Orangeburg-Calhoun Technical College Financial Statements with Independent Auditor s Report For the years ended June 30, 2013 and OCtech.

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1 Financial Statements with Independent Auditor s Report For the years ended and 2012 OCtech.edu

2 TABLE OF CONTENTS Pages ORGANIZATIONAL DATA... 1 INDEPENDENT AUDITOR S REPORT... 2 MANAGEMENT S DISCUSSION AND ANALYSIS... 4 BASIC FINANCIAL STATEMENTS Statement of Net Position Statement of Revenue, Expenses, and Changes in Net Position Statement of Cash Flows Non-Governmental Discretely Presented Component Unit Statement of Financial Position Statement of Activities Notes to Financial Statements SUPPLEMENTARY INFORMATION: Independent Auditor s Report on Summarized Schedule of Financial Information Summarized Schedule of Financial Information Independent Auditor s Report on State Lottery Tuition Assistance SINGLE AUDIT ACT REQUIREMENTS: Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A Schedule of Findings and Questioned Costs Summarized Schedule of Prior Audit Findings... 53

3 Organizational Data Area Commission Members and Officers * Orangeburg County Calhoun County Chairman John Shuler June 2016 Fred Gantt July 2016 Lawrence Weathers July 2015 David Rickenbaker July 2011 Jacqueline Shaw July 2015 Leroy Morant July 2014 Margaret Felder-Wilson, Ph.D. July 2014 Administrative Staff Walt Tobin, Ph. D., President Donna Elmore, Vice President for Academic Affairs Kim Huff, CPA, Vice President for Business Affairs Sandra Davis, Ph. D., Vice President for Student Services Areas Served By Commission Orangeburg and Calhoun Counties Location 3250 St. Matthews Road (Highway 601) Orangeburg, South Carolina Audit Period July 1, 2012 * Area Commission Members and Officers serve until new appointments are made Page 1

4 BROWN CPA, LLC Independent Auditor s Report Orangeburg-Calhoun Commission for Technical Education Orangeburg, South Carolina Report on Financial Statements We have audited the accompanying financial statements of the business-type activities and the discretely presented component unit of (the College ), a department of the State of South Carolina, as of and for the years ended and June 30, 2012, and the related notes to the financial statements, which collectively comprise the College s financial statements as listed in the table of contents. As discussed in Note 1, the financial statements of the are intended to present the financial position, the changes in financial position, and cash flows, of only that portion of the businesstype activities of the State of South Carolina financial reporting entity that is attributable to the transactions of the, a department of the State of South Carolina. They do not purport to, and do not, present the financial position of the State of South Carolina as of and June 30, 2012, and the changes in its financial position and its cash flows, where applicable, for the year ended in conformity with accounting principles generally accepted in the United States of America. Management s Responsibility for the Financial Statements Management 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 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 the Government Auditing Standards, 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. 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 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 audit opinions. MEMBER: P.O. Box 3288 Irmo, SC AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SOUTH CAROLINA ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS Page 2

5 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities and the discretely presented component unit of Orangeburg-Calhoun Technical College as of and June 30, 2012, and the changes in its financial position and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management s Discussion and Analysis on pages 4 12 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. Other Information Our audit was conducted for the purpose of forming opinions on the basic financial statements that collectively comprise s basic financial statements. The schedule of expenditures of federal awards is presented for the purpose of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and is also not a required part of the financial statements. The schedule of expenditures of federal awards is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic 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 schedule of expenditures of federal awards is fairly stated in all material respects, in relation to the financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 25, 2013, on our consideration of the College s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and is important for assessing the results of our audit. Irmo, South Carolina September 25, 2013 Page 3

