4695e99 warner university, inc. - florida auditor … rpts/2015...warner university, inc. statements...

WARNER UNIVERSITY, INC.

FINANCIAL STATEMENTS

AND SUPPLEMENTAL INFORMATION

YEARS ENDED JUNE 30, 2015 AND 2014


FINANCIAL STATEMENTS

AND SUPPLEMENTAL INFORMATION


TABLE OF CONTENTS

Page

Independent Auditor's Report 1-2

Financial Statements:

Statements of Financial Position 3

Statements of Activities 4

Statements of Cash Flows 5-6

Notes to Financial Statements 7-17

Supplemental Information:

Supplemental Schedules of Change in Net Assets 18

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 19-20

Independent Auditor's Report on Compliance for

Each Major Program and on Internal Control

Over Compliance Required by OMB Circular A-133 21-22

Schedule of Expenditures of Federal Awards and Florida

Financial Assistance Programs 23

Notes to Schedule of Expenditures of Federal Awards and

Florida Financial Assistance Programs 24-26

Schedule of Findings and Questioned Costs 27-28

Summary of Population, Items Tested, and Findings for

Florida Financial Assistance Programs 29

Schedule of Prior Audit Findings and Questioned Costs:

Federal Awards Programs 30

Florida Financial Assistance Programs 31

3


STATEMENTS OF FINANCIAL POSITION

JUNE 30, 2015 AND 2014

2015 2014

ASSETS

Cash and cash equivalents $ 116,212 $ 228,701

Accounts receivable from students, net 2,997,546 3,660,943Contributions receivable, net 169,417 531,552

Investments 2,312,217 2,795,670Inventory 276,756 239,477

Prepaids and other 84,889 92,330Loans receivable from students 339,667 337,266

Net property and equipment 26,758,383 25,505,870

Total assets $33,055,087 $33,391,809

LIABILITIES AND NET ASSETS

Liabilities

Accounts payable $ 199,419 $ 299,860

Accrued expenses 468,720 424,808Deferred revenue 582,878 595,294

Student deposits 598,040 606,397Deposits and other current liabilities 23,524 29,850

Annuities payable 148,170 201,471Refundable Federal funds - student loans 311,514 305,442

Line of credit 2,911,600 3,054,600Capitalized lease obligations 737,031 107,691

Notes payable 9,460,239 10,562,142

Total liabilities 15,441,135 16,187,555

Net Assets

Unresticted:

Undesignated (422,455) 2,285,462

Investment in property and equipment,

net of related liabilities 15,074,113 13,349,037

14,651,658 15,634,499Temporarily restricted 2,634,749 1,242,210

Permanently restricted 327,545 327,545

Total net assets 17,613,952 17,204,254

Total liabilities and net assets $33,055,087 $33,391,809

The accompanying notes to financial

statements should be read in con-

junction with this statement.


STATEMENTS OF ACTIVITIES


Temporarily

Unrestricted RestrictedOperating Activities

Revenues, Gains, and Other Support

Gross tuition and fees $16,470,487 $

Less: financial aid (5,468,831)

Net student tuition and fees 11,001,656Auxiliary enterprises 3,303,760

Contributions received 2,730,038 1,538,762Other support 234,704

Investment income 168,598Net realized and unrealized gain on investments (16,415) (9,668)

Net assets released from restriction for scholarships 130,863 (130,863)

Total revenues, gains, and other support 17,553,204 1,398,231

Expenses

Student services 5,349,755

Institutional support 5,701,357Instruction 3,531,787

Auxiliary enterprises 2,293,197Academic support 1,691,255

Total expenses 18,567,351

Change in net assets from operating activities (1,014,147) 1,398,231

Nonoperating Activities

Investment income in excess of amounts used for operations 7,549 18,065

Net assets released from restriction for capital improvements 23,757 (23,757)

Change in net assets from nonoperating activities 31,306 (5,692)

Change in net assets (982,841) 1,392,539

Net assets at beginning of year 15,634,499 1,242,210

Net assets at end of year $14,651,658 $ 2,634,749




44

2015 2014

Permanently Temporarily Permanently

Restricted Total Unrestricted Restricted Restricted Total

$ $16,470,487 $15,489,973 $ $ $15,489,973

(5,468,831) (5,007,122) (5,007,122)

11,001,656 10,482,851 10,482,8513,303,760 3,062,770 3,062,770

4,268,800 1,117,613 320,787 1,438,400234,704 429,061 429,061

168,598 104,072 104,072(26,083) 40,771 235,885 276,656

118,424 (118,424)

18,951,435 15,355,562 438,248 15,793,810

5,349,755 5,005,133 5,005,133

5,701,357 3,637,973 3,637,9733,531,787 3,327,507 3,327,507

2,293,197 2,174,960 2,174,9601,691,255 1,545,664 1,545,664

18,567,351 15,691,237 15,691,237

384,084 (335,675) 438,248 102,573

25,614 10,894 14,069 24,963

1,527,490 (1,527,490)

