Raritan Valley Community College

Transcription

1 Report of Audit on the Financial Statements and Supplementary Schedules of the Raritan Valley Community College for the Years Ending June 30, 2016 and 2015

2 Annual Financial Report of the Raritan Valley Community College For the Years Ended June 30, 2016 and 2015 Prepared by Raritan Valley Community College Finance Department

3 TABLE OF CONTENTS PAGE NUMBER FINANCIAL SECTION Independent s Auditor s Report 1-3 Management s Discussion and Analysis (Unaudited) 4-14 BASIC FINANCIAL STATEMENTS EXHIBITS A Statements of Net Position - June 30, 2016 and B Statements of Revenues, Expenses and Changes to Net Position for the Years Ended June 30, 2016 and C Statements of Cash Flows for the Years Ended June 30, 2016 and Notes to the Financial Statements - June 30, 2016 and Roster of Officials 40 REQUIRED SUPPLEMENTARY INFORMATION R-1 Schedule of the College s Proportionate Share of the Net Pension Liability - Public Employees Retirement System - Last Ten Years 41 R-2 R-3 Schedule of the College s Contributions - Public Employees Retirement System - Last Ten Years Schedules Related to Accounting and Reporting for Pension (GASB 68) Note to RSI III for the Fiscal Year Ended June 30, SUPPLEMENTARY INFORMATION SCHEDULES 1 Balance Sheets - June 30, 2016 and June 30, Statements of Changes in Fund Balances for the Years Ended June 30, 2016 and Statements of Current Funds Revenues, Expenditures and Other Changes for the Years Ended June 30, 2016 and

4 SUPPLEMENTARY INFORMATION (CONTINUED) PAGE NUMBER 4 Schedule of Current Expenditures for the Years Ended June 30, 2016 and Schedule of Current Auxiliary Revenues for the Years Ended June 20, 2016 and Schedule of Salary Expenditures for the Years Ended June 30, 2016 and SINGLE AUDIT SECTION Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance with Requirements Applicable to Each Major Federal and State Financial Assistance Programs and with Internal Control Over Compliance in Accordance by the Uniform Guidance and New Jersey OMB Circular Schedule of Expenditures of Federal Awards for the Year Ended June 30, Schedule of Expenditures of State Financial Assistance for the Year Ended June 30, Notes to the Schedules of Expenditures of Federal Awards and Expenditures of State Financial Assistance for the Year Ended June 30, Schedule of Findings and Questioned Costs for the Year Ended June 30, Schedule of Prior Audit Findings for the Year Ended June 30,

5 FINANCIAL SECTION

6 S CC S UPLEE, CLOONEY & COMPANY C ERTIFIED P UBLIC A CCOUNTANTS 308 East Broad Street, Westfield, New Jersey Telephone Fax info@scnco.com INDEPENDENT AUDITOR'S REPORT The Honorable President and Members of the Board of Trustees Raritan Valley Community College Somerville, New Jersey Report on the Financial Statements We have audited the accompanying financial statements of Raritan Valley Community College as of June 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise Raritan Valley Community College s basic financial statements as listed in the table of contents. 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 controls 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 Government Auditing Standards issued by the Comptroller General of the United States, Audit Requirements for Federal Awards, Uniform Guidance, and State of New Jersey OMB Circular 15-08, Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid. Those standards and provisions 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. 1

7 SUPLEE, CLOONEY & COMPANY We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Raritan Valley Community College as of June 30, 2016 and 2015 and the respective changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter Change in Accounting Principle As discussed in Note 8 to the basic financial statements, in 2015, the College adopted Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions and Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date (an amendment of GASB Statement 68). Our opinions are not modified with respect to this matter. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 29, 2016 on our consideration of Raritan Valley Community 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Raritan Valley Community College's internal control over financial reporting and compliance. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and the schedules related to accounting and reporting for pensions in Schedules R-1 through R-3 identified in the table of contents 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. 2

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9 MANAGEMENT S DISCUSSION AND ANALYSIS

10 Introduction MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED The Management Discussion and Analysis (MD&A) represents the College administration s view of the financial results for fiscal year (FY) 2016, the 12-month period beginning July 1, 2015 and ending June 30, The outside auditors engaged by the College to perform the audit and produce the annual financial report had no input on the MD&A. This analysis was prepared solely by the College administration based on information found in the financial report. The Statement of Net Position displays the amount of assets the College owns and the liabilities against those assets. The difference between total assets and total liabilities is defined as net position, the components of which are listed as either restricted or unrestricted. This schedule displays information similar to a balance sheet in a for-profit organization. In general terms, net position represents the owners equity section -- the total of the surplus of revenues less expenses over the life of the organization. In a year when the operations of the College produce a surplus, net position will usually increase. Likewise, if expenses exceed revenues in a given year, net position will usually decrease. Beginning in FY 2015 the Government Accounting Standards Board (GASB) Statement 68 requires state and local governmental entities to disclose their unfunded pension liabilities. The College participates in two pension plans sponsored by the State of New Jersey, which has a much publicized large unfunded liability. Although the College is not responsible for making pension payments to employees when they retire, GASB 68 dictates that the pro-rata share represented by College employees participating in PERS (Public Employee Retirement System) be reported in the audited financial statements to promote better financial clarity. Understandably, the net pension liability of $22,277,239 shown within non-current liabilities--is a very significant number at June 30, Neither the College nor the state have any liability for those employees in the Alternative Benefit Program (ABP), which is essentially a 401-k like plan. Footnotes 1, 7 and 8 explain pension plan accounting in greater detail. At June 30, 2016, total assets of $95,089,881 were up $1,373,347, or 1.5%, from the prior year. Large variances exist in cash, receivables from the State of New Jersey and capital assets all related to the completion of one construction project science addition and substantial progress on the workforce training center. The Statement of Revenues, Expenses and Changes to Net Position reflects revenue sources offset by expenditures made to operate the College. This statement shows information similar to that on an income statement in a corporate financial report. If there is an excess of revenue over expense, that excess increases net position. If expense is greater than revenue, there generally is a decrease in net position. The change in net position in 2016 is a decline of $654,335 primarily related to decrease in Federal grants. 4

11 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED The Statement of Cash Flows shows the breakdown of the receipts of cash and the disbursements of cash for the current year and prior year. It details the year s activity in the cash line under current assets and the restricted cash line under non-current assets on the Statement of Net Position. In other words, the decrease in cash for 2016 as shown on this statement-- $2,007,854 is also reflected on the Statement of Net Position as the difference between the current and restricted cash balance for the end of fiscal year 2016 versus fiscal year The impact of GASB 68 in the current year was to decrease the net result by $253,558 versus an increase of $150,764 in the prior year, both derived from the difference between actual pension payments versus those computed by an actuary. General Financial and Operating Information Enrollment College enrollment is comprised of those students taking courses for credit and those in non-credit programs. A full-time equivalent student (FTE) represents a student or combination of students taking thirty (30) credits during the year. The absolute number of credit-seeking students attending the College in the Fall of FY 2016 was 8,099 (as of the late start enrollment date), a decrease of 115. The number of full-time students was 79 lower at 3,361, while part-time also declined by 36 to 4,738. Total credit hours decreased by 2,096, or 1.8%, to 162,085 and FTE s dropped by 99 to 5,436. Management believes that the primary reasons for this decline are the continued reduction in the number of high school graduates and an improving job market pushing students to cut their course load. Nearly 7,000 non-credit students are served by the Professional Development Division and Workforce training programs. Increase Percent FY 16 FY 15 (Decrease) Change Full-time students (Fall) 3,361 3,440 ( 79) (2.3) Part-time students 4,738 4,774 ( 36) (.8) Total 8,099 8,214 (115) (1.4) Total credits taught 163, ,041 (2,956) (1.8) Total FTE 5,436 5,535 ( 99) (1.8) 5

12 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED Tuition Rates In FY 2016 the College charged $ per credit hour for tuition in the Fall 2015 and Spring 2016 terms. This was an $8.00 increase over the prior year when the Fall 2014 rate was $ per credit hour. Combining tuition and mandatory fees, the College is higher than the average rate charged by the other 18 state community colleges. Three institutions were higher and fifteen lower. The College imposes an extra $30.00 per credit fee for those students who live in other counties and do not work in Somerset or Hunterdon counties. General Service Fee The College charged $22.00 per credit hour in Fall 2015 (FY 2016), the same as the prior year. Net Position Assets, liabilities and net assets for the periods ending June 30 were as follows: FY 2016 FY 2015 Current Assets $ 11,571,728 $ 13,707,874 Non-Current Assets 79,612,002 78,557,914 Total Assets 91,183,730 92,265,788 Deferred Outflow of Resources-- Pension Related 3,906,151 1,448,746 Total Assets & Deferred Outflows $ 95,089,881 $ 93,714,534 Current Liabilities $ 9,451,613 $ 10,343,336 Non-Current Liabilities 657, ,471 Net Pension Liability 22,277,239 18,939,318 Total Liabilities 32,385,869 29,600,125 Deferred Inflow of Resources-- Pension Related 1,950,949 2,707,011 6

