Central Michigan University Public Broadcasting Network

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Central Michigan University

Public Broadcasting Network

Financial Report

with Additional Information

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Contents

Report Letter 1-2

Management’s Discussion and Analysis 3-9

Basic Financial Statements

Statement of Net Position 10

Statement of Revenue, Expenses, and Changes in Net Position 11

Statement of Cash Flows 12

Notes to Financial Statements 13-30

Additional Information 31

Report Letter 32

Consolidating Statement of Net Position 33

Consolidating Statement of Revenue, Expenses, and Changes in

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1

Independent Auditor’s Report To the Board of Trustees

Central Michigan University Public Broadcasting Network

We have audited the accompanying financial statements of Central Michigan University Public Broadcasting Network (the “Network”) as of June 30, 2012. We did not audit the financial statements of Delta College WUCX-FM, which represent 1.5 percent of the assets, and 4.8 percent of revenue of the Network. Those financial statements were audited by other auditors whose report thereon has been furnished to us and our opinion, insofar as it relates to the amounts included for Delta College WUCX-FM, is based on the report of the other auditors. The Network and Delta College WUCX-FM collectively comprise the basic financial statements. These financial statements are the responsibility of the Network's management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of the Network as of June 30, 2011 were audited by other auditors, whose report dated November 16, 2011 expressed an unqualified opinion on those statements. We conducted our audit of the basic financial statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Central Michigan University Public Broadcasting Network as of June 30, 2012 and the results of its operations and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the financial statements, effective with the fiscal year ended June 30, 2012, the Network early adopted GASB Statement No. 63, Financial Reporting of Deferred

Outflows of Resources, Deferred Inflows of Resources, and Net Position and GASB Statement No.

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Accounting principles generally accepted in the United States of America require that management's discussion and analysis, as identified on pages 3 through 9 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

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Management’s Discussion and Analysis - Unaudited

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This section of Central Michigan University Public Broadcasting Network’s (the “Network”) annual financial report presents our discussion and analysis of the financial performance of the television and radio stations for the fiscal year ended June 30, 2012, with selected comparative information for the years ended June 30, 2011 and June 30, 2010. This discussion has been prepared by management along with the financial statements and related footnote disclosures and should be read in conjunction with, and is qualified in its entirety by, the financial statements and footnotes. The discussion and analysis is designed to focus on current activities, resulting changes, and current known facts. The financial statements, footnotes, and this discussion are the responsibility of management.

Reporting Entity

Central Michigan University (the “University”) operates the not-for-profit Network through the Department of Public Broadcasting under licenses granted to the Board of Trustees of the University. The assets, liabilities, and net position of the Network, excluding the Delta College portion, are included in the financial statements of Central Michigan University. The stations in the Network are identified by the following call letters:

WCMU-DT and WCMU-FM, Mount Pleasant WUCX-FM, Bay City

WCMV-DT, Cadillac WCMW-FM, Harbor Springs

WCMW-DT, Manistee WCMB-FM, Oscoda

WCMZ-DT, Flint WCMZ-FM, Sault Sainte Marie

WCML-DT and WCML-FM, Alpena WWCM-FM, Standish W236BU-FM, Traverse City

WCMZ-DT is a result of Central Michigan University acquiring WFUM-TV from the University of Michigan on May 18, 2010, after operating the station under a management agreement since January 15, 2010. The call letters were immediately changed to WCMZ-DT. The purchase price was $1.0 million and included primarily the FCC license, tower, antenna, transmitter, and transmitter building. This station was incorporated into the Network and carries the same programming as the other four stations. This purchase was financed by a loan from Central Michigan University to the Network which is being repaid over 10 years at an annual interest cost of 5.0 percent. This acquisition expands the television coverage area into the greater Flint area and southeast Michigan.

On August 4, 2011, W236BU-FM went on the air in Traverse City as part of the radio network. This is a translator of the program broadcast from WCMW-FM, in Harbor Springs. It carries the same programming as the other radio stations and serves primarily the greater Traverse City area.

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Management’s Discussion and Analysis - Unaudited (Continued)

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Only WCMU-DT and WCMU-FM are funded by the Corporation for Public Broadcasting (CPB). However, the operations of all of the stations (including Delta College WUCX-FM) have been combined for financial reporting purposes, as allowed by the CPB. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, as prescribed by the Governmental Accounting Standards Board (GASB) and the Principles of Accounting and Financial Reporting for Public Telecommunications Entities.

Using the Financial Report

The Network’s financial report includes three financial statements: the statement of net position, the statement of revenue, expenses, and changes in net position, and the statement of cash flows - direct method. The financial statements presented focus on the financial condition, the results of operations, and cash flows of the Network as a whole. These financial statements are prepared in accordance with the Governmental Accounting Standards Board Statement No. 35,

Basic Financial Statements-and Management’s Discussion and Analysis-for Public Colleges and Universities, as amended by GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position.

The statements of net position includes all assets and liabilities. It is prepared under the accrual basis of accounting, whereby revenue and assets are recognized when the service is provided and expenses and liabilities are recognized when others provide the service, regardless of when cash is exchanged.

