WILLIAMSBURG TECHNICAL COLLEGE. Report on Examination of Basic Financial Statements and Additional Information Year Ended June 30, 2018

Transcription

1 WILLIAMSBURG TECHNICAL COLLEGE Report on Examination of Basic Financial Statements and Additional Information Year Ended June 30, 2018

2 TABLE OF CONTENTS Year Ended June 30, 2018 Area Commission 1 Independent Auditor s Report 2 Management s Discussion and Analysis 5 BASIC FINANCIAL STATEMENTS Statement of Net Position 14 Statement of Revenues 15 Statement of Cash Flows 16 Notes to Financial Statement 17 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Proportionate Share of the Net Pension Liability South Carolina Retirement System (SCRS) and Police Officer s Retirement System (PORS) 44 Schedule of Retirement Plan Contributions South Carolina Retirement System (SCRS) and Police Officer s Retirement System (PORS) 45 Schedule of Proportionate Share of OPEB Liability 46 Schedule of College OPEB Contributions 47 SINGLE AUDIT ACT REQUIREMENTS Independent Auditors 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 48 Report on Compliance with Requirements Applicable to each Major Program and Internal Control over Compliance In Accordance with OMB Circular A 50 Schedule of Expenditures of Federal Awards 52 Notes to Schedule of Expenditures of Federal Awards 53 Schedule of Findings and Questioned Costs 54 Disposition of Prior Year Audit Findings 55 Independent Auditor s Report on Compliance for the State Lottery Tuition Assistance Program and Report on Internal Control over Complaince 56

3 AREA COMMISSION June 30, 2017 Name County of Residence Office Held Term Expires Gardner, Johnny M. Kingstree, SC Poston, Henry M. Kingstree, SC Green, S. Christine Lane, SC Braxton, Stephen C. Hemingway, SC Brown, Walter H. Kingstree, SC Stuckey, James S. Stuckey, SC Williams, Gertrude P. Greeleyville, SC Cooper Jr., Harmon Hemingway, SC Howell III, Sidney L. Hemingway, SC Ward, Toni M. Kingstree, SC Williamsburg Chairman 7/1/15 Williamsburg Vice Chairman 7/1/15 Williamsburg Secretary- 7/1/12 Treasurer Williamsburg Member 7/1/14 Williamsburg Member 7/1/14 Williamsburg Member 7/1/14 Williamsburg Member 7/1/15 Williamsburg Member 7/1/15 Williamsburg Member 7/1/15 Williamsburg Member 7/1/18 There is one (1) vacancy on the commission. All members are appointed for three years and until their successors are appointed and qualify. 1

4 INDEPENDENT AUDITOR S REPORT To the President and Members of the Area Commission of Williamsburg Technical College Kingstree, South Carolina Report on the Financial Statements We have audited the accompanying financial statements of Williamsburg Technical College (the College ), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise the 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 control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 508 HAMPTON STREET, 1 ST FLOOR COLUMBIA, SOUTH CAROLINA FAX MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 2

5 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Williamsburg Technical College as of June 30, 2018, and the changes in financial position and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matters As discussed in Note 17, the College implemented Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, as of July 1, This standard significantly changes the accounting for the College s other postemployment benefits and related disclosures. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information - Accounting principles generally accepted in the United States of America require that the Management s Discussion and Analysis (on pages 5 through 13), the Schedules of College s Proportionate Share of the Net Pension Liability (on page 44), the Schedules of College Pension Contributions (on page 45), the Schedules of College s Proportionate Share of the Net OPEB Liability (on page 46), and the Schedules of College OPEB Contributions (on page 47), be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise Williamsburg Technical College s basic financial statements. The Schedule of Expenditures of Federal Awards (as required by the Uniform Guidance), as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. 3

