University of Wisconsin-Platteville: Academic Programs and Financial Report Highlights, Study notes of Financial Management

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Published by the Office of Finance University of Wisconsin System 1220 Linden Drive Madison, WI 53706

Editor: Rod Dole

Cover Photo: University of Wisconsin–Platteville students walk by Ullrich Hall, which was originally built in 1916 and served as the university's gymnasium and auditorium. The oldest building on campus, Ullrich Hall is listed on the National Register of Historic Places. Currently, Ullrich is now home to classrooms used by accounting, business, computer science, and software engineering as well as lab space for computer science and software engineering. The building is named after Fred Ullrich, who joined the faculty of the Platteville Normal School as an instructor in biological sciences in 1914, and later served as director of the agriculture school.

Founded in 1866 as the first teacher preparatory institution in the state of Wisconsin, UW-Platteville has a legacy of academic excellence that has helped thousands of students find their direct path to success. Today, UW-Platteville offers 40+ academic programs designed to help every student succeed professionally and personally. Programs are offered through three colleges: College of Business, Industry, Life Science and Agriculture, College of Engineering, Mathematics and Science, and College of Liberal Arts and Education.

At UW-Platteville, students enjoy the advantages of a large university in a small, supportive, and safe environment featuring challenging academics, opportunities for undergraduate research, state-of- the-art labs and facilities, and renowned faculty.

Photo Credit: UW-Platteville

2020 Annual Financial Report

Regents, Chancellors, and Officers of the UW System

OFFICERS

Tommy G. Thompson, Interim President

Sean P. Nelson, Vice President for Finance

Robert G. Cramer, Vice President for Administration

Scott Neitzel, Interim Vice President for University Relations

Anny Morrobel-Sosa, Vice President for Academic and Student Affairs

Quinn Williams, General Counsel

FINANCE STAFF

Julie Gordon, Senior Associate Vice President for Finance

Ginger Hintz, Assistant Vice President for Financial Administration and Controller

Rod Dole, Director of Financial Reporting

Renee Stephenson, Assistant Vice President of Budget Development and Planning

Charles Saunders, Director for Trust Funds/Assistant Trust Officer

CHANCELLORS

James Schmidt, UW-Eau Claire Michael Alexander, UW-Green Bay Joe Gow, UW-La Crosse Rebecca M. Blank, UW-Madison Mark Mone, UW-Milwaukee Andrew J. Leavitt, UW-Oshkosh Deborah Ford, UW-Parkside Dennis J. Shields, UW-Platteville Connie Foster, UW-River Falls, Interim Bernie L. Patterson, UW-Stevens Point Katherine P. Frank, UW-Stout Renée Wachter, UW-Superior Dwight C. Watson, UW-Whitewater

REGENTS

Robert Atwell, Sturgeon Bay Scott Beightol, Wales Amy Bogost, Madison Héctor Colón, New Berlin José Delgado, Brookfield Michael Grebe, Mequon (Regent Vice President) Eve Hall, New Berlin Mike Jones, Milwaukee Tracey Klein, Brookfield Becky Levzow, Rio Edmund Manydeeds III, Eau Claire Andrew S. Petersen, Middleton (Regent President) Cris Peterson, Grantsburg Corey Saffold, Fitchburg Carolyn Standford Taylor, Madison Karen Walsh, Madison Kyle Weatherly, Milwaukee Olivia Woodmansee, New Glarus

Years Ended June 30, 2020 and 2019

INTRODUCTION FROM THE VICE PRESIDENT FOR

FINANCE

the program’s net assets ($67.9 million) as a Noncurrent Asset.

Within the Statement of Revenues, Expenses, and Changes in Net Position:

• The UW System was awarded $99.3 million in federal funding through the Coronavirus Aid, Relief and Economic Security (CARES) Act. UW institutions must meet certain eligibility requirements before recognizing the funding. UW institutions recognized $72.3 million as non-operating revenue in 2019-20 and will recognize the remaining amount in 2020-21. These funds are restricted and must be used to address unforeseen financial needs created by the COVID-19 public health emergency, such as personal protective equipment, emergency student grants, housing and dining refunds and technology to accommodate remote learning.
• State Appropriations increased $1.7 million in 2019-20. The UW System had anticipated this increase to be larger as new funds had been appropriated for outcomes-based funding and the State’s portion of its 2019-21 pay plan. However, as a result of the COVID-19 pandemic, the State required the UW System to lapse $40.8 million of its General Purpose Revenue (GPR) for 2019-20. In addition, the State did not supplement the UW System for the GPR share of the pay plan that took effect on January 1, 2020.
• Sales and Services of Auxiliary Enterprises and Sales and Services of Educational Activities were significantly impacted by COVID-19, and reported reductions of $79.3 million and $33.2 million, respectively, between fiscal years 2019- and 2018-19. Several auxiliary operations and educational activities could no longer operate as they have historically or were closed entirely. Refunds for housing, dining, and other auxiliary operations were provided to students in Spring 2020. The federal CARES Act funds were often insufficient to address the entire refunded amounts within a UW institution or the institution strategically determined that a

portion of the funds were needed to address other COVID-related costs as well.

• As auxiliary and other operations changed, some of the revenue loss was offset with cost reductions. UW institutions took a variety of cost containment initiatives, such as furloughing staff or reducing staff hours, delaying or cancelling events, and eliminating all non-essential travel. Supplies and Services declined by $108.3 million in 2019-20.
• The UW System’s Salaries and Fringe Benefits expense, however, increased a total of $125.3 million between 2019- and 2018-19, excluding the impact of noncash pension and OPEB related fringe benefits. As previously noted, this increase is largely accounted for with the State’s 2019-21 pay plan, as approved by the Joint Committee on Employment Relations approved in December 2019. It includes a 2% wage adjustment in January 2020 and another 2% adjustment effective January 1,

Although all COVID-19 impacts are not yet known and continued uncertainties are likely in the financial investment markets, the UW System has made and will continue to make necessary fiscal adjustments with the objective of maintaining quality instruction, research and public service, while keeping our students and employees safe.

Sean P. Nelson, Vice President for Finance

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Independent Auditor’s Report on the Financial Statements and

Other Reporting Required by Government Auditing Standards

Senator Robert Cowles and

Representative Samantha Kerkman, Co-chairpersons

Joint Legislative Audit Committee

Members of the University of Wisconsin Board of Regents, and

Mr. Tommy G. Thompson, Interim President

University of Wisconsin System

Report on the Financial Statements

We have audited the accompanying financial statements and the related notes of the University

of Wisconsin (UW) System, and its aggregate discretely presented component units, which

collectively comprise UW System’s basic financial statements, as of and for the year ended

June 30, 2020, as listed in the table of contents.

Management’s Responsibility for the Financial Statements

Management of UW System 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.

Auditor’s Responsibility

Our responsibility is to express opinions on these financial statements based on our audit. We

did not audit the financial statements of the aggregate discretely presented component units.

Our opinion on the aggregate discretely presented component units is based solely upon the

audit report, prepared by other auditors and furnished to us, for the related university campus

foundation.

We conducted our audit 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 , which is 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. The financial

statements of the aggregate discretely presented component units were audited in accordance

with auditing standards generally accepted in the United States of America, but not in

accordance with Government Auditing Standards.

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 the 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 opinions on these financial statements.

Opinions

In our opinion, based on our audit and the report of other auditors, the financial statements

referred to in the first paragraph present fairly, in all material respects, the financial position

of UW System and its aggregate discretely presented component units as of June 30, 2020; the

respective changes in its financial position; and, where applicable, its cash flows thereof for

the year then ended in accordance with accounting principles generally accepted in the

United States of America.

Emphasis of Matter

As discussed in Note 1 to the financial statements, the financial statements referred to in the

first paragraph present only UW System and its aggregate discretely presented component

units, and do not purport to, and do not, present fairly the financial position of the State of

Wisconsin as of June 30, 2020, the changes in its financial position, or where applicable, its cash

flows for the year then ended, in accordance with accounting principles generally accepted in

the United States of America.

Our opinions are not modified with respect to this matter.

Other Matters

Report on Prior Year Financial Statements —The financial statements of UW System, and its

aggregate discretely presented component units, as of and for the year ended June 30, 2019,

were audited by a predecessor auditor who expressed an unmodified opinion on those

financial statements. The predecessor auditor’s report was dated December 16, 2019.

