california state university, fullerton of the state that attributable to the transactions of the...

CALIFORNIA STATE UNIVERSITY, FULLERTON

Financial Statements

June 30, 2011

(With Independent Auditors Report Thereon)


Table of Contents

Page

Independent Auditors Report 1

Managements Discussion and Analysis (Unaudited) 3

Financial Statements:

Statement of Net Assets 13

Statement of Revenues, Expenses, and Changes in Net Assets 14

Statement of Cash Flows 15

Notes to Financial Statements 17

KPMG LLP Suite 700 20 Pacifica Irvine, CA 92618-3391

KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative (KPMG International), a Swiss entity.

Independent Auditors Report

Dr. Willie Hagan, Interim President California State University, Fullerton:

We have audited the accompanying financial statements of California State University, Fullerton (the University), an agency of the State of California, and its aggregate discretely presented component units as of and for the year ended June 30, 2011, which collectively comprise the Universitys financial statements as listed in the table of contents. These financial statements are the responsibility of the Universitys management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of the aggregate discretely presented component units of the University. Those financial statements were audited by other auditors whose reports thereon have been furnished to us, and our opinions, insofar as they relate to the amounts included for the 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Universitys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of other auditors provide a reasonable basis for our opinions.

As discussed in note 2 to the financial statements, the financial statements of the University are intended to present the financial position, the changes in financial position, and cash flows of only that portion of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the State that are attributable to the transactions of the University. They do not purport to, and do not, present fairly the financial position of the State of California or the California State University System as of June 30, 2011, the changes in their financial position, or, where applicable, their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

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 and of its aggregate discretely presented component units as of June 30, 2011, and the respective changes in financial position and, where applicable, cash flows thereof, for the year then ended, in conformity with U.S. generally accepted accounting principles.

2

Managements discussion and analysis on pages 3 through 12 is not a required part of the basic financial statements but is supplementary information required by U.S. generally accepted accounting principles. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

February 17, 2012


Managements Discussion and Analysis

June 30, 2011

(Unaudited)

3 (Continued)

This section of California State University, Fullertons (the University) annual financial report presents the Universitys discussion and analysis of the financial performance of the University for the fiscal year ended June 30, 2011. This discussion has been prepared by management and should be read in conjunction with the financial statements and notes.

Introduction to the Financial Statements

This annual report consists of a series of financial statements prepared in accordance with the Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements and Managements Discussion and Analysis for State and Local Governments, as amended by GASB Statement No. 35, Basic Financial Statements and Managements Discussion and Analysis for Public Colleges and Universities. For reporting purposes, the University is considered a special-purpose government engaged only in business-type activities.

The financial statements include the statement of net assets; the statement of revenues, expenses, and changes in net assets; and the statement of cash flows. These statements are supported by the notes to the financial statements and this section. All sections must be considered together to obtain a complete understanding of the financial picture of the University.

Statement of Net Assets The statement of net assets includes all assets and liabilities. Assets and liabilities are generally reported at their book value, on an accrual basis, as of the statement date, except investments, which are reported at their fair market value. It also identifies major categories of restrictions on the net assets of the University.

Statement of Revenues, Expenses, and Changes in Net Assets The statement of revenues, expenses, and changes in net assets presents the revenues earned and expenses incurred during the year on an accrual basis.

Statement of Cash Flows The statement of cash flows presents the inflows and outflows of cash for the year and is summarized by operating, noncapital financing, capital and related financing, and investing activities. The statement is prepared using the direct method of cash flows and, therefore, presents gross rather than net amounts for the years activities.

The statement of cash flows for the discretely presented auxiliary organizations is not included in the Universitys financial statements.

Analytical Overview

Summary

The following discussion highlights managements understanding of the key financial aspects of the Universitys financial activities. Included is an analysis of current year activities and balances; a discussion of restrictions of University net assets; a discussion of capital assets and long-term debt; and factors impacting future reporting periods.



June 30, 2011

(Unaudited)

4 (Continued)

The Universitys condensed summary of net assets as of June 30, 2011 and 2010 is as follows:

Condensed Summary of Net Assets

June 302011 2010

Assets:Current assets $ 181,677,820 151,668,123 Capital assets 630,221,359 606,887,415 Other noncurrent assets 45,066,733 102,131,206

Total assets 856,965,912 860,686,744

Liabilities:Current liabilities 73,689,626 82,574,953 Long-term debt obligations, net of current portion 307,893,101 313,316,712 Other noncurrent liabilities 48,566,398 52,207,884

Total liabilities 430,149,125 448,099,549

Net assets:Invested in capital assets, net of related debt 300,187,950 309,398,916 Restricted, expendable 18,205,017 16,352,203 Unrestricted 108,423,820 86,836,076

Total net assets $ 426,816,787 412,587,195

Assets

Total assets decreased $3.7 million from prior year due to a $30.0 million increase in current assets and a $23.3 million increase in capital assets, offset by a $57.1 million decrease in other noncurrent assets. This increase in current assets is primarily due to increases in short-term investments of $26.6 million and accounts receivable of $1.7 million. The increase in short-term investments is attributed to an increase in student tuition and fees, which also impacted student accounts receivable, the primary component in the $1.7 million increase in accounts receivable.

Capital assets, net, increased $23.3 million primarily due to $57.4 million of current year additions, which were partially offset by $34 million in current year depreciation expense. Current year additions primarily related to the following capital projects: Parking Structure IV ($2 million), Childrens Center ($5.1 million), Student Housing & Dining facilities ($35.6 million), and tri-generation plant and HVAC improvements project ($4.3 million). Additional increases in the current year were $4.5 million in instructional equipment and technology upgrades, $4.3 million construction work in progress additions for the solar photovoltaic project, and $1 million in property received as gift-in-kind.

Other noncurrent assets decreased $57.1 million primarily due to the $57 million decrease in other long-term investments. The decrease in other long-term investments is primarily due to $48 million in expenditure of bond proceeds related to the projects noted above.



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5 (Continued)

Liabilities

Total current liabilities decreased $8.9 million primarily due to an $11.9 million decrease in accounts payable offset by increases across all other current liability accounts totaling $3.0 million. The $11.9 million decrease in accounts payable is a result of the completion of several major capital projects during the current fiscal year.

Net Assets

Total net assets increased $14.2 million from the prior year. A significant portion, $300.2 million, of net assets at the end of the year is invested in capital assets, net of related debt. Net assets invested in capital assets, net of related debt decreased $9.2 million from the prior year, primarily the result of a decrease in debt proceeds due to the completion of all major capital projects by the University. This decrease is offset by an increase in capital assets of $23.3 million and a $6 million increase in auxiliary lease receivables for the campus Police Building ground lease and an increase of $2.2 million in lease and debt obligations. $18.2 million of net assets at the end of the year are restricted for loans, capital projects, debt service, and other sponsored programs, which increased $1.9 million from prior year as discussed below. Approximately $108.4 million of net assets at the end of the year is unrestricted. Unrestricted net assets represent all other net resources available to the University for general and educational obligations.

Restricted Resources

Net assets of the University include funds that are restricted by donor or law. The following table summarizes which funds are restricted, the type of restriction, and the amount:

Restricted Net Assets

June 302011 2010

Expendable:Loans $ 219,696 207,675 Capital projects 16,020,347 5,294,416 Debt service 1,184,246 10,150,577 Other 780,728 699,535

Total restricted net assets expendable $ 18,205,017 16,352,203

Total restricted net assets, expendable, increased $1.9 million from $16.4 million to $18.2 million, as of June 30, 2011 and 2010, respectively. This is primarily due to a $10.7 million increase in net assets restricted for capital projects as a result of bond proceeds for the Student Housing and Dining Facility project. This was offset by a decrease of $8.9 million in net assets restricted for debt service, which represents increased amounts needed to cover upcoming debt service payments.



