financial statements and other financial … · 2019. 10. 30. · 1 report of independent auditors...

FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION

THE FLORIDA STATE UNIVERSITY

ATHLETICS ASSOCIATION, INC.

YEARS ENDED JUNE 30, 2019 AND 2018 WITH REPORT OF INDEPENDENT AUDITORS

THE FLORIDA STATE UNIVERSITY ATHLETICS ASSOCIAITION, INC.

FINANCIAL STATEMENTS

YEARS ENDED JUNE 30, 2019 AND 2018

CONTENTS

Report of Independent Auditors .......................................................................................... 1 Management’s Discussion and Analysis .............................................................................. 4 Financial Statements Statements of Net Position ....................................................................................................... 6 Statements of Revenues, Expenses and Changes in Net Position ........................................... 7 Statements of Cash Flows ........................................................................................................ 8 Notes to Financial Statements .................................................................................................. 9 Other Reports Report of Independent Auditors 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 ...................................................................................... 14

1

REPORT OF INDEPENDENT AUDITORS Mr. John Thrasher, President Florida State University Report on the Financial Statements We have audited the accompanying financial statements of Florida State University Athletics Association, Inc., which comprise the statements of net position as of June 30, 2019 and 2018, the related statements of revenues, expenses, and changes in net position and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Florida State University Athletics Association, Inc. as of June 30, 2019 and 2018, and the changes in its financial position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters As discussed in Note 1, the financial statements of Florida State University Athletics Association, Inc. are intended to present the financial position, changes in financial position and cash flows of only that portion of The Florida State University that is attributable to the transactions of Florida State University Athletics Association, Inc. They do not purport to, and do not, present fairly the financial position of Florida State University, as of June 30, 2019 and 2018, and the changes in its financial position and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 4 and 5 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

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Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 18, 2019 on our consideration of Florida State University Athletics Association, Inc.’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Florida State University Athletics Association, Inc.’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Florida State University Athletics Association, Inc.’s internal control over financial reporting and compliance.

Tallahassee, Florida October 18, 2019

4

THE FLORIDA STATE UNIVERSITY ATHLETICS ASSOCIATION

MANAGEMENT’S DISCUSSION AND ANALYSIS The management’s discussion & analysis (MD&A) provides an overview of the financial position and activities of the Florida State University Athletic Association (the Association) for the years ended June 30, 2019 and 2018. This overview is required by Governmental Accounting Standards Board (GASB) Statement No. 35, Basic Financial Statements – and Management’s Discussion & Analysis – For Public Colleges & Universities. It should be read in conjunction with the financial statements and supporting notes thereto. OVERVIEW OF FINANCIAL STATEMENTS The Association’s financial report contains a series of three basic financial statements: Statement of Net Position; Statement of Revenue, Expense and Changes in Net Position; and Statement of Cash Flows. These financial statements are prepared in accordance with generally accepted accounting principles promulgated by the Governmental Accounting Standards Board (GASB). The financial statements focus on the financial condition of the Association, the results of operations, and cash flows of the Association as a whole. The accrual basis of accounting is used for presentation which is similar to most private-sector companies. STATEMENT OF NET POSITION The statement of net position reflects the assets and liabilities of the Association, using the accrual basis of accounting, and presents the financial position of the Association as of June 30, 2019 and 2018. The difference between total assets, total liabilities, and net position, is one significant indicator of the Association’s current financial condition. The changes in net position that occur over time indicate enhancement or deterioration in the Association’s financial condition. The following table summarizes the Association’s assets, liabilities, and net position at June 30:

2019 2018

Assets

Current assets $ 6,359,835 $ 5,902,065 Other noncurrent assets 81,605 5,012,248

Total assets 6,441,440 10,914,313

Liabilities

Current liabilities 1,895,592 1,902,065 Noncurrent liabilities 81,605 1,114,752

Total liabilities 1,977,197 3,016,817

Net position

Unrestricted 4,464,243 7,897,496

Total net position $ 4,464,243 $ 7,897,496

5

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION The statement of revenues, expenses, and changes in net position depicts the Association’s revenue and expense activity. Revenues and expenses are recognized when earned or incurred, regardless of when cash is received or paid. The following summarizes the Association’s activity for the years ended June 30:

2019 2018 Operating revenues $ 143,872 $ 14,914,313 Less operating expenses (3,635,936) (7,016,817) Operating income (loss) (3,492,064) 7,897,496 Non-operating income 58,811 – Net change in net position (3,433,253) 7,897,496 Net position, beginning of year 7,897,496 –

