independent accountants' report on the application of


Jan 26, 2018 - INDEPENDENT ACCOUNTANTS' REPORT ON THE. APPLICATION OF AGREED - UPON PROCEDURES. Jeffrey S. Vitter, Ph.D., Chancellor.

INDEPENDENT ACCOUNTANTS’ REPORT ON THE APPLICATION OF AGREED - UPON PROCEDURES TO THE RECORDS OF THE UNIVERSITY OF MISSISSIPPI ATHLETICS FOR THE YEAR ENDED JUNE 30, 2017

THE UNIVERSITY OF MISSISSIPPI ATHLETICS TABLE OF CONTENTS JUNE 30, 2017

Page Independent Accountants’ Report on the Application of Agreed-Upon Procedures

3

Statement of Revenues and Expenses

8

Notes to Financial Statement

10

2

J. E. VANCE & COMPANY, P.A. CERTIFIED PUBLIC ACCOUNTANTS 825 JEFFERSON STREET POST OFFICE BOX 1280 TUPELO, MISSISSIPPI 38802 __________ (662) 842-2123 FACSIMILE (662) 841-6809 E-MAIL: [email protected]

INDEPENDENT ACCOUNTANTS’ REPORT ON THE APPLICATION OF AGREED - UPON PROCEDURES Jeffrey S. Vitter, Ph.D., Chancellor University of Mississippi We have performed the procedures enumerated below, which were agreed to by the chief executive of the University of Mississippi, solely to assist you in evaluating whether the accompanying statement of revenues and expenses of the University of Mississippi Athletic Department is in compliance with the National Collegiate Athletic Association (“NCAA”) Constitution 3.2.4.15 for the year ended June 30, 2017. The University of Mississippi’s management is responsible for the statement of revenues and expenses (“statement”) and the statement’s compliance with those requirements. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. Agreed-Upon Procedures Related to the Statement of Revenues and Expenses The procedures that we performed and our findings are as follows: 1.

Procedure:

Finding: 2.

Procedure:

Finding:

We obtained and reviewed the University of Mississippi Athletics (UMA) Statement of Revenues and Expenses prepared in compliance with NCAA Constitution 3.2.4.16, footing and crossfooting for accuracy. The Statement was accurately prepared. We obtained the UMA actual report of departmental revenues and expenses, the Ole Miss Athletics Foundation (OMA Foundation) audited financial statements, and confirmations of revenues and expenses of support groups (booster clubs) on behalf of the UMA. We reconciled these reports to the UMA Statement of Revenues and Expenses. We found no material variance between the reports and the amounts on the Statement.

3

3.

Procedure: Finding:

4.

Procedure:

Finding: 5.

Procedure:

Finding:

6.

Procedure:

Finding:

7.

Procedure: Finding:

8.

Procedure:

Finding:

9.

Procedure: Finding:

10.

Procedure:

Finding:

We obtained a reconciliation of the UMA Statement of Revenues and Expenses to the University of Mississippi Financial Summary. We found no material variance between the amounts reported on the Statement and the Financial Summary. We obtained the UMA schedule of long-term debt, footing and cross footing for accuracy. We obtained the UMA amortization schedule for the retirement of debt, recalculating the amounts. We found no material variance in the schedules. We obtained from the UMA Ticket Office reports of tickets sold, complimentary tickets, attendance, and revenues for each athletic event. We compared the reports to the UMA Statement of Revenues and Expenses. We found no material variance between the Ticket Office reports and the amounts reported on the Statement. We obtained an understanding of the University’s methodology for allocating student fees to athletic programs. We compared documentation from the University’s financial records to the amount reported on the UMA Statement of Revenues and Expenses. We found no material variance between the University report and the amounts reported on the Statement. We compared the contracts for guaranteed contests, both home and away, to the UMA Statement of Revenues and Expenses. We found no material variance between contract amounts and the amounts reported on the Statement. We compared a summary of revenues from OMA Foundation to UMA, for the purpose of paying salaries and benefits of UMA personnel, to the Statement of Revenues and Expenses. We found no material variance between the Foundation records and the amounts reported on the Statement. We compared University records of direct support to UMA to the UMA Statement of Revenues and Expenses. We found no material variance between the records and the amounts reported on the Statement. We compared documents reporting NCAA and Southeastern Conference distributions for tournament and post-season competition with the UMA Statement of Revenues and Expenses. We found no material variance between the reports and the amounts reported on the Statement.