June 30, 2011

(Unaudited)

6 (Continued)

The Universitys condensed summary of revenues, expenses, and changes in net assets for the years ended June 30, 2011 and 2010 is as follows:

Condensed Summary of Revenues, Expenses, and Changes in Net Assets

Year ended June 302011 2010

Operating revenues:Student tuition and fees, net $ 152,918,362 137,184,290 Sales and services of auxiliary enterprises, net 17,625,971 15,446,384 Other operating revenues 21,155,526 12,495,626

Total operating revenues 191,699,859 165,126,300

Operating expenses (414,947,809) (359,451,782)

Operating loss (223,247,950) (194,325,482)

Nonoperating revenues (expenses):State appropriations, noncapital 155,727,973 137,658,957 Federal financial aid grants, noncapital 51,712,364 45,621,883 State financial aid grants, noncapital 25,532,878 23,035,322 Nongovernmental and other financial aid grants, noncapital 667,826 509,657 Other federal nonoperating grants, noncapital 10,317,806 29,079,679 Gifts, noncapital 83,383 591,559 Investment income (expense), net 579,512 (1,449,457) Interest expense (16,974,578) (7,119,423) Other nonoperating revenues, net 7,907,786 6,573,406

Total nonoperating revenues 235,554,950 234,501,583

Income before other additions 12,307,000 40,176,101

State appropriations, capital 554,787 Grants and gifts, capital 1,367,805 2,520,358

Increase in net assets 14,229,592 42,696,459

Beginning net assets 412,587,195 369,890,736 Ending net assets $ 426,816,787 412,587,195

Operating Revenues and Expenses

Operating revenues and expenses come from sources that are connected directly to the Universitys primary business function. This includes revenues from categories such as tuition and fees, certain grants and contracts that will be used for noncapital purposes, and sales and services of auxiliary enterprises. Expenses include categories such as salaries, benefits, supplies and other services, scholarships and fellowships, and depreciation and amortization. In this discussion and analysis, expenses are reported by functional program such as instruction, research, public service, academic support, student services, institutional support, operation and



June 30, 2011

(Unaudited)

7 (Continued)

maintenance of plant, student grants and scholarships, auxiliary enterprise expenses, and depreciation and amortization.

Operating Revenues

Total operating revenues increased $26.6 million due to a $15.7 million increase in student tuition and fees, net, a $2.2 million increase in sales and services of auxiliary enterprises, net, and an $8.7 million increase in other operating revenues. The tuition fee rate increased 10% from the prior year for both the regular session and summer sessions and is the primary reason for the $15.7 million increase in student tuition and fees, net. The $8.7 million increase in other operating revenues was primarily due to a $6 million increase related to new systemwide guidelines regarding cost recovery and a $2.7 million increase from project administration fees related to the housing construction project. The $2.2 million increase in sales and services of auxiliary enterprises, net, is related to an increase in parking permit fees coupled with the opening of a new parking structure.

The following charts present the proportional share that each category of operating revenues contributed to the total for fiscal years 2011 and 2010:

Operating Revenues

Year ended June 30, 2011

Student tuition and fees, net $ 152,918,362 79.8%Sales and services of auxiliary enterprises, net 17,625,971 9.2Other operating revenues 21,155,526 11.0

Total operating revenues $ 191,699,859 100.0%

79.8%

9.2% 11.0%

Student tuition and fees, net

Sales and services of auxiliary enterprises, net

Other operating revenues



June 30, 2011

(Unaudited)

8 (Continued)

Operating Revenues


Student tuition and fees, net $ 137,184,290 83.0%Sales and services of auxiliary enterprises, net 15,446,384 9.4Other operating revenues 12,495,626 7.6

Total operating revenues $ 165,126,300 100.0%

Operating Expenses

Total operating expenses increased $55.5 million, or 15.4%, and is comprised of increases in the following areas: $18.9 million in instruction, $8.6 million in institutional support, $7.7 million in student grants and scholarship, $7 million in operation and maintenance of plant, $1.6 million in research, $3.2 million in academic support, $0.8 million in public service, and $4.7 million in depreciation. Salaries and benefits costs, within each of these functions, increased by $30.6 million due to the cancellation of furloughs in fiscal year 2011, offset by nonrenewal of contracts, layoffs, and vacancies brought about by budget cuts in the California State University System (the System). Supplies and services increased $12.6 million for the year within each of these functions, compared to the prior year in which budgetary cuts resulted in a reduction of said expenses by approximately $11 million. Increases in this area for the year were most notably in instruction with expenditures of $3.4 million primarily related to instructional equipment and technology improvements and $5.6 million in increases for the operation and maintenance of plant. Depreciation and amortization increased $4.7 million as a result of the completion of major capital projects.

83.0%

9.4%

7.6%

Student tuition and fees, net

Sales and services of auxiliary enterprises, net

Other operating revenues



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9 (Continued)

The following charts present the distribution of resources in support of the Universitys mission for fiscal years 2011 and 2010:

Operating Expenses


Instruction $ 155,484,890 37.5%Research 1,926,782 0.5Public service 3,028,107 0.7Academic support 28,396,054 6.8Student services 32,902,941 7.9Student grants and scholarships 66,264,536 16.0

Total instruction and educationalsupport activities 288,003,310 69.4

Institutional support 51,212,913 12.3Operation and maintenance of plant 33,959,839 8.2Auxiliary enterprises expenses 7,746,766 1.9Depreciation and amortization 34,024,981 8.2

Total operating expenses $ 414,947,809 100.0%

Operating Expenses


Instruction $ 134,561,995 37.4%Research 2,002,466 0.6Public service 2,270,711 0.6Academic support 25,183,971 7.0Student services 29,946,243 8.3Student grants and scholarships 58,584,768 16.3

Total instruction and educationalsupport activities 252,550,154 70.2

Institutional support 42,829,758 11.9Operation and maintenance of plant 26,986,144 7.6Auxiliary enterprises expenses 7,718,772 2.1Depreciation and amortization 29,366,954 8.2

Total operating expenses $ 359,451,782 100.0%

Nonoperating Revenues (Expenses)

Nonoperating revenues (expenses) come from sources that are not part of the Universitys primary business functions. Included in this classification are categories such as state appropriations; federal grants; certain financial aid grants, noncapital; grants and gifts, capital; investment income; and interest expense.

69.4%

12.3%

8.2%

1.9%

8.2%

Instruction and educational support activities

Institutional support

Operation and maintenance of plant

Auxiliary enterprise expenses

Depreciation and amortization

70.2%

11.9%

7.6%

2.1%

8.2%

Instruction and educational support activities

Institutional support

Operation and maintenance of plant

Auxiliary enterprise expenses

Depreciation and amortization



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As the University is part of the System, which is an agency of the State of California, the Universitys operations are partially funded from appropriations of state tax revenues. General (noncapital) appropriation revenues totaled $155.7 million, an increase of $18 million from the prior year due to an increase in the state budget allocation. Appropriations used for purposes of acquisition of capital assets totaled $0.6 million for the fiscal year ended June 30, 2011, a $0.6 million increase from the prior year when the amount totaled $0. Federal financial aid grants, noncapital increased by $6.1 million due to a 17.6% increase in Pell grant recipients, along with a 22% increase in other student grant awards. State financial aid grants, noncapital increased by $2.5 million as a result of increases in Cal Grant A and Cal Grant B fee awards by the California Student Aid Commission to match the fee increase. Other federal nonoperating grants, noncapital decreased by $18.8 million due to a decrease in funds received from the American Recovery & Reinvestment Act (ARRA) grant. Investment income increased by $2 million primarily as a result of improved market conditions, which resulted in investment earnings in the current year, as compared to the investment losses in the prior year. Other nonoperating revenues (expenses), net, increased $1.3 million as a result of a $4.3 million increase in auxiliary revenue for the construction of the Childrens Center offset by $2.9 million administrative overhead charges.

Capital Assets and Long-Term Debt Obligations

Capital Assets

Capital assets, net of accumulated depreciation, are shown below:

June 302011 2010

Land and land improvements $ 3,289,167 3,289,167 Works of art and historical treasures 2,327,623 2,327,623 Buildings and building improvements 547,105,904 362,359,544 Improvements, other than buildings 16,242,193 16,818,089 Infrastructure 27,114,461 28,548,625 Leasehold improvements 2,989,544 1,778,827 Personal property 17,342,145 18,287,639 Intangible assets 8,049,903 12,316,851 Construction work in progress 5,760,419 161,161,050

Total capital assets, net of accumulated depreciation $ 630,221,359 606,887,415

Capital assets increased by $23.3 million primarily due to $57.4 million of current year additions, which were partially offset by $34 million in current year depreciation and amortization expense. Current year additions are primarily related to the construction of the new Student Housing and Dining Facilities, Parking Structure IV, Childrens Center, and the tri-generation energy plant and HVAC improvements project. Capital projects were funded through Systemwide Revenue Bonds, campus-originated debt, and state appropriations, capital.