13 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED Total Liabilities & Deferred Inflows $ 34,336,818 $ 32,307,136 Net Position Invested in Capital Assets $ 68,970,042 $ 59,321,526 Restricted for Grants, Scholarships 1,876,073 2,046,178 Restricted for Capital Projects 7,900,655 17,497,836 Unrestricted Net Position Unrestricted Pension Related 3,310,626 (21,304,333) 3,592,633 (21,050,775) Total Net Position 60,753,063 61,407,398 Total Liabilities & Net Position $ 95,089,881 $ 93,714,534 Current assets declined by $2,136,146, or 15.6%, largely due to decreased cash of $2,007,854 related to the timing of capital project funding. Non-current assets rose by $1,054,088 reflecting capital transactions. Funds due from the State of New Jersey in support of building projects declined by $8,756,207 as it reimbursed expenditures recorded in the net capital asset accounts which rose $9,648,516. The gross capital additions were $13,447,280 offset by an increase of $3,798,764 in depreciation. Deferred Outflows of $3,906,151 in FY 2016 relates to College contributions subsequent to the initial measurement date (FY 2014) and changes in actuarial assumptions (e.g. ages, mortality, marital status, new employee, etc.). The net pension liability was $3,337,921 higher than the prior year because of these same variations. Non-current liabilities include the net pension liability previously described in the amount of $22,277,239. Deferred Inflows in the amount of $1,950,949 recognizes the difference between projected and actual earnings on pension plan investments and changes in the College s proportionate share of the total state liability. The Unrestricted balance within Net Position provides an indication of the institution s ability to counter negative financial trends. Before recognizing the impact of GASB 68, the unrestricted balance was a positive of $3,310,626. The unfunded pension liability adds a negative $21,304,333 in the net position line. Middle States, the College s accrediting body, suggests that 5.0% of operating expenses (excluding depreciation) is a desirable ratio to achieve. Before calculating this ratio, the pre-gasb 68 unrestricted balance should be reduced by Board of Trustee designated reserves in both years which were established to fund important strategic initiatives $235,741 and $695,001 for fiscal years 2016 and 2015, respectively. The ratio for FY 2016 is 6.3% ($3,310, ,741 divided by $48,433,921 total education/ general expenditures) versus 6.2% in FY 2015 ($3,592, ,001 divided by $46,979,303). 7

14 Revenue and Expense MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED The College receives its revenue from three main sources: Tuition and Fees, State Aid and County Support. In FY 2016 these three sources of income comprised approximately 75.5% of total revenue, 2.3% higher than the prior year. Grants of $10,857,352 and Auxiliary revenue of $1,967,719 are also significant sources of income. Operating revenue the sum of tuition, grants, auxiliary and other revenue totaled $34,836,650, or 65.4% of total revenue. The balance of revenue is classified as non-operating and was received from state and county appropriations and miscellaneous sources that include investment income and other fees. FY 2016 FY 2015 Operating Revenue Tuition & Fees (net of scholarships) $ 21,783,727 $ 20,783,303 Federal, State & Local Grants 10,857,352 12,141,981 Other sources 227, ,953 Auxiliary Enterprises 1,967,719 1,920,205 Total Operating Revenue 34,836,650 35,081,442 Less Operating Expenses (56,926,665) (56,475,578) Net Operating Loss $ (22,090,015) $ (21,394,136) Non-Operating Revenue State Appropriation $ 5,814,377 $ 5,740,870 County Appropriation 12,605,000 12,605,000 Investment Income 11,403 13,286 Total Non-Operating Revenue 18,430,780 18,359,156 Income/(Loss) Before Other Rev/Exp (3,659,235) (3,034,980) Capital Appropriations & Other 3,004,900 11,207,252 Increase (Decrease) in Net Position $ (654,335) $ 8,172,272 Net Position Beginning of Year $ 61,407,398 $ 53,235,126 Prior Period Adjustment Net Position Beginning of Year Restated $ 61,407,398 $ 53,235,126 Net Position End of Year $ 60,753,063 $ 61,407,398 8

15 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED FY 2016 FY 2015 Operating Expenses Instruction $ 20,270,499 $ 20,132,830 Research 852, ,887 Academic support 3,799,120 3,697,815 Student Services 5,459,789 5,201,043 Public Service 1,603,367 1,346,917 Operations & Maintenance of Plant 5,116,157 4,916,450 Grants & Contracts 1,609,376 2,529,869 Other Expenditures Institutional Support 18,749 11,332, ,494 10,976,361 Pension Adjustment Auxiliary Services 253,558 2,315,312 (150,764) 2,211,106 Depreciation 4,295,749 4,047,570 Total Operating Expenses $ 56,926,665 $ 56,475,578 Capital Assets Capital Asset balances for the years ended June 30 were as follows: FY 2016 FY 2015 Land $ 573,794 $ 573,794 Building & Construction in Progress 104,734,782 94,244,370 Furniture and Equipment 13,994,582 11,037,714 Library Books and Multimedia 1,774,100 1,774,100 Total $121,077,258 $107,629,978 Less Accumulated Depreciation (52,107,216) (48,308,452) Capital Assets, Net $ 68,970,042 $ 59,321,526 9

16 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED Discussion and Analysis Summary In FY 2016, the net position was lower than the prior year by $654,335. The primary factors were a $282,007 reduction in the unrestricted surplus (using $459,260 of the designated surplus offset by a current year operating surplus of $177,253); an increase in the pension liability of $253,558 and a $170,105 decline in restricted grants and scholarships. College operating revenues for FY 2016 were $244,792 lower than FY Tuition and fees net of scholarship allowances rose by $1,000,424, virtually all due to the tuition rate increase. Federal grants decreased by $932,992 as well as State and Local grants by $351,637. Tuition and Fee Revenue Tuition and fee revenue net of scholarships and grants was up by $1,000,424, or 4.8%. Most of the positive change related to the tuition rate increase of 6.2% against a credit volume drop of 1.8%. Included in these results are Workforce and Professional Development revenues which declined by $100,958. Grants Revenue Total grant revenue dropped by $1,284,629, or 10.6%. Federal grants comprising $7,460,313 of the total decreased by $932,993 or 11.1%, mostly from the winding down of the College s Department of Labor s Trade Adjustment Assistance Community College & Career Training (TAACCCT) award for workforce programs -- $1,033,718. In addition, Pell grants were $329,808 lower (enrollment decline) while a Bergen CC subgrant TAACCT award was $189,298 higher. A new National Science Foundation grant provided $152,880. State and Local grant support at $3,397,039 was lower by $351,637, or 9.4%. One grant ended in FY 2016 and another shortly thereafter. The Career and Technical Education Program (CTEP) grant declined by $38,207 and the Higher Education Technology Infrastructure Fund projects were almost completed as reimbursement fell by $206,147. The level of the Carl D. Perkins funding for technical equipment was $64,607 less. State and County Revenue State operating aid was $73,507 more than the prior year primarily the result of RVCC receiving a larger pro-rata share of the total operating aid allocated to the Community College sector based on the proportion of total qualified credits taught compared to other peer institutions. As a percentage of total educational and general revenues (excluding auxiliaries) State aid at 11.3% was slightly higher than the prior year. The State also pays for most pension costs directly but that benefit is not reflected in the College s financial 10

17 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED statements. That liability has grown at the pace of annual salary increases negotiated with several bargaining units. In addition, the State paid $9,912,616 towards new capital projects -- Science and Workforce buildings. Operating support from Somerset and Hunterdon Counties remained the same as FY 2015 at $12,605,000. The relative weight of County sources compared to total educational and general revenues was about the same as last year at 24.6%. Both Counties provide funding for major capital projects each year. That level of assistance net of state matching was $2,684,564 in FY 2016 and $614,482 in FY They also fund minor capital needs (mostly technology equipment) to the extent of $750,000 this past year (included in State and Local grant income). Auxiliary Services This category includes the bookstore, theater, planetarium, childcare center, physical education (PE) facilities rentals and customized training. Total revenue increased by $47,514, or 2.5%, to $1,967,719. The theater (ticket sales and rentals) and childcare center (student fees) account for 46% of the total. Year-to-year the largest gains were in the child care center -- $123,249 to $460,142 and community athletics (pool and gym rentals) -- $74,644 to $290,386. Expenses Total operating expenses for all funds combined inclusive of salaries, benefits and all other non-compensation items increased by $451,087, or.8%. Looking at the institution as a whole, the primary elements of this variance were: $512,173 greater salaries resulting from a 2.0% across-the-board salary increase (approximately $625,000) offset by several position vacancies, fewer instructional sections and less grant funded labor (primarily TAACCT); higher benefit cost $422,243 (mostly medical); less operating expenses of $296,085 (again mostly in TAACCT); higher depreciation $248,179 from new assets coming on-line; and $839,745 lower in other expenditures, a category that reflects the timing difference of spending on asset acquisition and their subsequent capitalization. The following compares other significant FY 2016 versus FY 2015 variances by functional expense category: Instruction, the largest category of expense, increased by only $137,669, or.7%, to $20,270,499. The approximate $310,000 related to the salary increase was offset by running fewer sections due to the enrollment decline. The only departments with yearto-year staffing increases responding to vacancies/demand were Nursing and Fitness and Wellness. Research consisting of Institutional Research, the Foundation, Dean of 11

18 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED Academic Resource Development, and Assessment rose $144,242, or 20.4%, reflecting filling two vacancies in Institutional Research and Academic Programs and Partnerships. Research increased by $144,243, or 20.4%, to $852,129, primarily reflecting the filling of two vacancies, one each in Institutional Research -- $76,589 and Academic Resource Development -- $38,776. Academic Support rose by $101,305, or 2.7%, to $3,799,120. The primary factors were: making the technology help desk manager a College employee versus third party and adding more staff support -- $140,966; reduction in rent paid for RVCC at Bridgewater -- $115,000; and personnel changes within the Dean of Academic and Student Affairs resulting in incremental cost of $77,855. Student Services increased by $258,746, or 5.0%, to $5,459,789. Most of this was due to much higher costs in Disability Services -- $204,258 representing a higher level of contracted interpreters for hearing impaired students -- $133, and filling a vacancy - $71,219. Transfer and Career Services also filled a vacancy -- $92,195 which was offset by a continuing open position in the First Year Experience -- $131,179. Public Service expenditures rose by $256,450, or 19.0% reflecting an increase in the auto program of $114,546 due to filling a vacancy and additional supplies and $170,729 in Advanced Manufacturing because it is no longer funded by the TAACCCT grant, offset by a reduction of professional development/personal enrichment programs of $43,908. Operation and Maintenance of Plant increased by $199,707, or 4.1%. The major-to-year changes were: Housekeeping rose by $321,432 as we shifted from a third party contract to employees and became fully staffed in FY 2016; utilities declined by $266,699 resulting from lower prices and the growing cumulative effect of energy saving renovations (chiefly LED lighting and automated building controls.); and $67,151 higher service contracts to take care of a number of mechanical system problems throughout the campus. Grants and contracts fell by $920,493, or 36.4% principally due to the completion of the TAACCT grant in October $1,033,718 drop. Other notable decreases were: Higher Education Technology Infrastructure spending -- $206,147; Rutgers/RVCC prison classes -- $37,616; and capitalized grant assets -- $111,556. Higher spending occurred in another TAACCT grant administered by Bergen Community College -- $189,068 and county provided minor capital technology funding -- $381,914. Other expenditures dropped by $839,745 to an expense of $18,749. This account reflects the net impact of capital transactions. Capital appropriations from the counties and state are reflected as revenue near the bottom on the Statement of Revenues, Expenses and 12