6 MANAGEMENT S DISCUSSION AND ANALYSIS As management of, we offer readers of the College s financial statements this narrative overview and analysis of the financial activities of the College for the fiscal years ended, and June 30, This discussion should be read in conjunction with the financial statements and the notes thereto, which follow this section. Responsibility for the completeness and fairness of this information rests with the College. Financial Highlights The assets ($28,592,417) of exceeded its liabilities ($2,199,384) at, by $26,393,033 (net position). Of this amount, $10,464,989 is unrestricted and may be used to meet the College s ongoing obligations. The College experienced an operating loss of $15,891,089 during the fiscal year ended, as reported in the Statement of Revenues, Expenses, and Changes in Net Position. However, this operating loss was offset by federal and state grants of $8,823,871, state appropriations of $4,163,935, local appropriations of $1,379,949, interest income of $24,269, and other non-operating revenues. The overall increase in the College s net position during the year was $261,194 or 1%. Overview of the Financial Statements The College is engaged only in Business-Type Activities (BTA) which are financed in part by fees charged to students for educational services. Accordingly, its activities are reported using the three financial statements required for proprietary funds: Statement of Net Position; Statement of Revenues, Expenses, and Changes in Net Position; and Statement of Cash Flows. The Statement of Net Position presents the financial position of the College at the end of the fiscal year and classifies assets and liabilities into current and noncurrent. The difference between total assets and total liabilities is net position, which is displayed in three broad categories: Investment in Capital Assets (net of related debt), Restricted, and Unrestricted. Net position is one indicator of the current financial condition of the College, while the change in net position is an indicator of whether the overall financial condition has improved or worsened during the year. The Statement of Revenues, Expenses, and Changes in Net Position is basically a statement of net income that replaces the fund perspective with the entity-wide perspective. Revenues Page 4

7 and expenses are categorized by operating and non-operating, and expenses are reported by object type. The Statement of Cash Flows will aid readers in identifying the sources and uses of cash by the major categories of operating, capital and related financing, noncapital financing, and investing activities. This statement also emphasizes the importance of state and county appropriations by displaying them separately from operating cash flows. Financial Analysis Net position may serve over time as a useful indicator of an entity s financial position. In the case of the College, assets exceeded liabilities by $26,393,033 at the close of the most recent fiscal year. This represents an increase of $261,194 over last year s amount of $26,131,839. Over half of the College s net position (60%) reflect its investment in capital assets (e.g., land, buildings, machinery, and equipment). The College uses these capital assets to provide services to students and industry. Consequently, these assets are not available for future spending. Currently, the College has no outstanding debt on any of these assets. The remaining 40% of the College s net position is unrestricted and may be used to meet the College s ongoing obligations. The area commission has designated a portion of these funds for capital projects. Charts and graphs follow that present specific areas of the College s financial condition on and June 30, Page 5

8 Net Position As of and June 30, Current Assets Non-Current Assets Capital Assets, Net of Depreciation Accounts Receivable, Net Total Assets $12,637,373 $11,905,907 15,928,044 27,000 28,592,417 16,133,359 35,373 28,074,639 Current Liabilities Non-Current Liabilities- Compensated Absences Total Liabilities 1,185,624 1,013,760 2,199, , ,557 1,942,800 Net Position Investment in Capital Assets, Net of Related Debt 15,928,044 16,133,359 Unrestricted 10,464,989 9,998,480 Total Net Position $26,393,033 $ 26,131,839 This schedule is prepared from the College s statement of net assets, which is presented on an accrual basis of accounting whereby assets are capitalized and depreciated. Please note that assets substantially exceed liabilities, denoting a sound financial position for the College. Net Position at Net Position at June 30, 2012 Unrestricted 40% Unrestricted 38% Invested in Capital Assets 60% Invested in Capital Assets 62% Page 6

9 Revenues, Expenses, and Changes in Net Position For the Years Ended Increase Percent June 30, 2012 (Decrease) Change Operating Operating Revenue Tuition and Fees $4,839,540 $4,724,388 $115, % Federal and State Grants 3,601,442 3,556,193 45, % Auxiliary 670, ,581 (57,299) -7.88% Other 21, ,454 (82,865) % Total Operating Revenue 9,132,853 9,112,616 20, % Less: Operating Expenses (25,023,942) (24,832,547) (191,395) 0.77% Total Operating Income (Loss) (15,891,089) (15,719,931) (171,158) 1.09% Non-Operating State Appropriations 4,163,935 3,742, , % Orangeburg County 1,061,949 1,061, % Calhoun County 318, ,000 5, % Federal and State Grants 8,823,871 8,686, , % Investment Income 0 (27,338) 27, % Interest Income 24,269 30,399 (6,130) % Other 697, ,148 (34,667) -4.73% Total Non-Operating 15,089,505 14,539, , % Net Income (Loss) Before Other Revenue, Expenses, (801,584) (1,180,390) 378, % Gains, or Losses Other Revenue, Expenses, Gains, or Losses State Capital Appropriations 500, , , % Transfer from Other State Agencies 562, , % Total Capital Contributions 1,062, , , % Increase in Net Position 261,194 (879,235) 1,140, % Net Position, Beg of Year 26,131,839 27,011,074 (879,235) -3.26% Net Position, End of Year $26,393,033 $26,131,839 $261, % Operating revenues as of increased by $20,237 over the previous fiscal year. Tuition revenue shows an increase of $115,152 over the prior year and auxiliary shows a decrease of $57,299. The amounts for tuition and auxiliary are not reported as gross revenues. They are shown as a net amount, after a deduction has been made for the amount covered by scholarships. There was also an increase in federal and state operating grants of $45,249 compared to last fiscal year. Operating expenses as of, increased by $191,395 over the same period in the previous fiscal year. Major factors contributing to this overall increase were an increase in salaries of $423,999, an increase in benefits of $222,987, and an increase in depreciation Page 7

