UNIVERSITY OF SOUTH FLORIDA PARKING FACILITY REVENUE … › 378 › USF_pkg_POSTED.a1d8KmZU.pdf · UNIVERSITY OF SOUTH FLORIDA PARKING FACILITY REVENUE BONDS CUSIPS Numbers Maturity

UNIVERSITY OF SOUTH FLORIDA PARKING FACILITY REVENUE BONDS

CUSIPS Numbers

Maturity DateSeries 2016A

RefundingDated 1/12/2017

7/01/26 341580BF4

Legshare\SEC\2017ContinuingDisclosureReporting\USF_pkg_117.wpd

ANNUAL FINANCIAL INFORMATIONAND OPERATING DATA

SUBMITTED PURSUANT TO RULE 15c2-12OF THE SECURITIES AND EXCHANGE COMMISSION

FOR THE

STATE OF FLORIDABOARD OF GOVERNORS

UNIVERSITY OF SOUTH FLORIDAPARKING FACILITY REVENUE REFUNDING BONDS,

SERIES 2016A

for Fiscal Year ending June 30, 2017


TABLE OF CONTENTS

PageI. Campus Population and Parking Spaces. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1II. Number and Costs of Parking Decals Issued by Type and Student Transportation Access Fee. . . . . . . . . . . . . . 2III. Comparison of Budget to Actual for Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3IV. Admission and Registration Headcounts and Percentages by Type of Student.. . . . . . . . . . . . . . . . . . . . . . . . . . 4V. Headcount and Full-Time Equivalent Enrollment by Level. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5VI. Debt Service Coverage from Pledged Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Investment of Funds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ATTACHEDUniversity of South Florida Parking Facility Unaudited Annual Financial Report for Fiscal Year Ended June 30, 2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ATTACHEDUniversity of South Florida Audited Financial Statements for Fiscal Year Ended June 30, 2017. . . . . . . ATTACHED


I. Campus Population and Parking Spaces.

Tampa CampusPopulation and Parking Spaces

Fall SemesterStudent Headcount

EnrollmentTotal Personnel

Headcount* Total Vehicle Spaces

2012-13 40,211 15,333 20,737

2013-14 41,225 16,421 20,809

2014-15 42,065 16,727 20,797

2015-16 42,191 16,905 20,824

2016-17 42,925 17,344 20,708

* Includes both full-time and part-time personnel.

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II. Number and Costs of Parking Decals Issued by Type1 and Student Transportation Access Fee.

Fiscal Year Ended June 30,Parking Decal Types 20132 2014 2015 2016 2017Student Annual Number Issued 15,245 14,738 14,102 14,522 13,945 Cost $174 $183 $183 $183 $183Student Semester Number Issued 18,583 16,149 16,647 17,153 16,764 Cost $87 $91 $91 $91 $91Resident Student Annual Number Issued 1,720 1,556 1,567 1,725 1,594 Cost $215 $226 $226 $226 $226Resident Student Semester Number Issued 2,204 2,484 2,854 2,905 2,776 Cost $108 $113 $113 $113 $113

Staff Annual Number Issued 4,476 4,596 4,656 4,965 5,152 Cost $257 $270 $270 $270 $270Staff Semester Number Issued 885 950 1,073 1,157 1,129 Cost $129 $135 $135 $135 $135Staff Gold Annual 3

Number Issued 1,180 1,178 1,192 1,235 1,281 Cost $429 $450 $450 $450 $450Moffit/Affiliate Annual Number Issued 1,065 1,200 1,000 1,000 1,000 Cost $290 $305 $305 $305 $305Moffit/Affiliate Annual Gold Number Issued 232 300 300 300 290 Cost $470 $494 $494 $494 $494

Vendor Annual Number Issued 156 153 117 200 182 Cost $339 $356 $356 $356 $356Reserved Number Issued 936 1,140 1,105 1,170 1,234 Cost $1,025 $1,076 $1,076 $1,076 $1,076Park n Ride Number Issued 2,087 2,048 2,016 1,812 1,577 Cost $59 $59 $59 $59 $59Motorcycle Number Issued 510 407 350 283 236 Cost $59 $62 $62 $62 $62Alumni Annual Number Issued 41 44 48 42 41 Cost $84 $88 $88 $88 $88Friends of USF Annual Number Issued 47 35 37 48 36 Cost $276 $290 $290 $290 $290Friends of USF Semester Number Issued 48 29 33 22 31 Cost $138 $145 $145 $145 $145

Total Number of Decals Issued 49,415 47,007 47,097 48,539 47,269

Student Transportation Access Fee Per Credit Hour Fee $3.00 $3.00 $3.00 $3.00 $3.00 Student Credit Hours 1,007,567 1,026,919 1,043,478 1,062,278 1,061,890

1 The number of parking decals issued includes decals that were issued as replacements at no charge or which were proratedthroughout the year. State sales tax is in addition to the price listed.2 Information for this year has been restated.3 This decal allows staff members access to certain designated lots on campus (currently there are six gold lots). The number of goldpermits sold directly corresponds to the available spaces in the gold lots; consequently, those staff members possessing a gold decalare guaranteed an available parking space.


III. Comparison of Budget to Actual for Fiscal Year

Comparison of Budget to Actualfor Fiscal Year Ended June 30,

Accrual Basis1,2 (Unaudited)2012-13 2013-14 2014-15 2015-16 2016-17

Budget Actual Difference Budget Actual Difference Budget Actual Difference Budget Actual Difference Budget Actual Difference

Revenues

Decal Sales 3 $10,081,000 $10,045,441 ($35,559) $10,694,934 $10,598,004 ($96,930) $10,466,188 $10,671,218 $205,030 $10,420,000 $8,635,011 ($1,784,989) $10,658,004 $10,643,029 ($14,975)

Transportation Access Fees 3,154,121 3,022,700 (131,421) 2,961,759 3,080,758 118,999 3,005,174 3,131,244 126,070 3,065,717 3,186,835 121,118 3,359,924 3,185,670 (174,254)

Due from Component Unit - - - - - - - 1,153 1,153 - (765) (765) - 380 380

Total Revenues $13,235,121 $13,068,141 ($166,980) $13,656,693 $13,678,762 $22,069 $13,471,362 $13,803,614 $332,252 $13,485,717 $14,047,255 $561,538 $14,017,928 $13,829,079 ($188,849)

Operating Expenses

Total Payroll $4,083,720 $3,868,333 ($215,387) $3,863,408 $3,933,715 $70,307 $4,277,389 $4,122,751 ($154,638) $4,269,188 $4,095,193 ($173,995) $4,439,779 $4,268,129 ($171,650)

Regular Expenses 6,189,996 4,900,594 (1,289,402)4 5,465,965 4,642,553 (823,412)5 4,706,530 4,651,191 (55,339) 4,832,300 4,825,883 (5,417) 6,555,530 4,443,719 (2,111,811)6

Total Operating Expenses $10,273,716 $8,768,927 ($1,504,789) $9,329,373 $8,576,268 ($753,105) $8,983,919 $8,773,942 ($209,977) $9,101,488 $8,922,077 ($179,411) $10,995,309 $8,711,848 ($2,283,461)

Other Income/(Expenses):

Capital Outlay 1 - - - - - - - - - - - - - - -

Depreciation Expense/gain loss on disposal ($1,696,372) ($1,696,372) - ($1,706,621) ($1,706,621) - ($1,996,614) ($1,996,614) - ($1,597,120) ($1,597,120) 0 (1,582,838) (1,582,838) -

Interest Income 56,000 119,354 63,354 60,000 103,824 43,824 67,281 101,641 34,360 63,470 103,138 39,668 85,860 148,135 62,275

Interest Expense (1,353,735) (1,366,297) (12,562) (1,272,285) (1,284,847) (12,562) (1,179,379) (1,291,257) (111,878) (1,077,459) (1,077,459) - (755,201) (755,201) -

Transfers - - - - - - - - - - - - - - -

Miscellaneous - (20,448) (20,448) - (20,448) (20,448) - (241,637)7 (241,637) - - - (147,389) (149,389) (2,000)

Total Other Income ($2,994,107) ($2,963,762) $30,344 ($2,918,906) ($2,908,092) $10,814 ($3,108,712) ($3,427,867) ($319,155) ($2,611,109) ($2,571,441) $39,688 ($2,399,568) ($2,339,293) $60,275

Net Revenue ($32,702) $1,335,452 $1,368,154 $1,408,414 $2,194,402 $785,988 $1,378,731 $1,601,805 $223,074 $1,773,120 $2,553,737 $780,617 $623,051 $2,777,938 $2,154,887

1 The University has an accrual basis system. Expenses for capital outlay are capitalized on the balance sheet and corresponding depreciation expense are reflected in this schedule.2 Totals may not foot due to rounding.3 Also includes meter collections, citation collections, vending permit collections and transportation collections, which are not budgeted separately, but are combined with Decal Sales for budgeting purposes.4 The large variance in budgeted versus actual Regular Expenses in 2012-13 was due to several budgeted major purchases ( including transit buses) and various renovations projects being deferred.5 Variance primarily due to the deferral of $350,000 expenses until 2014-15 and capitalization of $326,000 expenses that were budgeted for renovation and maintenance.6 The large variance in budgeted versus actual Regular Expenses in 2016-17 was due to transit bus purchases and special projects that were deferred, a decrease in reimbursement to the University for cost of services, and budgeted expenses that were subsequently

capitalized.7 Deferred charges were written off in Fiscal Year 2014-15 due to GASB 65.


IV. Admission and Registration Headcounts and Percentages by Type of Student. 1

Fall 20132 Fall 2014 Fall 2015 Fall 2016 Fall 2017*

All Students:

Applicants 53,5762 55,909 59,408 58,824 64,557

Admitted 23,558 24,327 24,137 23,875 26,893

% of Applicants Admitted 44.0% 43.5% 40.6% 40.6% 41.7%

Enrolled 11,354 11,263 11,105 11,165 11,791

% of Admitted Enrolled 48.2% 46.3% 46.0% 46.8% 43.8%

First-Time-in-College:

Applicants 24,794 25,488 27,224 25,810 29,132

Admitted 10,445 10,937 10,578 10,077 11,190


Enrolled 3,307 3,294 3,110 2,945 3,064


Florida College System Transfers:

Applicants 6,301 6,109 5,902 5,896 7,061

Admitted 4,452 4,340 4,210 4,403 5,378


Enrolled 3,037 3,009 2,905 3,009 3,196


Other Undergraduate Transfers:

Applicants 6,117 5,212 5,318 5,233 5,745

Admitted 3,142 2,429 2,545 2,548 2,913


Enrolled 1,829 1,415 1,522 1,464 1,559


Graduate:

Applicants 10,905 13,2183 13,590 13,597 13,943

Admitted 4,739 5,970 6,110 6,320 6,688


Enrolled 2,708 3,117 3,182 3,377 3,555


Professional Schools:

Applicants 5,459 5,882 7,374 8,321 8,676

Admitted 744 651 694 570 724


Enrolled 473 428 386 382 417


1 Some of the information in this table has been restated.2 Beginning Fall 2013, the data includes applicants and admitted students from the Colleges of Medicine, Physical Therapy and Pharmacy, which

were not previously reported.3 Added Post-Baccalaureate degree seeking and Post-Baccalaureate non-degree seeking.* Fall 2017 information is preliminary.


V. Headcount and Full-Time Equivalent Enrollment by Level.

Headcount Enrollment by Level

Fall Undergraduate Graduate Annual Total

2013* 36,999 11,331 48,330

2014* 36,929 11,649 48,578

2015* 37,180 11,804 48,984

2016* 37,602 12,209 49,811

2017 38,007 12,570 50,577

* Information for these years has been restated.

Fall FTE Enrollment(All Campuses)

Level Status

Fall Undergrad Graduate Professional Total

FTE of

Full-Time Part-Time Total

2013 31,206 6,949 796 38,951 32,589 6,362 38,951

2014 31,166 7,102 897 39,165 32,748 6,417 39,165

2015 31,593 7,341 860 39,794 33,556 6,238 39,794

2016 31,771 7,779 1,315 40,865 35,125 5,740 40,865

2017 32,370 7,988 1,370 41,729 36,041 5,688 41,729

Full-Time-Equivalent Enrollment by Level*(Using IPEDS method)

Academic Year Undergraduate Graduate Annual Total

2012-13 34,281 7,969 42,250

2013-14 33,843 8,282 42,125

2014-15 33,681 8,555 42,236

2015-16 34,219 8,694 42,913

2016-17 34,215 8,734 42,949

* The University has restated all FTE data. The University no longer reports FTE information using the “Florida” methodology, but now usesthe "Federal" methodology referred to as “IPEDS” FTE (Independent Postsecondary Education Data System from the National Center forEducation Statistics). Annual full-time equivalency under the “Federal” methodology is 30 hours for undergraduate students and 24 hoursfor graduate students. FTE enrollment is determined by dividing the total nu mber of hours enrolled by all students in a specific category bythe appropriate hour requirement. Annual full-time equivalency under the previously used “Florida” methodology is 40 hours forundergraduate students and 32 hours for graduate students.


VI. Debt Service Coverage from Pledged Revenues.

Historical Debt Service Coverage1

Fiscal Year Ended June 30,

2013 2014 2015 2016 2017Pledged Revenues

Operating Revenues2 $13,068,141 $13,678,761 $13,803,614 $14,047,255 $13,829,079

Less Operating Expenses3 (7,799,318) (7,627,751) (7,941,563) (8,148,196) (7,880,349)

Plus Interest Earnings4 119,354 103,824 101,641 103,138 148,135

Total Pledged Revenues $5,388,177 $6,154,834 $5,963,692 $6,002,197 $6,096,866

Debt Service on the Outstanding Bonds $3,558,735 $3,557,285 $3,559,379 $3,559,829 $3,057,465

Pledged Revenues After Debt Service

and Available for Other Expenses $1,829,442 $2,597,549 $2,404,313 $2,442,368 $3,039,401

Maximum Annual Debt Service $3,559,829 $3,557,285 $3,559,829 $3,559,829 $3,057,465

Debt Service Coverage Ratios

Annual Debt Service 1.51x 1.73x 1.68x 1.69x 1.99x

Maximum Annual Debt Service 1.51x 1.73x 1.68x 1.69x 1.99x

1 The financial information related to revenues and expenses was provided by the University and has not been audited. Totals may not add due to rounding.2 The increase in 2013-14 was due to a 5% rental rate increase.3 Excludes depreciation expense and University administrative overhead charges included as operating expenses in the financial statements. Administrative

overhead charges were $969,609 in 2012-13; $948,517 in 2013-14; $832,379 in 2014-15, and $773,881 in 2015-16, and $831,500 in 2016-17.4 Includes only interest earned on the operating account of the Existing Parking System.


Investment of Funds Investment by the Chief Financial Officer - Funds held in the State Treasury are invested by internal and external investment managers. As of June 30, 2017, the ratio was approximately 46% internally managed funds, 44% externally managed funds, 5% Certificates of Deposit and 5% in an externally managed Security Lending program. The total portfolio market value on June 30, 2017, was $24,498,384,318.70.

Under State law, the Treasury is charged with investing funds of each State agency and the judicial branch. As of June 30, 2017, $17.301 billion of the investments in the Treasury consisted of accounts held by State agencies that are required by law to maintain their investments in the Treasury; additionally, $6.172 billion as of this date consisted of moneys held by certain boards, associations, or entities created by the State Constitution or by State law that are not required to maintain their investments with the Treasury and are permitted to withdraw these funds from the Treasury.

As provided by State law, the Treasury must be able to timely meet all disbursement needs of the State. Accordingly, the Treasury allocates its investments to provide for estimated disbursements plus a cushion for liquidity in instances of greater-than-expected disbursement demand.

To this end, a portion of Treasury’s investments are managed for short-term liquidity and preservation of principal. The remainder is managed to obtain maximum yield, given the safety parameters of State law and Treasury's Comprehensive Investment Policy. Investments managed for short-term liquidity and preservation of principal are managed “internally” by Treasury personnel. The majority of investments managed for a maximum return are managed by “external” investment companies hired by the State.

The Externally Managed Investment Program provides long-term value while limiting risk appropriately and provides a backup source of liquidity. External investment strategy focuses on medium-term and long-term fixed income securities, rather than money market instruments, in order to take advantage of higher returns historically achieved by such securities. Portfolio managers are hired to actively manage funds. These funds may be invested in U.S. Treasury government agency obligations, investment grade corporate debt, municipal debt, mortgage backed securities, asset backed securities, and U.S. dollar denominated investment-grade foreign bonds that are registered with the Securities and Exchange Commission. The managers may also use leveraging techniques such as forward purchase commitments, and interest rate futures. Investment by the Board of Administration - The Board of Administration manages investment of assets on behalf of the members of the Florida Retirement System (the AFRS@) Defined Benefit Plan. It also acts as sinking fund trustee for most State bond issues and oversees the management of FRS Investment Plan investment options, Florida Hurricane Catastrophe Fund moneys, a short-term investment pool for local governments and smaller trust accounts on behalf of third party beneficiaries.

The Board of Administration adopts specific investment policy guidelines for the management of its funds which reflect the long-term risk, yield, and diversification requirements necessary to meet its fiduciary obligations. As of June 30, 2017, the Board of Administration directed the investment/administration of 24 funds in 550 portfolios.

As of June 30, 2017 the total market value of the FRS (Defined Benefit) Trust Fund was $153,573,300,932.88. The Board of Administration pursues an investment strategy which allocates assets to different investment types. The long-term objective is to meet liability needs as determined by actuarial assumptions. Asset allocation levels are determined by the liquidity and cash flow requirements of the FRS, absolute and relative valuations of the asset class investments, and opportunities within those asset classes. Funds are invested internally and externally under a Defined Benefit Plan Investment Policy Statement.

The Board of Administration uses a variety of derivative products as part of its overall investment strategy. These products are used to manage risk or to execute strategies more efficiently or more cost effectively than could be done in the cash markets. They are not used to speculate in the expectation of earning extremely high returns. Any of the products used must be within investment policy guidelines designed to control the overall risk of the portfolio.

The Board of Administration invests assets in 23 designated funds other than the FRS (Defined Benefit) Trust Fund. As of June 30, 2017, the total market value of these funds equaled $37,890,376,569.62. Each fund is independently managed by the Board of Administration in accordance with the applicable documents, legal requirements and investment plan. Liquidity and preservation of capital are preeminent investment objectives for most of these funds, so investments for these are restricted to high quality money market instruments (e.g., cash, short-term treasury securities, certificates of deposit, banker's acceptances, and commercial paper). The term of these investments is generally short, but may vary depending upon the requirements of each trust and its investment plan. Investment of bond sinking funds is controlled by the resolution authorizing issuance of a particular series of bonds. The Board of Administration’s investment policy with respect to sinking funds is that only U.S. Treasury securities, and repurchase agreements backed thereby, be used.

STATE OF FLORIDA UNIVERSITY OF SOUTH FLORIDA

PARKING SERVICES

ANNUAL FINANCIAL REPORT For the Fiscal Years Ended June 30, 2017 and 2016

Unaudited

TABLE OF CONTENTS

Financial Statements Management’s Discussion and Analysis

Statement of Net Position Statement of Revenues, Expenses, and Changes in Net Position Statement of Cash Flows Notes to Financial Statements Statistical Information Daytime Campus Population and Total Number of Parking Spaces Number and Costs of Parking Decals Issued by Type and Student Transportation

Access Fee Comparison of Budget to Actual Historical Debt Service Coverage from Pledged Revenues

Management’s Discussion and Analysis

Governance The University of South Florida (the “University” or “USF”) is a public educational institution accredited by the Commission on Colleges of the Southern Association of Colleges and Schools. The University is a part of the State University System and accordingly, the University is governed, regulated and coordinated by the Florida Board of Education and the University Board of Trustees. Financial Highlights

• Total operating revenue from sales and services of $13.8 million in 2017 showed a decrease of 1.6% over prior year’s sales and services of $14 million. This was a result of a decrease in revenue permit sales.

• Interest earnings increased $44,997 due to the increased cash and investment balances.

• Operating expenses showed an increase related to salaries of $172,936, a decrease in

regular expenses of $440,782 and an increase in overhead of $57,619. The following changes contributed to the $440,782 net decrease in regular expenses: 1. Decrease in reimbursement to the University for cost of services of $161,753. 2. Decrease in supplies/material expense of $108,791 and contractual services of

$82,306.

• Net cash provided by operating activities of approximately $5 million directly corresponds to sales receipts.

• The Parking System remains very solvent, at June 30, 2017; net assets are

approximately $40.6 million as total assets of $63 million exceed total liabilities of $22.5 million.

• Unrestricted cash and cash equivalents and investments of $14.6 million provide

excellent liquidity to the Parking System.

• The Parking System maintains restricted cash and investments of $10.1 million for capital projects, debt service and renewal and replacement costs.

Overview of Financial Statements

The Parking System financial statements include the following financial elements:

• A Statement of Net Position provides the reader with detail about the assets of the Parking System as well as its outstanding liabilities. The difference between assets and liabilities is reported as net position. The net position presentation shows additional breakdowns, which may help the reader’s understanding of available resources of the Parking System versus those that are restricted. Changes in net position over time may be helpful in indicating an improving or deteriorating financial position.

• The Statement of Revenues, Expenses and Changes in Net Position, presents the

revenues and expenses of the current fiscal year, which resulted from operations. The net revenue less expense when combined with other non-operating sources such as interest income and interest expenses results in the net income to the Parking System generated for the fiscal year, which increased the Net Position presented on the Statement of Net Position.

• The Statement of Cash Flows shows those items that resulted in sources and uses of

cash to the Parking System’s cash balance for the fiscal year for both restricted and unrestricted cash. A reconciliation of the cash change to the operating income of the Parking System is also included.

• The Notes to the Financial Statements provide background information that meets

stringent governmental accounting reporting requirements and gives the reader additional information that may not be readily seen on the actual statements. Examples of such information include: a summary of significant accounting policies, capital assets, compensated absences, and bond indebtedness. The notes are an integral part of the financial statements.

Analysis of Financial Statements

Revenue is derived from student transportation access fee assessed on a per credit-hour basis, faculty/staff and student permit sales, citations, visitor vending/meter collections, and other miscellaneous income such as advertising revenues and charter fees. The Parking System uses the revenue to provide parking and transportation services to students and University employees. In that way it is a business that must operate as efficiently as possible while still providing the University community with a superior level of service.