19 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED Changes to Net Position. These statements represent not just the current operating and restricted funds but also plant (physical asset) funds. The primary reason for sometimes significant year-to-year variations relates to the timing of actual project spending and its later capitalization as an asset. The major project completed in FY 2016 was the Ray Bateman Center for Student Life and Leadership. The total capitalized in FY 2016 was approximately $9,300,000 against spending in the same year of $7,036,000. Overall, buildings and equipment capitalized during the year was $13,944,265 against spending of $12,602,081. Institutional Support increased by $356,499, or 3.2%, to $11,332,860. Within this broad category, several individual departments had variances worth noting. Public relations jumped by $144,811 resulting from a more robust marketing campaign highlighting our new brand image and website. Technology services advanced $189,884 reflecting the net incremental cost of making the third party site manager a college employee -- $85,465; allocating less of the telecom engineer to capital projects -- $20,000; and higher software and licensing costs -- $96,111. Security rose by $128,752 reflecting $1.00/hour pay increase and a higher level of staffing. Offsetting these higher items, the Budget and Finance office dropped $123,871 due to less spending on college-wide strategic initiatives. The Pension adjustment went from a credit of $150,764 in FY 2015 to a charge of $253,558 in the current year based on a variety of factors including the number of eligible retirees changing actuarial assumptions and investment performance. The College does not have access to the information which would enable us to independently forecast what the financial impact could be at any given time. Auxiliary enterprises rose by $104,206, or 4.7%. That was largely due to the Child Care Center -- $107,262 staffing in support of a larger number of students and the Theater -- $64,580 for part-time technical help for productions. The planetarium dropped $51,569 due to position vacancies for part of the year. Capital Appropriations The College records as revenue the gross amount of capital project funding approved in the year appropriated by the County or State. A corresponding receivable would be set up for the committed funds. Generally, the College is paid upon presentation of supporting documents. In FY 2016, the College recognized appropriations of $3,004,900 which was a decrease of $8,202,352. Most of the decline related to prior year underwriting of the workforce training center by the State of New Jersey. The current year appropriations are for a variety of projects funded by Chapter 12 additional support for the workforce building, planetarium and a variety of campus infrastructure needs. 13

20 MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2016 UNAUDITED Capital Expenditures All of the funds for major capital improvements during FY 2016and 2015 were provided by a combination of the special Community College Chapter 12 program numerous projects and the state Go Bond science building addition; HEFT workforce training center; and the Higher Education Technology Infrastructure Fund (HETI) technology initiatives. For Chapter 12 Somerset and Hunterdon Counties split the debt service cost with the state. Both counties allocate their shares proportionately based on their tax ratables. Somerset County issues the related financing instruments, but the College does not report any bond indebtedness or payments due on the Statement of Net Assets. In FY 2016, the College spent $ 12,597,181 on capital expenditures compared to the prior year amount of $2,594,444. The major projects included: science building addition $7,036,201; workforce training center -- $4,171,931; main frame server upgrade -- $592,596; and athletic facilities -- $547,017. In addition, county provided minor capital, Federal Perkins, TAACCCT, HETI and other grants funded instructional machinery and equipment in the total amount of $949,

21 BASIC FINANCIAL STATEMENTS

22 EXHIBIT A STATEMENTS OF NET POSITION JUNE 30, 2016 AND ASSETS Current Assets Cash and Cash Equivalents $ 6,961,024 $ 8,968,878 Accounts Receivable, Net 4,188,408 4,283,918 Inventories 24,770 27,070 Prepaid Expenses 397, ,008 Total Current Assets $ 11,571,728 $ 13,707,874 Noncurrent Assets Due From State of New Jersey $ 5,361,434 $ 14,117,641 Due From Somerset County 5,280,526 5,068,747 Due From Vendor - 50,000 Capital Assets, Net 68,970,042 59,321,526 Total Noncurrent Assets $ 79,612,002 $ 78,557,914 Deferred Outflow of Resources Pension Related 3,906,151 1,448,746 Total Assets $ 95,089,881 $ 93,714,534 LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities $ 6,855,210 $ 7,933,883 Deposits 444, ,687 Deferred Revenue 2,040,648 1,968,766 Capital Lease Liability 110,912 - Total Current Liabilities $ 9,451,613 $ 10,343,336 Noncurrent Liabilities Net Pension Liability $ 22,277,239 $ 18,939,318 Deposits Held in Custody for Others 364, ,471 Capital Lease Liability 292,737 - Total Noncurrent Liabilities $ 22,934,256 $ 19,256,789 Total Liabilities $ 32,385,869 $ 29,600,125 Deferred Inflow of Resources Pension Related $ 1,950,949 $ 2,707,011 NET POSITION Net Investment in Capital Assets $ 68,970,042 $ 59,321,526 Restricted for grants and scholarships 1,876,073 2,046,178 Restricted for: Expendable Capital Projects 7,826,076 17,423,257 Other Capital 74,579 74,579 Unrestricted Net Position (17,993,707) (17,458,142) Total Net Position $ 60,753,063 $ 61,407,398 Total Liabilities, Deferred Inflows and Net Position $ 95,089,881 $ 93,714,534 The accompanying Notes to the Financial Statements are an integral part of this statement. 15

23 EXHIBIT B STATEMENTS OF REVENUES, EXPENSES AND CHANGES TO NET POSITION FOR THE YEARS ENDED JUNE 30, 2016 AND OPERATING REVENUES Tuition and Fees (net of scholarship allowances of $8,478,486 for 2016 and $8,594,632 for 2015) $ 21,783,727 $ 20,783,303 Federal Grants 7,460,313 8,393,305 State and Local Grants 3,397,039 3,748,676 Auxiliary Services 1,967,719 1,920,205 Other Operating Revenues 227, ,953 Total Operating Revenues $ 34,836,650 $ 35,081,442 OPERATING EXPENSES Instruction $ 20,270,499 $ 20,132,830 Research 852, ,887 Public Service 1,603,367 1,346,917 Academic Support 3,799,120 3,697,815 Student Services 5,459,789 5,201,043 Institutional Support 11,586,418 10,825,597 Operation and Maintenance of Plant 5,116,157 4,916,450 Auxiliary Services 2,315,312 2,211,106 Grants and Contracts 1,609,376 2,529,869 Other Expenditures 18, ,494 Depreciation 4,295,749 4,047,570 Total Operating Expenses $ 56,926,665 $ 56,475,578 Operating Loss $ (22,090,015) $ (21,394,136) NON-OPERATING REVENUES (EXPENSES) State Appropriations $ 5,814,377 $ 5,740,870 County Appropriation 12,605,000 12,605,000 Investment Income 11,403 13,286 Net Nonoperating Revenues $ 18,430,780 $ 18,359,156 Net Loss Before Other Revenues and Expenses $ (3,659,235) $ (3,034,980) OTHER REVENUES AND EXPENSES Capital Contributions $ 3,004,900 $ 11,206,950 Miscellaneous Net Increase (Decrease) Net Assets $ (654,335) $ 8,172,272 Net Position, Beginning of Year 61,407,398 53,235,126 Net Position, End of Year $ 60,753,063 $ 61,407,398 The accompanying Notes to the Financial Statements are an integral part of this statement. 16

24 EXHIBIT C PAGE 1 OF 2 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2016 AND CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees $ 29,983,089 $ 29,003,077 Grants and Contracts Received 11,171,344 12,126,597 Grant Payments (11,115,495) (12,081,774) Payments to Employees (Includes benefits) (39,250,183) (36,498,119) Payments to Suppliers (10,214,122) (9,882,978) Auxiliary Services 2,030,545 1,928,494 Auxiliary Payments (2,328,325) (2,211,390) Other receipts (payments) (225,778) (695,048) Net cash used by operating activities $ (19,948,925) $ (18,311,141) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations $ 5,814,377 $ 5,740,870 County Appropriations 12,779,835 12,444,917 Received in custody for others 282, ,912 Payments made for others (254,229) (229,048) Net cash flows provided by noncapital financing activities $ 18,622,445 $ 18,187,651 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Appropriations $ 11,571,134 $ 1,039,603 Capital Payments (12,263,911) (2,293,271) Net cash provided (used) by capital and related financing activities $ (692,777) $ (1,253,668) CASH FLOWS FROM INVESTING ACTIVITIES Investment Income $ 11,403 $ 13,286 Net Increase(Decrease) in Cash and Cash Equivalents $ (2,007,854) $ (1,363,872) Cash and Cash Equivalents, beginning of year 8,968,878 10,332,750 Cash and Cash Equivalents, end of year $ 6,961,024 $ 8,968,878 The accompanying Notes to the Financial Statements are an integral part of this statement. 17

25 EXHIBIT C PAGE 2 OF 2 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2016 AND RECONCILIATION OF NET OPERATING INCOME TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Loss $ (22,090,015) $ (21,394,136) Adjustment to reconcile Operating Loss to Net Cash Used by Operating Activities: Depreciation 4,295,749 4,047,570 Changes in Operating Assets: Accounts receivable (59,418) (338,324) Inventory 2,300 (5,654) Other assets - prepaid expense 21,817 (3,690) Accounts payable and accrued liabilities (853,212) 322,195 Deferred revenue 76,038 (780,429) Capital Expenditures & Grant Funded Assets Net of Other Expenses (1,342,184) (158,673) Net Cash Used by Operating Activities $ (19,948,925) $ (18,311,141) The accompanying Notes to the Financial Statements are an integral part of this statement. 18

