R. J. RICCIARDI CERTIFIED PUBLIC ACCOUNTANT

1000 FOURTH STREEX SUITE 400 SAN RAFAEL, CALIFORNIA 94901 TEL (415) 457-1215 FAX (415) 457-6735

August 3,2004

To the Board of Directors Sonoma Student Union Corporation Rohnert Park, California

In planning and performing my audit of the linandal statements of Sonoma Student Union Corporation (the Organization) for the year ended June 30,2004, I considered the Organization's internal control structure to plan my auditqprocedures for the purpose of expressing my opinion on the haandal statements and not to provide assurance on the internal control structure.

Duting my audit, I noted c& matters involving the internal conirol structure and other operational matters that are presented for your consideration. This letter does not affect my report dated August 3, 2004 on.the h a a n d statements of the Organization. I 4 review the status of these comments during my next audit engagement. My comments and recommendations, all of which have been discussed with approprkte members of managemen4 are not intended to be all-inclusive, but rather represent those matters which I consider worthy of your consideration. My comments and recommendations are submitted as constructive suggestions to assist you in strengthening controls and procedures; they are not intended to reflect on the honesty or integrity of any employee I will be pleased to discuss these comments in Eurther detail at your convenience, to perform any additional study of these matters, or to assist the Organization in implementing the recommendations. My comments are summarized as follows:

Current Year Observations

1) Se~aration of duties

0 bservation:

The admimstrative support assistant in the Student Union business office submits approved and coded payment requests to the University accounting office. The University accounting office reviews the payment request, creates thevendor, enters the voucher and produces the check. Checks are returned to: the administrative support assistant for delivery.

. . . Recommendation:

Ideally no one employee should have access to both physical assets and the related accounting records or to all phases of a transaction. I recommend the checks be mailed to the vendor or delivered to customer service for pick-up rather than retutned to the payment requestor.

Prior Year Observations

There were no prior year observations

Board of Directors Sonoma Student Union Corporation August 3,2004 - Page 2

This letter is intended solely for the information and use of management of Sonoma Student Union Corporation and is not intended to be and should not be used by anyone other than these specified parties. I shall be pleased to discuss with you any of the matters referred to in this letter.

Very truly yours,

dalPh J. .Ricciardi Certified Public Accountant

SONOMA STUDENT UNION CORPORATION

ROHNERT PARK, CALIFORNLA

FINANCIAL STATEMENTS

JUNE 30,2004

TABLE OF CONTENTS

PAGE

Financial Section

Financial Statements:

Independent Auditor's Report

Management's Discussion and Analysis

Statement of Net Assets

Statement of Revenues, Expenses and Changes in Net Assets Exhibit A

Statement of Revenues and Expenditures - Budget and Actual Exhibit B

Statement of Cash Flows Exhibit C

Notes to Basic Financial Statements

Supplemental Information:

Combining Statement of Revenues, Expenditures and Changes in Net Assets - Unrestricted Fund Schedule 1

R. J. RICCIARDI CERTIHED PUBLIC ACCOUNTANT

I000 FOURTH STREET . SUITE400 * SAN RAFAEL. CAL~FORNIA 94901 TEL (415) 457-1215 FAX (415) 457-6735

INDEPENDENT AUDITOR'S REPORT

To the Board of Directors Sonoma Student Union Corporation Rohnert Park, California

I have audited the accompanying basic financial statements of Sonoma Student Union Corporation as of June 30,2004 and for the fiscal year then ended, as listed in the table of contents. These basic f i n a n d statements are the responsibility of Sonoma Student Union Corporation's management My responsibility is to express an opinion on these basic financial statements based upon my audit. The prior year summarized compatative information has been derived from Sonoma Student Union Corporation's 2003 h a n d statements and, in my report dated August 22,2003, I expressed an unqualitiled opinion on those financial statements.

I conducted my audit in accordance with audiang standards generally accepted in the United States of America Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the basic h a n d statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluatingthe overall basic h a n d statement presentation. I believe that my audit provides a reasonable basis for my opinion.

In my opiriion, the h a n d statements referred to above present fairly, in all m a t e d respects, the financial position of Sonoma Student Union Corporation as of June 30,2004, and the results of its operations, and changes in cash flows for the fiscal year ended in conformity with accounting principles generally accepted in the United States of America.

