FISCAL YEARS 2012 & 2011 FINANCIAL STATEMENTS EXECUTIVE SUMMARY

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Jennifer Byrd
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1 FISCAL YEARS 2012 & 2011 FINANCIAL STATEMENTS EXECUTIVE SUMMARY

2 TO: FROM: The College of New Jersey Board of Trustees Dr. R. Barbara Gitenstein, President Lloyd Ricketts, Treasurer DATE: August 27, 2012 SUBJECT: Executive Summary of Audited Financial Statements We are pleased to submit the College of New Jersey (the College) audited financial statements for the fiscal year ending June 30, These statements were prepared by management in accordance with all applicable generally accepted accounting principles and Governmental Accounting Standards Board (GASB) principles. The financial statements for the Foundation, a component unit of the College, have been incorporated in this financial report. The accompanying Notes to the Financial Statements and the Management Discussion and Analysis (MD&A) are integral parts of the financial statements. The financial statements have been audited by the independent accounting firm, KPMG LLP, who was given unrestricted access to all financial records and related data, including minutes of all meetings of the Board of Trustees. KPMG s unqualified (clean) audit opinion is presented on pages 1-2 of the report. The institution s improved financial position is reflected in the consistent increase to net assets (see below). This is one indicator that the College s financial health continues to improve, reflecting sound and careful fiscal management across the institution. Net assets represent the value of the College s assets after liabilities are deducted. The increases were directly related to the positive operating performance and investment in facilities, coupled with the growth of our endowment portfolio. The chart below illustrates the growth of the Foundation s assets over the past six years, which resulted from a successful fundraising operation and investment appreciation. As of June 30, 2012, the Foundation s assets, which consist primarily of cash and investments, totaled $24.7 million. Page 1 of 8

3 The College sustained a $1.2 million or 4% reduction in its base state appropriations during fiscal year 2012, the sixth time in the last decade that the state has decreased appropriations for the College. With the State continuing to face fiscal pressures, we believe it is unlikely that this historical pattern will change and thus believe that it is also unlikely that state support will keep pace with the College s needs. Cognizant of our responsibility to allocate resources strategically and keep the cost of education at TCNJ affordable, the College has identified areas for focused review and strategies to ensure the maintenance of the College s long-term financial health. Underlying the focused reviews is a commitment to improving the structure and processes of strategic planning and of facilities master planning. These planning enhancements should be informed by a better understanding of the increasing demand for institutional scholarships, strategic enrollment management and thoughtful investment in academic and student development programs. The strategies include cost containment initiatives, expanding fund-raising activities, investment in facilities, diversifying revenues, enhancing entrepreneurial activity and reviewing the organizational structure to generate financial efficiencies and preserve organizational effectiveness. Management believes that institutional liquidity and continued strong operating performance are key components to the College s achieving its strategic goals and addressing the challenges ahead. Please read the accompanying Management Discussion and Analysis along with the financial reports and notes for a more comprehensive understanding of the College s financial position. On behalf of all those responsible for the fiscal stewardship of the College s resources, we respectfully submit The College of New Jersey Financial Report for the fiscal year ending June 30, Page 2 of 8

Statement of Net Assets The College of New Jersey and its affiliated entity (the Foundation) is financially strong with total net assets of $373 million at June 30, 2012.

4 Statement of Net Assets The College of New Jersey and its affiliated entity (the Foundation) is financially strong with total net assets of $373 million at June 30, The change in net assets is one indicator of status of the overall financial condition. During fiscal years 2012 and 2011, net assets increased by $10.0 million, or 2.8%, and $12.8 million, or 3.6%, respectively. In both fiscal years, the increases were directly related to positive operating performance, investments in plant, and the growth of our endowment portfolio. Page 3 of 8

Cash and Investments The majority of the College s portfolio is invested conservatively in short term, high credit quality fixed income securities (A rated or better).