4

11.

Procedure:

Finding:

13.

Procedure:

Finding:

14.

Procedure:

Finding: 15.

Procedure:

Finding: 16.

Procedure:

Finding:

17.

Procedure:

Finding:

18.

Procedure:

Finding:

19.

Procedure:

We inspected agreements related to the sale of broadcast rights. We compared amounts within the agreements to the UMA Statement of Revenues and Expenses. We found no material variance between the amounts in the agreements and the amounts reported on the Statement. We inspected agreements related to royalties, licensing, advertising, and sponsorships. We compared amounts within the agreements to the UMA Statement of Revenues and Expenses. We found no material variance between the amounts in the agreements and the amounts reported on the Statement. We performed attribute testing on a sample of revenues for royalties, licensing, advertising, and sponsorships for accuracy in amounts reported, coding, documentation, and processing. We found no variance in the sample. We performed attribute testing on a sample of revenues for revenue not reported in other categories for accuracy in amounts reported, coding, documentation, and processing. We found no variance in the sample. We compared a sample of students receiving aid to award letters, student accounts, and the UMA actual report of revenues and expenses. We found no material variance between the letters, accounts and the report. We compared a sample of coaches’ contracts (including football, men’s basketball, and women’s basketball) to University payroll records for salaries and benefits and to the amounts reported on the UMA Statement of Revenues and Expenses. We found no material variance between the contracts, records, and the amounts reported on the Statement. We compared a sample of budgeted amounts for salaries and benefits for UMA employees to University payroll records for salaries and benefits and to the amounts reported on the UMA Statement of Revenues and Expenses. We found no material variance between the budgets, records, and the amounts reported on the Statement. We compared a sample of coaches’ contracts to OMA Foundation payroll records for salaries and benefits and to the amounts reported on the UMA Statement of Revenues and Expenses.

5

20.

Finding:

We found no material variance between the contracts, records, and the amounts reported on the Statement.

Procedure:

We compared contracts of coaches receiving severance payments to University payroll records for salaries and benefits and to the UMA Statement of Revenues and Expenses. We found no material variance between the contracts, records, and the amounts reported on the Statement.

Finding:

21.

Procedure: Finding:

22.

Procedure: Finding:

23.

Procedure:

Finding: 24.

Procedure: Finding:

25.

Procedure:

Finding: 26.

Procedure:

Finding: 27.

Procedure:

Finding: 28.

Procedure:

We obtained a copy of the UMA policy for recruiting expense and compared it to the NCAA policy. We found no variance between the UMA policy and the NCAA policy. We obtained a copy of the UMA policy for team travel expense and compared it to the NCAA policy. We found no variance between the UMA policy and the NCAA policy. We performed attribute testing on a sample of expenses for equipment, uniforms, and supplies for accuracy in amounts, coding, documentation, and processing. We found no variance in the sample. We performed attribute testing on a sample of expenses for games for accuracy in amounts, coding, documentation, and processing. We found no variance in the sample. We performed attribute testing on a sample of expenses for fund raising, marketing, and promotion for accuracy in amounts, coding, documentation, and processing. We found no variance in the sample. We performed attribute testing on a sample of expenses for sports camps for accuracy in amounts, coding, documentation, and processing. We found no variance in the sample. We performed attribute testing on a sample of expenses for direct facilities maintenance and rental for accuracy in amounts, coding, documentation, and processing. We found no variance in the sample. We performed attribute testing on a sample of expenses for spirit groups for accuracy in amounts, coding, documentation, and processing.

