runp & Tervalon LLPapp1.lla.state.la.us/PublicReports.nsf/4C2A2FB51371594986257162… · table of contents page independent auditors' report 1 statement of financial position at

UNIVERSITY OF NEW ORLEANSRESEARCH AND TECHNOLOGY FOUNDATION, INC.

FINANCIAL AND COMPLIANCE AUDITTOGETHER WITH

INDEPENDENT AUDITORS' REPORT

FOR THE YEAR ENDED JUNE 30, 2005

U nder provisions of state law, this report is a publicdocument. Acopy of the report has been submitted tothe entity and other appropriate public officials. Thereport is available for public inspection at the BatonRouge office of the Legislative Auditor and, whereappropriate, at the office of the parish clerk of court.

Release Date 5~ 3 - °-fa

'runp & Tervalon LLP'Certified Public Accountants

TABLE OF CONTENTS

PAGE

INDEPENDENT AUDITORS' REPORT 1

STATEMENT OF FINANCIAL POSITIONAT JUNE 30, 2005 3

STATEMENT OF ACTIVITIES FOR THE YEARENDED JUNE 30, 2005 4

STATEMENT OF FUNCTIONAL EXPENSESFOR THE ENDED JUNE 30, 2005 5

STATEMENT OF CASH FLOWS FOR THE YEARENDED JUNE 30, 2005 6

NOTES TO THE FINANCIAL STATEMENTS 7

SUPPLEMENTARY INFORMATIONIndependent Auditors' Report on Supplementary Information 24Schedule of Expenditures of Federal Awards 25Notes to the Schedule of Expenditures of Federal Awards 28

TABLE OF CONTENTS, CONTINUED

PAGE

OTHER SUPPLEMENTARY INFORMATIONStatement of Net Assets 29Statement of Revenues, Expenses, and Changes in Net Assets 30Notes to the Other Supplementary Information 31

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE ANDINTERNAL CONTROL OVER FINANCIAL REPORTINGBASED ON AN AUDIT OF THE FINANCIAL STATEMENTSPERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS 37

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITHREQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAMAND INTERNAL CONTROL OVER COMPLIANCE INACCORDANCE WITH OMB CIRCULAR A-133 40

SCHEDULES OF FINDINGS AND QUESTIONED COSTS:Schedule I - Summary of the Independent Auditors' Results 43Schedule II - Financial Statement Findings 45Schedule III - Findings and Questioned Costs

Related to Federal Awards 46

LLPPublic Accountants

Member Michael B. Bruno, CPAAmerican Institute of Alcide J. Tervalon, Jr., CPA

Certified Public Accountants Wg|do j cpA

Society of LouisianaCertified Public Accountants Paul K. Andoh, Sr., CPA

INDEPENDENT AUDITORS1 REPORT

To the Board of DirectorsUniversity of New Orleans

Research and Technology Foundation, Inc.New Orleans, Louisiana

We have audited the accompanying statement of financial position of the University of NewOrleans Research and Technology Foundation, Inc. (a non-profit organization) as ofJune 30, 2005, and the related statements of activities, functional expenses and cash flowsfor the year then ended June 30, 2005. These financial statements are the responsibility ofthe management of the University of New Orleans Research and Technology Foundation,Inc. Our responsibility is to express an opinion on these financial statements based on ouraudit.

We conducted our audit in accordance with auditing standards generally accepted in theUnited States of America and the standards applicable to financial audits contained inGovernment Auditing Standards issued by the Comptroller General of the United States.Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all materialrespects, the financial position of the University of New Orleans Research andTechnology Foundation, Inc. as of June 30,2005, and the changes in its net assets, and itscash flows for the year then ended June 30, 2005 in conformity with accounting principlesgenerally accepted in the United States of America.

6424 LAKEOVER ROAD, SUITE A, JACKSON, MS 39213(601) 366-2344 FAX (601) 366-8440

INDEPENDENT AUDITORS1 REPORT(CONTINUED)


Research and Technology Foundation, Inc.New Orleans, LouisianaPage 2

In accordance with Government Auditing Standards, we have also issued a report datedOctober 7, 2005 on our consideration of the University of New Orleans Research andTechnology Foundation's, Inc. internal control over financial reporting and our tests of itscompliance with certain provisions of laws, regulations, contracts, grants, and other maters.The purpose of that report is to describe the scope of our testing of internal control overfinancial reporting and compliance and the results of that testing, and not to provide anopinion on the internal control over financial reporting or on compliance. That report is anintegral part of an audit performed in accordance with Government Auditing Standards, andshould be read in conjunction with this report in considering the results of our audit.

BRUNO & TERVALON LLPCERTIFIED PUBLIC ACCOUNTANTS

October 7, 2005

*runp& Tervalon LLP'Certified Public Accountants

UNIVERSITY OF NEW ORLEANSRESEARCH AND TECHNOLOGY FOUNDATION

STATEMENT OF FINANCIAL POSITIONAS OF JUNE 30.2005

ASSETSCurrent Assets

Cash and cash equivalents (NOTE 2)Investments (NOTE 6)Receivables (NOTE 7) .Deferred charges, net (NOTE 2)Other current assets (NOTE 8)

Total current assets

Noncurrent AssetsProperty and equipment, net (NOTES 2 and 5)

Total noncurrent assets

Total Assets

LIABILITIESCurrent Liabilities

Accounts payable and accrued liabilitiesDeferred revenuesAmounts held in custody for others (NOTE 9)Interest payable (NOTES 11 and 12)Current portion of notes payable (NOTE 11)Current portion of bonds payable (NOTE 12)

Total current liabilities

Noncurrent LiabilitiesNotes payable, net of current portion (NOTE 11)Bonds payable, net of current portion (NOTE 12)Other noncurrent liabilities (NOTE 2)