26 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The financial statements of Raritan Valley Community College (College) have been prepared in conformity with U.S. generally accepted accounting principles (GAAP) as applied to colleges and universities. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant of the Board's accounting policies are described below. Reporting Entity Raritan Valley Community College, hereinafter called the College was established under the statutes of the State of New Jersey (N.J.S. 18A:64A). The College is a tax exempt educational institution offering programs of instruction extending not more than two years beyond high school, which may include but need not be limited to specialized or comprehensive curriculums, including college credit transfer courses, terminal courses in the liberal arts and sciences and career training programs. The Board of Trustees, consisting of the County Superintendents of Schools of Somerset and Hunterdon Counties and seven persons appointed by the Director of the Board of Chosen Freeholders of Somerset County with the advice and consent of that Board and three persons appointed by the Director of the Board of Chosen Freeholders of Hunterdon County with the advice and consent of that Board and two persons appointed by the State of New Jersey and an alumni representative elected by the student body is responsible for the management and control of the College. The primary criterion for including activities within the College's reporting entity are set forth in Statement No. 14 of the Governmental Accounting Standards Board entitled The Financial Reporting Entity (GASB 14) as codified in Section 2100 of the GASB Codification of Governmental Accounting and Financial Reporting Standards. Under GASB Statement 14 the Financial Reporting Entity is determined by the degree of oversight responsibility maintained by the College. Oversight responsibility includes financial interdependency, selection of governing authority, designation of management, ability to significantly influence operations and accountability for fiscal matters. The combined financial statements include all funds of the College over which it exercises operating control. There were no additional entities required to be included in the reporting entity under the criteria as described above, in the current fiscal year. Based on the aforementioned criteria, the College has no component units but, as a County college, would be considered a component unit of the Counties of Somerset and Hunterdon. The Counties of Somerset and Hunterdon, however, report on a statutory basis of accounting which does not recognize component units. 19

27 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Reporting Entity (Continued) The financial activities of the Raritan Valley Community College Foundation, Inc. are not included in the College s financial statements. The Foundation is a non-profit corporation controlled by a separate Board of Directors. The goals of the Foundation are to advance and assist in the development, growth and operation of the College. The College has reviewed Governmental Accounting Standards Board Statement No. 39. As a result, the financial position and results of operations of the Foundation are not combined with the financial statements of the College. Basis of Presentation The accounting policies of the College conform to all US generally accepted accounting principles as applicable to public colleges and universities. GASB Statement No. 35 establishes standards for external financial reporting for public colleges and universities and requires that resources be classified for accounting and reporting purposes into the following net position 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: Nonexpendable Net position that is subject to externally imposed stipulations and must be maintained permanently by the College. Expendable Net position that is subject to externally imposed stipulations that can be fulfilled by actions of the College pursuant to the stipulations or that expire by the passage of time. Unrestricted Net position that is not subject to externally imposed stipulations and may be designated for specific purposes by action of management to the board of trustees. When an expense is incurred that can be paid using either restricted or unrestricted resources, the College s policy is to first apply the expense towards restricted resources and then towards unrestricted resources. 20

28 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Measurement Focus and Basis of Accounting For financial statement reporting purposes, the College is considered a special-purpose government entity engaged only in business-type activities. Accordingly, the College s financial statements are prepared using the flow of economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized in the accounting period in which they are earned and expenses are recognized in the period incurred, regardless of the timing of related cash flows. All significant intra-agency transactions have been eliminated. Non-exchange transactions, in which the College receives value without directly giving equal value in return, includes federal, state, and local grants, state and county appropriations, and other contributions. Classification of Revenues Operating Revenue includes activities that have the characteristics of exchange transactions, such as student tuition and fees, and sales and services of auxiliary enterprises, net of scholarship discounts and allowances. Non-operating revenue includes activities that have the characteristics of non-exchange transactions, such as state and county appropriations. Cash and Cash Equivalents The College considers petty cash, cash in banks and short term investments with original maturities of three months or less as cash and cash equivalents. Inventories Inventories are stated at cost. 21

29 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes The College qualifies as a tax-exempt organization under Section 501 (c)(3) of the Internal Revenue Code and, therefore, has no provision for federal income taxes. In addition, the College has been determined by the Internal Revenue Service not to be a private foundation within the meaning of Section 509(a)(1) of the Code. The most significant tax position of the College is its assertion that it is exempt from income taxes. Other significant tax positions include its determination of whether any amounts are subject to unrelated business tax (UBIT). Management has determined that the College had no activities subject to UBIT in the years ended June 30, 2016 or All significant tax positions have been considered by management and it has determined that it is more likely than not that all tax positions would be sustained upon examination by taxing authorities. The College is required to file Form 990 (Return of Organization Exempt from Income Tax) which is subject to examination by the Internal Revenue Service (IRS) up to three years from the extended due date of the tax return. The Forms 990 for 2013 through 2015 are open to examination by the IRS as of June 30, Capital Assets Capital Assets are recorded at historical cost. Capital Assets of the College are depreciated using the straight-line method over their useful lives. Accounting and Financial Reporting for Pensions The College implemented GASB 68 in the Year This Statement amends GASB Statement No. 27. It improves accounting and financial reporting by state and local governments for pensions. It also improves information provided by state and local government employers about financial support for pensions that is provided by other entities. This Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decision useful information, supporting assessments of accountability and interperiod equity, and creating additional transparency. This Statement replaces the requirement of Statement No. 27, Accounting for Pension by State and Local Governmental Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate to pensions that are provided through pension plans administered as trusts or equivalent arrangements that meet certain criteria. The requirements of Statements 27 and 50 remain applicable for pensions that are not covered by the scope of this Statement. This statement is effective for periods beginning after June 15,

30 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accounting and Financial Reporting for Pensions (Continued) The College has also implemented GASB Statement 71, Pension Transition for Contributions made Subsequent to the Measurement Date-an amendment to GASB No. 68. The objective of this Statement is to address an issue regarding application of the transition provisions of Statement No. 68, Accounting and Financial Reporting for Pensions. The issue relates to amounts associated with contributions, if any, made by a state or local government employer or non-employer contributing entity to a defined benefit pension plan after the measurement date of the government's beginning net pension liability. Statement 68 requires a state or local government employer (or non-employer contributing entity in a special funding situation) to recognize a net pension liability measured as of a date (the measurement date) no earlier than the end of its prior fiscal year. If a state or local government employer or non-employer contributing entity makes a contribution to a defined benefit pension plan between the measurement date of the reported net pension liability and the end of the government's reporting period, Statement 68 requires that the government recognize its contribution as a deferred outflow of resources. In addition, Statement 68 requires recognition of deferred outflows of resources and deferred inflows of resources for changes in the net pension liability of a state or local government employer or non-employer contributing entity that arise from other types of events. At transition to Statement 68, if it is not practical for an employer or non-employer contributing entity to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions, paragraph 137 of Statement 68 required that beginning balances for deferred outflows of resources and deferred inflows of resources not be reported. Consequently, if it is not practical to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions, contributions made after the measurement date of the beginning net pension liability could not have been reported as deferred outflows of resources at transition. This could have resulted in a significant understatement of an employer or non-employer contributing entity's beginning net position and expense in the initial period of implementation. This Statement amends paragraph 137 of Statement 68 to require that, at transition, a government recognize a beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the measurement date of the beginning net pension liability. Statement 68, as amended, continues to require that beginning balances for other deferred outflows of resources and deferred inflows of resources related to pensions be reported at transition only if it is practical to determine all such amounts. 23

31 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Accounting and Financial Reporting for Pensions (Continued) Under GAAP, the College is required to recognize the pension liability in Statements of Revenues, Expenses, Changes in Net Assets (balance sheets) and Notes to the Financial Statements in accordance with GASB 68. The liability required to be displayed by GASB 68 is displayed as a separate line item in the Unrestricted Net Liabilities area of the balance sheet. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. Currently, the College has only one item that qualifies for reporting in this category, deferred amounts related to pensions. In addition to liabilities, the statement of financial position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The College has one item that qualifies in this category, deferred amounts related to pension. Net Position Net position represents the difference between assets and liabilities. Net investment in capital assets is net of accumulated depreciation, reduced by the outstanding balance of any borrowing used for the acquisition, construction, or improvement of those assets. Net position is reported as restricted when there are limitations imposed on their use either through the enabling legislation adopted by the College or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. Financial Dependency The College receives appropriations from the State of New Jersey and the Counties of Somerset and Hunterdon. The College is economically dependent on these appropriations to carry on its operations. 24

32 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) CASH AND CASH EQUIVALENTS As of June 30, 2016 and 2015, cash and cash equivalents of the College consisted of the following: Deposits Checking and Money Market $6,961,024 $8,968,878 New Jersey statutes permit the deposit of public funds in public depositories which are located in New Jersey and which meet the requirements of the Governmental Unit Deposit Protection Act (GUDPA). GUDPA requires a bank that accepts public funds to be a public depository. A public depository is defined as a state bank, a national bank, or a savings bank, which is located in the State of New Jersey, the deposits of which are insured by the Federal Deposit Insurance Corporation. The statutes also require public depositories to maintain collateral for deposits of public funds that exceed certain insurance limits. All collateral must be deposited with the Federal Reserve Bank or a Banking Institution that is a member of the Federal Reserve System, and has capital funds of not less than $25,000,000. Under GUDPA, if a public depository fails, the collateral it has pledged, plus the collateral of all other public depositories, is available to pay the full amount of the deposits to the governmental unit. Custodial Credit Risk Deposits Custodial credit risk is the risk that in the event of a bank failure, the deposits may not be returned. The College does not have a specific deposit policy for custodial credit risk other than those policies that adhere to the requirements of statute. As of June 30, 2016, based upon the coverage provided by FDIC and NJGUDPA, no amount of the bank balance was exposed to custodial credit risk. The College is generally not exposed to credit risks and interest rate risks for its investments, nor is it exposed to foreign currency risk for its deposits and investments. 25

