incurred during
construction are included in construction in progress.
University facilities are not pledged as collateral for the revenue bonds. Instead, the bonds are
supported by a pledge of monies in the Higher Education Bond Service Fund established in the
custody of The Treasurer of State. If sufficient monies are not available from this fund, a pledge
exists to assess a special student fee uniformly applicable to students in state-assisted institutions
of higher education throughout the State.
As a result of the above described financial assistance provided by the State to The University,
outstanding debt issued by OPFC is not included within The University’s financial statements.
In addition, appropriations by the State’s General Assembly to the Board of Regents for payment
of debt service are not reflected as appropriation revenue received by The University, and the
related debt service payments are not recorded in The University’s accounts.
The Ohio Board of Regents adopts a two-year operating budget that includes line items to fund
infrastructure investments for higher education. The Capital Component program is an
appropriation line item in the Ohio Board of Regents operating budget. The program was
designed to add flexibility to the capital funding process and to provide incentives for the
efficient use of state capital funding provided to higher education institutions. The Capital
Component constitutes a reform of capital funding for higher education as part of the capital
funding policy adopted in 1997. This new capital funding policy provided state-assisted
institutions of higher education with the annual debt service equivalent of capital appropriations
that the institution otherwise could have received via the new formula-based higher education
capital budget. The formula is driven by considering existing space shortages on campus,
student enrollments, and other campus activities (i.e. non-credit activities, community service
functions and research). Thus, if the formula allocation exceeds the amount requested, 10% of
the difference is paid to the institution for 15 years in the form of Excess Capital Component
Allocation (Capital Component). The University intends to use this Capital Component toward
funding the debt service obligation of the Series 1999, 2003A, and 2004 Bond Issues.
27
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
9. Employee Benefit Plans
Retirement Plans
Employee retirement benefits are available for substantially all employees under contributory
retirement plans administered by the State Teachers Retirement System (STRS) and the School
Employees Retirement System (SERS). These retirement programs are statewide, cost-sharing,
multiple-employer defined benefit plans. STRS and SERS provide retirement and disability
benefits, annual cost of living adjustments, and death benefits for plan members and
beneficiaries. Authority to establish and amend benefits is provided by State statute per Chapter
3307 of the Ohio Revised Code (ORC).
Both STRS and SERS issue stand-alone financial reports. The STRS’ Comprehensive Annual
Financial Report may be obtained by writing to State Teachers Retirement System, 275 E. Broad
Street, Columbus, Ohio 43215-3371 and the SERS’ Comprehensive Annual Financial Report
may be obtained by writing to School Employees Retirement System, 300 East Broad Street,
Suite 100, Columbus, Ohio 43215-3746. The ORC provides statutory authority for employee
and employer contributions. The employee contribution rates for STRS and SERS are 10% of
covered payroll and The University is required to contribute 14% of covered payroll for both
programs. The University’s contributions to STRS and SERS for the years ending June 30,
2004, 2003, and 2002 were $9,620,002, $9,707,923, and $9,035,195, and $6,484,297,
$6,129,061, and $5,715,435, respectively, equal to the required contributions for each year.
Other Postretirement Employee Benefits
The University also provides certain health care benefits for dependents of retired employees and
life insurance benefits for retired employees. Substantially all of The University’s employees
hired prior to 1992 may become eligible for those benefits if they reach normal retirement age
while working for The University. During fiscal 2004 and 2003, the cost of dependent health
care and retiree life insurance benefits, recognized as expense when claims and premiums were
paid, totaled $1,450,000 and $1,391,513, respectively.
STRS provides comprehensive health care benefits to retirees and their dependents. Coverage
includes hospitalization, physician fees, prescription drugs, and reimbursement of monthly
Medicare Part B premiums. All benefit recipients and sponsored dependents are eligible for
health care coverage. Pursuant to the ORC, The State Teachers Retirement Board has
discretionary authority over how much, if any, of the health care costs will be absorbed by
STRS. Most benefit recipients are required to pay a portion of the health care cost in the form of
a monthly premium. The ORC grants authority to STRS to provide health care coverage to
benefit recipients, spouses, and dependents. By Ohio law, the cost of the coverage paid from
STRS funds shall be included in the employer contribution rate, currently 14% of covered
payroll. For fiscal year ended June 30, 2003, benefits are funded on a pay-as-you-go basis
through an allocation of employer contributions equal to 1% of covered payroll to a Health Care
Reserve Fund from which health care benefits are paid. The balance in the Health Care Reserve
Fund was $2.8 billion at June 30, 2003, the latest available information. For the year ended June
30, 2003, the net health care costs paid by STRS were $352,301,000 and there were 108,294
eligible benefit recipients.
28
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
9. Employee Benefit Plans - Continued
The ORC gives SERS the discretionary authority to provide postretirement health care to retirees
and their dependents. Coverage is made available to service retirees, with ten or more years of
qualifying service credit, disability and survivor benefit recipients. Members retiring on or after
August 1, 1989, with less than 25 years of service credit must pay a portion of their premium for
health care. The portion is based on years of service up to a maximum of 75% of the premium.
After the allocation for basic benefits, the remainder of the employer’s 14% contribution is
allocated to providing health care benefits. At June 30, 2003, the most recent data available, the
allocation rate is 5.83%. In addition, SERS levies a surcharge to fund health care benefits equal
to 14% of the difference between a minimum pay and the member’s pay, prorated for partial
service credit. For 2003, the minimum pay has been established as $14,500. The surcharge,
added to the unallocated portion of the 14% employer contribution rate, provides for
maintenance of the asset target level for the health care fund. Health care benefits are financed
on a pay-as-you-go basis. The target level for the health care reserve is 150% of annual health
care expenses. Expenses for health care at June 30, 2003, the latest available information, were
$204,930,737. At June 30, 2003, the Retirement System’s net assets available for payment of
health care benefits were $303.6 million. The number of participants currently receiving health
care benefits is approximately 50,000.