Total noncurrent liabilitiesTotal Liabilities

NET ASSETSUnrestricted (NOTE 2)Temporarily restricted (NOTE 2)

Total Net Assets

Total Liabilities and Net Assets

644,273

8,127,723

1,152,25040,515

82,900

10,047,661

70,604,644

70,604,644

$ 80,652,305

775,31351,17851,635715,504

139,9253,945,000

5,678,555

7,453,199

790,000434,205

8,677,40414,355,959

66,296,346

66,296,346

$ 80,652,305

The accompanying notes are an integral part of these financial statements.3


STATEMENT OF ACTIVITIESFOR THE YEAR ENDED JUNE 30.2005

Changes in unrestricted net assets:ContributionsInvestment earningsOther revenues:

Grants and contractsProperty operations (NOTES 13 and 14)Other

Total unrestricted revenues and support

Net assets released from restrictions:Satisfaction of program expenses

Total unrestricted revenues and other support

Expenses:Amounts paid to benefit University of New Orleans for:

Projects specified by the Board of DirectorsOther:

Grants and contractsProperty operations

Total program expenses

Supporting services'.Salaries and benefitsTravelProfessional servicesDepreciationOther

Total supporting services

Total expenses

Increase in unrestricted net assets

Changes in temporarily restricted net assets:Satisfaction of program expenses

Total net assets released from restrictions

Increase/(decrease) in temporarily restricted net assets

Increase in net assetsNet assets at beginning of yearNet assets at end of year

114,903154,453

10,765,6113,558,5041,660,224

16,253,695

150.00016,403,695

88,582

5,838,3443,547.6809,474,606

179,9381,903

749,4192,189,375

60,9843,181,619

12,656,225

3,747,470

(150,000)

3,597,47062.698.876

$ 66.296,346

The accompanying notes are an integral part of these financial statements.

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STATEMENT OF CASH FLOWSFOR THE YEAR ENDED JUNE 30,2005

Cash Flows from Operating ActivitiesChange in net assetsAdjustments to reconcile change in net assets to net cash

provided by operating activities:Depreciation and amortizationAmortization of deferred equipment reimbursementDecrease in accounts and grants receivableDecrease in accounts and interest payableAmortized discount on notes payableDecrease in other assetsIncrease in deferred revenue

Net cash provided by operating activities

Cash Flows Used in Investing ActivitiesPurchase of fixed assetsPurchase pf investments, Net

Net cash used in investing activities

Cash Flows from Financing ActivitiesPayments on notes payablePayments on bonds payable

Net cash used in financing activities

Net decrease in cashCash at beginning of year

Cash at end of year

$ 3,597,470

2,881,400(642,067)1,074,800

(2,038,667)(366,718)

62,47926.897

4.595.594

(1,057,636)706.651

(350.985)

(248,113)(4.040.000)

(4.288.113)

(43,504)687.777

5 644.273

The accompanying notes are an integral part of these financial statements.


NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 - Organization:

The University of New Orleans Research and Technology Foundation, Inc.(the Foundation) was organized on March 3, 1997 as a non-profitorganization to accomplish the following purposes:

A. As its principal purpose, to support any and allappropriate programs, facilities and research andeducational opportunities offered by the University ofNew Orleans (the "University") and the LouisianaState University System ("the LSU System");

B. To promote and support the well-being andadvancement of the University and all the colleges,schools, departments, and divisions comprising it,and to develop, expand, and improve the University'scurricula, programs, and facilities so as to providegreater educational advantages and opportunities;encourage teaching, research, scholarship, andservice, and increase the University's benefits to thecitizens of the State of Louisiana, the United States ofAmerica and the world;

C. To engage in scientific research carried on for thepurpose of aiding a community or geographical areaby attracting new industry to the community or areaor by encouraging the development of or retention of,an industry in the community or area;

D. To promote the development of high technologyindustries and research in Louisiana;

E. To create, develop, construct, operate, manage andfinance one or more research and technology parks,technology enterprise centers and other facilities andoperations which promote development of research,development and high technology in Louisiana;


NOTES TO THE FINANCIAL STATEMENTS, CONTINUED

NOTE 1 - Organization, Continued:

F. To increase employment opportunities in Louisiana;

G. To promote research and development in Louisiana;

H. To promote cooperation between the public andprivate sector with respect to research anddevelopment;

I. To attract nationally prominent scientists andresearchers to the University;

J. To maximize research capabilities in Louisiana;

K. To solicit and accept, whether by way of outright,limited or conditional gifts, grants and bequests, intrust or otherwise, donations of all kinds, includingproperty, both real and personal, whether principal orincome, tangible or intangible, vested or contingent,for the purpose of providing funds or property for thegeneral purposes of the corporation and for research,instructional activities, scholarships, public serviceactivities, and such other designated benefits for theUniversity and its faculty, staff and students as maybe prescribed by donors or testators to thecorporation;

L. To exercise all such powers and authority as may benecessary for the accomplishment of the objects andpurposes herein set forth and to do any and all otherthings related to or connected therewith which are notforbidden by law.



NOTE 2 - Summary of Significant Accounting Policies:

Principles of Accounting

The financial statements are prepared in accordance with generally acceptedaccounting principles and are prepared on the accrual basis. The preparationof financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period. Actual resultscould differ from those estimates.

Basis of Reporting

SFAS No. 117 establishes standards for external financial reporting by not-for-profit organizations and requires that resources be classified for accountingand reporting purposes into three net asset categories (i.e. unrestricted netassets, temporarily restricted net assets, and permanently restricted net assets)according to externally (donor) imposed restrictions.