Assets: 2017 2016Current assets 14,886,217$ 13,130,312$ Included: cash and cash equivalents 2,444,969 2,156,285 Investments 12,169,313 10,732,445 Capital assets 37,410,611 38,796,699 Restricted cash and cash equivalents 1,687,886 1,658,927 Restricted Investments 8,401,093 8,256,956 Total Assets 62,385,807$ 61,842,894$

Deferred Outflow s of Resources 658,436 361,525 Total Assets & Deferred Outflow s of Resources 63,044,243 62,204,419

LiabilitiesCurrent liabilities 2,743,410$ 2,735,105$ Noncurrent liabilities 19,703,610 21,531,706 Total Liabilities 22,447,020$ 24,266,812$

Deferred Inflow s of ResourcesDeferred Inflow s of Pension Resources 9,873$ 128,196$ Total Liabilities & Deferred Outflow s of Resources 22,456,893$ 24,395,008$

Net Positon: Invested in capital assets, net of related debt 17,454,299$ 16,687,513$ Restricted 10,870,344 10,251,207 Unrestricted 12,262,707 10,870,692 Total net position 40,587,350$ 37,809,412$

Total operating revenues 13,829,079$ 14,047,254$ Total operating expenses 10,277,262$ 10,479,050$ Operating income 3,551,818$ 3,568,205$ Interest income 148,135$ 103,138$ Interest/other expenses (922,015)$ (1,117,606)$ Transfers, net -$ -$ Change in net position 2,777,938$ 2,553,737$

Net cash provided by operating activities 5,004,728$ 5,644,535$ Net cash provided/(used) by noncapital f inancing activities (transfers) -$ -$ Net cash (used) by capital and related f inancing activities (3,254,214)$ (3,754,633)$ Net cash provided (used) by investing activities (1,432,870)$ (1,556,466)$ Net change in cash and cash equivalents 317,644$ 333,436$

Over the past several years there has been a significant improvement in sales of services, revenue collection and budgetary controls. This has resulted in a very strong financial position for future capital expansion. The above improvements to sales, collections, and budgetary controls were made possible by:

• Improved debt collection strategies and follow-up • Improved management of fixed and variable expense • Short and long-term goal setting

STATE OF FLORIDA, UNIVERSITY OF SOUTH FLORIDA

PARKING FACILITY REVENUE BONDS STATEMENT OF NET POSITION

JUNE 30, Unaudited

2017

2016

ASSETS Current assets Cash and cash equivalents $ 2,444,969

$ 2,156,285

Investments 12,169,313

10,732,445 Accounts receivable, net 267,308

240,817

Due from other funds 4,626 765 Total current assets 14,886,217

13,130,312

Noncurrent assets Restricted cash 1,687,886

1,658,927

Restricted Investments 8,401,093

8,256,956 Capital assets 37,410,611

38,796,699

Total noncurrent assets 47,499,590

48,712,582 Total assets $ 62,385,807

$ 61,842,894

Deferred Outflows of Resources Deferred Outflows of Pension Resources 658,436 361,525 Total Assets & Deferred Outflows of Resources 63,044,243 62,204,419 LIABILITIES

Current liabilities Accounts payable $ 235,915

$ 496,496

Bonds payable, current portion 2,495,000

2,225,000 Pension Liability- HIS, current portion 12,495

13,609

Total current liabilities 2,743,410

2,735,105

Noncurrent liabilities Bonds payable 17,461,312

19,884,187

Post Employment Health Care Benefits payable 696,191

588,556 Pension liability 1,317,042 831,343 Compensated absences payable 229,065 227,621

Total noncurrent liabilities 19,703,610

21,531,706

Total liabilities 22,447,020

24,266,812

Deferred Inflows of Resources

Deferred Inflows of Pension Resources 9,873 128,196

Total Liabilities & Deferred Inflows of Resources 22,456,893 24,395,008

NET POSITION Invested in capital assets, net of related debt 17,454,299

16,687,513

Restricted for capital projects 7,205,042

6,911,572 Restricted for debt service 802,801

637,955

Restricted for renewal and replacement 2,862,501

2,701,680 Unrestricted 12,262,707

10,870,692

Total net position 40,587,350

37,809,412 Total liabilities and net position $ 63,044,243

$ 62,204,419

The accompanying notes to financial statements are an integral part of this statement Totals may not foot due to rounding.


PARKING FACILITY REVENUE BONDS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

FOR THE YEAR ENDED JUNE 30 Unaudited

2017

2016

Revenues Operating revenues Sales and services $ 13,828,699

$ 14,048,020

Other revenues 380 (765) Total operating revenues 13,829,079

14,047,255

Expenses Operating expenses Salaries and related benefits 4,268,129

4,095,193

Expenses 3,612,220

4,053,002 Overhead expense 831,500

773,881

Depreciation 1,565,413

1,556,973 Total operating expenses 10,277,262

10,479,050

Operating income 3,551,818

3,568,205

Nonoperating revenues (expense) Interest income 148,135

103,138

Interest expense (755,201)

(1,077,459) Other non operating expense (149,389) Loss on disposal of equipment (17,425)

(40,147)

Total nonoperating income (expenses) (773,879)

(1,014,468)

Change in net position 2,777,938

2,553,737

Total net position Beginning of year 37,809,412

35,255,675

Adjustments to Beginning Net Position - -

End of year $ 40,587,350

$ 37,809,412

The accompanying notes to financial statements are an integral part of this statement. Totals may not foot due to rounding.


PARKING FACILITY REVENUE BONDS STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED JUNE 30 Unaudited

2017 2016

CASH FLOWS FROM OPERATING ACTIVITIES

Sales receipts $ 13,802,588 $ 14,074,728

Payment for salaries and related benefits (4,089,699) (4,008,172) Payment for expenses (4,704.300) (4,422,408) Advances to/ from other funds (3,861) 388

Net cash provided by operating activities 5,004,728 5,644,535

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES

Acquisition of fixed assets (196,749)

(194,804)

Debt service principal payments (2,340,000) (2,485,000) Debt service interest payments (717,465) (1,074,829)

Net cash used by capital and related financing activities (3,254,214) (3,754,633)

CASH FLOWS FROM INVESTING ACTIVITIES

Sales (Purchase) of Investments (1,581,005) (1,659,605)

Interest on investments 148,135 103,138

Net cash provided by investing activities (1,432,870) (1,556,467)

Net increase in cash and cash equivalents 317,644 333,436

Cash and cash equivalents, beginning of year 3,815,212 3,481,776

Cash and cash equivalents, end of year $ 4,132,856 $ 3,815,212

Reconciliation of net operating revenues to net cash

provided by operating activities

Operating income

Adjustments to reconcile operating income to net cash

provided by operating activities- $ 3,551,818

$ 3,568,205

Depreciation expense 1,565,413

1,556,973

Change in assets and liabilities

Accounts receivable (26,491) 27,474

Due from other funds (3,861) 388

Accounts payable (260,581) 404,475

Post Employment Health Care Benefits Payable 107,635 117,064 Pension Liability 69,351 (39,332)

Compensated absences payable 1,444 9,289

Net cash provided by operating activities $ 5,004,728 $ 5,644,535

The accompanying notes to financial statements are an integral part of this statement. Totals may not foot due to rounding.


PARKING FACILITY REVENUE BONDS NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2017 AND 2016

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of the University of South Florida Parking Facility Revenue Bonds are an integral part of the financial statements of the University of South Florida (the University). The University is a part of the State University System and accordingly, the University is governed, regulated and coordinated by the Florida Board of Education and the University Board of Trustees. The Parking System's financial statements have been prepared in conformity with generally accepted accounting principles as applied to governmental units. The significant accounting policies of the Parking System are described below: Basis of Presentation: The Parking System is classified as a business type activity and accounts for its operations through the use of an enterprise fund. Enterprise funds are used to account for activities similar to those found in the private sector, where the determination of net income is necessary or useful for sound financial administration. Basis of Accounting: Basis of accounting refers to when revenues, expenses, and related assets, deferred outflows of resources, liabilities, and deferred inflows of resources, are recognized in the accounts and reported in the financial statements. The financial statements are prepared on the accrual basis of accounting. Revenues are recorded when earned, and expenses are recorded when incurred. All fund assets and liabilities, current and noncurrent, are accounted for on the statement of net assets. Enterprise funds have the option under Governmental Accounting Standards Board (GASB) Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that Use Proprietary Fund Accounting to elect to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Parking System has elected not to apply FASB pronouncements issued after the applicable date. Investments: Investments are stated at fair value, which is based on quoted market prices; investment fund shares are determined by the fair value per share of the fund’s underlying portfolio.


USF PARKING SERVICES NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2017 AND 2016 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Deferred Financing Charges and Bond Discount: In connection with the issuance of the Parking System's bonds, certain related costs are deferred and amortized over the life of the related issue using the straight-line method. The use of the straight-line method does not materially differ from the effective interest method. Capital Assets: Capital assets are stated at cost. Depreciation on buildings is computed using the straight-line method over an estimated useful life of the asset. The useful lives of the asset are as follows: Buildings - 35 to 40 years Furniture, fixtures and equipment - 5 to 15 years Vehicles - 10 to 12 years Software - 5 years

When assets are retired or otherwise disposed of, the costs and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the results from operations in the period of disposal. Net interest costs are capitalized during the construction period. Revenue Recognition: Investment Income: Interest on investments is recorded as income when earned. Sales and Services: Revenue is derived from the student transportation access fee assessed on a pre-credit-hour basis, faculty/staff and student decals sales, citations and pay/lots meters collections, and other miscellaneous income such as boot fees and campus signs. Revenue is recognized when earned. Compensated Absences Liability: Employees earn the right to be compensated during absences for annual leave (vacation) and sick leave pursuant to the Florida Administrative Code, and to bargaining agreements between the State of Florida and the United Faculty of Florida. Leave earned is accrued to the credit of the employee and records are kept on each employee's unpaid (unused) leave balances. GASB Statement No. 16, Accounting for Compensated Absences, requires that the University accrue a liability for employees' rights to receive compensation for future absences when certain conditions are met. At June 30, 2017 and 2016, the estimated liability for annual and sick leave was $209,411 and $215,859, respectively. Allowance for doubtful receivables: Accounts Receivable was calculated by aging the accounts over one year as doubtful. Immaterial amounts from accrued receivables are not recognized in these financial reports.


PARKING SERVICES NOTES TO FINANCIAL STATEMENTS

FOR THE YEARS ENDED JUNE 30, 2017 AND 2016

NOTE 2 – CASH AND CASH EQUIVALENTS Amounts reported as cash and cash equivalents consist of cash on hand and cash held in demand accounts. University cash deposits are held in banks qualified as public depositories under Florida law. All such deposits are insured by the Federal depository insurance, up to specified limits, or collateralized with securities held in Florida’s multiple financial institution collateral pool required by Chapter 280, Florida Statutes. NOTE 3-INVESTMENTS Pursuant to Section 218.415(16), Florida Statutes, the University is authorized to invest in the Local Government Surplus Funds Trust Fund investment pool; interest-bearing time deposits and savings accounts in qualified public depositories; direct obligations of the US Treasury; obligations of Federal agencies; securities of, or interests in, certain open-end or closed-end management type investment companies; SEC registered money market funds; and other investments approved by the University’s Board of Trustees. Investments set aside to make debt service payments, maintain sinking or reserve funds, or to purchase or construct capital assets are classified as restricted. The University’s recurring fair value measurements as of June 30, 2017 are valued using the following valuation techniques and inputs: United States Treasury securities, Obligations of United States government agencies and instrumentalities, and Bonds and notes: These securities are valued daily by a pricing service that uses evaluated pricing applications which incorporate available market information. Available information is also applied through benchmarking processes, sector groupings, and matrix pricing (Level 2 inputs). Repurchase agreements: Repurchase agreements are collateralized at 102% with securities guaranteed by the US Government or an agency thereof and are valued at quoted prices for similar assets in active markets (Level 2 inputs). Stocks and other equity securities: This type includes domestic and international equities valued at quoted prices in an active market (Level 1 inputs). Equity mutual funds. This category includes investments in domestic and international equities through commingled fund structures. The investment objective of these funds is to track the performance of their respective benchmarks. Investments in this category are valued at quoted prices in an active market (Level 1 inputs). Bond mutual funds. This category includes investments in fixed income securities through commingled fund structures. The investment objective of these funds is to track the performance of their respective market-weighted indices with a short-term dollar-weighted

average maturity. Investments in this category are valued at quoted prices in an active market (Level 1 inputs). Money market mutual funds. This category includes investments in high-quality money market instruments through commingled fund structures. The investment objective of these funds is to maximize current income, to the extent consistent with the preservation of capital, and maintain liquidity. Investments in this category are valued at quoted prices in an active market (Level 1 inputs). The University’s investments at June 30, 2017, are reported as follows:

QuotedPrices Significant

in Active Other SignificantMarkets for Observable Unobservable

Identical Assets Inputs InputsInvestments by fair value level Amount (Level 1) (Level 2) (Level 3)United States Treasury Securities 11,796,958$ -$ 11,796,958$ -$ Repurchase Agreements 42,319,732 42,319,732 Bonds and Notes 20,397,314 - 20,397,314 -

14,385,226 14,385,226 - - Mutual Funds: Equities 125,035,118 125,035,118 - - Bonds 452,825,288 452,825,288 - - Alternative 6,068,186 6,068,186 - -

1,352,586 1,352,586 - -

Total investments by fair value level 674,180,408$ 599,666,404$ 74,514,004$ -$

Investments measured at the net asset value (NAV)

Hedge Funds 2,663,750

Total investments measured at NAV 2,663,750

Total investments measured at fair value 676,844,158$

Money Market

Fair Value Measurements Using

Stocks and Other Equity Securities

The valuation method for investments measured at the net asset value (NAV) per share (or its equivalent) is presented in the following table:

Redemption RedemptionUnfunded Frequency (if Notice

Investments measured at the NAV Fair Value Commitments Currently Eligible) Period

Hedge funds 2,663,750$ -$ Annually 95 days

Total investments measured at the NAV 2,663,750$

Hedge funds. This category includes an investment in a hedge fund of funds that seeks capital appreciation by investing with long/short equity and absolute return-oriented managers that employ a bottom up, fundamental approach to investing. The fair value of the investments in this category has been estimated using the net asset value per share of the investments. Because the University reports under the GASB reporting model, it is required to disclose various investment risks. The University Board of Trustees has adopted a written investment policy. The University’s investment policy allows investments in cash and cash equivalents, equities, and fixed income investments. The following risks apply to these investments: Interest Rate and Credit Risk: Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. The University investment policy limits the

short term fixed income portfolio (United States Treasury securities, United States government agency obligations, mortgage-backed securities, corporate debt, state and municipal securities investments) to a weighted average duration of less than five years. For long term investments, the investment policy does not limit the duration for long term corporate notes or other direct debt obligations. The University investment policy provides for interest rate risk. The risk varies depending on the type of investment. Credit Risk: Credit risk is the risk that an insurer or other counterparty to an investment will not fulfill its obligations. The University investment policy provides that all fixed income securities investments shall be rated in the top three rating classifications as defined by both Moody’s and Standard & Poor’s. The University investment policy provides for credit rate risk. The risk varies depending on the type of investment. The following interest rate and credit risks apply to the University’s investments in debt securities and money market mutual funds at June 30, 2017:

WeightedAverage Standard Fair

Investment Type Maturities Moody's and Poor's Value

United States Treasury Securities (3) 3.79 (1) (1) 11,796,958$ Repurchase Agreements (4) 1 Day (2) (2) 42,319,732 Bonds and Notes (3) 3.76 Aaa - A3 AAA - A- 19,548,669 Bonds and Notes (3) 0.54 Aaa - Aa2 Not Rated 848,645 Bond Mutual Funds (4) 3.03 Years Not Rated Not Rated 452,825,288 Money Market Mutual Funds (3) 21 Days Aaa-mf AAAm 1,352,586

Total 528,691,878$

Credit Quality Rating

University Debt Investment Maturity and Quality Ratings

Notes: (1) Disclosure of credit risk is not required for this investment type. (2) Repurchase agreement is collateralized by a Federal Home Loan Mortgage Corporation security and is not rated. (3) USF Health Sciences Center Self-Insurance Program (4) University

Concentration of Credit Risk: Concentration of credit risk is the risk of loss attributed to the magnitude of the investment in a single issuer. The University’s investment policy provides that the maximum amount that may be invested in the securities of an individual issuer not backed by the full faith and credit of the U.S. Government shall not exceed five percent of the assets of the investment portfolio, and no single corporate bond issuer shall exceed five percent of the market value of the investment portfolio. Direct investments in securities of the U.S. Government, Government agencies and State of Florida Investment Pools, or Pooled Funds comprised solely of U.S. Government Securities are not subject to these restrictions. The Parking System investments are in the repurchase agreements and bond mutual funds listed above. Investment earnings for the year ended June 30, 2017 and 2016 were $148,135 and $103,138 respectively. NOTE 4 – NET RECEIVABLES Accounts receivable is reported net of an allowance for uncollectible accounts. At June 30, 2017, allowance for uncollectible accounts was estimated to be $133,894.

NOTE 5 – CAPITAL ASSETS Capital asset activity for the year ended June 30, 2017 was as follows:

July 1, 2016 Additions Retirements June 30, 2017Buildings 51,925,662 - 51,925,662Construction in Progress - - - Furniture, Fixtures & Equipment 1,092,397 131,740 230,602 993,536Software 6,000 - - 6,000Vehicles 3,225,573 65,010 127,903 3,162,680Total 56,249,633 196,749 358,504 56,087,878

Less Accumulated Depreciation:Buildings 14,418,903 1,298,015 15,716,918Furniture, Fixtures & Equipment 967,913 60,513 213,177 815,249Software 6,000 6,000Vehicles 2,060,117 206,886 127,903 2,139,100Total Accumulated Depreciation 17,452,933 1,565,413 341,080 18,677,267

Capital Assets Net 38,796,699 (1,368,664) 17,425 37,410,611

NOTE 6 – LONG TERM DEBT

Long-term liability activity for the year ended June 30, 2017 was as follows:

Beginning Ending Balance Additions Reductions Balance Current Portion

Bonds Payable2016A Parking (Refunded 2002, 2004A, and 2006A) 22,125,000 21,545,000 23,610,000 20,060,000 2,495,000 Unamortized Premium 27,293 27,293 - Unamortized Loss - (109,448) (5,760) (103,688) Unamortized Bond Discount (43,106) (43,106) -

Total Bonds Payable 22,109,187 21,435,552 23,588,426 19,956,312 2,495,000

Other liabilities - Post Employment Health Care Benefits Payable 588,556 107,635 696,191 Compensated absences 227,621 1,444 229,065

Total Other liabilities 816,177 109,079 - 925,256

Total 22,925,363 21,544,631 23,588,426 20,881,568 2,495,000

Bonds were issued to construct University parking garages. Bonds outstanding are secured by a pledge of traffic and parking fees and various other student fee assessments. A summary of pertinent information related to the University’s indebtness resulting from the issuance of the bonds follows:

Amount of Amount Outstanding InterestBond Type and Series Original Issue Principal Interest Rates

2016A Parking 21,545,000 20,060,000 1,969,220 2.20 Less: Bond Discount/PremiumAmt deferred on Refunding (103,688)Total Bonds Payable 21,545,000 19,956,312 1,969,220

Annual requirements to amortize all bonded debt outstanding as of June 30, 2017 are as

follows:

Fiscal Year Ending June 30 Principal Interest Total2018 2,495,000 441,320 2,936,320 2019 2,550,000 386,430 2,936,430 2020 2,610,000 330,330 2,940,330 2021 2,665,000 272,910 2,937,910 2022 2,715,000 214,280 2,929,280

2023-2026 7,025,000 323,950 7,348,950 2028-2032 - - -

subtotal 20,060,000 1,969,220 22,029,220 Less: Bond Discount/Premium - -

Amount Deferred on Refunding (103,688) (103,688) Total (net of discount) 19,956,312 1,969,220 21,925,532

The bond resolutions provide for the establishment of Sinking Funds to be held and administered by the State Board of Administration (SBA) for the purpose of paying the principal and interest on the bonds as they become due. The bond resolutions provide for the establishment of a Reserve Account which is to be used for payments of debt service when amounts in the Sinking Fund are insufficient. The Reserve Account will be funded in an amount equivalent to Maximum Annual Debt Service by surety bond from Municipal Bond Investors Assurance Corporation.

The bond covenants require the establishment of facility maintenance and equipment reserve funds. Proposed annual operating budgets of the University shall provide for at least 3% of the total annual projected pledged revenues for each specific bond issue to be deposited into a reserve fund(s) for auxiliary facilities until an amount equal to at least 30% of the current year annual pledged revenue is reached. The required amount is currently 30% of the current year annual pledged revenue.

The monies in said Building Maintenance and Equipment Reserve may be drawn on and used by the University for the purpose of paying the cost of ususual or extraordinary maintenance or repairs, renewals and replacements, and the renovating or replacement or the equipment not paid as part of ordinary and normal expense of the operation and maintenance of the Parking System.

Interest expense on bonds for the fiscal year ended June 30, 2017 and 2016 respectively was $717,465 and $1,074,829.

Sherrill F. Norman, CPA

Auditor General

Report No. 2018-066

December 2017

UNIVERSITY OF SOUTH FLORIDA

For the Fiscal Year Ended

June 30, 2017

Finan

cial Audit

Board of Trustees and President

During the 2016-17 fiscal year, Dr. Judy L. Genshaft served as President of the University of South

Florida and the following individuals served as Members of the Board of Trustees:

Brian D. Lamb, Chair Stanley I. Levy Jordan B. Zimmerman, Vice Chair Harold W. Mullis Jr. Michael Carrere John B. Ramil James Garey a from 8-8-16 Byron E. Shinn Stephanie E. Goforth James Stikeleather Christopher Griffin b through 5-8-17 Dr. Gregory B. Teague a through Scott L. Hopes 8-7-16 Moneer Kheireddine b from 5-9-17 Nancy H. Watkins

a System faculty council president (equivalent to faculty senate chair referred to in

Section 1001.71(1), Florida Statutes). b Student Body President.

The Auditor General conducts audits of governmental entities to provide the Legislature, Florida’s citizens, public entity

management, and other stakeholders unbiased, timely, and relevant information for use in promoting government

accountability and stewardship and improving government operations.

The team leader was Jenny L. Phipps, and the supervisor was Rachel P. Sellers, CPA.

Please address inquiries regarding this report to Jaime Hoelscher, CPA, Audit Manager, by e-mail at

[email protected]: or by telephone at (850) 412-2868.

This report and other reports prepared by the Auditor General are available at:

FLAuditor.gov

Printed copies of our reports may be requested by contacting us at:

State of Florida Auditor General

Claude Pepper Building, Suite G74 ∙ 111 West Madison Street ∙ Tallahassee, FL 32399-1450 ∙ (850) 412-2722

https://flauditor.gov

UNIVERSITY OF SOUTH FLORIDA

TABLE OF CONTENTS

Page No.

SUMMARY ........................................................................................................................................... i

INDEPENDENT AUDITOR’S REPORT ................................................................................................ 1

Report on the Financial Statements ................................................................................................. 1

Other Reporting Required by Government Auditing Standards ....................................................... 3

MANAGEMENT’S DISCUSSION AND ANALYSIS .............................................................................. 4

BASIC FINANCIAL STATEMENTS

Statement of Net Position ................................................................................................................ 16

Statement of Revenues, Expenses, and Changes in Net Position .................................................. 18

Statement of Cash Flows ................................................................................................................. 20

Notes to Financial Statements ......................................................................................................... 22

OTHER REQUIRED SUPPLEMENTARY INFORMATION

Schedule of Funding Progress – Other Postemployment Benefits Plan .......................................... 66

Schedule of the University’s Proportionate Share of the Net Pension Liability – Florida Retirement System Pension Plan ................................................................................................... 66

Schedule of University Contributions – Florida Retirement System Pension Plan .......................... 66

Schedule of the University’s Proportionate Share of the Net Pension Liability – Health Insurance Subsidy Pension Plan .................................................................................................... 67

Schedule of University Contributions – Health Insurance Subsidy Pension Plan ............................ 67

Notes to Required Supplementary Information ................................................................................ 68

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS ................................................ 69

Internal Control Over Financial Reporting ........................................................................................ 69

Compliance and Other Matters ........................................................................................................ 70

Purpose of this Report ..................................................................................................................... 70

Report No. 2018-066 December 2017 Page i

SUMMARY

SUMMARY OF REPORT ON FINANCIAL STATEMENTS

Our audit disclosed that the basic financial statements of the University of South Florida (a component

unit of the State of Florida) were presented fairly, in all material respects, in accordance with prescribed

financial reporting standards.