25,614 1,538,384 (1,513,421) 24,963

409,698 1,202,709 (1,075,173) 127,536

327,545 17,204,254 14,431,790 2,317,383 327,545 17,076,718

$ 327,545 $17,613,952 $15,634,499 $ 1,242,210 $ 327,545 $17,204,254

5


STATEMENTS OF CASH FLOWS


2015 2014

Operating Activities

Change in net assets $ 409,698 $ 127,536

Adjustments to reconcile change in net assets

to net cash provided (used) by operating activities:

Net realized and unrealized (gain)

loss on investments 26,083 (276,656)Depreciation 921,700 646,980

Noncash forgiveness of notes payable (1,800,000)Reinvested investment income (25,614) (24,963)

Bad debt provision 617,197 74,713(Increase) decrease in:

Student receivables 43,799 (421,744)Contributions receivable 362,135 (478,110)

Inventory (37,279) (507)Prepaids and other 7,441 29,209

Increase (decrease) in:

Accounts payable and accrued expenses (56,529) 55,144

Deferred revenue and annuities (65,717) (94,552)Deposits (8,611) 44,022

Total adjustments (15,395) (446,464)

Net cash provided (used) by operating activities 394,303 (318,928)

Investing Activities

Purchases of property and equipment (1,413,706) (5,961,848)Proceeds from sales of securities 501,963 24,293

Purchases of investments (18,979) (1,448,747)

Net cash used by investing activities (930,722) (7,386,302)

6


STATEMENTS OF CASH FLOWS - CONTINUED


2015 2014

Financing Activities

Payments on notes payable and capital leases $ (437,267) $ (405,483)

Net (payments) proceeds - line of credit (143,000) 1,454,600

Proceeds from notes payable 1,004,197 6,730,100

Net cash provided by financing activities 423,930 7,779,217

Net increase (decrease) in cash and cash equivalents (112,489) 73,987

Cash and cash equivalents at beginning of year 228,701 154,714

Cash and cash equivalents at end of year $ 116,212 $ 228,701

Supplemental Disclosure of Cash Flow Information

Interest paid during the year $ 753,970 $ 387,447

Noncash Investing and Financing Activities

Contribution of notes payable upon death of lender $ 1,800,000 $

Purchase of furniture and equipment via capital lease $ 760,507 $




7


NOTES TO FINANCIAL STATEMENTS


General

Warner University, Inc. (the University) is a Christian coeducational liberal arts university,

founded in 1968, and located in Lake Wales, Florida. It is affiliated with the General Assembly of the

Church of God based in Anderson, Indiana and offers two and four year degrees in a variety of fields

and three masters degree programs in business administration, management, and education. Its total

enrollment is 1,162 students, of which 367 are residential students and approximately 501 are enrolled

in online programs.

Note A - Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements are prepared on the accrual basis of accounting. Net

assets, revenues, gains, and losses are classified based on the absence or existence and nature of

donor-imposed restrictions as follows:

Unrestricted Net Assets - Net assets that are not subject to donor-imposed restrictions.

Temporarily Restricted Net Assets - Net assets subject to donor-imposed restrictions that will be

met either by actions of the University or the passage of time.

Permanently Restricted Net Assets - Net assets subject to donor-imposed restrictions that they be

maintained permanently by the University. Generally, the donors of such assets permit the University

to use all or part of the income earned on these assets.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally

accepted in the United States of America requires management to make estimates and assumptions

that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

Accounts Receivable - Students

Accounts receivable from students represent amounts due for tuition, fees, room, and board from

currently enrolled and former students. The University extends credit to students and parents of

dependent students in connection with their enrollment. Accounts receivable are stated at their

estimated net realizable value. Management provides an allowance for doubtful accounts, equal to

the estimated uncollectible amount, based on historical collection experience and a review of the

current status of individual accounts. At June 30, 2015 and 2014, the allowance for doubtful accounts

is approximately $1,605,000 and $985,000, respectively. The University assesses interest on unpaid

amounts at 1% per month when an unpaid account reaches 90 days past due. Balances outstanding

after the University has used reasonable collection efforts are written off through a charge to the

valuation allowance. It is reasonably possible that the estimate of the allowance for doubtful accounts

will change.

8


NOTES TO FINANCIAL STATEMENTS - CONTINUED


Note A - Summary of Significant Accounting Policies - Continued

Contributions Receivable

Unconditional promises to give are recorded at estimated net realizable value. Contributions to

be received after one year are discounted to the present value of estimated future cash flows.

Cash and Cash Equivalents

For purposes of the Statements of Cash Flows, the University considers all highly liquid

investments purchased with an original maturity of three months or less to be cash equivalents.

Investments

Investments are stated at estimated fair value. See Note I for fair value measurements.

Remainder Interest in Charitable Trusts

Remainder interest in charitable trusts represents assets held in trust by others for which the

University is irrevocably designated as remainder. These investments are valued at market,

discounted at 5%. Management believes the net amount approximates the present value of estimated

future cash flows.