Alternative Retirement Plan
In 1997, the State approved an Alternative Retirement Plan (ARP) for full-time academic and
administrative employees which allows new employees and those with less than five years of
service to opt out of STRS and SERS and contribute to one of the ARPs formed as Section
401(a) defined contribution plans. The legislation, as amended, requires employees to contribute
to the ARPs at the same rates as previously stated for STRS and SERS employee contributions,
while the employer contributes 3.50% of their 14.00% STRS employer contribution to STRS and
no funding to SERS. The University holds one-half of one percent for administrative expenses.
The employer contribution rate is based on independent actuarial studies. The University’s
contributions for ARP employees for the years ending June 30, 2004, 2003, and 2002 were
$2,574,706, $2,598,782, and $2,423,718, respectively, equal to the required contributions for
each year. The ARPs do not provide postretirement benefits other than pension and death
benefits.
10. Litigation, Commitments, and Contingencies
The University has been named as a defendant in a number of suits alleging various matters. It is
the opinion of The University’s management that disposition of the pending matters will not
have a material adverse effect on the financial statements.
29
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
10. Litigation, Commitments, and Contingencies - Continued
In addition to purchasing insurance to cover potential losses from certain litigation, The
University participates in a risk pool, along with other State universities, for commercial
property coverage. Each university contributes on a basis equal to their percentage of the total
insurable value of the pool. Future contributions will be adjusted based upon each university’s
loss history. Each university has a base deductible of $100,000. The next $250,000 of any one
claim is the responsibility of the pool, which has a total annual aggregate limit of $700,000. The
commercial property insurer is liable for the amount of any claim in excess of $350,000, or
$100,000 in the event the pool has reached its annual aggregate.
The University receives grants and contracts from certain federal and state agencies to fund
research and other activities. The federal grants are audited annually in accordance with Office
of Management and Budget Circular A-133. Federal agencies also may conduct additional
audits under federal law or regulations or may arrange for funding the cost of such additional
audits be independent auditing firms. The state grants are subject to review and audit by the
grantor agencies or their designee. Such federal or state audits could lead to a request for
reimbursement by the grantor agency for expenditures disallowed under the terms of the grant.
No significant costs have been questioned to date, and management believes that any
disallowance or adjustment of such costs would not have a material adverse effect on the
financial statements.
The University is currently in contract negotiations with the University of Akron Chapter of the
American Association of University Professors (AAUP) which represents full-time faculty
members. The AAUP has filed an unfair labor practice complaint with the State of Ohio State
Employment Relations Board regarding several bargaining subjects. The outcome of the
complaint is unknown at this time, and management believes that any adjustment of costs related
to this complaint would not have a material adverse effect on the financial statements.
The University has been appropriated $28,104,000 from the State for buildings and renovations,
of which $13,423,000 has been expended as of June 30, 2004. In addition, as of June 30, 2004,
several University-funded construction projects will cost an estimated $30,600,000 to complete.
30
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
11. Component units
Detail of the component units’ net assets at June 30, 2004 and 2003 are as follows:
Foundation
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net
Pledges receivable, net
Prepaid expenses and
deferred charges
$
2004
Research
Foundation
36,980 $
1,430,381
1,224,591
--220,614
---
$
Totals
Foundation
36,980
1,650,995
1,224,591
$
2003
Research
Foundation
34,165 $
58,223
1,988,535
--129,062
---
Totals
$
34,165
187,285
1,988,535
---
114,985
114,985
---
112,500
112,500
2,691,952
335,599
3,027,551
2,080,923
241,562
2,322,485
Restricted current assets:
Cash and cash equivalents
Pooled investments
-----
1,808,536
159,000
1,808,536
159,000
-----
989,973
---
989,973
---
Total restricted current assets
Total current assets
---
1,967,536
1,967,536
---
989,973
989,973
Noncurrent assets:
Endowment investments
Pledges receivable, net
Capital assets, net
122,634,134
1,020,114
416,055
-------
122,634,134
1,020,114
416,055
109,045,562
1,961,529
335,056
-------
109,045,562
1,961,529
335,056
Total assets
126,762,255
2,303,135
129,065,390
113,423,070
1,231,535
114,654,605
126,030
109,157
---
416,504
50,308
990,408
542,534
159,465
990,408
350,846
132,054
---
296,777
52,791
525,999
647,623
184,845
525,999
235,187
1,457,220
1,692,407
482,900
875,567
1,358,467
Noncurrent liabilities:
Actuarial liability for
annuity/unitrust agreements
10,318,336
---
10,318,336
10,803,710
---
10,803,710
Total liabilities
10,553,523
1,457,220
12,010,743
11,286,610
875,567
12,162,177
416,055
---
416,055
335,056
---
335,056
69,324,110
40,975,798
5,492,769
----845,915
69,324,110
40,975,798
6,338,684
62,536,029
33,530,832
5,734,543
----355,968
62,536,029
33,530,832
6,090,511
Liabilities
Current liabilities:
Accounts payable
Accrued liabilities
Deferred revenue
Net assets
Invested in capital assets, net
Restricted:
Nonexpendable
Expendable
Unrestricted
Total net assets
$116,208,732 $
845,915 $117,054,647
31
$102,136,460 $
355,968 $102,492,428