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Major capital projects additions during fiscal year 2011 are as follows (in millions):

Student Housing & Dining Facilities $ 35.6 Parking Structure IV 2.0 Childrens Center Building 5.1 Campus Tri-Generation Plant and

HVAC Renovation 4.3 CWIP-Roof-Top Solar Photovoltaic 4.3 All other current year additions 6.1

$ 57.4

Capital assets commitments at June 30, 2011 totaled $3.4 million.

Long-Term Debt Obligations

Debt outstanding at June 30, 2011 and 2010 is summarized below by type of debt instrument:

June 302011 2010

Systemwide Revenue Bonds:Series 2002A $ 18,950,000 19,455,000 Series 2004A 18,520,000 19,125,000 Series 2005A 15,620,000 16,035,000 Series 2005B 2,230,000 2,585,000 Series 2007A 25,295,000 25,745,000 Series 2007C 5,780,000 6,215,000 Series 2008A 6,100,000 6,205,000 Series 2009A 69,195,000 69,195,000 Series 2010A 33,075,000 33,075,000 Series 2010A 6,750,000 6,750,000 Series 2010B 56,875,000 56,875,000 Series 2010B 14,700,000 14,700,000

Revenue bond anticipation note 14,133,000 14,289,000 Other Energy conservation project loan (BOA) 20,282,264 21,573,125 Other Auxiliary Service Corporation loan 2,268,119 2,487,260

Total 309,773,383 314,309,385

Unamortized bond premium 3,519,493 3,787,822 Unamortized loss on refunding (157,385) (184,105)

Total long-term debt 313,135,491 317,913,102

Less current portion (5,242,390) (4,596,390) Long-term debt, net of current portion $ 307,893,101 313,316,712



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12

The University did not issue Systemwide Revenue Bonds in fiscal year 2011.

Bond Ratings

Moodys Investors Service currently provides an intrinsic rating of Aa2, with a stable outlook, for the Systemwide Revenue Bonds. Standard & Poors Rating Service currently provides an intrinsic rating of A+, with a stable outlook, for the Systemwide Revenue Bonds. With the exception of certain maturities of Series 2005C, Series 2007A, Series 2008A, Series 2009A, and all maturities of Series 2010A and 2010B, all Systemwide Revenue Bonds are insured. Since the middle of fiscal year 2008, some providers of insurance for Systemwide Revenue Bonds have been downgraded to ratings below Aaa/AAA. Those bonds that are uninsured bear the intrinsic ratings of the Systemwide Revenue Bonds, which are Aa2 from the Moodys Investors Service and A+ from the Standard & Poors Rating Service. See notes 9 and 10 to the financial statements for further information on long-term debt obligations.

Factors Impacting Future Periods

The State Budget Act for fiscal year 2012, approved by the Governor on June 30, 2011, reduces the System appropriations by $650 million, or 24% below the fiscal year 2011 enacted budget level. The result will be an approximately $480 million decrease in noncapital state appropriations for the University in fiscal year 2012 to a total of $2.10 billion from $2.58 billion in fiscal year 2011. In December 2011, the Systems fiscal year 2012 appropriations were further reduced by an additional $100 million due to a $1 billion shortfall in the state revenue.

To mitigate the impact of the appropriation reductions, the System increased tuition fee rates, including a 10% increase approved by the Board of Trustees (the Board) in November 2010 and an additional 12% increase approved by the Board in July 2011, both effective for fiscal year 2012, which together will yield approximately $265 million in new tuition fee revenue after discounting for financial aid. Moreover, the System reduced its base resident student enrollment target for fiscal year 2012 by roughly 10,000 full-time equivalent students (FTE) to approximately 332,000, and implemented expense reduction measures of approximately $292 million.

In November 2011, the Board approved an increase in student tuition fees for fiscal year 2013 to raise approximately $138 million in new tuition fee revenue after discounting for financial aid.

The University or System state noncapital appropriations budget enacted for fiscal year 2012 approved by the legislative process is $116.1 million, a decrease of $39.6 million from the fiscal year 2011 funding level of $155.7 million. The increase in student fees in fiscal year 2012 is expected to generate $26.4 million in new revenue, net of financial aid during fiscal year 2012.

13


Statement of Net Assets

June 30, 2011

Discretelypresented

component unitsAuxiliary

Assets University Organizations Total

Current assets:Cash and cash equivalents $ 1,067,961 17,244,325 18,312,286 Short-term investments 165,440,680 29,890,132 195,330,812 Leases receivable, current portion 105,000 795,000 900,000 Notes receivable, current portion 230,000 480,457 710,457 Accounts receivable, net 12,022,875 3,273,144 15,296,019 Pledges receivable, net 3,560,246 3,560,246 Prepaid expenses and other assets 2,811,304 4,558,053 7,369,357

Total current assets 181,677,820 59,801,357 241,479,177

Noncurrent assets:Restricted cash and cash equivalents 2,049,901 2,049,901 Accounts receivable, net 554,752 554,752 Student loans receivable, net 5,277,952 5,277,952 Leases receivable, net of current portion 5,995,000 27,065,000 33,060,000 Notes receivable, net of current portion 13,903,000 17,203,741 31,106,741 Pledges receivable, net 11,377,499 11,377,499 Endowment investments 31,551,527 31,551,527 Other long-term investments 19,336,029 3,472,958 22,808,987 Capital assets, net 630,221,359 22,446,905 652,668,264 Other assets 27,871 27,871

Total noncurrent assets 675,288,092 115,195,402 790,483,494

Total assets 856,965,912 174,996,759 1,031,962,671

Liabilities and Net Assets

Current liabilities:Accounts payable 16,880,188 6,226,237 23,106,425 Accrued salaries and benefits payable 21,507,217 54,023 21,561,240 Accrued compensated absences current portion 6,110,386 429,812 6,540,198 Deferred revenue 13,502,918 97,339 13,600,257 Capitalized lease obligations current portion 3,907,259 73,147 3,980,406 Long-term debt obligations current portion 5,242,390 1,311,400 6,553,790 Depository accounts 154,831 154,831 Other liabilities 6,384,437 8,172,773 14,557,210

Total current liabilities 73,689,626 16,364,731 90,054,357

Noncurrent liabilities:Accrued compensated absences, net of current portion 6,110,383 388,313 6,498,696 Grants refundable 6,044,124 6,044,124 Capitalized lease obligations, net of current portion 33,223,657 79,242 33,302,899 Long-term debt obligations, net of current portion 307,893,101 59,051,103 366,944,204 Depository accounts 133,983 65,924 199,907 Other postemployment benefits obligation 3,054,251 5,870,179 8,924,430 Other liabilities 2,451,407 2,451,407

Total noncurrent liabilities 356,459,499 67,906,168 424,365,667

Total liabilities 430,149,125 84,270,899 514,420,024

Net assets:Invested in capital assets, net of related debt 300,187,950 1,943,013 302,130,963 Restricted for:

Nonexpendable endowments 39,501,305 39,501,305 Expendable:

Scholarships and fellowships 3,687,578 3,687,578 Loans 219,696 219,696 Capital projects 16,020,347 16,020,347 Debt service 1,184,246 1,184,246 Other 780,728 16,452,568 17,233,296

Unrestricted 108,423,820 29,141,396 137,565,216 Total net assets $ 426,816,787 90,725,860 517,542,647

See accompanying notes to financial statements.