6 The Schedule of Expenditures of Federal Awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 26, 2018, on our consideration of Williamsburg Technical College s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the College s 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 the College s internal control over financial reporting and compliance. Report on State Lottery Tuition Assistance Program We have also issued our report dated September 26, 2018 on our consideration of Williamsburg Technical College s administration of the State Lottery Tuition Assistance Program and on our tests of its compliance with certain provisions of State law and Policy and Procedure of the State Board for Technical and Comprehensive Education. Columbia, South Carolina September 26,

7 MANAGEMENT S DISCUSSION AND ANALYSIS This section of Williamsburg Technical College s (the College ) presents management s discussion and analysis of the College s financial performance during the fiscal year ended June 30, This discussion should be read in conjunction with financial statements and the notes thereto, which follow this section. The financial statement presentation required by GASB Statements No. 34 and No. 35 provides a comprehensive, entity-wide perspective of the College's assets, liabilities, Net Position, revenues, expenses, changes in Net Position, and cash flows and replaces the fund-group perspective previously required. In accordance with GASB Statement No. 74, Accounting and Financial Reporting for Pensions, the College has included the proportionate share of the State s net pension liability on its books effective June 30, In accordance with GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, the College has included the proportionate share of the State s net OPEB liability on its books effective June 30, Financial Highlights The assets and deferred outflow of resources for Williamsburg Technical College exceeded its liabilities and deferred inflow of resources at June 30, 2018, by 498,015 (net position). The unrestricted net position is a deficit of ($3,414,948) as a result of the net pension liability of $6,725,992 and other post-employment benefits (OPEB) liability of $4,937,499 and related deferred inflows and outflows. The amount available to meet the College s ongoing obligations, excluding the net pension and OPEB liabilities, deferred inflows, and deferred outflows is $8,936,673. The College has no capital debt during the current fiscal year. The College received and spent capital funding in the amount of $1,088,173 from State and other sources that provided the resources for its ongoing efforts to improve and update equipment and buildings. This included the construction in progress of our new facilities management building. This building should be completed by the end of The College experienced an operating loss of $5,638,654 as reported in the Statement of Revenues, Expenses, and Changes in Net Position. However, the operating loss was partially offset by State appropriations, which are the College s largest unrestricted revenue source, of $2,211,683 local appropriations of $1,031,336, and Federal Grants of $1,688,573. Capital appropriations and grants of $1,149,048 covered the remaining loss. Overview of the Financial Statements The College is engaged only in Business-Type Activities (BTA) that are financed in part by fees charged to students for educational services. Accordingly, its activities are reported using the three financial statements required for proprietary funds: Statement of Net Position; Statement of Revenues, Expenses, and Changes in Net Position; and Statement of Cash Flows. 5

8 The Statement of Net Position presents the financial position of the College at the end of the fiscal year and requires classification of assets and liabilities into current and noncurrent categories. The difference between total assets and total liabilities is reflected in the Net Position section, which displays net position in three broad categories: invested in capital assets (net of related debt), restricted, and unrestricted. Net position are one indicator of the current financial condition of the College, while the change in net position is an indicator that the overall financial condition has improved or worsened during the year. The Statement of Revenues, Expenses, and Changes in Net position replace the fund perspective with the entity-wide perspective. Revenues and expenses are categorized by operating and nonoperating, and expenses are reported by natural classification. The Statement of Cash Flows will aid readers in identifying the sources and uses of cash by the major categories of operating, capital and related financing, noncapital financing, and investing activities. This statement also emphasizes the College s dependence on state and county appropriations by separating them from operating cash flows. STATEMENT OF NET POSITION The Statement of Net Position presents the financial position of the College at the end of the fiscal year and classifies assets and liabilities into current and non-current categories. The Statement of Net Position is a point in time financial statement, which presents to the reader a snapshot of the end of the year financial data. Assets are property owned by the college. Liabilities are what the College owes to others. Current assets are generally expected to be converted into cash, sold or consumed within a year. Current liabilities are obligations that are due to be paid within the year. Noncurrent assets and liabilities are those that are longer term in nature. Net position represents the difference between total assets and total liabilities. Net financial position is displayed in three broad categories: net investment in capital assets, restricted and unrestricted. Net position is one indicator of the current financial condition of the College, while the change in net position is an indicator that the overall financial condition has improved or deteriorated during the year. Beginning in fiscal year ended June 30, 2015, as a result of the implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, the College is required to recognize a portion of the unfunded net pension liability of the cost sharing plan. Beginning in fiscal year ended June 30, 2018, as a result of the implementation of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, the College is required to recognize a portion of the unfunded other post-employment benefits (OPEB) of the state cost sharing plan. Recognition of these liabilities has a material impact on the College s overall net position. The resulting decrease in the College s net assets is not indicative of a deterioration of the financial condition of the college. 6