10 expense of $51,163. There was a decrease in supplies and other services decrease of $47,817 in scholarships, and a slight increase in utilities of $711. of $459,648, a Non-operating revenues increased from last fiscal year to the current year by $549,964. There was an increase in federal and state non-operating grants of $137,248 and an increase in state appropriations of $421,174. Orangeburg County funding basically remained unchanged, while Calhoun County funding increased $5,000. Other areas netted to a decrease of $13,458. The college received state capital appropriations from the state in the amount of $500,,000 during fiscal year The college also received equipment and supplies totaling $562,778 from another technical college through a federal grant. Following are several charts that show the college s revenues and expenditures by major categories. In some instances separate charts are provided forr the last two fiscal years. Other charts may include both years to show easier comparisons. Operating Revenue Tuition and Fees 53.0% Federal & State Grants 39.5% Other Income 0.2% Auxiliary 7.3% Operating Revenue Tuition and Fees 51.9% Federal & State Grants 39.0% Other Income 1.1% Auxiliary 8.0% Page 8

11 Non Operating Revenue/Capital Contributions County Interest Income, Appropriations, 0.2% 8.5% State Appropriations, 25.8% Federal & State Grants, 54.6% Transferss from Other State Agencies, 3.5% State Capital Appropriations, 3.1% Other Income, 4.3% Non Operating Revenue/Capital Contributions County Interest Income, Appropriations, 0.2% 9.3% State Appropriations, 25.2% Federal & State Grants, 58.5% Capital Grants, 2.0% Other Income, 4.8% % Page 9

12 Salaries Benefits Scholarships Utilities Supplies & Other Depreciation Operating Expensess (By Natural Classification) $3,449,153 $3,226,166 $3,735,070 $3,782,887 $462,872 $462,161 $4,574,074 $5,033,722 $1,185,386 $1,134,223 $11,617,387 $11,193, Salaries Benefits Scholarships Utilities Supplies & Other Depreciation Operating Expensess (By Natural Classification) $3,226,166 $3,088,598 $3,782,887 $4,470,430 $462,161 $474,820 $5,033,722 $ $5,628,993 $1,134,223 $1,140,138 $11,193,388 $1 1,214, Page 10

13 Cash Flows For the Years Ended and Junee 30, Cash Flows from Operating Activities Cash Flows from Non-Capital Financing Activities Cash Flows from Capital and Related Financing Activities Cash Flows from Investing Activities $(14,083,775) $( (14,522,232) 15,087,667 14,619,330 67,475 (122,639) 7,352,702 Net Increase (Decrease) in Cash Cash Beginning of Year Cash End of Year 1,071,367 9,960,659 $11,032,026 7,327,161 2,633,498 $9,960,659 Capital Asset and Debt Administration The College undertook a number of small projects during fiscal year including the following: replacement of an HVAC unit in one building, updating a lab for use by the industrial division, creating a new lab for the new physical therapy assistant program, upgrading the phone system to a VOIP system, as well as numerous other small projects. The college also added some much needed equipment in many instructional areas. The college used $500,000 of state capital appropriation funds to purchase instructional equipment in the industrial division. The balance of projects and equipment purchases were made with local funds. The College has no long-term debt as of. Capital Assets, Net of Accumulated Depreciation At June 30,, 2013 Land Improvments $89,940 Vehicles $43,010 Machinery & Equipment $1, 424,342 Buildings & Improvements $14,265,074 Land $105, ,000,000, 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 Page 11