14


Statement of Revenues, Expenses, and Changes in Net Assets


Discretelypresented

component unitsAuxiliary

University Organizations Eliminations Total

Revenues:Operating revenues:

Student tuition and fees (net of scholarshipallowances of $44,835,609) $ 152,918,362 10,675,984 163,594,346

Grants and contracts, noncapital:Federal 11,988,021 11,988,021 State 3,740,840 3,740,840 Local 3,112,564 3,112,564 Nongovernmental 2,136,407 2,136,407

Sales and services of educational activities 2,308 3,719,838 3,722,146 Sales and services of auxiliary enterprises

(net of scholarship allowances of $0) 17,625,971 33,019,997 50,645,968 Other operating revenues 21,153,218 7,210,710 28,363,928

Total operating revenues 191,699,859 75,604,361 267,304,220

Expenses:Operating expenses:

Instruction 155,484,890 7,406,588 162,891,478 Research 1,926,782 2,696,960 4,623,742 Public service 3,028,107 2,960,161 5,988,268 Academic support 28,396,054 6,444,003 34,840,057 Student services 32,902,941 13,025,459 45,928,400 Institutional support 51,212,913 3,496,774 54,709,687 Operation and maintenance of plant 33,959,839 4,776,970 38,736,809 Student grants and scholarships 66,264,536 1,547,650 67,812,186 Auxiliary enterprise expenses 7,746,766 36,482,575 (971,725) 43,257,616 Depreciation and amortization 34,024,981 1,478,326 35,503,307

Total operating expenses 414,947,809 80,315,466 (971,725) 494,291,550

Operating loss (223,247,950) (4,711,105) 971,725 (226,987,330)

Nonoperating revenues (expenses):State appropriations, noncapital 155,727,973 155,727,973 Federal financial aid grants, noncapital 51,712,364 51,712,364 State financial aid grants, noncapital 25,532,878 25,532,878 Nongovernmental and other financial aid grants, noncapital 667,826 667,826 Other federal nonoperating grants, noncapital 10,317,806 10,317,806 Gifts, noncapital 83,383 4,897,180 4,980,563 Investment income, net 579,512 4,938,710 5,518,222 Interest expense (16,974,578) (470) (16,975,048) Other nonoperating revenues (expenses), net 7,907,786 (1,142,910) (73,521) 6,691,355

Net nonoperating revenues 235,554,950 8,692,510 (73,521) 244,173,939

Income before other additions 12,307,000 3,981,405 898,204 17,186,609

State appropriations, capital 554,787 554,787 Grants and gifts, capital 1,367,805 (898,204) 469,601 Additions to permanent endowments 2,672,530 2,672,530

Increase in net assets 14,229,592 6,653,935 20,883,527

Net assets:Net assets at beginning of year 412,587,195 84,071,925 496,659,120 Net assets at end of year $ 426,816,787 90,725,860 517,542,647


15 (Continued)


Statement of Cash Flows


University

Cash flows from operating activities:Student tuition and fees $ 151,165,373 Payments to suppliers (65,759,570) Payments to employees (252,995,498) Payments to students (66,286,317) Sales and services of educational activities 2,308 Sales and services of auxiliary enterprises 17,461,968 Other receipts 23,492,327

Net cash used in operating activities (192,919,409)

Cash flows from noncapital financing activities:State appropriations 155,727,973 Federal financial aid grants 51,757,227 State financial aid grants 25,458,581 Nongovernmental and other financial aid grants 667,826 Other federal nonoperating grants 10,317,806 Gifts and grants received for other than capital purposes 83,383 Federal loan program receipts 1,406,555 Federal loan program disbursements (1,208,781) Monies received on behalf of others 2,563,647 Monies disbursed on behalf of others (6,026,853) Other noncapital financing activities 7,971,339

Net cash provided by noncapital financing activities 248,718,703

Cash flows from capital and related financing activities:Proceeds from capital debt 39,064 State appropriations 13,574 Acquisition of capital assets (60,360,972) Principal paid on capital debt and leases (8,113,256) Interest paid on capital debt and leases (18,150,271) Principal payments received on notes receivable 156,000

Net cash used in capital and related financing activities (86,415,861)

Cash flows from investing activities:Proceeds from sales and maturities of investments 606,750,438 Purchases of investments (575,638,290) Investment income received 545,094

Net cash provided by investing activities 31,657,242

Net increase in cash and cash equivalents 1,040,675

Cash and cash equivalents at beginning of year 27,286 Cash and cash equivalents at end of year $ 1,067,961

16


Statement of Cash Flows


University

Reconciliation of operating loss to net cash used in operating activities:Operating loss $ (223,247,950) Adjustments to reconcile operating loss to net cash used in operating activities:

Depreciation and amortization 34,024,981 Change in assets and liabilities:

Accounts receivable, net (1,813,443) Student loans receivable, net (8,503) Prepaid expenses and other assets (546,721) Accounts payable (8,460,466) Accrued salaries and benefits 642,412 Accrued compensated absences 2,203,060 Deferred revenue 677,445 Other postemployment benefits obligation 899,565 Other liabilities 2,710,211

Net cash used in operating activities $ (192,919,409)

Supplemental schedule of noncash transactions:Contributed capital assets $ 469,601 Change in accrued capital asset costs (purchased but unpaid at year-end) (3,461,943) Amortization of bond premium 268,329 Amortization of loss on refunding 26,720



Notes to Financial Statements

June 30, 2011

17 (Continued)

(1) Organization

California State University, Fullerton (the University), an agency of the State of California (the State), was established as a campus of the California State University under the State of California Education Code to offer undergraduate and graduate instruction for professional and occupational goals emphasizing a broad liberal arts education. As one of 23 campuses in the California State University System (the System), the University is included in the financial statements of the System. Responsibility for the University is vested in the Trustees of the System (the Trustees) who, in turn, appoint the Chancellor, the chief executive officer of the System, and the University president, the chief executive officer of the University.

The University provides instruction for baccalaureate and masters degrees and certificate programs and operates various auxiliary enterprises such as student dormitories, student unions, and parking facilities. In addition, the University administers a variety of financial aid programs, which are funded primarily through state and federal programs.

(2) Summary of Significant Accounting Policies

(a) Financial Reporting Entity

In accordance with Governmental Accounting Standards Board (GASB) Statements No. 34, Basic Financial Statements and Managements Discussion and Analysis for State and Local Governments, and No. 35, Basic Financial Statements and Managements Discussion and Analysis for Public Colleges and Universities, the accompanying financial statements include the accounts of the University and the Universitys five recognized auxiliary organizations. These auxiliary organizations are legally separate entities that provide services primarily to the Universitys students and faculty. Separate financial statements are issued for each of the recognized auxiliary organizations and may be obtained from the University.

The recognized auxiliary organizations are as follows:

California State University, Fullerton Philanthropic Foundation

CSU Fullerton Auxiliary Services Corporation

CSU Fullerton Housing Authority

Associated Students, California State University, Fullerton, Inc.

Titan Student Centers, A Component of Associated Students California State University, Fullerton, Inc.



June 30, 2011

18 (Continued)

Summary information for the discretely presented auxiliary organizations is as follows:

CSUF Fullerton OtherPhilanthropic Auxiliary Auxiliary

Year ended June 30, 2011 Foundation Services Corp. Organizations Total

Operating revenues:Student tuition and fees, net $ 10,675,984 10,675,984 Grants and contracts,

noncapital 20,132,343 845,489 20,977,832 Sales and services of auxiliary

enterprises, net 33,019,997 33,019,997 Sales and services of

educational activities 3,719,838 3,719,838 Other 1,396,620 5,769,663 44,427 7,210,710

Total operatingrevenues 1,396,620 58,922,003 15,285,738 75,604,361

Operating expenses:Instruction 2,020,085 5,386,503 7,406,588 Research 167,259 2,529,701 2,696,960 Public service 136,038 2,578,774 245,349 2,960,161 Academic support 534,018 5,909,985 6,444,003 Student services 1,153,773 3,727,380 8,144,306 13,025,459 Institutional support 3,496,774 3,496,774 Operation and maintenance of

plant 4,776,970 4,776,970 Student grants and

scholarships 1,547,650 1,547,650 Auxiliary enterprise expenses 270,155 30,867,515 5,344,905 36,482,575 Depreciation and amortization 875,322 603,004 1,478,326

Total operatingexpenses 9,325,752 56,652,150 14,337,564 80,315,466

Operating income(loss) (7,929,132) 2,269,853 948,174 (4,711,105)

Net nonoperating revenues(expenses) 9,655,417 (151,647) (811,260) 8,692,510

Income beforeother additions 1,726,285 2,118,206 136,914 3,981,405

Additions to permanentendowments 2,672,530 2,672,530

Increase in netassets 4,398,815 2,118,206 136,914 6,653,935

Beginning net assets,July 1, 2010 56,081,250 19,999,146 7,991,529 84,071,925

Ending net assets, June 30, 2011 $ 60,480,065 22,117,352 8,128,443 90,725,860



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19 (Continued)

The auxiliary organizations are presented in the accompanying financial statements as discretely presented component units due to the nature and significance of their relationship with the University. The relationships are such that exclusion of these organizations from the reporting entity would render the financial statements incomplete, primarily due to the activities that the organizations carry out on behalf of the University, such as research, grant administration, foodservice, and academic support. The auxiliary organizations are discretely presented to allow the financial statement users to distinguish them from the University.