The University of Akron
Notes to Financial Statements – Continued
June 30, 2004 and 2003
11. Component units - Continued
Detail of the component units’ revenues, expenses, and changes in net assets at June 30, 2004
and 2003 are as follows:
Foundation
Revenues
Operating revenues:
Federal grants and contracts
State grants and contracts
Private grants and contracts
Gifts and contributions
Other sources
Total operating revenues
$
2004
Research
Foundation
---) $ 14,921) $
---)
28,524)
---) 1,735,416)
3,828,597)
---)
---)
102,942)
3,828,597) 1,881,803))
Totals
14,921) $
28,524)
1,735,416)
3,828,597)
102,942)
5,710,400)
Foundation
2003
Research
Foundation
---) $ 48,957) $
---)
---)
---) 1,006,323)
5,010,563)
---)
---)
---)
5,010,563)) 1,055,280))
Totals
48,957)
---)
1,006,323)
5,010,563)
---)
6,065,843)
Expenses
Operating expenses:
Educational and general:
Separately budgeted research
Institutional support
Depreciation
---)
503,435)
---)
486,314)
---)
---)
486,314)
503,435)
---)
---)
727,065)
3,209)
311,659)
---)
---)
311,659)
727,065)
3,209)
Total operating expenses
503,435)
486,314)
989,749)
730,274)
311,659)
1,041,933)
3,325,162)
1,395,489)
4,720,651)
4,280,289)
743,621)
5,023,910)
1,835,985)
13,191)
1,849,176)
1,997,972)
5,265)
2,003,237)
14,302,952)
159,000)
(9,009,709) (1,079,983)
14,461,952)
(10,089,692)
(2,793,460)
(9,967,279)
---)
(510,213)
(2,793,460)
(10,477,492)
(246,072)
137,540)
(393,490)
89,793)
---)
576)
(393,490)
90,369)
Operating income
Nonoperating revenues
(expenses)
Investment income, net
Unrealized appreciation
(depreciation) on investments
Distributions to the university
Distributions on behalf of the
university
Other nonoperating revenues
Net nonoperating revenues
(expenses)
Gain (loss) before other changes
Other changes
Additions to permanent
endowments
Increase (decrease) in net assets
Net assets
Net assets – beginning of year
Net assets – end of year
(246,072)
135,290)
---)
2,250)
7,018,446)
(905,542)
6,112,904)
(11,066,464)
(504,372)
(11,570,836)
10,343,608)
489,947)
10,833,555)
(6,786,175)
239,249)
(6,546,926)
3,728,665)
---)
3,728,665)
3,611,420)
---)
3,611,420)
14,072,273)
489,947)
14,562,220)
(3,174,755)
239,249)
(2,935,506)
102,136,460)
355,968)
102,492,428)
105,311,215)
116,719)
105,427,934)
$116,208,733) $ 845,915) $116,895,648) $102,136,460) $ 355,968) $102,492,428)
32
The University of Akron
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2004
Federal Grantor/Pass-Through Grantor/Program or Cluster Title
Student Financial Aid Cluster
Department of Education:
Direct programs:
Federal Pell Grant Program
Federal Supplemental Educational Opportunity Grant
Federal College Work-Study
Federal Perkins Loans
Total Department of Education - Student Financial Aid Cluster
Catalog
Federal
Domestic
Assistance
84.063
84.007
84.033
84.038
Research and Development Cluster
Department of Agriculture:
Direct programs:
Grants for Agriculture - Competitive Research Grants
Initiative for Future Agriculture and Food Systems
Univerisity of Arizona - Agricultural Research-Basic and Applied Research
Total Department of Agriculture
Department of Commerce:
Direct program:
NIST - Measurement and Engineering Research and Standards
Department of Defense:
Direct programs:
ONR - Basic and Applied Scientific Research
United States Army - Basic Scientific Research
USAF - Air Force Defense Research Sciences Program
National Security Agency - Mathematical Sciences Grants Programs
Pass-through programs:
UARF-Creative Action LLC Basic and Applied Scientific Research
Mississippi State University-Basic and Applied Scientific Research
Cleveland Clinic - Military Medical Research and Development
NEOUCOM - Military Medical Research and Development
Battelle - Basic Scientific Research
Psych Systems & Research Inc. - Basic Scientific Research
University of Dayton - Air Force Defense Research Sciences Program
Foster Miller, Inc. - Air Force Defense Research Sciences Program
Foster Miller, Inc. - Air Force Defense Research Sciences Program
MIT - Research and Technology Development
Santa Fe Science and Technology - Research and Technology Development
Total Department of Defense
Department of Justice:
Direct program:
National Institute Justice Research, Evaluation, and Development Project Grants
Pass-through programs:
A.B.T. Associates - NIJ Research, Evaluation, and Development Project Grants
NORC-ADAM Program - NIJ Research, Evaluation, and Development Project Grants
Ohio Criminal Justice - Bryne Formula Grant Program
Oriana House - Drug Court Discretionary Grant Program
Total Department of Justice
$
148,171
182,953
59
331,183
11.609
60,603
12.300
12.431
12.800
12.901
111,325
57,355
739,405
7,137
N00014-03-M-0254
N00014-02-1-0450
DAMD17-01-1-0673
DAMD17-03-1-0082
DAAH04-96-C0086
DASW01-03-C-0003
F33615-00-D-5008
F33615-01-C-2112
F33615-02-C-2294
F49620-01-0447
MDA972-99-C-0004
10,394
45,111
43,675
33,378
(4,893)
101,355
(685)
(23,053)
80,069
110,751
(648)
1,310,676
15.AAT
35,625
16.560
20,426
16.560
16.560
16.579
16.585
584
43,425
54,148
36
118,619
2003-DG-B01-7403
See accompanying notes to the Schedule of Expenditures of Federal Awards
33
17,283,456
989,038
1,139,501
324,324
19,736,319
10.206
10.302
10.001
12.300
12.300
12.420
12.420
12.431
12.431
12.800
12.800
12.800
12.910
12.910
Department of the Interior:
Pass-through program:
Cuyahoga Valley National Park
Federal
Expenditures
Pass Through Entity
Identifying Number
The University of Akron
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2004
Federal Grantor/Pass-Through Grantor/Program or Cluster Title
Department of State
Pass-through program:
Axiom Resource Management, Inc. - Educational Partnerships Program
Department of Transportation:
Direct program:
NHTSA State and Community Highway Safety
Pass-through programs:
Ohio Department of Transportation - Highway Planning and Construction
Ohio Department of Transportation - Highway Planning and Construction