A description of the three (3) net asset categories is as follows:

• Unrestricted net assets include funds not subject to donor-imposedstipulations. The revenues received and expenses incurred in conductingthe mission of the Foundation are included in this category. TheFoundation has determined that any donor-imposed restrictions forcurrent or developing programs and activities are generally met withinthe operating cycle of the Foundation, and therefore, the Foundation'spolicy is to record these net assets as unrestricted. Also, the Foundationconsiders the revenues received from the Cooperative EndeavorAgreements (the Agreements) to be exchange transactions, since eachparty to the Agreements receive and sacrifice something of approximatelyequal value.



NOTE 2 - Summary of Significant Accounting Policies , Continued:

Basis of Reporting. Continued

• Temporarily restricted net assets include realized gains and losses,investment income and gifts and contributions for which donor imposedrestrictions have not been met.

• Permanently restricted net assets are contributions which are required bythe donor-imposed restriction to be invested in perpetuity and only theincome be made available for program operations in accordance with thedonor restrictions. Such income is reflected in temporarily restricted netassets until utilized for donor imposed restrictions.

At June 30,2005, the Foundation had $66,296,346 in unrestricted net assets,and no temporary or permanently restricted net assets.

Fixed Assets

Fixed assets are stated at cost, if purchased, or at fair market value at the dateof the gift, if donated. Depreciation of the buildings and office furniture andequipment is provided using the straight-line method over the estimated usefullife of the fixed assets which is forty (40) and five (5) years, respectively.Equipment acquired under capital leases are depreciated over the life of theequipment which is five (5) years,

Cash Equivalents

For purposes of the Statement of Cash Flows, the Foundation considers allinvestments purchased with a maturity of three months or less to be cashequivalents.

10



NOTE 2 - Summary of Significant Accounting Policies. Continued:

Deferred Charges/Deferred Reimbursement

Deferred charges represent software and labor costs incurred for theinstallation of the data processing equipment. Deferred reimbursementsrepresent amounts received from a third party for the reimbursement ofaforementioned deferred charges. Such costs and reimbursements are beingamortized over five years. Amortization income, which is net of theamortization expense, totaled $424,005 at June 30,2005. The amortization ofthe reimbursement totaled $642,966 at June 30, 2005.

Bond Issuance Costs

Bond issuance costs incurred in relationship to the bond indebtedness has beencapitalized and amortized over the life of the bond liability which range fromthree years to seven years. Amortization expense for the year ended June 30,2005 totaled $57,252.

Amortization of Premium/Discount

Bonds Payable

The bond premium paid on the Series 1999 Revenue Refunding bonds($21,663) is amortized over the related life of the bond issue. Theamortization of the premium has been recorded to investment expense.The remaining balance of the premium at June 30, 2005 totaled $1,803.

Note Payable

During the year ended December 31, 1999, the Foundation received anon-interest bearing loan in the amount of $1,500,000, The present valueconcept was utilized to determine the initial amount of the discount($1,011,313) which is amortized over the life of the loan utilizing theinterest method. The balance of the discount at June 30, 2005 totaled$644,595.

11



NOTE 2 - Summary of Significant Accounting Policies. Continued:

Functional Allocation of Expenses

The costs of providing the various programs and activities have beensummarized on a functional basis in the statement of activities. Accordingly,certain costs have been allocated among the programs and supporting servicesbenefited.

NOTE 3 - Cooperative Endeavor Agreements:

University of New Orleans/Avondale Maritime Technology Center of Excellence

General

OnMay 16,1997, the State of Louisiana (the State), the Board of Supervisorsof Louisiana State University and Agricultural and Mechanical College (theUniversity), the University of New Orleans Research and TechnologyFoundation, Inc. (the Foundation), and Avondale Industries, Inc. enteredinto a Cooperative Endeavor Agreement (the Agreement) for an initial term offifteen years, and from one-to-seven additional five year periods.

The Agreement and related amendment provided for the use of annuallyappropriated State funds and the corporate guarantee by Avondale of certainfinancial obligations incurred by the Foundation for the purpose of enhancingor maintaining the economic well-being of the State of Louisiana. As amaterial inducement to the State to enter into the Agreement, Avondalerepresented that it was awarded a contract for the construction of certain U. S.Department of Navy vessels which will provide a substantial economic benefitto the State. The Foundation and Avondale represented that the economicbenefit occurring as a result of the payment or performance of the State'sobligation will equal or exceed the value of the State's obligations.

12



NOTE 3 - Cooperative Endeavor Agreements, Continued:

University of New Orleans/Avondale Maritime Technology Center of Excellence. Continued

Obligations

Avondale donated certain property to the University which is leased to theFoundation pursuant to the terms of a Ground Lease. A ship design facilityincluding a laboratory and support area (the Facility) for the UNO School ofNaval Architecture and Marine Engineering has been built on such property bythe Foundation and is sub-leased to Avondale. Also, the Foundation hasequipped the facility and leased such equipment to Avondale.

The State of Louisiana will pay to the Foundation no more than the remainingpresent value of $40,000,000, which amount may be paid in one or moreinstallments on or before September 1 of each year as follows:

On or before September 1, 2005 $4,366,469On or before September 1, 2006 $ 796,598

The Foundation shall submit to the State of Louisiana on or beforeNovember 1 a documentation supporting the amount to be appropriated for theimmediately following year in satisfaction of the State's obligation. On July 1,2005, the Foundation submitted a request totaling $4,366,469 to the State ofLouisiana's Department of Economic Development for the 2005 funding.Such amount was received in July 2005.