Net position, end of year $ 4,464,243 $ 7,897,496 STATEMENT OF CASH FLOWS The statement of cash flows provides additional information about the Association’s financial results by reporting the major sources and uses of cash. This statement assists in evaluating the Association’s ability to generate net cash flows, and its ability to meet its obligations when they come due. The statement of cash flows reconciles the Association’s cash transactions. Receipts during the year were used to provide financial and administrative support to the University’s varsity sports programs and were used in the purchase of investments. For the year ended June 30, 2019, there was no cash provided by or used in noncapital or capital related financing activities. The balance of cash and cash equivalents was $0 for both the beginning and end of the year. ECONOMIC CONDITIONS AND OUTLOOK Operating revenues and net position have decreased for the year ended June 30, 2019 from the previous year. These decreases are a result of revenues from multi-year pledges being recorded in the previous year when the amounts are considered earned under the accrual basis of accounting. The financial outlook for the 2020 fiscal year remains positive. In the upcoming year, the Association intends to provide support for excess coaches’ buyouts and provide University support for Athletic related capital improvements. REQUEST FOR INFORMATION Questions concerning information provided in the MD&A or elsewhere in the June 30, 2019 financial statements and supporting notes thereto should be addressed to Florida State University Department of Athletics, Business Office, P.O. Box 2195, Tallahassee, Florida 32306.

2019 2018

Assets

Current assets

Cash and cash equivalents -$ -$

Investments 552,990 -

Interest receivable 2,451 -

Current portion of contributions receivable 4,000,000 4,000,000

Current portion of liquidated damages from coaches receivable 1,804,394 1,902,065

Total current assets 6,359,835 5,902,065

Noncurrent assets

Contributions receivable, net of current portion and discount - 3,897,496

Liquidated damages from coaches receivable,

net of current portion and discount 81,605 1,114,752

Total assets 6,441,440$ 10,914,313$

Liabilities

Current liabilities

Current portion of accrued expenses 126,634$ 1,619,503$

Due to other University funds 1,768,958 282,562

Total current liabilities 1,895,592 1,902,065

Noncurrent liabilities

Accrued expenses, net of current portion and discount 81,605 1,114,752

Total liabilities 1,977,197 3,016,817

Net Position

Unrestricted 4,464,243 7,897,496 Total net position 4,464,243$ 7,897,496$

6

June 30,

THE FLORIDA STATE UNIVERSITYATHLETIC ASSOCIATION, INC.

STATEMENTS OF NET POSITION

See accompanying notes.

2019 2018

Operating revenuesContributions 102,504$ 11,897,496$ Liquidated damages from coaches 41,368 3,016,817

Total operating revenues 143,872 14,914,313

Operating expensesUniversity support expenditures 3,500,000 4,000,000 Termination benefits to coaches 132,566 3,016,817 Other operating expenses 3,370 -

Total operating expenses 3,635,936 7,016,817

Operating income (loss) (3,492,064) 7,897,496

Nonoperating revenuesInvestment earnings 58,811 -

Increase (decrease) in net position (3,433,253) 7,897,496

Net position, beginning of year 7,897,496 -

Net position, end of year 4,464,243$ 7,897,496$


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Years ended June 30,


STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION

2019 2018

Cash flows from operating activities

Receipts from contributions 4,000,000$ 4,000,000$

Payments to related entities (3,500,000) (4,000,000)

Payments to suppliers and others (3,370) -

Net cash provided by operating activities 496,630 -

Cash flows from investing activities

Purchases of investments (547,352) -

Investment earnings 50,722 -

Net cash used in investing activities (496,630) -

Cash and cash equivalents, beginning of year - -

Cash and cash equivalents, end of year -$ -$

Reconciliation of operating (loss) income to net cash provided by

operating activities:

Operating (loss) income (3,492,064)$ 7,897,496$

Adjustments to reconcile operating (loss) income to net

cash provided by operating activities:

Decrease (increase) in contributions receivable 3,897,496 (10,914,313)

Decrease in liquidated damages receivable 1,130,818 -

(Decrease) increase in accrued expenses (2,526,016) 2,734,255

Increase in due to other University funds 1,486,396 282,562

Net cash provided by operating activities 496,630$ -$

8

Years ended June 30,


STATEMENTS OF CASH FLOWS


THE FLORIDA STATE UNIVERSITY ATHLETIC ASSOCIATION, INC.

NOTES TO FINANCIAL STATEMENTS

9

1. Summary of Significant Accounting Policies The following is a summary of the more significant accounting policies of Florida State University Athletic Association, Inc. (the Association), which affect significant elements of the accompanying financial statements.

Reporting entity – The Association is a direct support organization of Florida State University (the University) pursuant to Section 1004.28, Florida Statutes. The Association is a non-profit Florida Corporation exempt from tax under Code Section 501(c)(3) of the Internal Revenue Code (IRC). The Association is organized and operated exclusively to receive, hold, invest, and administer property for the benefit of the Florida State University. The purpose of the Association includes providing financial and administrative support to the University’s varsity sports as deemed necessary and appropriate by the University President.

Measurement focus and basis of accounting – The financial statements of the Association have been prepared following the financial reporting requirements for enterprise funds, which use the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recognized when they are incurred. In order to comply with restrictions that donors place on contributions and other gifts, as well as designations made by the Board of Directors, the principles of fund accounting are used.

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

The Association distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses for the Association are those that result from supporting the operation of the University’s intercollegiate athletic programs. It excludes all revenue and expenses related to capital and related financing, noncapital financing, and investing activities.