SUMMARY OF REPORT ON INTERNAL CONTROL AND COMPLIANCE

Our audit did not identify any deficiencies in internal control over financial reporting that we consider to

be material weaknesses.

The results of our tests disclosed no instances of noncompliance or other matters that are required to be

reported under Government Auditing Standards issued by the Comptroller General of the United States.

AUDIT OBJECTIVES AND SCOPE

Our audit objectives were to determine whether the University of South Florida and its officers with

administrative and stewardship responsibilities for University operations had:

Presented the University’s basic financial statements in accordance with generally acceptedaccounting principles;

Established and implemented internal control over financial reporting and compliance withrequirements that could have a direct and material effect on the financial statements; and

Complied with the various provisions of laws, rules, regulations, contracts, and grant agreementsthat are material to the financial statements.

The scope of this audit included an examination of the University’s basic financial statements as of and

for the fiscal year ended June 30, 2017. We obtained an understanding of the University’s environment,

including its internal control, and assessed the risk of material misstatement necessary to plan the audit

of the basic financial statements. We also examined various transactions to determine whether they

were executed, in both manner and substance, in accordance with governing provisions of laws, rules,

regulations, contracts, and grant agreements.

An examination of Federal awards administered by the University is included within the scope of our

Statewide audit of Federal awards administered by the State of Florida.

AUDIT METHODOLOGY

We conducted our audit in accordance with auditing standards generally accepted in the United States

of America and applicable standards contained in Government Auditing Standards, issued by the

Comptroller General of the United States.

Report No. 2018-066 December 2017 Page 1

Phone: (850) 412-2722 Fax: (850) 488-6975

Sherrill F. Norman, CPA Auditor General

AUDITOR GENERAL STATE OF FLORIDA Claude Denson Pepper Building, Suite G74

111 West Madison Street Tallahassee, Florida 32399-1450

The President of the Senate, the Speaker of the House of Representatives, and the Legislative Auditing Committee

INDEPENDENT AUDITOR’S REPORT

Report on the Financial Statements

We have audited the accompanying financial statements of the University of South Florida, a component

unit of the State of Florida, and its aggregate discretely presented component units as of and for the fiscal

year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise

the University’s basic financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in

accordance with accounting principles generally accepted in the United States of America; this includes

the design, implementation, and maintenance of internal control relevant to the preparation and fair

presentation of financial statements that are free from material misstatement, whether due to fraud or

error.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We did not

audit the financial statements of the blended and aggregate discretely presented component units. The

financial statements of the University of South Florida Health Sciences Center Self-Insurance Program,

a blended component unit, represent 3.3 percent, 2.8 percent, and 0.8 percent, respectively, of the

assets, net position, and revenues reported for the University of South Florida. The financial statements

of the aggregate discretely presented component units represent 100 percent of the transactions and

account balances of the discretely presented component units’ columns. Those financial statements

were audited by other auditors whose reports have been furnished to us, and our opinions, insofar as

they relate to the amounts included for the blended and aggregate discretely presented component units,

are based solely on the reports of the other auditors. We conducted our audit 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

Report No. 2018-066 Page 2 December 2017

States. Those standards require that we plan and perform the audit to obtain reasonable assurance

about whether the financial statements are free from material misstatement. The financial statements of

the University of South Florida Health Sciences Center Self-Insurance Program, a blended component

unit, were not audited in accordance with Government Auditing Standards.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in

the financial statements. The procedures selected depend on the auditor’s judgment, including the

assessment of the risks of material misstatement of the financial statements, whether due to fraud or

error. In making those risk assessments, the auditor considers internal control relevant to the entity’s

preparation and fair presentation of the financial statements in order to design audit procedures that are

appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness

of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes

evaluating the appropriateness of accounting policies used and the reasonableness of significant

accounting estimates made by management, as well as evaluating the overall presentation of the

financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our audit opinions.

Opinions

In our opinion, based on our audit and the reports of other auditors, the financial statements referred to

above present fairly, in all material respects, the respective financial position of the University of South

Florida and of its aggregate discretely presented component units as of June 30, 2017, and the respective

changes in financial position and, where applicable, cash flows thereof for the fiscal year then ended in

accordance with accounting principles generally accepted in the United States of America.

Other Matter

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that MANAGEMENT’S

DISCUSSION AND ANALYSIS, the Schedule of Funding Progress – Other Postemployment

Benefits Plan, Schedule of the University’s Proportionate Share of the Net Pension Liability –

Florida Retirement System Pension Plan, Schedule of University Contributions – Florida

Retirement System Pension Plan, Schedule of the University’s Proportionate Share of the Net

Pension Liability – Health Insurance Subsidy Pension Plan, Schedule of University Contributions

– Health Insurance Subsidy Pension Plan, and Notes to Required Supplementary Information, as

listed in the table of contents, be presented to supplement the basic financial statements. Such

information, although not a part of the basic financial statements, is required by the Governmental

Accounting Standards Board who considers it to be an essential part of financial reporting for placing the

basic financial statements in an appropriate operational, economic, or historical context. We have applied

certain limited procedures to the required supplementary information in accordance with auditing

standards generally accepted in the United States of America, which consisted of inquiries of

management about the methods of preparing the information and comparing the information for

consistency with management’s responses to our inquiries, the basic financial statements, and other

knowledge we obtained during our audit of the basic financial statements. We do not express an opinion


or provide any assurance on the information because the limited procedures do not provide us with

sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued a report dated

December 15, 2017, on our consideration of the University of South Florida’s internal control over

financial reporting and on our tests of its compliance with certain provisions of laws, rules, regulations,

contracts, and grant agreements and other matters included under the heading INDEPENDENT

AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON

COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS

PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS. 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 effectiveness of 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 in considering the University of South

Florida’s internal control over financial reporting and compliance.

Respectfully submitted,

Sherrill F. Norman, CPA Tallahassee, Florida December 15, 2017


MANAGEMENT’S DISCUSSION AND ANALYSIS

Management’s discussion and analysis (MD&A) provides an overview of the financial position and

activities of the University for the fiscal year ended June 30, 2017, and should be read in conjunction with

the financial statements and notes thereto. The MD&A, and financial statements and notes thereto, are

the responsibility of University management. The MD&A contains financial activity of the University for

the fiscal years ended June 30, 2017, and June 30, 2016.

FINANCIAL HIGHLIGHTS

The University’s assets and deferred outflows of resources totaled $2 billion at June 30, 2017. This

balance reflects a $188.9 million, or 10.7 percent, increase as compared to the 2015-16 fiscal year,

resulting from increases in cash and investments, pension-related deferred outflows, and receivables.

While assets and deferred outflows of resources grew, liabilities and deferred inflows of resources

increased by $121.7 million, or 19.1 percent, totaling $759.4 million at June 30, 2017, as compared to

$637.7 million at June 30, 2016, resulting from increases in pension and other postemployment benefits

liabilities. As a result, the University’s net position increased by $67.2 million, resulting in a year-end

balance of $1.2 billion.

The University’s operating revenues totaled $848.2 million for the 2016-17 fiscal year, representing a

4 percent increase compared to the 2015-16 fiscal year due mainly to increases in grants and contracts

and sales and services of auxiliary enterprises. Operating expenses totaled $1.3 billion for the

2016-17 fiscal year, representing an increase of 5 percent as compared to the 2015-16 fiscal year due

mainly to an increase in compensation and employee benefits.

Net position represents the residual interest in the University’s assets and deferred outflows of resources

after deducting liabilities and deferred inflows of resources. The University’s comparative total net

position by category for the fiscal years ended June 30, 2017, and June 30, 2016, is shown in the

following graph:


Net Position

(In Thousands)

The following chart provides a graphical presentation of University revenues by category for the

2016-17 fiscal year:

Total Revenues

OVERVIEW OF FINANCIAL STATEMENTS

Pursuant to GASB Statement No. 35, the University’s financial report consists of three basic financial

statements: the statement of net position; the statement of revenues, expenses, and changes in net

position; and the statement of cash flows. The financial statements, and notes thereto, encompass the

University and its component units. These component units include:

Blended Component Unit:

o University of South Florida Health Sciences Center Self-Insurance Program

$0

$500,000

$1,000,000

Net Investment inCapital Assets

Restricted Unrestricted

$743,215

$239,918$213,073

$723,763

$201,277 $203,977

2017 2016

Operating Revenues

59%

Nonoperating Revenues

38%

Other Revenues3%


Discretely Presented Component Units:

o University of South Florida Foundation, Inc.

o University of South Florida Alumni Association, Inc.

o USF Health Professions Conferencing Corporation

o University of South Florida Medical Services Support Corporation

o Sun Dome, Inc.

o University of South Florida Research Foundation, Inc.

o USF Financing Corporation

o USF Property Corporation

o University Medical Service Association, Inc.

Information regarding these component units, including summaries of the blended and discretely

presented component units’ separately issued financial statements, is presented in the notes to financial

statements. This MD&A focuses on the University, excluding the discretely presented component units.

For those component units reporting under GASB standards, MD&A information is included in their

separately issued audit reports.

The Statement of Net Position

The statement of net position reflects the assets, deferred outflows of resources, liabilities, and deferred

inflows of resources of the University, using the accrual basis of accounting, and presents the financial

position of the University at a specified time. Assets, plus deferred outflows of resources, less liabilities,

less deferred inflows of resources, equals net position, which is one indicator of the University’s current

financial condition. The changes in net position that occur over time indicate improvement or deterioration

in the University’s financial condition.

The following summarizes the University’s assets, deferred outflows of resources, liabilities, deferred

inflows of resources, and net position at June 30:


Condensed Statement of Net Position at June 30

(In Thousands)

2017 2016

AssetsCurrent Assets 894,715$ 786,001$ Capital Assets, Net 852,341 845,684 Other Noncurrent Assets 71,189 61,980

Total Assets 1,818,245 1,693,665

Deferred Outflows of Resources 137,405 73,082

LiabilitiesCurrent Liabilities 212,028 209,844 Noncurrent Liabilities 541,744 401,971

Total Liabilities 753,772 611,815

Deferred Inflows of Resources 5,672 25,915

Net PositionNet Investment in Capital Assets 743,215 723,763 Restricted 239,918 201,277 Unrestricted 213,073 203,977

Total Net Position 1,196,206$ 1,129,017$

Current assets for the University increased a total of $108.7 million between the 2 fiscal years due to

increases in current cash and investments, net accounts receivable, and the amount due from State.

Current cash and investments increased $66.2 million primarily as a result of increases in investment

income, State appropriations, and auxiliary operations. Net accounts receivable increased $35 million,

including $18.7 million for FCC Broadcast Television Spectrum Incentive Auction proceeds for WUSF-TV.

Due from State increased $15.5 million primarily due to the additional Public Education Capital Outlay

funding for the USF Morsani College of Medicine.

Deferred outflows of resources increased $64.3 million, and deferred inflows of resources decreased

$20.2 million relating to pension activity.

Total liabilities increased $142 million. Major components of this increase include an increase in other

postemployment benefits (OPEB) payable of $26.3 million, due to actuarial estimates, and an increase

in the GASB Statement No. 68 net pension liability of $106.6 million.

Net position is reported in three major categories. The first category, net investment in capital assets,

provides the University’s equity in property, plant, and equipment owned by the University. Restricted

net position is another category, which may be further broken down into nonexpendable and expendable.

Restricted nonexpendable net position represents funds that have been donated to the University that

are required to be invested in perpetuity. This net position component is primarily maintained within the

University of South Florida Foundation, Inc., a component unit of the University. Restricted expendable

net position is available for use by the University, but must be spent for purposes as determined by donors


or external entities that have placed time or purpose restrictions on the use of the assets. The final

category is unrestricted net position and is available to the University for any lawful purpose of the

University.

The Statement of Revenues, Expenses, and Changes in Net Position

The statement of revenues, expenses, and changes in net position presents the University’s revenue and

expense activity, categorized as operating and nonoperating. Revenues and expenses are recognized

when earned or incurred, regardless of when cash is received or paid.

The following summarizes the University’s activity for the 2016-17 and 2015-16 fiscal years:

Condensed Statement of Revenues, Expenses, and Changes in Net Position For the Fiscal Years

(In Thousands)

2016-17 2015-16

Operating Revenues 848,169$ 815,705$ Less, Operating Expenses 1,332,703 1,268,746

Operating Loss (484,534) (453,041) Net Nonoperating Revenues 511,475 452,962

Income (Loss) Before Other Revenues 26,941 (79) Other Revenues 40,248 41,350

Net Increase In Net Position 67,189 41,271

Net Position, Beginning of Year 1,129,017 1,087,746

Net Position, End of Year 1,196,206$ 1,129,017$

Operating Revenues

GASB Statement No. 35 categorizes revenues as either operating or nonoperating. Operating revenues

generally result from exchange transactions where each of the parties to the transaction either gives or

receives something of equal or similar value.

The following summarizes the operating revenues by source that were used to fund operating activities

for the 2016-17 and 2015-16 fiscal years:

Operating Revenues For the Fiscal Years

(In Thousands)

2016-17 2015-16

Student Tuition and Fees, Net 293,198$ 291,042$ Grants and Contracts 395,692 380,966 Sales and Services of Auxiliary Enterprises 147,665 133,239 Other 11,614 10,458

Total Operating Revenues 848,169$ 815,705$


The following chart presents the University’s operating revenues for the 2016-17 and 2015-16 fiscal

years:

Operating Revenues

(In Thousands)

University operating revenues increased by $32.5 million, or 4 percent. This is primarily attributed to a

$14.7 million increase in grants and contracts revenues due to grants and contracts from Federal and

nongovernmental funding and a $14.4 million increase in sales and services of auxiliary enterprises

generated across multiple sources.

Operating Expenses

Expenses are categorized as operating or nonoperating. The majority of the University’s expenses are

operating expenses as defined by GASB Statement No. 35. GASB gives financial reporting entities the

choice of reporting operating expenses in the functional or natural classifications. The University has

chosen to report the expenses in their natural classification on the statement of revenues, expenses, and

changes in net position and has displayed the functional classification in the notes to financial statements.

The following summarizes operating expenses by natural classification for the 2016-17 and 2015-16 fiscal

years:

$0 $225,000 $450,000

Other

Sales and Servicesof Auxiliary Enterprises

Grants and Contracts

Student Tuition and Fees, Net

$10,458

$133,239

$380,966

$291,042

$11,614

$147,665

$395,692

$293,198

2016‐17 2015‐16


Operating Expenses For the Fiscal Years

(In Thousands)

2016-17 2015-16

Compensation and Employee Benefits 882,382$ 825,087$ Services and Supplies 298,359 291,174 Utilities and Communications 24,412 24,217 Scholarships, Fellowships, and Waivers 70,601 74,844 Depreciation 49,082 49,547 Self-Insurance Claims 7,867 3,877

Total Operating Expenses 1,332,703$ 1,268,746$

The following chart presents the University’s operating expenses for the 2016-17 and 2015-16 fiscal

years:

Operating Expenses

(In Thousands)

Total operating expenses increased by $64 million, or 5 percent, resulting primarily from a $57.3 million

increase in compensation and employee benefits. The increase in compensation and employee benefits

was primarily due to expenses associated with salary and benefit increases, as well as increases in

pension expenses.

Nonoperating Revenues and Expenses

Certain revenue sources that the University relies on to provide funding for operations, including State

noncapital appropriations, Federal and State student financial aid, certain gifts and grants, and

investment income, are defined by GASB as nonoperating. Nonoperating expenses include capital

financing costs and other costs related to capital assets. The following summarizes the University’s

nonoperating revenues and expenses for the 2016-17 and 2015-16 fiscal years:

$0 $500,000 $1,000,000

Self‐Insurance Claims

Depreciation

Scholarships, Fellowships, andWaivers

Utilities and Communications

Services and Supplies

Compensation and EmployeeBenefits

$3,877

$49,547

$74,844

$24,217

$291,174

$825,087

$7,867

$49,082

$70,601

$24,412

$298,359

$882,382

2016‐17 2015‐16


Nonoperating Revenues (Expenses) For the Fiscal Years

(In Thousands)

2016-17 2015-16

State Noncapital Appropriations 387,160$ 368,733$ Federal and State Student Financial Aid 91,884 94,867 Noncapital Grants and Donations 23,735 24,949 Investment Income 24,952 10,161 Other Nonoperating Revenues 6,030 1,710 Gain (Loss) on Disposal of Capital Assets 9,965 (812) Interest on Capital Asset-Related Debt (763) (1,129) Other Nonoperating Expenses (31,488) (45,517)

Net Nonoperating Revenues 511,475$ 452,962$

Total net nonoperating revenues increased by $58.5 million, or 12.9 percent. Major contributors to this

increase include an increase in state noncapital appropriations of $18.4 million due to Education and

General funds, an increase in net investment income of $14.8 million, primarily from unrealized gains on

investments, an increase in the gain on disposal of capital assets of $10.8 million, resulting from the FCC

auction proceeds for WUSF-TV, and a decrease in other nonoperating expenses of $14 million, mainly

due to decreased net transfers to the USF Financing Corporation.

Other Revenues

This category is composed of State capital appropriations and capital grants, contracts, donations, and

fees. The following summarizes the University’s other revenues, expenses, gains, or losses for the

2016-17 and 2015-16 fiscal years:

Other Revenues For the Fiscal Years

(In Thousands)

2016-17 2015-16

State Capital Appropriations 39,311$ 40,094$ Capital Grants, Contracts, Donations, and Fees 937 1,256

Total 40,248$ 41,350$

The Statement of Cash Flows

The statement of cash flows provides information about the University’s financial results by reporting the

major sources and uses of cash and cash equivalents. This statement will assist in evaluating the

University’s ability to generate net cash flows, its ability to meet its financial obligations as they come

due, and its need for external financing. Cash flows from operating activities show the net cash used by

the operating activities of the University. Cash flows from capital financing activities include all plant

funds and related long-term debt activities. Cash flows from investing activities show the net source and

use of cash related to purchasing or selling investments, and earning income on those investments. Cash

flows from noncapital financing activities include those activities not covered in other sections.


The following summarizes cash flows for the 2016-17 and 2015-16 fiscal years:

Condensed Statement of Cash Flows For the Fiscal Years

(In Thousands)

2016-17 2015-16

Cash Provided (Used) by:Operating Activities (383,075)$ (366,488)$ Noncapital Financing Activities 470,867 432,635 Capital and Related Financing Activities (37,130) (28,711) Investing Activities (20,234) (41,882)

Net Increase (Decrease) in Cash and Cash Equivalents 30,428 (4,446) Cash and Cash Equivalents, Beginning of Year 41,660 46,106

Cash and Cash Equivalents, End of Year 72,088$ 41,660$

Major sources of funds came from State noncapital appropriations ($387.2 million), Federal Direct

Student Loan receipts ($248.8 million), net student tuition and fees ($293.9 million), grants and contracts

($391.4 million), and sales and services of auxiliary enterprises ($145.7 million). Major uses of funds

were for payments made to and on behalf of employees totaling $828.9 million; payments to suppliers

totaling $317.6 million; disbursements to students for Federal Direct Student Loans totaling

$248.8 million.

Cash provided by noncapital financing activities increased by $38.2 million as a result of increases in

State noncapital appropriations and operating subsidies and transfers. Cash used by investing activities

decreased by $21.6 million, primarily due to an increase in proceeds from sales and maturities of

investments.

CAPITAL ASSETS, CAPITAL EXPENSES AND COMMITMENTS, AND DEBT ADMINISTRATION

Capital Assets

At June 30, 2017, the University had $1.5 billion in capital assets, less accumulated depreciation of

$673.6 million, for net capital assets of $852.3 million. Depreciation charges for the current fiscal year

totaled $49.1 million. The following table summarizes the University’s capital assets, net of accumulated

depreciation, at June 30:


Capital Assets, Net at June 30

(In Thousands)

2017 2016

Land 16,198$ 16,198$ Construction in Progress 42,178 41,259 Buildings 692,290 687,634 Infrastructure and Other Improvements 32,197 32,806 Furniture and Equipment 53,071 52,727 Library Resources 11,515 9,664 Property Under Capital Leases 89 48 Works of Art and Historical Treasures 1,397 1,330 Other Capital Assets 3,406 4,018

Capital Assets, Net 852,341$ 845,684$

Additional information about the University’s capital assets is presented in the notes to the financial

statements.

Capital Expenses and Commitments

The University’s construction commitments at June 30, 2017, are as follows:

Amount(In Thousands)

Total Committed 160,237$ Completed to Date (42,178)

Balance Committed 118,059$

Additional information about the University’s construction commitments is presented in the notes to

financial statements.

Debt Administration

As of June 30, 2017, the University had $20.3 million in outstanding capital improvement debt payable,

installment purchases payable, and capital leases payable, representing a decrease of $2 million, or

8.9 percent, from the prior fiscal year. The following table summarizes the outstanding long-term debt

by type for the fiscal years ended June 30:

Long-Term Debt at June 30

(In Thousands)

2017 2016

Capital Improvement Debt 19,956$ 22,109$ Installment Purchases 236 83 Capital Leases 60 32

Total 20,252$ 22,224$


Additional information about the University’s long-term debt is presented in the notes to financial

statements.

ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE

The University’s economic condition is closely tied to that of the State of Florida. The budget that the

Florida Legislature adopted for the 2017-18 fiscal year provided a 4.5 percent increase for State

universities. Regarding the University’s legislative priorities, the budget also incorporated an increase to

the funding associated with the Emerging Preeminence designation in performance based funding which

positively impacts the University of South Florida. This increase translated to $8.7 million in additional

Educational and General Funds for the University.