Inventory

Inventory consists of bookstore merchandise held for sale and consumable printing supplies.

Inventories are stated at the lower of cost or market, with cost determined on a first-in, first-out basis.

Loans Receivable from Students

Loans receivable from students represents amounts owed on student loans made under the

Federal Perkins Loan Program.

Property and Equipment

Property and equipment are recorded at cost if purchased, or estimated fair value at the date of

donation. Depreciation is computed using the straight-line method over the estimated useful lives of

the related assets. Lives generally range from five to ten years for equipment, ten to twenty years for

property improvements, and forty to sixty years for buildings.

Expenditures for repairs necessary to maintain property and equipment in efficient operating

condition are charged to operations. Expenditures which increase the useful lives of assets are

capitalized.

9





Impairment of Long-Lived Assets and Property Held for Sale

Long-lived assets and property held for sale are reviewed for impairment whenever events or

changes in circumstances indicate that the amount of an asset may not be recoverable. Recoverability

is measured by a comparison of the carrying amounts of an asset to future net cash flows expected to

be generated by the asset. If an asset is considered impaired, the impairment loss to be recognized is

measured by the amount by which the carrying amount of the asset exceeds its fair value.

Revenue Recognition

Tuition, room, board, and participation fees are recognized over the term of the respective

semester. Other fee and auxiliary enterprise revenues are recognized as products are sold or services

are provided.

Contributions, including unconditional promises to give, are recognized as revenues in the period

received. Donated marketable securities and other noncash donations are recorded as contributions

at their fair value at the date of the donation. The University reports contributions of cash and other

assets as restricted support if the donor stipulates a limited use of the donated assets. When a donor

restriction expires, that is, when a stipulated time restriction ends or purpose restriction is

accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported

in the Statements of Activities as Net Assets Released from Restriction. Conditional promises to give

are recognized only when the conditions on which they depend are substantially met and the promises

become unconditional.

The University reports contributions of land, buildings, and equipment as unrestricted support

unless explicit donor restrictions specify how donated assets must be used. Contributions of long-

lived assets with explicit restrictions that specify how the assets are to be used and contributions of

cash or other assets that must be used to acquire long-lived assets are reported as restricted support.

Absent explicit donor restrictions about how long these long-lived assets must be maintained, the

University reports expirations of donor restrictions when the donated or acquired long-lived assets

are placed in service as instructed by the donor. The University reclassifies temporarily restricted net

assets to unrestricted net assets at that time.

Functional Allocation of Expenses

The costs of providing the University's various programs and activities have been summarized on

a functional basis in the Statements of Activities. Accordingly, certain costs have been allocated

among the programs and supporting services benefited.

10





Tax Status and Positions

The University is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue

Code and is not subject to federal and state income taxes on exempt income. In addition, the

University qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has

been classified as an organization that is not a private foundation under Section 509(a)(2).

Although organizations exempt under Section 501(c)(3) pay no tax on their exempt function

income, they can be liable for business tax on income they earn from activities not related to their

exempt purpose. For the years ended June 30, 2015 and 2014, management believes the University

engaged in no activities that are not related to its exempt purpose.

In accordance with Accounting Standards Codification (ASC) 740-10, any interest and penalties

recognized associated with a tax position are classified as current in the University's financial

statements.

Management has evaluated its tax positions taken for all open years. Currently, the 2011 - 2014

tax years are open and subject to examination by the Internal Revenue Service. The University is not

currently under audit, nor has it been contacted by the Internal Revenue Service. Based on the

evaluation of the University's tax positions, management believes all positions taken would be upheld

under an examination.

Reclassifications

Certain amounts in the 2014 financial statements have been reclassified to conform to the 2015

presentation. No change in net assets as previously reported for 2014 results from these

reclassifications.

Date of Management Review

Subsequent events were evaluated through October 14, 2015 , which is the date the financial

statements were available to be issued.

11




Note B - Contributions Receivable

Contributions receivable at June 30, 2015 and 2014, consist of the following unconditional

promises to give to the University:

2015 2014

Within one year $ 104,905 $ 223,770One to five years 60,142 257,377

Six to ten years 37,580 117,138 Total 202,627 598,285

Less: present value discount at 4% (17,237) (17,033) Less: allowance for uncollectible pledges (15,973) (50,000)

Net pledges receivable $ 169,417 $ 531,252

The allowance for uncollectible contributions is based on management's judgment and analysis

of contributions receivable, past collection experience, and other relevant factors that bear on the

ultimate collectibility of outstanding amounts.