9 Financial Analysis of the College as a Whole This schedule is a condensed version of the College s Assets, Liabilities and Net Position and is prepared from the Statement of Net Position. Condensed Summary of Net Position (thousands of dollars) Assets (As Restated) Increase/ (Decrease) Percent Change Current Assets $ 10,278 $ 9,676 $ % Long-Term Investments - 1,000 (1,000) % Capital Assets, Net 1, % Total Assets 11,366 11,370 (4) -0.04% Deferred Outflows on Net Pension Liability 1, % Deferred Outflows on Net OPEB Liability % Total Deferred Outflows 1,215 1, % Total Assets and Deferred Outflows of Resources 12,581 12, % Liabilities Current Liabilities 2,167 2,891 (724) % Noncurrent Liabilities 11,925 12,087 (162) -1.34% Total Liabilities 14,092 14,978 (886) -5.92% Deferred Inflows on Net Pension Liability % Deferred Inflows on OPEB Liability Total Deferred Inflows % Total Liabilities and Deferred Inflows of Resources 14,433 15,315 (882) -5.76% Net Position Invested in Capital Assets 1, % Restricted - Nonexpendable % Unrestricted (3,415) (3,519) % Total Net Postion $ (2,320) $ (2,818) $ % The unrestricted net position was ($3.4) million at June 30, The deficit is a result of the implementation of GASB Nos. 68 and 71 in the prior fiscal years, and GASB No. 75 in the current fiscal year, which resulted in a ($3.4) million negative impact on the unrestricted net position as of June 30, 2018 to record a net pension and OPEB obligation and related deferred inflows and outflows. The net pension and OPEB obligation will be paid by future contribution rates which are expected to be funded by future state and tuition revenues and not funded by current unrestricted net position. If the negative impact of recognizing the net pension and OPEB obligation were to be removed from unrestricted net position at June 30, 2018, the College would show a positive unrestricted net position of $ 8.9 million. 7

10 The College s investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding reflects approximately forty seven percent of its total Net Position. The College uses these capital assets to provide services to students; consequently, these assets are not available for future spending. Approximately twenty-five of the College s Net Position excluding Pension and OPEB requirements represents resources that are subject to external restrictions on how they may be used. Unrestricted Net Position of $6.7 million or approximately seventy percent may be used to meet the College s ongoing unrestricted obligations. Pictorial presentations of specific areas of the College s financial condition on June 30, 2018 appear in the charts and graphs that follow. 8

11 Cash decrease by $611,062 during the fiscal year. The majority of the decrease is due to the construction in progress of our new building and the establishment of our SIM labs for nursing. A summary schedule of the decrease in cash flows for the fiscal years ended June 30, 2018 and 2017 is as follows: Condensed Summary of Cash Flows (thousands of dollars) Cash Provided (Used) by: Increase/ (Decrease) Percent Change Operating Activities $ (5,211) $ (4,286) $ (925) % Non-Capital Financing Activities 5,035 4, % Capital and Related Financing Activities (438) 474 (912) % Investing Activities 3 4 (1) % Net Increase (Decrease) in Cash $ (611) $ 619 $ (1,230) % 9

