DESERT COMMUNITY COLLEGE DISTRICT AUXILIARY SERVICES (AN AUXILIARY ORGANIZATION OF DESERT COMMUNITY COLLEGE DISTRICT) PALM DESERT, CALIFORNIA

Transcription

1 DESERT COMMUNITY COLLEGE DISTRICT AUXILIARY SERVICES (AN AUXILIARY ORGANIZATION OF DESERT COMMUNITY COLLEGE DISTRICT) PALM DESERT, CALIFORNIA INDEPENDENT AUDITORS' REPORT AND FINANCIAL STATEMENTS

2 TABLE OF CONTENTS Page Independent Auditors Report 1 Financial Statements: Combined Statement of Financial Position 2 Combined Statement of Activities 3 Combined Statement of Cash Flows 4 Notes to Financial Statements 5 9

3 LUND & GUTTRY LLP / CERTIFIED PUBLIC ACCOUNTANTS BOB HOPE DRIVE SUITE 309 P.O. Box 250 RANCHO MIRAGE, CA Telephone (760) Fax (760) INDEPENDENT AUDITORS' REPORT Board of Directors Desert Community College District Auxiliary Services Palm Desert, California We have audited the accompanying Financial Statements of Desert Community College District Auxiliary Services (an auxiliary organization of Desert Community College District) as of and for the year ended June 30, 2011, as listed in the foregoing table of contents. These financial statements are the responsibility of the Desert Community College District Auxiliary Services' management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized information has been derived from the Desert Community College Auxiliary Services 2010 financial statements and, in our report dated November 23, 2010, we expressed an unqualified opinion on those financial statements. We conducted our audit 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, the financial statements referred to above present fairly, in all material respects, the financial position of Desert Community College District Auxiliary Services as of June 30, 2011 and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. December 8,

4 COMBINED STATEMENT OF FINANCIAL POSITION JUNE 30, 2011 WITH COMPARATIVE TOTALS FOR JUNE 30, 2010 General Operating Trust Agency Student Loan and Scholarship 2011 Totals 2010 (Memorandum Only) ASSETS Cash and cash equivalents $ 1,440,485 $ 77,898 $ 44,469 $ 1,562,852 $ 1,520,156 Accounts receivable 47, ,775 41,490 Due from Desert Community College District 1,250 16,665-17,915 13,761 Property and equipment, net 25, ,745 31,451 TOTAL ASSETS $ 1,515,255 $ 94,563 $ 44,469 $ 1,654,287 $ 1,606,858 LIABILITIES Accounts payable $ 17,003 $ 8,032 $ - $ 25,035 $ 21,012 Due to Desert Community College District 257, , ,322 Sales tax payable ,076 TOTAL LIABILITIES 274,888 8, , ,410 NET ASSETS Unrestricted 1,240, ,240,367 1,180,113 Temporarily restricted - 66,531 44, , ,335 Permanently restricted - 20,000-20,000 20,000 TOTAL NET ASSETS 1,240,367 86,531 44,469 1,371,367 1,313,448 TOTAL LIABILITIES AND NET ASSETS $ 1,515,255 $ 94,563 $ 44,469 $ 1,654,287 $ 1,606,858 (The accompanying notes are an integral part ot these financial statements) -2-

5 COMBINED STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2011 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2010 General Operating Trust Agency Student Loan and Scholarship 2011 (The accompanying notes are an integral part of these financial statements) -3- Totals 2010 (Memorandum Only) UNRESTRICTED REVENUE Commission income $ 360,685 $ - $ - $ 360,685 $ 337,895 Golf driving range 315, , ,344 Bookstore signing bonus 100, ,000 - Interest 1, ,997 11,686 Other income TOTAL UNRESTRICTED REVENUE 778, , ,960 EXPENSES Administrative 57, ,244 47,433 Golf driving range 410, , ,888 Depreciation 5, ,706 5,443 Contributions to Desert Community College District 244, , ,768 TOTAL UNRESTRICTED EXPENSES 717, , ,532 INCREASE (DECREASE) IN UNRESTRICTED NET ASSETS 60, ,254 (32,572) TEMPORARILY RESTRICTED REVENUE AND SUPPORT Donations and grants - 13,832-13,832 21,215 Loans collected ,605 14,605 9,175 TOTAL TEMPORARILY RESTRICTED REVENUE AND SUPPORT - 13,832 14,605 28,437 30,390 INDIRECT EXPENSES Student assistance - 17,072 13,700 30,772 29,713 TOTAL TEMPORARILY RESTRICTED EXPENSES - 17,072 13,700 30,772 29,713 INCREASE (DECREASE) IN TEMPORARILY RESTRICTED NET ASSETS - (3,240) 905 (2,335) 677 INCREASE (DECREASE) IN TOTAL NET ASSETS 60,254 (3,240) ,919 (31,895) NET ASSETS Beginning of year 1,180,113 89,771 43,564 1,313,448 1,345,343 End of year $ 1,240,367 $ 86,531 $ 44,469 $ 1,371,367 $ 1,313,448