Note C - Investments

At June 30, 2015 and 2014, investments consist of:

2015 2014Corporate stock $ 55,755 $ 148,905

Corporate bonds and notes 530,324Mutual funds 1,529,156 1,407,490

Remainder interest in charitable trusts 727,306 708,951

Total investments $ 2,312,217 $ 2,795,670

Investment activity during the years ended June 30, 2015 and 2014, is as follows:

2015 2014Investments, beginning of year $ 2,795,670 $ 1,069,597

Investments donated and purchased 18,979 1,448,747Withdrawal by University:

Scholarships (16,400) (16,222) Working capital (476,560)

Investment returns/gains:

Reinvested dividends and interest 25,614 24,963

Net realized and unrealized gains (26,083) 276,656Investment expenses (9,003) (8,071)

Investments, end of year $ 2,312,217 $ 2,795,670

12




Note D - Property and Equipment

Property and equipment at June 30, 2015 and 2014, consists of the following:

2015 2014Buildings $27,111,114 $25,851,770

Land and improvements 2,975,763 2,881,914Equipment, furniture, and vehicles 2,424,996 2,323,623

Books and collections 774,143 756,532Property held for investment 1,458,962 823,873

Construction in progress 81,483 59,804

Total 34,826,461 32,697,516 Less: accumulated depreciation 8,068,078 7,191,646

Net property and equipment $26,758,383 $25,505,870

At June 30, 2015, construction in progress consists of the following:

2015 EstimatedBalance Total Cost

Agriculture building $ 51,902 $ 2,000,000Physical plant building and barn 21,181 50,000

Athletic facilities 8,400 10,000

Total construction in progress $ 81,483 $ 2,060,000

Depreciation expense for June 30, 2015 and 2014, was $921,700 and $646,980, respectively.

Note E - Annuities Payable

At June 30, 2015 and 2014, the University has annuity agreements with eight individuals.

Pursuant to terms of agreements with these donors, the University pays a fixed amount to them over

their remaining lives. At June 30, 2015 and 2014, a liability of $148,170 and $201,471 is recorded

based on their life expectancies using a discount rate of 7%.

Note F - Line of Credit

The University has a $3,200,000 line of credit agreement with Citizens Bank & Trust of Polk

County. At June 30, 2015 and June 30, 2014, outstanding borrowings total $2,911,600 and $3,054,600,

respectively. Interest on borrowings is payable monthly at 5%. The line is due in full on September

15, 2017, unless demand is made earlier. The line of credit is collateralized by a mortgage on the

improved portion of the west campus.

13




Note G - Capitalized Lease Obligations

The University periodically enters into capitalized lease obligations for equipment. These leases

are classified as capital leases since they provide for bargain purchase options at the expiration of the

lease terms. At June 30, 2015 and June 30, 2014, the University has included in net property and

equipment leased assets with a net book value of $751,959 and $134,405, respectively. Amortization of

assets held under capital leases is included with depreciation expense.

The following is a schedule of future minimum lease payments under the capital leases at June

30, 2015 (imputed interest not material):

Year Ending

June 30, 2016 $ 214,921

2017 179,033 2018 186,653

2019 156,424

Total $ 737,031

Note H - Notes Payable

As of June 30, 2015 and 2014, notes payable consist of:

2015 2014Two remaining notes payable to one estate. Proceeds

used for capital purchases. Interest payable monthlyat 4.5%. Maturity date of December 11, 2015.

Four of these notes totaling $1,800,000 wereforgiven during 2015 as part of estate distributions. $ 700,000 $ 2,250,000

Notes payable to churches and related entities.

Interest rates ranging from 4.25% to 4.5%. Notes are due on demand. Uncollateralized. 863,000 113,000

Note payable to Citizens Bank & Trust of Polk

County. Collateralized by a mortgage on the improved portion of the west campus. Monthly

payments of $34,623 include principal and interest at 5.5%. Balloon payment of

$4,465,372 due February 7, 2018. 4,860,344 5,000,000

14




Note H - Notes Payable - Continued

2015 2014Note payable to Citizens Bank & Trust of Polk

County. Collateralized by a mortgage on the improved portion of the west campus. Monthly

payments of $11,912 include principal and interest at 4.99%. Balloon payment of

$1,292,281 due April 25, 2017. $ 1,419,634 $ 1,488,838

Note payable to Citizens Bank & Trust of Polk County. Collateralized by a mortgage on the

improved portion of the west campus. Monthly payments of $6,875 plus interest at 6% on the

outstanding balance, through September 2016. Balloon payment of $1,074,229 due

October 1, 2016. 1,178,885 1,254,510

Note payable to Citizens Bank & Trust of Polk County. Collateralized by a mortgage on the

improved portion of the west campus. Monthly payments of $4,000 through April 2020, include

interest at 5%. Balloon payment of $297,159 due in May 2020. 438,376 455,794

Total notes payable $ 9,460,239 $10,562,142

Maturity of notes payable is as follows. Amounts due on demand are classified as payable during

the year ending June 30, 2016.

Year Ending Amount Due

June 30, or Callable 2016 $ 1,783,674

2017 1,726,407 2018 5,596,276

2019 30,445 2020 323,437

Total $ 9,460,239

15




Note I - Fair Value Measurements

The University's financial assets and liabilities are stated at fair value based on the following

hierarchy of fair value measurement inputs:

Level 1 Financial assets and liabilities whose values are based on unadjusted quoted prices

for identical assets or liabilities in an active market.

Level 2 Financial assets and liabilities whose values are based on quoted prices in markets

that are not actively traded.