14 Capital Assets, Net of Accumulated Depreciation At June 30,, 2012 Land Improvments $97,435 Vehicles $59,398 Machinery & Equipment $856,171 Buildings & Improvements $15,014,677 Land $105, ,000,000, 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 Economic Factors The college continues to experience little increasess in funding from the State of South Carolina following the drastic reductions over thee past several years. State funds are primarily allocated for personnel expenditures, but local funds and tuition are also needed to cover the balance of these personnel costss as well as the other costs of the institution. Orangeburg County significantly reduced its funding over the past few years as well. County funds are used to cover physical plant operations. The county funding remained at the reduced amount for and is expected to remain constant for as well. The college has pursued other funding sources to continue to offer the services expected. First, the college has increased its pursuit of various federal and private grants. Grants do not replace lost operating funds, but they do provide a variety of opportunities for enhanced academic instruction and improved services to students. The college also sought and received a special one-time funding for industrial training equipment from the state legislature during the fiscal year. The college continues to carefully monitor its spending and has undertaken a number of cost cutting measures. The college considers tuition increases in small increments periodically that are not detrimental to students. Normally thesee increases occur in the fall each year. The college carefully considers the additional burdens any tuition increasee places on the students, but it must also weigh this against the need to provide the services expected. Page 12

15 ORANGEBURG-CALHOUN TECHNICAL COLLEGE STATEMENT OF NET POSITION June 30, 2012 Assets Current assets Cash and equivalents $ 11,032,026 $ 9,960,659 Accounts receivable, net 1,213,226 1,623,381 Inventories 245, ,367 Due from component unit 100,226 25,509 Prepaid expenses 41,796 53,566 Other assets 4,424 4,425 Total current assets 12,637,373 11,905,907 Noncurrent assets Accounts receivable, net 27,000 35,373 Capital assets, net 15,928,044 16,133,359 Total noncurrent assets 15,955,044 16,168,732 Total assets 28,592,417 28,074,639 Liabilities Current liabilities Accounts payable 278, ,310 Accrued payroll and related liabilities 233, ,121 Compensated absences 86,082 93,809 Unearned revenue 588, ,003 Total current liabilities 1,185, ,243 Noncurrent liabilities Compensated absences 1,013, ,557 Total noncurrent liabilities 1,013, ,557 Total liabilities 2,199,384 1,942,800 Net position Invested in capital assets 15,928,044 16,133,359 Unrestricted 10,464,989 9,998,480 Total net position $ 26,393,033 $ 26,131,839 See accompanying notes to the financial statements Page 13

16 ORANGEBURG-CALHOUN TECHNICAL COLLEGE STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN NET POSITION June 30, 2012 Operating Revenue Student tuition and fees (net of scholarship allowances of $5,953,214 for 2013 and $5,812,753 for 2012) $ 4,839,540 $ 4,724,388 Federal grants and contracts 927, ,079 Federal grants and contracts, American Recovery & Reinvestment Act 20, ,483 State grants and contracts 2,653,052 2,201,631 Auxiliary enterprises (net of scholarship allowances of $1,026,125 for 2013 and $1,070,940 for 2012) 670, ,581 Other operating income 21, ,454 Total operating revenue 9,132,853 9,112,616 Operating Expenses Salaries 11,617,387 11,193,388 Benefits 3,449,153 3,226,166 Scholarships 3,735,070 3,782,887 Utilities 462, ,161 Supplies and other services 4,574,074 5,033,722 Depreciation 1,185,386 1,134,223 25,023,942 24,832,547 Operating loss (15,891,089) (15,719,931) Nonoperating Revenue (Expenses) State appropriations 4,163,935 3,742,761 County appropriations 1,379,949 1,374,948 Federal grants and contracts 8,546,181 8,256,174 Federal grants and contracts, American Recovery & Reinvestment Act 15, ,909 State grants and contracts 262, ,540 Other nonoperating revenue 697, ,486 Investment income (loss) - (27,338) Interest income 24,269 30,399 Gain (loss) on disposal of assets - (5,338) Total nonoperating revenue 15,089,505 14,539,541 Income (loss) before contributions and transfers (801,584) (1,180,390) State capital appropriations 500, ,155 Transfer from State Agency 562,778 - Change in net position 261,194 (879,235) Net Position Beginning of year 26,131,839 27,011,074 End of year $ 26,393,033 $ 26,131,839 See accompanying notes to the financial statements Page 14