6

29.

Finding:

We found no variance in the sample.

Procedure:

We performed attribute testing on a sample of medical expenses and medical insurance for accuracy in amounts, coding, documentation, and processing. We found no variance in the sample.

Finding: 30.

Procedure:

Finding: 31.

Procedure:

Finding:

We performed attribute testing on a sample of expenses for direct overhead and administrative expenses for accuracy in amounts, coding, documentation, and processing. We found no variance in the sample. We performed attribute testing on a sample of expenses for expenses not reported in other categories for accuracy in amounts, coding, documentation, and processing. We found no variance in the sample.

We were not engaged to and did not conduct an examination, the objective of which would be the expression of an opinion on the compliance of the accompanying statement of revenues and expenses of the University of Mississippi Athletics. Accordingly, we do not express such an opinion. Had we preformed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of the specified parties listed above, and is not intended to be and should not be used by anyone other than these specified parties.

Tupelo, Mississippi November 18, 2017

7

THE UNIVERSITY OF MISSISSIPPI ATHLETICS STATEMENT OF REVENUES AND EXPENSES YEAR ENDED JUNE 30, 2017

FOOTBALL OPERATING REVENUES Ticket Sales Student Fees Direct Institutional Support Less - Transfers to Institution Guarantees Contributions In-Kind Compensation and Benefits Provided by a Third-Party Media Rights NCAA Distributions Conference Distributions Program, Novelty, Parking, and Concession Sales Royalties, Licensing, Advertisements, and Sponsorships Sports Camp Revenues Endowment and Investment Income Other TOTAL OPERATING REVENUES

$

MEN'S BASKETBALL

WOMEN'S BASKETBALL

1,490,957

52,009

20,863,713

TOTAL

12,908,926 619,384

23,738,310 1,911,778 3,091,881 (2,218,780) 2,835,000 31,681,284 673,874

471,803 216,785 20,633

250,000 14,814,152 241,219 1,564,691

250,000 33,878,437 2,647,883 8,910,387

22,029

350,387

272,803

2,529,197

48,376

12,905 6,224 3,218

227,500 751,794 35,328 75,335

4,788,390 238,459 85,058 1,148,303

5,023,290 1,187,862 154,297 1,539,811

10,700,410

398,757

7,307,970

188,553

152,336

1,621,412

2,750,000 14,397,196 54,490

2,236,620

1,000 17,180

84,000 2,121,362

14,447,762 62,173 6,913,799

4,050,359 2,107,761 393,714

94,361 19,945 17,550

1,712,408

171,570

12,500

62,681,761

NONPROGRAM SPECIFIC

1,331,631

1,008,350

7,400 172,204 27,687 264,579 $

OTHER SPORTS

See independent accountants’ report and accompanying notes. 8

$ 1,911,778 121,230 (2,218,780)

36,745,613 $

117,834,511

THE UNIVERSITY OF MISSISSIPPI ATHLETICS STATEMENT OF REVENUES AND EXPENSES (CONTINUED) YEAR ENDED JUNE 30, 2017 OPERATING EXPENSES Athletics Student Aid $ Guarantees Coaching Salaries, Benefits and Bonuses Paid by the University and Related Entities Coaching Salaries, Benefits and Bonuses Paid by a Third Party Support Staff/Administrative Compensation, Benefits and Bonuses Paid by the University and Related Entities Support Staff/Administrative Compensation, Benefits and Bonuses Paid by a Third Party Severance Payments Recruiting Team Travel Sports Equipment, Uniforms and Supplies Game Expense Fund Raising, Marketing and Promotion Sports Camps Spirit Groups Athletic Facilities, Debt Service, Leases and Rental Fees Direct Overhead and Administrative Expenses Medical Expenses and Insurance Memberships and Dues Student-Athlete Meals (non-travel) Other Operating Expenses