33 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (3) ACCOUNTS RECEIVABLE Accounts receivable consisted of the following as of June 30: Student accounts receivable $ 3,570,665 $ 3,247,130 Third party contracts 196, ,640 Federal, state and local grants receivable 289, ,448 Other receivables 707, ,075 $ 4,764,194 $ 4,815,293 Less allowance for doubtful accounts 575, ,375 Accounts Receivable, Net $4,188,408 $4,283,918 (4) INVENTORIES Inventories are stated at cost. Analyses of the inventories at June 30 are as follows: Planetarium Gift Shop: Supplies $ 3,864 $ 5,257 Central Stores: Supplies 20,906 21,813 Total Inventories $24,770 $27,070 26

34 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (5) CAPITAL ASSETS The College has an established formal system of accounting for its capital assets. Purchased or constructed capital assets are reported at historic cost. Donated capital assets are valued at their estimated fair market value on the date received. The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Capital assets are depreciated in the financial statements using the straight-line method over the following estimated useful lives: Asset Class Estimated Useful Lives Buildings and Site Development 20 to 50 Building Improvements 15 Furniture and Equipment 3 to 20 Library Books and Multimedia 5 Net investment in Capital Assets amounted to $68,970,042 and $59,321,526 as of June 30, 2016 and 2015, respectively. An analysis of this amount is as follows: Balance July 1, 2015 Additions Deletions Balance June 30,2016 Land $ 573,794 $ -- $ --- $ 573,794 Building and Site 91,703,334 8,720, ,423,685 Development Furniture and Equipment 11,037,714 3,453, ,985 13,994,582 Library Books and Multimedia 1,774, ,774,100 Construction in Progress 2,541,036 4,179,795 2,409,734 4,311,097 Total $107,629,978 $16,353,999 $2,906,719 $121,077,258 Accumulated (48,308,452) (4,295,749) (496,985) (52,107,216) Depreciation Capital Assets, Net $59,321,526 $12,058,250 $2,409,734 $68,970,042 27

35 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (6) LONG-TERM LIABILITIES The following is a summary of transactions that affect long-term liabilities for the year ended June 30, 2016: Balance Balance Amounts Due June 30, June 30, Within 2015 Change 2016 One Year Net Pension Liability $18,939,318 $3,337,921 $22,277,239 $ -- Capital Lease Liability , , ,912 Deposits Held in Custody for Others 317,471 46, , $19,256,789 $3,677,467 $22,934,256 $110,912 (7) PENSION PLANS Description of Plans - All required full-time employees of the College are covered by either the Public Employees Retirement System (PERS) or the Alternative Benefits Program (ABP) which have been established by state statute and are administered by the New Jersey Division of Pension and Benefits (Division). According to the State of New Jersey Administrative Code, all obligations of both Systems will be assumed by the State of New Jersey should the Systems terminate. The Division issues a publicly available financial report that includes financial statements and required supplementary information for each of the systems. These reports may be obtained by writing to the Division of Pensions and Benefits, PO Box 295, Trenton, New Jersey, or online at Alternative Benefit Program (ABP) - The Alternative Benefit Program (ABP) provides retirement benefits through seven privately operated defined contribution retirement plans. The College assumes no liability for ABP members other than payment of contributions. ABP provides retirement and death benefits for or on behalf of these fulltime professional employees and faculty members electing to participate in this optional retirement program. Participation eligibility as well as contributory and noncontributory requirements is established by the State of New Jersey Retirement and Social Security Law. Benefits are determined by the amount of individual accumulations and the retirement income option selected. All benefits vest after the completion of one year of service. Individually owned annuity contracts that provide for full ownership of retirement and survivor benefits are purchased at the time of vesting. College employees are required to contribute 5% and may contribute voluntary additional contributions of salary up to the maximum Federal statutory limit, on a pre-tax basis. Employer contributions, some of which are reimbursed by the State, are 8%. 28

36 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (7) PENSION PLANS (CONTINUED) Public Employees Retirement System (PERS) - The Public Employees Retirement System (PERS) was established as of January 1, 1955 under the provision of N.J.S.A. 43:15A to provide retirement, death, disability and medical benefits to certain qualified members. The Public Employees Retirement System is a cost-sharing multipleemployer plan. Membership is mandatory for substantially all full-time employees of the State of New Jersey or any county, municipality, school district, or public agency, provided the employee is not required to be a member of another state-administered retirement system or other state or local jurisdiction. Defined Contribution Retirement Program (DCRP) - The Defined Contribution Retirement Program (DCRP) was established under the provision of Chapter 92, P.L and Chapter 103, P.L to provide coverage to elected and certain appointed officials and part-time employees, effective July 1, Part-time employees that earn an annual salary of at least $5,000 and work less than 35 hours per week are eligible to enroll in the New Jersey Defined Contribution Plan (DCRP). The DCRP is offered through the Prudential Retirement Insurance and Annuity Company. Employees contribute 5.5% of salary and the College contributes 3% of salary, for a total contribution of 8.5%. Membership is mandatory for such individuals with vesting occurring after one year of membership. Significant Legislation Effective June 28, 2011, P.L. 2011, c. 78 enacted certain changes in the operations and benefit provisions of the PERS system. Pension Plan Design Changes Effective June 28, 2011, P.L. 2011, c. 78, new members of PERS, hired on or after June 28, 2011, will need 30 years of creditable service and have attained the age of 65 for receipt of the early retirement benefit without a reduction of 1/4 of 1% for each month that the member is under age 65. New members will be eligible for a service retirement benefit at age 65. Funding Changes Under the new legislation, the methodology for calculating the unfunded accrued liability payment portion of the employer s annual pension contribution to the PERS was changed. The unfunded actuarial accrued liability (UAAL) will be amortized for each plan over an open-ended 30-year period and paid in level dollars. Beginning with the July 1, 2019 actuarial valuation (July 1, 2018 for PFRS), the UAAL will be amortized over a closed 30-year period until the remaining period reaches 20, when the amortization period will revert to an open-ended 20-year period. 29

37 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (7) PENSION PLANS (CONTINUED) COLA Suspension The payment of automatic cost-of-living adjustment to current and future retirees and beneficiaries are suspended until reactivated as permitted by this law. Vesting and Benefit Provisions The vesting and benefit provisions of PERS are set by N.J.S.A. 43:15A and 43.3B. All benefits vest after ten years of service, except for post-retirement healthcare benefits that vest after 25 years of service. Members are always fully vested for their own contributions and, after three years of service credit, become vested for 2% of related interest earned on the contributions. In the case of death before retirement, members beneficiaries are entitled to full interest credited to the members accounts. Contribution Requirements - The contribution policy is set by N.J.S.A. 43:15A, and N.J.S.A. 18:166, and requires contributions by active members and contributing employers. Plan member and employer contributions may be amended by State of New Jersey legislation. Effective June 28, 2011, P.L. 2011, c. 78 provides for an increase in the employee contribution rates: from 5.5% to 6.5% plus an additional 1% phased-in over 7 years beginning in the first year, meaning after 12 months, after the law s effective date for PERS. Employers are required to contribute at an actuarially determined rate in the PERS. The actuarially determined contribution includes funding for cost-of-living adjustments, noncontributory death benefits, and post-retirement medical premiums. Three Year Trend Information for PERS Year Ended June 30 Annual Pension Cost (APC) 2009 Deferral Ch. 19 P.L. Principal and Interest Cost Percentage of APC Contributed Net Pension Obligation 2016 $853,192 $36, % $889, ,764 35, % 857, ,857 34, % 821,764 30

38 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (7) PENSION PLANS (CONTINUED) Contribution Requirements (continued) During the fiscal year ended June 30, 2009, the College deferred 50% of its normal and accrued PERS liability. The deferred amount will be paid back with interest over 15 years. During the fiscal year ending June 30, 2016, the College made a principal payment of $36,024. ABP Contributions - The College made total ABP contributions for the year ended June 30, 2016 of $1,510,530, $1,465,629 for the year ended June 30, 2015, and $1,447,785 for the year ended June 30, The College received reimbursement from the State of New Jersey for the 2016 fiscal year of $1,190,393, $1,157,825 for the 2015 fiscal year, and $1,151,194 for the 2014 fiscal year for employer costs incurred on behalf of employees classified as Academic by the State of New Jersey who were enrolled in the ABP plan. DCRP Contributions - The College made total DCRP contributions for the year ended June 30, 2016 of $12,402, $9,419 for the year ended June 30, 2015 and $7,846 for the fiscal year ended June 30, (8) ACCOUNTING AND FINANCIAL REPORTING FOR PENSION - GASB 68 Public Employees Retirement System (PERS) At June 30, 2016, the College reported a liability of $22,277,239 for its proportionate share of the net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of July 1, 2014 which was rolled forward to June 30, The College's proportion of the net pension liability was based on a projection of the College's long-term share of contributions to the pension plan relative to the projected contributions of all participating members, actuarially determined. At June 30, 2015, the College's proportion was percent, which was a decrease of percent from its proportion measured as of June 30,

39 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (8) ACCOUNTING AND FINANCIAL REPORTING FOR PENSION - GASB 68 Public Employees Retirement System (PERS) (Continued) For the year ended June 30, 2016, the College recognized pension expense of $1,106,722. At June 30, 2016, the College reported deferred outflows of resources and deferred inflows of resources related to PERS from the following sources: Deferred Inflow of Resources Deferred Outflow of Resources Changes of assumptions $2,392,398 Differences between expected and actual experience 531,457 Net difference between projected and actual earnings on pension plan investments $ 358,175 Changes in proportion and differences between College contributions and proportionate share of contributions 1,592,774 College contributions subsequent to the measurement date 982,296 $1,950,949 $3,906,151 The $889,216 reported as deferred outflows of resources related to pensions resulting from College contributions subsequent to the measurement date (i.e. for the school year ending June 30, 2016, the plan measurement date is June 30, 2015) will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended June 30 Amount 2016 $113, , , , ,104 32