17 ORANGEBURG-CALHOUN TECHNICAL COLLEGE STATEMENT OF CASH FLOWS June 30, 2012 Cash flows from operating activities Tuition and fees (net of scholarship allowances) $ 4,860,110 $ 4,714,786 Federal, State and local grants and contracts 3,730,364 4,013,326 Auxiliary enterprise charges (net of scholarship allowances) 670, ,581 Other receipts 266,644 (183,475) Payments to suppliers (4,854,118) (5,608,008) Payments to employees (11,609,032) (11,224,802) Payment for benefits (3,412,955) (3,178,753) Payments to students (3,735,070) (3,782,887) Student loan receipts from lendors 4,536,952 4,604,409 Disbursements to or on behalf of student borrowers (4,536,952) (4,604,409) Net cash used in operating activities (14,083,775) (14,522,232) Cash flows from noncapital financing activities State appropriations 4,004,458 3,820,273 County appropriations 1,379,949 1,374,948 State, local and federal grants and contracts - nonoperating 8,823,871 8,686,623 Other income - nonoperating 879, ,486 Net cash provided by noncapital financing activities 15,087,667 14,619,330 Cash flows from capital and related financing activities State capital grant 500, ,155 Purchase of capital assets (432,525) (423,794) Net cash used in capital and related financing activities 67,475 (122,639) Cash flows from investing activities Proceeds from sales and maturities of investments - 7,362,551 Interest on investments - (9,849) Net cash (used in) provided by investing activities - 7,352,702 Net increase in cash 1,071,367 7,327,161 Cash and cash equivalents Beginning of year 9,960,659 2,633,498 End of year $ 11,032,026 $ 9,960,659 See accompanying notes to the financial statements Page 15

18 ORANGEBURG-CALHOUN TECHNICAL COLLEGE STATEMENT OF CASH FLOWS June 30, 2012 Reconciliation of operating loss to net cash used in operating activities: Operating loss $ (15,891,089) $ (15,719,931) Adjustments to reconcile operating loss to net cash used in operating activities: Depreciation expense 1,185,386 1,134,223 Provision for bad debts 85,736 67,177 Loss on sale of capital assets - 5,338 Changes in assets and liabilities: Receivables, net 332, ,757 Inventories (7,308) (77,949) Interest receivable - 6,788 Due from component unit (74,717) (24,898) Deferred charges and prepaid expenses 11,770 14,541 Accounts and other payables 157,718 (56,846) Accrued payroll and related liabilities 29,003 2,534 Compensated absences 15,476 39,083 Unearned revenue 71,458 (267,049) Net cash used in operating activities $ (14,083,775) $ (14,522,232) Supplemental Information Changes in fair value of external investment pool Equipment transferred from other State Agency $ - $ 27,338 $ 547,545 $ - See accompanying notes to the financial statements Page 16

19 ORANGEBURG-CALHOUN TECHNICAL COLLEGE FOUNDATION, INC. NON-GOVERNMENTAL COMPONENT UNIT STATEMENT OF FINANCIAL POSITION June 30, 2012 Assets Current assets: Cash and cash equivalents $ 532,226 $ 543,028 Accounts receivable 101,187 1,641 Contributions Receivable 72,490 72,148 Investments - general 715, ,342 Assets held for sale 14,000 14,000 Total current assets 1,435,753 1,321,159 Noncurrent assets Contributions receivable 141, ,789 Equipment - - Investments - endowment 220, ,519 Total noncurrent assets 361, ,308 Total assets $ 1,797,694 $ 1,716,467 Liabilities and Net Assets Current liabilities Accounts payable $ 373 $ 88 Due to the college 100,226 25, ,599 25,597 Total liabilities 100,599 25,597 Net assets Unrestricted Board designated 264, ,036 Unrestricted 1,044, ,177 Total unrestricted 1,308,756 1,315,213 Temporarily restricted 199, ,641 Permanently restricted 188, ,016 Total net assets 1,697,095 1,690,870 Total liabilities and net assets $ 1,797,694 $ 1,716,467 The accompanying notes are an integral part of these financial statements. Page 17