The statements of revenue, expenses, and changes in net position presents the revenue earned and expenses incurred during the year. Activities are reported as either operating or nonoperating revenue. The utilization of long-lived assets, referred to as capital assets, is reflected in the financial statements as depreciation, which amortizes the cost of an asset over its expected useful life.

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Condensed Financial Information

Statement of Net Position

2012 2011 2010 Current assets $ 1,017,785 $ 967,038 $ 1,164,716 Noncurrent assets: Capital 12,592,447 12,572,577 13,510,906 Other 1,433,534 1,528,796 1,180,658 Total assets 15,043,766 15,068,411 15,856,280 Current liabilities 264,662 280,010 401,583 Noncurrent liabilities 592,873 822,121 1,040,067 Total liabilities 857,535 1,102,131 1,441,650

Total net position $ 14,186,231 $ 13,966,280 $ 14,414,630

Current assets consist of cash and cash equivalents, receivables, prepaid expenses, and

unexpired program rights. Current assets totaled $1.0 million at June 30, 2012 as compared to $1.0 million at June 30, 2011 and $1.2 million at June 30, 2010.

Fiscal year 2012 compared to 2011

 Receivables are up $0.1 million due to timing of rent and royalty collections. Fiscal year 2011 compared to 2010

 Receivables are down $0.3 million due to timing of grant billings.

Noncurrent assets include capital assets, net of accumulated depreciation, and endowment

investments at fair value. Noncurrent assets totaled $14.0 million at June 30, 2012 as compared to $14.1 million at June 30, 2011 and $14.7 million at June 30, 2010.

 Endowment investments decreased $0.1 million. Capital assets remained consistent with the prior year due to additions related to $1.1 million in equipment additions from the digital transition grant being offset by the increase in accumulated depreciation of $1 million. Refer to Note 3 to the financial statements for details regarding capital assets.

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Noncurrent liabilities include compensated absences for employees and amounts due to the University for the purchase of WFUM-TV. Noncurrent liabilities totaled $0.6, at June 30, 2012 as compared to $0.8 million at June 30, 2011 and $1.0 million at June 30, 2010. Compensated absences remain consistent year to year, while the amount due to the University is decreasing as the Network makes payments in accordance with the maturity schedule. See Notes 5 and 6 to the financial statements for details on these balances.

Net position represents the difference between the Network’s assets and liabilities. Total net position at June 30 is summarized as follows:

2012 2011 2010

Restricted - Nonexpendable $ 1,016,501 $ 982,899 $ 871,654

Restricted - Expendable 1,004,379 1,052,360 893,785

Unrestricted 148,669 153,939 138,285

Net investment in capital assets 12,016,682 11,777,082 12,510,906

Total net position $ 14,186,231 $ 13,966,280 $ 14,414,630

Fiscal year 2012 compared to 2011  Net position increased by $0.2 million. Fiscal year 2011 compared to 2010

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Statement of Revenue, Expenses and Changes in Net Position

2012 2011 2010

Operating Revenue

University support - Operating $ 2,866,326 $ 2,761,785 $ 2,830,438 Grants 1,192,646 1,316,711 1,151,923 Contributions and underwriting 2,522,435 2,488,372 2,374,643 Other operating revenue 569,672 378,059 392,957 Total operating revenue 7,151,079 6,944,927 6,749,961

Operating Expenses 8,278,363 7,801,882 8,011,751

Operating Loss (1,127,284) (856,955) (1,261,790)

Nonoperating Revenue (Expenses)

University additional support - Capital - - 16,208 Investment (loss) income, net of expenses (59,336) 304,354 152,873 Interest on capital assets related debt (39,775) (50,000) (14,688)

Total nonoperating (expenses) revenue (99,111) 254,354 154,393

Loss Before Other Revenue (1,226,395) (602,601) (1,107,397)

Other Revenue

Capital grants and gifts, net of allowance 1,408,559 43,005 1,069,172 Additions to permanent endowments 37,787 111,246 2,804 Total other revenue 1,446,346 154,251 1,071,976

Increase (Decrease) in Net Position 219,951 (448,350) (35,421)

Net Position - Beginning of year 13,966,280 14,414,630 14,450,051

Net Position - End of year $ 14,186,231 $ 13,966,280 $ 14,414,630

Total operating revenue for fiscal years ended June 30, 2012, 2011, and 2010 was $7.2 million, $6.9 million, and $6.7 million, respectively.

 University support is up $0.1 million due to an increase in tower maintenance projects performed by the University.

 Contributions and underwriting remained consistent with fiscal year 2011. Fiscal year 2011 compared to 2010

 University support is down $0.1 million due to the fiscal year 2010 completion of maintenance projects performed by the University, offset by an appropriation increase.

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Operating expenses for fiscal year 2012 totaling $8.3 million includes compensation and

benefits of $3.2 million, utilities of $0.4 million, supplies of $3.7 million, and depreciation of $1.0 million.

A comparative summary of the Network’s expenses for the years ended June 30 is as follows:

2012 2011 2010

Compensation and benefits $ 3,197,118 $ 3,158,432 $ 3,184,028

Supplies 3,690,223 3,218,778 3,679,573

Utilities 418,804 398,064 293,654

Depreciation 972,218 1,026,608 854,496

Total operating expenses $ 8,278,363 $ 7,801,882 $ 8,011,751

 Compensation and benefits remained consistent with fiscal year 2011.