40 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (8) ACCOUNTING AND FINANCIAL REPORTING FOR PENSION - GASB 68 (CONTINUED) Actuarial Assumptions The total pension liability for the June 30, 2015 measurement date was determined by an actuarial valuation as of July 1, 2014, which rolled forward to June 30, This actuarial valuation used the following assumptions, applied to all periods in the measurement. Inflation 3.04 Percent Salary Increases: Percent (based on age) Thereafter Percent (based on age) Investment Rate of Return 7.90 Percent The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2008 to June 30, To the extent that actual experience deviates from these assumptions, the emerging liabilities may be higher or lower than anticipated. The more the experience deviates, the larger the impact on future financial statements. Mortality Rates Mortality rates were based on the RP-2000 Combined Healthy Male and Female Mortality Tables (setback one year for males and females) for service retirement and beneficiaries of former members with adjustments for mortality improvements from the base year of 2012 based on Projection Scale AA. The RP-2000 Disabled Mortality Tables (setback 3 years for males and setback 1 year for females) are used to value disabled retirees. 33

41 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (8) ACCOUNTING AND FINANCIAL REPORTING FOR PENSION - GASB 68 (CONTINUED) Public Employees Retirement System (PERS) (Continued) Long-Term Rate of Return In accordance with State statute, the long-term expected rate of return on plan investments (7.9% at June 30, 2015) is determined by the State Treasurer, after consultation with the Directors of the Division of Investments and Division of Pensions and Benefits, the board of trustees and the actuaries. The long-term expected rate of return was determined using a building block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. Best estimates of arithmetic real rates of return for each major asset class included in PERS's target asset allocation as of June 30, 2015 and 2014 are summarized in the following table: 6/30/2015 Long-Term Expected Asset Class Target Allocation Real Rate of Return Cash 5.00% 1.04% Mortgages 2.10% 1.62% High Yield Bonds 2.00% 4.03% Inflation Indexed Bonds 1.50% 3.25% Broad U.S. Equities 27.25% 8.52% Developed Foreign Markets 12.00% 6.88% Emerging Market Equities 6.40% 10.00% Private Equity 9.25% 12.41% Hedge Funds/Absolute Returns 12.00% 4.72% Real Estate (Property) 2.00% 6.83% Commodities 1.00% 5.32% U.S. Treasuries 1.75% 1.64% Investment Grade Credit 10.00% 1.79% Global Debt ex US 3.50% (0.40)% REIT 4.25% 5.12% % 34

42 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (8) ACCOUNTING AND FINANCIAL REPORTING FOR PENSION - GASB 68 (CONTINUED) Public Employees Retirement System (PERS) (Continued) Discount Rate The discount rate used to measure the total pension liability was 4.90% and 5.39% as of June 30, 2015 and 2014, respectively. This single blended discount rate was based on the long-term expected rate of return on pension plan investments of 7.9%, and a municipal bond rate of 3.80% and 4.29% as of June 30, 2015 and 2014, respectively, based on the Bond Buyer Go 20-Bond Municipal Bond Index which includes tax-exempt general obligation municipal bonds with an average rating of AA/Aa or higher. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made based on the average of the last five years of contributions made in relation to the last five years of actuarially determined contributions. Based on those assumptions, the plan's fiduciary net position was projected to be available to make projected future benefit payments of current plan members through Therefore, the long-term expected rate of return on plan investments was applied to projected benefit payments through 2033, and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability. Sensitivity of the collective net pension liability to changes in the discount rate. The following presents the College s proportionate share of the collective net pension liability of the participating employers as of June 30, 2015 calculated using the discount rate as disclosed above as well as what the collective net pension liability would be if it was calculated using a discount rate that is 1 -percentage point lower or 1- percentagepoint higher than the current rate: 1% Decrease 3.90% June 30, 2015 At Current Discount Rate 4.90% 1% Increase 5.90% College s proportionate share of the pension liability $27,687,882 $22,277,239 $17,740,995 35

43 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (8) ACCOUNTING AND FINANCIAL REPORTING FOR PENSION - GASB 68 (CONTINUED) Public Employees Retirement System (PERS) (Continued) Pension plan fiduciary net position. Detailed information about the pension plan s fiduciary net position is available in the separately issued Financial Report for the State of New Jersey Public Employees Retirement System (PERS). The report may be obtained at State of New Jersey Division of Pensions and Benefits P.O. Box 295 Trenton, New Jersey (9) POST RETIREMENT HEALTH BENEFITS Chapter 384 of Public Laws 1987 and Chapter 6 of Public Laws 1990 required TPAF and PERS, respectively, to fund post-retirement medical benefits for those State employees who retire after accumulating 25 years of credited service or on a disability retirement. P.L. 2007, c. 103 amended the law to eliminate the funding of postretirement medical benefits through the TPAF and PERS. It created separate funds outside of the pension plans for the funding and payment of post-retirement medical benefits for retired State employees and retired educational employees. As of June 30, 2015, there were 107,314 retirees eligible for post-retirement medical benefits, and the State contributed $1.25 billion on their behalf. The cost of these benefits is funded through contributions by the State in accordance with Chapter 62, P.L Funding of post-retirement medical premiums changed from a pre-funding basis to a pay-as-you-go basis beginning in Fiscal Year The State is also responsible for the cost attributable to Chapter 126, P.L. 1992, which provides free health benefits to members of PERS and the Alternate Benefit Program who retired from a Board of Education or County College with 25 years of service. The State paid $214.1 million toward Chapter 126 benefits for 19,056 eligible retired members in fiscal year (10) DEFERRED REVENUE AND STUDENT DEPOSITS Deferred Revenue and Student Deposits at June 30 consisted of the following: Tuition and Fees $2,003,467 $1,912,283 Student Deposits 444, ,687 Auxiliary Revenue 30,693 23,315 Other 6,488 33,168 TOTAL $2,485,491 $2,409,453 36

44 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (11) UNRESTRICTED NET POSITION Unrestricted Net Position appropriated and reserved at June 30, 2016 and 2015 is as follows: Appropriated Budget $ 235,761 $ 695,001 Unappropriated 3,074,865 2,897,632 Net Pension Liability (21,304,333) (21,050,775) TOTAL $(17,993,707) $(17,458,142) (12) RESTRICTED NET POSITION-OTHER CAPITAL The Other Capital Net Position consists of reserves set aside for the following purposes: Equipment $74,579 $74,579 (13) DEPOSITS HELD IN CUSTODY FOR OTHERS Deposits held in custody for others amounted to $364,280 and $317,471 at June 30, 2016 and 2015, respectively. These funds are received by the College and disbursed only on the instructions and behalf of the organization from whom the funds were received. (14) ACCRUED SICK AND VACATION PAY Employees of the College are entitled to paid vacation, sick days and personal days depending on job classification, length of service and other factors. The College has calculated its liability for these items as follows: Sick Pay $2,408,235 $2,615,936 Vacation Pay 1,454,577 1,522,966 TOTAL $3,862,812 $4,138,902 37

45 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (15) RESTATEMENT As stated in Note 8, in 2015, the College implemented GASB 68. As a result the College s Net Position at June 30, 2014 was restated as follows: Governmental Activities Beginning Net Position 06/30/14 $ 74,436,665 Adjustments: Recognition of Net Pension Liability (Measurement Date) (21,201,539) Beginning Net Position 06/30/14 (as Restated) $ 53,235,126 The Unrestricted Net Asset balance was restated to properly reflect the College s Net Position under GASB 68. (16) LITIGATION, CLAIMS AND CONTINGENT LIABILITIES In the ordinary conduct of its business, the College may be a party to litigation. At June 30, 2016, in the opinion of management based upon consultation with legal counsel, there were no matters pending or threatened which would have a material adverse effect on the financial position of the College. 38

46 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 (17) RISK MANAGEMENT The College is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions, injuries to employees; and natural disasters. The College maintains commercial insurance coverage covering each of those risks of loss. Management believes such coverage is sufficient to preclude any significant uninsured losses to the College. Settled claims have not exceeded the commercial coverage in any of the past three fiscal years. The College is currently a member of the Somerset County Joint Insurance Fund (the Fund ). The Fund provides its members with property, liability, workers compensation, motor vehicle, and other miscellaneous coverages. The Fund is a risk-sharing public entity risk pool that is both an insured and self-administered group established for the purpose of providing low-cost insurance coverage for their members in order to keep local property taxes at a minimum. As a member of the Fund, the College could be subject to supplemental assessments in the event of deficiencies. If the assets of the Fund were to be exhausted, members would become responsible for their respective shares of the Fund s liabilities. The College self-funds its New Jersey Unemployment Compensation Insurance claims. The balance of this fund amounted to $140,561 and $240,561 at June 30, 2016 and (18) SUBSEQUENT EVENTS The College has evaluated subsequent events occurring after the financial statement date through November 29, 2016 which is the date the financial statements were available to be issued. Based on this evaluation, the College has determined that no subsequent events have occurred which require disclosure in the financial statements. (19) CONTINGENCIES The College receives financial assistance from the State of New Jersey and the U.S. Government in the form of grants. Entitlement to the funds is generally conditional upon compliance with terms and conditions of the grant agreements and applicable regulations, including the expenditure of the funds for eligible purposes. The State and Federal grants received and expended in the fiscal year were subject to federal Uniform Guidance and New Jersey OMB which mandates that grant revenues and expenditures be audited in conjunction with the College s annual audit. Substantially, all grants and cost reimbursements are subject to financial and compliance audits by the grantors. College management does not believe such an audit would result in material amounts of disallowed costs. 39