Required Supplementary Information— Accounting principles generally accepted in the United

States of America require that the management’s discussion and analysis; the schedule of

UW System’s proportionate share of the net pension liability (asset) and the related notes; the

schedule of UW System’s pension contributions and the related notes; and the schedules of

UW System’s proportionate share of the OPEB liability (asset) and the related notes, as listed

in the table of contents, be presented to supplement the financial statements. Such information,

although not a part of the financial statements, is required by the Governmental Accounting

Standards Board, which considers it to be essential for placing the financial statements in an

Years Ended June 30, 2020 and 2019

MANAGEMENT’S DISCUSSION AND ANALYSIS

(Unaudited)

Management’s Discussion and Analysis

The following discussion and analysis provides an overview of the financial position and activities of the University of Wisconsin System (University) for the years ended June 30, 2020 and 2019, with comparative information for the year ended June 30, 2018, where appropriate. This discussion has been prepared by management, is unaudited, and should be read in conjunction with the financial statements and footnotes.

The University is made up of 13 four-year universities and 13 additional campuses affiliated with seven of the four-year institutions. In academic year 2019-2020, the University enrolled 167, students, employed approximately 33,015 faculty and staff, and granted 37,893 associate, bachelor’s, master’s, and other advanced degrees. University institutions were awarded over $1,096.3 million in federal grants and contracts in fiscal year 2020 and an additional $639.4 million from non-federal sponsors. The University has a long tradition of public service, embodied by an ongoing commitment to the Wisconsin Idea, that the boundaries of the University are the boundaries of the State.

Degrees Granted Headcount Enrollments UW-Madison 11,230 UW-Madison 44, UW-Milwaukee 6,053 UW-Milwaukee 26, UW-Eau Claire 2,365 UW-Eau Claire 11, UW-Green Bay 1,526 UW-Green Bay 8, UW-La Crosse 2,380 UW-La Crosse 10, UW-Oshkosh 2,776 UW-Oshkosh 15, UW-Parkside 946 UW-Parkside 4, UW-Platteville 1,888 UW-Platteville 8, UW-River Falls 1,346 UW-River Falls 5, UW-Stevens Point 1,918 UW-Stevens Point 8, UW-Stout 1,878 UW-Stout 8, UW-Superior 607 UW-Superior 2, UW-Whitewater 2,980 UW-Whitewater 12, Total 37,893 Total 167,

Using the Financial Statements

The University’s annual financial report includes the Statement of Net Position; the Statement of Revenues, Expenses, and Changes in Net Position; the Statement of Cash Flows; and the Notes to the Financial Statements. These items are prepared in accordance with standards established by the Governmental Accounting Standards Board (GASB).

The Statement of Net Position is a financial condition snapshot as of June 30, 2020 and 2019, and includes all assets and deferred outflows of resources, and liabilities and deferred inflows of resources, with the difference between the two reported as net position. Current assets are those that are available to satisfy current liabilities inclusive of assets that will be converted to cash within one year. Current liabilities are those that will be paid within one year. Increases or decreases in net position provide an indicator of the improvement or erosion of the University’s financial health when considered in conjunction with non-financial information, such as conditions of facilities and enrollment levels. Net Position is divided into three major categories: Net Investment in Capital Assets, Restricted, and Unrestricted. Net Investment in Capital Assets consists of capital assets

UNIVERSITY OF WISCONSIN SYSTEM

Management's Discussion and Analysis

Years Ended June 30, 2020 and 2019

Analysis of Financial Position and Results of Operations

The University’s total net position remained stable after fiscal year 2020. As of June 30, 2020, the University had total assets of $8.9 billion and total liabilities of $3.1 billion.

Statement of Net Position (in millions) 2020 2019 2018 Current Assets $ 2,432.5 $ 2,298.0 $ 2,312. Capital Assets, Net 5,345.4 5,258.4 5,140. Other Noncurrent Assets 1,092.3 612.8 986. Total Assets 8,870.2 8,169.2 8,439.

Deferred Outflows of Resources 1,183.4 1,340.4 750.

Current Liabilities 702.4 658.6 661. Noncurrent Liabilities 2,429.0 2,654.7 2,248. Total Liabilities 3,131.4 3,313.3 2,910.

Deferred Inflows of Resources 1,522.7 836.6 849.