 Supplies increased $0.5 million due to an increased grant activity and tower maintenance projects.

 Depreciation increased $0.2 million primarily due to having the additional assets associated with the acquisition of WCMZ-DT Station for a full year.

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Statements of Cash Flows - Direct Method

2012 2011 2010

Cash received from operations $ 6,338,130 $ 6,241,361 $ 5,969,451

Cash expended for operations (6,580,241) (6,077,898) (6,335,070)

Net cash (used in) provided by operating activities (242,111) 163,463 (365,619) Net cash provided by noncapital financing activities 37,787 111,246 2,804 Net cash provided by (used in) capital financing

activities 156,966 (150,752) 213,274

Net cash provided by (used in) investing activities 35,927 (43,784) 56,778 Net (decrease) increase in cash and cash

equivalents (11,431) 80,173 (92,763)

Cash and cash equivalents at beginning of year _569,116 _488,943 _581,706

Cash and cash equivalents at end of year _$_557,685 _$_569,116 _$_488,943

Summary

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See Notes to Financial Statements. 10

Statement of Net Position

2012 2011

Assets

Current assets:

Cash and cash equivalents (Note 2) $ 557,685 $ 569,116 Accounts receivable 135,269 19,225 Pledges receivable - Net 266,833 251,851 Prepaid expenses 54,696 123,319 Unexpired program rights 3,302 3,527 Total current assets 1,017,785 967,038 Noncurrent assets:

Endowment investments (Note 2) 1,433,534 1,528,796 Capital assets - Net (Note 3) 12,592,447 12,572,577 Total noncurrent assets 14,025,981 14,101,373 Total assets 15,043,766 15,068,411

Liabilities

Current liabilities:

Accounts payable and accrued liabilities (Note 4) 63,808 61,019 Accrued payroll (Note 4) 87,878 108,148 Deferred revenue 12,259 21,113 Current portion due to CMU (Note 6) 100,717 89,730 Total current liabilities 264,662 280,010 Noncurrent liabilities:

Long-term liabilities (Note 5) 117,825 116,356 Due to CMU (Note 6) 475,048 705,765 Total noncurrent liabilities 592,873 822,121 Total liabilities 857,535 1,102,131

Net Position

Net investment in capital assets 12,016,682 11,777,082 Restricted for: Nonexpendable 1,016,501 982,899 Expendable: Department uses 284,900 97,307 Capital projects 719,479 955,053 Unrestricted 148,669 153,939 Total net position $ 14,186,231 $ 13,966,280

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Statement of Revenue, Expenses, and Changes in Net Position

2012 2011

Revenue

Operating revenue:

University appropriations - Operations $ 1,924,681 $ 1,937,140 University additional support - Operations 267,458 80,254 University administrative support - Operations 674,187 744,391 Contributions and pledges - Net of allowance 1,959,876 1,947,083 Community service grants 1,186,509 1,308,156 Outreach grants 6,137 8,555 Program underwriting 557,559 529,289 Production underwriting 5,000 12,000 Rents and royalties 400,647 273,458 Special fundraising activities 45,292 35,006 In-kind support 74,190 25,197 Other operating revenue 49,543 44,398 Total operating revenue 7,151,079 6,944,927

Expenses

Operating expenses:

Programming and local production 2,184,984 2,274,267 Broadcasting 2,892,680 2,254,052 Program information 346,341 348,882 Fundraising 1,011,171 1,042,564 Management and general 870,969 855,509 Depreciation 972,218 1,026,608 Total operating expenses 8,278,363 7,801,882

Operating Loss (1,127,284) (856,955)

Nonoperating (Expenses) Revenue

Investment (loss) income (59,336) 304,354 Interest on capital assets related debt (39,775) (50,000)

Total nonoperating expenses (99,111) 254,354

Loss Before Other Revenue (1,226,395) (602,601)

Other Revenue

Capital gifts and pledges - Net of allowance 175 275 Capital grants 1,408,384 42,730 Additions to permanent endowments 37,787 111,246 Total other revenue 1,446,346 154,251

Increase (Decrease) in Net Position 219,951 (448,350)

Net Position

Beginning of year 13,966,280 14,414,630 End of year $ 14,186,231 $ 13,966,280

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Statement of Cash Flows

2012 2011

Cash Flow from Operating Activities

Grants from CPB $ 1,186,509 $ 1,308,156

Research grants and contracts 1,800 19,889

Payments to suppliers (3,022,781) (2,605,308)

Payments for utilities (418,804) (398,064)

Payments to employees (2,242,286) (2,242,664)

Payments for benefits (896,370) (831,862)

Contributions 1,951,591 1,964,395

Underwriting 555,862 531,014

Rents and royalties 292,936 285,094

Special fundraising events 45,292 35,006

General University support 2,192,139 2,017,394

Other receipts 112,001 80,413

Net cash (used in) provided by operating activities (242,111) 163,463 Cash Flow from Noncapital Financing Activities - Private gifts for

endowment purposes 37,787 111,246

Cash Flow from Capital Financing Activities

Capital gifts and pledges 175 275

Capital grants 1,408,384 215,846

Payments on amounts due to CMU (219,730) (204,505) Interest paid on capital debt (39,775) (50,000)