Level 3 Financial assets and liabilities whose values are based on prices or valuation

techniques that require inputs that are both unobservable and significant to the

overall fair value measurement. These inputs reflect management's own

assumptions about the assumptions a market participant would use in pricing the

asset or liability.

At June 30, 2015, the University's financial assets and liabilities are categorized as follows:

Fair Value Level 1 Level 3

Assets

Corporate stock $ 55,755 $ 55,755 $

Mutual funds 1,529,156 1,529,156Remainder interest in charitable trusts 727,306 727,306

Total $ 2,312,217 $ 1,584,911 $ 727,306

Liabilities

Annuities payable $ 148,170 $ $ 148,170

Notes payable 9,460,239 9,460,239

Total $ 9,608,409 $ $ 9,608,409

16




Note I - Fair Value Measurements - Continued

At June 30, 2014, the University's financial assets and liabilities are categorized as follows:

Fair Value Level 1 Level 3Assets

Corporate stock $ 148,905 $ 148,905 $Corporate bonds and notes 530,324 530,324

Mutual funds 1,407,490 1,407,490Remainder interest in charitable trusts 708,951 708,951

Total $ 2,795,670 $ 2,086,719 $ 708,951

Liabilities

Annuities payable $ 201,471 $ $ 201,471Notes payable 10,562,142 10,562,142

Total $10,763,613 $ $10,763,613

Financial assets and liabilities valued using Level 3 inputs had the following activity:

2015 2014Remainder interest in charitable trusts,

beginning of year $ 708,951 $ 503,162Unrealized gains or losses in fair value 18,355 205,789

Split-interest agreements, end of year $ 727,306 $ 708,951

Annuities payable, beginning of year $ 201,471 $ 314,027

Annuity payments (38,682) (95,785)Unrealized gains or losses in fair value (14,619) (16,771)

Annuities payable, end of year $ 148,170 $ 201,471

Notes and loans payable, beginning of year $10,562,142 $ 4,175,402

Loans originated 1,004,197 6,730,100Principal repaid (306,100) (343,360)

Principal forgiven (1,800,000)Unrealized gains or losses in fair value

Notes and loans payable, end of year $ 9,460,239 $10,562,142

17




Note J - Restricted Net Assets

Temporarily restricted net assets at June 30, 2015 and 2014, are available for the following

purposes:

2015 2014Scholarships $ 123,624 $ 149,984

Agriculture program 1,783,819 383,275Unrestricted (time restriction) 727,306 708,951

Total temporarily restricted net assets $ 2,634,749 $ 1,242,210

Permanently restricted net assets are invested in perpetuity, the income from which is restricted

for providing scholarships to qualified students. At June 30, 2015 and 2014, the University's

permanently restricted net assets consist of the Blackford Scholarship Fund.

Note K - Significant Concentrations of Credit Risk

Financial instruments that potentially subject the University to concentrations of credit risk

consist principally of temporary cash investments and student receivables. The University maintains

its cash in bank deposit accounts that, at times, may exceed federally insured limits. At June 30, 2015

and 2014, all cash balances are fully insured. Concentrations of credit risk with respect to student

receivables are limited due to the large number of students and their dispersion across different

geographic areas.

Note L - Employee Benefit Plans

The University sponsors a 403(b) retirement plan for all full-time faculty and staff members who

have completed one year of service. Under the plan, participants may contribute up to 15% of their

salary through salary reductions. The University contributes to the Plan 5% of each eligible

employee's salary. The University contributed $261,250 and $240,161 to the plan for the years ended

June 30, 2015 and 2014, respectively.

In 2011, the University established a non-qualified deferred compensation plan for the benefit of

the president of the University. The University entered into a "Rabbi Trust" agreement with an

independent trustee for the purpose of funding this plan. The trust was terminated effective June 30,

2014. The president renounced any interest he had in the "Rabbi Trust". The assets that were

previously held by the plan remain in the investments of the University; however, the liability of the

deferred compensation plan was eliminated with dissolution of the trust.

SUPPLEMENTAL INFORMATION

18


SUPPLEMENTAL SCHEDULES OF CHANGE IN NET ASSETS


2015 2014

Revenues, Gains, and Other Support

Gross tuition and fees $16,470,487 $15,489,973

Less: financial aid (5,468,831) (5,007,122)

Net student tuition and fees 11,001,656 10,482,851Auxiliary enterprises 3,303,760 3,062,770

Contributions received 4,268,800 1,438,400Other support 234,704 429,061

Investment income 194,212 129,036Net realized and unrealized gain (loss) on investments (26,083) 276,656

Total revenues, gains, and other support 18,977,049 15,818,774

Expenses

Student services 5,060,152 4,756,567Institutional support 2,643,926 2,297,874

Instruction 3,340,597 3,162,256Auxiliary enterprises 2,169,057 2,066,946

Academic support 1,599,701 1,468,902Operation and maintenance of plant 1,005,124 779,266