20 ORANGEBURG-CALHOUN TECHNICAL COLLEGE FOUNDATION, INC. NON-GOVERNMENTAL COMPONENT UNIT STATEMENT OF ACTIVITIES Temporarily Permanently Unrestricted Restricted Restricted Total Support and Revenues Contributions $ 10,058 $ 210,164 $ 500 $ 220,722 Contributions scholarships - 15,177-15,177 Total support other than event income 10, , ,899 Event income 92, ,214 Direct event expenses (19,931) - - (19,931) Net support from events 72, ,283 Interest and dividends 28,861 6,583-35,444 Net realized gain from investments 31, ,338 Net unrealized gain from investments 9,384 10,775-20,159 Other income 6, ,455 Total revenues, gains, and other support 158, , ,578 Net assets released from: Program restrictions - Nonscholarships 217,363 (217,363) - - Program restrictions - Scholarships 13,154 (13,154) - - Total revenues, gains, and other support 388,896 12, ,578 Expenses Program services Scholarships 93, ,728 Faculty support 211, ,000 Other program services 36, ,449 Total program services 341, ,177 Support Services Management and general 51, ,809 Fund-raising expenses 2, ,367 Total support services 54, ,176 Total expenses 395, ,353 Change in net assets (6,457) 12, ,225 Net assets beginning of year 187, , ,657 Net assets at end of year $ (6,457) $ 199,823 $ 188,516 $ 381,882 The accompanying notes are an integral part of these financial statements. Page 18

21 Notes to Financial Statements Note 1 Summary of Significant Accounting Policies The accounting policies of (the College ) conform to accounting principles generally accepted in the United States of America (GAAP) as applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles in the United States. The following is a summary of the more significant accounting policies: Nature of Operations, a member institution of the South Carolina Technical College System, provides a range of educational programs to meet the needs of the adult population of Orangeburg and Calhoun counties. Included in this range of programs are technical and occupational associate degree, diploma and certificate curricula that are consistent with the needs of employers in the College s service area. As an integral part of this mission, the College provides a program of continuing education designed to satisfy the occupational demands of employers through retraining and upgrading skills of individual employees. The College also provides a variety of developmental education programs, support services and offerings to assist students in meeting their personal and professional educational objectives. Reporting Entity The core of the financial reporting entity is the primary government which has a separately elected governing body. As required by generally accepted accounting principles, the financial reporting entity includes both the primary government and all of its component units. Component units are legally separate organizations for which the elected officials of the primary government are financially accountable. In turn component units may have component units. The financial reporting entity, as defined by Governmental Accounting Standards Board ( GASB ) Statement No. 14. The Financial Reporting Entity, as amended by GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion could cause the financial statements to be misleading or incomplete. As a member institute of the South Carolina Technical College System, the College is reported as a part of the primary government of the State of South Carolina (the State ) in the State s Comprehensive Annual Financial Report. In addition, the accompanying financial statements present the College as the primary government with its component unit. The College has identified the Orangeburg Ca1houn Technical College Foundation (the Foundation ) as a discretely presented component unit. However, based on the nature and significance of the Foundation s relationship with the State, the Foundation is not a component unit of the State. Page 19

22 Notes to Financial Statements The Foundation is a legally separate eleemosynary organization with a self-perpetuating Board of Trustees. It was chartered to receive private funds for the exclusive benefit and support of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon are restricted to solely support activities of the College. Therefore, the Foundation qualifies as a discretely presented component unit. As a non-governmental not-for-profit organization the Foundation s reports are prepared under guidance issued by the Financial Accounting Standards Board ( FASB ), which differs from the reporting guidance of GASB. No modifications have been made to the Foundation s financial statements included in the College s statements for these differences. Complete financial statements for the Foundation may be obtained at its administrative offices located at 3250 Saint Matthews Road, Orangeburg, South Carolina Financial Statements The financial statements of the College are presented in accordance with GASB Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments, and GASB Statement No. 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities; The financial statement presentation required by these statements provides a comprehensive, entity-wide perspective of the College s net position, revenues, expenses and changes in net position and cash flows. Basis of Accounting For financial reporting purposes, the College is considered a special purpose government engaged only in business-type activities. Accordingly, the College s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Student tuition and auxiliary enterprise fees are presented net of scholarships and fellowships applied to student accounts, while stipends and other payments made directly are presented as scholarship expenses. All significant intrainstitutional transactions have been eliminated. The Foundation s statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America for Not-for-Profit Organizations through guidance from FASB. The Foundation s revenue and expenses are recognized as increases and decreases in one of three net asset classifications; unrestricted, temporarily restricted and permanently restricted. Permanently restricted net assets consist of contributions and other inflows of assets whose use is limited in perpetuity by donor imposed stipulations. Temporarily restricted net assets consist of contributions and other transactions whose use is limited by time or purpose by donor imposed stipulations. Unrestricted net assets are transactions which are neither temporarily nor permanently restricted. The use of temporarily restricted net assets through satisfaction of time or purpose restriction is recognized in the Page 20