Additionally, Avondale agreed that:

• It will utilize the Facilities for the design and construction of Vesselspursuant to the Navy LPD-17 Contract and other contracts. Avondaleagrees that it will fulfill its obligations pursuant to said NAVY LPD-17

13



NOTE 3 - Cooperative Endeavor Agreements. Continued:

University of New Orleans/Avondale Maritime Technology Center of Excellence. Continued

Contract and other contracts. Furthermore Avondale agrees that it willprovide support to the University of New Orleans School of NavalArchitecture and Marine Engineering by providing to the University aRight of Use of space constituting initially 12,000 square feet wasincreased to 21,000 square feet in the Facility subleased by Avondale fromthe Foundation.

• In the event the costs of the project required to be expended by theFoundation in constructing the facility and acquiring the equipmentexceed the amounts paid by the State, Avondale will pay to theFoundation the amounts required for the Foundation to fulfill theobligations to construct and equip the facility.

Naw Information Technology Center

OnNovember 14,1997,May 1,1999, and May 17,2000 the State of Louisianaand the Louisiana Department of Economic Development (the State), theUniversity and the Foundation entered into three separate CooperativeEndeavor Agreements (the Cooperative Agreements) with each agreementhaving a term of three years.

The Cooperative Agreements provide for the use of State funds to pay forproject costs associated with the planning, financing and construction ofbuildings, professional fees and other project costs for the Navy InformationTechnology Center located in Orleans Parish. Such facilities willaccommodate the consolidation of the Navy and Department of DefenseMilitary personnel systems research and development and Navy informationsystems. As a material inducement to the State to enter into the CooperativeAgreements, the Foundation represented that certain economic benefits wouldbe derived from the Naval Consolidation which will equal or exceed the valueof the State's obligation under the terms of the Cooperative Agreements.

14



NOTE 3 - Cooperative Endeavor Agreements. Continued:

Louisiana Educational Television Authority

General

On February 15, 2002, the State of Louisiana, the Board of Supervisors ofLouisiana State University and Agricultural and Mechanical College,Louisiana Educational Television Authority (LETA), The Greater NewOrleans Educational Television Foundation (WYES-TV), The EducationalBroadcasting Foundation, Inc. (WLAE-TV) and the Foundation entered into aCooperative Endeavor Agreement.

The Cooperative Agreement provides for the development of a state of the artdigital facility known as, The New Orleans Teleplex, which will be capable ofbroadcasting in high definition television. This facility is expected to create apositive economic impact for the New Orleans area.

LETA made an initial payment of $500,000 to the Foundation, through anappropriation by the State Legislature in 2001, for the development phase ofthe Teleplex. As of June 30, 2005, the Foundation has received a total of$2,500,000 from LETA to fund planning and development costs. WYES-TVand WLAE-TV have pledged to provide an aggregate of $3,000,000 towardsthe construction of the Teleplex and an aggregate $1,000,000 towardequipping the Teleplex as a joint obligation.

NOTE 4 - Income Taxes:

The Foundation is exempt from corporate income taxes under Section501(c)(3) of the Internal Revenue Code.

15



NOTE 5 - Fixed Assets:

Fixed assets consist of the following at June 30, 2005:

Description

Land improvementsBuilding-AvondaleBuilding and ParkingGarage-Navy Facilities

Building-Advanced TechnologyCenterConstruction-in-ProgressOffice furniture and equipmentEquipment acquired under

capital leasesTenant ImprovementsAccumulated depreciation

Net fixed assets

Balance06/30/04

$ 258,57312,718,555

55,736,742

Additions Reductions

$ -0- $36,182

586,534

-0--0-

Balance06/30/05

$ 258,57312,754,737

-0- 56,323,276

8,838,7371,546,4376,480,674

10,537,25818,384

f23.974.972">

165,81882,797

-0-

-0-199,596

(2,613.380")

-0*(13,291)

-0-

-0--0--0-

9,004,5551,615,9436,480,674

10,537,258217,98.0

C26.588.352")

S 72.160.388 Sfl.542.4J SO12ED S 70.604.644

NOTE 6 - Investments:

Investments include Federal Mortgage notes, certificate of deposit, and moneymarkets accounts totaling $8,127,723 of current investments.

NOTE 7 - Receivables:

Receivables consist of the following:

Accounts receivableGrants receivableDue from affiliates

Total

$566,004469,625116.621

16



NOTE 7 - Receivables. Continued:

Due from affiliates represents amounts due from the University of NewOrleans and University of New Orleans Foundation.

NOTE 8 - Other Assets:

Other current assets consists of the following:

Bond issuance costs, net $72,866Prepaid expenses and deposits 10.034

Total

NOTE 9 - Amounts Held in Custody for Others:

Amounts held in custody for others consist of security deposits from buildingtenants. The tenants are required to pay a security deposit at the beginning oftheir lease. At June 30, 2005, security deposits totaled $51,635.

NOTE 10 - Fair Value of Financial Instruments:

The estimated fair value of all significant instrument amounts have beendetermined by the Foundation using available market information andappropriate valuation methodologies. The following methods and assumptionswere used to estimate the fair value of each class of financial instruments:

17



NOTE 10 - Fair Value of Financial Instruments. Continued:

• Cash and cash equivalents and deposits with trustees - TheFoundation considers the carrying amounts of these financialinstruments to be fair value.

• Equipment reimbursement receivable - The Foundation considersthe carrying amount of the financial instrument to be fair value.

• Investments - The fair value for federal mortgage notes equals therelated cost plus amortized discount.

• Bonds Payable and Notes Payable - The fair value was estimatedusing rates currently available for debt with similar terms andremaining maturities.