47 ROSTER OF OFFICIALS AT JUNE 30, 2016 NAME EXPIRATION OF TERM (Vacant) Raymond H. Bateman*** 11/01/2016 Michael Kalafer*** 11/01/2016 Dr. Paul J. Hirsch*** 11/01/2017 Dr. Catherine Hebson McVicker** 12/31/2015 Lisa Midgette*** 12/31/2017 Gary Hazard** 12/31/2018 Peter G. Schoberl* 10/31/2016 Robert P. Wise** 11/01/2017 Tracey DiFrancesco Zaikov*** Thomas Wilson*** Margaret M. Windrem* W. Timothy Howes*** 12/31/ /31/ /31/ /01/2015 Juan Torres Interim Hunterdon and Somerset Indefinite County Executive Superintendent of Schools Kevin Rosario Alumni Representative 6/2017 Robert P. Wise Gary Hazard Tracy DiFrancesco Zaikov Lisa Midgette Peter G. Schoberl (Vacant) Raymond H. Bateman Robert P. Wise Mauro, Savo, Camerino & Grant DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaun, P.C. Michael McDonough John Trojan Keith Pomakoy Charles Chulvick Jacki Belin Nancy Moore *State Appointments **Hunterdon County Appointments ***Somerset County Appointments OFFICERS COLLEGE ADMINISTRATION Chairperson Vice-Chairperson-Hunterdon County Vice-Chairperson- Somerset County Secretary Treasurer Board of School Estimate Board of School Estimate Legal Counsel Labor Counsel President Vice President of Finance and Facilities Interim Sr. Vice President for Academic Affairs Vice President for Technology, Assessment and Planning Vice President for Strategic Programs and Development Vice President for HR and Labor Relations 40

48 SCHEDULE "R-1" College's Proportion Share College's of the Net Pension Plan Fiduciary College's Proportionate Liability (Asset) Net Position Fiscal Year Proportion Share Share of College's as a percentage as a percentage Ending of the Net Pension the Net Pension Covered-Employee of it's Covered- of the total June 30, Liability (Asset) Liability (Asset) Payroll Employee Payroll Pension Liability % $ 21,201,539 $ 7,027, % 40.71% % 18,939,318 7,580, % 42.74% % 22,277,239 7,854, % 38.21% SCHEDULE OF THE COLLEGE'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY PUBLIC EMPLOYEES RETIREMENT SYSTEM LAST TEN YEARS 41 Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available.

49 SCHEDULE "R-2" Contributions in Contributions as Relation to the College's a Percentage of Fiscal Year Contractually Contractually Contribution Covered- Covered- Ending Required Required Deficiency Employee Employee June 30, Contribution Contributions (Excess) Payroll Payroll 2014 $ 835,859 $ 835,859 $ -0- $ 7,027, $ 11.89% , , ,580, % , , ,854, % SCHEDULE OF THE COLLEGE'S CONTRIBUTIONS PUBLIC EMPLOYEES RETIREMENT SYSTEM LAST TEN YEARS Note: Schedule is intended to show ten year trend. Additional years will be reported as they become available. 42

50 SCHEDULE "R-3" SCHEDULES RELATED TO ACCOUNTING AND REPORTING FOR PENSION (GASB 68) NOTE TO RSI III FOR THE FISCAL YEAR ENDED JUNE 30, 2016 PUBLIC EMPLOYEES RETIREMENT SYSTEM (PERS) Change in benefit terms None Change in assumptions The calculation of the discount rate used to measure the total pension liability is dependent upon the long-term expected rate of return, and the municipal bond index rate. There was a change in the municipal bond index rate from the prior measurement date (4.29%) to the current measurement date (3.80%), resulting in a change in the discount rate from 5.39% to 4.90%. This change in the discount rate is considered to be a change in actuarial assumptions under GASB No

51 SUPPLEMENTARY INFORMATION

52 SCHEDULE 1 SHEET #1 A S S E T S LIABILITIES AND FUND BALANCES JUNE JUNE JUNE JUNE 30, , , , 2015 CURRENT FUNDS CURRENT FUNDS Unrestricted: Unrestricted: Cash $ 2,943,728 $ 3,983,016 Liabilities and Reserves: Accounts Receivable 4,360,845 3,943,024 Accounts Payable $ 736,439 $ 825,109 Allowance for Doubtful Accounts (575,786) (531,375) Salaries Payable 188, ,190 Due from State/Counties 111, ,299 Payroll Deductions 537,051 1,135,104 Inventories 24,770 27,070 Student Deposits 444, ,687 Prepaid Expenses 392, ,455 Deferred Revenue 2,040,648 1,968,766 Restricted: Restricted: Cash $ 5,602,573 $ 5,906,595 Liabilities and Reserves: Accounts Receivable 289, ,448 Accounts Payable $ 122,219 $ 198,605 Due from Somerset County 1,082 17,365 Prepaid Expenses 118, ,071 Salaries Payable 11,816 5,579 Due from State of New Jersey 2, Deferred Revenue - - Reserved For: Unemployment Insurance 140, ,561 Vacation Pay 1,454,577 1,522,965 Sick Pay 2,408,235 2,615,936 Total Liabilities and Reserves $ 4,137,408 $ 4,583,646 Fund Balance - Reserved $ 1,876,073 $ 2,046,178 TOTAL RESTRICTED $ 6,013,481 $ 6,629,824 TOTAL RESTRICTED $ 6,013,481 $ 6,629,824 TOTAL CURRENT FUNDS $ 13,271,469 $ 14,754,313 TOTAL CURRENT FUNDS $ 13,271,469 $ 14,754,313 BALANCE SHEETS JUNE 30, 2016 AND JUNE 30, Total Liabilities and Reserves $ 3,947,362 $ 4,531,856 Fund Balances: Unreserved: Designated For: Subsequent Years Expenditures $ 235,741 $ 695,001 Undesignated 3,074,885 2,897,632 Total Fund Balance $ 3,310,626 $ 3,592,633 TOTAL UNRESTRICTED $ 7,257,988 $ 8,124,489 TOTAL UNRESTRICTED $ 7,257,988 $ 8,124,489

53 SCHEDULE 1 SHEET #2 A S S E T S LIABILITIES AND FUND BALANCES JUNE JUNE JUNE JUNE 30, , , , 2015 PLANT FUNDS PLANT FUNDS Unexpended: Unexpended: Due to Other Funds $ (2,021,374) $ (1,328,597) Accounts Payable $ 675,268 $ 337,098 Due From County of Somerset 5,279,444 5,051,382 Due From State of New Jersey 5,243,274 13,987,570 Total Liabilities $ 675,268 $ 337,098 Accounts Receivable - 50,000 Fund Balance - Reserved 7,826,076 17,423,257 Total Unexpended $ 8,501,344 $ 17,760,355 Total Unexpended $ 8,501,344 $ 17,760,355 Investment in Plant: Investment in Plant: Land $ 573,794 $ 573,794 Capital Lease Liability $ 403,649 $ - Building and Site Development 104,734,782 94,244,370 Equipment 13,994,582 11,037,714 Library Books 1,774,100 1,774,100 Net Investment in Plant $ 68,566,393 $ 59,321,526 Less Accumulated Depreciation (52,107,216) (48,308,452) Net Invested In Plant $ 68,970,042 $ 59,321,526 Net Invested In Plant $ 68,970,042 $ 59,321,526 TOTAL PLANT FUNDS $ 77,545,965 $ 77,156,460 TOTAL PLANT FUNDS $ 77,545,965 $ 77,156,460 AGENCY FUNDS AGENCY FUNDS Cash $ 361,468 $ 333,235 Accounts Payable $ 2,016 $ 37,544 Petty Cash Fund Deposits Held in Custody for Others 364, ,471 Accounts Receivable 2,235 10,522 Prepaid Expenses 2,543 11,208 TOTAL AGENCY FUNDS $ 366,296 $ 355,015 TOTAL AGENCY FUNDS $ 366,296 $ 355,015 BALANCE SHEETS JUNE 30, 2016 AND JUNE 30, Replacement: Replacement: Cash $ 74,579 $ 74,579 Fund Balance - Reserved $ 74,579 $ 74,579 Total Replacement $ 74,579 $ 74,579 Total Replacement $ 74,579 $ 74,579 Total Invested In Plant $ 121,077,258 $ 107,629,978

54 SCHEDULE 2 COMPARATIVE TOTALS YEAR ENDED JUNE 30, 2016 (MEMORANDUM ONLY) CURRENT FUNDS PLANT FUNDS INVESTMENT JUNE 30 UNRESTRICTED RESTRICTED UNEXPENDED REPLACEMENT IN PLANT Revenues and Other Additions: Education and General Revenues $ 48,681,590 $ - $ - $ - $ - $ 48,681,590 $ 47,723,805 Grants - 10,857,352 3,004, ,862,252 23,348,931 Interest on Investments 11, ,403 13,286 Miscellaneous Income 227, , ,255 Auxiliary Enterprises Revenues 1,967, ,967,719 1,920,205 Expended for Plant Facilities ,944,265 13,944,265 2,754,566 Total Revenues and Other Additions $ 50,888,564 $ 10,857,352 $ 3,004,900 $ - $ 13,944,265 $ 78,695,081 $ 75,997,048 Transfers and Additions (Deductions) (421,338) 9, (411,357) (179,144) Net Increase/(Decrease) for the Year $ (282,007) $ (170,105) $ (9,597,181) $ - $ 9,648,516 $ (400,777) $ 8,021,508 Fund Balance at Beginning of Year 3,592,633 2,046,178 17,423,257 74,579 59,321,526 82,458,173 74,436,665 Fund Balance at End of Year $ 3,310,626 $ 1,876,073 $ 7,826,076 $ 74,579 $ 68,970,042 $ 82,057,396 $ 82,458,173 STATEMENTS OF CHANGES IN FUND BALANCES FOR THE YEARS ENDED JUNE 30, 2016 AND Expenditures and Other Deductions: Education and General Expenditures $ 48,433,921 $ - $ - $ - $ - $ 48,433,921 $ 46,979,303 Auxiliary Enterprises Expenditures 2,315, ,315,312 2,211,106 Scholarships - 8,478, ,478,486 8,594,632 Other Deductions - 2,558,952 12,602,081-4,295,749 19,456,782 10,011,355 Total Expenditures and Other Deductions $ 50,749,233 $ 11,037,438 $ 12,602,081 $ - $ 4,295,749 $ 78,684,501 $ 67,796,396