The basic financial statements referred to above follow the requitements of Government Accountmg Standards Board Statements No. 35, Baric FinancialStatemenb - and Management's D u w ~ i o n andAna&ir - For Public C o l h g ~ ~ and Universilis, No. 36, Ren$ient Reportingfor Certain Non-Exchange Revenues, an Amendment of G A S B Smement No. 33, NO. 37, Basic FknndStarements - and Management3 Dzkwszon andAnafysis -for State and Local Govenrmenb; Omm'bw, and No. 38, C d i n Finann'aIStatement Note Duchures, as discussed in Note 1 to the basic financial statements.

Management's Discussion and Analysis is supplementq information required by the Government Accounting Standards Board, but is not part of the basic financial statements. I have applied c& limited procedures to this information, principally inquiries of management regardq the methods of measurement and presentation of this information, but we did not audit this information and I express no opinion on i t

My audit was made for the purpose of fonning an opinion on the basic financial statements taken as a whole. The supplemental information listed on Schedule 1 is presented for putposes of additional analysis and is not a requited part of the basic hnancial statements of Sonoma Student Union Corporation. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements, and in my opinion is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Certified Public Accountant

San Rafael, California August 3,2004

Management's Discussion and Analvsis

This section of the Sonoma Student Union Corporation's annual financial report presents ' management's overview and analysis of the financial activities of the organization for the fiscal year

ended June 30, 2004. We encourage the reader to consider the information presented here in conjunction with the financial statements as a whole.

Introduction to the Basic Financial statements

This discussion and analysis is intended to serve as an introduction to the Organization's audited financial statements, which are comprised of the basic financial statements (pages 6-9), the footnotes (pages 10-1 7), and supplementary information (pages 18-1 9). This annual report is prepared in accordance with the Governmental Accounting Standards Board Statement 35, Basic Financial Statements - and Management's Discussion and Analysis - for Public Colleges and Universities. The Business-Type Activity (BTA) reporting model is used which best represents the activities of the University and its auxiliaries. The Sonoma Student Union Corporation is one of four non-profit auxiliaries on the Sonoma State University campus.

The required financial statements include the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. Notes to the financial statements, supplementary detail and/or statistical information, and this summary support these statements. All sections must be considered together to obtain a complete understanding of the financial picture of the organization.

Statement of Net Assets: This statement includes all assets and liabilities using the accrual basis of accounting as of the statement date. The difference between the two classifications is represented as "Net Assets"; this section of the statement identifies major categories of restrictions on these assets and reflects the overall financial position of the organization as a whole.

Statement of Revenues, Expenses and Chanqes in Net Assets: This statement presents the revenues earned and the expenses incurred during the year using the accrual basis of accounting. Under accrual basis, all increases or decreases in net assets are reported as soon as the underlying event occurs, regardless of the timing of the cash flow. Consequently revenues and/or expenditures reported during this fiscal year may result in changes to cash flow in a future period.

Statement of Revenues and Expenditures - Budqet and Actual (optional): This is supplementary information as provided in previous audit reports for analysis purposes only.

Statement of Cash Flows: This statement reflects inflows and oufflows of cash, summarized by operating, capital, financing and investing activities. The direct method was used to prepare this information, which means that gross rather than net amounts were presented for the year's activities.

Notes to the Financial Statements: This additional information is essential to a full understanding of the data reported in the basic financial statements.

Supplemental Information: This is offered to support the required financial statements and to assist the reader in a clearer understanding of the operating units within the organization.

Reporting Entity

The financial statements of Sonoma State University will be separated between the University and its component units. The latter are separate I.R.C. 501(c)(3) non-profit auxiliary organizations whose financial information will be presented in a discrete column and in the footnotes of the

University's financial statements. Consequently, these auxiliaries must comply with the same governmental rulings and must present their individual separate audited financial statements in the same format.

Analytical Overview

Summary Total assets of the organization have increased this year by $228,957. This classification is comprised of Current Assets (Cash, Accounts Receivable, and Prepaid Expenses), which increased overall by $201,143 and Capital Assets, which increased by $27,814. The latter category is presented net of accumulated depreciation, and the increase is due primarily to Leasehold Improvements made to the Student Union during the year.

Liabilities have decreased this year, in this case by $1 13,458, as a result of paying the debt related to the Gymnasium Floor project.

Unrestricted Net Assets have increased $314,602; while Net Assets invested in Capital Assets, net of related debt, have increased $27,814. The overall change to Net Assets is an increase of $342,415 (a 65.17% increase from the prior year), resulting in a 6130104 balance of $867,827.