Net Investment in Capital Assets 3,574.4 3,614.4 3,519. Restricted Net Position 1,748.5 1,197.6 1,600. Unrestricted Net Position 76.6 547.7 310. Total Net Position $ 5,399.5 $ 5,359.7 $ 5,430.

Current assets minus current liabilities represents the net working capital of the University. Net working capital increased from $1,639.4 million at June 30, 2019 to $1,730.1 million at June 30, 2020. The net working capital at year end represented approximately 120 days of 2020 operating expenses. This indicates that the University could support normal operations for 120 days without additional revenues or liquidating noncurrent assets.

The following table contains a summary of Current Assets which consists primarily of operating cash and cash equivalents, securities lending collateral, accounts receivable, student loans receivable, supply inventories, and prepaid expenses. The largest change between 2020 and 2019 was in cash and cash equivalents, which increased by $85.4 million due to the issuance of state bonds in June 2020.

Current Assets (in millions) 2020 2019 2018 Cash & Cash Equivalents $ 1,949.1 $ 1,863.7 $ 1,868. Securities Lending Collateral 109.4 109.3 106. Accounts Receivable, Net 285.8 249.0 259. Other Current Assets 88.2 76.0 78. Total Current Assets $ 2,432.5 $ 2,298.0 $ 2,312.

The Board of Regents has authority to invest gifts and bequests received by the University. Through March 2018, investments were primarily held in two investment pools: The Long Term Fund and the Intermediate Term Fund. Effective April 1, 2018 and as permitted through Section 36.11 (11m) of the Wisconsin statutes, the Board of Regents transferred its investment management responsibilities to the State of Wisconsin Investment Board (SWIB). As a result of this transfer, the Board of Regents eliminated the Intermediate Term Fund as a separate investment pool. The Board of Regents

UNIVERSITY OF WISCONSIN SYSTEM

Management's Discussion and Analysis

Years Ended June 30, 2020 and 2019

establishes investment policies and guidelines, including target investment allocations. Benefiting UW entities receive quarterly distributions from the Long Term Fund, principally endowed assets, based on an annual spending rate applied to a twelve‑quarter moving average market value of the Fund. A comparison of university-controlled endowments over the past several years can be found in Chart 3 of the Supplemental Information section of this report. Additional information on cash and investments is provided in Note 2 to the Financial Statements.

Non-current assets are comprised mainly of endowment investments, capital assets (net of accumulated depreciation), and student loans receivable. Notable changes between years include:

• Endowment investments, valued at $470.4 million at June 30, 2020, increased by $3.6 million during fiscal year 2020. The increase was driven by market‑based fluctuations in investment performance.
• In 2020, investment earnings related to the pension plan fiduciary net position outpaced projected earnings resulting in a net pension asset of $430.5 million that increased non- current assets. In 2019, however, changes in actuarial assumptions, including a reduction in the discount rate and long-term expected rate of return from 7.2% in 2018 to 7.0% in 2019, and investment earnings related to the pension plan fiduciary net position that were below projected earnings resulted in a net pension liability of $474.4 million that increased non- current liabilities.
• In 2020, the Department of Employee Trust Funds (ETF), which has program administration and oversight of postemployment benefits, determined that the Supplemental Health Insurance Conversion Credit (SHICC) program should be considered a defined benefit other postemployment benefit. As such, the University has recorded its proportionate share of the net OPEB asset at June 30, 2020 of $67.9 million as a non-current asset.

Deferred outflows decreased by $157.0 million in fiscal year 2020, due to adjustments related to pension and OPEB obligations.

Non-current liabilities decreased by $225.7 million in fiscal year 2020. The most significant reason for this is the adjustment to the pension plan fiduciary net position, as noted above.

Deferred inflows increased by $686.1 million in fiscal year 2020, due to adjustments related to pension and OPEB obligations.

Further, these reporting changes resulted in $34.1 million of additional pension expense being included on the Statement of Revenues, Expenses, and Changes in Net Position. These changes are more fully described in Notes 1 and 8 to the Financial Statements.

Most of the unrestricted net position has been identified for purposes to fulfill the University's fiduciary responsibilities, including academic and research programs and capital projects. Additional information related to net position can be found in Note 13 to the Financial Statements.