Ohio Department of Transportation - Highway Planning and Construction
Total Department of Transportation
Catalog
Federal
Domestic
Assistance
Pass Through Entity
Identifying Number
19.424
SINLEC
20.600
20.205
20.205
20.205
Appalachian Regional Commission
Pass-through program:
Ohio Department of Development - Appalachian Area Development
National Aeronautics and Space Administration:
Direct program:
Technology transfer
Pass-through programs:
USRA/NCMR - Technology Transfer
UARF-Physical Sciences - Technology Transfer
University of Toledo-Technology Transfer
The Ohio State University Research Foundation-Technology Transfer
Morehouse School of Medicine-Technology Transfer
Ohio Aerospace Institute-Technology Transfer
Old Dominion University - Technology Transfer
Total National Aeronautics and Space Administration
9,378
AC-SPR-2(37)
E036(641)
E040(613)
277,993
32,857
34,767
354,995
5,229
43.002
1,563,123
NCC3-975
NAS1-02066
NNC04GA24G
NCC3-1086
NCC2-1322
NCC-959
NAG1-01043
47.041
47.049
47.050
47.074
47.075
47.076
47.041
47.041
47.041
47.041
47.041
47.041
47.049
47.050
47.067
47.073
47.075
47.076
47.076
47.076
4,603
(1,485)
6,266
29,064
7,846
61,382
22,479
1,693,278
1,016,183
1,921,949
264,928
323,516
120,915
403,171
DMI-0100354
EEC-9980325
CTS-0218977
EEC-9820538
CMS-0219701
ECS-0304453
CHE-0211696
OCE-0117112
DMR-9714254
ECD-9108700
INT-0002341
EHR-0090472
EPS-0082979
DUE-0088847
See accompanying notes to the Schedule of Expenditures of Federal Awards
34
27,443
23.002
43.002
43.002
43.002
43.002
43.002
43.002
43.002
National Science Foundation:
Direct programs:
Engineering Grants
Mathematical and Physical Sciences
Geosciences
Biological Sciences
Social, Behavioral, and Economic Sciences
Educational and Human Resources
Pass-through programs:
University of Nebraska - Engineering Grants
Michigan State University - Engineering Grants
University of Kentucky Research Foundation - Engineering Grants
Cleveland Clinic Foundation - Engineering Grants
Virginia Polytech Institute - Engineering Grants
Drexel University - Engineering Grants
Wayne State University - Mathematical and Physical Sciences
University of South Carolina - Geosciences
Kent State University
Case Western Reserve University
National Academies - Social, Behavioral, and Economic Sciences
West Virginia University - Educational and Human Resources
Mississippi State University - Educational and Human Resources
University of Oregon - Educational and Human Resources
Total National Science Foundation
Federal
Expenditures
53,894
1,458
38,492
78
29,758
25,187
20,397
30,410
(4,425)
17
6,538
54,273
14,083
10,386
4,331,208
The University of Akron
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2004
Federal Grantor/Pass-Through Grantor/Program or Cluster Title
Environmental Protection Agency:
Pass-through programs:
Ohio EPA - Nonpoint Source Implementation Grants
Ohio EPA - Nonpoint Source Implementation Grants
Total Environmental Protection Agency
Department of Energy:
Direct programs:
Department of Energy
Office of Science Financial Assistance Program
University Coal Program
Pass-through programs:
University of Pittsburgh - Fossil Energy Research and Development
University of Pittsburgh - Fossil Energy Research and Development
Parsons Infrastructure & Technology Group-Fossil Energy Research and Development
Total Department of Energy
Department of Education:
Direct programs:
Preparing Tomorrow's Teachers to Use Technology
Fund for the Improvement of Postsecondary Education
National Institute on Disability and Rehabilitation Research
Pass-through programs:
Ohio Rehabilitation Services Commission-Vocational Rehabilitation Grants
Brain Injury - National Institute on Disability and Rehabilitation Research
Alliance Schools - Fund for the Improvement of Education
Total Department of Education
Catalog
Federal
Domestic
Assistance
Pass Through Entity
Identifying Number
66.460
66.460
C999500900-0
C997550001-0
81.000
81.049
81.057
81.089
81.089
81.089
Department of Health and Human Services:
Direct programs:
Special Programs for the Aging
Nurse Anesthetist Traineeships
Centers for Disease Control
Biomedical Imaging Research
Advanced Education Nursing Grant Program
Basic Nurse Education, Practice and Retention Grants
Nursing Research
Academic Research Enhancement Award
Cancer Treatment Research
Community Services Block Grant Discretionary Awards, Community Food, and Nutrition
Heart and Vascular Diseases Research
Lung Diseases Research
Diabetes, Endocrinology, and Metabolism Research
Digestive Diseases and Nutrition Research
Vision Research
Minority Access to Research Careers
Scholarships for Health Profession Students
DE-FC26-01NT41196
FC26-98FT40143
DE-AM26-99FT40463
35,324
(3,013)
41,567
398,196
156,911
337,001
113,319
H133A010607
R215S020123
93.048
93.124
93.262
93.286
93.358
93.359A
93.361
93.390
93.395
93.571
93.837
93.838
93.847
93.848
93.867
93.880
93.925
See accompanying notes to the Schedule of Expenditures of Federal Awards
35
46,904
41,357
88,261
92,813
136,146
95,359
84.342A
84.116Z
84.133A
84.126
84.133A
84.215S
Federal
Expenditures
1,954
23,000
45,097
677,282
63,168
7,023
39,530
12,610
55,580
295,046
212,247
(1,110)
53,127
2,205
1,085
3,883
43,556
9,084
51,168
7,216
36,871
The University of Akron
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2004
Federal Grantor/Pass-Through Grantor/Program or Cluster Title
Department of Health and Human Services - continued:
Pass-through programs:
VNA-Special Programs for the Aging Title IV & Title II Discretionary Projects
Stella Maris - Consolidated Knowledge Development and Application (KD&A) Program
ADASBCC-Consolidated Knowledge Development and Application (KD&A) Program
Ohio Rehabilitation Services Commission-Truamatic Brain Injury State Demo. Grant Prg
Community Health-SAMHSA-Projects of Regional and National Significance
ADASBCC-SAMHSA-Project of Regional and National Significance