12 This schedule is a summary of the College s operating results for the fiscal year. Condensed Summary of Revenues, Expenses and Changes in Net Position (thousands of dollars) Revenues: (As Restated) Increase/ (Decrease) Percent Change Student Tuition and Fees $ 326 $ 428 $ (102) % Grants and Contracts 1,423 1, % Auxiliary Programs (12) % Other Operating Revenues (47) % Total Operating Revenues 1,792 1,923 (131) -6.81% State Appropriations 2,212 1, % County Appropriations 1,031 1,069 (38) -3.55% Refunded to Grantor - (26) % Gain on Sale of Assets - 10 (10) % Investment Income % Grants and Contracts 1,689 1, % Total Non-Operating Revenues 4,988 4, % Total Revenues 6,780 6, % Expenses Salaries 3,291 3, % Benefits 1, % Scholarships % Utilities % Supplies and other services 2,062 1, % Depreciation % Total Operating Expenses 7,431 5,955 1, % Capital Contributions, Other Revenue, Expenses State Capital Appropriations 1, % Capital Grants Capital Contributions. and Transfers Change in Net Position 1, % (140) % Net Position, Beginning of year Net Position End of year, as Originally Reported Restatement for Net OPEB Liability Net Position End of year, as Restated (2,818) 1,668 (4,486) 2,306 (2,306) (5,124) 5,124 $ (2,320) $ (2,818) $ % A large portion of the revenue included in the Grants and Contracts category represents student financial assistance, which is used to pay tuition and fees for students to attend the College. An approximation of tuition and fees paid from this source of funds has been recognized as a reduction of tuition and fees in the form of scholarship allowances, in order to eliminate duplication of revenues. 10

13 Revenue by Category 2% 0% 0% 7% 9% 33% 11% Student Tuition and Fees Grants and Contracts Auxiliary Programs Other Operating Revenues Other Operating Revenues Total Operating Revenues State Appropriations 25% 8% 0% 5% 0% 0% County Appropriations Refunded to Grantor Gain on Sale of Assets Investment Income In excess of $4.6 million of the College s operating expenses occurred in the salary and benefits classification. Supplies and Other Services is the second largest classification of expenses and include expenses not otherwise classified. Of the total operational expenses approximately 62 percent are identified as instructional, academic support, and student services support. Note 13 in the accompanying notes to the financial statements identify operating expenses by functional classification. 7% 3% 2% Expenses by Function Instruction Academic Support Student Services 14% 12% 39% Operation and Maintenance of Plant Institutional Support Scholarships 11% 12% Auxiliary Enterprises Depreciation 11

14 Capital Asset and Debt Administration The college has completed a capital needs assessment and is preparing a comprehensive plan to address the plant needs. Currently the college has no capital debt. The College has recorded compensated absences payable in the amount of $292,472 for obligations to employees of which $29,740 is considered a current liability. The college has recorded the required pension noncurrent liability of $6,725,992 and the OPEB liability of $4,937,499. There is no current portion, because the benefits obligations payable over the next 12 months do not exceed the plan assets. The long term liabilities details are located in Note 10. The change in capital assets during the fiscal year is as follows: Beginning Capital Assets, Net of Accumulated Depreciation $ 694,389 Assets Purchased During the Year 210,517 Construction in Progress 334,149 Depreciation Expense Recorded During the Current Year 150,882 Ending Capital Assets Net of Accumulated Depreciation $1,088,173 GASB Statements Beginning in fiscal year ended June 30, 2015, as a result of the implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, the College is required to recognize a portion of the unfunded net pension liability of the cost sharing plan. Beginning in fiscal year ended June 30, 2018, as a result of the implementation of GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, the College is required to recognize a portion of the unfunded other post-employment benefits (OPEB) of the state cost sharing plan. Recognition of these liabilities has a material impact on the College s overall net position.. Economic Factors The County Funding appears to be stable for budget year The state has an increase for employer share of Retirement and health insurance. The state will provide funding for the state funded employees and the college will have to fund the balance of cost. There is discussion of a capital bond bill in the state for the 2019 session and we have made our request for a Science and Technology building. Enrollment is trending down across all of higher education, however WTC s enrollment has remained somewhat stable. WTC has seen a slight increase in curriculum students as well as in workforce training students. The increase in skills and knowledge required even for entry level jobs in the current job market is likely to support continued positive enrollment in both curriculum and workforce training for the foreseeable future. The college maintains strong positive connections with local business and industry through advisory board participation and frequent site visits. 12