Capital and Debt Activities

Of the $5.4 billion in net position, $3.6 billion is net investment in capital assets. In an effort to maintain quality in the University’s academic and research programs and residence halls, the University has implemented a long-range plan to fund new construction and modernize existing facilities. Capital additions consist of new construction, replacement and renovation of academic and research facilities, as well as significant investment in technology and equipment. Note 4 to the Financial Statements describes the University’s capitalization and depreciation policies, and includes summarized changes in the book value of these assets, including major construction projects completed or in progress. Note 6 to the Financial Statements describes the University’s long term debt and includes summarized information on those balances, as well as future debt service requirements.

UNIVERSITY OF WISCONSIN SYSTEM

Management's Discussion and Analysis

Years Ended June 30, 2020 and 2019

The University’s operating and non-operating revenues are provided in the table below. Operating revenues decreased $48.2 million since fiscal year 2018 with the primary decrease in sales and services of auxiliaries and all other operating revenues. Non-operating revenues increased $94.2 million between fiscal year 2018 and fiscal year 2020 primarily due to changes in state appropriations, gifts and federal CARES Act funding. The University was awarded $99.3 million in federal funding through the Coronavirus Aid, Relief, and Economic Security (CARES) Act during 2019-20. In accordance with the CARES Act, the University must meet certain eligibility requirements before recognizing the funding. The University recognized $72.3 million as non-operating revenue in 2019-20 and will recognize the remaining amount in 2020-21. These funds are restricted and must be used to address unforeseen financial needs created by the COVID-19 public health emergency, such as personal protective equipment, emergency student grants, housing and dining refunds and technology to accommodate remote learning.

Revenues (in millions): 2020 2019 2018 Operating Revenues Student Tuition and Fees, Net $ 1,407.9 $ 1,402.3 $ 1,382. Federal Grants and Contracts 685.0 617.0 599. State, Local, & Private Grants and Contracts 421.2 447.5 432. Sales and Services of Educational Activities 338.6 371.8 319. Sales and Services of Auxiliaries, Net 354.3 433.6 445. All Other Operating Revenues 461.6 469.0 537. Total Operating Revenues 3,668.6 3,741.2 3,716.

Non-Operating Revenues State Appropriations 885.3^ 883.6^ 838. Gifts 382.3^ 395.7^ 370. Federal Pell Grants 149.6^ 160.0^ 162. Federal CARES Act Grants 72.3^ —^ — Net Investment Income (Loss) 44.0^ 86.4^ 45. Other Non-Operating Revenues 27.7^ 35.1^ 50. Total Non-Operating Revenues 1,561.2 1,560.8 1,466. Total Revenues $ 5,229.8 $ 5,302.0 $ 5,183.

UNIVERSITY OF WISCONSIN SYSTEM

Management's Discussion and Analysis

Years Ended June 30, 2020 and 2019

Operating expenses, classified by function, and non-operating expenses, are as follows:

Expenses (in millions): 2020 2019 2018 Operating Expenses Instruction $ 1,314.8 $ 1,452.9 $ 1,257. Research 1,032.0 987.1 984. Public Service 348.7 364.8 298. Academic Support 442.2 428.7 401. Student Services 500.7 505.5 479. Institutional Support 338.7 309.1 311. Operation/Maintenance 312.8 298.9 284. Financial Aid 273.3 243.6 257. Auxiliary Enterprises 298.8 359.7 363. Other Functions 69.3 71.0 81. Depreciation 329.1 327.3 324. Total Operating Expenses 5,260.4 5,348.6 5,044. Non-Operating Expenses 138.5 137.5 124. Total Expenses $ 5,398.9 $ 5,486.1 $ 5,168.

One of the University's strengths has been its ability to supplement student tuition and fee revenue and state appropriations with support from other sources, including foundations, investment income, and government-sponsored programs (see Charts 1 and 2 in the Supplemental Information of this report). The University continues to aggressively seek funding sources consistent with its mission to meet operating activities in a financially prudent manner. In addition, the University will continue to make cost containment and revenue diversification a priority. Increase in Instruction operating expenses during fiscal year 2019 is attributed to the increase in pension plan expense reported within salary and fringe benefits expense, as compared to fiscal year 2020 and 2018.

UNIVERSITY OF WISCONSIN SYSTEM

Management's Discussion and Analysis

Years Ended June 30, 2020 and 2019