The financial statements present only the statement of net assets; statement of revenues, expenses, and changes in net assets; and statement of cash flows of only that portion of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the State that is attributable to the transactions of the University and the financial statements do not purport to, and do not, present fairly the financial position of the State or the System as of June 30, 2011, and the changes in their financial position or, where applicable, their cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles.

(b) Basis of Presentation

The accompanying financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting in accordance with U.S. generally accepted accounting principles, as prescribed by the GASB. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met.

The financial statements required by GASB Statement Nos. 34 and 35 include a statement of net assets; a statement of revenues, expenses, and changes in net assets; and a statement of cash flows. As a public institution, the University is considered a special-purpose government under the provisions of GASB Statement No. 35. The University records revenue in part from fees and other charges for services to external users and, accordingly, has chosen to present its financial statements using the reporting model for special-purpose governments engaged only in business-type activities. This model allows all financial information for the University to be reported in a single column in each of the financial statements, accompanied by aggregated financial information for the auxiliary organizations. In accordance with the business-type activities reporting model, the University prepares its statement of cash flows using the direct method.

The auxiliary organizations included in these financial statements apply the accounting and reporting standards promulgated by the Financial Accounting Standards Board (FASB).

(c) Election of Applicable FASB Statements

The University follows standards of accounting and financial reporting issued by the FASB prior to November 30, 1989, unless those standards conflict with or contradict guidance of the GASB. The University also has the option of following subsequent private sector guidance subject to the same limitation. The University has elected not to adopt the pronouncements issued by the FASB after November 30, 1989.



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(d) Classification of Current and Noncurrent Assets (Other Than Investments) and Liabilities

The University considers assets to be current that can reasonably be expected, as part of its normal business operations, to be converted to cash and be available for liquidation of current liabilities within 12 months of the statement of net assets date. Liabilities that reasonably can be expected, as part of normal University business operations, to be liquidated within 12 months of the statement of net assets date are considered to be current. All other assets and liabilities are considered to be noncurrent. For classification of current and noncurrent investments, refer to note 2(f).

(e) Cash and Statement of Cash Flows

The University considers highly liquid investments with an original maturity date of three months or less to be cash equivalents. The University considers amounts included in the California State University Investment Pool to be investments. The statement of cash flows does not include the cash flows of the discretely presented auxiliary organizations.

(f) Investments

Investments are reflected at fair value using quoted market prices. Realized and unrealized gains and losses are included in the accompanying statement of revenues, expenses, and changes in net assets as investment income, net.

Investments that are used for current operations are classified as short-term investments. Investments that are restricted for withdrawal or use for other than current operations, designated or restricted for the acquisition or construction of noncurrent assets, designated or restricted for the liquidation of the noncurrent portion of long-term debt, and restricted as to the liquidity of the investments are classified as other long-term investment.

(g) Capital Assets

Capital assets are stated at cost or estimated historical cost if purchased, or if donated, at estimated fair value at date of donation. Capital assets, including infrastructure and intangible assets, with a value of $5,000 or more and with a useful life of one year or more are capitalized. Such costs include, where applicable, interest capitalized as part of the cost of constructed capital assets. Title to all assets, whether purchased, constructed, or donated, is held by the the State. Although title is not with the University for land and buildings, the University has exclusive use of these assets and is responsible for the maintenance of these assets and thus has recorded the cost of these assets on the accompanying financial statements. Capital assets, with the exception of land and land improvements, works of art and historical treasures, construction work in progress, and certain intangible assets, are depreciated or amortized on a straight-line basis over their estimated useful lives, which range from 3 to 45 years. Library books, unless considered rare collections, are capitalized and depreciated over a 10-year period. Periodicals and subscriptions are expensed as purchased. Works of art and historical treasures are valued at cost if purchased or the fair market value at the date of donation if contributed. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are expensed as incurred.

Depreciation and amortization expense is shown separately in the statement of revenues, expenses, and changes in net assets rather than being allocated among other categories of operating expenses.



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21 (Continued)

(h) Deferred Revenue

Deferred revenue consists primarily of fees collected in advance for summer and fall terms, and continuing education programs.

(i) Compensated Absences

Compensated absences are recognized when the right to receive the compensation is earned by the employees. Vacation is accrued on a monthly basis. The University uses an employees current pay rate as of July 1, 2011 to calculate the liability for accrued compensated absences. The University employees pay rates are based on length of service and job classifications.

(j) Grants Refundable

The University periodically receives contributions from the federal government in support of its operation of the Federal Perkins and Nursing Loan programs, both Title IV loan programs. The federal government has the ability to terminate its support of these programs at any time and to request the University to return those contributions that it has made on a cumulative basis. Accordingly, the federal contributions received and retained by the University at year-end are considered to be liabilities of the University, and are reflected as such in the accompanying statement of net assets.

(k) Net Assets

The Universitys net assets are classified into the following net asset categories:

Invested in capital assets, net of related debt Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.

Restricted nonexpendable Net assets subject to externally imposed conditions that the University retains them in perpetuity. Net assets in this category consist of endowments held by the University or its related auxiliaries.

Restricted expendable Net assets subject to externally imposed conditions that can be fulfilled by the actions of the University or by the passage of time.

Unrestricted All other categories of net assets. In addition, unrestricted net assets may be designated for use by management of the University or have legislative or bond indenture requirements associated with their use. These requirements limit the area of operations for which expenditures of net assets may be made and require that unrestricted net assets be designated to support future operations in these areas. Campus housing programs are a primary example of operations that have unrestricted net assets with designated uses.

(l) Classification of Revenues and Expenses

The University considers operating revenues and expenses in the statement of revenues, expenses, and changes in net assets to be those revenues and expenses that result from exchange transactions or from other activities that are connected directly to the Universitys primary functions. Exchange



June 30, 2011

22 (Continued)

transactions include charges for services rendered and the acquisition of goods and services. Moreover, the Office of the Chancellor administers and charges campuses for centralized expenses such as State pro rata and management of capital projects and pooled investments, which are included in operating expenses by function in the accompanying statement of revenues, expenses, and changes in net assets.

Certain other transactions are reported as nonoperating revenues and expenses in accordance with GASB Statement No. 35. These nonoperating activities include the Universitys capital and noncapital appropriations from the State, financial aid and American Recovery & Reinvestment Act (ARRA) grants, net investment income, noncapital gifts, interest expense, and capital gifts and grants.

The State appropriates funds to the System on an annual basis. The appropriations are, in turn, allocated among the campuses by the Office of the Chancellor. Appropriations are recognized as revenue when authorization is received, and are reported as either noncapital appropriations when used to support general operations or capital appropriations when used for capital projects.

In fiscal year 2011, the State received federal education grants that were passed on to school districts and the States universities to restore state appropriations. The Governor had filed an application with the federal government to receive the States share of the Education Stabilization Fund that was created as part of the federal stimulus bill under the ARRA. The federal education grants have been appropriated to the System by the State and reported separately under the caption of other federal nonoperating grants, noncapital in nonoperating revenues and expenses in the accompanying statement of revenues, expenses, and changes in net assets.

Student tuition and fee revenue, and sales and services of auxiliary enterprises, including revenues from student housing programs, are presented net of scholarships and fellowships applied to student accounts. Certain other scholarship amounts are paid directly to, or refunded to, the student and are reflected as expenses.

(m) Internal Services Activities

Certain institutional internal service providers offer goods and services to University departments, as well as to their external customers. These include activities such as copy centers, postal services, and telecommunications. All internal services activities to University departments have been eliminated in the accompanying financial statements. These eliminations are recorded by removing the revenue and expense in the internal service sales and service units and, if significant, allocating any residual balances to those departments receiving the goods and services during the year.