Cash and cash equivalents – For purposes of reporting cash flows, cash and cash equivalents include cash on hand and cash in demand accounts. Association cash deposits are held in banks qualified as public depositories under Florida law. All such deposits are insured by the Federal Depository Insurance Corporation (FDIC) up to specified limits, or collateralized with securities held in Florida’s multiple financial institution collateral pool in accordance with Florida statutes.

Investments and Fair Value Measurement – The Association categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The Association is invested in the State Treasury Special Purpose Investment Account (SPIA). SPIA is measured at net asset value per share. Investments measured at net asset value are not subject to the fair value hierarchy level classification under GASB 72.

Revenue Recognition – Contributions – Annual contributions are recorded as revenue at the time they are received or when all eligibility requirements are met, whichever is first.

Other Revenues – Other revenues includes the amount of estimated liquidated damages to be recovered per contractual obligations associated with involuntary termination benefits for an athletic coach’s breach of contract.



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1. Summary of Significant Accounting Policies (continued)

Accounts receivable – Accounts receivable from operations are stated at their net realizable value. Accounts receivable for liquidated damages are recorded at net present value using the income approach. Management uses the discounted present value to convert future amounts to present value based on the U.S. Treasury Securities at a 3-year constant maturity. Management considers all accounts receivable balances to be fully collectable. As such, no allowance for uncollectable amounts has been recorded as of June 30, 2019 and 2018. The Association has no policy requiring collateral or other security to support its accounts receivable.

Termination Benefits – The Association has entered into employment contracts with certain employees that provided for involuntary termination benefits. An expense and liability is created by the Association when a plan of termination has been approved by those with the authority to commit the Association to the plan, the plan has been communicated to those employees, and the amount can be reasonably estimated. Termination benefits are recorded at net present value. The present value of termination benefits payable is determined by using the U.S. Treasury Securities at a 3-year constant maturity.

Income taxes – Pursuant to a determination letter received from the Internal Revenue Service, the Association is exempt from federal income taxes under IRC Section 501(c)(3) and as such, is liable for tax only on business income unrelated to the purpose for which they are exempt. There are no provisions for income tax for the years ended June 30, 2019 or 2018.

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 the reported amounts of assets, liabilities, and changes therein and disclosures of contingent assets and liabilities. Actual results could differ from those estimates.

Net position – Net position is classified and displayed in two components:

(i) Restricted – consists of net position that has constraints placed upon their use either by

external donors or creditors or through laws, regulations or constraints imposed by law through constitutional provisions or enabling legislation, reduced by any liabilities to be paid from these assets.

(ii) Unrestricted – consists of net position that does not meet the definition of “restricted.”

When both restricted and unrestricted net position is available for use, it is the Association’s policy to use the restricted resources first, then unrestricted resources as they are needed.



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1. Summary of Significant Accounting Policies (continued)

Subsequent events – The Association has evaluated events and transactions for potential recognition or disclosure in the financial statements through October 18, 2019, the date which the financial statements were available to be issued. During the period from June 30, 2019 to October 18, 2019 the Association did not have any material recognizable subsequent events other than as described in Note 7.

2. Investments The Association reported investments at fair value totaling $552,990 and $0 for the years ended June 30, 2019 and 2018, respectively, in the State Treasury Special Purpose Investment Account (SPIA) investment pool, representing ownership of a share of the pool, not the underlying securities. Pooled investments with the State Treasury are not registered with the Securities and Exchange Commission. Oversight of the pooled investments with the State Treasury is provided by the Treasury Investment Committee per Section 17.575, Florida Statutes. The authorized investment types are set forth in Section 17.57, Florida Statutes. The SPIA carried a credit rating of AA-f by Standard & Poor’s, had an effective duration of 2.71 years and fair value factor of 1.0103 at June 30, 2019. Participants contribute to the Treasury Pool on a dollar basis. These funds are commingled and a fair value of the pool is determined from the individual values of the securities. The fair value of the securities is summed and a total pool fair value is determined. A fair value factor is calculated by dividing the pool’s total fair value by the pool participant’s total cash balances. The fair value factor is the ratio used to determine the fair value of an individual participant’s pool balance. The Association relies on policies developed by the State Treasury for managing interest rate risk or credit risk for this investment pool. Disclosures for the State Treasury investment pool are included in the notes to financial statements of the State’s Comprehensive Annual Financial Report. All of the Association’s recurring fair value measurements as of June 30, 2019 are investments with the State Treasury Special Purpose Investment Account (SPIA) investment pool which are valued based on the Association’s share of the pool. 3. Liquidated Damages Receivable from Third Parties During the 2017-2018 football season, the University’s head football coach resigned thereby breaching his employment agreement with the University. Pursuant to the terms of his employment agreement, the head football coach is liable to the University for certain liquidated damages relating to the termination benefits of assistant coaches. See Note 6 for a description of the termination benefits payable to assistant coaches. Liquidated damages receivable as of June 30, are summarized as follows:

2019 2018 Total liquidated damages - football coaches $ 3,018,377 $ 4,523,106 Less: amounts due to the FSU Athletics Department (1,130,983) (1,463,526) Liquidated damages due to the Association 1,887,394 3,059,580 Less: discount on long-term portion (1.71% and 2.63%, respectively)

(1,395)

(42,763)

Net liquidated damages receivable $ 1,885,999 $ 3,016,817



12

3. Liquidated Damages Receivable from Third Parties (continued) Liquidated Damages expected to be collected after June 30, 2019 are as follows:

Year Ending June 30,

Guaranteed Amount

2020 $ 1,804,394 2021 81,605 2022 – 2023 – 2024 –

$ 1,885,999 4. Contributions Receivable Contributions receivable at June 30 are summarized as follows:

2019 2018 Total unconditional contributions $ 4,000,000 $ 8,000,000 Less: discount on long-term contributions (1.71% and 2.63%, respectively)

- (102,504)

Net contributions receivable $ 4,000,000 $ 7,897,496 5. Related Party Transactions As stated in Note 1, the Association is a direct support organization of The Florida State University (the University). Additionally, the University’s personnel have operational responsibility of the Association. Certain payroll expenditures in relation to termination benefits described in Note 6, were paid by the University on behalf of the Association. During the year ended June 30, 2019 and 2018 those payments totaled $1,486,396 and $282,562, respectively. Payables to the University totaled $1,768,958 and $282,562 at June 30, 2019 and 2018, respectively. Additionally, the Association transferred funds for athletic related projects, including capital improvements, to other departments within the University. Those transfers totaled $3,500,000 and 4,000,000 for the year ended June 30, 2019 and 2018, respectively. 6. Termination Benefits During the year ended June 30, 2018, the University terminated six former assistant football coaches, thereby enacting the involuntary termination clause of the applicable employment contracts. Employment agreements associated with those coaches provide for termination benefits equal to the total compensation remaining on the employee’s contracts after a 20 week period, reduced on a dollar for dollar basis by any new compensation agreement entered into by the employee with any third party. As described in Note 3, consistent with the head football coach’s employment agreement, the termination benefit obligation for these six former assistant football coaches will be repaid to the Association by the former head football coach.



13

6. Termination Benefits (continued) During the year ended June 30, 2019 the estimated amounts payable to these terminated coaches was reduced based on new employment agreements between those coaches and third parties. This change reduced the amount payable by the Association and receivable from the former head football coach by $1,172,186. During the year ended June 30, 2019 the University terminated one former assistant football coach with an employment agreement with the Association. The employment agreement associated with this coach provide for termination benefits equal to the total compensation remaining on the employee’s contract after a 20 week period, reduced on a dollar for dollar basis by any new compensation agreement entered into by the employee with any third party. The estimated remaining termination benefits for the seven terminated coaches are to be paid in years 2020 through 2021. All long-term portions of the termination benefits have been discounted by 1.71%. At June 30, 2019, the total estimated liability for involuntary termination benefits for each of the next five years, is as follows:

Year Ending June 30,

Guaranteed Amount

2020 $ 126,634 2021 81,605 2022 – 2023 – 2024 –

$ 208,239 7. Subsequent Events Announced in June 2019, the Florida State’s Board of Trustees approved a Memorandum of Agreement to combine FSU’s Athletics Department and Seminole Boosters into the Florida State University Athletics Association (FSUAA). Starting in the year ended June 30, 2020 the FSUAA will be the new management structure for FSU athletics. The five-member Board of Directors will govern FSUAA. These members include the President of the University (the Chair), FSU’s NCAA Faculty Athletics Representative, and the Chair of the Seminole Boosters. The Director of Athletics will serve as the Chief Executive Officer (CEO) of FSUAA and have a direct reporting line to the University President/FSUAA Board Chair. The FSUAA will oversee all aspects of FSU’s athletics program, approve budgets, strategic plans, develop policies regarding scheduling, financing facilities, prioritizing projects and programs and will be responsible for hiring, evaluating and compensating the Director of Athletics.

Other Reports

14

REPORT OF INDEPENDENT AUDITORS 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

Mr. John Thrasher, President Florida State University We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Florida State University Athletics Association, Inc. (the Association), which comprise the statement of financial position as of June 30, 2019, the related statements of revenues, expenses, and changes in net position and cash flows for the year ended, and the related notes to the financial statements, and have issued our report thereon dated October 18, 2019. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Association’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Association’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Association’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Page Two

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Compliance and Other Matters As part of obtaining reasonable assurance about whether the Association’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.


To the Board of Directors Florida State University Athletics Association, Inc. We are pleased to present this report related to our audit of the financial statements of Florida State University Athletics Association (the Association) as of and for the year ended June 30, 2019. This report summarizes certain matters required by professional standards to be communicated to you in your oversight responsibility for the Association’s financial reporting process. Generally accepted auditing standards (AU-C 260, The Auditor’s Communication with Those Charged with Governance) require the auditor to promote effective two-way communication between the auditor and those charged with governance. Consistent with this requirement, the following summarizes our responsibilities regarding the financial statement audit as well as observations arising from our audit that are significant and relevant to your responsibility to oversee the financial and related compliance reporting process.