FOOTBALL 3,765,336 1,475,000

MEN'S BASKETBALL 574,425 470,500

WOMEN'S BASKETBALL 551,955 166,000

OTHER SPORTS 4,806,515 88,281

10,100,265

2,721,835

1,119,104

5,180,378

19,121,582

29,838

12,197

12,500

50,745

105,280

3,172,389

406,714

423,553

1,448,972

11,415,993

16,867,621

18,553 652,094 558,821 1,705,574 2,076,245 2,389,995 106,646 65,302 212,597

2,750

3,498

4,745

115,174 93,672

241,765 792,765 256,384 1,227,789 96,706 8,413 19,012

184,645 595,174 207,418 456,103 45,936 4,543 12,677

475,806 2,859,589 1,916,645 1,909,629 99,231 380,306

207,597 2,493,735 24,940 650,003

144,720 745,766 1,461,037 5,953,102 4,456,692 6,191,113 2,842,254 483,504 894,289

4,859,247 3,116,901 249,243

2,387,943 525,150 31,768

251,161 512,782

111,588 103,952

2,387,943 406,537 27,473 2,420 62,453 97,413

1,442,179 915,014 487,911 6,464 309,149 695,188

4,648,659 10,487,829 262,790 61,351 245,170 2,120,981

15,725,971 15,451,431 1,059,185 70,235 979,521 3,530,316

6,767,345

23,076,747

33,731,775 $

108,885,512

(6,368,588)

(15,768,777)

3,013,838 $

8,948,999

Total Operating Expenses

$

35,317,989

9,991,656

Excess (Deficiency) of Revenues Over (Under) Expenses

$

27,363,772

708,754

See accountants’ report and accompanying notes. 9

NON-PROGRAM SPECIFIC 903,881 $

TOTAL 10,602,112 2,199,781

THE UNIVERSITY OF MISSISSIPPI ATHLETICS NOTES TO FINANCIAL STATEMENT

(1)

Student/Athlete Financial Aid The UMA Statement of Revenues and Expenses includes only scholarships restricted in purpose to students participating in athletic programs. Financial aid awarded on the basis of other criteria, such as need or academic excellence, is not reflected in the statement.

(2)

Complimentary Automobiles The University does not maintain records as to the value of complimentary automobiles provided certain athletic personnel from various automobile dealers. These benefits are therefore not reflected in the UMA Statement of Revenues and Expenses.

(3)

Contributions to UMA and Expenditures on Behalf of UMA The University of Mississippi Athletics accepts gifts and contributions in support of the athletic program from affiliated and other outside organizations. These gifts and contributions are recorded in the University’s financial records. Further, affiliated and outside organizations make expenditures on behalf of the athletic program that are not recorded in the University’s financial records. Both the contributions to and expenditures on behalf of UMA are recorded in the UMA Statement of Revenues and Expenses in this report.

10

THE UNIVERSITY OF MISSISSIPPI ATHLETICS NOTES TO FINANCIAL STATEMENT (CONTINUED)

(3)

Contributions to UMA and Expenditures on Behalf of UMA (Continued) The following schedule provides detailed information on contributions and expenditures by affiliated and outside organizations: Football

Basketball (M)

Basketball (W)

Other Sports

Non-program Specific

Total

Cash Contributions OMA Foundation

$

14,397,196

2,236,620

17,180

2,121,362

12,908,926

$

31,681,284

Total Contributions

$

14,397,196

2,236,620

17,180

2,121,362

12,908,926

$

31,681,284

Reconciliation to Statement of Revenues & Expenses Contributions

$

14,397,196

2,236,620

17,180

2,121,362

12,908,926

$

31,681,284

$

14,397,196

2,236,620

17,180

2,121,362

12,908,926

$

31,681,284

11

THE UNIVERSITY OF MISSISSIPPI ATHLETICS NOTES TO FINANCIAL STATEMENT (CONTINUED) (4)