23 Notes to Financial Statements Statement of Activities as a simultaneous increase and decrease in the classes of net assets thereby as a release from restrictions. Cash and Cash Equivalents For purposes of the statement of cash flows, the College considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. The Area Commission, governing board of the College, has established policies regarding the custodial credit risk of the deposits with financial institutions that require the collateralization of all deposits with obligations of the United States or its agencies. The policies require that all deposits be denominated in United States dollars. Investments Deposits and investments for the College are governed by the South Carolina Code of Laws, Section , Investment of Funds. The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain or loss on the carrying value of investments are reported as a component of investment income in the statement of revenue, expenses, and changes in net position. Disclosures related to deposit risks, such as custodial credit risk, and investment risks, such as credit risks (including custodial credit risk and concentrations of credit risks) and interest rate risk are required by GASB Statement No. 40, Deposits and Investment Risk Disclosures an amendment to GASB Statement No. 3. The Area Commission has established investment policies allowing the investment in overnight repurchase agreements or certificates of deposits. The certificates of deposit are required to be guaranteed by obligations of the United States or collateralized by pledged securities by a third party. Furthermore the investments must be in accordance with the Code of Laws of South Carolina. The policy states that the most competitive yield available should be selected for investment purchases. The investment policy does not specifically address diversification of investments. The College is authorized by the Code of Laws of South Carolina to invest in obligations of the United States and its agencies, obligations of the State of South Carolina and its political subdivisions, collateralized or federally insured certificates of deposit, certain rated obligations of corporations within the United States, and collateralized repurchase agreements. The Foundation accounts for its investments at fair value in accordance with Financial Accounting Standards Codification section 958 Not-for-Profit Entities section 320 Investments- Debt and Equity Securities. Changes in unrealized gain or loss are reported as increases or decreases in unrestricted net assets unless donor stipulation restricts the use of these changes for Page 21

24 Notes to Financial Statements specific purposes or reinvestment in the corpus which would he reported as temporarily or permanently restricted net assets, respectively. Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students. Accounts receivable also includes amounts due from the Federal government, State and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College s grants and contracts. The College has established an allowance for uncollectible accounts receivable based upon past collection experience, current market conditions, and other factors known to management. Generally speaking the allowance has been calculated as follows: June 30, 2012 All debts over 2 years % % Debts 1-2 yrs old 85.00% 85.00% Debts last 3 semesters 75.00% 75.00% Next semester and beyond 15.00% 15.00% Receivables for the Foundation include contributions receivable recognized as a receivable at the date of notification of the promise to give. The amount reported net of allowance and discount for time value is the present value of the estimated future cash flows expected to be collected. Inventories Inventories for internal use are valued at cost. Inventories for resale are carried at the lower of cost or market on the first-in, first-out ( FIFO ) basis. Capital Assets Capital assets are recorded at cost at the date of acquisition or fair value at the date of donation in the case of gifts. The College follows capitalization guidelines established by the State of South Carolina. All land is capitalized, regardless of cost. Qualifying improvements that rest in or on the land itself are recorded as depreciable land improvements. Major additions and renovations and other improvements that add to the usable space, prepare existing buildings for new uses, or extend the useful life of an existing building are capitalized. The College capitalizes movable personal property with a unit value in excess of $5,000 and a useful life in excess of two years and depreciable land improvements, buildings and improvements, and intangible assets costing in excess of $100,000. Routine repairs and maintenance and library materials, except individual items costing in excess of $5,000, are charged to operating expenses in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally fifteen to fifty years for buildings and improvements and land improvements and two to twenty-five years for machinery, equipment and vehicles. Page 22

25 Notes to Financial Statements Unearned Revenue and Deposits Unearned revenue includes amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Unearned revenue also includes amounts received from exchange type grants and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay expense is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as a component of current and long-term liabilities in the statement of net position and as a component of salary and benefit expenses in the statement of revenue, expense, and changes in net position. Net Position The College s net position is classified as follows: Invested in capital assets, net of related debt: This represents the College s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been included but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net position expendable: Restricted expendable net position include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Restricted net position nonexpendable: Nonexpendable restricted net position consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. Unrestricted net position: Unrestricted net position represent resources derived from student tuition and fees, appropriations, and auxiliary enterprises. These are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for any purpose. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. The College s policy for applying expenses that can use both restricted and unrestricted resources is to first apply the expense to restricted resources and then to unrestricted resources. Page 23