(n) Income Taxes

The System was established under the State of California Education Code as an agency of the State. As a campus of the System, the University is generally not subject to federal or state income taxes. However, the University remains subject to income taxes on any net income that is derived from a trade or business, regularly carried on and not in furtherance of the purpose for which it was granted exemption. No income tax provision has been recorded as the net income, if any, from any unrelated



June 30, 2011

23 (Continued)

trade or business, in the opinion of management, is not material to the financial statements taken as a whole.

(o) Eliminations

All significant nonexchange transactions between the University and the discretely presented auxiliary organizations have been eliminated from the total column and are separately presented in the eliminations column in the accompanying statement of revenues, expenses, and changes in net assets.

(p) Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts in the accompanying financial statements. Actual results could differ from those estimates.

(3) Cash and Cash Equivalents and Investments

The Universitys cash and cash equivalents and investments as of June 30, 2011 are classified in the accompanying statement of net assets as follows:

Cash and cash equivalents $ 1,067,961

Short-term investments 165,440,680 Other long-term investments 19,336,029

Total investments 184,776,709

Total cash, cash equivalentsand investments $ 185,844,670

(a) Cash and Cash Equivalents

At June 30, 2011, cash and cash equivalents consisted of demand deposits held at commercial banks and petty cash. Total cash and cash equivalents of $1,067,961 had a corresponding carrying balance with commercial banks of $1,055,040,

Custodial Credit Risk for Deposits

Custodial credit risk for deposits is the risk that the University will not be able to recover deposits or will not be able to recover collateral securities that are in possession of an outside party. The California Government Code and Education Code do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits, other than the provision that a financial institution must secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law. This risk is mitigated in that the Universitys deposits are maintained at financial institutions that are fully insured or collateralized as required by state law.



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(b) Investments

At June 30, 2011, the Universitys investment portfolio consists primarily of investments in the State of California Surplus Money Investment Fund (SMIF) and the California State University Investment Pool. For the California State University Investment Pool, separate accounting is maintained as to the amounts allocable to the various funds and programs.

Investment Policy

State law and regulations require that surplus monies of the University must be invested. The primary objective of the Universitys investment policy is to safeguard the principal. The secondary objective is to meet the liquidity needs of the University. The third objective is to return an acceptable yield. The Universitys investment policy authorizes funds held in local trust accounts under Education Code Sections 89721 and 89724 to be invested in any of the securities authorized by Government Code Section 16430 and Education Code Section 89724, subject to certain limitations. In general, the Universitys investment policy permits investments in obligations of the federal and California state governments, certificates of deposit, high grade corporate and fixed income securities, and certain other investment instruments.

Interest Rate Risk

Interest rate risk is the risk that changes in interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. The University has formal duration guidelines to manage its interest rate risk. The duration guidelines include limits on the maximum maturity of any individual investment in the portfolio and average duration of the investment portfolio. One of the ways that the University manages its exposure to interest rate risk is by purchasing a combination of short-term and long-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or nearing maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. The University identifies and manages the interest rate risk inherent in its portfolio by measuring the weighted average maturity of its portfolio. Weighted average maturity is based on the stated maturity date, assuming that the callable investments will not be called. The weighted average maturity of the Universitys investment portfolio for each investment type as of June 30, 2011 is presented in the table below.

Credit Risk

Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization.



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The following table presents the fair value, weighted average maturity, and actual rating by investment type of the Universitys allocated share of the California State University Investment Pool and the SMIF as of June 30, 2011:

Weightedaverage Rating as of year-endmaturity Not

Investment type Fair value (in years) AAA AA A BBB rated

Money market $ 283,439 $ 283,439 Commercial paper 12,083,999 0.075 12,083,999 Certificates of deposit 22,595,225 0.410 1,513,566 14,717,045 6,364,614Repurchase agreements 384,923 0.003 384,923 U.S. agency securities 50,547,392 1.204 34,757,383 15,790,009 Corporate and fixed income

securities 53,388,280 1.700 20,101,291 13,903,071 19,293,122 90,796 U.S. Treasury securities 21,666,768 1.445 21,666,768State of California SMIF 22,959,824 0.640 22,959,824Mortgage-backed securities 866,859 7.550 733,037 133,822

Totalinvestments $ 184,776,709 $ 55,875,150 15,550,459 62,269,098 90,796 50,991,206

Concentration of Credit Risk

The Universitys investment policy contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. As of June 30, 2011, the following investments (other than U.S. Treasury securities, mutual funds, and external investment pools) represented 5% or more of the Universitys investment portfolio: Federal Home Loan Bank notes guaranteed by the federal government ($18,904,561 or 13%), Federal Home Loan Mortgage Corporation notes ($18,854,720 or 13%), and Federal National Mortgage Association notes guaranteed by the federal government ($10,507,773 or 7%).

Risk and Uncertainties

The University may invest in various types of investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that, such changes could materially affect the amounts reported in the statement of net assets.

The University, through the California State University Investment Pool, invests in securities with contractual cash flows, such as asset-backed securities and mortgage-backed securities. The value, liquidity, and related income of these securities are sensitive to changes in economic conditions, including real estate values, delinquencies or defaults, or both, and may be adversely affected by shifts in the markets perception of the issuers and changes in interest rates.

For information regarding the investments of the individual discretely presented auxiliary organizations, refer to their separately issued financial statements.



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(4) Accounts Receivable

Accounts receivable at June 30, 2011 consisted of the following:

Current Noncurrent Total

State appropriations $ 8,603 554,752 563,355 Auxiliary organizations 2,643,923 2,643,923 Student accounts 11,452,868 11,452,868 Other 1,850,588 1,850,588

15,955,982 554,752 16,510,734

Less allowance for doubtful accounts (3,933,107) (3,933,107) Total $ 12,022,875 554,752 12,577,627

(5) Lease Receivable

The University entered into a 30-year capital lease agreement with CSU Fullerton Auxiliary Services Corporation to lease the recently constructed Police Building facilities to the auxiliary organization effective November 1, 2009. A portion of the proceeds from the issuance of the Systemwide Revenue Bonds Series 2008A was used to finance such facilities. Lease payments are due twice a year on May 1 and November 1.

Lease payments are due to the University as follows:

Fiscal years ending:2012 $ 105,000 2013 110,000 2014 115,000 2015 120,000 2016 130,000 2017 2020 5,520,000

Total lease receivable 6,100,000

Less current portion (105,000) Long-term lease receivable, net of current portion $ 5,995,000



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27 (Continued)

(6) Student Loans Receivable

Student loans receivable, net at June 30, 2011 consisted of the following:

Perkins loans $ 5,435,187 Other student loans 11,911

Total student loansreceivable, gross 5,447,098

Less allowance for doubtful accounts (169,146)

Total student loansreceivable, net $ 5,277,952

(7) Notes Receivable

The University entered into an agreement with CSU Fullerton Auxiliary Services Corporation (ASC) to provide financing related to the off-campus faculty/staff housing project effective November 19, 2008. This project and debt originated with the CSU Fullerton Housing Authority, an auxiliary organization chartered for the purpose of developing and constructing low-cost faculty/staff housing. Proceeds from the issuance of the Systemwide Bond Anticipation Note were used primarily to refinance existing debt related to the project. Note payments from ASC are due twice a year, on May 1 and November 1.