Comparative Analysis of Current and Prior Year Activities and Balances ,

Increase

613012004 613012003 (Decrease)

Operating Revenues $1,834,723 $1,426131 6 $408,407 Note # l

Operating Expenses 1,493,378 1,363,854 129,524 Note #2

Net Operating Income $341,345 $62,462 $278,883

Investment Income, Net $7,539 $4,345 $3,194 Note #3

Other Expenses 7,013 34,890 (27,877) Note M

Won-Operating Net Income

Note #1 - The Student Tuition and Fees category was the main contributor, increasing by $418,935 due to an increase in the return of fee revenue. Operating revenues decreased by $46,902 due to less events and lower program attendance. Allocations from other SSU departments were increased by $37,745 over the prior year.

Note #2 - Overall, operating expenses increased by 7.27%.

Note #3 - An increase in investment income reflected the organization's use of cash for operations during this fiscal year, as well as the increase in student tuition.

Note #4 - lnterest on indebtedness decreased because the current loan for the gymnasium floor was completely paid off by June 30, 2004. Also, FY 02103 indebtedness included a loan with Foundation that was paid off in FY 02/03.

Restricted Resources

The organization's funds have no legal restrictions placed on their use. Therefore, net assets are either unrestricted or invested in capital assets, net of related debt.

Budaetarv Hiqhliq hts

Actual operating revenue was $1 1,867 less than budget. Operating Expenses were $234,891 less than forecasted. The result was operating income of $341,345, an increase of $278,883 over the prior year. This was largely due lo a decrease in expenditures.

In the non-operating category, Investment Income was $4,461 less than expected, while Interest on indebtedness was $15,488 under budget, a favorable net change in Non-operating Income of $1 1,026

The budgeted net increase of $107,821 became an actual net increase of $342,416, an overall change of $234,595. Although total revenues were under budget ($16,328), savings in personnel expenses ($216,722) and general expenditures ($33,656) account for the increase to net assets.

Factors Impacting Future Periods

Factors lmpactinq Future Periods The fee increase approved by a student referendum to support a new Recreation Center was passed in November of 2000. Acondition of this referendum was that an increase in Student Union fees of $160 per year took place in 2002-03 to support construction and operation of the new Recreation Center. In 2003-04 this fee increased (per the referendum election language) by another $30 per year, bringing the total Recreation Center portion of the fee to $190 per year per student. A financial plan to service the debt, maintenance reserves, and operating expenses for the new Recreation Center was approved by the Chancellor's Office and University Administration. Construction began on the Recreation Center in February 2003. Commercial paper was used to finance the beginning of construction for the Rec Center. Construction bonds were sold in 2004 to cover the total cost of construction. Occupancy of the center is scheduled for Fall Semester 2004. Although budgeting for 2003104 included some operating funds, no operating dollars were spent as opening did not take place as originally scheduled.

Annual Inflation Adiustments to Fee Revenue As stated above, the students of SSU voted in November 2000 to raise their Student Union Fee to support the construction and operation of a new Recreation Center. Also included in this fee increase was a requirement to increase the operational portion of the fee by an inflationary factor each year. The operational portion of the fee is identified as "The total fee income less maximum annual debt service." Basically this amounts to 25% of the Recreation Center fee dedicated to operations. The inflationary increase for the operational portion of this fee was determined to be 1.8% for fiscal year 04-05.

In a separate fee referendum in April of 2001, the students of Sonoma State University approved an annual inflationary increase to student union fees based on the annual Bay Area Cost of Living Index. This continuing annual increase normally allows the Sonoma Student Union Corporation to maintain levels of programs and services while the costs to deliver these programs and services increases due to inflation. As with the Recreation Center Operations portion of the fee, the increase to the Student Union portion of the fee also increased by 1.8% for fiscal year 04-05.

Other Factors State budnet issues have affected the CSU budclet and indirectlv affect the Student Union corporation budget through decreases in enrollment irojections. ~ n n i a l inflationary increases help to mitigate the problems caused by decreased enrollment. This helps to keep programs and services funded at a workable level.

Another factor, which impacts future periods, includes the increased rental revenue to be received from US Bank Corporation. On July 1, 2004 the Sonoma Student Union Corporation entered into a four-year lease agreement with US Bank to locate a full service branch in the Student Union Building. Beginning in fiscal year 04-05, rental revenue will increase by a minimum of $10,000 per year. This figure could be higher as the lease calls for a sliding scale of increased rent based on the number of SSU community members that open accounts with the branch.