The carrying value and estimated fair values of the Foundation's financialinstruments at June 30, 2005 are as follows;

CarryingValue

Cash and cash equivalents $ 644,273 $ 644,273Accounts receivable 566,004 566,004Grants receivable 469,625 469,625Due from affiliates 116,621 116,621Investments 8,127,723 8,127,723Bonds payable 4,733,197 4,733,197Notes payable 7,593,124 7,593,124Interest payable 715,504 715,504

18



NOTE 11- Notes Payable:

On October 19, 1999, the Foundation entered into a Construction LoanAgreement in the amount of $1,500,000 with the Louisiana Public FacilitiesAuthority. The loan bears no interest with the first annual payment dueOctober 1,2000 and continuing through October 1,2014. The payments areconditioned upon the establishment of a $500,000 operating reserve. AtJune 30,2005 the operating reserve totaled $500,000. Each annual paymentshall be equal to 87.35% of the net cash flow relative to the AdvancedTechnology Center for the immediate preceding fiscal year. The unamortizeddiscount relative to the note totaled $644,595 at June 30, 2005, which isrecorded as a reduction of the note payable and an increase in interest expense.

On October 19,1999, the Foundation entered into a Loan Agreement with alocal bank. The balance of the loan at June 30, 2005 was $6,849,735. Theloan bears an interest rate of 7.25% with annual payment beginning in 2001and continuing through January 19,2011.

The following is a summary of notes payable at June 30, 2005:

Louisiana Public Facilities AuthorityPrincipal amount $ 1,3 87,984Unamortized discount (644.595)

Sub-total 743,389Local bank 6.849.735

Total

At June 30,2005, the current and non-current portion of notes payable totaled$139,925 and $7,453,199, respectively.

19



NOTE 12 - Bonds Payable:

On October 20, 1999, the Louisiana Local Government EnvironmentalFacilities and Community Development Authority issued $24,950,000 ofRevenue Refunding Bonds (Series 1999) to the Foundation. The proceeds ofthe Bonds were used to refund certain existing indebtedness incurred withrespect to financing the construction and equipping of the UNO/AvondaleMaritime Technology Center of Excellence and paying the costs of issuance ofthe Series 1999 bonds. The bond agreement provides for interest on theoutstanding bonds at rates ranging from 4.50% to 5.00% per annum. Theoutstanding bonds, some of which were purchased at a premium and accruedinterest, are required to be repaid as follows:

Date Amount

October 1, 2005 3,945,000October 1,2006 790.000

Sub-total 4,735,000Discount/premium (L803)

Total S4.733.197

Under the terms of the bond agreement, bond funds totaling $472 have beendeposited with a trustee at June 30, 2005.

20



NOTE 13 - Ground Leases:

On May 16,1997, the Board of Supervisors of Louisiana State University andAgricultural and Mechanical College, acting on behalf of the University ofNew Orleans (the University) entered into a non-transferable ground leaseagreement with the University of New Orleans Research and TechnologyFoundation, Inc. (the Foundation). The terms of the lease agreementprovides that the University will lease a tract of approximately 4.57 acres ofland that is located in Jefferson Parish to the Foundation who will in turndevelop construct, maintain, operate, manage and lease improvements on suchland for the purpose set forth in the Cooperative Endeavor Agreement. Thelease agreement is for a term of fifty years with annual rent totaling $100. Atthe expiration of the lease, the facilities and all furniture, fixtures, equipmentand furnishings permanently affixed to the facilities shall become the propertyof the University.

On December 1, 1997, the University entered into a non-transferable groundlease agreement with the Foundation. Such agreement was amended onOctober 1, 1999. The terms of the lease agreement and related amendmentprovide that the University will lease a tract of approximately 30 acres ofcertain lakefront property and three acres of land on the University of NewOrleans East Campus that are located in Orleans Parish to the Foundationwho will develop, construct, maintain, operate, manage and/or leaseimprovements on such land. Prior to entering into the ground lease agreementwith the Foundation, the University, the State of Louisiana and the U. S.Department of Commerce invested $3,923,191 in the infrastructure of the site,which improved the Foundation's ability to sub-lease the property to tenants.The lease agreement is for a term of ninety-nine years with annual rent totaling$10,000 provided however, that the rent payments will be offset dollar-for-dollar by property operating expenses paid for by the Foundation.

21



NOTE 14 - Property. Facility and Equipment Lease Agreements:

UNO/A vondale Maritime Technology Center of Excellence

On May 16,1997, the Foundation and Avondale Industries, Inc. entered intoa sub-lease agreement which provides for Avondale Industries, Inc. to leasefrom the Foundation, the land located in Jefferson Parish together with thefacilities to be constructed on the land, the facility equipment and the right ofuninterrupted access to and from all streets and roads adjoining the land.

The terms of the sub-lease agreement during the first twelve years (1997-2008)provides for Avondale Industries, Inc. to pay as rental the sum of $100,000 peryear by September 1 of each year provided that the State has made the annualappropriation provided for in the Cooperative Endeavor Agreement.Beginning September 1,2009 and for each year thereafter during the term ofthe sub-lease, rent in the amount of $ 100,000 is due and payable by September1 of each year without regard to the State Appropriation.

Naval Reserve Information System Office

On January 15, 1998, April 14, 1999 and on July 3, 2000, the Foundationentered into a sub-lease agreement and amended lease modifications,respectively with the United States of America (the Government) to lease fromthe Foundation, approximately 300,000 square feet of administrative space,700 hard surface parking spaces, and 15.71 acres of land located at theUniversity of New Orleans Research and Technology Park. The terms of thefacility lease agreement provide that the Government will have and hold thenoted facility for the term beginning on the date of completion of the facilityfor an initial ten year term with fifteen individual one year renewal terms withthe annual rent for the premises and maintenance services of $1.00 and$2,203,259, respectively.