Total expenses before interest and depreciation 15,818,557 14,531,811

Excess of revenues, gains, and other support over

expenses before interest, depreciation, and

bad debt expense 3,158,492 1,286,963

Interest expense 756,127 387,447

Depreciation 921,700 646,980Bad debt expense 1,070,967 125,000

Change in net assets $ 409,698 $ 127,536

23


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

AND FLORIDA FINANCIAL ASSISTANCE PROGRAMS

YEAR ENDED JUNE 30, 2015

Federal Federal

CFDA No. ExpendituresFederal Grantor - U. S. Department of Education:

Student Financial Aid Cluster:

Federal Supplemental Educational Opportunity Grants 84.007 $ 67,729

Federal Work-Study Program 84.033 76,381Federal Perkins Loan Program (Note B) 84.038 27,070

Federal Pell Grant Program 84.063 3,198,456Federal Direct Student Loan Program 84.268 9,283,168

Teacher Education Assistance for College

and Higher Education Grants 84.379 40,166

Total expenditures of Federal awards $12,692,970

Florida Florida

CSFA No. ExpendituresFlorida Grantor - Florida Department of Education:

Florida Work Experience Program 48.053 $ 44,083

Florida Student Assistance Grant Program 48.054 224,390Scholarships for Children and Spouses of Deceased

or Disabled Veterans and Service Members 48.055 9,808Florida Bright Futures Scholarship Program 48.059 163,673

Florida Resident Access Grant Program 48.064 2,319,000

Subtotal 2,760,954

Florida Grantor - Florida Department of Highway

Safety and Motor Vehicles:

Warner Southern College License Plate Project 76.062 3,042

Total expenditures of Florida financial assistance programs $ 2,763,996

The accompanying notes to schedule of

expenditures of Federal awards and

Florida financial assistance programs

should be read in conjunction with

this schedule.


NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND FLORIDA FINANCIAL ASSISTANCE PROGRAMS


Note A - Basis Of Presentation The accompanying Schedule of Expenditures of Federal Awards and Florida Financial Assistance Programs includes the Federal and Florida grant activity of Warner University, Inc. The schedule is prepared on the cash basis of accounting. Expenditures are recognized when paid. The amounts presented include required matching amounts, where applicable. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and the Florida Single Audit Act. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. Because the schedule presents only a selected portion of the activities of the University, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the University in accordance with accounting principles generally accepted in the United States of America. Note B - Loans Outstanding At June 30, 2015, Warner University, Inc., had loans outstanding under the Federal Perkins Loan Program (CFDA No. 84.038) of $311,514. Loans made during the year are included in the Federal expenditures presented in the schedule. Note C - Florida Student Financial Assistance Programs The administration of each State program is the responsibility of the Florida Department of Education's Office of Student Financial Assistance and management of Warner University, Inc. The following is a brief description of each Florida student financial assistance program administered by the Student Financial Aid Office of Warner University, Inc.:

1. Florida Work Experience Program

The Florida Work Experience Program (FWEP) is a need-based program providing eligible Florida students work experiences to complement and reinforce their educational and career goals. FWEP is a decentralized program, which means each participating institution determines application procedures, deadlines, student eligibility, and award amounts.

24


NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND FLORIDA FINANCIAL ASSISTANCE PROGRAMS - CONTINUED


Note C - Florida Student Financial Assistance Programs - Continued

2. Florida Student Assistance Grant Program The Florida Student Assistance Grant (FSAG) Program is a need-based program consisting of

four separately funded student financial aid programs available to degree-seeking, resident, undergraduate students who demonstrate substantial financial need and are enrolled in participating postsecondary institutions. FSAG is a decentralized program, as defined above.

● The Florida Public Student Assistance Grant is available to students who attend

state universities and public community colleges. ● The Florida Private Student Assistance Grant is available to students who

attend eligible private, non-profit, four-year colleges and universities. ● The Florida Postsecondary Student Assistance Grant is available to students

who attend eligible degree-granting private colleges and universities not eligible under the Florida Private Student Assistance Grant.

● The Florida Public Postsecondary Career Education Student Assistance Grant is available to students who attend participating public community colleges or career centers operated by district school boards.

3. Scholarships for Children and Spouses of Deceased or Disabled Veterans and Service

Members

The Scholarships for Children and Spouses of Deceased or Disabled Veterans and Service Members (CSDDV) provides scholarships for dependent children or unremarried spouses of Florida veterans or service members who died as a result of service-connected injuries, diseases, or disabilities sustained while on active duty or who have been verified by the Florida Department of Veterans' Affairs as having service-connected 100% permanent and total disabilities. CSDDV also provides funds for dependent children whose parent is classified as a prisoner of war or missing in action by the Armed Forces of the United States or as civilian personnel captured while serving with the consent or authorization of the United States government during wartime service. CSDDV provides funding for tuition and registration fees at an eligible public postsecondary institution or the equivalent at an eligible private postsecondary institution in Florida.