Fiscal year 04-05 will also see a change in management for the Student Union Corporation as the long-standing Executive Director retires. A recruitment and search process will identify a replacement with an estimated start date of January 3,2005.

John R. Wright, Executive Director

SONOMA STUDENT UNION CORPORATION

P June 30,2004

(With Comparative Totals for June 30,2003)

ASSETS

CURRENT ASSETS Cash and cash equivalents Accounts receivable, net Prepaid expenses- TOTAL CURRENT ASSETS

NONCURRENT ASSETS Capital assets, net TOTAL NONCURRENT ASSETS

TOTAL ASSETS

CURRENT LIABILITIES Accounts payable and accrued liabilities Accrued salaries and benefits payable Accrued compensated absences Deferred revenue Long-term debt obligations - current portion Other current liabilities TOTAL CURRENT LIABILITIES

NONCURRENT LIABILITIES Accrued compensated absences TOTAL NONCURRENT LIABILITIES

NET ASSETS Invested in capital assets, net of related debt Unrestricted

TOTAL NET ASSETS

TOTAL LIABILITIES AND NET ASSETS

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

SONOMA STUDENT UNION CORPORATION Exhibit A STATEMENT OF REVENUES,BPENSES AND CHANGES IN NET ASSETS

For the Year Ended June 30,2004

OPERATING REVENUES

Student tuition and fees Non-governmental

Sales and services of auxiliary enterprises Other operating revenues

TOTAL OPERATING REVENUE

OPERATING EXPENSES

Student services Student grants and scholarships Depreciation

TOTAL OPERATING EXPENSES

OPERATING INCOME (LOSS)

NONOPERATING REVENUES (EXPENSES)

Investment income, net Interest on capital-related debt

NET NONOPERATING INCOME (EXPENSES)

OPERATING INCOME (LOSS) BEFORE OTHER REVENUES AND LOSSES

OTHER REVENUES AND (LOSSES) Gain (loss) on disposal of assets

TOTAL OTHER REVENUES AND (LOSSES)

NET INCREASE (DECREASE) IN NET ASSETS

NET ASSETS, BEGINNING O F YEAR

NET ASSETS, END O F YEAR

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

SONOMA STUDENT UNION CORPORATION MENT OF RF.VENUES AND EXPENDITURES

For the Year Ended June 30,2004

Variance Favorable

Budget Actual (Unfavorable)

OPERATING REVENUES

Student tuition and fees Non-governmental

Sales and services of auxiliary enterprises Other operating revenues

TOTAL OPERATING REVENUE

OPERATING EXPENSES

Student services Student grants and scholarships Depreciation

TOTAL OPERATING EXPENSES

OPERATING INCOME (LOSS)

NONOPERATING REVENUES (EXPENSES)

Investment income, net Interest on capital-related debt

NET NONOPERATING INCOME (EXPENSES)

OPERATING INCOME (LOSS) BEFORE OTHER REVENUES AND LOSSES

OTHER REVENUES AND (LOSSES) Gain (loss) on disposal of assets

TOTAL OTHER REVENUES AND (LOSSES)

NET INCREASE (DECREASE) IN NET ASSETS

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

- 8 -

Sonoma Student Union Corporation FLOWS

For the Year Ended June 30,2004

Cash flows from operating activities: Student tuition and fees Grants non-governmental Payments to Suppliers Payments to Employees Payments to Students Sales and services of auxiliary enterprises Other receipts (payments)

Net Cash provided (used) by operating activities

Cash flows from capital and related financing activities:

Proceeds from capital debt Acquisition of property, plant and equipment Disposition of property, plant and equipment Principal paid on capital debt and lease Interest paid on capital debt and lease

Net cash provided (used) by capital and related financing activities

Cash flows from investing activities:

Investment income (loss)

Net cash provided (used) by investing activities

Net increase (decrease) in cash Cash - beginning of period

Cash - end of period

Reconciliation of net operating revenues (expenses) to net cash provided (used) by operating activities:

Operating income (loss) Adjustments to reconcile net income (loss) to net cash

provided (used) by operating activities: Depreciation

Change in assets and liabilities: Accounts receivable, net Prepaid expenses Accounts payable Accrued salaries and benefits payable Accrued compensated absences Deferred revenue Other liabilities

Cash flows reported in other categories

Interest on noncapital related debt

Net cash provided (used) by operating activities

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

Sonoma Student Union Corporation NOTES TO BASIC FINANCIAL STATEMENTS

June 30,2004

NOTE 1 - ORGANIZATION

Sonoma Student Union Corporation (the Organization) was organized in 1975 to promote and furnish facilities for the educational development and academic services of Sonoma State University (the University). The Organization's first and foremost role is to serve as a focal point for student Lfe outside the classroom. The Organization strives to enhance the student's university experience by offering programs that contibute to the student's emotional and physical well-being and to hidher intellectual, cultural, and social development outside the context of the formal instruction program. It includes expenditures for student activities, 'cultural events, i n m d athletics, recreation and fitness programs, and student organizations.