REQUESTS FOR INFORMATION

Questions concerning information provided in the MD&A or other required supplemental information, and

financial statements and notes thereto, or requests for additional financial information should be

addressed to Jennifer Condon, Associate Vice President and Controller, University of South Florida,

4202 East Fowler Avenue ALN147, Tampa, Florida 33620-5800.


THIS PAGE LEFT INTENTIONALLY BLANK


BASIC FINANCIAL STATEMENTS

University of South Florida A Component Unit of the State of Florida

Statement of Net Position

June 30, 2017 Component

University Units

ASSETSCurrent Assets:

Cash and Cash Equivalents 70,037,117$ 20,369,918$ Investments 611,678,974 104,283,459 Accounts Receivable, Net 110,056,643 85,579,971 Loans and Notes Receivable, Net 2,142,161 - Due from State 90,478,039 - Due from University - 78,033,189 Due from Component Units 8,980,754 3,672,857 Inventories 232,038 - Other Current Assets 1,109,654 5,511,367

Total Current Assets 894,715,380 297,450,761

Noncurrent Assets:Restricted Cash and Cash Equivalents 2,050,823 1,025,000 Restricted Investments 65,165,184 532,667,789 Loans and Notes Receivable, Net 3,973,077 432,000 Depreciable Capital Assets, Net 791,478,969 289,393,589 Nondepreciable Capital Assets 60,861,732 19,498,151 Other Noncurrent Assets - 16,827,179

Total Noncurrent Assets 923,529,785 859,843,708

Total Assets 1,818,245,165 1,157,294,469

DEFERRED OUTFLOWS OF RESOURCESDeferred Amounts Related to Pensions 137,405,152 - Interest Rate Swap Agreement - 156,607

Total Deferred Outflows of Resources 137,405,152 156,607

LIABILITIESCurrent Liabilities:

Accounts Payable 27,149,357 11,491,505 Construction Contracts Payable 3,695,086 - Salary and Wages Payable 32,791,372 12,239,814 Deposits Payable 13,901,809 1,233,618 Due to University - 8,980,754 Due to Component Units 78,033,189 3,672,857 Unearned Revenue 43,587,540 4,784,419 Other Current Liabilities - 43,970 Long-Term Liabilities - Current Portion:

Bonds Payable - 4,923,417 Certificates of Participation Payable - 8,400,000 Capital Improvement Debt Payable 2,483,479 - Loans and Notes Payable - 537,466 Installment Purchase Payable 61,385 - Capital Leases Payable 43,180 970,526 Estimated Insurance Claims Payable 1,332,333 - Compensated Absences Payable 6,342,167 - Net Pension Liability 2,607,447 -

Total Current Liabilities 212,028,344 57,278,346



Statement of Net Position (Continued)

June 30, 2017 Component

University Units

LIABILITIES (Continued)Noncurrent Liabilities:

Bonds Payable - 102,513,111 Certificates of Participation Payable - 239,604,889 Capital Improvement Debt Payable 17,472,833 - Loans and Notes Payable - 5,221,620 Installment Purchase Payable 174,343 - Capital Leases Payable 16,658 1,684,780 Estimated Insurance Claims Payable 25,085,161 - Compensated Absences Payable 75,779,205 - Federal Advance Payable 3,086,504 - Other Noncurrent Liabilities - 14,330,942 Other Postemployment Benefits Payable 145,284,000 - Net Pension Liability 274,845,673 -

Total Noncurrent Liabilities 541,744,377 363,355,342

Total Liabilities 753,772,721 420,633,688

DEFERRED INFLOWS OF RESOURCESDeferred Amounts Related to Pensions 2,060,328 - Deferred Service Concession Arrangement Receipts 3,611,450 -

Total Deferred Inflows of Resources 5,671,778 -

NET POSITIONNet Investment in Capital Assets 743,214,908 39,364,572 Restricted for Nonexpendable:

Endowment - 589,403,222 Restricted for Expendable:

Debt Service 1,752,396 - Loans 5,801,357 - Capital Projects 100,734,861 - Other 131,629,778 -

Unrestricted 213,072,518 108,049,594

TOTAL NET POSITION 1,196,205,818$ 736,817,388$

The accompanying notes to financial statements are an integral part of this statement.



Statement of Revenues, Expenses, and Changes in Net Position

For the Fiscal Year Ended June 30, 2017 Component

University Units

REVENUESOperating Revenues:

Student Tuition and Fees, Net of Scholarship Allowances of $110,784,410 ($3,185,670 Pledged for the Student Union Revenue Bonds) 293,197,695$ -$ Federal Grants and Contracts 201,794,458 - State and Local Grants and Contracts 26,825,208 - Nongovernmental Grants and Contracts 167,072,179 68,848,666 Sales and Services of Auxiliary Enterprises ($10,636,504 Pledged for the Parking System Revenue Bonds) 147,664,677 - Sales and Services of Component Units - 249,019,497 Royalties and Licensing Fees - 2,614,265 Gifts and Donations - 39,402,402 Interest on Loans and Notes Receivable 203,894 - Other Operating Revenues 11,410,671 49,582,055

Total Operating Revenues 848,168,782 409,466,885

EXPENSESOperating Expenses:

Compensation and Employee Benefits 882,382,402 219,273,768 Services and Supplies 298,358,831 149,622,902 Utilities and Communications 24,411,949 1,427,893 Scholarships, Fellowships, and Waivers 70,601,198 8,413,232 Depreciation 49,081,846 15,810,523 Self-Insurance Claims 7,866,825 -

Total Operating Expenses 1,332,703,051 394,548,318

Operating Income (Loss) (484,534,269) 14,918,567

NONOPERATING REVENUES (EXPENSES)State Noncapital Appropriations 387,159,939 - Federal and State Student Financial Aid 91,883,518 - Noncapital Grants and Donations 23,735,290 - Investment Income 24,951,906 78,286,933 Other Nonoperating Revenues 6,029,809 1,321,608 Gain on Disposal of Capital Assets 9,965,433 434,501 Interest on Capital Asset-Related Debt (762,863) (13,363,714) Other Nonoperating Expenses (31,487,894) (23,528,558)

Net Nonoperating Revenues 511,475,138 43,150,770

Income Before Other Revenues 26,940,869 58,069,337 State Capital Appropriations 39,310,559 - Capital Grants, Contracts, Donations, and Fees 936,915 -

Increase in Net Position 67,188,343 58,069,337

Net Position, Beginning of Year 1,129,017,475 678,748,051

Net Position, End of Year 1,196,205,818$ 736,817,388$



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Statement of Cash Flows

For the Fiscal Year Ended June 30, 2017 University

CASH FLOWS FROM OPERATING ACTIVITIESStudent Tuition and Fees, Net 293,850,565$ Grants and Contracts 391,424,939 Sales and Services of Auxiliary Enterprises 145,712,501 Interest on Loans and Notes Receivable 187,812 Payments to Employees (828,946,180) Payments to Suppliers for Goods and Services (317,592,369) Payments to Students for Scholarships and Fellowships (70,601,198) Payments on Self-Insurance Claims and Expenses (2,279,053) Loans Issued to Students (984,101) Collection on Loans to Students 1,140,232 Other Operating Receipts 5,011,677

Net Cash Used by Operating Activities (383,075,175)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIESState Noncapital Appropriations 387,159,939 Federal and State Student Financial Aid 91,883,517 Noncapital Grants, Contracts, and Donations 22,972,925 Federal Direct Loan Program Receipts 248,823,125 Federal Direct Loan Program Disbursements (248,823,125) Operating Subsidies and Transfers 11,166,157 Net Change in Funds Held for Others (761,124) Other Nonoperating Receipts 209,809 Other Nonoperating Disbursements (41,763,807)

Net Cash Provided by Noncapital Financing Activities 470,867,416

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIESState Capital Appropriations 23,854,642 Capital Grants, Contracts, Donations and Fees 200,000 Other Receipts for Capital Projects 9,275,000 Purchase or Construction of Capital Assets (67,340,254) Principal Paid on Capital Debt and Leases (2,394,252) Interest Paid on Capital Debt and Leases (725,127)

Net Cash Used by Capital and Related Financing Activities (37,129,991)

CASH FLOWS FROM INVESTING ACTIVITIESProceeds from Sales and Maturities of Investments 48,121,451 Purchases of Investments (87,600,000) Investment Income 19,244,737

Net Cash Used by Investing Activities (20,233,812)

Net Increase in Cash and Cash Equivalents 30,428,438 Cash and Cash Equivalents, Beginning of Year 41,659,502

Cash and Cash Equivalents, End of Year 72,087,940$



Statement of Cash Flows (Continued)

For the Fiscal Year Ended June 30, 2017 University

RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIESOperating Loss (484,534,269)$ Adjustments to Reconcile Operating Loss to Net Cash Used by Operating Activities:

Depreciation Expense 49,081,846 Changes in Assets, Liabilities, Deferred Outflows of Resources, and Deferred Inflows of Resources:

Receivables, Net (15,896,450) Loans and Notes Receivable, Net 156,131 Inventories 4,257 Other Assets 1,137,345 Accounts Payable 4,103,826 Salaries and Wages Payable 4,704,813 Deposits Payable 268,045 Compensated Absences Payable 3,824,042 Unearned Revenue 3,710,106 Estimated Insurance Claims Payable 5,587,772 Other Postemployment Benefits Payable 26,308,000 Net Pension Liability 106,646,875 Deferred Outflows of Resources Related to Pensions (64,323,249) Deferred Inflows of Resources Related to Pensions (23,854,265)

NET CASH USED BY OPERATING ACTIVITIES (383,075,175)$

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND CAPITAL FINANCING ACTIVITIES

5,707,169$

9,785,433$

736,915$

(275,000)$

Gains from the disposal of capital assets were recognized on the statement ofrevenues, expenses, and changes in net position, but are not cash transactionsfor the statement of cash flows.

Unrealized gains on investments were recognized as an increase to investmentincome on the statement of revenues, expenses, and changes in net position, butare not cash transactions for the statement of cash flows.

Donation of capital assets were recognized on the statement of revenues,expenses, and changes in net position, but are not cash transactions for thestatement of cash flows.

The Division of Bond Finance issued $21,545,000 of Capital Improvement ParkingRevenue Refunding Bonds, Series 2016A, to refund $21,270,000 of outstandingCapital Improvement Parking Revenue Bonds, Series 2002, Series 2004A, andSeries 2006A. The new debt and defeasance of the old debt were recorded as anincrease and a decrease, respectively, to capital improvement debt payable onthe statement of net position; however, because the proceeds of the new debtwere immediately placed into an irrevocable trust for the defeasance of the Series2002, Series 2004A, and Series 2006A debt, the transaction did not affect cashand cash equivalents.



NOTES TO FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Reporting Entity. The University is a separate public instrumentality that is part of the State university

system of public universities, which is under the general direction and control of the Florida Board of

Governors. The University is directly governed by a Board of Trustees (Trustees) consisting of

13 members. The Governor appoints 6 citizen members and the Board of Governors appoints 5 citizen

members. These members are confirmed by the Florida Senate and serve staggered terms of 5 years.

The chair of the faculty senate and the president of the student body of the University are also members.

The Board of Governors establishes the powers and duties of the Trustees. The Trustees are responsible

for setting policies for the University, which provide governance in accordance with State law and Board

of Governors’ Regulations, and selecting the University President. The University President serves as

the executive officer and the corporate secretary of the Trustees, and is responsible for administering the

policies prescribed by the Trustees.

Criteria for defining the reporting entity are identified and described in the Governmental Accounting

Standards Board’s (GASB) Codification of Governmental Accounting and Financial Reporting Standards,

Sections 2100 and 2600. These criteria were used to evaluate potential component units for which the

primary government is financially accountable and other organizations for which the nature and

significance of their relationship with the primary government are such that exclusion would cause the

primary government’s financial statements to be misleading. Based on the application of these criteria,

the University is a component unit of the State of Florida, and its financial balances and activities are

reported in the State’s Comprehensive Annual Financial Report by discrete presentation.

Blended Component Unit. Based on the application of the criteria for determining component units, the

University of South Florida Health Sciences Center Self-Insurance Program1 is included within the

University’s reporting entity as a blended component unit. The University of South Florida Health

Sciences Center Self-Insurance Program was created in 1972 and provides medical professional liability,

covering the USF Board of Trustees and faculty, staff, and students engaged in medical programs at the

University. Condensed financial statements for the University’s blended component unit are shown in a

subsequent note.

Discretely Presented Component Units. Based on the application of the criteria for determining

component units, the following affiliated organizations (direct-support organizations) are included within

the University reporting entity as a discretely presented component units. An annual audit of each

discretely presented component unit’s financial statements is conducted by independent certified public

accountants. The annual reports are submitted to the Auditor General and the University Board of

Trustees. Additional information on the University’s discretely presented component units, including

copies of audit reports, is available by contacting the University Controller’s Office. Condensed financial

statements for the University’s discretely presented component units are shown in a subsequent note.

1 Effective July 1, 2016, the name changed from Medical Professional Liability Self-Insurance Program to University of South Florida Health Sciences Center Self-Insurance Program to be consistent with the name prescribed in Florida Board of Governors Regulation 10.001, Self-Insurance Programs.


Direct-Support Organizations. The University’s direct-support organizations are provided for in

Section 1004.28, Florida Statutes, and Board of Governors Regulation 9.011. These legally separate,

not-for-profit corporations are organized and operated exclusively to assist the University to achieve

excellence by providing supplemental resources from private gifts and bequests and valuable education

support services and are governed by separate boards. The Statute authorizes these organizations to

receive, hold, invest, and administer property and to make expenditures to or for the benefit of the

University. These organizations and their purposes are explained as follows:

The University of South Florida Foundation, Inc. accepts, invests, administers, and distributes private gifts given for the funding of activities and facilities directly related to the mission, role, and scope of the University of South Florida.

The University of South Florida Alumni Association, Inc. fosters the spirit of loyalty and fraternity among the graduates, former students, and friends of the University, and promotes their continued active interest in and on behalf of the University.

The Sun Dome, Inc. operates a multi-purpose facility on behalf of the University of South Florida to provide the students, faculty, and staff of the University, as well as the general public, an array of cultural, athletic, and other educational events and activities, including a variety of entertainment events.

The University of South Florida Research Foundation, Inc. has been established to provide a means by which inventions and works may be developed, protected, applied, and utilized so that the results of University research will be made available to the public and funds will be made available from the commercial application of inventions and works to be dedicated to the benefit of the University and shared with the inventor/author.

The USF Financing Corporation was organized and operated to receive, hold, invest, and administer property and to make expenditures to or for the benefit of the University of South Florida.

The USF Property Corporation was formed for the primary purpose of acting as lessor in connection with “lease-purchase” financings in support of the activities and educational purposes of the University of South Florida and of the USF Financing Corporation by assisting in acquiring facilities and constructing facilities on the University campus and in general, furthering the University’s education mission.

The USF Health Professions Conferencing Corporation was established to provide educational, administrative, logistical, and financial services to support the USF Health’s Office of Continuing Professional Development (OCPD). The OCPD is committed to sponsoring quality continuing educational activities to meet the needs of USF faculty, alumni, and healthcare professionals practicing throughout the State, nationally, and internationally.

The University Medical Service Association, Inc. (“UMSA”) is approved as the USF Health Faculty Practice Plan (the “Plan”) pursuant to Florida Board of Governors Regulation 9.017 and USF Regulation 9.017. UMSA specifically functions as the University’s agent for the orderly collection and administration of income generated from University faculty practice in accordance with the Plan, and employs and provides personnel to support the USF Health clinical enterprise and mission.

The University of South Florida Medical Services Support Corporation (“MSSC”) is organized and operated exclusively to receive, hold, invest and administer property and to make expenditures to or for the benefit of the University. At the September 16, 2015, Board meeting, the Board approved the transition of MSSC’s operations to UMSA over the course of the 2015-16 fiscal year. MSSC continues to be a direct-support organization of the University, but has not had any operations since the time the transition was completed.


Basis of Presentation. The University’s accounting policies conform with accounting principles

generally accepted in the United States of America applicable to public colleges and universities as

prescribed by GASB. The National Association of College and University Business Officers (NACUBO)

also provides the University with recommendations prescribed in accordance with generally accepted

accounting principles promulgated by GASB and the Financial Accounting Standards Board (FASB).

GASB allows public universities various reporting options. The University has elected to report as an

entity engaged in only business-type activities. This election requires the adoption of the accrual basis

of accounting and entitywide reporting including the following components:

Management’s Discussion and Analysis

Basic Financial Statements:

o Statement of Net Position

o Statement of Revenues, Expenses, and Changes in Net Position

o Statement of Cash Flows

o Notes to Financial Statements

Other Required Supplementary Information

Measurement Focus and Basis of Accounting. Basis of accounting refers to when revenues,

expenses, and related assets, deferred outflows of resources, liabilities, and deferred inflows of

resources, are recognized in the accounts and reported in the financial statements. Specifically, it relates

to the timing of the measurements made, regardless of the measurement focus applied. The University’s

financial statements are presented using the economic resources measurement focus and the accrual

basis of accounting. Revenues, expenses, gains, losses, assets, deferred outflows of resources,

liabilities, and deferred inflows of resources resulting from exchange and exchange-like transactions are

recognized when the exchange takes place. Revenues, expenses, gains, losses, assets, deferred

outflows of resources, liabilities, and deferred inflows of resources resulting from nonexchange activities

are generally recognized when all applicable eligibility requirements, including time requirements, are

met. The University follows GASB standards of accounting and financial reporting.

The University’s discretely presented component units use the economic resources measurement focus

and accrual basis of accounting whereby revenues are recognized when earned and expenses are

recognized when incurred. Some follow GASB standards of accounting and financial reporting, and

others follow FASB standards of accounting and financial reporting for not-for-profit organizations.

Significant interdepartmental sales between auxiliary service departments and other institutional

departments have been accounted for as reductions of expenses and not revenues of those departments.

The University’s principal operating activities consist of instruction, research, and public service.

Operating revenues and expenses generally include all fiscal transactions directly related to these

activities as well as administration, operation and maintenance of capital assets, and depreciation on

capital assets. Nonoperating revenues include State noncapital appropriations, Federal and State

student financial aid, and investment income (net of unrealized gains or losses on investments). Interest

on capital asset-related debt is a nonoperating expense. Other revenues generally include revenues for

capital construction projects.


The statement of net position is presented in a classified format to distinguish between current and

noncurrent assets and liabilities. When both restricted and unrestricted resources are available to fund

certain programs, it is the University’s policy to first apply the restricted resources to such programs,

followed by the use of the unrestricted resources.

The statement of revenues, expenses, and changes in net position is presented by major sources and is

reported net of tuition scholarship allowances. Tuition scholarship allowances are the difference between

the stated charge for goods and services provided by the University and the amount that is actually paid

by the student or the third party making payment on behalf of the student. The University applied “The

Alternate Method” as prescribed in NACUBO Advisory Report 2000-05 to determine the reported net

tuition scholarship allowances. Under this method, the University computes these amounts by allocating

the cash payments to students, excluding payments for services, on a ratio of total aid to the aid not

considered third-party aid.

The statement of cash flows is presented using the direct method in compliance with GASB Statement

No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities

That Use Proprietary Fund Accounting.

Cash and Cash Equivalents. Cash and cash equivalents consist of cash on hand and cash in demand

accounts. University cash deposits are held in banks qualified as public depositories under Florida law.

All such deposits are insured by Federal depository insurance, up to specified limits, or collateralized with

securities held in Florida’s multiple financial institution collateral pool required by Chapter 280, Florida

Statutes. Cash and cash equivalents that are externally restricted to make debt service payments,

maintain sinking or reserve funds, or to purchase or construct capital or other restricted assets, are

classified as restricted.

Capital Assets. University capital assets consist of land; construction in progress; buildings;

infrastructure and other improvements; furniture and equipment; library resources; property under capital

leases; works of art and historical treasures; and other capital assets. These assets are capitalized and

recorded at cost at the date of acquisition or at acquisition value at the date received in the case of gifts

and purchases of State surplus property. Additions, improvements, and other outlays that significantly

extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are

expensed as incurred. The University has a capitalization threshold of $5,000 for tangible personal

property and $100,000 for new buildings and other building improvements. Depreciation is computed on

the straight-line basis over the following estimated useful lives:

Buildings – 10 to 40 years, depending on construction

Infrastructure and Other Improvements – 20 years

Furniture and Equipment – 3 to 20 years

Library Resources – 10 years

Property Under Capital Leases – 7 to 10 years

Other Capital Assets – 3 to 20 years

Works of Art and Historical Treasures – 5 years


Noncurrent Liabilities. Noncurrent liabilities include capital improvement debt payable, installment

purchases payable, capital leases payable, estimated insurance claims payable, compensated absences

payable, Federal advance payable, other postemployment benefits payable, and net pension liabilities

that are not scheduled to be paid within the next fiscal year. Capital improvement debt is reported net of

unamortized premium or discount. The University amortizes debt premiums and discounts over the life

of the debt using the straight-line method.

Pensions. For purposes of measuring the net pension liabilities, deferred outflows of resources and

deferred inflows of resources related to pensions, and pension expense, information about the fiduciary

net position of the Florida Retirement System (FRS) defined benefit plan and the Health Insurance

Subsidy (HIS) defined benefit plan and additions to/deductions from the FRS’s and the HIS’s fiduciary

net position have been determined on the same basis as they are reported by the FRS and the HIS plans.

For this purpose, benefit payments (including refunds of employee contributions) are recognized when

due and payable in accordance with benefit terms. Investments are reported at fair value.

2. Investments

Section 1011.42(5), Florida Statutes, authorizes universities to invest funds with the State Treasury and

State Board of Administration (SBA), and requires that universities comply with the statutory requirements

governing investment of public funds by local governments. Accordingly, universities are subject to the

requirements of Chapter 218, Part IV, Florida Statutes. The Board of Trustees has adopted a written

investment policy providing that surplus funds of the University shall be invested in those institutions and

instruments permitted under the provisions of Florida Statutes. Pursuant to Section 218.415(16),

Florida Statutes, the University is authorized to invest in the Florida PRIME investment pool administered

by the SBA; Securities and Exchange Commission registered money market funds with the highest credit

quality rating from a nationally recognized rating agency; interest-bearing time deposits and savings

accounts in qualified public depositories, as defined in Section 280.02, Florida Statutes; direct obligations

of the United States Treasury; obligations of Federal agencies and instrumentalities; securities of, or

interests in, certain open end or closed end management type investment companies; and other

investments approved by the Board of Trustees as authorized by law. Investments set aside to make

debt service payments, maintain sinking or reserve funds, or to purchase or construct capital assets are

classified as restricted.

The University categorizes its fair value measurements within the fair value hierarchy established by

generally accepted accounting principles. The hierarchy is based on the valuation inputs used to

measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets,

Level 2 inputs are significant other observable inputs, and Level 3 inputs are significant unobservable

inputs.

The University’s recurring fair value measurements as of June 30, 2017, are valued using the following

valuation techniques and inputs:

United States Treasury securities and Bonds and notes: These securities are valued daily by a pricing

service that uses evaluated pricing applications which incorporate available market information.

Available information is also applied through benchmarking processes, sector groupings, and matrix

pricing (Level 2 inputs).


Repurchase agreements: Repurchase agreements are collateralized at 102 percent by securities

guaranteed by the US Government or an agency thereof and are valued at quoted prices for similar

assets in active markets (Level 2 inputs).

Stocks and other equity securities: This type includes domestic and international equities valued at

quoted prices in an active market (Level 1 inputs).

Equity Mutual Funds. This category includes investments in domestic and international equities through

commingled fund structures. The investment objective of these funds is to track the performance of their

respective benchmarks. Investments in this category are valued at quoted prices in an active market

(Level 1 inputs).

Bond Mutual Funds. This category includes investments in fixed income securities through commingled

fund structures. The investment objective of these funds is to track the performance of their respective

market-weighted indices with a short-term dollar-weighted average maturity. Investments in this category

are valued at quoted prices in an active market (Level 1 inputs).

Alternative Mutual Funds. This category includes investments in stocks and industries, equity indices,

fixed income, currencies and commodities. The investment objective of these funds is to seek positive

absolute returns. The fund seeks to provide long-term returns with a low correlation to traditional asset

class returns by investing in a broad spectrum of asset classes and markets. Investments in this category

are valued at quoted prices in an active market (Level 1 inputs).

Money Market Mutual Funds. This category includes investments in high-quality money market

instruments through commingled fund structures. The investment objectives of these funds are to

maximize current income, to the extent consistent with the preservation of capital, and maintain liquidity.

Investments in this category are valued at quoted prices in an active market (Level 1 inputs).

The University’s investments at June 30, 2017, are reported as follows:


Quoted Prices Significant in Active Other Significant

Markets for Observable UnobservableIdentical Assets Inputs Inputs

Investments by fair value level Amount (Level 1) (Level 2) (Level 3)

United States Treasury Securities 11,796,958$ -$ 11,796,958$ -$ Repurchase Agreements 42,319,732 - 42,319,732 - Bonds and Notes 20,397,314 - 20,397,314 -

14,385,226 14,385,226 - - Mutual Funds: Equities 125,035,118 125,035,118 - - Bonds 452,825,288 452,825,288 - - Alternative 6,068,186 6,068,186 - - Money Market 1,352,586 1,352,586 - -

Total investments by fair value level 674,180,408$ 599,666,404$ 74,514,004$ -$


Hedge Funds 2,663,750





The valuation method for investments measured at the net asset value (NAV) per share (or its equivalent)

is presented in the following table:



Hedge Funds 2,663,750$ -$ Annually 95 days

Total investments measured at the NAV 2,663,750$

Hedge Funds. This category includes an investment in a hedge fund of funds that seeks capital

appreciation by investing with long/short equity and absolute return-oriented managers that employ a

bottom up, fundamental approach to investing. The fair value of the investments in this category has

been estimated using the net asset value per share of the investments.

