1. F&I Reserve Discussion topics April 19, 2019
Designations and Recommendations

2. Reserves Table of Contents
Reserve Policy Update/Review
CalPERS Actuarial Update March 2019
Recommended Reserve Designations
Per Accounting Standards Update – ASU

3. CalPERS Actuarial Update
CalPERS GASB 68 Publications – March 2019
Miscellaneous Risk Pool Measurement update
Measurement Date of June 30, 2018
Baselines Liabilities and Assets for YE June 2019
Public Agency Schedules
Employer Allocation for Components of Net Pension Liability
Shops Liability increase of $190,818
Will impact Year End Operating Statement
Legacy employee participant plan
Shrinking participant funding pool ongoing

4. Reserve Recommendations Formal Designations
Potential Designation of $15,449,000 Plus
$6,000,000 - PERS Designation/Pay-down Schedule
$2,068,000 - Committed Funds
$7,381,000 Plus - Additional Reserves/Donations
Estimated available Funds $14M-$15M

5. Reserve Recommendations CalPERS Reserve Recommendation
$6,000,000 – Designation/Pay-down Plan
Proposed Funding profile of $3.5M
$1,000,000 initial payment
$500,000 annual payment for years 1-5
This Amount is above and beyond the mandated 20 year schedule in place ($438K-$653K years 1-5)
Option Plan $2M down, $500K for 3 years
Annual Reserve review/Adjustment
Revisit Funding Profile in 3 years

6. Reserve Recommendations Committed Funds
$500,000 – Beach Investment Group (BIG)
Formerly SMIF – Portfolio held with Wells Fargo
$400,000 Beach Club Deposits
Student/Staff funds varying between $300K-$500K
$768,000 – Sick Pay Designation (Current)
$200,000 – Pre-1989 Hires ($195K)
$568,000 – Retiree Eligible ($562K)
$400,000 – Current/One year Retiree Medical
VEBA Funding ended 6/30/17

7. Reserve Recommendations Other Designations
$7,381,000 Plus in Other Designations and/or Donations
$100,000 – HFHM Chair
$1,000,000 - Alumni Center
$1,000,000 - Kitchen
$3,281,000 – Outpost Bond
$2,000,000? - Short Term Facility repair
ISES Report Pending
UDP Replacement - $30,000,00
Annual Funding Option?

8. Non-Profit Accounting Change & Reserve Reporting
F&I February 8, 2019

9. Agenda Non-Profit Accounting Standards CalPERS Actuarial Review
Revisit Prior Reserve Overview

10. Non-Profit Accounting Standards Reporting Changes
New reporting standards to Improve:
Clarity of Liquidity and funds Availability
Net Asset Disclosure and Reserve itemization
Functional Expense Reporting
Applies to current Fiscal Year ending 6/30/19
Limited Impact to Shops
No Donor Funding
Already taken action on reporting requirements

11. Liquidity and Availability
Non-Profit Accounting Standards Reporting Changes Liquidity & Availablity
Liquidity and Availability
Addresses Balance Sheet leverage
Dependent on Net Asset Disclosure
Policy required
Must be disclosed in audit Report notes
Will update Reserve Policy to address this item
Shops already addresses line of Credit

12. Non-Profit Accounting Standards Reporting Changes Net Asset Disclosure
Shops Assets self earned and not restricted
Shops does not have Donor Restricted Assets
All Assets classified as “Without Donor Restrictions”
Shops has never formally designated assets
Need to Designate funds for liquidity disclosure
Will be itemized and categorized within “WDR”
Should include mid-term and long Term reserves
Last Audit Report took an “informal” position for reclassifying Assets to other due to lack of designation

13. Shops has addressed this in prior audits
Non-Profit Accounting Standards Reporting Changes Functional Expense Reporting
Shops has addressed this in prior audits
Reporting 46 departments by account detail
For the Shops a Program Area is determined to be by Business Area
Bookstore, C-Store, Res Dining, Etc
Allocation algorithm Review
Depreciation
G&A detail functionally captured
No impact to Operating Statements anticipated

14. Non-Profit Accounting Standards Reporting Changes Cash Flow
No Change anticipated
Direct Method for monthly reporting
Provides better insight into operational results
Indirect Method for year-end Audit
Includes variances in all assets and liabilities
Contains detailed purchases/sales of investments