University of Pittsburgh-Nursing Research
Ohio Dept. of Jobs and Family Services-Foster Care Title IV-E
Case Western Reserve University - Aging Research
Indiana University - Vision Research
Ohio Dept. of Health-HIV Care Formula Grants
Ohio Dept. of Mental Health-Block Grants for Community Mental Health Services
ODADAS - Block Grants for Prevention and Treatment of Substance Abuse
Total Department of Health and Human Services
Catalog
Federal
Domestic
Assistance
93.048
93.230
93.230
93.234
93.243
93.243
93.361
93.658
93.866
93.867
93.917
93.958
93.959
Pass Through Entity
Identifying Number
90AM2747
1 H79 TI13505-01
1 H82 MC 00006-01
1 H79 TI4463-01
1 H79 TI14109-01
5 R01 NR004749-07
P50AG08012-12
R01 EY11365-06A1
Total Research and Development Cluster
Federal
Expenditures
50,512
130,915
99,316
12,769
65,420
48,336
5,121
24,776
207
26,437
12,640
46,148
169,603
1,584,489
11,017,087
Child Nutrition Cluster
Department of Agriculture:
Pass-through programs:
Ohio Department of Education - Summer Food Service Program for Childre
Firestone Endowment-Summer Food Service Programs for Children
NCAA Youth Sports-Summer Food Service Program for Children
Total Department of Agriculture
Special Education Cluster
Department of Education:
Pass-through program:
Barberton Decker Center - Special Education Preschool Grant
TRIO Cluster
Department of Education:
Direct programs:
TRIO Talent Search
TRIO Upward Bound
TRIO Upward Bound Math/Science
TRIO McNair Post Baccalaureate Achievement
Total TRIO Cluster
10.559
10.559
10.559
14,259
1,229
11,221
26,709
84.173
77,568
84.044A
84.047A
84.047M
84.217A
408,653
456,628
269,228
122,592
1,257,101
Other Programs
Instruction
Department of Defense:
Pass-through program:
State of Ohio-National Guard Military Operations and Maintenance (O&M) Projects
National Science Foundation:
Direct program:
Education and Human Resources
Pass-through program:
The Ohio State University Research Foundation-Education and Human Resources
Total National Science Foundation
12.401
13,571
47.076
13,612
47.076
HRD-0331560
See accompanying notes to the Schedule of Expenditures of Federal Awards
36
10,127
23,739
The University of Akron
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2004
Federal Grantor/Pass-Through Grantor/Program or Cluster Title
Department of Education:
Direct programs:
Graduate Assistance in Areas of National Need
Gaining Early Awareness and Readiness for Undergraduate Programs
Pass-through program:
Services and Results for Children with Disabilites
Total Department of Education
Catalog
Federal
Domestic
Assistance
Pass Through Entity
Identifying Number
84.200A
84.334A
84.325
Department of Health and Human Services:
Direct programs:
Comprehensive Geriatric Education Program
Nurse Education, Practice and Retention Grants
Pass-through program:
Ohio Department of Job & Family Services-Foster Care Title IV-E
Total Department of Health and Human Services
Federal
Expenditures
191,528
281,347
H325D030008
20,980
493,855
93.265
93.359
130,770
119,958
93.658
35,040
285,768
Total Instruction
816,933
Public Service
Department of Agriculture:
Pass-through program:
Center for Child Development - Child and Adult Care Food Program
10.558
19,200
12.000
12.000
20,853
1,024
21,877
14.000
14.193
95
5,275
5,370
16.580
16.579
16.729
83,561
64,747
15,390
163,698
Department of State:
Direct program:
Education Partnerships Program
19.424
28,039
Small Business Administration:
Pass-through program:
Akron Small Business Development Center
59.037
10,093
Department of Defense:
Direct programs:
Air Force ROTC Uniform
Army ROTC
Total Department of Defense
Department of Housing and Urban Development:
Pass-through programs:
City of Akron/Knight Family Foundation
AMHA - Elder Screening - Federally Assisted Low Income Housing Drug Elimination
Total Department of Housing and Urban Development
Department of Justice:
Direct programs:
Discretionary Drug and Criminal Justice Assistance Program
Ohio Criminal Justice-Byrne Formula Grant Program
Community Partnership-Drug Free Communities Support Program Grant
Total Department of Justice
See accompanying notes to the Schedule of Expenditures of Federal Awards
37
The University of Akron
Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2004
Federal Grantor/Pass-Through Grantor/Program or Cluster Title
Department of Education:
Direct program:
Fund for the Improvement of Education
Pass-through programs:
Ohio Department of Education - Vocational Education Basic Grants to States
University of Illinois - National Institute on Disability and Rehabilitation Research
Ohio Board Regents - Eisenhower Professional Development - Federal Activities
Ohio Department of Education - Even Start State Education Agencies
Ohio Department of Education - Tech Prep Education
Ohio Board Regents - Improving Teacher Quality State Grants
Total Department of Education
Department of Health and Human Services:
Direct program:
Community Services Block Grant Discretionary Awards-Community Food and Nutrition
Pass-through programs:
SPAHEC - Model State Supported Area Health Education Centers
Trumbull County Private Industry Council
Holmes County - Temporary Assistance for Needy Families
NCAA Youth Sports - Community Services Block Grant Discretionary Awards
Barberton Decker Center - Job Opportunities for Low Income Individuals
OBR/CSCC Job Prep - Job Opportunities for Low Income Individuals
Barberton Decker Center - Social Services Block Grant
NOVA Southeastern University - Academic Administrative Units in Primary Care
Total Department of Health and Human Services
Corporation for National and Community Service:
Pass-through programs:
Center for Healthy Communities - Learn and Serve America Higher Education
Wright State University - Learn and Serve America Higher Education
Corporation for National and Cummunity Service-Learn and Serve America Higher Educ.