Component Units Investments

The University’s discretely presented component units’ investments at June 30, 2017, are reported at fair

value as follows:


University of University of UniversityUniversity of South Florida South Florida Medical

South Florida Alumni Research USF ServiceFoundation, Association, Foundation, Financing Association,

Investment Type Inc. Inc. Inc. Corporation Inc. Total

Certificates of Deposit -$ -$ -$ 6,000,000$ -$ 6,000,000$ Security Pledged to Swap Counterparty - - - 6,390,000 - 6,390,000 Bonds and Notes - - 1,235,480 - 1,235,480 Stocks and Other Equity Securities - - 1,619,860 (585,974) - 1,033,886 Investment Agreements 78,259,971 1,020,737 4,120,497 - - 83,401,205 Hedge Funds - - - - 1,171,935 1,171,935 Mutual Funds: Equities 312,360,390 3,941,408 18,214,695 - 7,122,538 341,639,031 Bonds 141,764,704 1,647,438 5,248,799 - 2,693,342 151,354,283 Money Market 13,224,255 148,334 316,928 31,035,911 - 44,725,428

Total Component Units' Investments 545,609,320$ 6,757,917$ 30,756,259$ 42,839,937$ 10,987,815$ 636,951,248$

The component units’ recurring fair value measurements as of June 30, 2017, are valued using the

following valuation techniques and inputs:


Quoted Prices Significant in Active Other Significant

Markets for Observable UnobservableIdentical Assets Inputs Inputs

Investments by fair value level Amount (Level 1) (Level 2) (Level 3)

Certificates of Deposit 6,000,000$ 6,000,000$ -$ -$ Money Market Accounts 44,725,428 43,310,620 39,350 1,375,458 Bonds and Notes 1,235,480 - 1,235,480 - Stocks and Other Equity Securities 1,619,860 1,619,860 - - Investment Agreements 150,000 - - 150,000 Mutual Funds: Bonds and Notes 72,893,967 60,782,815 1,349,732 10,761,420

111,316,784 101,144,227 337,645 9,834,912

Total investments by fair value level 237,941,519$ 212,857,522$ 2,962,207$ 22,121,790$


Hedge Funds 1,171,935 Investment Agreements Private Equity 38,725,320 Fixed Income 24,388,551 Real Asset 20,137,334 Mutual Funds Equities 230,322,247 Bonds 78,460,316



Other

Security Pledged to Swap Counterparty 6,390,000 Equity Method Investment (585,974)

Total Other Investments 5,804,026$

Total Component Unit Investments 636,951,248$



The valuation method for investments measured at the net asset value (NAV) per share (or its equivalent)

is presented in the following table:



Investment Agreements: Private Equity 38,725,320$ 13,975,179$ NA NA Fixed Income 24,388,551 17,360,339 Monthly 3-5 days Real Asset 20,137,334 2,118,826 NA NAHedge Funds 1,171,935 - Annually 95 daysMutual Funds: Equities 230,322,247 - Daily/Monthly 2-30 days Bonds 78,460,316 - Weekly 0-7 days

Total investments measured at the NAV 393,205,703$ 33,454,344$


Private Equity and Real Asset Investments. This category consists of private capital partnerships in

fund of fund underlying managers. Investments include private equity, real estate, and real assets that

are not subject to redemption. The USF Foundation instead receives distributions through the liquidation

of the underlying assets of the investees. The estimated remaining life on these funds range from 1 to

11 years.

Fixed Income Investments. This category consists of a high-yield bond portfolio in a commingled fund

in which the manager holds publicly traded corporate bonds with some rated below investment grade.

The fair value of the investments in this category has been estimated using the net asset value per share

of the investments.

Hedge Funds. This category includes an investment in a hedge fund of funds that seeks capital

appreciation by investing with long/short equity and absolute return-oriented managers that employ a

bottom up, fundamental approach to investing. The fair value of the investments in this category has

been estimated using the net asset value per share of the investments.

Equity Mutual Funds. This category includes investments in domestic and international equities through

commingled fund structures. The investment objective of these funds is to track the performance of their

respective benchmarks. The fair value of the investments in this category has been estimated using the

net asset value per share of the investments.

Bond Mutual Funds. This category includes investments in fixed income securities through commingled

fund structures. The investment objective of these funds is to track the performance of their respective

market-weighted indices with a short-term dollar-weighted average maturity. The fair value of the

investments in this category has been estimated using the net asset value per share of the investments.

The University’s investments (which include investments of its blended component unit, the USF Health

Sciences Center Self-Insurance Program), and investments of the University of South Florida Research

Foundation, Inc. (Research Foundation), a discretely presented component unit, consisted of various

debt, equity and equity-type securities, repurchase agreements, hedge funds, and equity, bond,

alternative, and money market mutual funds. The University investment policy, the USF Health Sciences

Center Self-Insurance Program investment policy, and the Research Foundation investment policy allow

investments in cash and cash equivalents, equities, mutual funds, repurchase agreements, and fixed-

income investments. The University’s investment policy and the Research Foundation’s investment

policy also allow investments in hedge funds. The following risks apply to the University, USF Health

Sciences Center Self-Insurance Program, and Research Foundation investments.

Interest Rate Risk: Interest rate risk is the risk that changes in interest rates will adversely affect the fair

value of an investment. The University, the USF Health Sciences Center Self-Insurance Program, and

the Research Foundation investment policies limit the fixed-income portfolio (United States Treasury

securities, United States government agency obligations, mortgage-based securities, corporate debt,

State, and municipal securities investments) to a weighted-average duration of less than five years. For

long-term investments, the University and Research Foundation investment policies do not limit the

duration for long-term corporate notes or other direct debt obligations. The University and Research

Foundation’s investment policies provide for interest rate risk. The risk varies depending on the type of

investment.


Credit Risk: Credit risk is the risk that an insurer or other counterparty to an investment will not fulfill its

obligations. The USF Health Sciences Center Self-Insurance Program investment policy provides that

all fixed-income securities investments shall be rated in the top three rating classifications as defined by

both Moody’s and Standard & Poor’s. The University and Research Foundation investment policies

provide for credit risk. The risk varies depending on the type of investment.

The following interest rate and credit risks apply to the University, USF Health Sciences Center

Self-Insurance Program and Research Foundation investments in debt securities and mutual funds at

June 30, 2017:

WeightedAverage Standard Fair

Investment Type Maturities Moody's and Poor's Value

United States Treasury Securities (3) 3.79 (1) (1) 11,796,958$ Repurchase Agreements (4) 1 Day (2) (2) 42,319,732 Bonds and Notes (3) 3.76 Aaa - A3 AAA - A- 19,548,669 Bonds and Notes (3) 0.54 Aaa - Aa2 Not Rated 848,645 Bond Mutual Funds (4) 3.03 Years Not Rated Not Rated 452,825,288 Money Market Mutual Funds (3) 21 Days Aaa-mf AAAm 1,352,586

Total 528,691,878$

Credit Quality Rating

University Debt Investment Maturity and Quality Ratings

Notes: (1) Disclosure of credit risk is not required for this investment type.

(2) Repurchase agreement is collateralized by a Federal Home Loan Mortgage Corporation security and is not rated.

(3) USF Health Sciences Center Self-Insurance Program.

(4) University.

Fair Less Than More ThanInvestment Type Value 1 1-5 6-10 10Bonds and Notes 1,235,480$ 94,714$ 336,524$ 255,832$ 548,410$ Mutual Funds: Bonds 5,248,799 173,256 2,007,683 3,067,860 - Money Market 316,928 316,928 - - -

Total 6,801,207$ 584,898$ 2,344,207$ 3,323,692$ 548,410$

Investment Maturites (In Years)

University of South Florida Research Foundation, Inc. Investment Maturity


Fair Less Than AInvestment Type Value AAA AA A or Not Rated

Bonds and Notes 1,235,480$ 320,140$ 131,698$ 233,523$ 550,119$ Mutual Funds: Bonds 5,248,799 369,586 307,023 1,089,996 3,482,194 Money Market 316,928 - - - 316,928

Total 6,801,207$ 689,726$ 438,721$ 1,323,519$ 4,349,241$

University of South Florida Research Foundation, Inc.Quality Ratings (1)

Note: (1) Rated by Standard and Poor’s.

Custodial Credit Risk: Custodial credit risk is the risk that in the event of the failure of the counterparty,

the value of investments or collateral securities in the possession of an outside party will not be

recoverable. Exposure to custodial risk relates to investments that are held by someone other than the

University and not registered in their names. Investments for the University are held in counterparty

accounts as custodian. The University investment policy provides for custodial credit risk. All

investments for the USF Health Sciences Center Self-Insurance Program are held in counterparty

accounts as custodian.

Concentration of Credit Risk: Concentration of credit risk is the risk of loss attributed to the

magnitude of the University’s investment in a single issuer. The University, USF Health Sciences Center

Self-Insurance Program, and Research Foundation investment policies provide that the maximum

amount that may be invested in the securities of an individual issuer not backed by the full faith and credit

of the United States Government shall not exceed five percent of the market value of the assets of the

investment portfolio, and no single corporate bond issuer shall exceed five percent of the market value

of the investment portfolio. Direct investments in securities of the United States Government,

Government agencies and State of Florida Investment Pools, or Pooled Funds comprised solely of United

States Government Securities are not subject to these restrictions for the University and the Research

Foundation. The University did not have any investments in securities of an individual issuer or single

corporate bond issue that exceeded five percent of the market value of the investment portfolio at

June 30, 2017.

3. Receivables

Accounts Receivable. Accounts receivable represent amounts for contract and grant reimbursements

due from third parties, student tuition and fees, various sales and services provided to students and third

parties, and interest accrued on loans receivable. As of June 30, 2017, the University reported the

following amounts as accounts receivable:


Description Amount

Contracts and Grants 57,104,275$ Student Tuition and Fees 10,059,113 WUSF Bandwidth Auction Proceeds 18,754,503 USF Health Sciences Center Self-Insurance 6,433,256 Investment Redemption 2,447,973 Other 15,257,523

Total Accounts Receivable 110,056,643$

Loans and Notes Receivable. Loans and notes receivable represent all amounts owed on promissory

notes from debtors, including student loans made under the Federal Perkins Loan Program and other

loan programs.

Allowance for Doubtful Receivables. Allowances for doubtful accounts, and loans and notes

receivable, are reported based on management’s best estimate as of fiscal year-end considering type,

age, collection history, and other factors considered appropriate. Accounts receivable, and loans and

notes receivable, are reported net of allowances of $16,619,751 and $1,921,380, respectively, at

June 30, 2017.

No allowance has been accrued for contracts and grants receivable. University management considers

these to be fully collectible.

4. Due From State

The amount due from State consists of $77,950,000 from Public Education Capital Outlay,

$10,728,039 from Capital Improvement Fee Trust Fund, and $1,800,000 from lottery allocations due from

the State to the University for construction of University facilities.

5. Due From and To Component Units/University

The $8,980,754 reported as due from component units consists of amounts owed to the University from

the University of South Florida Research Foundation, Inc. ($8,018,081) for grant and special

project-related revenue and administrative overhead rebate; from Sun Dome, Inc. ($166,247) for

operating expenses; from University of South Florida Foundation, Inc. ($429,053), primarily for salary

and operating expense support; from the USF Health Professions Conferencing Corporation

($296,128) for program residuals; and from the University of South Florida Alumni Association

($71,245) for payroll expenses.

The $78,033,189 reported as due to component units represents amounts owed by the University to the

USF Financing Corporation for the construction and financing of buildings and pledged revenues

($77,142,635); and to the University Medical Service Association, Inc. ($890,554) for deposits made to

support the funding of salaries and other operating expenses at USF Health.

6. Capital Assets

Capital assets activity for the fiscal year ended June 30, 2017, is shown in the following table:


Beginning EndingDescription Balance Additions Reductions Balance

Nondepreciable Capital Assets:Land 16,197,729$ -$ -$ 16,197,729$ Works of Art and Historical Treasures 1,206,389 105,932 - 1,312,321 Other Capital Assets 1,173,750 - - 1,173,750 Construction in Progress 41,259,352 50,691,313 49,772,733 42,177,932

Total Nondepreciable Capital Assets 59,837,220$ 50,797,245$ 49,772,733$ 60,861,732$

Depreciable Capital Assets:Buildings 1,159,499,435$ 44,786,960$ 17,337,892$ 1,186,948,503$ Infrastructure and Other Improvements 67,257,795 1,954,063 - 69,211,858 Furniture and Equipment 168,048,311 13,596,119 9,181,426 172,463,004 Library Resources 18,165,372 3,540,717 404,643 21,301,446 Property Under Capital Leases 81,338 54,541 - 135,879 Works of Art and Historical Treasures 324,600 - - 324,600 Other Capital Assets 23,807,920 52,136 9,191,561 14,668,495

Total Depreciable Capital Assets 1,437,184,771 63,984,536 36,115,522 1,465,053,785

Less, Accumulated Depreciation:Buildings 471,864,905 31,742,313 8,948,762 494,658,456 Infrastructure and Other Improvements 34,452,133 2,562,830 - 37,014,963 Furniture and Equipment 115,321,316 12,430,635 8,360,347 119,391,604 Library Resources 8,501,360 1,688,007 402,334 9,787,033 Property Under Capital Leases 32,923 13,640 - 46,563 Works of Art and Historical Treasures 201,433 38,000 - 239,433 Other Capital Assets 20,963,449 606,421 9,133,106 12,436,764

Total Accumulated Depreciation 651,337,519 49,081,846 26,844,549 673,574,816

Total Depreciable Capital Assets, Net 785,847,252$ 14,902,690$ 9,270,973$ 791,478,969$

7. Service Concession Arrangement

During the 2016-17 fiscal year, the University entered into an agreement with HSRE-Capstone Tampa

LLC (Tenant), under which the Tenant will construct, operate, and collect payments for student housing

and retail facilities through June 30 after the 45th anniversary of substantial completion of the new

facilities. The University entered into this agreement in order to satisfy the current and projected needs

and demands for student housing facilities while using its resources in an efficient and effective manner.

Phase I of construction, to also include a dining facility and a health and wellness facility, is expected to

be substantially completed during the 2017-18 fiscal year. Phase II is expected to be substantially

completed during the 2018-19 fiscal year. The Tenant will transfer ownership of the new facilities to the

University at the end of the agreement. The Tenant is entitled to all revenues and other income received

from the lease of the housing facilities. The Tenant will pay the University base rent annually as a

distribution of the net operating surplus as defined in the agreement. The University will pay the Tenant

a fee in the amount of $300,000 per year for the use of the dining facility. The University retains the right

to approve retail tenants and will oversee student housing by providing administrative services. Housing

resident rental rates must be approved unanimously by an advisory committee which includes two

members designated by the University. The University reports cash in the amount of $2,816,016,

receivables in the amount of $1,536,450, construction in progress in the amount of $458,984, unearned


revenue in the amount of $1,200,000, and deferred inflows of resources in the amount of $3,611,450 at

year-end pursuant to the service concession arrangement.

8. Unearned Revenue

Unearned revenue at June 30, 2017, includes Alec P. Courtelis Matching Trust fund appropriations for

which the University had not yet received approval from the Florida Department of Education, as of

June 30, 2017, to spend the funds, amounts received from contracts and grants, and auxiliary

prepayments received prior to fiscal year-end related to subsequent accounting periods. As of

June 30, 2017, the University reported the following amounts as unearned revenue:

Description Amount

Contracts and Grants 39,881,571$ Capital Appropriations 334,685 Auxiliary Prepayments 3,371,284

Total Unearned Revenue 43,587,540$

9. Long-Term Liabilities

Long-term liabilities of the University at June 30, 2017, include capital improvement debt payable,

installment purchases payable, capital leases payable, estimated insurance claims payable,

compensated absences payable, Federal advance payable, other postemployment benefits payable, and

net pension liability. Long-term liabilities activity for the fiscal year ended June 30, 2017, is shown below:

Beginning Ending CurrentDescription Balance Additions Reductions Balance Portion

Capital Improvement Debt Payable 22,109,187$ 21,435,552$ 23,588,427$ 19,956,312$ 2,483,479$ Installment Purchases Payable 82,717 180,026 27,015 235,728 61,385 Capital Leases Payable 32,535 54,541 27,238 59,838 43,180 Estimated Insurance Claims Payable 20,829,722 7,866,825 2,279,053 26,417,494 1,332,333 Compensated Absences Payable 78,297,329 9,241,024 5,416,981 82,121,372 6,342,167 Federal Advance Payable 3,216,794 - 130,290 3,086,504 - Other Postemployment Benefits Payable 118,976,000 32,022,000 5,714,000 145,284,000 - Net Pension Liability 170,806,245 181,939,842 75,292,967 277,453,120 2,607,447

Total Long-Term Liabilities 414,350,529$ 252,739,810$ 112,475,971$ 554,614,368$ 12,869,991$

Capital Improvement Debt Payable. The University had the following capital improvement debt payable

outstanding at June 30, 2017:

Amount Amount Interest MaturityCapital Improvement Debt of Original Outstanding Rate DateType and Series Debt (1) (Percent) To

Capital Improvement Debt:2016A Parking 21,545,000$ 19,956,312$ 2.20 2026

Total Capital Improvement Debt 21,545,000$ 19,956,312$

Note: (1) Amount outstanding includes unamortized discounts and premiums.


The University has pledged a portion of future traffic and parking fees and various student fee

assessments to repay $19,956,312 in capital improvement (parking) revenue bonds issued by the

Florida Board of Governors on behalf of the University. Proceeds from the bonds provided financing to

construct student parking garages. The bonds are payable solely from traffic and parking fees and

transportation access fees and are payable through 2026. The University has committed to appropriate

each year from the traffic and parking fees and transportation access fees amounts sufficient to cover

the principal and interest requirements on the debt. Total principal and interest remaining on the debt is

$22,029,220, and principal and interest paid for the current year totaled $3,057,465. During the

2016-17 fiscal year, traffic and parking fees and transportation access fees totaled $10,636,504 and

$3,185,670, respectively.

The University extinguished long-term capital improvement debt obligations by the issuance of new

long-term capital improvement debt instruments as follows:

On December 13, 2016, the Florida Board of Governors issued $21,545,000 of Capital Improvement Parking Revenue Refunding Bonds, Series 2016A. The capital improvement debt proceeds were used to defease $21,270,000 of outstanding Capital Improvement Parking Revenue Bonds, Series 2002, Series 2004A, and Series 2006A. On January 12, 2017, the proceeds were placed in an Escrow Deposit Trust Fund to redeem to the bonds on January 13, 2017. The trust assets and the liability for the defeased bonds are not included in the University's statement of net position. As a result of the refunding, the University reduced its capital improvement debt service requirement by $1,982,158 over the next 10 years and obtained an economic gain of $1,792,127. At June 30, 2016, the outstanding balance of the defeased debt was $22,125,000.

Annual requirements to amortize all capital improvement debt outstanding as of June 30, 2017, are as

follows:

Fiscal Year Ending June 30 Principal Interest Total

2018 2,495,000$ 441,320$ 2,936,320$ 2019 2,550,000 386,430 2,936,430 2020 2,610,000 330,330 2,940,330 2021 2,665,000 272,910 2,937,910 2022 2,715,000 214,280 2,929,280 2023-2026 7,025,000 323,950 7,348,950

Subtotal 20,060,000 1,969,220 22,029,220 Net Discounts and Premiums (103,688) - (103,688)

Total 19,956,312$ 1,969,220$ 21,925,532$

Installment Purchases Payable. The University has entered into several installment purchase

agreements for the purchase of equipment reported at $322,028. The stated interest rates ranged from

2.2 percent to 3.2 percent. Future minimum payments remaining under installment purchase agreements

and the present value of the minimum payments as of June 30, 2017, are as follows:


Fiscal Year Ending June 30 Amount

2018 67,868$ 2019 67,868 2020 39,157 2021 39,157 2022 39,158

Total Minimum Payments 253,208 Less, Amount Representing Interest 17,480

Present Value of Minimum Payments 235,728$

Capital Leases Payable. The University has entered into a capital lease agreement for equipment in

the amount of $135,879. The stated interest rates ranged from zero percent to 7.5 percent. Future

minimum payments under the capital lease agreements and the present value of the minimum payments

as of June 30, 2017, are as follows:


2018 45,547$ 2019 17,080

Total Minimum Payments 62,627 Less, Amount Representing Interest 2,789

Present Value of Minimum Payments 59,838$

Compensated Absences Payable. Employees earn the right to be compensated during absences for

annual leave (vacation) and sick leave earned pursuant to Board of Governors regulations, University

regulations, and bargaining agreements. Leave earned is accrued to the credit of the employee and

records are kept on each employee’s unpaid (unused) leave balance. The University reports a liability

for the accrued leave; however, State noncapital appropriations fund only the portion of accrued leave

that is used or paid in the current fiscal year. Although the University expects the liability to be funded

primarily from future appropriations, generally accepted accounting principles do not permit the recording

of a receivable in anticipation of future appropriations. At June 30, 2017, the estimated liability for

compensated absences, which includes the University’s share of the Florida Retirement System and

FICA contributions, totaled $82,121,372. The current portion of the compensated absences liability,

$6,342,167, is the amount expected to be paid in the coming fiscal year, and represents a historical

percentage of leave used applied to total accrued leave liability.

Federal Advance Payable. This represents the University’s liability for the Federal Capital Contribution

(advance) provided to fund the University’s Federal Perkins Loan program. This amount will ultimately

be returned to the Federal government should the University cease making Federal Perkins Loans or has

excess cash in the loan program. Federal capital contributions held by the University totaled $3,086,504.

Other Postemployment Benefits Payable. The University follows GASB Statement No. 45, Accounting

and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, for certain

postemployment healthcare benefits administered by the State Group Health Insurance Program.


Plan Description. Pursuant to the provisions of Section 112.0801, Florida Statutes, all employees who

retire from the University are eligible to participate in the State Group Health Insurance Program, an

agent multiple-employer defined benefit (OPEB) Plan. The University subsidizes the premium rates paid

by retirees by allowing them to participate in the OPEB Plan at reduced or blended group (implicitly

subsidized) premium rates for both active and retired employees. These rates provide an implicit subsidy

for retirees because, on an actuarial basis, their current and future claims are expected to result in higher

costs to the OPEB Plan on average than those of active employees. Retirees are required to enroll in

the Federal Medicare (Medicare) program for their primary coverage as soon as they are eligible.

A stand-alone report is not issued and the OPEB Plan information is not included in the annual report of

a public employee retirement system or another entity.

Funding Policy. OPEB Plan benefits are pursuant to the provisions of Section 112.0801, Florida Statutes,

and benefits and contributions can be amended by the Florida Legislature. The State has not

advance-funded OPEB costs or the net OPEB obligation. Premiums necessary for funding the OPEB

Plan each year on a pay-as-you-go basis are established by the Governor’s recommended budget and

the General Appropriations Act. For the 2016-17 fiscal year, 1,093 retirees received postemployment

healthcare benefits. The University provided required contributions of $5,714,000 toward the annual

OPEB cost, composed of benefit payments made on behalf of retirees for claims expenses (net of

reinsurance), administrative expenses, and reinsurance premiums. Retiree contributions totaled

$7,636,000, which represents 1.5 percent of covered payroll.