25


NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND FLORIDA FINANCIAL ASSISTANCE PROGRAMS - CONTINUED


Note C - Florida Student Financial Assistance Programs - Continued

4. Florida Bright Futures Scholarship Program

The Florida Bright Futures Scholarship Program provides scholarships to Florida high school graduates with high academic achievement. These scholarships are lottery-funded. The program provides qualified, first-time-in-college, full-time, undergraduate students with assistance in paying for costs of education. Scholarships are available only to Florida residents attending eligible colleges and universities located in the state of Florida. The Florida Bright Futures Scholarship Program is comprised of the following awards:

● Florida Academic Scholars Award (FAS) ● Florida Medallion Scholars Award (FMS) ● Florida Gold Seal Vocational Scholars Award (GSV)

5. Florida Resident Access Grant Program The William L. Boyd, IV, Florida Resident Access Grant (FRAG) Program provides tuition

assistance to Florida undergraduate students attending an eligible private, non-profit Florida college or university. FRAG is a decentralized program, as defined above.

Note D - Other Florida Financial Assistance Programs The Warner University License Plate Project is a state program that issues specialty license plates that depict the University's logo. The funds that the University receives are based solely on license plate sales.

26


SCHEDULE OF FINDINGS AND QUESTIONED COSTS

YEAR ENDED JUNE 30, 2015 Summary of Auditor's Results Financial Statements Type of auditor's report issued: Unqualified opinion Internal control over financial reporting:

● Material weakness identified? Yes X No ● Significant deficiency identified? Yes X None reported

Noncompliance material to financial statements noted? Yes X No

Federal and Florida Awards Internal control over major programs:

● Material weakness identified? Yes X No ● Significant deficiency identified? Yes X None reported

Type of auditor's report issued on compliance for major programs: Unqualified opinion

Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of OMB Circular A-133? Yes X No

Identification of major programs:

The Federal programs listed below are part of a cluster; therefore, they are treated and tested as a major program.

Student Financial Aid Cluster: Federal Supplemental Educational Opportunity Grants CFDA No. 84.007 Federal Work-Study Program CFDA No. 84.033 Federal Perkins Loan Program CFDA No. 84.038 Federal Pell Grant Program CFDA No. 84.063 Federal Direct Student Loan Program CFDA No. 84.268 Teacher Education Assistance for College and Higher Education Grants CFDA No. 84.379

27


SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED

YEAR ENDED JUNE 30, 2015 Summary of Auditor's Results - Continued Identification of major programs - continued:

The Florida Student Financial Assistance Programs are also treated as a cluster and are tested as a major program:

Florida Work Experience Program CSFA No. 48.053 Florida Student Assistance Grant Program CSFA No. 48.054 Scholarships for Children and Spouses of Deceased or Disabled Veterans and Service Members CSFA No. 48.055 Florida Bright Futures Scholarship Program CSFA No. 48.059 Florida Resident Access Grant Program CSFA No. 48.064

Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Warner University, Inc., qualified as low-risk auditee? X Yes No “Schedule of Prior Audit Findings and Questioned Costs - Federal Awards Program” attached? X Yes No “Schedule of Prior Audit Findings and Questioned Costs - Florida Financial Assistance Programs” attached? X Yes No “Corrective Action Plan” attached? Yes X No (No findings required to be reported under the Federal or Florida Single Audit Acts.)

Financial Statement Findings No matters were reported. Federal Award Findings and Questioned Costs No matters were reported. Florida Award Findings and Questioned Costs No matters were reported.

28

29


SUMMARY OF POPULATION, ITEMS TESTED, AND FINDINGS FOR

FLORIDA FINANCIAL ASSISTANCE PROGRAMS


Description Number Percent Amount Percent

of of of of ofCategory Students Population Awards Population

FWEP: Population 32 100% $ 44,083 100%

Tested 13 40.6% $ 16,437 37.3%Findings 0 0% $ 0 0%

FSAG: Population 149 100% $ 224,390 100%

Tested 47 31.5% $ 74,564 33.2%Findings 0 0% $ 0 0%

CSDDV: Population 2 100% $ 9,808 100%

Tested 2 100% $ 9,808 100%Findings 0 0% $ 0 0%

FAS: Population 5 100% $ 14,832 100%

Tested 5 100% $ 14,832 100%Findings 0 0% $ 0 0%

FMS: Population 73 100% $ 147,840 100%

Tested 25 34.3% $ 53,438 36.2%Findings 0 0% $ 0 0%

GSV: Population 1 100% $ 693 100%

Tested 1 100% $ 693 100%Findings 0 0% $ 0 0%

FRAG: Population 850 100% $ 2,319,000 100%

Tested 82 9.7% $ 208,500 9.0%Findings 0 0% $ 0 0%


SCHEDULE OF PRIOR AUDIT FINDINGS AND QUESTIONED COSTS - FEDERAL AWARDS PROGRAMS


No matters were reported.

30


SCHEDULE OF PRIOR AUDIT FINDINGS AND QUESTIONED COSTS - FLORIDA FINANCIAL ASSISTANCE PROGRAMS


No matters were reported.