Total Corporation for National and Community Service
Catalog
Federal
Domestic
Assistance
Federal
Expenditures
Pass Through Entity
Identifying Number
84.215K
84.048
84.133
84.168
84.213C
84.243
84.367
99,799
56,003
28,487
332
156,788
117,008
114,543
572,960
H133B30069
93.571
23,384
93.107
93.558
93.558
93.570
93.593
93.593
93.667
93.984
26,894
(31)
179,232
94,568
163,869
96
249,189
3,078
740,279
94.005
94.005
94.006
5 D12 HP 00045-03
1,012
(304)
21,508
22,216
03ACH-K729-04-A147
Total Public Service
1,583,732
Total Other Programs
2,400,665
Total Expenditures of Federal Awards
$
See accompanying notes to the Schedule of Expenditures of Federal Awards
38
34,515,449
The University of Akron
Notes to Schedule of Expenditures of Federal Awards
For the Year Ended June 30, 2004
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying Schedule of Expenditures of Federal Awards (the "Schedule") includes
the federal grant transactions of The University of Akron (the "University") recorded on the
accrual basis of accounting. Grant revenues are recorded for financial reporting purposes
when the University has expended the funds in accordance with the grant aggreement.
(b) Subrecipients
Certain funds are passed through to subgrantee organizations by the University. Expenditures
incurred by the subgrantees and reimbursed by the University are presented in the Schedule.
During the year ended June 30, 2004, the University disbursed funds to subrecipients in the
amount of $910,172.
The University is also the subrecipient of federal funds which have been subject to testing
and are reported as expenditures and listed separately as pass-through programs.
(c) Facilities and Administrative Costs
The University recovers facilities and administrative costs by means of predetermined rates.
The predetermined rates are a result of negotiated agreements with the U.S. Department of
Health and Human Services. The predetermined rates are 47% for on-campus research and
26% for off-campus research until June 30, 2004.
(2) Loan Advances
The following schedule represents total loans advanced to students by the University and balances
outstanding for the Perkins and Nursing Student Loan Programs for the year ended June 30, 2004:
CFDA
Numbers
Outstanding
Balances
Advances
Perkins Loan Program
84.038
$
2,028,869
$
11,042,672
Nursing Student Loan Program
93.364
$
283,951
$
1,066,035
(3) Federal Family Education Loan Program
During the year ended June 30, 2004, the University processed applications for the following loan
amounts under the Federal Family Education Loan Program which includes Stafford Loans,
unsubsidized Stafford Loans and Parent Plus Loans for Undergraduate Students.
CFDA Number
Federal Family Education Loan Program
39
84.032
Advances
$
93,936,521
The University of Akron
Notes to Schedule of Expenditures of Federal Awards, Continued
For the Year Ended June 30, 2004
(4) Reconciliation
The following schedule is a reconciliation of total expenditures as shown on the Schedule to the
revenue shown as federal grants and contracts on the Statement of Revenues, Expenses and
Changes in Net Assets (the “Statement”), which is included as part of the University's financial
statements:
Expenditures per the Schedule
$ 34,515,449
Perkins Loan funds excluded from federal grants on the Statement
State grants
Local grants
Private grants
Sales
Indirect costs excluded from federal grants on Statement
Change in deferred revenue from federal grants
Federal grants and contracts as shown on the Statement
(324,324)
(1,168,512)
(216,278)
(2,340,981)
(19,200)
(34,178)
400,915)
$ 30,812,891
Current restricted funds derived from appropriations, gifts or grants may be used only to meet
current expenditures for the purposes specifically identified by sponsoring agencies. The
appropriations, gifts or grants are recognized as revenue in the University's external financial
statements as expended. Therefore, expenditures per the Schedule agree with federal grants and
contracts revenue on the Statement, except as noted above.
40
APPENDIX C
BOND INSURANCE AND SPECIMEN POLICY
AMBAC ASSURANCE CORPORATION
Payment Pursuant to Financial Guaranty Insurance Policy
Ambac Assurance has made a commitment to issue a financial guaranty insurance policy (the “Financial
Guaranty Insurance Policy”) relating to The University of Akron General Receipts Refunding Bonds,
Series 2005 (the “Series 2005 Bonds”) effective as of the date of issuance of the Series 2005 Bonds.
Under the terms of the Financial Guaranty Insurance Policy, Ambac Assurance will pay to The Bank of
New York, in New York, New York or any successor thereto (the “Insurance Trustee”) that portion of the
principal of and interest on the Series 2005 Bonds which shall become Due for Payment but shall be
unpaid by reason of Nonpayment by the Obligor (as such terms are defined in the Financial Guaranty
Insurance Policy). Ambac Assurance will make such payments to the Insurance Trustee on the later of the
date on which such principal and interest becomes Due for Payment or within one business day following
the date on which Ambac Assurance shall have received notice of Nonpayment from the Trustee/Paying
Agent/Bond Registrar. The insurance will extend for the term of the Series 2005 Bonds and, once issued,
cannot be canceled by Ambac Assurance.