To accomplish this mission, the Organization has entered into an operating agreement with the California State University Trustees and is reported as a component unit on the Sonoma State University Financial Statements.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Financial Reporting Entity

The financial statements present only the Statement of Net Assets, Statement of Revenues, Expenses, and Changes in Net Assets, and Statement of Cash Flows of the Organization.

The Organization is one of four recognized Sonoma State University auxiliary organizations. A d a r y organizations are legally separate entities that provide services primarily to the University's students and faculty.

(b) Basis of Presentation

The accompanying financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting in accordance with accoun&g principles generally accepted in the United States of America, as prescribed by the Governmental Accounting Standards Board (GASB). Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met.

The accompanying financial statements are resented on the basis set forth in Government Accounting Standards Board Statements No. 35, Basic F d Statanszts - and Managem~3 Discus& and Atdym - For Pub& G&gs and llmbmdh, No. 36, Recqnszt R-gjb NO^- E x c b a n ~ Rewms, an * of GASB S t a m No. 33, No. 37, Basic F d Statemszts - and M a n a g m ~ 3 Dkamim and anal^ -for State and Lourl Gawnments; Owmbus, and No. 38, G?rtariz F d Statement Note Disc&.

The financial statements required by GASB Statements Nos. 34 and 35 include a statement of net assets, a statement of revenues, expenses, and changes in net assets, and a statement of cash flows.

The Organization records revenue in part from fees and other charges for services to external users, and accordingly has chosen to present its financial statements using the reporting model for special-purpose governments engaged only in business-type activities.

This model allows all financial information for the Organization to be reported in a single column in each of the financial statements. In accordance with the business-type activities r e p o ~ g model, the Organization prepares its statement of cash flows using the direct method.

Sonoma Student Union Corporation NOTES TO BASIC FINANCIAL STATEMENTS

June 30,2004

NOTE 2 - S-Y OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(c) Election of Applicable FASB Statements

The Organization uses al l applicable GASB pronouncements and all Financial Accounting Standards Board Statements and Interpretations issued on or before November 30, 1989, unless these pronouncements conflict with or contradict GASB pronouncements.

(d) Classification of Current and Noncurrent Assets and Liabilities

The Organization considers assets to be current that can reasonably be expected, as part of its n o d business operations, to be converted to cash and be available for liquidation of current liabilities w i h 12 months of the statement of net assets date. Liabilities that reasonably can be expected, as part of n o d business operations, to be liquidated within 12 months of the- statement of net assets date are considered to be current. All other assets and liabilities are considered to be noncurrent.

(e) Cash Equivalents

The Organization considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents.

(f) Investments

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

(g) Capital Assets

Capital assets are stated at cost or estimated historical cost if purchased, or if donated, at estimated fair value at date of donation Capital assets, including infrastructure, with a value of $1,000 or more and with a useful life of one year or more are capitalized. Capital assets are depreciated on a straight-line basis over their estimated useful lives, which range from five to forty years. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are expensed as incurred.

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

(h) Deferred Revenue

Deferred revenue consists primarily of fees collected in advance but not yet earned as of the year-end.

i) Compensated Absences

Employees accrue annual leave at rates based on length of service and job classification. Employee vacation benefits earned, but not used, are recognized as liabilities of the Organization.

Sick leave benefits are earned and accumulated for each employee. However, accumulated sick leave benefits are not recognized as liabilities of the Organization because the payment of such benefits is notprobable or estimable.

Sonoma Student Union Corporation NOTES TO BASIC FINANCIAL STATEMENTS

June 30,2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (concluded)

(j) Net Assets

The Organization's net assets are classified into the following net asset categories:

I d in wtpltal assets, net of~kzted &bt: Capital assets, net of accumulated depreciation and outstanding balances of debt attributable to the acquisition, construction, or improvement of those assets.

U W : All other categories of net assets. In addition, unrestricted net assets may be designated for use by management of the Organization.