Area Comments

Our Responsibilities With Regard to the Financial Statement Audit

Our responsibilities under auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States have been described to you in our arrangement letter dated July 24, 2019. Our audit of the financial statements does not relieve management or those charged with governance of their responsibilities, which are also described in that letter.

Overview of the Planned Scope and Timing of the Financial Statement Audit

We discussed with members of the Board of Directors and the Association’s management various matters about which generally accepted auditing standards require communication. These include matters concerning two-way communication, our independence, the audit planning process, the concept of materiality in planning and executing the audit, our approach to internal control relevant to the audit, and the timing of the audit.

Page Two

Area Comments

Accounting Policies and Practices Adoption of, or Change in, Accounting Policies

Management has the ultimate responsibility for the appropriateness of the accounting policies used by the Association. The Association did not adopt any significant new accounting policies, nor have there been any changes in existing significant accounting policies during the current period.

Significant or Unusual Transactions

We did not identify any significant or unusual transactions or significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.

Management’s Judgments and Accounting Estimates

Accounting estimates are an integral part of the preparation of financial statements and are based upon management’s current judgment. The process used by management encompasses their knowledge and experience about past and current events and certain assumptions about future events. Management has informed us that they used all the relevant facts available to them at the time to make the best judgments about accounting estimates, and we considered this information in the scope of our audit. Estimates significant to the financial statements include:

The collectability and related allowance for doubtful accounts for amounts owed to the Association from the former head football coach for breach of contract.

The Board of Directors may wish to monitor throughout the year the process used to determine and record these accounting estimates.

Audit Adjustments Audit adjustments proposed by us and recorded by Association are shown on the attached Exhibit A.

Uncorrected Misstatements There were no uncorrected misstatements that management determined to be immaterial.

Page Three

Area Comments

Departure From the Auditor’s Standard Report

Included in the auditors report is an other matters paragraph.

Disagreements With Management We encountered no disagreements with management over the application of significant accounting principles, the basis for management’s judgments on any significant matters, the scope of the audit, or significant disclosures to be included in the financial statements.

Consultations With Other Accountants

We are not aware of any consultations management had with other accountants about accounting or auditing matters.

Significant Issues Discussed With Management

No significant issues arising from the audit were discussed or the subject of correspondence with management.

Significant Difficulties Encountered in Performing the Audit

We did not encounter any significant difficulties in dealing with management during the audit. We received full cooperation and appreciate the assistance provided by the Association’s financial and accounting personnel.

Letter(s) Communicating Significant Deficiencies and Material Weaknesses in Internal Control Over Financial Reporting

We have separately communicated any significant deficiencies and material weaknesses in internal control over financial reporting identified during our audit of the financial statements as required by Government Auditing Standards. This communication is included in the Report on Internal Control Over Financial Reporting section of the financial statements.

Page Four

Area Comments

Significant Written Communications Between Management and Our Firm

See Exhibit B for a copy of the representation letter provided to us by the Association’s management.

*****

This report is intended solely for the information and use of the Board of Directors and management of the Association and is not intended to be, and should not be, used by anyone other than these specified parties. It will be our pleasure to respond to any questions you have regarding this letter. We appreciate the opportunity to continue to be of service to Florida State University Athletics Association.


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Exhibit B

BYLAWS OF THE FLORIDA STATE UNIVERSITY ATHLETIC ASSOCIATION, INC.

ARTICLE I NAME AND PURPOSE

The name of this Corporation shall be the Florida State University Athletics Association, Inc. (“FSUAA”). The FSUAA shall serve as a Direct Support Organization of the Florida State University (“University”) within the definition of Section 1004.28, Florida Statutes, as set forth in the FSUAA Articles of Incorporation. The purpose of this corporation is to administer varsity collegiate athletics for and on behalf of Florida State University, including oversight, governance, and coordination between the Department of Intercollegiate Athletics and Seminole Boosters, Inc.

ARTICLE II MEMBERSHIP

The membership of the FSUAA shall consist of persons who are interested in the economic and educational mission of the Corporation. The following individuals shall serve as directors of FSUAA:

A. The University President;

B. The University Faculty Athletics Representative;

C. A member of the University Board of Trustees appointed by the Chair of the University Board of

Trustees;

D. The Chair of Seminole Boosters, Inc., or its designee; and

E. A member of the University faculty or administration, appointed by the University President, who does not directly report to the University President. This appointee shall serve a two (2) year term, subject to reappointment by the University President.