The Financial Guaranty Insurance Policy will insure payment only on stated maturity dates and on
mandatory sinking fund installment dates, in the case of principal, and on stated dates for payment, in the
case of interest. If the Series 2005 Bonds become subject to mandatory redemption and insufficient funds
are available for redemption of all outstanding Series 2005 Bonds, Ambac Assurance will remain
obligated to pay principal of and interest on outstanding Series 2005 Bonds on the originally scheduled
interest and principal payment dates including mandatory sinking fund redemption dates. In the event of
any acceleration of the principal of the Series 2005 Bonds , the insured payments will be made at such
times and in such amounts as would have been made had there not been an acceleration.
In the event the Trustee has notice that any payment of principal of or interest on a Bond which has
become Due for Payment and which is made to a Holder by or on behalf of the Obligor has been deemed
a preferential transfer and theretofore recovered from its registered owner pursuant to the United States
Bankruptcy Code in accordance with a final, nonappealable order of a court of competent jurisdiction,
such registered owner will be entitled to payment from Ambac Assurance to the extent of such recovery if
sufficient funds are not otherwise available.
The Financial Guaranty Insurance Policy does not insure any risk other than Nonpayment, as defined in
the Policy. Specifically, the Financial Guaranty Insurance Policy does not cover:
1.
payment on acceleration, as a result of a call for redemption (other than mandatory sinking
fund redemption) or as a result of any other advancement of maturity.
2.
payment of any redemption, prepayment or acceleration premium.
3.
nonpayment of principal or interest caused by the insolvency or negligence of any Trustee ,
Paying Agent or Bond Registrar, if any.
If it becomes necessary to call upon the Financial Guaranty Insurance Policy, payment of principal
requires surrender of Series 2005 Bonds to the Insurance Trustee together with an appropriate instrument
C-1
of assignment so as to permit ownership of such Series 2005 Bonds to be registered in the name of
Ambac Assurance to the extent of the payment under the Financial Guaranty Insurance Policy. Payment
of interest pursuant to the Financial Guaranty Insurance Policy requires proof of Holder entitlement to
interest payments and an appropriate assignment of the Holder’s right to payment to Ambac Assurance.
Upon payment of the insurance benefits, Ambac Assurance will become the owner of the Series 2005
Bonds, appurtenant coupon, if any, or right to payment of principal or interest on such Bond and will be
fully subrogated to the surrendering Holder’s rights to payment.
Ambac Assurance Corporation
Ambac Assurance Corporation (“Ambac Assurance”) is a Wisconsin-domiciled stock insurance
corporation regulated by the Office of the Commissioner of Insurance of the State of Wisconsin and
licensed to do business in 50 states, the District of Columbia, the Territ ory of Guam, the Commonwealth
of Puerto Rico and the U.S. Virgin Islands, with admitted assets of approximately $8,645,000,000
(unaudited) and statutory capital of approximately $5,403,000,000 (unaudited) as of September 30,
2005. Statutory capital cons ists of Ambac Assurance’s policyholders’ surplus and statutory contingency
reserve. Standard & Poor’s Credit Markets Services, a Division of The McGraw-Hill Companies,
Moody’s Investors Service and Fitch Ratings have each assigned a triple -A financial strength rating to
Ambac Assurance.
Ambac Assurance has obtained a ruling from the Internal Revenue Service to the effect that the insuring
of an obligation by Ambac Assurance will not affect the treatment for federal income tax purposes of
interest on such obligation and that insurance proceeds representing maturing interest paid by Ambac
Assurance under policy provisions substantially identical to those contained in its financial guaranty
insurance policy shall be treated for federal income tax purposes in the same manner as if such payments
were made by the Obligor of the Series 2005 Bonds.
Ambac Assurance makes no representation regarding the Series 2005 Bonds or the advisability of
investing in the Series 2005 Bonds and makes no representation regarding, nor has it participated in the
preparation of, the Official Statement other than the information supplied by Ambac Assurance and
presented under the heading “Bond Insurance Policy” and “Appendix C”.
Available Information
The parent company of Ambac Assurance, Ambac Financial Group, Inc. (the “Company”), is subject to
the informational requirements of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and in accordance therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the “SEC”). These reports, proxy statements and other information
can be read and copied at the SEC’s public reference room at 100 F Street, N.E., Room 1580,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public
reference room. The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding companies that file electronically with the SEC,
including the Company . These reports, proxy statements and other information can also be read at the
offices of the New York Stock Exchange, Inc. (the “NYSE”), 20 Broad Street, New York, New York
10005.
Copies of Ambac Assurance’s financial statements prepared in accordance with statutory accounting
standards are available from Ambac Assurance. The address of Ambac Assurance’s administrative offices
and its telephone number are One State Street Plaza, 19th Floor, New York, New York 10004 and (212)
668-0340.
C-2
Incorporation of Certain Documents by Reference
The following documents filed by the Company with the SEC (File No. 1-10777) are incorporated by
reference in this Official Statement:
1.
The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004
and filed on March 15, 2005;
2.
The Company’s Current Report on Form 8-K dated April 5, 2005 and filed on April 11, 2005;
3.
The Company’s Current Report on Form 8-K dated and filed on April 20, 2005;
4.
The Company’s Current Report on Form 8-K dated May 3, 2005 and filed on May 5, 2005;
5.
The Company’s Quarterly Report on Form 10-Q for the fiscal quarterly period ended March 31,
2005 and filed on May 10, 2005;
6.
The Company’s Current Report on Form 8-K dated and filed on July 20, 2005;
7.
The Company’s Current Report on Form 8-K dated July 28, 2005 and filed on August 2, 2005;
8.
The Company’s Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 30,
2005 and filed on August 9, 2005;
9.
