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F&I Reserve Discussion: September 2018 Audit Report and Future Planning

This discussion covers the audit recommendations, asset and liability balances, long-term reserve needs, and funding opportunities for the F&I reserves. It also addresses the reduction of PERS liability and the need for a reserve plan.

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F&I Reserve Discussion: September 2018 Audit Report and Future Planning

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Presentation Transcript

  1. F&I Reserve Discussion topics September 21, 2018

  2. ReservesTable of Contents • Reserve Discussions Timeline • October 2017 F&I • May 2018 F&I/Board Budget Review • See Backup slides • September 2018 – External Audit Recommendations • Assets & Liabilities balances • Where do we go from here?

  3. F&I Reserve Discussion October 2017 F&I Recap • Reviewed Reserve Policy adherence • Verbal Auditor recommendation to reclassify • Revisited Prior Budget Reserve model • Discussed existing and Strategic Requirements • PERS, Bonds, UDP renovation etc. • Noted need to Reserve for long term build

  4. F&I Reserve Discussion May 2018 F&I/Board Budget Review • Presented Reserve standings • Reviewed Assets, Liabilities and risk • Noted Auditor recommendation for designating funds • No Facility set aside funding in place • Recommended $42M candidates for reserves • See Budget slides

  5. F&I Reserve Discussion September 2018 Audit Report • Audit Recommendations • Consider Lowering Idle Cash Bank Balances • Consider Developing an Operating Reserve Policy • Audit Actions • Reclassified Investments from Current Assets to Other Long Term • Considered Long Term since no plan in place • CO guidelines recommend designation

  6. ReservesAssets & Liabilities status • Liabilities and Assets growing proportionately • Enough assets to cover liability and Working Capital • Mitigate interest rate on PERS balance • Legacy employer contribution rate increasing • No set aside for Facility Repair/Rebuild

  7. Long Term Liabilities Trend

  8. Cash/Investment Balance Trend(With VEBA-Off Balance Sheet)

  9. F&I Reserve Discussion • Where do we go from here?

  10. RESERVES Cash Designation & Funding FROM FY2018/2019 BUDGET

  11. FY 2018/2019 Budget Review FROM FY2018/2019 Budget Reserve Planning • Per CSU Policy accommodations made for: • Working Capital • Annual Capital Replacement /Major Maintenance • Adequate funds on hand for Midterm Support • Planned Positive Cash Flow in FY2018/19 • Assumes Minimal Capital investment plan • Auditor recommendation for “Designating” funds for existing liabilities and future needs

  12. FY 2018/2019 Budget Review FROM FY2018/2019 Budget Reserve Planning (Cont’d) • PERS Unfunded Liability largest debt/risk • Accrues Interest exceeding Operating ROI • VEBA funding (Off Balance Sheet) • Mitigates Long Term Retiree Medical Liability • Assumes no additional investment • No Facility set aside funding in place • Need to start reserving and/or Designate Funds for long term rebuild

  13. FY 2018/2019 Budget Review FROME FY 2018/2019 BudgetReserve Matrix

  14. FY 2018/2019 Budget Review FROM FY 2018/2019 BudgetReserve Funding Opportunities

  15. FY 2018/2019 Budget Review FROM FY2018/2019 Budget Reserve Designation • Recommend that monies be “Designated” as other assets in support of the following: • $500,000 - SMIF Portfolio(Held with Wells Fargo) • $500,000 – Beach Club Deposits (Student funds) • $5,000,000 - PERS Unfunded Liability (or pay down) • $3,000,000 – Outpost Bond • $2,000,000 – Short Term Facility repair • $1,000,000 – Alumni Center • $30,000,00 – UDP Replacement

  16. FROM FY2018/2019 Budget PERS Liability Reduction • Current unfunded liability of $6.1M • Annual payments increasing to $700K • $360,853 – July 2018, $445,000 – July 2019 • Current schedule incurs $7.6M in interest • Discount rate of 7% • CalPERS adopting a 20 year minimum schedule • See CalPERS Bulletin and backup files • Recommend to adopt a plan similar to VEBA • $2M down, $1M/year for 3-5 years

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