26 Notes to Financial Statements Classification of Revenue The College has classified its revenue as either operating or nonoperating revenue according to the following criteria: Operating revenue: Operating revenue generally results from exchange transactions to provide goods or services related to the College s principal ongoing operations. These revenue include (1) student tuition and fees received in exchange for providing educational services and other related services to students; (2) receipts for scholarships where the provider has identified the student recipients; (3) fees received from organizations and individuals in exchange for miscellaneous goods and services provided by the College; and (4) grants and contracts that are essentially the same as contracts for services that finance programs the College would not otherwise undertake. Nonoperating revenue: Nonoperating revenue includes activities that have the characteristics of nonexchange transactions. These revenue include gifts and contributions, appropriations, investment income, and any grants and contracts that are not classified as operating revenue or restricted by the grantor or to be used exclusively for capital purposes. Auxiliary Enterprises and Internal Service Activities Auxiliary enterprise revenue primarily represents revenue generated by the bookstore and cafeteria services. Revenue of internal service and auxiliary enterprise activities and the related expenditures of college departments have been eliminated. Nonexchange Transactions Nonexchange transactions involving financial or capital resources are transactions in which the College either gives value to another party without directly receiving equal value in exchange or receives value from another party without directly giving equal value in exchange. The types of nonexchange transactions the College engages in include Voluntary nonexchange transactions (certain grants and donations), Imposed nonexchange revenue (fines and penalties), and Government-mandated nonexchange transactions. Voluntary nonexchange transactions usually involve eligibility requirements that must be met before transactions are recognized. The eligibility requirements can include one or more of the following: a) The recipient has the characteristics specified by the provider. b) Time requirements specified by the provider have been met. c) The provider offers resources on a reimbursement basis and allowable costs have been incurred under the applicable program. d) The provider s offer of resources is contingent upon a specified action of the recipient and that action occurred. Page 24

27 Notes to Financial Statements Resources transmitted before the eligibility requirements are met are reported as advances by the provider and as deferred revenue by recipients. Assets from imposed nonexchange revenue are recognized when an enforceable legal claim to the assets arises or when the resources are received, whichever occurs first. Income Taxes The College is exempt from income taxes under the Internal Revenue Code. The Foundation is exempt from income taxes under section 50l(c)(3) of the Internal Revenue Code. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and affect disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Reclassification Certain prior year amounts have been reclassified to conform with the current year presentation. Note 2 Deposits and Investments Deposits The College s policies regarding the risk of financial instruments are included in Note 1. The College is exposed to certain custodial credit risks from the use of local financial institutions for its depository accounts. At a total of $11,391,743 was on deposit with local institutions in the name of the College and were fully insured or collateralized by securities held in the College s name. The College did not recognize any losses due to default by counterparties relating to depository relationships. At a total of $556,451 was on deposit with local institutions in the name of the Foundation and were fully insured or collateralized by securities held in the Foundation s name. The Foundation did not recognize any losses due to default by counterparties relating to depository relationships. Investments For the years ended and 2012 the College held no debt or equity securities. See below for a reconciliation of the investment classification differences for statement and note disclosure presentation. Page 25

28 Notes to Financial Statements The Foundation s investments included the following pools: June 30, 2012 Cost Fair Value Cost Fair Value Scholarship Endowment $ 197,712 $ 220,399 $ 197,880 $ 208,519 Term Endowment 631, , , ,342 Total $ 829,514 $ 936,249 $ 812,286 $ 898,861 Securities held by the pool as of include the following: Cost Unrealized Gains Unrealized Losses Fair Value Money market $ 29,573 $ $ $ 29,573 Equity funds 475, ,526 (228) 586,106 Mutual bond funds 324,133 1,323 (4,886) 320,570 General Investments $ 829,514 $ 111,849 $ (5,114) $ 936,249 Securities held by the pool as of June 30, 2012 include the following: Cost Unrealized Gains Unrealized Losses Fair Value Money market $ 8,477 $ $ $ 8,477 Equity funds 467,084 86,315 (1,924) 551,475 Mutual bond funds 336,725 2,367 (183) 338,909 General Investments $ 812,286 $ 88,682 $ (2,107) $ 898,861 Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the investor will not be able to recover the value of the investments or collateral securities that are in the possession of the outside party. All of the investment pool assets are uninsured and unregistered, held by the counter party s trust department or agent in the investor s name. The Foundation has not experienced any losses resulting from custodial credit risk or credit risk. Credit Risk Credit risk is managed through the diversification of securities and types of securities within the investment pools. Credit ratings are not available for investments in debt securities. Interest Rate Risk Page 26