Annual OPEB Cost and Net OPEB Obligation. The University’s annual OPEB cost (expense) is

calculated based on the annual required contribution (ARC), an amount actuarially determined in

accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that

if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded

actuarial liabilities over a period not to exceed 30 years. The following table shows the University’s

annual OPEB cost for the fiscal year, the amount actually contributed to the OPEB Plan, and changes in

the University’s net OPEB obligation:

Description Amount

Normal Cost (Service Cost for One Year) 17,073,000$ Amortization of Unfunded Actuarial Accrued Liability 13,368,000 Interest on Normal Cost and Amortization 1,218,000

Annual Required Contribution 31,659,000 Interest on Net OPEB Obligation 4,759,000 Adjustment to Annual Required Contribution (4,396,000)

Annual OPEB Cost (Expense) 32,022,000 Contribution Toward the OPEB Cost (5,714,000)

Increase in Net OPEB Obligation 26,308,000 Net OPEB Obligation, Beginning of Year 118,976,000

Net OPEB Obligation, End of Year 145,284,000$


The University’s annual OPEB cost, the percentage of annual OPEB cost contributed to the OPEB Plan,

and the net OPEB obligation as of June 30, 2017, and for the 2 preceding fiscal years were as follows:

Percentage ofAnnual

Annual OPEB Cost Net OPEBFiscal Year OPEB Cost Contributed Obligation

2014-15 19,790,000$ 13.9% 92,231,000$ 2015-16 31,812,000 15.9% 118,976,000 2016-17 32,022,000 17.8% 145,284,000

Funded Status and Funding Progress. As of July 1, 2015, the most recent actuarial valuation date, the

actuarial accrued liability for benefits was $348,214,000, and the actuarial value of assets was $0,

resulting in an unfunded actuarial accrued liability of $348,214,000 and a funded ratio of 0 percent. The

covered payroll (annual payroll of active participating employees) was $521,103,327 for the

2016-17 fiscal year, and the ratio of the unfunded actuarial accrued liability to the covered payroll was

66.8 percent.

Actuarial valuations for an OPEB Plan involve estimates of the value of reported amounts and

assumptions about the probability of occurrence of events far into the future. Examples include

assumptions about future employment and termination, mortality, and healthcare cost trends. Actuarially

determined amounts regarding the funded status of the OPEB Plan and the annual required contributions

of the employer are subject to continual revision as actual results are compared with past expectations

and new estimates are made about the future. The Schedule of Funding Progress, presented as required

supplementary information following the notes to financial statements, presents multiyear trend

information that shows whether the actuarial value of OPEB Plan assets is increasing or decreasing over

time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions. Projections of benefits for financial reporting purposes are based

on the substantive OPEB Plan provisions, as understood by the employer and participating members,

and include the types of benefits provided at the time of each valuation and the historical pattern of

sharing of benefit costs between the employer and participating members. The actuarial calculations of

the OPEB Plan reflect a long-term perspective. Consistent with this perspective, the actuarial valuations

used actuarial methods and assumptions that include techniques that are designed to reduce the effects

of short-term volatility in actuarial accrued liabilities and the actuarial value of assets.

The University’s OPEB actuarial valuation as of July 1, 2015, used the entry-age cost actuarial method

to estimate the actuarial accrued liability as of June 30, 2017, and the University’s 2016-17 fiscal year

ARC. This method was selected because it is the same method used for the valuation of the

Florida Retirement System. Because the OPEB liability is currently unfunded, the actuarial assumptions

included a 4 percent rate of return on invested assets. The actuarial assumptions also included a payroll

growth rate of 3.25 percent per year and an inflation rate of 3 percent. Initial healthcare cost trend rates

were 3.1 percent, 7.5 percent, and 8.8 percent for the first 3 years, respectively, for all retirees in the

Preferred Provider Option (PPO) Plan, and 3 percent, 5.7 percent, and 7 percent for the first 3 years for

all retirees in the Health Maintenance Organization (HMO) Plan. The unfunded actuarial accrued liability


is being amortized over 30 years using the level percentage of projected payroll on an open basis.

The remaining amortization period at June 30, 2017, was 20 years.

Net Pension Liability. As a participating employer in the Florida Retirement System, the University

recognizes its proportionate share of the collective net pension liabilities of the FRS cost-sharing

multiple-employer defined benefit plans. As of June 30, 2017, the University’s proportionate share of the

net pension liabilities totaled $277,453,120. Note 11. includes a complete discussion of defined benefit

pension plans.

10. Long-Term Debt – USF Financing Corporation – Component Unit

Certificates of Participation Series 2003A. The Series 2003A Certificates were issued pursuant to an

amended and supplemented trust indenture, dated March 1, 2003, by and between the University of

South Florida Foundation, Inc. (Foundation), and a trustee. The $13,200,000 Certificates were issued to

finance the construction of an athletic training facility located on the University’s Tampa campus pursuant

to a ground lease between the University and the Foundation. The Certificates were issued as variable

rate debt secured by a direct-pay letter of credit issued by the trustee. Due to downgrades of the trustee’s

short-term credit rating, the Certificates were remarketed at interest rates reflective of the credit quality

of the trustee, causing increased interest costs. On March 15, 2011, the trustee agreed to convert the

interest rate from variable to fixed and purchase the Certificates for their own account. Simultaneously

with the conversion to a fixed rate, the USF Financing Corporation accepted an assignment from the

Foundation of its rights, title, interest, and obligations related to the $9,905,000 outstanding

Series 2003A Certificates. The Series 2003A tax-exempt Certificates bear a fixed interest rate equal to

3.14 percent. The Series 2003A Certificates mature in 2022.

The 2003A Certificates were issued pursuant to the terms of a Trust Indenture dated as of March 1, 2003,

by and between the Foundation and the Trustee, as amended and supplemented from time to time,

including particularly, as supplemented by that certain First Supplement to Trust Indenture dated

November 16, 2005, the Second Supplement to Trust Indenture dated as of March 8, 2011, and the

Third Supplement and Amendment to Trust Indenture dated as of March 15, 2011, both by and between

the Foundation and the Trustee. The project is leased by the Foundation to the University Board of

Trustees pursuant to a Master Operating Lease dated as of March 1, 2003, as amended by the

First Amendment to Master Operating Lease dated December 1, 2005, each by and between the

Foundation, as lessor, and the University Board, as lessee.

For the Series 2003A Certificates, the Foundation has entered into a Master Ground Lease Agreement

dated as of March 1, 2003, by and between the University Board of Trustees, as ground lessor, and the

Foundation, as ground lessee.

Certificates of Participation Series 2010A and 2010B. On December 23, 2010, the USF Financing

Corporation issued $2,860,000 Certificates of Participation Series 2010A (Tax-Exempt) and

$15,140,000 Certificates of Participation Series 2010B (Build America Bonds). The proceeds of the

Series 2010A and 2010B Certificates were used to (1) finance the acquisition, construction, and

installation of a mixed-use facility that includes a student center and a student housing facility on the

University’s St. Petersburg Campus, (2) fund capitalized interest accounts, and (3) pay certain expenses

related to the issuance and sale of the Series 2010A and 2010B Certificates. The Series 2010A fixed


rate Certificates have interest rates ranging from 4 to 5 percent. As the Series 2010B fixed rate

Certificates were issued under the Build America Bonds program, the net interest cost is equal to

65 percent of the gross interest rate, which is 8.35 and 8.55 percent. Pursuant to the requirements of

the amended Balanced Budget and Emergency Deficit Control Act of 1985, during the 2016-17 fiscal

year, the direct Federal subsidy was reduced and the net interest cost equaled 67.4 percent. The

Series 2010A Certificates mature in 2020 and the Series 2010B Certificates mature in 2040.

The Series 2010A and 2010B Certificates were issued pursuant to a Master Trust Agreement dated as

of May 1, 2005, as supplemented by the Series 2010 Supplemental Trust Agreement, dated

December 1, 2010, by and among a Trustee, the USF Property Corporation, as lessor, and the

USF Financing Corporation, as lessee. For the Series 2010A and 2010B Certificates, the USF Property

Corporation has entered into a Ground Lease Agreement, dated December 1, 2010, with the University

Board of Trustees whereby the University has leased to the USF Property Corporation the land on which

the Series 2010 Projects are located. All of the rights, title, and interest of the USF Property Corporation

in the Ground Lease Agreement, including the right of the USF Property Corporation to receive lease

payments; to use, sell, and re-let property; and to exercise remedies thereunder, have been irrevocably

assigned by the USF Property Corporation to the Trustee.

Pursuant to a support agreement dated December 1, 2010, by and among the University of South Florida

Foundation, Inc., the USF Property Corporation, and the USF Financing Corporation, the Foundation

guaranteed to pay the deficiency between the principal and interest requirement on the Series 2010A and

2010B Certificates allocable to the student center portion and the University’s activity and service fees

pledged to cover the student center debt service. The principal and interest requirement associated with

the student center is approximately 43 percent of the basic rent payment due under the lease agreement.

The support agreement provides that the Foundation may be released from its obligations and the

support agreement terminated upon delivery to the Trustee of a certification by the University affirming

that pledged Activity and Service fees exceed certain thresholds stipulated in the agreement. On

July 8, 2016, the University provided the certification to the Trustee and the support agreement was

terminated.

Certificates of Participation Series 2012A (refunded Series 2012A Certificates). On May 6, 2015,

the USF Financing Corporation issued the $77,015,000 Series 2012A Remarketing Certificates of

Participation to convert the Series 2012A Certificates of Participation from variable rate to fixed rate

Certificates. The tax-exempt, fixed rate Remarketing Certificates have interest rates ranging from 2 to

5 percent and mature in 2035.

The Series 2012A Certificates were originally issued on October 1, 2012 as variable rate Certificates to

refund the Series 2005B Certificates. The Series 2005B Certificates were issued on May 25, 2005, and

the proceeds were used to (1) finance the cost to lease purchase certain student housing facilities existing

on the University’s Tampa campus, (2) acquire, construct, and equip a housing facility and a related

parking facility on the University’s St. Petersburg campus, and (3) pay certain expenses related to the

issuance and sale of the Series 2005B Certificates, including the financial guaranty insurance policy

premium. On March 18 and 20, 2008, the USF Financing Corporation converted the Series 2005B


Certificates from auction rate securities to variable rate demand bonds with weekly rate periods. The

Certificates were secured by an irrevocable direct pay letter of credit.

The Series 2012A variable rate Certificates were largely hedged to limit the effect of changes in interest

rates. On April 15, 2015, in connection with the reissuance of the Certificates, the USF Financing

Corporation terminated the interest rate swap agreement related to these Certificates.

The Series 2012A Remarketing Certificates were issued pursuant to a Master Trust Agreement, dated

May 1, 2005, as supplemented by the Series 2012A Supplemental Trust Agreement, dated

October 1, 2012 and amended on April 1, 2015, by and among a Trustee, the USF Property Corporation,

as lessor, and the USF Financing Corporation, as lessee.

For the Series 2012A Remarketing Certificates, the USF Property Corporation has entered into a Ground

Lease Agreement, dated May 1, 2005, and amended on May 1, 2015, with the University Board of

Trustees whereby the University has leased to the USF Property Corporation the land on which the

housing and parking facilities are located. All of the rights, title, and interest of the USF Property

Corporation in the Ground Lease Agreement, including the right of the USF Property Corporation to

receive lease payments; to use, sell, and re-let properties; and to exercise remedies thereunder, have

been irrevocably assigned by the USF Property Corporation to the Trustee.

Certificates of Participation Series 2012B (refunded Series 2007 Certificates – Housing). On

October 1, 2012, the USF Financing Corporation issued the $68,975,000 Certificates of Participation

2012B to refund the Series 2007 Certificates of Participation – Housing. The tax-exempt, variable rate

Certificates are hedged to limit the effect of changes in interest rates. The Certificates have an interest

rate of 4.35 and mature in 2037.

The proceeds derived from the issuance of the Series 2007 Certificates – Housing, issued on

September 25, 2007, were used to (1) finance the cost to acquire, construct, and equip a certain housing

facility on the University’s Tampa campus, (2) fund a capitalized interest account, and (3) pay certain

expenses related to the issuance and sale of the Series 2007 Certificates, including the financial guaranty

insurance policy premium. The Series 2007 Certificates – Housing initially carried interest at auction

rates for generally successive seven-day auction periods. On March 24, 2008, the USF Financing

Corporation converted the Series 2007 Certificates – Housing from auction rate securities to variable rate

demand bonds with a weekly rate period. In connection with the conversion, the USF Financing

Corporation surrendered the municipal bond insurance policy. The Series 2007 Certificates were then

secured pursuant to an irrevocable direct pay letter of credit, prior to being refunded by the

Series 2012B Certificates.

The Series 2012B Certificates were issued pursuant to a Master Trust Agreement, dated May 1, 2005,

as supplemented by the Series 2012B Supplemental Trust Agreement, dated October 1, 2012, by and

among a Trustee, the USF Property Corporation, as lessor, and the USF Financing Corporation, as

lessee. For the Series 2012B Certificates, the USF Property Corporation has entered into a Ground

Lease Agreement, dated September 1, 2007, with the University Board of Trustees whereby the

University has leased to the USF Property Corporation the land on which the Magnolia Residence Hall

is located. All of the rights, title, and interest of the USF Property Corporation in the Ground Lease

Agreement, including the right of the USF Property Corporation to receive lease payments; to use, sell,


and re-let properties; and to exercise remedies thereunder, have been irrevocably assigned by the

USF Property Corporation to the Trustee.

Certificates of Participation Series 2013A (refunded Series 2006A Certificates). On July 1, 2016,

the USF Financing Corporation converted the $37,920,000 Series 2013A Certificates from a variable

rate, hedged with an interest rate swap, to a 2.31 percent fixed rate. The Series 2013A Certificates were

originally issued on September 3, 2013, to refund the Series 2006A Certificates. The Certificates mature

in 2036.

The proceeds derived from the issuance of the Series 2006A Certificates, issued on March 16, 2006,

were used to (1) finance the acquisition and construction of two fully-equipped medical office buildings

consisting of the North Clinic Facility and the South Clinic Facility and (2) pay certain expenses related

to the issuance and sale of the Series 2006A Certificates. The Series 2006A Certificates initially carried

interest at weekly rates for generally successive seven-day weekly rate periods, and were secured

pursuant to two separate irrevocable direct-pay letters of credit, prior to being refunded by the Series

2013A Certificates.

The Series 2013A Certificates were issued pursuant to a Master Trust Agreement, dated March 1, 2006,

as supplemented by the Series 2013A Supplemental Trust Agreement, dated September 1, 2013, by and


lessee. For the Series 2013A Certificates, the USF Property Corporation has entered into a Ground

Lease Agreement, dated March 1, 2006, with the University Board of Trustees whereby the University

has leased to the USF Property Corporation interest in the lands on which the North Clinic Facility and

South Clinic Facility were constructed. With respect to the South Clinic Facility site, the University Board

of Trustees possesses sublease interest in the site pursuant to a sublease, dated March 15, 2006,

between the University and Florida Health Science Center, Inc. d/b/a Tampa General Hospital, whereby

Tampa General Hospital has subleased to the University the land on which the South Clinic Facility was

constructed. The USF Financing Corporation has subleased both the North Clinic Facility and South

Clinic Facility to the University Medical Service Association, Inc. (UMSA), a direct-support organization

of the University, pursuant to individual office building lease agreements, each dated March 1, 2006.

The USF Financing Corporation’s right to receive all payments received from UMSA under the Facility

Lease Agreements are collaterally assigned to the Trustee pursuant to one or more separate

assignments. All of the rights, title, and interest of the USF Property Corporation in the Ground Lease

Agreement, including the right of the USF Property Corporation to receive lease payments; to use, sell,

and re-let properties; and to exercise remedies thereunder, have been irrevocably assigned by the


Certificates of Participation 2013B (refunded Series 2007 Certificates – Health). On

September 3, 2013, the USF Financing Corporation issued the $20,855,000 Certificates of Participation

Series 2013B to refund the Series 2007 Health Certificates of Participation. The tax-exempt, variable

rate Certificates are hedged to limit the effect of changes in interest rates. The Certificates have an

interest rate of 4.25 and mature in 2037.

The proceeds derived from the issuance of the Series 2007 Certificates – Health, issued on

November 19, 2007, were used to (1) provide funds for the purpose of financing the acquisition,


construction, installation and equipping of a medical office building located on the University’s Tampa

Campus, (2) fund a capitalized interest account, and (3) pay certain expenses related to the issuance

and sale of the 2007 Certificates. The Series 2007 Certificates – Health initially carried interest at weekly

rates for generally successive seven-day weekly rate periods, and were secured pursuant to an

irrevocable direct-pay letter of credit, prior to being refunded by the Series 2013B Certificates.

The Series 2013B Certificates were issued pursuant to a Master Trust Agreement, dated March 1, 2006,

as supplemented by the Series 2013B Supplemental Trust Agreement, dated September 1, 2013, by and


lessee. For the Series 2013B Certificates, the USF Property Corporation has entered into a Ground

Lease Agreement, dated November 1, 2007 with the University Board of Trustees whereby the University

has leased to the USF Property Corporation the land on which the Medical Office Building is constructed.

The USF Financing Corporation has subleased the Medical Office Building to UMSA pursuant to a facility

lease agreement, dated November 1, 2007.

The USF Financing Corporation’s right to receive all payments from UMSA under the Facility Lease

Agreement are collaterally assigned to the Trustee pursuant to one or more separate assignments. All

of the rights, title, and interest of the USF Property Corporation in the Ground Lease Agreement, including

the right of the USF Property Corporation to receive lease payments; to use, sell, and re-let properties;

and to exercise remedies thereunder, have been irrevocably assigned by the USF Property Corporation

to the Trustee.

Certificates of Participation Series 2015A (refunded Series 2005A Certificates). On May 6, 2015,

the USF Financing Corporation issued the $23,640,000 Certificates of Participation Series 2015A to

refund the Series 2005A Certificates of Participation. The 2015A tax-exempt, fixed rate Certificates have

interest rates ranging from 2.63 to 5 percent and mature in 2023.

The proceeds of the Series 2005A Certificates, issued on May 25, 2005, were used to (1) retire or defease

the University’s prior housing financings, and (2) pay certain expenses related to the issuance and sale

of the Series 2005A Certificates, including the financial guaranty insurance policy premium.

The Series 2015A Certificates were issued pursuant to a Master Trust Agreement, dated as of

May 1, 2005, as supplemented by the Series 2015A Supplemental Trust Agreement, dated as of

May 1, 2015, by and among a Trustee, the USF Property Corporation, as lessor, and the USF Financing

Corporation, as lessee.

For the Series 2015A Certificates, the USF Property Corporation has entered into a Ground Lease

Agreement, dated as of May 1, 2005, and amended on May 1, 2015, with the University Board of Trustees

whereby the University has leased to the USF Property Corporation the land on which the housing

facilities are located. All of the rights, title, and interest of the USF Property Corporation in the Ground

Lease Agreement, including the right of the USF Property Corporation to receive lease payments; to use,

sell, and re-let properties; and to exercise remedies thereunder, have been irrevocably assigned by the


Bonds Series 2015 – Marshall Center (refunded Series 2005C Certificates). On May 6, 2015, the

USF Financing Corporation issued the $31,595,000 Series 2015 Capital Improvement Refunding


Revenue Bonds – Marshall Center to refund the Series 2005C Certificates of Participation. The

tax-exempt, fixed rate Bonds have interest rates ranging from 2 to 5 percent and mature in 2036.

The proceeds derived from the issuance of the Series 2005C Certificates, issued on January 19, 2006,

were used to (1) finance the construction of the Marshall Center student center, and (2) pay certain

expenses related to the issuance and sale of the Series 2005C Certificates including the financial

guaranty insurance policy premium.

On May 6, 2015, in connection with the refunding of the Series 2005C Certificates with the

Series 2015 Marshall Center Bonds, the ground lease agreement related to the Housing facilities was

amended and the Marshall Center was removed from the subject parcel. The ground lease agreement

requires that any property, and improvements thereon, revert back to the University upon termination of

the ground lease. Thus, on the same date, the USF Financing Corporation transferred the Marshall

Center building and building improvements to the University at net book value.

The Series 2015 Bonds were issued pursuant to the terms of a Trust Indenture, dated as of May 1, 2015,

by and among a Trustee and the USF Financing Corporation.

Notes Series 2010A and 2010B Athletics. On January 15, 2010 and December 15, 2010, the

USF Financing Corporation issued the $10,000,000 Series 2010A Taxable Promissory Note and the

$13,500,000 Series 2010B Taxable Promissory Note, respectively. The proceeds of the Notes were

used to finance the acquisition, construction, and equipping of the athletics district facilities. The

Series 2010A and 2010B fixed rate Notes have gross interest rates of 8.02 and 6.17 percent,

respectively. As the Notes were issued under the Build America Bonds program, the net interest costs

are equal to 65 percent of the gross interest rates. Pursuant to the requirements of the amended

Balanced Budget and Emergency Deficit Control Act of 1985, during the 2016-17 fiscal year, the direct

Federal subsidies were reduced and the net interest costs equaled 67.4 percent. The Series 2010A and

2010B Notes mature in 2030 and 2031, respectively.

For the Series 2010A and 2010B Notes, the USF Financing Corporation has entered into a Ground Lease

Agreement, dated as of January 15, 2010, with the University Board of Trustees whereby the University

has leased to the USF Financing Corporation the land on which the athletics district facilities are located.

Note Series 2010 CAMLS. On December 15, 2010, the USF Financing Corporation issued the

$20,000,000 Series 2010 CAMLS Taxable Promissory Note. The proceeds of the Note were used to

finance the acquisition, construction, and equipping of the USF Center for Advanced Medical Learning

and Simulation (CAMLS) facility. The Series 2010 Note has a gross interest rate of 6.17 percent. As the

Note was issued under the Build America Bonds program, the net interest cost is equal to 65 percent of

the gross interest rate. Pursuant to the requirements of the amended Balanced Budget and Emergency

Deficit Control Act of 1985, during the 2016-17 fiscal year, the direct Federal subsidy was reduced and

the net interest cost equaled 67.4 percent. The Series 2010 Note matures in 2031.

For the Series 2010 CAMLS Note, the USF Financing Corporation has entered into a Ground Lease

Agreement, dated as of December 15, 2010, with the University Board of Trustees whereby the University

has leased to the USF Financing Corporation the land on which the CAMLS facility is located. The USF

Financing Corporation has subleased the CAMLS facility to the USF Health Professions Conferencing

Corporation, a direct-support organization of the University, pursuant to a facility lease agreement.


Note Series 2013 Sun Dome Arena. On September 27, 2013, the USF Financing Corporation issued

the $20,000,000 Series 2013 Arena Taxable Promissory Note. The proceeds of the Note were used to

reimburse the University of South Florida for a portion of the costs undertaken by the University to

renovate the USF Sun Dome Arena. The Series 2013 Note has an interest rate of 4.78 percent and

matures in 2033.