22



NOTE 15 - Related Party Transaction:

University of New Orleans Foundation

The University of New Orleans Foundation provides certain payroll managementfunctions, as well as office space, meeting space, utilities, and use of all officefurniture and equipment to the Foundation for a nominal monthly fee. TheFoundation has paid $472,217 to the University of New Orleans Foundation for theaforementioned services.

NOTE 16 - Concentration of Credit Risk:

The Foundation maintains cash balances at several banks. Accounts at eachinstitution are insured by the Federal Deposit Insurance Corporation up to $ 100,000.Balances in excess of FDIC insurance at June 30,2005 were $526,782.

NOTE 17 - Contingency:

The City property tax assessor has assessed the Foundation with real estate propertytaxes, interest and penalties for certain buildings owned by the Foundation in the totalamount of $4,746,877 as of August 2004. The Foundation believes that it is entitledto property tax exemptions under present law and jurisprudence due to its non-profitstatus and due to the use of these buildings to further the non-profit goals of theFoundation. The Foundation is engaged in ongoing discussions with the assessor. Ifnecessary, the Foundation is prepared to litigate this issue. Although, the Foundationbelieves that it has adequate defenses against the assessment, if not successful, theassessment, interest and penalties may have a significant impact on the financialcondition of the Foundation. The Foundation's counsel is unable to predict theeventual outcome of this matter or the potential loss contingencies, if any, to whichthe Foundation may be subject.

NOTE 18 - Subsequent Event:

The Foundation was adversely affected by Hurricane Katrina which occurred onAugust 29, 2005. The Foundation is currently assessing the impact of theHurricane, on subsequent year* support and revenues.

The Foundation believes that the disruption in operations will not affect its ability tomake timely debt payments, and believes it will continue as an ongoing entity.

23

SUPPLEMENTARY INFORMATION

LLPW^Certified Public Accountants

Member Michael B. Bruno, CPAAmerican Institute of Alcide J. Tervalon, Jr., CPACertified Public Accountants ... . . . . . . . ^r..

0 , , , . „.,; . Waldo J. Moret, Jr., CPASociety of Loufsiana ' '

Certified Public Accountants Paul K. Andoh, Sr., CPA

INDEPENDENT AUDITORS' REPORTON

SUPPLEMENTARY INFORMATION


Research and Technology Foundation, Inc.New Orleans, Louisiana

Our report on our audit of the financial statements of the University of New OrleansResearch and Technology Foundation, Inc. (the Foundation) appears on page 1. Thataudit was conducted for the purpose of forming an opinion on the financial statements takenas a whole.

The accompanying Schedule of Expenditures of Federal Awards is presented for purposes ofadditional analysis as required by U.S. Office of Management and Budget Circular A-133,Audits of States, Local Governments, and Non-Proiit Organizations, and is not a requiredpart of the financial statements. The information in the Schedule of Expenditures of FederalAwards has been subjected to the auditing procedures applied in the audit of the financialstatements and, in our opinion, is fairly presented in all material respects in relation to thefinancial statements taken as a whole.

The other supplementary information which is prepared in accordance with accountingprinciples generally accepted in the United States of America and is not a required part of thefinancial statements has also been subj ected to auditing procedures applied in the audit of thefinancial statements and, in our opinion, is fairly stated in all material respects in relation tothe financial statements taken as a whole.


October 7, 2005

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NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDSFOR THE YEAR ENDED JUNE 30, 2005

NOTE 1 - Basis of Accounting:

The accompanying schedule of expenditures of federal awards includes thefederal grant activity of the Foundation and is presented on the accrual basisof accounting. The information in this schedule is presented in accordancewith the requirements of OMB Circular A-133, Audits of States, LocalGovernments, and Non-Profits Organization. Therefore, some amountspresented in this schedule may differ from amounts presented, or used in thepreparation of, the basic financial statements.

NOTE 2 - Sub-recipients:

Of the federal expenditures presented in the Schedule, the Foundationprovided $3,819,765 to various sub-recipients under the various grant awards.

28


STATEMENT OF NET ASSETSFOR THE YEAR ENDED JUNE 30.2005

ASSETSCurrent Assets

Cash and cash equivalents $ 644,273Investments 8,127,723Accounts receivable, net 1,152,250Deferred charges and prepaid expenses 40,515Other current assets 82,900

Total current assets 10,047,661

Noncurrent AssetsCapital assets, net 70,604,644

Total noncurrent assets 70,604,644Total assets $ 80,652,305

LIABILITIESCurrent Liabilities

Accounts payable and accrued liabilities $ 775,313Deferred revenues 51,178Amounts held in custody for others 51,635Notes payable 139,925Bonds payable 3,945,000Other current liabilities 715,504

Total current liabilities 5,678,555

Noncurrent LiabilitiesNotes payable 7,453,199Bonds payable 790,000Other noncurrent liabilities 434,205

Total noncurrent liabilities 8,677,404Total liabilities 14,355,959

NET ASSETSUnrestricted 66,296,346

Total Net Assets $ 66,296,346

29


STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETSFOR THE YEAR ENDED JUNE 30.2005

OPERATING REVENUESGifts received by the foundations $ 114,903Federal grants and contracts 4,820,803State and local grants and contracts 1,133,183Nongovernmental grants and contracts 149,100Other operating revenues 5,218,728

Total operating revenues 11,436,717

OPERATING EXPENSESOther operating expenses 11,706,662

Total operating expenses 11.706,662Operating income (loss) (269,945)

NONOPERATING REVENUES AND (EXPENSES)State appropriations 4,662,525Net investment income (loss) 154,453Interest expense (860,981)Payments to or on behalf of the university (88,582)

Net nonoperating revenues (expenses) 3,867,415Income before other revenues, expenses,gains, and losses 3.597.470

Increase (decrease) in net assets 3,597,470

Net assets at beginning of year, restated 62,698,876

Net assets at end of year $ 66.296.346

30

OTHER SUPPLEMENTARY INFORMATION


NOTES TO THE OTHER SUPPLEMENTARY INFORMATION

ORGANIZATION

Thellnlversity or New Orleans Research and Technology Foundation is a legally separate, tax-exemptorganization supporting the LSU System, specifically the following campus: University of New Orleans.This foundation was included In the university's financial statements because its assets equaled 3% ormore of the assets of the university system it supports.