31

Bunting, Thpp & Ingley, LLPRoom A. Nciiiy, CPA CIRTIrIIn Punt Ic AC(L)LINrANTS 230 EAst TII.lNIAN AVI:MTI’

Dwmnii L. RIrvD, CPA A Tradition of Excellence Since 1926 P.O. Box 990Mlduiiji 6. I Iuiusi CPA LAKF WALES, FIAMUDA 33859- 0990DAVID W. AlIEN, CIAWn.i lAM M. JAO’iN, CPA 863/ 676- 7)81

MARYANN Rui imwui&, CPA FAx 863/676- 8899—

c-mail: tnfohricpa corn

www. hricpa. cornL. A. Wi wiiI.mn , Ill, (:l’AP,u 1’. SwY lit i CPASAl V, 111W D. Thoi’mA, CPASt/ANNE B. B rirililu, CPA Also WITh (lIlIES IN

TAMI\ ‘liii ‘A

To the Board of TrusteesWarner University. Inc.Lake Wales, Florida

In planning and performing our audit of the financial statements of Warner University.Inc. as of and for the year ended June 30, 2015. in accordance with auditing standards generallyaccepted in the United States of America. we considered the University’s internal control overfinancial reporting (internal control) as a basis for designing auditing procedures that areappropriate in the circumstances for the purpose of expressing our opinion on the linancialstatements, but not for the purpose of expressing an opinion on the effectiveness of theUniversity’s internal control. Accordingly, we do not express an opinion on the effectiveness olthe University’s internal control.

A de/iciencj’ in inienud control exists when the design or operation of a control does notallow management or employees, in the normal course of performing their assigned fttnctions. toprevent, or detect and correct misstatements on a timely basis. A material weakness is adeficiency or combination of deficiencies in internal control, such that there is a reasonablepossibility that a material misstatement of the University’s linancial statements will not beprevented, or detected and corrected on a timely basis.

Our consideration of internal control was for the limited purpose described in the firstparagraph and was not designed to identify all deficiencies in internal control that might bematerial weaknesses. Given these limitations, during our audit ii’e did no! ic/em//v tiii’

deficiencies in internal control I/itt! 1I’e consider to be material i’eaknesses. However, materialweaknesses may exist that have not been identified.

In connection with our audit, we have the following observations or recommendations Ihryou to consider regarding the University:

MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS • FLORIDA INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

Warner University. Inc.Page Two

Summary of Financial Condition of the University

For the year ended June 30. 2015, the University had an increase in net assets of$409,698. Revenues increased approximately $3,150,000 from $15,818,774 in 2014 to$18,977,049 in 2015, while expenses increased by approximately $2,900,000 from $15,691,237in 2014 to $18,567,351 in 2015.

The current year increase in net assets of $409.698 includes an operational surplus of$1,331,398, less $921,700 of depreciation expense. The prior year increase in net assets of$127,536 included an operational surplus of $774,516. less $646,980 of depreciation expense.

The University experienced an decrease in student accounts receivable, net of deposits ofapproximately $655,000. The balance on the line of credit decreased by $143,000, and long-term debt collateralized by the campus real estate decreased approximately $475,000.

Enrollment remained consistent with the prior year. The University’s net asset balanceremains stable at $17,613,952.

Status of Prior Year Recommendations

Emphasize Compliance in All Arcas of Student Financial Aid

In the prior year’s letter, we reported that the firm of Manning & Associates CPAs. LLC.who performed compliance work on the University’s student financial aid processes, identifiedfindings related to Federal funds in each of the previous two years.

From an institutional stand—point, we considered these findings immaterial matters ofnoncompliance and did not reported them in the University’s Single Audit Report. We didconcur with the Director of Financial Aid’s Institutional Response to these findings.

We are pleased to report that Manning & Associates had no findings related to Federal orState funds in their current year report on compliance.

Student Accounts Receivable

As we stated in the prior year, there have been several policies and proceduresimplemented in an effort to increase the collection of the student account balances. Managementhas increased the allowance for uncollectible accounts to $20,000 per month with a charge to baddebt expense. In addition, after analyzing the collectability of the accounts, the allowance fordoubtful accounts was increased by and additional $800,000 through a current year addition tobad debt expense.

We commend the efforts that have been made to reduce the student accounts receivablebalance, as this balance continues to be one of the largest assets on the statement of financialposition. We encourage management to diligently pursue collection and continue to evaluate thecollectability of the outstanding accounts on a regular basis.

Warner University, Inc.Page Three

‘‘‘TV’

This communication is intended solely for the use of the Board of Trustees, management.Federal and State awarding agencies, pass-through entities, and accreditation agencies and is notintended to be and should not be used by anyone other than these specified parties.

We appreciate the opportunity to serve as your independent auditors. We are available toyou and the University administration throughout the year to answer any questions you may haveor to assist you in any way.

j%j% *%%Lake Wa es, FloridaOctober 14, 2015

4695e99 warner university, inc. - florida auditor … rpts/2015...warner university, inc. statements...

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