6 COMBINED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2011 WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2010 General Operating Trust Agency Student Loan and Scholarship 2011 Totals 2010 (Memorandum Only) CASH FLOWS FROM OPERATING ACTIVITIES Increase (decrease) in net assets $ 60,254 $ (3,240) $ 905 $ 57,919 $ (31,895) Adjustments to reconcile increase (decrease) in net assets to net cash provided (used) by operating activities Depreciation 5, ,706 5,443 (Increase) decrease in assets: Due from Desert Community College District 5,208 (9,362) - (4,154) 50,460 Accounts receivable (6,285) - - (6,285) (10,641) Increase (decrease) in liabilities: Due to Desert Community College District (12,786) (2,362) - (15,148) 248,008 Accounts payable 6, ,385 (18,138) Sales tax payable (1,727) - - (1,727) (4,276) Net cash provided (used) by operating activities 56,755 (14,964) , ,961 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (5,006) Net cash used by investing activities (5,006) NET INCREASE (DECREASE) IN CASH 56,755 (14,964) , ,955 CASH Beginning of year 1,383,730 92,862 43,564 1,520,156 1,286,201 End of year $ 1,440,485 $ 77,898 $ 44,469 $ 1,562,852 $ 1,520,156 (The accompanying notes are an integral part of these financial statements) -4-

7 NOTES TO FINANCIAL STATEMENTS 1) ORGANIZATION AND OPERATION Desert Community College District Auxiliary Services (Auxiliary) is a non-profit public benefit corporate auxiliary of Desert Community College District (the District). The organization was formed in July, 1985, pursuant to California Assembly Bill No. 2627, Chapter 858, "Community Colleges Auxiliary Organizations," and operates in conformity with general regulations established by the Board of Governors of the California Community Colleges and the District as required by the Education Code, Section (c). The Auxiliary operates primarily in the area known as the Coachella Valley of Southern California for the purpose of providing support services and economic benefit to the District. As with all non-profit organizations, the Auxiliary is subject to local economic factors and their effect on revenue and support. The Auxiliary qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code. The Board of Directors, at June 30, 2011, consists of the following individuals: Position Term Name Title Expires Edwin Deas Chairperson 2012 Wade Ellis Secretary/Treasurer 2012 Jerry Patton Member 2012 Robert Blizinski Member ) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies and procedures used are those recommended by the California Community Colleges manual of Auxiliary Organizations Requirements for Accounting, Reporting and Auditing prepared pursuant to the California Administrative Code, Title 5, Section The financial records of the organization are maintained and the financial statements are prepared on the modified accrual basis of accounting. Receivables Accounts receivable are deemed fully collectible at June 30, 2011 and therefore no allowance for doubtful accounts has been established. Concentration of Credit Risk The Auxiliary maintains commercial checking accounts and certificates of deposit and at times throughout the year, the account balances may exceed federally insured limits. The Auxiliary has not experienced any losses in such accounts. Management believes it is not exposed to any significant credit risk on their cash balances. -5-

8 NOTES TO FINANCIAL STATEMENTS 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and Cash Equivalents For purposes of the Statement of Cash Flows, cash equivalents include cash on hand, cash in bank, certificates of deposit, and all highly liquid investments with original maturities of one year or less. Use of Estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Capital Assets The Auxiliary s policy is to not capitalize acquired property and equipment except for golf driving range property and equipment. Instead, capital assets acquired are donated by memorandum to the District, where they are recorded in the Districts' property and equipment. Golf driving range property and equipment are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of five to fifteen years. Income Taxes The Auxiliary is a not-for-profit organization that is exempt from federal income taxes under Internal Revenue Code Section 501(c)(3), and from California franchise taxes under related state tax regulations and classified by the Internal Revenue Service as other than a private foundation. The Auxiliary is subject to tax on income from any unrelated business operations. The Auxiliary s Form 990, Return of Organization s Exempt from Income Tax, is subject to examination by the IRS generally for three years after it is filed. Net income derived from the use by the general public of the golf driving range operations is taxable as unrelated business tax income under Federal and State statutes. Income tax due from golf driving range operations amounted to $0 for the years ended June 30, 2011 and Memorandum Totals The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Organization s financial statements for the prior year, from which the summarized information was derived. Description of s 1. The General Operating is used to account for those financial transactions that are not required to be accounted for in any other fund. 2. The Trust and Agency is used to account for temporarily and permanently restricted monies received or disbursed on behalf of student organizations. 3. The Student Loan and Scholarship is maintained to account for temporarily and permanently restricted loans, scholarships and other financial aid to students. -6-