ARTICLE III

BOARD OF DIRECTORS

A. The University President shall serve as Chair of the Board of Directors.

B. The Board of Directors shall have the following duties:

1. To discharge faithfully all the duties imposed upon it by the FSUAA Articles of Incorporation and to see that all other provisions of the Articles are properly executed;

2. To meet upon the call of the Chair or any three (3) members of the Board of Directors;

3. To select banks or other depositories for the deposit of the funds and securities of the FSUAA, and to conduct its financial affairs in conformity with the policies and procedures adopted by the Board of Directors;

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4. To audit the books and records of the FSUAA at least once each fiscal year, together with a management letter, including the response from management, and financial statement reflecting a post-audit of financial accounts. Such audit shall be conducted by a firm of independent Certified Public Accountants selected by the Chair, To engage a firm of independent Certified Public Accountants for the performance of a financial audit, and the rendering of the associated management letter, for each fiscal year consistent with University policy on auditor selection and rotation. The firm's engagement letter shall provide that it render an opinion on the financial statements in accordance with generally accepted accounting principles and to have the results of the audit reported to the Board of Directors. Thereafter, the audit report and management's responses shall be sent to the University President or the President's designee for review not later than the end of the third month following the close of the FSUAA's fiscal year.

5. To review and approve expenditure plans. The expenditure plans shall separately delineate

planned actions which may result in a commitment of University resources or the resources of this Corporation.

C. A majority of the Directors shall constitute a quorum at any meeting of the Board of Directors or

Committees thereof, and all questions shall be determined by a majority affirmative vote of the members of the Board of Directors, at least two of whom must be full-time administrative or faculty employees of the University.

D. The Chair shall preside at meetings of the Board of Directors. In the absence of the Chair at any

meeting, the Chair may appoint any Director to preside.

E. Meetings may be conducted by conference telephone or similar communications equipment provided all persons participating in such meetings are able to communicate with each other.

F. Proxies, whether general or special, shall not be accepted for any purpose in the meetings of the

Board of Directors or Committees thereof.

G. Meetings of the Board of Directors or any Committee shall comply with the requirements of Florida Law, including laws governing public meetings, and shall provide for public comment.

ARTICLE IV

CHAIR OF THE BOARD OF DIRECTORS The Chair of the Board of Directors shall have the following duties:

A. The University President, in consultation with the Board of Directors, shall appoint the University Athletic Director and designate the Athletic Director as the Chief Executive Officer of this Corporation. The Chief Executive Officer shall report to the University President and to the Board of Directors. The Chief Executive Officer shall attend all meetings of the Board of Directors, as practicable, and may attend the meetings of any committee. The Chief Executive Officer may be removed for cause or unacceptable performance by the University President after consultation with the Board of Directors. “Unacceptable performance” means persistent failure to fulfill duties of the position to high standards and in a manner that serves the best interests of the Corporation and the University, as determined by the University President after consulting with the Board of Directors.

B. To monitor and control the use of FSUAA resources, including the Corporation’s name;

Commented [MP1]: This part became redundant when I moved the language from Article IV.

Commented [MP2]: Moved from Article IV This used to be IV.H.

Commented [MP3]: Moved from Article IV This used to be IV.D.

2

C. To monitor and ensure compliance with NCAA bylaws, State and Federal laws, and policies and regulations of the Florida Board of Governors and the Florida State University Board of Trustees;

D. To possess line-item authority over the budget of the FSUAA, including the establishment of

additional line items and reduction or elimination of existing budgetary items;

E. To prepare the agenda for all meetings of the Board of Directors; and

F. To appoint the Officers of the FSUAA annually from the voting membership of this Corporation, current members of the Florida State University Athletics Board, and other qualified personnel or alumni/ae of Florida State University.

ARTICLE V OFFICERS

The Officers of the FSUAA shall include the Chief Executive Officer, a Vice President, a Secretary, and a Treasurer. In the event of absence, inability, or refusal to act by any of the Officers, the Chair of the Board of Directors shall appoint a successor or successors to perform the duties of their respective offices.

A. Chief Executive Officer. The Chief Executive Officer shall:

1. Attend all meetings of the Board and its Committees, as practicable;

2. Sign the name of this Corporation to all documents requiring the signature of this Corporation; and

3. Promptly implement the orders of the Board of Directors, or to advise the Board if its orders are not carried out.

B. Vice President. The Vice President shall perform the duties of the Chief Executive Officer during

the absence or incapacity of that officer.

C. Secretary. The Secretary shall ensure that this Corporation:

1. Keep and maintain accurate minutes of the proceedings of the annual meeting of this Corporation and all meetings of the Board of Directors and preserve same in a book or electronic file of such nature as to serve as a permanent record;

2. Keep and maintain record copies of the FSUAA Articles of Incorporation and Bylaws;

3. Keep and maintain accurate lists of membership, including terms of service and appointments to the Board, its Committees, and Officer positions; and

4. Carry on the general correspondence of this Corporation as may be assigned by the Chief Executive Officer or the Chair of the Board of Directors.

D. Treasurer. The Treasurer shall:

1. Assure that adequate provision is made for the care and custody of all the assets of this

Corporation; and

3

2. Maintain and keep in force a blanket surety bond to assure that each officer and employee who is authorized to collect, hold, or disburse funds of the Corporation shall faithfully discharge their duties, the adequacy of which shall be determined by the Board Executive Committee.; and

3. Pay out funds only in accordance with the guidelines established by the Board or as

otherwise approved by the Board.