Principal and Interest Payments. Principal and interest payment requirements on the long-term debt

outstanding as of June 30, 2017, are as follows:

Fiscal Year Ending June 30 Principal Interest Total

2018 11,733,417$ 14,946,318$ 26,679,735$ 2019 12,197,668 14,431,005 26,628,673 2020 12,734,217 13,873,378 26,607,595 2021 13,303,556 13,281,463 26,585,019 2022 13,931,215 12,687,625 26,618,840 2023-2027 75,814,007 53,076,498 128,890,505 2028-2032 90,207,032 32,283,656 122,490,688 2033-2037 82,895,000 11,392,142 94,287,142 2038-2040 9,915,000 903,160 10,818,160

Subtotal 322,731,112 166,875,245 489,606,357 Premiums 13,484,164 - 13,484,164 Costs of Issuance (1,238,859) - (1,238,859)

Total 334,976,417$ 166,875,245$ 501,851,662$

Interest Rate Swap Agreements. Effective September 25, 2007, the USF Financing Corporation

entered into an interest rate swap agreement with a counterparty to limit the effects of changes in interest

rates on the Series 2012B Certificates (refunded Series 2007 Certificates – Housing). The initial notional

amount of the swap agreement is $73,700,000. The effect of the agreement is to limit the interest

expense on the total $61,775,000 principal in variable rate Series 2012B Certificates. The interest rate

on the swap agreement, as amended on March 24, 2008, is 3.552 percent and the interest rate swap

agreement expires July 1, 2037.

Effective November 19, 2007, the USF Financing Corporation entered into an interest swap agreement

with a counterparty to limit the effects of changes in interest rates on the Series 2013B Certificates

(refunded Series 2007 Certificates – Health). The initial notional amount of the interest rate swap

agreement is $22,830,000. The effect of the agreement is to limit the interest expense on the total

$19,165,000 principal in the variable rate Series 2013B Certificates. The interest rate on the swap

agreement is 3.397 percent and the swap agreement expires July 1, 2018.

On July 1, 2016, the interest rate swap agreement related to the Series 2013A Certificates (refunded

Series 2006A Certificates) expired. The related Certificates were converted to fixed rate on the same

day. The interest rate swap agreements contain collateral provisions to mitigate counterparty credit risk.

The collateral provisions of the interest rate swap agreement relating to the Series 2012B Certificates

require the USF Financing Corporation to maintain a rating of at least Baa1 by Moody’s Investors Service

or BBB+ by Standard & Poor’s on its Housing Certificates. The provisions require the USF Financing

Corporation to post collateral, in the form of cash or securities, for the negative valuation exposure in


excess of the $10 million minimum threshold level. Additionally, the collateral provisions of the interest

rate swap agreement relating to the Series 2013B Certificates, amended August 19, 2014, require the

USF Financing Corporation to post collateral, in the form of cash or securities, totaling $1,000,000,

regardless of fluctuations in exposure. As of June 30, 2017, the total posted collateral was $6,390,000.

The fair value of the swap agreements is the estimated amount the USF Financing Corporation would

receive or pay to terminate the agreement at the reporting date, taking into account the current interest

rates and the current creditworthiness of the counterparties. As of June 30, 2017, the USF Financing

Corporation interest rate swap agreements had a cumulative negative fair value of $13,375,342, which

represents the amount to be paid to terminate the agreements at the reporting date.

As of June 30, 2017, the USF Financing Corporation was not exposed to credit risk on its outstanding

interest rate swap agreements because the agreements had a negative fair value. However, should

interest rates change and the fair value of the swap agreements become positive, the USF Financing

Corporation would be exposed to credit risk in the amount of the derivative’s fair value.

The USF Financing Corporation is exposed to the risk (basis risk) that a mismatch occurs between the

interest cost of the underlying variable rate certificates and the variable rate payment received on the

associated interest rate swap agreement. The USF Financing Corporation mitigates the risk by analyzing

potential debt and swap interest rate index structures to ensure an effective hedge of cash flows and

tracks the spread of certificate rates paid to the hedges rates, typically a few basis points.

The USF Financing Corporation is exposed to the risk (rollover risk) that the interest rate swap

agreements or letters of credit mature prior to the termination of the variable rate debt. The USF

Financing Corporation mitigates this risk by assessing, years in advance of the maturity of these items,

the amount of variable rate debt then outstanding and makes provisions for extending these items.

Maintaining strong credit ratings for the USF Financing Corporation and the underlying bond system

plays an important role in this process.

The USF Financing Corporation is exposed to the risk (termination risk) that the interest rate swap

agreements could be terminated by the counterparty. The USF Financing Corporation mitigates this risk

with interest rate swap agreements that restrict termination by the counterparty and, if terminated, posted

collateral assets would provide a liquid offset. The USF Financing Corporation has an option to terminate

the interest rate swap agreement and, in the case of the USF Financing Corporation owing a termination

payment to the counterparty, the University would use cash balances or funds provided by the refinanced

transaction.

11. Retirement Plans – Defined Benefit Pension Plans

General Information about the Florida Retirement System (FRS)

The FRS was created in Chapter 121, Florida Statutes, to provide a defined benefit pension plan for

participating public employees. The FRS was amended in 1998 to add the Deferred Retirement Option

Program (DROP) under the defined benefit plan and amended in 2000 to provide a defined contribution

plan alternative to the defined benefit plan for FRS members effective July 1, 2002. This integrated

defined contribution pension plan is the FRS Investment Plan. Chapter 112, Florida Statutes, established

the Retiree Health Insurance Subsidy (HIS) Program, a cost-sharing multiple-employer defined benefit


pension plan to assist retired members of any State-administered retirement system in paying the costs

of health insurance. Chapter 121, Florida Statutes, also provides for nonintegrated, optional retirement

programs in lieu of the FRS to certain members of the Senior Management Service Class employed by

the State and faculty and specified employees in the State university system.

Essentially all regular employees of the University are eligible to enroll as members of the

State-administered FRS. Provisions relating to the FRS are established by Chapters 121 and

122, Florida Statutes; Chapter 112, Part IV, Florida Statutes; Chapter 238, Florida Statutes; and FRS

Rules, Chapter 60S, Florida Administrative Code; wherein eligibility, contributions, and benefits are

defined and described in detail. Such provisions may be amended at any time by further action from the

Florida Legislature. The FRS is a single retirement system administered by the Florida Department of

Management Services, Division of Retirement, and consists of two cost-sharing multiple-employer

defined benefit plans and other nonintegrated programs. A comprehensive annual financial report of the

FRS, which includes its financial statements, required supplementary information, actuarial report, and

other relevant information, is available from the Florida Department of Management Services’ Web site

(www.dms.myflorida.com).

The University’s FRS and HIS pension expense totaled $42,740,272 for the fiscal year ended

June 30, 2017.

FRS Pension Plan

Plan Description. The FRS Pension Plan (Plan) is a cost-sharing multiple-employer defined benefit

pension plan, with a DROP for eligible employees. The general classes of membership are as follows:

Regular Class – Members of the FRS who do not qualify for membership in the other classes.

Senior Management Service Class (SMSC) – Members in senior management level positions.

Special Risk Class – Members who are employed as law enforcement officers and meet the criteria to qualify for this class.

Employees enrolled in the Plan prior to July 1, 2011, vest at 6 years of creditable service and employees

enrolled in the Plan on or after July 1, 2011, vest at 8 years of creditable service. All vested members,

enrolled prior to July 1, 2011, are eligible for normal retirement benefits at age 62 or at any age after

30 years of service, except for members classified as special risk who are eligible for normal retirement

benefits at age 55 or at any age after 25 years of service. All members enrolled in the Plan on or after

July 1, 2011, once vested, are eligible for normal retirement benefits at age 65 or any time after 33 years

of creditable service, except for members classified as special risk who are eligible for normal retirement

benefits at age 60 or at any age after 30 years of service. Employees enrolled in the Plan may include

up to 4 years of credit for military service toward creditable service. The Plan also includes an early

retirement provision; however, there is a benefit reduction for each year a member retires before his or

her normal retirement date. The Plan provides retirement, disability, death benefits, and annual cost of

living adjustments to eligible participants.

DROP, subject to provisions of Section 121.091, Florida Statutes, permits employees eligible for normal

retirement under the Plan to defer receipt of monthly benefit payments while continuing employment with

an FRS-participating employer. An employee may participate in DROP for a period not to exceed


60 months after electing to participate. During the period of DROP participation, deferred monthly

benefits are held in the FRS Trust Fund and accrue interest. The net pension liability does not include

amounts for DROP participants, as these members are considered retired and are not accruing additional

pension benefits.

Benefits Provided. Benefits under the Plan are computed on the basis of age, and/or years of service,

average final compensation, and credit service. Credit for each year of service is expressed as a

percentage of the average final compensation. For members initially enrolled before July 1, 2011, the

average final compensation is the average of the 5 highest fiscal years’ earnings; for members initially

enrolled on or after July 1, 2011, the average final compensation is the average of the 8 highest fiscal

years’ earnings. The total percentage value of the benefit received is determined by calculating the total

value of all service, which is based on retirement plan and/or the class to which the member belonged

when the service credit was earned. Members are eligible for in-line-of-duty or regular disability and

survivors’ benefits. The following table shows the percentage value for each year of service credit

earned:

Class, Initial Enrollment, and Retirement Age/Years of Service % Value

Regular Class members initially enrolled before July 1, 2011

Retirement up to age 62 or up to 30 years of service 1.60

Retirement at age 63 or with 31 years of service 1.63


Retirement at age 65 or with 33 or more years of service 1.68

Regular Class members initially enrolled on or after July 1, 2011

Retirement up to age 65 or up to 33 years of service 1.60



Retirement at age 68 or with 36 or more years of service 1.68

Senior Management Service Class 2.00

Special Risk Class

Service on and after October 1, 1974 3.00

As provided in Section 121.101, Florida Statutes, if the member is initially enrolled in the FRS before

July 1, 2011, and all service credit was accrued before July 1, 2011, the annual cost-of-living adjustment

is 3 percent per year. If the member is initially enrolled before July 1, 2011, and has service credit on or

after July 1, 2011, there is an individually calculated cost-of-living adjustment. The annual cost-of-living

adjustment is a proportion of 3 percent determined by dividing the sum of the pre-July 2011 service credit

by the total service credit at retirement multiplied by 3 percent. Plan members initially enrolled on or after

July 1, 2011, will not have a cost-of-living adjustment after retirement.

Contributions. The Florida Legislature establishes contribution rates for participating employers and

employees. Contribution rates during the 2016-17 fiscal year were:


Percent of Gross Salary

Class Employee Employer (1)

FRS, Regular 3.00 7.52

FRS, Senior Management Service 3.00 21.77

FRS, Special Risk 3.00 22.57

FRS, Plan E 6.25 11.90

Deferred Retirement Option Program (applicable to members from all of the above classes)

0.00 12.99

FRS, Reemployed Retiree (2) (2)

Notes: (1) Employer rates include 1.66 percent for the postemployment health insurance subsidy. Also, employer rates, other than for DROP participants, include 0.06 percent for administrative costs of the Investment Plan.

(2) Contribution rates are dependent upon retirement class in which reemployed.

The University’s contributions to the Plan totaled $20,316,942 for the fiscal year ended June 30, 2017.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of

Resources Related to Pensions. At June 30, 2017, the University reported a liability of $192,838,109 for

its proportionate share of the net pension liability. The net pension liability was measured as of

June 30, 2016, and the total pension liability used to calculate the net pension liability was determined

by an actuarial valuation as of July 1, 2016. The University’s proportionate share of the net pension

liability was based on the University’s 2015-16 fiscal year contributions relative to the total 2015-16 fiscal

year contributions of all participating members. At June 30, 2016, the University’s proportionate share

was 0.763712910 percent, which was a decrease of 0.000607087 from its proportionate share measured

as of June 30, 2015.

For the year ended June 30, 2017, the University recognized pension expense of $34,909,101. In

addition, the University reported deferred outflows of resources and deferred inflows of resources related

to pensions from the following sources:

Deferred Outflows Deferred InflowsDescription of Resources of Resources

Differences between expected and actual experience 14,765,169$ 1,795,453$ Change of assumptions 11,666,128 - Net difference between projected and actual earnings on FRS Plan investments 49,846,301 - Changes in proportion and differences between University contributions and proportionate share of contributions 19,347,062 72,153 University FRS contributions subsequent to the measurement date 20,316,942 -

Total 115,941,602$ 1,867,606$

The deferred outflows of resources totaling $20,316,942, resulting from University contributions

subsequent to the measurement date, will be recognized as a reduction of the net pension liability in the


fiscal year ending June 30, 2018. Other amounts reported as deferred outflows of resources and deferred

inflows of resources related to pensions will be recognized in pension expense as follows:


2018 15,764,923$ 2019 15,764,923 2020 35,198,105 2021 22,758,392 2022 3,316,232 Thereafter 954,479

Total 93,757,054$

Actuarial Assumptions. The total pension liability in the July 1, 2016, actuarial valuation was determined

using the following actuarial assumptions, applied to all periods included in the measurement:

Inflation 2.60 percent Salary increases 3.25 percent, average, including inflation Investment rate of return 7.60 percent, net of pension plan investment

expense, including inflation

Mortality rates were based on the Generational RP-2000 with Projection Scale BB.

The actuarial assumptions used in the July 1, 2016, valuation were based on the results of an actuarial

experience study for the period July 1, 2008, through June 30, 2013.

The long-term expected rate of return on pension plan investments was not based on historical returns,

but instead is based on a forward-looking capital market economic model. The allocation policy’s

description of each asset class was used to map the target allocation to the asset classes shown below.

Each asset class assumption is based on a consistent set of underlying assumptions, and includes an

adjustment for the inflation assumption. The target allocation and best estimates of arithmetic and

geometric real rates of return for each major asset class are summarized in the following table:

CompoundAnnual Annual

Target Arithmetic (Geometric) StandardAsset Class Allocation (1) Return Return Deviation

Cash 1% 3.0% 3.0% 1.7%Fixed Income 18% 4.7% 4.6% 4.6%Global Equity 53% 8.1% 6.8% 17.2%Real Estate (Property) 10% 6.4% 5.8% 12.0%Private Equity 6% 11.5% 7.8% 30.0%Strategic Investments 12% 6.1% 5.6% 11.1%

Total 100%

Assumed inflation - Mean 2.6% 1.9%

Note: (1) As outlined in the Plan's investment policy.

Discount Rate. The discount rate used to measure the total pension liability was 7.60 percent. The

Plan’s fiduciary net position was projected to be available to make all projected future benefit payments


of current active and inactive employees. Therefore, the discount rate for calculating the total pension

liability is equal to the long-term expected rate of return. The discount rate used to determine the total

pension liability decreased from 7.65 percent from the prior measurement date.

Sensitivity of the University’s Proportionate Share of the Net Pension Liability to Changes in the Discount

Rate. The following presents the University’s proportionate share of the net pension liability calculated

using the discount rate of 7.60 percent, as well as what the University’s proportionate share of the net

pension liability would be if it were calculated using a discount rate that is 1 percentage point lower

(6.60 percent) or 1 percentage point higher (8.60 percent) than the current rate:

1% Decrease (6.60%)

Current Discount Rate (7.60%)

1% Increase

(8.60%)

University’s proportionate share of the net pension liability $355,028,015 $192,838,109 $ 57,836,433

Pension Plan Fiduciary Net Position. Detailed information about the Plan’s fiduciary net position is

available in the separately issued FRS Pension Plan and Other State Administered Systems

Comprehensive Annual Financial Report.

HIS Pension Plan

Plan Description. The HIS Pension Plan (HIS Plan) is a cost-sharing multiple-employer defined benefit

pension plan established under Section 112.363, Florida Statutes. The benefit is a monthly payment to

assist retirees of State-administered retirement systems in paying their health insurance costs and is

administered by the Florida Department of Management Services, Division of Retirement.

Benefits Provided. For the fiscal year ended June 30, 2017, eligible retirees and beneficiaries received

a monthly HIS payment of $5 for each year of creditable service completed at the time of retirement with

a minimum HIS payment of $30 and a maximum HIS payment of $150 per month, pursuant to

Section 112.363, Florida Statutes. To be eligible to receive a HIS Plan benefit, a retiree under a

State-administered retirement system must provide proof of health insurance coverage, which can

include Medicare.

Contributions. The HIS Plan is funded by required contributions from FRS participating employers as set

by the Florida Legislature. Employer contributions are a percentage of gross compensation for all active

FRS members. For the fiscal year ended June 30, 2017, the contribution rate was 1.66 percent of payroll

pursuant to Section 112.363, Florida Statutes. The University contributed 100 percent of its statutorily

required contributions for the current and preceding 3 years. HIS Plan contributions are deposited in a

separate trust fund from which HIS payments are authorized. HIS Plan benefits are not guaranteed and

are subject to annual legislative appropriation. In the event the legislative appropriation or available funds

fail to provide full subsidy benefits to all participants, benefits may be reduced or canceled.

The University’s contributions to the HIS Plan totaled $3,803,232 for the fiscal year ended June 30, 2017.

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of

Resources Related to Pensions. At June 30, 2017, the University reported a liability of $84,615,011 for

its proportionate share of the net pension liability. The current portion of the net pension liability is the


University’s proportionate share of benefit payments expected to be paid within one year, net of the

University’s proportionate share of the HIS Plan’s fiduciary net position available to pay that amount. The

net pension liability was measured as of June 30, 2016, and the total pension liability used to calculate

the net pension liability was determined by an actuarial valuation as of July 1, 2016. The University’s

proportionate share of the net pension liability was based on the University’s 2015-16 fiscal year

contributions relative to the total 2015-16 fiscal year contributions of all participating members.

At June 30, 2016, the University’s proportionate share was 0.726023325 percent, which was an increase

of 0.019207795 from its proportionate share measured as of June 30, 2015.

For the fiscal year ended June 30, 2017, the University recognized pension expense of $7,831,171. In

addition, the University reported deferred outflows of resources and deferred inflows of resources related

to pensions from the following sources:

Deferred Outflows Deferred InflowsDescription of Resources of Resources

Change of assumptions 13,278,246$ -$ Difference between actual and expected experience - 192,722 Net difference between projected and actual earnings on HIS Plan investments 42,783 - Changes in proportion and differences between University HIS contributions and proportionate share of HIS contributions 4,339,289 - University HIS contributions subsequent to the

measurement date 3,803,232 -

Total 21,463,550$ 192,722$

The deferred outflows of resources totaling $3,803,232 resulting from University contributions

subsequent to the measurement date, will be recognized as a reduction of the net pension liability in the

fiscal year ending June 30, 2018. Other amounts reported as deferred outflows of resources and deferred

inflows of resources related to pensions will be recognized in pension expense as follows:


2018 3,151,597$ 2019 3,151,597 2020 3,143,451 2021 3,139,540 2022 2,763,999 Thereafter 2,117,412

Total 17,467,596$

Actuarial Assumptions. The total pension liability at July 1, 2016, actuarial valuation was determined

using the following actuarial assumptions, applied to all periods included in the measurement:


Inflation 2.60 percent

Salary Increases 3.25 percent, average, including inflation

Municipal bond rate 2.85 percent

Mortality rates were based on the Generational RP-2000 with Projected Scale BB.

While an experience study had not been completed for the HIS Plan, the actuarial assumptions that

determined the total pension liability for the HIS Plan were based on certain results of the most recent

experience study for the FRS Plan.

Discount Rate. The discount rate used to measure the total pension liability was 2.85 percent. In general,

the discount rate for calculating the total pension liability is equal to the single rate equivalent to

discounting at the long-term expected rate of return for benefit payments prior to the projected depletion

date. Because the HIS benefit is essentially funded on a pay-as-you-go basis, the depletion date is

considered to be immediate, and the single equivalent discount rate is equal to the municipal bond rate

selected by the plan sponsor. The Bond Buyer General Obligation 20-Bond Municipal Bond Index was

adopted as the applicable municipal bond index. The discount rate used to determine the total pension

liability decreased from 3.80 percent from the prior measurement date.

Sensitivity of the University’s Proportionate Share of the Net Pension Liability to Changes in the Discount

Rate. The following presents the University’s proportionate share of the net pension liability calculated

using the discount rate of 2.85 percent, as well as what the University’s proportionate share of the net

pension liability would be if it were calculated using a discount rate that is 1 percentage point lower

(1.85 percent) or 1 percentage point higher (3.85 percent) than the current rate:

1% Decrease (1.85%)

Current Discount Rate (2.85%)

1% Increase

(3.85%)

University’s proportionate share of the net pension liability $97,072,641 $84,615,011 $74,275,858

Pension Plan Fiduciary Net Position. Detailed information about the HIS Plan’s fiduciary net position is

available in the separately issued FRS Pension Plan and Other State Administered Comprehensive

Annual Financial Report.

12. Retirement Plans – Defined Contribution Pension Plans

FRS Investment Plan. The SBA administers the defined contribution plan officially titled the FRS

Investment Plan (Investment Plan). The Investment Plan is reported in the SBA’s annual financial

statements and in the State of Florida Comprehensive Annual Financial Report.

As provided in Section 121.4501, Florida Statutes, eligible FRS members may elect to participate in the

Investment Plan in lieu of the FRS defined benefit plan. University employees already participating in

the State University System Optional Retirement Program or DROP are not eligible to participate in the

Investment Plan. Employer and employee contributions are defined by law, but the ultimate benefit

depends in part on the performance of investment funds. Service retirement benefits are based upon

the value of the member’s account upon retirement. Benefit terms, including contribution requirements,


are established and may be amended by the Florida Legislature. The Investment Plan is funded with the

same employer and employee contributions, that are based on salary and membership class (Regular

Class, Senior Management Service Class, etc.), as the FRS defined benefit plan. Contributions are

directed to individual member accounts, and the individual members allocate contributions and account

balances among various approved investment choices. Costs of administering the Investment Plan,

including the FRS Financial Guidance Program, are funded through an employer contribution of

0.06 percent of payroll and by forfeited benefits of Investment Plan members. Allocations to the

Investment Plan member accounts during the 2016-17 fiscal year were as follows:

Class

Percent of Gross

Compensation

FRS, Regular 6.30

FRS, Senior Management Service 7.67

FRS, Special Risk Regular 14.00

For all membership classes, employees are immediately vested in their own contributions and are vested

after 1 year of service for employer contributions and investment earnings regardless of membership

class. If an accumulated benefit obligation for service credit originally earned under the FRS Pension

Plan is transferred to the FRS Investment Plan, the member must have the years of service required for

FRS Pension Plan vesting (including the service credit represented by the transferred funds) to be vested

for these funds and the earnings on the funds. Nonvested employer contributions are placed in a

suspense account for up to 5 years. If the employee returns to FRS-covered employment within the

5-year period, the employee will regain control over their account. If the employee does not return within

the 5-year period, the employee will forfeit the accumulated account balance. For the fiscal year ended

June 30, 2017, the information for the amount of forfeitures was unavailable from the SBA; however,

management believes that these amounts, if any, would be immaterial to the University.

After termination and applying to receive benefits, the member may rollover vested funds to another

qualified plan, structure a periodic payment under the Investment Plan, receive a lump-sum distribution,

leave the funds invested for future distribution, or any combination of these options. Disability coverage

is provided in which the member may either transfer the account balance to the FRS Pension Plan when

approved for disability retirement to receive guaranteed lifetime monthly benefits under the FRS Pension

Plan, or remain in the Investment Plan and rely upon that account balance for retirement income.

The University’s Investment Plan pension expense totaled $4,788,913 for the fiscal year ended

June 30, 2017.

State University System Optional Retirement Program. Section 121.35, Florida Statutes, provides

for an Optional Retirement Program (Program) for eligible university instructors and administrators. The

Program is designed to aid State universities in recruiting employees by offering more portability to

employees not expected to remain in FRS for 8 or more years.