15. CalPERS Actuarial Reporting
Annual reports plus valuation updates
Latest Report dated August 2018 (As of 6/30/17)
Valuation updates pending
Brings asset value to 6/30/18 levels
GAAP requirement for year-end Pension Reporting
Two Reports
Legacy – 30 years of underfunding
40 Retirees and 29 Active (10 Fully Eligible)
PEPRA - For hires as of 1/1/13
28 active

16. CalPERS Actuarial Reporting Focus On Miscellaneous Legacy
Unfunded Accrued Liability (UAL) (Page 5)
Similar to prior estimate of $6.1M
Market was favorable during this time
Near term annual payments $439K-$687K
Assumes a 7.25% Return for
CalPERS Changes/Guidelines (Page 6)
Discount rate of 7.0%
Amortization Schedule to 20 Years
Effective with the June 30, 2019 actuarial valuation

17. CalPERS Actuarial Reporting Focus On Miscellaneous Legacy
Potential Interest Payments (Page 11)
$4.3M+
No 20 year (hybrid) amortization Schedule depicted
Page 5 assumes the 20 year profile starting
Hypothetical Termination Liability (Page 17)
$23M-$27M depending on Rates
Conservative U.S. Treasury yields
As of 6/30/17

18. Reserves Policy Refinement Pending Revisit Prior Reserve Overview
Core Policy adequate
Expand to include Liquidity and Designations
Clean up language to bring Executive Orders current
CSU Audit – Lack of Campus President Approval*
Revisit Prior Reserve Overview
* Future Action

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

20. Reserves Table 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?

21. 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

22. 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

23. 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

24. Reserves Assets & 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

25. Long Term Liabilities Trend
Potential GASB 68 PERS Impact ongoing
- 30 year pay down plan for unfunded liability moving to 20

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

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

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

29. FROM FY2018/2019 Budget Reserve Planning
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
See Policy for Controller reporting requirements and thresholds.
Working Capital targeted at 8% of expenses = $2.7M
Reserve Funding Opportunities are:
Beach Card – Student funds
Alumni Center/Catering Kitchen
Designate/Grow funds for early Bond payoff – 2 year assessment
Pay down PERS Unfunded Liability
Develop long term plan for UDP Renovation

30. FROM FY2018/2019 Budget Reserve Planning (Cont’d)
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
PERS assumes 7% earnings. Net Contribution and Investment policy much lower.
Reserve Funding Opportunities are:
VEBA – 1 year or so funding continuum, turn over to TPA
Alumni Center/Catering Kitchen
Designate/Grow funds for early Bond payoff – 2 year assessment
Pay down PERS Unfunded Liability
Develop long term plan for UDP Renovation

31. FROME FY 2018/2019 Budget Reserve Matrix
FY 2018/2019 Budget Review
FROME FY 2018/2019 Budget Reserve Matrix
Capital Actual = $441,676
Facilities Outlook = $380,226 Starbucks
Short term = same
Per Reserve Policy definitions/Requirements we’ve satisfied the need for Operating Statement items.
-FY2017/2018 is done hence zero WC. $2.8M estimated for FY2018/19 as percentage of expense
- Classic definition of Current Assets minus Current Liabilities
Beach Club Deposits $350K$750K. Currently at $460K.
Paying as we go for all:
Facilities/Capital Replacement & Major Repair Funding accommodated through depreciation
Vacation/Holiday payout - Unrestricted. Ongoing accrual/Pay-out
Unemployment Insurance (UIT) held with CSURMA
Post Medical current year premiums being paid through Operating Statement
- Overall liability is being addressed through VEBA and future returns on investment.
SMIF held at Wells Fargo already in a separate account – Not restricted or designated but isolated

32. FROM FY 2018/2019 Budget Reserve Funding Opportunities
FY 2018/2019 Budget Review
FROM FY 2018/2019 Budget Reserve Funding Opportunities
All but Facilities are recorded on the Balance Sheet
Provisioning and recognized various liabilities. Paying down on some:
- Facilities Infrastructure pending
- Vacation/Holiday is partially designated on the asset side in name only
SRB Funding Payments – Finite pay down schedule
Refunding save $500K in interest over the remaining 22 years.
10 year Bond Call again.
VEBA assumes funding to initial commitment only – Future unfunded liability paid from VEBA investment returns
Beach Club is ongoing projected average with holding increasing due to Flex $’s
Liability is being addressed regularly. Could designate percentage of funds if balance increased dramatically.
SMIF – No liability unless we run out of cash and need to call in the account

33. FROM FY2018/2019 Budget Reserve Designation
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

34. 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