Purchases of capital assets (992,088) (112,368)

Net cash provided by (used in) capital financing activities 156,966 (150,752) Cash Flow from Investing Activities - Interest of investments 35,927 (43,784) Net (Decrease) Increase in Cash and Cash Equivalents (11,431) 80,173 Cash and Cash Equivalents - Beginning of year 569,116 488,943 Cash and Cash Equivalents - End of year $ 557,685 $ 569,116 Reconciliation of Net Operating Loss to Net

Cash Provided by Operating Activities

Operating loss $ (1,127,285) $ (856,955)

Adjustments to reconcile operating loss to net cash provided by operating activities:

Depreciation expense 972,218 1,050,697

Change in assets and liabilities:

Receivables - Net (131,027) 32,221

Prepaid expenses 68,623 (22,129)

Unexpired program rights 225 -Accounts payable and accrued liabilities 2,789 (60,018)

Accrued payroll (20,270) 14,259

Deferred revenue (8,853) 8,604 Compensated absences 1,469 (3,216)

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Notes to Financial Statements June 30, 2012 and 2011

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Note 1 - Basis of Presentation and Significant Accounting Policies

Reporting Entity - Central Michigan University, Mount Pleasant, Michigan (the

“University” or CMU) operates not-for-profit television and radio stations, Central Michigan University Public Broadcasting Network (the “Network”), through the Department of Public Broadcasting under licenses granted to the board of trustees of the University. These stations are identified by the following call letters:

WCMU-DT and WCMU-FM, Mount Pleasant WCMV-DT, Cadillac

WCMW-DT, Manistee WCMZ-DT, Flint

WCML-DT and WCML-FM, Alpena WUCX-FM, Bay City

WCMW-FM, Harbor Springs WCMB-FM, Oscoda

WCMZ-FM, Sault Sainte Marie WWCM-FM, Standish

W236BU-FM, Traverse City

WUCX-FM, Bay City, is operated jointly by Central Michigan University and Delta College. For 2012 and 2011, the financial statements of Delta College WUCX-FM have been audited separately and combined with the Central Michigan University Network in these financial statements. Inter-organizational transactions have been eliminated. See Note 13 for disclosures related to the Delta College WUCX-FM financial statements.

Only WCMU-DT and WCMU-FM are funded by the Corporation for Public Broadcasting (CPB). However, the operations of all of the stations have been combined for financial reporting purposes, as allowed by the CPB.

Basis of Presentation - The financial statements have been prepared in accordance

with accounting principles generally accepted in the United States of America, as prescribed by the Governmental Accounting Standards Board (GASB) and the

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Note 1 - Basis of Presentation and Significant Accounting Policies (Continued)

The Network follows the “business-type” activities requirements of GASB Statement No. 34, Basic Financial Statements and Management’s Discussion and Analysis - For

State and Local Governments, as amended by GASB Statement No. 35, Basic Financial Statements - and Management’s Discussion and Analysis - for Public Colleges and Universities, as amended by GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position. These

statements require the following components of the Network’s financial statements:  Management’s Discussion and Analysis

 Basic financial statements including a statement of net position, statement of revenue, expenses, and changes in net position, and statement of cash flows - direct method for the Network as a whole

 Notes to the financial statements

GASB Statement No. 34, amended by GASB Statement No. 63, requires that resources be classified for accounting and reporting purposes into the following four net asset categories:

 Net investment in capital assets: Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets

 Restricted:

o Nonexpendable - Net position subject to externally imposed constraints that they be maintained permanently by the Network. Such assets include the Network’s permanent endowment funds

o Expendable - Net position whose use by the Network is subject to externally imposed constraints that can be fulfilled by actions of the Network pursuant to those constraints or that expire by the passage of time

 Unrestricted: Net positions that are not subject to externally imposed constraints. Unrestricted net positions may be designated for specific purposes by action of management or the board or may otherwise be limited by contractual agreements with outside parties

Basis of Accounting

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The Network early implemented GASB Statement No. 62, Codification of Accounting

and Financial Reporting Guidance Contained in pre-November 30, 1989 FASB and AICPA Pronouncements. The objective of this statement is to incorporate into the GASB’s

authoritative literature certain accounting and financial guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements:

 Financial Accounting Standards Board (FASB) Statements and Interpretations  Accounting Principles Board Opinions

 Accounting research bulletins of the American Institute of Certified Public Accountants (AICPA), Committee or Accounting Procedure

Use of Estimates - The preparation 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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Summary of Significant Accounting Policies

Cash and Cash Equivalents and Investments - Cash and cash equivalents and

marketable securities are stated at fair value.

Accounts Receivable - Accounts receivable at June 30, 2012 and 2011 consisted of

rent and royalty receivables. Accounts receivable are deemed fully collectible.

Capital Assets - Institutional capital assets are stated at cost when purchased and at

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Depreciation is provided for capital assets on a straight-line basis over the estimated useful life of the property as follows:

Classification Life

Buildings > $100,000 40 years

Buildings < $100,000 10 years

Intangible Assets 40 years

Equipment - Digital TV 20 years

Equipment 8 years

Vehicles 4 years

Intangible Assets - Intangible assets acquired for the exclusive or predominant use

by the Network have been recorded at cost at the date of acquisition. The intangible assets have an indefinite useful life.