During the year ended June 30,2005, the University of New Orleans Research and Technology Foundationmade distributions to or on behalf of the university for both estricted and unrestricted purposes in the amount

of$88,582.

Complete financial statements for theUnversity of New Orleans Research and Technology Foundation can beobtained from: 2000 Lakeshore Drive, New Orleans, Louisiana, 70148

TheUniversity of New Orleans Research and Technology Foundation is a nonprofit organization thatreports under FASB standards, including FASB Statement No. 117, Financial Reporting for Not-for-ProfitOrganizations. As such, certain revenue recognition criteria and presentation features are different fromGASB revenue recognition criteria and presentation features. With the exception of necessary presentationadjustments, no modifications have been made to the foundation's financial information in the university'sfinancial report for these differences.

31

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LIPPublic Accountants

MemberAmerican Institute of

Certified Public Accountants, , ._ . . , , . .Society of LouisianaCertified Public Accountants

Michael B. Bruno, CPA

Alcide J. Tervalon, Jr., CPA... , _ , , „ . x . „„.Waldo J. Moret, Jr., CPAPaul K. Andoh, Sr., CPA

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE ANDINTERNAL CONTROL OVER FINANCIAL

REPORTING BASED ON AN AUDIT OFFINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS


Research and Technology Foundation, Inc.

We have audited the financial statements of the University of New Orleans Research andTechnology Foundation, Inc. (the Foundation) as of and for the year ended June 30,2004,and have issued our report thereon dated October 7, 2005. We conducted our audit inaccordance with auditing standards generally accepted in the United States of America andthe standards applicable to financial audits contained in Government Auditing Standards.issued by the Comptroller General of the United States.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Foundation's financialstatements are free of material misstatement, we performed tests of its compliance withcertain provisions of laws, regulations, contracts and grants, noncompliance with whichcould have a direct and material effect on the determination of financial statement amounts.However, providing an opinion on compliance with those provisions was not an objective ofour audit and, accordingly, we do not express such an opinion. The results of our testsdisclosed no instances of noncompliance or other matters that are required to be reportedunder Government Auditing Standards.

37




GOVERNMENT AUDITING STANDARDS(CONTINUED)

Internal Control Over Financial Reporting

In planning and performing our audit, except for the functions performed at AvondaleIndustries, Inc. in connection with reviewing and approving invoices for payment ofcomputer programming, labor costs billings and travel costs, we considered the Foundation'sinternal control over financial reporting in order to determine our auditing procedures for thepurpose of expressing our opinion on the financial statements and not to provide assuranceon the internal control over financial reporting. For the internal control categories atAvondale Industries, Inc., internal auditors will obtain an understanding of the design ofrelevant policies and procedures* will determine whether they have been placed in operation,and will assess control risk prior to June 30,2005. Furthermore, the scope of our work didnot extend to these internal control policies and procedures established and maintained atAvondale Industries, Inc.

Our consideration of the internal control over financial reporting would not necessarilydisclose all matters in the internal control over financial reporting that might be materialweaknesses. A material weakness is a condition in which the design or operation of one ormore of the internal control components does not reduce to a relatively low level the risk thatmisstatements in amounts that would be material in relation to the financial statements beingaudited may occur and not be detected within a timely period by employees in the normalcourse of performing their assigned functions. We noted no matters involving the internalcontrol over financial reporting and its operation that we consider to be material weaknesses.

38



GOVERNMENT AUDITING STANDARDS(CONTINUED)

This report is intended solely for the information and use of the Board of Directors,management and the Legislative Auditor of the State of Louisiana and is not intended to beand should not be used by anyone other than these specified parties. Under LouisianaRevised Statute 24:513, this report is distributed by the Legislative Auditor for the State ofLouisiana as a public document.


October 7, 2005

39

*runp& Tervalon LLP7Certified Public Accountants

LLPPublic Accountants

MemberAmerican Institute of

Certified Public AccountantsSociety of Louisiana

Certified Public Accountants

Michael B. Bruno, CPA

Alcide J. Tervalon, Jr., CPA... ,. . .. . „„,Waldo J' Moret' Jr- CPA

Paul K. Andoh, Sr., CPA

INDEPENDENT AUDITORS' REPORT ON COMPLIANCEWITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM

AND ON INTERNAL CONTROL OVER COMPLIANCEIN ACCORDANCE WITH OMB CIRCULAR A-133

To the Board of DirectorsUniversity of New OrleansResearch and Technology Foundation, Inc.

Compliance

We have audited the compliance of University of New Orleans Research and TechnologyFoundation, Inc. (the Foundation) with the types of compliance requirements described inthe U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplementthat are applicable to its major federal program for the year ended June 30, 2005. TheFoundation's major federal program is identified in the summary of independent auditors'results section of the accompanying schedule of findings and questioned costs. Compliancewith the requirements of laws, regulations, contracts and grants applicable to major federalprogram is the responsibility of the Foundation's management. Our responsibility is toexpress an opinion on the Foundation's compliance based on our audit.