Under the note agreements, note payments are due to the University as follows:

Fiscal year ending:2012 $ 230,000 2013 315,000 2014 340,000 2015 355,000 2016 370,000 Thereafter 12,523,000

Total notes receivable 14,133,000

Less current portion (230,000)

Long-term notes receivable,net of current portion $ 13,903,000



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28 (Continued)

(8) Capital Assets

Capital assets activity for the year ended June 30, 2011 consisted of the following:

Balance, Balance,June 30, 2010 Additions Retirements Transfers June 30, 2011

Nondepreciable/nonamortizablecapital assets:

Land and land improvements $ 3,289,167 3,289,167 Works of art and historical

treasures 2,327,623 2,327,623 Construction work in

progress 161,161,050 5,381,690 (160,782,321) 5,760,419

Total nondepreciable/nonamortizablecapital assets 166,777,840 5,381,690 (160,782,321) 11,377,209

Depreciable/amortizablecapital assets:

Buildings and buildingimprovements 597,816,387 46,092,415 160,565,718 804,474,520

Improvements, other thanbuildings 41,232,318 332,747 216,603 41,781,668

Infrastructure 46,031,339 120,024 46,151,363 Leasehold improvements 3,666,925 1,720,811 5,387,736 Personal property:

Equipment 33,257,558 3,279,909 (421,912) 36,115,555 Library books and

materials 21,591,385 441,034 (19,020) 22,013,399 Intangible assets 27,644,796 (508,581) 27,136,215

Total depreciable/amortizablecapital assets 771,240,708 51,986,940 (949,513) 160,782,321 983,060,456

Total cost 938,018,548 57,368,630 (949,513) 994,437,665



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Balance, Balance,June 30, 2010 Additions Retirements Transfers June 30, 2011

Less accumulated depreciation/amortization:

Buildings and buildingimprovements $ (235,456,843) (21,911,773) (257,368,616)

Improvements, other thanbuildings (24,414,229) (1,125,246) (25,539,475)

Infrastructure (17,482,714) (1,554,188) (19,036,902) Leasehold improvements (1,888,098) (510,094) (2,398,192) Personal property:

Equipment (20,468,866) (3,533,924) 412,207 (23,590,583) Library books and

materials (16,092,438) (1,122,808) 19,020 (17,196,226) Intangible assets (15,327,945) (4,266,948) 508,581 (19,086,312)

Total accumulateddepreciation/amortization (331,131,133) (34,024,981) 939,808 (364,216,306)

Net capital assets $ 606,887,415 23,343,649 (9,705) 630,221,359

For information regarding the capital assets of the individual discretely presented auxiliary organizations, refer to their separately issued financial statements.

(9) Lease Obligations

The University is obligated under various capital and operating leases and installment purchase agreements for the acquisition of equipment and facility rentals.

Capital leases consist primarily of leases of certain facilities and office equipment. Total capital assets related to capital leases have a carrying value of $26,360,595 at June 30, 2011. Substantially all of these assets are pledged as security for the related leases. The leases bear interest at rates ranging from 2.6% to 4.5% and have terms expiring in various years through 2030.

Operating leases consist primarily of leases for the use of real property and have terms expiring in various years through fiscal year 2031. The leases can be canceled if the State does not provide adequate funding.



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Future minimum lease payments under capital and operating leases having remaining terms in excess of one year are as follows:

Capital Operatingleases leases

Years ending June 30:2012 $ 5,436,671 1,604,636 2013 5,568,837 1,444,523 2014 4,423,260 1,342,560 2015 2,965,874 1,334,135 2016 2,204,548 1,364,633 2017 2021 17,810,521 2,067,689 2022 2026 8,538,625 287,200 2027 2031 8,536,875 287,200

Total minimum lease payments 55,485,211 $ 9,732,576

Less amount representing interest (18,354,295)

Present value of future minimum lease payments 37,130,916

Less current portion (3,907,259) Capital lease obligations, net of current portion $ 33,223,657

Rent expense under operating leases for the year ended June 30, 2011 totaled $1,671,510.

Lease financing is provided to the System for the construction of various System and campus facilities through its participation with the State in the State Public Works Board Lease Revenue Bond Program. Certain capital assets recorded by the University may have been financed under these arrangements. However, since the obligation for the repayment of this financing rests with the System and the proceeds of such financing are not readily identifiable with a campus or project, a substantial portion of such financing is not allocated to the individual campuses of the System. Unallocated Lease Revenue Bonds outstanding for the System as of June 30, 2011 totaled $804,745,000.

(10) Long-Term Debt Obligations

(a) General Obligation Bond Program

The General Obligation Bond program of the State has provided capital outlay funds for the three segments of California Higher Education through voter-approved bonds. Each of the approved bond programs provides a pool of available funds, which is allocated on a project-by-project basis among the University of California, the System, and the Community Colleges. Financing provided to the University through State General Obligation Bonds is not allocated to the System by the State. This debt remains the obligation of the State and is funded by state tax revenues. Accordingly, such debt is not reflected in the accompanying financial statements. Total General Obligation Bond debt carried by the State related to System projects is approximately $2,707,128,000 as of June 30, 2011.



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(b) Revenue Bond Programs

The Revenue Bond Act of 1947 provides the Trustees with the ability to issue revenue bonds to fund specific self-supporting programs. The statute has enabled the Trustees to finance student housing, student unions, parking facilities, health facilities, continuing education facilities, and auxiliary organization facilities.

The housing program provides on campus housing primarily for students. Housing is a self-supporting program deriving its revenues from fees collected for the use of the residence facilities and from interest income. Funds are used for current operating expenses, maintenance and repair, improvements to facilities, and interest and principal payments on outstanding bonds. Available balances after payment of all operating expenses and required charges remain available for future program expenses and capital needs.

The student union program provides facilities and programs aimed at creating and enhancing learning experiences outside the classroom by promoting interaction among students, faculty, and staff. The student union program is self-supporting and derives its revenues primarily from student fees and from interest income. Funds are used for maintenance and repair, improvements to facilities, and interest and principal payments on outstanding bonds. After payment of all authorized charges, the balances of these funds are available and can be transferred to a campus auxiliary organization that would have a contract with the University to operate the facility. The operating entity may derive additional revenue from facility subrental, recreational and commercial activities, and interest income.

The parking program provides parking facilities. The parking program is self-supporting and derives its revenues primarily from student fees and from interest income. Funds are used for construction, repair and maintenance, and principal and interest payments on outstanding bonds. Available balances after payment of all operating expenses and required charges remain available for future program expenses and capital needs.

The health facilities program provides facilities on campus in which to provide health services to students. The health facilities program derives its revenues primarily from student fees and from interest income. Funds are used for current operating expenses, maintenance and repair, improvements to facilities, and interest and principal payments on outstanding bonds. Available balances after payment of all operating expenses and required charges remain available for future program expenses and capital needs.

The continuing education program provides nonstate-supported courses to students. The continuing education program is self-supporting and derives its revenues primarily from student fees and from interest income. Funds are used for current operating expenses, maintenance and repair, improvements to facilities, and interest and principal payments on outstanding bonds. Available balances after payment of all operating expenses and required charges remain available for future program expenses and capital needs.

Designated auxiliary organization programs provide for certain additional facilities on campuses for the benefit of students and staff. Funds received by the University from designated auxiliary organizations are used to pay principal and interest payments on outstanding bonds. Available



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balances after payment of all operating expenses and required charges remain available for future program expenses and capital needs.

The Systemwide Revenue Bond program, formerly the Housing Revenue Bond program, was approved by the Trustees in fiscal year 2003. This program provides funding for various construction projects, including student residence and dining halls facilities, continuing education buildings, student unions, parking facilities, health facilities, and auxiliary organization facilities at designated campuses within the System as specified by the individual bond documents. It is designed to provide lower cost debt and greater flexibility to finance revenue bond projects of the System. Rather than relying on specific pledged revenues to support specific debt obligations, this program pools several sources of revenue as the pledge for the related revenue producing projects.

The University participates in the Systemwide Revenue Bond program and its allocated share of outstanding Systemwide Revenue Bond debt as of June 30, 2011 was $273,090,000, which has been used to finance certain projects.

The System has pledged future continuing education, healthcare facilities, housing, parking, and student union revenues plus designated auxiliary revenues, net of maintenance and operation expenses before extraordinary items (net income available for debt service), to repay $3,618,713,000 in Systemwide Revenue Bonds issued through fiscal year 2011. The bonds are payable solely from continuing education, healthcare facilities, housing, parking, student union, and designated auxiliary net income available for debt service and are payable through fiscal year 2045. The Systemwide Revenue Bond indenture requires net income available for debt service to be at least equal to aggregate debt service for all bond indebtedness each fiscal year. The total debt service remaining to be paid on the bonds for the System is $6,048,938,884. In fiscal year 2011, total debt service paid and net income available for debt service, which excluded the designated auxiliary net income, for the System were $226,515,000 and $309,165,000, respectively.