Deferred Revenue - Deferred revenue represents tower lease revenue and

unearned grant revenue received that will be recognized by the Network during the year in which they are earned.

Administrative Support - Administrative support from the University consists of

that portion of the indirect costs incurred by the University and attributable to the Network’s operations (such as personnel services, purchasing, and payables). Administrative support is calculated and recorded as revenue and expense using methods mandated by the CPB.

Revenue Recognition - Revenue is recognized when earned and expenditures are

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Contributions and Pledges - Contributions are recorded when received.

Voluntary nonexchange transactions (pledges) are recognized in accordance with GASB Statement No. 33, Accounting and Financial Reporting for Nonexchange

Transactions. GASB Statement No. 33 requires recognition of the entire pledge in

the first period that use is permitted and all applicable eligibility requirements have been satisfied. Such pledges are recorded net of allowance for uncollectible pledges.

Change in Accounting Principles - Effective with the fiscal year ended June 30,

2012, the Network early adopted GASB Statement No. 63, Financial Reporting of

Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position and

GASB Statement No. 65, Items Previously Reported as Assets and Liabilities. These statements introduce and define those elements as a consumption of net assets by the Network that is applicable to a future reporting period, and an acquisition of net assets by the Network that is applicable to a future reporting period, respectively. The standards also incorporate deferred outflows of resources and deferred inflows of resources into the definitions of the required components of the residual measure and by renaming that measure as net position, rather than net assets. In accordance with the standards, the Network has modified the presentation of the statement of net position at June 30, 2012 in accordance with the standard.

Note 2 - Cash and Cash Equivalents and Endowment Investments

The Network considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Network’s deposits and investments are included on the statement of net position under the following classifications as of June 30:

2012 2011

Cash and cash equivalents $ 557,685 $ 569,116

Endowment investments 1,433,534 1,528,796

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Note 2 - Cash and Cash Equivalents and Endowment Investments (Continued)

The above amounts are classified by GASB Statement No. 3 in the following categories at June 30:

2012 2011

Bank deposits (checking accounts, savings

accounts, and certificates of deposit) $ 557,685 $ 569,116

Investments in securities and similar vehicles 1,433,534 1,528,796

Total $ 1,991,219 $ 2,097,912

Deposits - The University invests and manages cash collectively by pooling cash

reserves, including cash of the Network. It is not practicable to determine the amount reflected in the accounts of the banks (without recognition of checks written but not cleared, or of deposits in transit) or the amount of federal depository insurance that is applicable to the Network’s portion of the pooled deposits as of June 30, 2012 or 2011. A portion of the Network’s cash is deposited in interest bearing accounts.

Endowment Investments - The Network has received certain contributions that

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Note 3 - Capital Assets

Beginning Balance July 1, 2011 Additions Reductions Ending Balance June 30, 2012 Land $ 197,598 $ - $ - $ 197,598 Buildings 6,749,669 - 33,327 6,716,342 Furniture and equipment 13,752,070 1,061,438 167,186 14,646,322 Intangible assets 305,612 - - 305,612 Construction in progress 44,884 - 44,884

-Total 21,049,833 1,061,438 245,397 21,865,874 Less accumulated depreciation:

Buildings 2,797,112 236,478 24,354 3,009,236 Furniture and equipment 5,546,176 727,960 151,693 6,122,443 Intangible assets 133,968 7,780 - 141,748 Total 8,477,256 972,218 176,047 9,273,427 Capital assets - Net $ 12,572,577 $ 89,220 $ 69,350 $ 12,592,447

Beginning Balance July 1, 2010 Additions Reductions Ending Balance June 30, 2011 Land $ 197,598 $ - $ - $ 197,598 Buildings 6,749,669 - - 6,749,669 Furniture and equipment 14,018,511 67,484 333,925 13,752,070 Intangible assets 305,612 - - 305,612 Construction in progress - 44,884 - 44,884 Total 21,271,390 112,368 333,925 21,049,833 Less accumulated depreciation:

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Note 4 - Accounts Payable and Accrued Liabilities and Accrued Payroll Accounts payable and accrued liabilities represent amounts due at June 30 for goods and services received prior to the end of the fiscal year. Accounts payable and accrued liabilities and accrued payroll at June 30 were as follows:

2012 2011

Vendors $ 63,808 $ 61,019

Accrued payroll 87,878 108,148

Total $ 151,686 $ 169,167

Note 5 - Long-term Liabilities

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-Notes to Financial Statements June 30, 2012 and 2011

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Note 6 - Due to CMU

The Network acquired WFUM-TV from the University of Michigan on May 18, 2010, after operating the station under a management agreement since January 15, 2010. The call letters were immediately changed to WCMZ-DT. The purchase price was $1.0 million and included primarily the FCC license, tower, antenna, transmitter, and transmitter building. This station was incorporated into the Network and carries the same programming as the other four stations. This acquisition expands the television coverage area into the greater Flint area and southeast Michigan. This purchase was financed by a loan from Central Michigan University to the Network which is being repaid over 10 years at an annual fixed interest cost of 5.0 percent. The Network paid $219,730 against the $1.0 million principal and $39,775 in interest during the year ended June 30, 2012. The Network paid $204,505 against the $1.0 million principal and $50,000 in interest during the year ended June 30, 2011. The principal balance of $575,765 and interest due to the University in each of the succeeding six years ending June 30 and thereafter are as follows:

Principal Interest Total

2013 $ 100,717 $ 28,788 $ 129,505 2014 105,753 23,752 129,505 2015 111,040 18,465 129,505 2016 116,592 12,913 129,505 2017 122,422 7,083 129,505 2018 19,241 962 20,203 575,765 $ $ 91,963 $ 667,728

Note 7 - Operating Expenses

Operating expenses by natural classification at June 30 were as follows:

2012 2011

Salaries, wages, and benefits $ 3,197,118 $ 3,158,432

Supplies and support services 4,109,027 3,616,842

Depreciation 972,218 1,026,608

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Note 8 - Retirement Plans

The Network's employees are included in retirement plans funded by the University either through the Michigan Public School Employees’ Retirement System or through the Teachers Insurance and Annuity Association/College Retirement Equities Fund and/or Fidelity Investment Tax Exempt Services Company. See the notes to the University’s financial statements for details of these plans.

Total retirement expense for the Network for the years ended June 30, 2012 and 2011 was $382,166 and $336,460, respectively. The Network has no obligation under the plans beyond making the required payments to the respective retirement plan administrators.

Note 9 - Operating Leases

The Network has entered into various operating leases for land, building space, and towers. It is expected that in the normal course of business, such leases will continue to be required.

Operating lease expense amounted to $47,879 for 2012 and $56,344 for 2011. The following is a schedule of the Network’s aggregate minimum rental commitment for operating leases for each of the succeeding five years ending June 30:

2013 $ 32,635 2014 31,501 2015 28,197 2016 28,832 2017 29,485 Total $ 150,650

Note 10 - Nonfederal Financial Support (NFFS)

The CPB allocates a portion of its funds annually to public broadcasting entities, primarily based on NFFS, which is defined by CPB. NFFS is defined as the total value of cash and the fair market value of services received as contributions or payments and meeting all the respective criteria for each.

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Note 11 - Indirect Administrative Support

Indirect support from Central Michigan University consists of allocations of the University’s institutional support and facility operation costs that benefit the Network. It is calculated based upon the ratio of the Network’s operating costs to the University’s total institutional support and facility operations costs. The fair value of this support is recognized as operating revenue in the statements of revenue, expenses, and changes in net position under University administrative support for operations and also in operating expenses. The combined value of this support included in the statements of revenue, expenses, and changes in net position was $674,187 and $744,391 for the years ended June 30, 2012 and 2011, respectively. Note 12 - Contingencies

In the normal course of its activities, the Network is a party in various legal and administrative actions. The Network has not experienced significant losses or costs. After taking into consideration legal counsel’s evaluation of pending actions and information relative to potential future claims based on past events, the Network is in the opinion that the outcome thereof will not have a material effect on the financial statements.

Note 13 - Delta College WUCX-FM

The following footnotes are taken directly from Delta College WUCX-FM’s financial statements and are presented in their entirety to provide additional information regarding the Delta College financial information.

Significant Accounting Policies Reporting Entity

WUCX-FM (the “Station”) is a nonprofit public radio station operated by and is a separate organizational unit of Delta College (the “College”), a community college located in University Center, Michigan. The Station has operated since 1989 under a Joint Operating Agreement with Central Michigan University’s public radio station, WCMU-FM, which maintains the broadcast license granted by the Federal Communications Commission. The Station’s financial statements have been prepared in accordance with the generally accepted accounting principles as applicable to public colleges and universities outlined in Governmental Accounting Standards Board (GASB) Statement No. 35, Basic Financial Statements and Management’s Discussion

and Analysis for Public Colleges and Universities, as required by the Corporation for

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Note 13 - Delta College WUCX-FM (Continued)

Significant accounting policies followed by the Station are described below to enhance the usefulness of the financial statements to the reader:

Accrual Basis

The financial statements of the Station have been prepared on the accrual basis of accounting, whereby revenue is recognized when earned and expenditures are recognized when the related liabilities are incurred and certain measurement and matching criteria are met. In accordance with GASB Statement No. 20, the Station is required to follow all applicable GASB pronouncements. In addition, the Station should apply all applicable Financial Accounting Standards Board (FASB) Codification sections applicable on or before November 30, 1989 unless those pronouncements conflict with or contradict GASB pronouncements. The Station has elected not to apply FASB Codification sections applicable after November 30, 1989.

Use of Estimates

The preparation 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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of all highly liquid investments with an initial maturity of three months or less.

Investments

Investments are recorded at fair value, based on quoted market prices.

Capital Assets

Capital assets are recorded at cost or, if acquired by gift, at the fair market value as of the date of acquisition. Expenditures for maintenance and repairs are expensed as incurred. Depreciation is calculated on capital assets using the straight-line method over the estimated useful lives of the assets. The American Health Association’s

Estimated Useful Lives of Depreciable Hospital Assets was utilized as a guide in

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Revenue Recognition

Restricted grant revenue is recognized only to the extent expended. Unearned revenue represents restricted grant funds received that will be recognized by the Station and available for expenditure during the following year.