55 SCHEDULE 3 COMPARATIVE TOTALS (MEMORANDUM ONLY) CURRENT YEAR JUNE 30 UNRESTRICTED RESTRICTED REVENUES Tuition and Fees $ 30,262,213 $ 30,262,213 $ 29,377,935 State Appropriations 5,814,377 5,814,377 5,740,870 County Appropriations: County of Somerset $ 9,194,717 County of Hunterdon 3,410,283 $ 12,605,000 12,605,000 $ 12,605,000 12,605,000 $ 48,681,590 $ 48,681,590 47,723,805 EXPENDITURES Instruction $ 20,270,499 $ 20,270,499 $ 20,132,830 Research 852, , ,887 Public Service 1,603,367 1,603,367 1,346,917 Academic Support 3,799,120 3,799,120 3,697,815 Student Services 5,459,789 5,459,789 5,201,043 Institutional Support 11,332,860 11,332,860 10,976,361 Operation and Maintenance of Plant 5,116,157 5,116,157 4,916,450 Total Educational and General $ 48,433,921 $ 48,433,921 $ 46,979,303 Auxiliary Services $ 2,315,312 $ 2,315,312 $ 2,211,106 Scholarships: Federal $ 6,840,067 State 1,254,623 Local 383,796 $ 8,478,486 $ 8,478,486 $ 8,478,486 $ 8,594,632 Other Expenses 2,558,952 2,558,952 3,367,892 TOTAL EXPENDITURES $ 50,749,233 $ 11,037,438 $ 61,786,671 $ 61,152,933 TRANSFERS AND ADDITIONS (DEDUCTIONS) Transfers and Additions (Deductions) (421,338) 9,891 (411,447) (179,144) Miscellaneous Additions (Charges) Net Increase/(Decrease) in Fund Balance $ (282,007) $ (170,195) $ (452,202) $ 703,153 STATEMENTS OF CURRENT FUNDS REVENUES, EXPENDITURES AND OTHER CHANGES FOR THE YEARS ENDED JUNE 30, 2016 AND Governmental Grants: Federal $ 7,460,313 State 1,659,740 $ 9,120,053 $ 9,120,053 $ 9,120,053 $ 10,450,990 Local Grants 1,737,299 1,737,299 1,690,991 $ 10,857,352 $ 10,857,352 $ 12,141,981 Interest on Investments $ 11,403 $ 11,403 $ 13,286 Miscellaneous Income 227, , ,953 Auxiliary Services 1,967,719 1,967,719 1,920,205 TOTAL REVENUE $ 50,888,564 $ 10,857,352 $ 61,745,916 $ 62,035,230

56 SCHEDULE 4 SHEET #1 SCHEDULE OF CURRENT EXPENDITURES FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 YEAR ENDED JUNE 30, Instruction: Communication and Languages $ 1,623,643 $ 1,652,973 English 2,256,597 2,259,083 Honors College 42,641 34,014 Social Science and Education 2,462,044 2,445,352 Fitness and Wellness 305, ,323 Ophthalmics 198, ,178 Science and Engineering 3,301,975 3,325,115 Nursing 1,796,927 1,708,802 Mathematics 2,443,461 2,390,926 Visual and Performing Arts 1,867,458 1,796,758 Computer Science 1,388,757 1,376,612 Business and Public Service 2,123,194 2,156,960 Paralegal Studies 94, ,094 Contracted Instruction 131, ,271 Faculty Travel and Development 31,051 44,596 Health Information Technology 108, ,775 Medical Assisting 94,329 90,998 $ 20,270,499 $ 20,132,830 Research: Academic Program Development and Partnership $ 367,149 $ 328,373 Institutional Research and Assessment 241, ,979 RVCC Foundation 220, ,561 Academic Assessment 22,984 9,974 $ 852,129 $ 707,887 Public Service: Workforce Development Non-Credit $ 158,326 $ 236,225 Non-Credit Allied Health 75,849 74,712 Small Business Development Center 85,184 81,066 Youth Academic Programs 305, ,243 Professional Development 88, ,337 Personal Enrichment Lifelong Learning Institute 3,253 6,601 Trades 1,840 23,908 Automotive 378, ,252 Advanced Manufacturing 170,729 - Massage Therapy 28,526 - Cosmetology 306, ,573 $ 1,603,367 $ 1,346,917 Academic Support: Instructional Technology and Computing $ 732,454 $ 768,479 Technology Help Desk 677, ,510 Dean of Academic Affairs 806, ,012 Library 1,246,269 1,226,182 University Center 1,726 1,931 Bound Brook Outreach 3 1,717 RVCC at Bridgewater 135, ,000 Workforce Development & Career Education 108,862 86,897 Allied Health 90,463 97,087 $ 3,799,120 $ 3,697,815 Student Services: Academic Services, EOF $ 127,438 $ 122,465 Advising and Counseling Services 1,176,660 1,192,749 Academic Support Center 449, ,051 First Year Experience 183, ,598 Intercollegiate Athletics 442, ,916 Financial Aid 315, ,471 Testing Center 403, ,977 Enrollment Services 654, ,758 Student Life 298, ,735 Transfer and Career Services 478, ,614 Dean of Student Services 369, ,741 Disability Services 314, ,705 Service Learning 188, ,147 Fitness Center 57,240 44,116 $ 5,459,789 $ 5,201,043 48

57 SCHEDULE 4 SHEET #2 SCHEDULE OF CURRENT EXPENDITURES FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 YEAR ENDED JUNE 30, Institutional Support: Human Resources $ 882,317 $ 902,963 Commencement 52,846 66,857 Insurance 303, ,669 Internal Services 746, ,872 Legal and Audit 228, ,846 Purchasing and Contracts 436, ,132 Security 1,028, ,412 Budget and Finance 989, ,403 Office of Senior Vice President Academic Affairs 666, ,004 Office of Vice President Finance and Facilities 419, ,987 Office of Vice President Technology, Assessment and Planning 512, ,829 Technology Services 2,251,022 2,061,138 Office of the President 334, ,812 Conference Services 170, ,485 Public Relations 813, ,194 Admissions 440, ,544 Graphics 143, ,220 Print Shop 130, ,284 Office of Vice President Strategic Programs and Development 173, ,740 Office of the Board of Trustees 13,432 10,500 General Institution- Expenses 364, ,844 Dean of Multicultural Affairs 234, ,626 $ 11,332,860 $ 10,976,361 Operation and Maintenance of Plant: Facilities and Grounds $ 3,770,602 $ 3,967,267 Housekeeping 1,345, ,183 $ 5,116,157 $ 4,916,450 Auxiliary Services: Bookstore $ - $ - Children's Campus 586, ,240 Community Athletics 224, ,707 Cultural Programs 90,097 89,280 Food Service 12,942 23,341 Customized Training 198, ,746 Planetarium 191, ,287 Theatre 1,011, ,505 $ 2,315,312 $ 2,211,106 TOTAL $ 50,749,233 $ 49,190,409 49

58 SCHEDULE 5 SCHEDULE OF CURRENT AUXILIARY REVENUES FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 YEAR ENDED JUNE 30, Food Service $ 41,932 $ 40,191 Bookstore 391, ,625 Community Athletics 290, ,742 Children's Campus 460, ,893 Customized Training 117, ,814 Theatre 447, ,947 Planetarium 217, ,993 TOTAL $ 1,967,719 $ 1,920,205 50

59 SCHEDULE 6 SCHEDULE OF SALARY EXPENDITURES FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 During the year, the following salary expenditures were recorded: Instructional $ 15,964,953 $ 15,907,245 Research 610, ,687 Public Service 732, ,613 Academic Support 2,447,438 2,269,916 Student Services 3,753,544 3,693,126 Institutional Support 4,593,084 4,598,742 Physical Plant 1,634,422 1,461,689 Auxiliary Services 1,352,569 1,224,874 TOTAL $ 31,088,828 $ 30,327,892 51

60 SINGLE AUDIT SECTION

61 S CC S UPLEE, CLOONEY & COMPANY C ERTIFIED P UBLIC A CCOUNTANTS 308 East Broad Street, Westfield, New Jersey Telephone Fax info@scnco.com 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 The Honorable President and Members of the Board of Trustees Raritan Valley Community College Somerville, New Jersey We have audited, in accordance with the auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Raritan Valley Community College (the "College") as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the College s financial statements, and have issued our report thereon dated November 29, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the College s control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements but not for the purpose of expressing an opinion on the effectiveness of the College s internal control. Accordingly, we do not express an opinion on the effectiveness of Raritan Valley Community College s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the College s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 52

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63 S CC S UPLEE, CLOONEY & COMPANY C ERTIFIED P UBLIC A CCOUNTANTS 308 East Broad Street, Westfield, New Jersey Telephone Fax info@scnco.com INDEPENDENT AUDITOR S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR FEDERAL AND STATE FINANCIAL ASSISTANCE PROGRAMS AND WITH INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE BY THE UNIFORM GUIDANCE AND NEW JERSEY OMB CIRCULAR The Honorable President and Members of the Board of Trustees Raritan Valley Community College Somerville, New Jersey Report on Compliance for Each Major Federal and State Program We have audited Raritan Valley Community College s compliance with the types of compliance requirements described in the OMB Compliance Supplement and the New Jersey OMB State Grant Compliance Supplement that could have a direct and material effect on each of Raritan Valley Community College s major federal and state programs for the year ended June 30, The College s major federal and state programs are identified in the summary of auditor s results section of the accompanying Schedule of Findings and Questioned Costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal and state programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Raritan Valley Community College s major federal and state programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; Audit Requirements for Federal Awards, Uniform Guidance; and New Jersey OMB Those standards, Uniform Guidance and New Jersey OMB require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal or state program occurred. An audit includes examining, on a test basis, evidence about Raritan Valley Community College s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal and state program. However, our audit does not provide a legal determination of the Raritan Valley Community College s compliance. 54

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