The Program is a defined contribution plan, which provides full and immediate vesting of all contributions

submitted to the participating companies on behalf of the participant. Employees in eligible positions can

make an irrevocable election to participate in the Program, rather than the FRS, and purchase retirement


and death benefits through contracts provided by certain insurance carriers. The employing university

contributes 5.14 percent of the participant’s salary to the participant’s account, 2.83 percent to cover the

unfunded actuarial liability of the FRS pension plan, 0.01 percent to cover administrative costs, for a total

of 7.98 percent, and employees contribute 3 percent of the employee’s salary. Additionally, the employee

may contribute, by payroll deduction, an amount not to exceed the percentage contributed by the

University to the participant’s annuity account. The contributions are invested in the company or

companies selected by the participant to create a fund for the purchase of annuities at retirement.

The University’s contributions to the Program totaled $22,566,754, and employee contributions totaled

$15,229,214 for the 2016-17 fiscal year.

13. Construction Commitments

The University’s construction commitments at June 30, 2017, are as follows:

Total Completed BalanceProject Description Commitment to Date Committed

USF Morsani College of Medicine 44,868,809$ 359,855$ 44,508,954$ USF Health Heart Institute 34,818,914 6,717,672 28,101,242 USF Health Student Union Annex 8,743,363 8,460,417 282,946 Magnolia Residence Hall Exterior Upgrade 7,921,961 3,921,961 4,000,000 Holly Residence Hall Renovations 6,500,000 - 6,500,000 Florida Institue of Oceanography Research Vessel 6,210,000 4,778,645 1,431,355 USF Library Remodel 6,173,595 3,472,435 2,701,160 USF Wellness Center Complex 5,965,390 - 5,965,390 Kosove Residence Hall Renovations 4,000,000 - 4,000,000 Subtotal 125,202,032 27,710,985 97,491,047 Other Projects (1) 35,034,768 14,466,947 20,567,821

Total 160,236,800$ 42,177,932$ 118,058,868$

Note: (1) Individual projects with current balance committed of less than $4 million at June 30, 2017.

14. Risk Management Programs

The University is exposed to various risks of loss related to torts; theft of, damage to, and destruction of

assets; errors and omissions; injuries to employees; and natural disasters. Pursuant to

Section 1001.72(2), Florida Statutes, the University participates in State self-insurance programs

providing insurance for property and casualty, workers’ compensation, general liability, fleet automotive

liability, Federal Civil Rights, and employment discrimination liability. During the 2016-17 fiscal year, for

property losses, the State retained the first $2 million per occurrence for all perils except named

windstorm and flood. The State retained the first $2 million per occurrence with an annual aggregate

retention of $40 million for named windstorm and flood losses. After the annual aggregate retention,

losses in excess of $2 million per occurrence were commercially insured up to $85 million for named

windstorm and flood through February 14, 2017, and increased to $92.5 million starting

February 15, 2017. For perils other than named windstorm and flood, losses in excess of $2 million per

occurrence were commercially insured up to $200 million through February 14, 2017, and increased to

$225 million starting February 15, 2017; and losses exceeding those amounts were retained by the State.

No excess insurance coverage is provided for workers’ compensation, general and automotive liability,


Federal Civil Rights and employment action coverage; all losses in these categories are completely

self-insured by the State through the State Risk Management Trust Fund established pursuant to

Chapter 284, Florida Statutes. Payments on tort claims are limited to $200,000 per person, and

$300,000 per occurrence as set by Section 768.28(5), Florida Statutes. Calculation of premiums

considers the cash needs of the program and the amount of risk exposure for each participant.

Settlements have not exceeded insurance coverage during the past 3 fiscal years.

Pursuant to Section 110.123, Florida Statutes, University employees may obtain healthcare services

through participation in the State group health insurance plan or through membership in a health

maintenance organization plan under contract with the State. The State’s risk financing activities

associated with State group health insurance, such as risk of loss related to medical and prescription

drug claims, are administered through the State Employees Group Health Insurance Trust Fund. It is the

practice of the State not to purchase commercial coverage for the risk of loss covered by this Fund.

Additional information on the State’s group health insurance plan, including the actuarial report, is

available from the Florida Department of Management Services, Division of State Group Insurance.

University Self-Insured Program.

The University of South Florida Health Sciences Center Self-Insurance Program provides medical

professional liability insurance coverage to the University of South Florida Board of Trustees, as well as

the faculty, staff, residents and students engaged in medical programs at the University of South Florida.

The Program provides coverage to protected entities in the amount of $200,000 per claim and

$300,000 per occurrence pursuant to Section 768.28, Florida Statutes. Additional coverage is provided

through the University of South Florida Health Sciences Center Insurance Company, a captive insurance

company, with a self-insured retention of $3 million per occurrence up to an aggregate of $10 million for

all payments made on claims arising during the fiscal year. Losses in excess of the individual and

aggregate amounts, up to $35 million, are insured commercially. Settled claims have not exceeded this

commercial coverage in any of the past three fiscal years.

The Program’s estimated liability for unpaid claims at fiscal year-end is the result of both management

and actuarial analyses and includes an amount for claims that have been incurred but not reported.

Changes in the Program’s claim liability amount for the fiscal years ended June 30, 2016, and

June 30, 2017, are presented in the following table:

Fiscal Year

Claims Liability

Beginning of Year

Claims and Changes in Estimates

Claim Payments

Claims Liability

End of Year2015-16 19,430,248$ 3,876,519$ (2,477,045)$ 20,829,722$ 2016-17 20,829,722 7,866,825 (2,279,053) 26,417,494

15. Litigation

The University is involved in several pending and threatened legal actions. The range of potential loss

from all such claims and actions, as estimated by the University’s legal counsel and management, should

not materially affect the University’s financial position.


16. Functional Distribution of Operating Expenses

The functional classification of an operating expense (instruction, research, etc.) is assigned to a

department based on the nature of the activity, which represents the material portion of the activity

attributable to the department. For example, activities of an academic department for which the primary

departmental function is instruction may include some activities other than direct instruction such as

research and public service. However, when the primary mission of the department consists of

instructional program elements, all expenses of the department are reported under the instruction

classification. The operating expenses on the statement of revenues, expenses, and changes in net

position are presented by natural classifications. The following are those same expenses presented in

functional classifications as recommended by NACUBO:

Functional Classification Amount

Instruction 379,326,083$ Research 305,407,041 Public Services 6,977,031 Academic Support 144,865,398 Student Services 58,106,553 Institutional Support 94,547,866 Operation and Maintenance of Plant 57,383,029 Scholarships, Fellowships, and Waivers 70,601,198 Depreciation 49,081,846 Auxiliary Enterprises 166,336,813 Loan Operations 70,193

Total Operating Expenses 1,332,703,051$

17. Segment Information

A segment is defined as an identifiable activity (or grouping of activities) that has one or more bonds or

other debt instruments outstanding with a revenue stream pledged in support of that debt. In addition,

the activity’s related revenues, expenses, gains, losses, assets, deferred outflows of resources, liabilities,

and deferred inflows of resources are required to be accounted for separately. The following financial

information for the University’s Parking facilities represents identifiable activities for which one or more

bonds are outstanding:


Condensed Statement of Net Position

ParkingFacility

AssetsCurrent Assets 14,886,217$ Capital Assets, Net 37,410,611 Other Noncurrent Assets 10,088,979

Total Assets 62,385,807

Deferred Outflows of Resources 658,436

LiabilitiesCurrent Liabilities 2,743,410 Noncurrent Liabilities 19,703,610

Total Liabilities 22,447,020

Deferred Inflows of Resources 9,873

Net PositionNet Investment in Capital Assets 17,454,299 Restricted - Expendable 10,870,344 Unrestricted 12,262,707

Total Net Position 40,587,350$

Condensed Statement of Revenues, Expenses, and Changes in Net Position

ParkingFacility

Operating Revenues 13,829,079$ Depreciation Expense (1,565,413) Other Operating Expenses (8,711,848)

Operating Income 3,551,818

Nonoperating Revenues (Expenses):Nonoperating Revenue 148,135 Interest Expense (755,201) Other Nonoperating Expense (166,814)

Net Nonoperating Expenses (773,880)

Increase in Net Position 2,777,938 Net Position, Beginning of Year 37,809,412

Net Position, End of Year 40,587,350$


Condensed Statement of Cash Flows

ParkingFacility

Net Cash Provided (Used) by:Operating Activities 5,004,728$ Capital and Related Financing Activities (3,254,214) Investing Activities (1,432,870)

Net Increase in Cash and Cash Equivalents 317,644 Cash and Cash Equivalents, Beginning of Year 3,815,212

Cash and Cash Equivalents, End of Year 4,132,856$

18. Blended Component Unit

The University has one blended component unit as discussed in Note 1. The following financial

information is presented net of eliminations for the University’s blended component unit:


TotalSelf-Insurance Primary

Program University Eliminations Government

Assets: Current Assets 11,985,490$ 882,729,890$ -$ 894,715,380$ Capital Assets, Net 28,569 852,312,132 - 852,340,701 Other Noncurrent Assets 47,710,293 23,478,791 - 71,189,084

Total Assets 59,724,352 1,758,520,813 - 1,818,245,165

Deferred Outflows of Resources - 137,405,152 - 137,405,152

Liabilities: Current Liabilities 1,400,419 210,627,925 - 212,028,344 Noncurrent Liabilities 25,085,161 516,659,216 - 541,744,377

Total Liabilities 26,485,580 727,287,141 - 753,772,721

Deferred Inflows of Resources - 5,671,778 - 5,671,778

Net Position: Net Investment in Capital Assets 28,569 743,186,339 - 743,214,908 Restricted - Expendable 33,210,203 206,708,189 - 239,918,392 Unrestricted - 213,072,518 - 213,072,518

Total Net Position 33,238,772$ 1,162,967,046$ -$ 1,196,205,818$

USF HealthSciences Center



USF HealthSciences Center TotalSelf-insurance Primary


Operating Revenues 8,350,287$ 840,278,473$ (459,978)$ 848,168,782$ Depreciation Expense (11,210) (49,070,636) - (49,081,846) Other Operating Expenses (8,088,196) (1,275,992,987) 459,978 (1,283,621,205)

Operating Income (Loss) 250,881 (484,785,150) - (484,534,269)

Nonoperating Revenues (Expenses):Nonoperating Revenue 2,991,959 540,733,936 - 543,725,895 Interest Expense - (762,863) - (762,863) Other Nonoperating Expense - (31,487,894) - (31,487,894)

Net Nonoperating Revenues 2,991,959 508,483,179 - 511,475,138

Other Revenues - 40,247,474 - 40,247,474

Increase in Net Position 3,242,840 63,945,503 - 67,188,343

Net Position, Beginning of Year 29,995,932 1,099,021,543 - 1,129,017,475

Net Position, End of Year 33,238,772$ 1,162,967,046$ -$ 1,196,205,818$

Condensed Statement of Cash Flows

USF HealthSciences Center TotalSelf-Insurance Primary


Net Cash Provided (Used) by:Operating Activities 3,210,642$ (386,285,817)$ -$ (383,075,175)$ Noncapital Financing Activities - 470,867,416 - 470,867,416 Capital and Related Financing Activities - (37,129,991) - (37,129,991) Investing Activities (2,393,719) (17,840,093) - (20,233,812)

Net Increase in Cash and Cash Equivalents 816,923 29,611,515 - 30,428,438 Cash and Cash Equivalents, Beginning of Year 3,139,040 38,520,462 - 41,659,502

Cash and Cash Equivalents, End of Year 3,955,963$ 68,131,977$ -$ 72,087,940$

19. Discretely Presented Component Units

The University has nine discretely presented component units as discussed in Note 1. These component

units comprise 100 percent of the transactions and account balances of the aggregate discretely

presented component units’ columns of the financial statements. The following financial information is

from the most recently available audited financial statements for the component units:



USF Financing UniversityUniversity of University of Corporation Medical

University of South Florida USF Health South Florida and USF ServiceSouth Florida Alumni Professions Research Property Association,Foundation, Association, Conferencing Sun Dome, Foundation, Corporation Inc. (Faculty

Inc. Inc. Corporation Inc. Inc. (1) Practice Plan) Total

Assets: Current Assets 124,643,599$ 877,629$ 2,018,673$ 1,407,566$ 12,923,067$ 84,541,091$ 71,039,136$ 297,450,761$ Capital Assets, Net 13,271,642 - 3,868,253 678,358 42,887,598 241,653,714 6,532,175 308,891,740 Other Noncurrent Assets 466,840,039 6,246,194 227,292 - 31,622,369 36,839,937 9,176,137 550,951,968

Total Assets 604,755,280 7,123,823 6,114,218 2,085,924 87,433,034 363,034,742 86,747,448 1,157,294,469

Deferred Outflows of Resources - - - - 156,607 - - 156,607

Liabilities: Current Liabilities 4,543,041 2,210,901 2,711,549 1,122,771 11,334,107 20,984,018 14,371,959 57,278,346 Noncurrent Liabilities 5,085,584 - 992,056 - 19,031,607 336,618,342 1,627,753 363,355,342

Total Liabilities 9,628,625 2,210,901 3,703,605 1,122,771 30,365,714 357,602,360 15,999,712 420,633,688

Net Position: Net Investment in Capital Assets 7,824,239 - 2,127,301 678,358 23,447,598 - 5,287,076 39,364,572 Restricted 581,606,470 1,208,715 248,037 - - - 6,340,000 589,403,222 Unrestricted 5,695,946 3,704,207 35,275 284,795 33,776,329 5,432,382 59,120,660 108,049,594

Total Net Position 595,126,655$ 4,912,922$ 2,410,613$ 963,153$ 57,223,927$ 5,432,382$ 70,747,736$ 736,817,388$

Direct-Support Organizations

Note: (1) The USF Financing Corporation’s and USF Property Corporation’s financial statements were consolidated due to the USF Financing Corporation’s ongoing economic interest in the USF Property Corporation and its ability to control the activities of the USF Property Corporation through common boards of directors.



USF Financing UniversityUniversity of University of Corporation Medical

University of South Florida USF Health South Florida and USF ServiceSouth Florida Alumni Professions Research Property Association,Foundation, Association, Conferencing Sun Dome, Foundation, Corporation Inc. (Faculty

Inc. Inc. Corporation Inc. Inc. (1) Practice Plan) Total

Operating Revenues 55,070,414$ 2,695,233$ 15,039,757$ 6,602,010$ 12,203,215$ 54,849,151$ 263,007,105$ 409,466,885$ Operating Expenses (63,788,027) (2,581,147) (13,065,512) (6,270,007) (9,633,109) (35,018,268) (264,192,248) (394,548,318)

Operating Income (Loss) (8,717,613) 114,086 1,974,245 332,003 2,570,106 19,830,883 (1,185,143) 14,918,567 Net Nonoperating Revenues (Expenses) 63,639,075 755,985 (665,889) 158,433 2,631,784 (17,980,098) (5,388,520) 43,150,770

Increase (Decrease) in Net Position 54,921,462 870,071 1,308,356 490,436 5,201,890 1,850,785 (6,573,663) 58,069,337

Net Postion, Beginning of Year 540,205,193 4,042,851 1,102,257 472,717 52,022,037 3,581,597 77,321,399 678,748,051

Net Position, End of Year 595,126,655$ 4,912,922$ 2,410,613$ 963,153$ 57,223,927$ 5,432,382$ 70,747,736$ 736,817,388$

Direct-Support Organizations

Note: (1) The USF Financing Corporation’s and USF Property Corporation’s financial statements were consolidated due to the USF Financing Corporation’s ongoing economic interest in the USF Property Corporation and its ability to control the activities of the USF Property Corporation through common boards of directors.


20. Subsequent Events

USF Financing Corporation – Component Unit

On September 29, 2017, the USF Financing Corporation, a university direct-support organization,

extended the direct bank placement for the Series 2012B Housing Certificates of Participation with

outstanding par amount of $59,800,000 for a new term of 10 years. The extended Certificates continue

to be held by Wells Fargo Bank, N.A.


OTHER REQUIRED SUPPLEMENTARY INFORMATION

Schedule of Funding Progress – Other Postemployment Benefits Plan

Actuarial UAAL as aActuarial Accrued Unfunded Percentage

Actuarial Value of Liability (AAL) AAL Funded Covered of CoveredValuation Assets (1) (UAAL) Ratio Payroll Payroll

Date (a) (b) (b-a) (a/b) (c) [(b-a)/c]

7/1/2011 -$ 230,266,000$ 230,266,000$ 0% 463,709,057$ 49.7%7/1/2013 - 247,391,000 247,391,000 0% 482,063,719 51.3%7/1/2015 - 348,214,000 348,214,000 0% 498,680,238 69.8%

Note: (1) The entry-age cost actuarial method was used to calculate the actuarial accrued liability.

Schedule of the University’s Proportionate Share of the Net Pension Liability –

Florida Retirement System Pension Plan

2016 (1) 2015 (1) 2014 (1) 2013 (1)University's proportion of the FRS net pension liability 0.763712910% 0.764319997% 0.718476151% 0.558052129%

University's proportionate share of the FRS net pension liability 192,838,109$ 98,722,179$ 43,837,611$ 96,065,609$

University's covered payroll (2) 490,228,479$ 466,345,909$ 443,554,247$ 431,524,683$

University's proportionate share of the FRS net pension liability as a percentage of its covered payroll 39.34% 21.17% 9.88% 22.26%

FRS Plan fiduciary net position as a percentage of the FRS total pension liability 84.88% 92.00% 96.09% 88.54%

Notes: (1) The amounts presented for each fiscal year were determined as of June 30.

(2) Covered payroll includes defined benefit plan actives, investment plan members, State university system optional retirement program members, and members in DROP because total employer contributions are determined on a uniform basis (blended rate) as required by Part III of Chapter 121, Florida Statutes.

Schedule of University Contributions – Florida Retirement System Pension Plan

2017 (1) 2016 (1) 2015 (1) 2014 (1)Contractually required FRS contribution $ 20,316,942 $ 18,547,490 $ 18,634,771 $ 15,737,677

FRS contributions in relation to the contractually required contribution 20,316,942 18,547,490 18,634,771 15,737,677

FRS contribution deficiency (excess) -$ -$ -$ -$


FRS contributions as a percentage of covered payroll 3.96% 3.78% 4.00% 3.55%


(2) Covered payroll includes defined benefit plan actives, investment plan members, State university system optional retirement program members, and members in DROP because total employer contributions are determined on a uniform basis (blended rate) as required by Part III of Chapter 121, Florida Statutes.


Schedule of the University’s Proportionate Share of the Net Pension Liability –

Health Insurance Subsidy Pension Plan

2016 (1) 2015 (1) 2014 (1) 2013 (1)University's proportion of the HIS net pension liability 0.726023325% 0.706815530% 0.668866670% 0.662647783%

University's proportionate share of the HIS net pension liability 84,615,011$ 72,084,066$ 62,540,666$ 57,692,202$


University's proportionate share of the HIS net pension liability as a percentage of its covered payroll 38.40% 34.51% 32.10% 30.47%

HIS Plan fiduciary net position as a percentage of the HIS total pension liability 0.97% 0.50% 0.99% 1.78%


(2) Covered payroll includes defined benefit plan actives, investment plan members, and members in DROP.

Schedule of University Contributions – Health Insurance Subsidy Pension Plan

2017 (1) 2016 (1) 2015 (1) 2014 (1)Contractually required HIS contribution $ 3,803,232 $ 3,647,462 $ 2,701,889 $ 2,291,312

HIS contributions in relation to the contractually required HIS contribution 3,803,232 3,647,462 2,701,889 2,291,312

HIS contribution deficiency (excess) -$ -$ -$ -$


HIS contributions as a percentage of covered payroll 1.66% 1.66% 1.29% 1.18%


(2) Covered payroll includes defined benefit plan actives, investment plan members, and members in DROP.


NOTES TO REQUIRED SUPPLEMENTARY INFORMATION

1. Schedule of Funding Progress – Other Postemployment Benefit Plan

The July 1, 2015 unfunded actuarial accrued liability of $348,214,000 was significantly higher than the

July 1, 2013, liability of $247,391,000 as a result of (1) the per capita claims cost assumption increased,

(2) retiree contributions were not as high as expected, (3) the healthcare trend rate assumption was

revised, and (4) certain demographic assumptions were revised (retirement rates, termination rates, etc.).

2. Schedule of Net Pension Liability and Schedule of Contributions – Florida Retirement System Pension Plan

Changes of Assumptions. The long-term expected rate of return was decreased from 7.65 percent to

7.60 percent, and the active member mortality assumption was updated.

3. Schedule of Net Pension Liability and Schedule of Contributions – Health Insurance Subsidy Pension Plan

Changes of Assumptions. The municipal rate used to determine total pension liability decreased from

3.80 percent to 2.85 percent.


Phone: (850) 412-2722 Fax: (850) 488-6975

Sherrill F. Norman, CPA Auditor General

AUDITOR GENERAL STATE OF FLORIDA Claude Denson Pepper Building, Suite G74

111 West Madison Street Tallahassee, Florida 32399-1450

The President of the Senate, the Speaker of the House of Representatives, and the Legislative Auditing Committee

INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER

FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED

IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

We have audited, in accordance with the 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, the financial statements of the University of South

Florida, a component unit of the State of Florida, and its aggregate discretely presented component units

as of and for the fiscal year ended June 30, 2017, and the related notes to the financial statements, which

collectively comprise the University’s basic financial statements, and have issued our report thereon

dated December 15, 2017, included under the heading INDEPENDENT AUDITOR’S REPORT. Our

report includes a reference to other auditors who audited the financial statements of the blended and

aggregate discretely presented component units, as described in our report on the University’s financial

statements. This report does not include the results of the other auditors’ testing of internal control over

financial reporting or compliance and other matters that are reported on separately by those auditors.

The financial statements of the University of South Florida Health Sciences Center Self-Insurance

Program, a blended component unit, were not audited in accordance with Government Auditing

Standards.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered the University’s internal

control over financial reporting (internal control) to determine audit procedures that are appropriate in the

circumstances for the purpose of expressing our opinions on the financial statements, but not for the

purpose of expressing an opinion on the effectiveness of the University’s internal control. Accordingly,

we do not express an opinion on the effectiveness of the University’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow

management or employees, in the normal course of performing their assigned functions, to prevent, or

detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a


combination of deficiencies, in internal control such that there is a reasonable possibility that a material

misstatement of the University’s financial statements will not be prevented, or detected and corrected on

a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control

that is less severe than a material weakness, yet important enough to merit attention by those charged

with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this

section and was not designed to identify all deficiencies in internal control that might be material

weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any

deficiencies in internal control that we consider to be material weaknesses. However, material

weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the University’s financial statements are free

from material misstatement, we performed tests of its compliance with certain provisions of laws, rules,

regulations, contracts, and grant agreements, noncompliance with which could 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 of our audit and, accordingly, we do not express such an

opinion. The results of our tests disclosed no instances of noncompliance or other matters that are

required to be reported under Government Auditing Standards.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance

and the results of that testing, and not to provide an opinion on the effectiveness of the University’s

internal control or on compliance. This report is an integral part of an audit performed in accordance with

Government Auditing Standards in considering the University’s internal control and compliance.

Accordingly, this report is not suitable for any other purpose.

Respectfully submitted,

Sherrill F. Norman, CPA Tallahassee, Florida December 15, 2017

Documents

UNIVERSITY OF SOUTH FLORIDA PARKING FACILITY REVENUE … › 378 › USF_pkg_POSTED.a1d8KmZU.pdf · UNIVERSITY OF SOUTH FLORIDA PARKING FACILITY REVENUE BONDS CUSIPS Numbers Maturity