Gifts and Pledges

Gifts are recorded when received. Voluntary nonexchange transactions (pledges) are recognized in accordance with GASB Statement No. 33, Accounting and Financial

Reporting for Nonexchange Transactions. GASB Statement No. 33 requires recognition

of the entire pledge in the first period that use is permitted and all applicable eligibility requirements have been satisfied. Such pledges are recorded at their discounted present values, net of allowance for uncollectible pledges. The Station has no pledges receivable recorded at June 30, 2012 or June 30, 2011.

Purchased Program Rights

Purchased program rights are recorded when acquired and amortized on an accelerated basis as the programs are broadcast.

Compensated Absences

Compensated absences represent the accumulated liability to be paid under the Station’s current vacation policy. Under the Station’s policy, employees accrue vacation on a bi-weekly basis at a rate that is dependent on the employee’s pay class.

Operating Activities

The Station’s policy for defining operating activities as reported on the statement of revenue, expenses, and changes in net position are those that generally result from the provision of public broadcasting services. Revenue restricted by donors to use for capital improvements, and revenue and expenses that result from financing and investing activities are recorded as nonoperating revenue and expenses.

Donated Facilities and Administrative Support

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Cash and Cash Equivalents and Investments

The Station considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The Station’s deposits and investments are included on the balance sheet under the following classifications as of June 30, 2012 and 2011:

2012 2011

Cash and cash equivalents $ 100,883 $ 81,358

Long-term investments 74,111 96,906

Total $ 174,994 $ 178,264

The above amounts are classified in the following categories:

2012 2011

Bank deposits (checking accounts, savings

accounts, and certificates of deposit) $ 100,883 $ 81,358

Investments in securities and similar vehicles _74,111 _96,906

Total $ 174,994 $ 178,264

Deposits

Delta College invests and manages cash collectively by pooling cash reserves, including cash of the Station. It is not practicable to determine the amount reflected in the accounts of the banks (without recognition of checks written but not cleared, or of deposits in transit) or the amount of federal depository insurance that is applicable to the Station’s portion of the pooled deposits as of June 30, 2012 or June 30, 2011. A portion of the Station’s cash is deposited in interest-bearing accounts.

Investments

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Capital Assets

The following tables present the changes in the various capital asset class categories for the years ended June 30:

Year Ended June 30, 2012

Estimated Useful Life Beginning Balance Additions/ Depreciation Deletions Ending Balance Buildings 40 years $ 80,531 $ - $ - $ 80,531 Furniture and equipment 5-20 years 129,442 - 8,350 121,092 Total 209,973 - 8,350 201,623 Less accumulated depreciation:

Buildings 31,939 1,620 - 33,559 Furniture and equipment 126,368 559 8,350 118,577 Total 158,307 $ 2,179 $ 8,350 152,136 Capital assets, net $ 51,666 $ 51,666 Year Ended June 30, 2011

Estimated Useful Life Beginning Balance Additions/ Depreciation Deletions Ending Balance Buildings 40 years $ 80,531 $ - $ - $ 80,531 Furniture and equipment 5-20 years 129,442 - - 129,442 Total 209,973 - - 209,973 Less accumulated depreciation:

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Unrestricted Net Position

The Station has designated the use of unrestricted net position as follows as of June 30:

2012 2011

Designated for funds functioning as endowments $ 74,111 $ 96,906

Unrestricted and unallocated 74,558 57,033

Total unrestricted net position $ 148,669 $ 153,939

Retirement Plans

The Station’s employees are included in a retirement plan funded by Delta College either through the Michigan Public School Employees’ Retirement System (MPSERS), or the Optional Retirement Plan, a defined contribution plan, administered by TIAA-CREF. Prior to July 1, 2010, the MPSERS plan was strictly a defined benefit plan. Effective July 1, 2010, new MPSERS members participate in a hybrid plan which is both a defined benefit and defined contribution plan.

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Community Service Grants

The Station operates under a Joint Operating Agreement with Central Michigan University’s public radio station, WCMU-FM. This agreement allows the Station to share in annual funding from WCMU-FM’s Community Service Grant from the Corporation for Public Broadcasting (CPB). The Station’s share of CPB Community Service Grants received and expended during recent fiscal years were as follows:

Year of Grant Grants Received 2012 2011 2010 2012 $ 28,833 $ 28,833 $ - $ - $ -2011 29,398 - 29,398 - -2010 31,753 - - 31,753 -Expended Uncommitted Balance at June 30

Nonfederal Financial Support (NFFS)

The CPB allocates a portion of its funds annually to public broadcasting entities, primarily based on NFFS, which is defined by CPB. NFFS is defined as the total value of cash and the fair market value of services received as contributions or payments and meeting all the respective criteria for each.

Calculated in accordance with CPB guidelines, the Station reported total NFFS of $412,639 and $396,098 for the years ended June 30, 2012 and 2011, respectively.