(k) Classification of Revenues and Expenses

The Organization considers operating revenues and expenses in the statement of revenues, expenses, and changes in net assets to be those revenues and expenses that result from exchange transactions or from other activities that are connected directly to the Organization's primary functions. Exchange transactions include charges for services rendered and the acquisition of goods and services. Certain other msactions are reported as nonoperating revenues and expenses or capital contributions in accordance with GASB Statement No. 35. These nonoperating activities include the Organization's net investment income, gtfts, and interest expense.

(1) Income Taxes

The Organization is exempt from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The Organization is also exempt from Glifornia franchise taxes and, therefore, has made no provision for Federal or California income taxes. In addition, the Organization has been determined by the Internal Revenue Service not to be a "private foundation" within the meaning of Section 509(a) of the Code.

(m) Estimates

The prepmtion 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 in the accompanying hancial statements. A d results could differ from those estimates.

(n) Risk Management

The Organization is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; and natural disasters for which the Organization carries commercial insurance.

NOTE 3 - CASH AND CASH EOUIVALENTS

At June 30, 2004 and 2003 cash and cash equivalents were $574,282 and $365,894, respectively. The corresponding bank balance was $731,858 for 2004 and $382,574 for 2003. The differences between the cash and cash equivalents balance and the bank balance are related to deposits in transit and outstandmg checks. The bank insures $172,830 by federal depository insurance. The balance is uninsured and held by the financial institutions in the Organization's name. It is the opinion of management that the uninsured portion is not of particular concern at this time due to the solvency of the financial institutions.

Sonoma Student Union Corporation NOTES TO BASIC FINANCIAL STATEMENTS

June 30,2004

NOTE 4 - PREPAID EXPENSES

Prepaid expense balances are calculated and adjusted at year-end to properly charge funds in the period benefitted. Prepaid expenses as of June 30 are comprised of the following:

Program - ICC tour Program - Wilderness Welcome Program - Summer Camp Other Worker's Compensation Benefits Leases Liability Insurance

Total

NOTE 5 - CAPITAL, ASSETS

Capital assets activity for the year ended June 30,2004 consisted of the following:

Balance Balance June 30,2003 Additions Deletions Transfers June 30,2004

Depreciable capital assets: Buildings and building

improvements $ 316,197 $ - $ - $ - $ 316,197 Improvements, other than

buildings 225,622 47,759 (31,912) - 241,469 Personal property:

Equipment 319,180 14,003 (2,058) - 331,125

Total depreciable capital assets $ 860,999 61,762 (33,970) - 888,791

Less accumulated depreciation (485,422) (31,831) 31,853 (485,400)

Net capital assets $ 375,577 $ 29,931 $ (2,117) $ - $ 403,391

NOTE 6 - LEASE OBLIGATIONS

The Organization is obligated under an operating lease for the use of personal property d a term of 63 months through fiscal year 2005/2006. The lease provides a baseline usage and additional charges are incurred if the usage exceeds h s count.

Sonoma Student Union Corporation NOTES TO BASIC FINANCIAL STATEMENTS

June 30,2004

NOTE 6 - LEASE OBLIGATIONS (concluded)

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

Operating leases

Year ending June 30: 2005 2006

Total minimum lease payments

Less amount representing interest

Present value of future minimum lease payments $ 36,870

Equipment rental expense under this operating lease for the years ended June 30,2004 and 2003 totaled $34,901 and $39,919, respectively.

NOTE 7 - ACCRUED COMPENSATED ABSENCES

Employee vacation benefits earned, but not used, are recognized as liabilities of the Organization. Total accrued vacation benefits payable was $38,564 and $36,899 as of June 30, 2004 and 2003, respectively.

Sick leave benefits are earned and accumulated for each employee. However, accumulated sick leave benefits are not recognized as liabilities of the Organization because the payment of such benefits is not probable or estimable.

NOTE 8 - DEFERRED REVENUE

Deferred revenue as of June 30 represents that portion of fees received, but not yet earned as of the year-end. The amount of fees to be earned are:

Program - ICC tour Program - Wilderness Welcome Program - Summer Camp Open Recreation Program - Summer Central Program - Welcome Week

Total

Sonoma Student Union Corporation NOTES TO BASIC FINANCIAL STATEMENTS

June 30,2004

NOTE 9 - LONG-TERM DEBT OBLIGATIONS AND INTEREST PAYABLE

Long-term debt activity for the year ended June 30,2004 was as follows:

Beginning Ending balance Additions Reductions balance

Long-term debt obligations: Interfund Loan $ 11O,OOO $ - $ (IlO,OOO) $ -

Accrued Interest Payable Interfund Loan: 6,875 7,012 (13,887) -

Total lone-term

NOTE 10 - PENSION PLAN AND POSTRETIREMENT BENEFITS

(a) Plan Description

The Organization, as an agency of the State of California, contributes to the California Public Employeest Retirement System (CDERS). The state's ~ l a n with CalPERS is an agent multiple- employer defined benefit pension plan. For the Organimtion, the plan acts as a cost-sharing multiple-employer defined benefit pension plan that provides a defined benefit pension and post-retirement benefit program for substantially all eligible Organization employees. CalPERS functions as an investment and administrative agent for its members. The plan also provides survivor, death and disability benefits. The Public Employees' Medical and Hospital Care Act cover eligible employees for medical benefits.

A menu of benefit provisions as well as other requirements are established by State statutes within the Public Employees' Retirement Law. The Organization selects optional benefit provisions from the benefit menu by contract with W E R S and adopts those benefits through local ordinance. CalPERS issues a separate comprehensive annual financial report. Copies of the WERS' annual financial report may be obtained from the W E R S Executive Office, 400 P Street, Sacramento, California 958 14.

(b) Funding Policy

Active plan members in CalPERS are required to contribute 7% of their annual covered salary. The employer is required to contibute the actuarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration. The required employer contribution rate for fiscal 2003/04 was 7.039%. The contibution requirements of the plan members are established by State statute and the employer conmbution rate is established and may be amended by W E R S . Future unforeseen changes in unfunded liability/(excess assets) may have a sigdcant impact on the employer conmbution rate as they occur.

Sonoma Student Union Corporation

June 30,2004

NOTE 10 - PENSION PLAN AND POS'RETIREMENT BENEFITS

(c) Annual Pension Cost:

For fiscal year 2003/04, the Organization's annual pension cost was $24,090. The required contribution for fiscal year 2003/04 was determined as part of the June 30, 2001 actuarial valuation using the enuy age normal actuarial cost method with the contributions determined as a percent of pay. The actuarial assumptions included (a) 8.25% investment rate of return (net of administrative expenses) and (b) projected salary increases that vary by duration of service ranging from 3.75% to 14.20% for miscellaneous members. Both (a) and (b) include an inflation component of 3.5%. The actuarial value of CaPERS' assets was determined using a technique that smooths the effect of short-term volatility in the market value of investments over a two to five year period depending on the size of investment gains and/or losses. CaPERS' unfunded actuarial accrued liability (or excess assets) is being amortized as a level percentage of projected payroll on a closed basis.

(d) Funded Status of the Man: Entry Age

Nonnal Unfunded Annual UA AL As a Valuation Accrued Actuarial Value Liability (Excess Covered % of

Date Liability of Assets Assets) Funded Status Payroll Payroll

(a) @) (a)-@) @)/(a) ( c ) [(a)-(b)l/(c) 06/30/99 741,092 903,502 (162,410) 121.9% 395,975 (41.0) 06/30/00 846,728 1,029,456 (182,728) 121.6% 407,038 (44.9) 06/30/01 1,123,941 1,105,679 18,262 98.4% 397,968 4.6

NOTE 11 - CLASSIFICATION OF OPERATING EXPENSES

The Organization has elected to report operating expenses by functional classification in the statement of revenues, expenses, and changes in net assets, but to provide the natural classification of those expenses as an additional disclosure. For the years ended June 30, 2004 and 2003, operating expenses by natural classification consisted of the following.

Scholarships Supplies and and other

2004 Salaries Benefits fellowships services Depreciation Total

Functional classification: Instruction $ - $ - $ - $ - $ - $ - Research - - - - - - Public senrice - - - - - - Academic support - - - - - - Student s e ~ c e s 705,285 142,351 - 609,036 - 1,456,672 Institutional support - - - - - - Operation and maintenance of - - - - -

plant - - - - - - Student grants and scholarship - - 4,875 - - 4,875 Auxiliary enterprise expenses - - - - - - Depreciation - - - - 31,831 31,831

Total $ 705,285 $ 142,351 $ 4,875 $ 609,036 $ 31,831 $ 1,493,378

Sonoma Student Union Corporation NOTES TO BASIC FINANCIAL STATEMENTS

June 30,2004

Scholarships Supplies and and other

2003 Salaries Benefits fellowships services Depreciation Total

Functional classification: Instmaion $ - $ - $ - $ - $ - $ - Research - - - - - -