We conducted our audit of compliance in accordance with auditing standards generallyaccepted in the United States of America; the standards applicable to financial auditscontained in Government Auditing Standards: issued by the Comptroller General of theUnited States; and OMB Circular A-133, "Audits of States. Local Governments, and Non-Profit Organizations." Those standards and OMB Circular A-133 require that we plan andperform the audit to obtain reasonable assurance about whether noncompliance with the typesof compliance requirements referred to above that could have a direct and material

40




(CONTINUED)

effect on a major federal program occurred. An audit includes examining, on a test basis,evidence about the Foundation's compliance with those requirements and performing suchother procedures as we considered necessary in the circumstances. We believe that our auditprovides a reasonable basis for our opinion. Our audit does not provide a legal determinationon the Foundation's compliance with those requirements.

In our opinion, the Foundation complied, in all material respects, with the requirementsreferred to above that are applicable to its major federal program for the year ended June 30,2005.

Internal Control Over Compliance

The management of the Foundation is responsible for establishing and maintaining effectiveinternal control over compliance with requirements of laws, regulations, contracts and grantsapplicable to federal programs. In planning and performing our audit, we considered theFoundation's internal control over compliance with requirements that could have a directand material effect on a major federal program in order to determine our auditing proceduresfor the purpose of expressing our opinion on compliance and to test and report on internalcontrol over compliance in accordance with OMB Circular A-133.

41



(CONTINUED)

Our consideration of the internal control over compliance would not necessarily disclose allmatters in the internal control that might be material weaknesses. A material weakness is acondition in which the design or operation of one or more of ihe internal control componentsdoes not reduce to a relatively low level the risk that noncompliance with applicablerequirements of laws, regulations, contracts and grants that would be material in relation to amaj or federal program being audited may occur and not be detected within a timely period byemployees in the normal course of performing their assigned functions. We noted nomatters involving the internal control over compliance and its operation that we consider tobe material weaknesses.

This report is intended solely for the information of the Board of Directors, management, theLegislative Auditor of the State of Louisiana and federal awarding agencies and pass-throughentities and is not intended to be and should not be used by anyone other than these specifiedparties

Ik I


October 7, 2005

42

*runp& Tervalon LLP''Certified Public Accountants


SCHEDULE OF FINDINGS AND QUESTIONED COSTSSUMMARY OF THE INDEPENDENT AUDITORS' RESULTS


SCHEDULE I - Summary of the Independent Auditors' Results

1. Type of report issued on the financial statements. Unqualified Opinion.

2. Did the audit disclose any reportable conditions in internal control. No.

3. Were any of the reportable conditions material weaknesses. No.

4. Did the audit disclose any noncompliance which is material to the financial statementsof the organization. No.

5. Did the audit disclose any reportable conditions in internal control over majorprograms. No.

6. Were any of the reportable conditions in internal control over major programsmaterial weaknesses. No.

7. Type of report issued on compliance for major programs. Unqualified.

8. Did the audit disclose any audit findings which the independent auditors are requiredto report under OMB Circular A-133, Section 510(a). No.

9. The following is an identification of major programs:

CFDA or Name ofContract Number Federal Program

Various ' Research and DevelopmentCluster

43


SCHEDULE OF FINDINGS AND QUESTIONED COSTSSUMMARY OF THE INDEPENDENT AUDITORS' RESULTS, CONTINUED


SCHEDULE I - Summary of the Independent Auditors' Results, Continued

10. The dollar threshold used to distinguish between Type A and Type B Programs, asdescribed in OMB Circular A-133, Section 520(b) was S30Q.OOO.

11. Did the auditee qualify as a low risk auditee under OMB Circular A-133, Section 530.No

44


SCHEDULE OF FINDINGS AND QUESTIONED COSTSFOR THE YEAR ENDED JUNE 30, 2005

SCHEDULE II - Financial Statement Findings

None noted.

45


SCHEDULE OF FINDINGS AND QUESTIONED COSTS, CONTINUEDFOR THE YEAR ENDED JUNE 30, 2004

SCHEDULE m - Findings related to Federal Awards

None noted.

46

SUMMARY SCHEDULE OF PRIOR FEDERAL AUDIT FINDINGSUNIVERSITY OF NEW ORLEANS RESEARCH AND TECHNOLOGY FOUNDATION

FOR THE YEAR ENDED JUNE 30. 2005

Finding Title: Sub-recipient Monitoring

Reference Number(s): 2004-01(from attached schedule of findings, may include more than one)

Single Audit Report Year: June 30. 2004

Initial Year of Finding: June 30, 2004

Amount of Questioned Costs in Finding (if applicable): $-0-

Page Number (from Single Audit Report): 48

Program Name(s): Pontchartrain Restoration Program. Workforce Learning Community.Central Gulf Coast Regional Computer Forensic Lab Project. LakePontchartrain Basin Restoration Program

Federal Grantor Agency: U.S. Department of Defense. U.S. Department of Commerce, U.S.Department of Environmental Protection Agency. U.S. Department ofJustice

CFDA Number(s): 11.463. 12.FG173C20T2.16.2002LP-CXK004. 66.X976089Q1

Status of Questioned Costs (check one): Resolved: N/A Unresolved:No Further Action Needed:

Briefly describe the status of the Questioned Costs. Were they refunded to federal government?Are they still in negotiation?

Status Of Finding (check one):

Fully CorrectedPartially CorrectedChange of Corrective Action

Not Corrected _No Further Action Needed _

{See OMB A-ISS section 3i5(bX4»

Description Of StatUS_:_ (include corrective Action planned and anticipated completion date, if applicable);

Preparer's Name:

Phone Number:

Documents

runp & Tervalon LLPapp1.lla.state.la.us/PublicReports.nsf/4C2A2FB51371594986257162… · table of contents page independent auditors' report 1 statement of financial position at