Indirect Administrative Support

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Note 14 - Upcoming Accounting Pronouncement

In June 2012, the GASB issued GASB Statement No. 68, Accounting and Financial

Reporting for Pensions. Statement No. 68 requires governments providing defined

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Independent Auditor’s Report on Additional Information To the Board of Trustees

Central Michigan University Public Broadcasting Network

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise Central Michigan University Public Broadcasting Network’s financial statements. The accompanying other supplemental information, as identified in the table of contents, is presented for the purpose of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.

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Consolidating Statement of Net Position June 30, 2012

CMU and

CMU Delta Combined Delta

Combined College Total Combined

Television Radio Total WUCX-FM Radio Total

Assets

Current assets:

Cash and cash equivalents $ 236,617 $ 220,185 $ 456,802 $ 100,883 $ 321,068 $ 557,685 Accounts receivable 106,777 28,492 135,269 - 28,492 135,269 Pledges receivable - Net 83,885 182,948 266,833 - 182,948 266,833 Prepaid expenses 31,675 23,021 54,696 - 23,021 54,696 Unexpired program rights - - - 3,302 3,302 3,302 Total current assets 458,954 454,646 913,600 104,185 558,831 1,017,785 Noncurrent assets:

Endowment investments 1,118,199 241,224 1,359,423 74,111 315,335 1,433,534 Capital assets - Net 11,410,769 1,132,191 12,542,960 49,487 1,181,678 12,592,447 Total noncurrent assets 12,528,968 1,373,415 13,902,383 123,598 1,497,013 14,025,981 Total assets 12,987,922 1,828,061 14,815,983 227,783 2,055,844 15,043,766 Liabilities

Current liabilities:

Accounts payable and accrued

liabilities 36,794 24,397 61,191 2,617 27,014 63,808 Accrued payroll 53,818 7,050 60,868 27,010 34,060 87,878 Deferred revenue 12,259 - 12,259 - - 12,259 Long-term liabilities - Current

portion 100,717 - 100,717 - - 100,717 Total current liabilities 203,588 31,447 235,035 29,627 61,074 264,662 Noncurrent liabilities: Long-term liabilities 71,698 46,127 117,825 - 46,127 117,825 Due to CMU 475,048 - 475,048 - - 475,048 Total noncurrent liabilities 546,746 46,127 592,873 - 46,127 592,873 Total liabilities 750,334 77,574 827,908 29,627 107,201 857,535 Net Position

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Consolidating Statement of Revenue, Expenses, and Changes in Net Position Year Ended June 30, 2012

CMU CMU Delta Combined and Delta Combined College Total Combined Television Radio Total WUCX-FM Radio Total Revenue

Operating revenue:

University appropriations - Operations $ 1,157,772 $ 625,855 $ 1,783,627 $ 141,054 $ 766,909 $ 1,924,681 University additional support - Operations 117,866 149,592 267,458 - 149,592 267,458 University administrative support - Operations 364,368 254,916 619,284 54,903 309,819 674,187 Contributions and pledges - Net of allowance 1,099,012 693,615 1,792,627 167,249 860,864 1,959,876 Community service grants 851,112 335,397 1,186,509 - 335,397 1,186,509 Outreach grants 6,137 - 6,137 - - 6,137 Program underwriting and pledges - Net of

allowance 112,278 393,632 505,910 51,649 445,281 557,559 Production underwriting 5,000 - 5,000 - - 5,000 Rents and royalties 346,566 54,081 400,647 - 54,081 400,647 Special fundraising activities 22,646 22,646 45,292 - 22,646 45,292 In-kind support 41,898 32,292 74,190 - 32,292 74,190 Other operating revenue 36,015 13,528 49,543 - 13,528 49,543 Total operating revenue 4,160,670 2,575,554 6,736,224 414,855 2,990,409 7,151,079 Expenses

Operating expenses:

Programming and local production 1,274,047 712,411 1,986,458 198,526 910,937 2,184,984 Broadcasting 1,943,157 842,439 2,785,596 107,084 949,523 2,892,680 Program information 201,704 144,637 346,341 - 144,637 346,341 Fundraising 542,982 405,995 948,977 62,194 468,189 1,011,171 Management and general 461,350 359,387 820,737 50,232 409,619 870,969 Depreciation 845,821 124,218 970,039 2,179 126,397 972,218 Total operating expenses 5,269,061 2,589,087 7,858,148 420,215 3,009,302 8,278,363 Operating Loss (1,108,391) (13,533) (1,121,924) (5,360) (18,893) (1,127,284) Nonoperating Expenses

Investment income, net of expenses (49,243) (8,004) (57,247) (2,089) (10,093) (59,336) Interest on capital assets related debt (39,775) - (39,775) - - (39,775) Total nonoperating expenses (89,018) (8,004) (97,022) (2,089) (10,093) (99,111) Total loss before other revenue (1,197,409) (21,537) (1,218,946) (7,449) (28,986) (1,226,395) Other Revenue

Capital gifts and pledges, net of allowance 175 - 175 - - 175 Capital grants 1,408,384 - 1,408,384 - - 1,408,384 Additions to permanent endowments 8,098 29,689 37,787 - 29,689 37,787 Total other revenue 1,416,657 29,689 1,446,346 - 29,689 1,446,346 Increase (Decrease) in Net Position