The information furnished and deemed to be filed under Item 2.02 contained in the Company’s
Current Report on Form 8-K dated and filed on October 19, 2005; and
10.
The Company’s Quarterly Report on Form 10-Q for the fiscal quarterly period ended
September 30, 2005 and filed on November 9, 2005.
All documents subsequently filed by the Company pursuant to the requirements of the Exchange Act after
the date of this Official Statement will be available for inspection in the same manner as described above
in “Available Information”.
C-3
C-4
APPENDIX D
Proposed Legal Opinion of
Bond Counsel
To:
SBK-Brooks Investment Corp.
Cleveland, Ohio
Re: $21,295,000 The University of Akron General Receipts Refunding Bonds, Series 2005
We are acting as bond counsel in connection with the issuance by The University of Akron
(the “University”) of the captioned bonds in the aggregate principal amount of $21,295,000 and dated
December 14, 2005 (the “Series 2005 Bonds”). The Series 2005 Bonds are being issued under a Trust
Indenture dated as of June 1, 1997 between the University and U.S. Bank National Association, as trustee,
as amended and supplemented, including a Sixth Supplemental Trust Indenture dated as of November 1,
2005 (as amended and supplemented, the “Indenture”). The Series 2005 Bonds are being issued for the
purposes set forth in Resolution No. 11-2-05 adopted by the Board of Trustees of the University on
November 1, 2005 (the “Authorizing Resolution”), including refunding certain outstanding bonds and
paying financing costs, all as described in the Authorizing Resolution and the Indenture.
We have examined the transcript of proceedings for the Series 2005 Bonds, which transcript
includes signed and delivered counterparts of the following: (a) the Indenture and (b) the Tax Regulatory
Agreement dated as of November 1, 2005 (the “Tax Regulatory Agreement”) between the University and
the Trustee.
Based upon the foregoing examinations and an examination of such other documents and
materials as we have deemed relevant to the opinions expressed, and subject to the limitations expressed
in this opinion, we render to you the following opinions:
1.
The Series 2005 Bonds have been duly authorized, signed, and delivered and constitute
legal, valid, and binding special obligations of the University. The principal of, premium, if any, and
interest on the Series 2005 Bonds (the “Debt Service Charges”), together with Debt Service Charges on
any Parity Obligations, as defined in the Indenture, are payable solely from the General Receipts, as
defined in the Indenture. The Series 2005 Bonds are secured by a lien on and pledge of the General
Receipts and the Special Funds, as defined in the Indenture, on a parity with any Parity Obligations issued
and to be issued under the Indenture. The Series 2005 Bonds are entitled to the benefit and security of the
Indenture.
Indenture.
2.
The payment of Debt Service Charges on the Series 2005 Bonds is secured by the
3.
The Indenture and the Tax Regulatory Agreement are legal, valid, and binding
obligations of the University and are enforceable in accordance with their respective terms.
4.
The interest on the Series 2005 Bonds is excludable from gross income for purposes of
the federal income tax. Interest on the Series 2005 Bonds is not an item of tax preference for purposes of
the federal alternative minimum tax imposed on individuals and corporations; however, in the case of
corporations, that interest may be included in adjusted current earnings for purposes of calculating the
alternative minimum tax. That interest will be included in computing the “branch profits tax” imposed on
certain corporations under Section 884 of the Internal Revenue Code of 1986, as amended (the “Code”)
and will be included in certain passive income of certain Subchapter S corporations under Code Section
1375.
D-1
5.
The interest on the Series 2005 Bonds, and the transfer and any profit on the Series
2005 Bonds, is exempt from the Ohio personal income tax, the Ohio commercial activity tax and
municipal and school district income taxes in Ohio and is excludable from the income base used in
calculating the Ohio corporate franchise tax.
The Indenture and the Tax Regulatory Agreement contain certain representations and
requirements relating to future events. The continued accuracy of and compliance with those
requirements by the parties to the Indenture and the Tax Regulatory Agreement are necessary to assure
the continued status of the interest on the Series 2005 Bonds as excludable from gross income for federal
income tax purposes. We have assumed that continued accuracy and compliance in rendering the opinion
expressed in paragraphs 4 and 5.
In giving this opinion, we have relied upon certifications and representations of fact,
estimates, and expectations furnished by the University and others, which we have not independently
verified.
Except as set forth in paragraph 4, we express no opinion regarding other federal tax
consequences with respect to the ownership of the Series 2005 Bonds.
We express no opinion as to, but have assumed to the extent necessary to establish mutuality,
the binding effect on, and enforceability against the Trustee of the Indenture and the Tax Regulatory
Agreement.
This opinion is qualified in its entirety to the extent that (i) the enforceability of the Series
2005 Bonds, the Indenture, and the Tax Regulatory Agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance, and other laws in effect from time to time affecting
rights of creditors, (ii) the availability of certain remedies may be precluded by general principles of
equity, (iii) principles of public policy may preclude enforcement of certain indemnity provisions, and
(iv) the provisions for the recovery of attorneys’ fees may not be enforceable under Ohio laws.
This opinion is based solely upon Ohio and federal law as in effect on this date and on
representations as stated in this opinion which we have no reason not to believe to be true and correct on
this date. We assume no obligation to revise or supplement this opinion if the present law of those
jurisdictions changes or if those representations prove untrue when made or become untrue at some point
in the future.
We have not been engaged to review the accuracy, completeness, or sufficiency of the
Official Statement of the University dated November __, 2005, (the “Official Statement”) or other
offering material relating to the Series 2005 Bonds, except to the extent stated in the Official Statement.
We express no opinion herein as to those matters.
We express no opinion as to the Statement of Insurance printed on the form of the Series
2005 Bonds.
Respectfully submitted,
ROETZEL & ANDRESS,
A Legal Professional Association
D-2