ARTICLE VI COMMITTEES

The Chair of the Board of Directors may, with the approval of the Board of Directors, create standing and/or select committees. The Chair of the Board of Directors shall appoint a Chair of each committee from the voting membership of this Corporation. Unless otherwise provided in these bylaws, committee membership may consist of voting members of this Corporation, current members of the Florida State University Athletics Board, and other qualified personnel or alumni/ae of Florida State University. The Chair of the Board of Directors shall, in consultation with the Board of Directors, charge each committee with specific duties and responsibilities. At a minimum, the standing committees shall include an Audit Committee and a Finance Committee.

A. Audit Committee. The Audit Committee shall be responsible for all matters relating to the FSUAA’s financial reporting and internal controls. It shall provide oversight of the integrity of financial statements and reporting; the independence and qualifications of its Independent Auditor; and the performance of internal audit processes.

1. The Committee shall assist with the appointment, compensation, retention, dismissal and

oversight of the work of any public accounting firm engaged (including the resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for FSUAA.

2. The Committee shall review the annual audited financial statements, including required

disclosures; review the scope of any audit and significant accounting policies and audit conclusions; and provide guidance concerning unresolved differences between audit findings and the FSUAA’s response, any failure of internal controls, or any other significant financial or accounting matters.

B. Finance Committee. The Finance Committee shall be responsible for all matters relating to the

Corporation’s financial affairs and business operations, including the following:

1. The Committee shall analyze the various financial operations, activities, and plans of the Corporation and make appropriate recommendations to the Board to ensure achievement of the Corporation’s goals and objectives.

2. The Committee shall be responsible for in-process guidance, review, and analysis of the

Corporation’s budget.

3. The Committee shall review and approve the investment of funds and the purchase of real and personal property.

Formatted: Indent: Left: 0.75", Numbered + Level: 1 +Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment:Left + Aligned at: 0.5" + Indent at: 0.75"

Commented [MP4]: This was taken from old bylaws to address severance payments.

Commented [MP5]: When establishing committees, it will be important to define whether they are “fact-finding” bodies or “decision making” bodies.

Formatted: No bullets or numbering

Formatted: Indent: Left: 0.75"

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4. The Committee shall review and make recommendations to the Board on proposed

contracts and agreements that are of particular interest or concern to the Board.

5. The Committee shall ensure compliance with restrictions on gifts and report periodically to the Board on those gifts.

6. The Committee shall exercise oversight regarding the care, maintenance, and security of the financial health of the Corporation.

ARTICLE VII

MISCELLANEOUS PROVISIONS

A. The Chief Executive Officer shall have the authority to hire personnel and to sign the name of the Corporation to all documents requiring the signature of this Corporation.

B. Contracts for the routine activities of this Corporation, such as those covering radio broadcasts, concessions, use of facilities and ordinary purchases shall be signed in the name of this Corporation by the Chief Executive Officer or such officer’s designee.

C. Directors and Officers of this Corporation shall not receive any compensation from this Corporation

for their services as director or officer; provided, however, that they may be reimbursed from funds of this Corporation for any traveling expenses or other expenditures incurred by them in the proper performance of their duties.

D. This Corporation shall indemnify and hold harmless all directors, officers, and agents of this

Corporation for any liability heretofore or hereafter incurred as a result of their actions in the performance of their duties on behalf of this Corporation. This Corporation shall have the authority to purchase insurance for this purpose.

E. This Corporation shall not make, directly or indirectly, any gift to a political committee or other

committee defined in Section 106.011, Florida Statutes, for any purpose other than those certified by a majority of the Board of Directors at a regularly scheduled meeting as being directly related to the educational mission of the University.

F. This Corporation shall at all times comply with the applicable provisions of Florida law, as well as

the Regulations of the Florida Board of Governors and the Florida State University Board of Trustees.

G. These Bylaws shall be altered, amended, or rescinded only by an affirmative vote of the majority

of all of the voting members. In case it becomes necessary to call a special meeting for this purpose, written notice shall be given to each voting member of the Corporation at least fifteen (15) calendar days before the date set for the meeting, and such notice shall indicate the provision sought to be amended and the nature of the amendment proposed to be adopted. All amendments shall be forwarded to the University President for review and approval prior to becoming effective.

H. The fiscal year of this Corporation shall begin on July 1 and end on June 30 of the following year.

I. This Corporation is committed to non-discrimination on the basis of race, creed, color, sex, religion,

national origin, age, disability, genetic information, veterans’ status, marital status, sexual orientation, gender identity, gender expression, or any other legally protected group status.