15 Williamsburg Technical College continues to be on the approved list for the phase one training for the Boeing Project. The College has continued the Production Technician Certificate, training formerly known as the SCMC program which provides basic manufacturing and safety training that is relevant to many local and state industries. The classes are in high demand by students as well as employers and continue to be successful with placement of qualified workers with local employers. The College continues to maintain a strong partnership with the Williamsburg County Economic Development Board Currently, Federal Pell and State LTA covers most of the students tuition and fees. This year the College continued the two distributions of Pell to assist students with the rising cost of books and supplies for the two main semesters of the school year. Pell is awarding year around for the year. Lottery tuition assistance (LTA) applies only after federal Pell has been exhausted and then for the balance of tuition costs up to the maximum per credit hour established by State Board for Technical and Comprehensive Education (SBTCE) and approved by Commission on Higher Education (CHE). The amount of LTA for the year will remain at $1,140 for a full time student. Currently LTA funds cannot be used for books and supplies or other cost of attendance. In addition, the SC Legislature selected WTC to implement the Williamsburg Promise, a tuition assistance program for qualified students that also assisted with the cost of books and fees. The successful implementation of the Williamsburg Promise program during the year prompted the expansion of the program during the year to the 34 plaintiff school districts under the new title, South Carolina Promise. The College s Practical Nursing Program continues to be successful with very high licensure pass 100% rates and very high job placement rates. WTC has been granted approval by the State Board of Nursing to establish an Associate Degree Nursing Program (RN) with date to begin the ADN program August The college added a Phlebotomy certificate in the spring 0f 2107 and had a 100% pass rate for the first class and subsequent classes as well. In addition, grant funds are being sought from multiple sources to supplement and accelerate the growth of our Allied Health Programs. The College has partnered with the local high schools to assist with recruiting and funding dual enrollment students. The state has designated funding for dual enrollment to the school districts and we are working on how funds will be shared between the district and the college. The school district has encouraged and embraced the increasing of dual enrollment offerings. We feel that this is a win for all; an increase in college enrollment along with high school students having the ability to graduate with up to 24 hours of college credits. 13

16 STATEMENT OF NET POSITION June 30, 2018 ASSETS Current Assets: Cash and Cash Equivalents $ 7,900,807 Short-Term Investments 1,666,658 Short-Term Investments - Restricted for Endowments 7,081 Accounts Receivable, Net 647,802 Inventory 46,204 Prepaid Expenses 9,696 Total Current Assets 10,278,248 Non-Current Assets: Capital Assets Not Being Depreciated 461,339 Capital Assets, Net of Depreciation 626,834 Total Non-Current Assets 1,088,173 Total Assets 11,366,421 Deferred Outflows of Resources: Deferred Outflows on Net Pension Liability 1,033,904 Deferred Outflows on Net OPEB Liability 180,900 Total Deferred Outflows of Resources 1,214,804 LIABILITIES Total Assets and Deferred Outflows of Resources $ 12,581,225 Current Liabilities: Accounts Payable $ 36,200 Payroll Related Liabilities 35,707 Retainage Payable 8,166 Compensated Absences Payable 29,740 Unearned Revenues 2,057,403 Total Current Liabilities 2,167,216 Noncurrent Liabilities: Compensated Absences Payable 262,732 Net Pension Liability 6,725,992 Net OPEB Liability 4,937,499 Total Non-Current Liabilities 11,926,223 Total Liabilities 14,093,439 Deferred Inflows of Resources: Deferred Inflows on Net Pension Liability 340,672 Deferred Inflows on Net OPEB Liability 466,808 Total Deferred Inflows of Resources 807,480 Total Liabilities and Deferred Inflows of Resources 14,900,919 NET POSITION Invested in Capital Assets 1,088,173 Restricted For Nonexpendable Purposes: Endowment 7,081 Unrestricted (Deficit) (3,414,948) Total Net Position (Deficit) $ (2,319,694) The accompanying Notes to Financial Statements are an integral part of this statement. 14