- - - - Public service - - Academic support - - - - - Student services 693,557 110,249 - 514,852 - 1,318,658 Institutional support - - - - - Operation and maintenance of

plant - - - - - - Student grants and scholarship - - 4,610 - - 4,610 Auxiliary enterprise expenses - - - - - - Depreciation - - - - 40,586 40,586

Total $ 693,557 $ 110,249 $ 4,610 $ 514,852 $ 40,586 $ 1,363,854

NOTE 12 - TRANSACTIONS VlrlTH RELATED ENTlTIES

The Organization has an operating agreement with the California State University Trustees for the provision of certain auxiliary activities including student activities, cultural events, intramural athletics, recreation and fitness programs, and student organizations. The agreement permits the O r g e t i o n to use buildings and facilities within the campus in the provision of these services. The agreement provides for reimbursement of allowable direct costs plus an allocable portion of indirect costs associated with facilities, goods, and services provided by the University on behalf of the Trustees in accordance with CSU Executive Order 753-AJlocation of Costs to Auxiliary Enterprises and the University's annual cost allocation plan. These amounts are included in Student & eqmses in the Statements of Revenue, Expense, and Changes in Net Assets.

In addition, the Organization has been granted authority to enter into subleases with the University and its Auxiliary Organizations. The fees received from these leases are included in Sales rmd 6 of mdky mtwpnses in the Statements of Revenue, Expense, and Changes in Net Assets.

Related party activities during the years ended June 30,2004 and 2003 are reflected below.

2003/04 2002/03 Payments to the University in accordance with CSU Executive

Order 753 $ 213,286 $ 181,834

Payments to the University and recognized auxiliary organizations for senrices, office space rental, and programs 226,482 143,748

Amounts received from the University and recognized auxiliary organizations 249,317 237,100

Amounts receivable from the University and recognized auxiliary organizations (included in Accounts receivable in the Statements of Net Assets)

Amounts payable to the University and recognized auxiliary organizations (included in Accountspayable in the Statements of Net Assets)

Sonoma Student Union Corporation G S m T OF REVENUES, = E N D m D CHANGES IN NET ASSETS

Unrestricted Fund For the Year Ended June 30,2004

Front Desk Total General and Union Recreational Event Support Sales and Recreational Open Unrestricted

Student Union Administrative Programming Center Services Services Copy Center Sports Recreation Funds

REVENUE Private Contributions Student Union Fee Reimbursements-External Invenment Income Revenues-Otr Operating Revenue Rent Revenue Gain on Disposal of Asset T/I - Other SSU Entities

TOTAL REVENUE

Management And Supervisory Support Staff Salaries Student Assistant Work Study-On Campus Oasdi Dental Imrance Health And Welfare Retirement Workers Compensation Unemployment Compensation Medicare Vision Care Telephone Usage NerworWTelccommunications

Utilities Travel-In State Travel-Out Of State Tvl In-Mileage Const~uction Retention Subscriptions Contractual Services Contractual Services-CCP Non-Cap Eqmt < $5000 Postage and Courier Services

Sonoma Student Union Corporation I T C

Unrestricted Fund For the Year Ended June 30,2004

General and Administrative

177

Union Programming

7,423 657

Front Desk Sales and Services

2

14

Total Unrrrtricted

Funds 24,591

23,677 7,013

11,320

18,461 16,054

145 43,759

582 2,567

4,875 2,401

9,234 3,665

18,850 180 240

147,688 8,496

66,601

31,832

9,O'J'J

Recreational Center

Event Support Services

1,105 2,810

Recreational Sport5

7,417

6,308

Student Union 3,358

12,764

7,013 79 1

1,125

4,839 n

395 -

1,567

40 1,370 6,279 2,492

12,818

180 2

100,428 8,276 4,511

21,959

9,000 56 -

586,428

Copy Center 2,859

416 - -

317 584 -

41,209 - - - - - - - -

36 - -

1,099 73 1 -

Recreation 1,880 Printing and Copying

Supplies Interest On Bon& And Notes Training & Conference Registration Ad & Promotional Publications Repairs And Maintenance Expensel-Otr Equipment Rental Emp-Non-Tax Move Allow Space Rental-Admin Awar& Memberships CSURMA-Liability CSURMA-Property CMS Expense Bank Charges Cash Over/Short University Services AudidLegal Expenre Operating Expense Depreciation T/O - Allocations Loss on Disposal of Auet Cost of Goo& Sold

TOTAL EXPENDlTURES

N Total Revenues