Formatted: Indent: Left: 0.75", Numbered + Level: 1 +Numbering Style: 1, 2, 3, … + Start at: 1 + Alignment:Left + Aligned at: 0.5" + Indent at: 0.75"

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J. All actual or potential conflicts of interest involving directors of the Corporation shall be disclosed

and addressed in accordance with the applicable Conflict of Interest Policy and Florida law. I HEREBY CERTIFY that the foregoing constitutes the Bylaws of the Florida State University Athletic Association, Inc., and were adopted by the Board of Directors on the day of , 2019. ___________________________________ _____________________ Secretary Date

6

FLORIDA STATE UNIVERSITY ATHLETICS ASSOCIATION MEETING MINUTES

June 27, 2019

1:00 pm

Florida State University 201 Westcott Building

Tallahassee, FL

_____________________________________________________________________________

Members Present: David Coburn, Pam Perrewé and John Thrasher I. CALL TO ORDER AND WELCOME

President John Thrasher, Chair Chair Thrasher called the meeting to order at 1:00 pm and welcomed all of those present. All Board members were identified as present which constituted a quorum. President Thrasher began by explaining the history of the Florida State University Athletics Association (FSUAA), a direct support organization (DSO) created in 2012 and approved by the Board of Trustees. President Thrasher referenced an item in the meeting packet, available for everyone’s review, which included historical information related to the FSUAA. President Thrasher then explained that the purpose of today’s meeting is to expand the scope of the FSUAA consistent with work that has been done over the past year with FSU Athletics and Seminole Boosters, Inc. The members of the existing FSUAA board are Chair John Thrasher, President of Florida State University; President & CEO David Coburn, Director of Athletics; and Director Dr. Pam Perrewé, Professor of the College of Business and Faculty Athletics Representative. Additional individuals present at the meeting were introduced by President Thrasher: Mr. Ed Burr, Chair of the FSU Board of Trustees; Mr. Doug Russell, Chair of the Board of Directors of Seminole Boosters, Inc.; Mr. Mark Hillis, Vice Chair of the Board of Trustees; and Mike Pierce, Assistant General Counsel of Florida State University.

1

II. PUBLIC COMMENTS No public comment requests were submitted.

III. ADOPTION OF REVISED BYLAWS

President Thrasher discussed proposed amendments to the FSUAA Bylaws presented in the meeting packet, which incorporates a Memorandum of Understanding (MOU) that has been developed with the Seminole Boosters organization. The proposed amendments would create new oversight and governance responsibilities for the FSUAA, and would expand the Board of Directors to include additional voting members . Under the revised bylaws, the FSUAA would now be governed by a five-member board as follows: A. The University President; B. The University Faculty Athletics Representative (FAR); C. A member of the University Board of Trustees; D. The Chair of the Seminole Boosters, Inc. E. A member of the University faculty or administration, appointed by the President,

who does not directly report to the President. This appointee shall serve a two (2) year term.

Mr. Coburn moved that the revised bylaws be adopted. Dr. Perrewé seconded the motion. Before the motion was voted upon, there was discussion of Article II. D., regarding the need for the Chair of Seminole Boosters, Inc., to appoint a designee if necessary. After discussion, Mr. Coburn moved that the bylaws be adopted as amended to allow a Booster designee and Dr. Perrewé seconded the motion. With no further objections or discussion, the revised, amended bylaws were approved unanimously. With this adoption, Mr. Coburn, as Director of Athletics, will no longer serve on the FSUAA Board, and Ed Burr, Doug Russell and Dr. James Clark will assume places on the Board as members. (Dr. Clark was out of town but present via conference call).

IV. ADOPTION OF BOARD POLICY ON GOVERNANCE President Thrasher referenced the Policy on Governance which is being proposed after discussions with the representatives from Seminole Boosters, Inc., the Athletics Department and Chair Burr. President Thrasher emphasized the importance of this policy and the integral role it will play in how the two organizations will come together

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and be governed as one unit under the FSUAA. The Board Policy reaffirms the core principles of institutional control required by law and regulations, including the rules of the NCAA and the Board of Governors. Mr. Russell moved that the policy be adopted. Dr. Perrewé seconded the motion and after no request for discussion, it was approved unanimously.

V. ADOPTION OF 2019-20 FSUAA BUDGET President Thrasher presented the next order of business, which was the 2019-20 proposed budget for FSUAA. Mr. Burr moved that the budget be adopted. Dr. Perrewé seconded the motion and after no request for discussion, it was unanimously approved.

VI. OPEN FORUM FOR BOARD MEMBERS With no further items to be approved, President Thrasher spoke to the issue of transparency. He emphasized that the FSUAA will continue to operate with noticed, open meetings and continue to conform to the Sunshine Laws of the State of Florida. From there, the meeting was open for discussion of any new business. Chair Burr acknowledged Seminole Boosters Chair Doug Russell, and incoming Chair Bob Davis, for their efforts in moving discussion forward with the FSUAA. He also thanked President Thrasher and David Coburn for their participation, as well as Carolyn Egan. Current Seminole Boosters President Andy Miller, incoming Boosters Board Chair Bob Davis, Chair Doug Russell, and Dr. Pam Perrewé all spoke to their confidence in the new FSUAA structure. They are optimistic that these changes will result in better communication, enhanced efficiency and alignment of priorities, and greater success overall for the University.

VII. ADJOURNMENT The next meeting is planned for the fall with a date to be determined. With there being no further business, the meeting was adjourned at 1:19 pm.

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financial statements and other financial … · 2019. 10. 30. · 1 report of independent auditors...

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