9 NOTES TO FINANCIAL STATEMENTS 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Net Asset Classifications The Auxiliary reports information regarding its financial position and activities according to three net asset classifications: unrestricted, temporarily restricted and permanently restricted. Unrestricted net assets - Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets - Net assets subject to donor stipulations that limit their use either through purposes or time restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently restricted net assets - Net assets subject to donor-imposed restrictions that stipulate the resources be maintained permanently, but permit the Auxiliary to use, or expend part or all of the income derived from the donated assets for either specified or unspecified purposes. 3) PROPERTY AND EQUIPMENT Property and equipment at June 30, consists of the following: Equipment $39,610 $39,610 Less accumulated depreciation (13,865) ( 8,159) $25,745 $31,451 4) RELATED PARTY TRANSACTIONS The Auxiliary uses District facilities known as the College Bookstore, College Cafeteria, and Golf Driving Range. In return for the use of the facilities, the Auxiliary has a master agreement to pay the District, upon request, 99% of the commissions earned from the Food Services contract. The Board of Directors has adopted amendments to the master agreement between the Auxiliary and District which extends the term of the agreement indefinitely. The Bookstore, Cafeteria and Golf Driving Range agreements are described separately in Notes 5, 7, and 8, respectively. The Auxiliary reimburses the District for expenditures incurred by the District as a result of the activities of the Auxiliary. The District bills the Auxiliary for its proportional share of operating expenses which it pays on behalf of the Auxiliary. 5) BOOKSTORE AGREEMENT The Auxiliary has a contract with Follett Higher Education Group, Inc. to operate the bookstore. The agreement was for five years commencing December 7, The contract was renewed and amended as of July 1, 2010, continuing to July 1, 2015 with successive one-year renewal options thereafter. -7-

10 NOTES TO FINANCIAL STATEMENTS 5) BOOKSTORE AGREEMENT (continued) The amended contract stipulates an annual rental payment of 10.2 percent of gross revenue up to $2,000,000; plus 11.2 percent of any part of gross revenue over $2,000,000, but less than $4,000,000; plus 12.2 percent of any part of gross revenue over $4,000,000; with a guaranteed minimum of $250,000 per full year provided that enrollment does not drop by 10 percent or more from the prior year. The Auxiliary received a $100,000 signing bonus at the start of the July 1, 2010 amended contract. The total commission income generated by the contract for the years ended June 30, 2011 and 2010 were $264,067 and $239,456, respectively. 6) SPONSORSHIP AGREEMENT The Auxiliary has a contract with BCI Coca-Cola Bottling Company of Los Angeles to provide exclusive rights to the sales and marketing of beverages on campus. The contract stipulates a monthly commission payment of twenty to thirty five percent of sales, dependent upon product size, paid to the Auxiliary for five years commencing November 1, The total commission income generated by the contract for the years ended June 30, 2011 and 2010 were $46,518 and $62,194, respectively. 7) CAFETERIA AGREEMENT The Auxiliary has a contract with S&B Foods to operate the cafeteria. The contract stipulates a monthly commission of 10 percent of gross sales from all cafeteria sales and vending sales excluding Coca-Cola bottling vending machine sales. The contract commenced on July 29, 2004 and ended on June 30, 2009, with the option to extend the contract for five consecutive additional periods upon the same terms and conditions originally agreed upon. The first of five options was exercised and the current contract will end on June 30, The contract stipulates a minimum annual commission of $50,000. The cafeteria operated in a temporary kitchen during the year ended June 30, 2010 and returned to a renovated cafeteria in the year ended June 30, Total commission income generated by the contract for the years ended June 30, 2011 and 2010 were $50,000 and $34,034, respectively. 8) GOLF DRIVING RANGE AGREEMENT In May 2008, the District terminated a contract with a tenant and decided to have the Auxiliary account for the golf driving range operations going forward. The golf range is used by the District in its physical education and golf management programs. The golf range is also open to members of the general public who pay a fee. The Auxiliary receives no income from students enrolled in golf-related District courses. Net income derived from the use of the facility by the general public is taxable income from unrelated business operations. Golf range facilities available for lease to outside entities were vacant in the years ended June 30, 2011 and The decrease in net assets by the golf driving range operations for the years ended June 30, 2011 and 2010 were ($100,285) and ($60,987), respectively. -8-

11 NOTES TO FINANCIAL STATEMENTS 9) GENERAL OPERATING FUND ACTIVITY Unrestricted revenues and expenses for the year ended June 30, 2011 are as follows: Golf Driving Sponsorship Total General Bookstore Cafeteria Range Agreement Other Operating Commission income $ 264,067 $ 50,000 $ - $ 46,618 $ - $ 360,685 Golf range income , ,525 Bookstore signing bonus 100, ,000 Interest ,997 1,997 Total revenue 364,067 50, ,525 46,618 1, ,207 Administrative ,244 57,244 Golf driving range , ,104 Depreciation - - 5, ,706 Contributions to Desert Community College District , ,899 Total expenses , , ,953 Increase (decrease) in unrestricted net assets $ 364,067 $ 50,000 $ (100,285) $ 46,618 $ (300,146) $ 60,254 10) SUBSEQUENT EVENTS The Auxiliary evaluated all potential subsequent events as of December 8, 2011 when the financial statements were authorized and available to be issued. No subsequent events or transactions were identified after June 30, 2011 or as of December 8, 2011 that require disclosure to the financial statements. -9-