5 Cash and Investments The majority of the College s portfolio is invested conservatively in short term, high credit quality fixed income securities (A rated or better). With the Federal Reserve keeping short term interest at historically low rates, this strategy has had a significant impact on College s investment returns over the past two fiscal years. The Foundation s investment portfolio did not perform as well in fiscal year 2012 as in fiscal year 2011, due to the turbulent stock market. The endowment pool had a negative return of (0.49%) compared to the positive performance of more than 18% for the previous fiscal year while the more conservatively invested gift annuity pool had a positive return of 0.79% compared to 22.0% the prior year. In managing the endowment portfolio, one of the most important strategies is to determine the appropriate allocation of investments among the various asset classes. The Foundation s investment committee has taken prudent actions over the years in an attempt to diversify the investments across asset classes, to temper market volatility and to control risks. Page 4 of 8

Statement of Revenues, Expenses and Changes in Net Assets The College s greatest financial strength has been its ability to generate solid operating margins despite unstable and declining net state

6 Statement of Revenues, Expenses and Changes in Net Assets The College s greatest financial strength has been its ability to generate solid operating margins despite unstable and declining net state support. The College s operating surplus and associated operating margins remain healthy, at $11.5 million or 5.6% for fiscal year 2012 and $15.3 million or 7.5% for fiscal year Key Financial Indicators at June 30, 2012 Bond Rating and Outlook Moody's Investors Standard & Fitch Service Poors Long Term Rating AA A2 A Rating Outlook Stable Stable Stable Total Debt Outstanding = $374 million (TCNJ is viewed as highly leveraged) Expendable Financial Resources = $139.4 million (cushion for debt and operations) Unrestricted Financial Resources = $95.4 million (positive TCNJ has a high degree of monthly liquidity) Expendable Resources to Total Debt = 0.4 times (measures the degree of leverage) Expendable Resources to Operations = 0.71 times or 9 months of expenses (the measure of financial strength & flexibility) Annual Debt Service Coverage = 2.0 times (TCNJ s ability to meet its debt service burden) Page 5 of 8

Total Revenues Operations for the year produced positive results with a

The increase can be attributed to successful fundraising, modest

7 Total Revenues Operations for the year produced positive results with a net increase in total revenues of $2.0 million. The increase can be attributed to successful fundraising, modest investment income, and a strategic growth in enrollment coupled with tuition, housing and fees increases. This increase was offset by an overall reduction in net state appropriations plus unrealized losses within the endowment portfolio. Page 6 of 8

Total Expenses The College has consistently demonstrated its commitment to preserving the quality of its academic programs despite the challenging fiscal environment by continuing to allocate a

8 Total Expenses The College has consistently demonstrated its commitment to preserving the quality of its academic programs despite the challenging fiscal environment by continuing to allocate a significant portion of expense to direct student support (Instruction, research, student services, academic support and college funded scholarships). Note: In the College s operating budget (state supported budget) more than two thirds (69%) of the budget is dedicated to primary purpose or direct student support. In most functional categories, the increases during fiscal year 2012 were primarily due to contractual salary and related fringe benefit increases collectively bargained at the State level. The overall net increase for FY2012 was $4.8 million, of which $5.9 million was attributed to increases in the direct student support category. This was offset by expenditure reduction in the other categories including interest expense and auxiliary enterprise. Page 7 of 8

Gifts to the Foundation Alumni and friends continue to

operation in fiscal year 2012 as evidenced by the $3.

05 million in cash), the previous fiscal year.

(totaling $19.4 million) over the past five years.

9 Gifts to the Foundation Alumni and friends continue to show their support for the College through generous gifts made to the Foundation. The College continues its successful fundraising operation in fiscal year 2012 as evidenced by the $3.9 million in contributions received ($3.5 million in cash), compared to the $4.1 million in contributions ($4.05 million in cash), the previous fiscal year. The chart below illustrates the fundraising success (totaling $19.4 million) over the past five years. FY 2012 Contributions $3.9 Million FY 2011 Contributions $4.1 Million 0.3% 21.1% 15.5% Unrestricted 11.4% 5.9% 15.1% Restricted Endowment 63.2% Charitable Gift Annuity 67.6% Page 8 of 8

EXECUTIVE SUMMARY OF AUDITED FINANCIAL STATEMENTS JUNE 30, 2014

EXECUTIVE SUMMARY OF AUDITED FINANCIAL STATEMENTS JUNE 30, 2014 Dear Trustees, We are pleased to submit The College of New Jersey (the College) audited financial statements for the fiscal year ending June