Long-term Debt Debt outstanding as of June 30, 2017 consisted of the following:

Bonds Payable Football Stadium 2006A Athletic Projects Old PPD Building Baseball South Endzone North Endzone Refunding 2005-Stadium Refunding 2006A-Athletics Pavilion #1 Pavilion #2 Total Bonds Payable

$

Original Issue 24,422,142

Outstanding 6/30/2016 5,746,686

5,955,015 7,190,000 10,125,000 17,660,000 5,900,000 4,920,000 62,900,000 12,100,000 151,172,157

465,000 4,795,000 9,570,000 17,660,000 5,900,000 4,920,000 62,900,000 10,777,229 122,733,915

Principle Paid 1,041,066

Issued

Outstanding 6/30/2017 $ 4,705,620

465,000 4,795,000 585,000 685,000 435,000 35,000

-0-

-0-08,985,000 16,975,000 5,465,000 4,885,000 62,900,000 8,669,466 112,585,086

2,107,763 10,148,829

Notes and Contracts Payable Football Scoreboard Various Scoreboards Switch Equipment Track Facility Athletic Production Equipment OU-Swayze Field Gillom Center Cameras Football Practice Fields 2006B-1 Baseball Athletic Offices Fed Ex Starnes Center Total Notes and Contracts Payable

7,426,682 1,500,000 201,963 500,000 227,091 121,394 619,685 1,350,000 2,744,306 4,440,000 16,727 25,730 19,173,578

1,726,989 611,758 41,524 5,174,249 183,753 121,394 619,685 1,350,000 2,744,306 -0-0-012,573,658

572,309 4,440,000 16,727 25,730 15,384,855

OM Foundation Debt BS Loan Stadium Improvements Indoor Tennis Facility Total OMA Foundation Debt

30,000,000 11,500,000 8,000,000 49,500,000

22,389,816 8,031,570 -030,421,386

3,468,430 3,980,283 7,448,713

Total long-term debt

$

219,845,735

165,728,959

12

846,563 198,704 41,524

880,426 413,054 -06,414,818 139,399 1,110,235 8,720,364 1,012,500 3,316,615 4,440,000 16,727 25,730 26,489,868

1,240,569 44,354 988,841 8,100,679 337,500

22,833,568

1,468,645 2,184,398 1,443,527

20,205,418 10,056,473 3,980,283 34,242,174

3,627,925 15,245,399

$

173,317,128

THE UNIVERSITY OF MISSISSIPPI ATHLETICS NOTES TO FINANCIAL STATEMENT (CONTINUED)

(4)

Long-term Debt (Continued) Debt service requirements to maturity for long-term debt are as follows:

(5)

Year ending June 30,

Principal

Interest

2018 2019 2020 2021 2022 Thereafter

$ 12,309,109 28,350,491 10,436,550 10,676,745 9,998,426 101,545,807

$

Total

$ 173,317,128

$ 41,903,249

5,344,774 4,612,240 4,085,093 3,805,580 3,520,518 20,535,044

Athletics-related Assets Assets are acquired by issuing a purchase requisition and then a purchase order. Purchasing laws of the state of Mississippi are followed in regards to the various dollar amount levels. The University Property Control Department receives copies of capital equipment orders to tag and locate items for inventory purposes. Capital assets are recorded at cost at the date of acquisition, or, if donated, at fair market value at the date of donation. Depreciation is computed using the straight-line method over the estimated useful life of the asset. All materials purchased for the University remain the property of the State until consumed or disposed of with the approval of the University’s Property Office. The Manager of Administrative Affairs is notified when there is furniture and/or equipment items that are no longer of need to the Department. The Manager of Administrative Affairs sends a written report to the Property Officer, indicating if the items are for sale or disposal. Items to be sold are advertised by the Purchasing Department following standard procedures. Items having no sale value are sent to the University Salvage Committee for disposal.

13

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