17 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2018 REVENUES Operating Revenues Student Tuition and Fees, net of scholarship allowances of $2,273,114 $ 326,069 Federal Grants and Contracts 496,217 State Grants and Contracts 916,184 Private Grants and Contracts 10,242 Auxiliary Programs, net of scholarship allowances of $179,015 26,824 Other Operating Revenues 16,999 Total Operating Revenues 1,792,535 EXPENSES Operating Expenses Salaries 3,290,668 Benefits 1,329,567 Scholarships 487,460 Utilities 110,459 Supplies and other services 2,062,153 Depreciation 150,882 Total Operating Expenses 7,431,189 Operating Gain (Loss) (5,638,654) Non-Operating Revenues Federal Grants and Contracts 1,688,573 State Appropriations 2,211,683 County Appropriations 1,031,336 Investment Income 56,029 Net Non-Operating Revenues 4,987,621 Gain (Loss) Before Other Revenues, Expenses, Gains or Losses (651,033) Capital Contributions, Other Revenues, Expenses State Capital Appropriations 1,049,548 Federal Capital Grant 99,500 Change in Net Position 498,015 NET POSITION Net Position (Deficit), Beginning of Year, as Restated (2,817,709) Net Position (Deficit), End of Year $ (2,319,694) The accompanying Notes to Financial Statements are an integral part of this statement. 15

18 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2018 CASH FLOWS FROM OPERATING ACTIVITIES Student Tuition and Fees, net of scholarship allowances $ 355,869 Federal, State and Local Grants and Contracts 1,556,257 Auxiliary Enterprise, net of scholarship allowances 26,824 Other Receipts 16,999 Scholarships (487,460) Payments to Vendors (2,205,037) Payments to Employees (Salary and Benefits) (4,474,647) Net Cash Used in Operating Activities (5,211,195) CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIES State Appropriations 2,353,633 County Appropriations 992,867 Federal, State and Local Contracts 1,688,573 Net Cash Provided by Non-Capital Financing Activities 5,035,073 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES State Capital Appropriations 7,627 Federal Capital Grants 99,500 Purchase of Capital Assets (544,666) Net Cash Used in Capital and Related Financing Activities (437,539) CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments 2,599 Net Cash Provided by Investing Activities 2,599 Net Decrease in Cash Cash - Beginning of year (611,062) 8,511,869 Cash - End of Year $ 7,900,807 Reconciliation of Net Operating Revenue (Expenses) to Net Cash Provided (Used in) Operating Activities Operating Income (Loss) $ (5,638,654) Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used in) Operating Activities: Depreciation 150,882 Allowance for bad debts 11,221 Pension Charges 102,419 OPEB Charges 99,190 (Increase) Decrease in: Accounts Receivable (118,429) Inventory (13,651) Prepaid Expenses (289) Increase (Decrease) in: Accounts Payable (37,872) Payroll Related Liabilities (105,630) Retainage Payable 8,166 Compensated Absences 49,609 Unearned Revenue 281,843 Total Adjustments 427,459 Net Cash Used in Operating Activities $ (5,211,195) The accompanying Notes to Financial Statements are an integral part of this statement. 16