(c) Revenue Bond Anticipation Notes

Revenue Bond Anticipation Notes (BANs) are authorized and issued by the Trustees and purchased by the California State University Institute (the Institute), an auxiliary organization of the System, to provide short-term financing to the System for construction projects. They are generally issued for one- to three-year periods of up to three years in anticipation of issuing permanent revenue bonds at a future date. The University-issued BANs were issued for the University during 2011 to finance the development and construction of housing facilities. Interest is variable and changes based upon the cost of the Institutes commercial paper program. The interest rate was 0.37% as of June 30, 2011. Amounts outstanding under the BANs totaled $14,133,000 at June 30, 2011. The not-to-exceed amounts related to outstanding amounts totaled $16,930,000 of which $1,640,000 was unissued at June 30, 2011.



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Long-term debt obligations of the University as of June 30, 2011 consist of the following:

Fiscal year of Original AmountInterest maturity issue outstanding

Description rate date amount at June 30

Systemwide revenue bonds:Housing Series 2002A 4.25-5.50% 2031/32 $ 22,450,000 18,950,000 Parking Series 2004A 2.75-525% 2029/30 21,850,000 18,520,000 Parking Series 2005A 3.25% 5.00% 2031/32 17,205,000 15,620,000 Housing Series 2005B 5.00% 2015/16 4,055,000 2,230,000 Student Union Series 2007A 4.00-5.00% 2037/38 26,595,000 25,295,000 Student Union Series 2007C 5.00% 2020/21 7,020,000 5,780,000 Auxiliary Police Building

Series 2008A 3.50-5.00% 2038/39 6,305,000 6,100,000 Housing Series 2009A 3.00-6.00% 2040/41 69,195,000 69,195,000 Housing Series 2010A 1.00% 5.00% 2028/29 33,075,000 33,075,000 Parking Series 2010A 1.00% 5.00% 2021/22 6,750,000 6,750,000 Housing Series 2010B 6.43% 6.48% 2041/42 56,875,000 56,875,000 Parking Series 2010B 5.45% 6.48% 2035/36 14,700,000 14,700,000 BAN Auxiliary Organization Variable 2018/19 15,715,000 14,133,000

Other:Energy Conservation Project 4.40% 2023/24 22,500,000 20,282,264 College of Business ASC

Loan Variable 2022/23 3,500,000 2,268,119

Total 309,773,383

Unamortized bond premium 3,519,493 Unamortized loss on refunding (157,385)

Total long-term debt 313,135,491

Less current portion (5,242,390)

Long-term debt, net of current portion $ 307,893,101



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Long-term debt principal obligations and related interest mature in the following fiscal years:

Principal Interest Total

Years ending June 30:2012 $ 5,242,390 15,547,544 20,789,934 2013 7,144,820 15,338,269 22,483,089 2014 7,544,188 15,065,416 22,609,604 2015 8,123,995 14,730,131 22,854,126 2016 8,784,654 14,343,707 23,128,361 2017 2021 59,534,526 65,337,958 124,872,484 2022 2026 50,778,810 53,127,877 103,906,687 2027 2031 55,940,000 39,286,754 95,226,754 2032 2036 52,420,000 23,784,553 76,204,553 2037 2041 48,990,000 8,981,065 57,971,065 2042 2046 5,270,000 170,853 5,440,853

$ 309,773,383 265,714,127 575,487,510

Long-term debt obligations of the discretely presented auxiliary organizations have been issued to purchase or construct facilities for University-related uses. For information regarding the long-term debt obligations of the individual discretely presented auxiliary organizations, refer to their separately issued financial statements.

(11) Advanced Refundings

Prior Years Refundings

In prior years, the University defeased certain Systemwide Revenue Student Union Series C Bonds by placing the proceeds from the issuance of the Systemwide Revenue Bonds Series 2007C refunding bonds in an irrevocable trust with the State Treasurer to provide for all future debt service payments on the refunded bonds. The proceeds from the refunding bonds were used to purchase U.S. government securities that were placed in the State University Trust Fund. The investments and fixed earnings from the investments are considered sufficient to fully service the defeased debt until the debt is called or matured. Accordingly, the trust account assets and the liability for the defeased bonds are not included in the Universitys financial statements. The amount of prior year defeased bonds outstanding as of June 30, 2011 totaled $7,020,000.



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(12) Long-term Liabilities Activity

Long-term liabilities activity of the University for the year ended June 30, 2011 was as follows:

Beginning Ending Currentbalance Additions Reductions balance portion

Accrued compensated absences $ 10,017,709 7,906,866 (5,703,826) 12,220,749 6,110,386 Capitalized lease obligations

(note 9) 40,669,106 (3,538,190) 37,130,916 3,907,259 Long-term debt obligations

(note 10):Systemwide Revenue

Bonds Student Union 31,960,000 (885,000) 31,075,000 925,000 Systemwide Revenue

Bonds Housing 181,185,000 (860,000) 180,325,000 905,000 Systemwide Revenue

Bonds Parking 56,610,000 (1,020,000) 55,590,000 1,550,000 Systemwide Revenue

Bonds Auxiliary Organization 6,205,000 (105,000) 6,100,000 105,000 Revenue Bond Anticipation

Notes Auxiliary Organization 14,289,000 39,064 (195,064) 14,133,000 230,000 Other 24,060,385 (1,510,002) 22,550,383 1,527,390

Total 314,309,385 39,064 (4,575,066) 309,773,383 5,242,390

Unamortized bond premium 3,787,822 (268,329) 3,519,493 Unamortized loss on refunding (184,105) 26,720 (157,385)

Total long-term debtobligations 317,913,102 39,064 (4,816,675) 313,135,491 5,242,390

Total long-termliabilities $ 368,599,917 7,945,930 (14,058,691) 362,487,156 15,260,035

(13) Pension Plan and Postretirement Benefits

(a) Pension Plan

Plan Description

The University, as an agency of the State, contributes to the CalPERS. The States plan with CalPERS is an agent multiple-employer defined benefit pension plan and CalPERS functions as an investment and administrative agent for its members. For the University, the plan acts as a cost-sharing multiple-employer defined benefit pension plan, which provides a defined benefit pension and postretirement program for substantially all eligible University employees. The plan also provides survivor, death, and disability benefits. Eligible employees are covered by the Public Employees Medical and Hospital Care Act (PEMHCA) for medical benefits.

CalPERS issues a publicly available comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS annual financial report



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may be obtained from the California Public Employees Retirement System Executive Office, 400 P Street, Sacramento, CA 95814.

Funding Policy

University personnel are required to contribute 5% of their annual earnings in excess of $513 per month to CalPERS. The University is required to contribute at an actuarially determined rate; the current rate is approximately 18.2% of annual covered payroll. The contribution requirements of the plan members are established and may be amended by CalPERS. There is no contractual maximum contribution required for the University by CalPERS.

The Universitys contributions to CalPERS for the most recent three fiscal years were equal to the required contributions and were as follows:

2009 $ 25,717,050 2010 23,719,195 2011 28,030,416

(b) Postretirement Healthcare Plan

The GASB has issued GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, relating to Other Postemployment Benefits (OPEB), which is effective July 1, 2007. Under this Statement, public employers sponsoring and subsidizing retiree healthcare benefit programs will need to recognize the cost of such benefits on an accrual basis.

Plan Description

The State provides retiree healthcare benefits to statewide employees including University employees through the programs administered by CalPERS. The States substantive plan represents a single-employer defined benefit OPEB plan, which includes medical and prescription drug benefits (collectively, healthcare benefits) to the retired University employees. The System provides dental benefits to eligible Universitys retirees. Eligible retirees receive healthcare and dental benefits upon retirement at age 50 with five years of service credit.

For healthcare benefits, CalPERS offers Preferred Provider Organizations (PPOs), Health Maintenance Organizations (HMOs), and Exclusive Provider Organizations (EPOs) (limited to members in certain California counties); for dental benefits, a Dental Maintenance Organization (DMO) and dental indemnity plans to the Universitys retirees. Health plans offered, covered benefits, monthly rates, and copayments are determined by the CalPERS Board, which reviews health plan contracts annually.

The contribution requirements of retirees and the State are established and may be amended by the State legi

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