19 Notes to the Financial Statements June 30, 2018 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations: Williamsburg Technical College (the College ), a member institution of the South Carolina Technical College System, provides a range of educational programs to meet the needs of the adult population of Williamsburg county and the surrounding area. Included in this range of programs are technical and occupational associate degrees, diploma and certificate curricula that are consistent with the needs of employers in the College s service area. As an integral part of this mission, the College provides a program of continuing education designed to satisfy the occupational demands of employers through retraining and upgrading the skills of individual employees. The College also provides a variety of developmental education programs, support services, and offerings to assist students in meeting their personal and professional educational objectives. Reporting Entity: The financial reporting entity, as defined by the Governmental Accounting Standards Board (GASB) Codification Section 2100, Defining the Financial Reporting Entity, consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion could cause the financial statements to be misleading or incomplete. GASB Codification Section 2600, Reporting Entity and Component Unit Presentation and Disclosure, provides criteria for determining whether certain organizations should be reported as component units based on the nature and significance of their relationship with a primary government and classifies reporting requirements for those organizations. Based on these criteria, the College evaluates potential component units on an annual basis and presents component units that are deemed significant. As of June 30, 2018, the College has determined there are no significant component units. Accordingly, the financial statements include the accounts of Williamsburg Technical College as the primary government. Williamsburg Technical College is a component unit of the State of South Carolina and is reported in the State s Comprehensive Annual Financial Report. Financial Statements: The financial statement presentation for the College meets the requirements of GASB Codification Sections , Financial Reporting Entity, and Co5, Colleges and Universities. The financial statement presentation provides a comprehensive, entity-wide perspective of the College s assets, liabilities, net position, revenues, expenses, changes in net position, and cash flows. Basis of Accounting: For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Student tuition and auxiliary enterprise fees are presented net of scholarships applied to student accounts, while stipends and other payments made directly are presented as scholarship expenses. Cash and Cash Equivalents: For purposes of the statement of cash flows, the College considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Investments: Deposits and investments for the College are governed by the South Carolina Code of Laws, Section , Investment of Funds. GASB Statement No. 40, Deposits and Investment Risk Disclosures an amendment to GASB Statement No. 3, requires disclosures related to deposit risks, such as custodial credit risk, and investment risks, such as credit risk (including custodial credit risk and concentrations of credit risks) and interest rate risk. The college accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statement of revenues, expenses and changes in net position. 17

20 Notes to the Financial Statements June 30, 2018 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounts Receivable: Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff. Accounts receivable also include amounts due from the Federal government, State and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College s grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Allowances for losses for student accounts receivable are established based upon actual losses experienced in prior years and evaluations of the current account portfolio. Inventories: Inventories for internal use are valued at cost. Inventories for resale are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Capital Assets: Capital assets are recorded at cost at the date of acquisition or fair market value at the date of donation in the case of gifts. The College follows capitalization guidelines established by the State of South Carolina. All land is capitalized, regardless of cost. Qualifying improvements that rest in or on the land itself are recorded as depreciable land improvements. Major additions, renovations, and other improvements that add to the usable space, prepare existing buildings for new uses, or extend the useful life of an existing building are capitalized. The College capitalizes movable personal property with a unit value in excess of $5,000 and a useful life in excess of two years and depreciable land improvements, buildings and improvements, and intangible assets costing in excess of $100,000. Routine repairs and maintenance and library materials, except individual items costing in excess of $5,000, are charged to operating expenses in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 15 to 50 years for buildings and improvements and land improvements and 2 to 25 years for machinery, equipment, and vehicles. Unearned Revenues and Deposits: Unearned revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Unearned revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences: Employee vacation pay expense is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year end as a component of long-term liabilities in the statement of net position and as a component of benefits expenses in the statement of revenues, expenses, and changes in net position. The liability for accrued compensated absences includes all accrued vacation leave, unused holiday leave, and related fringe benefits. Other compensated absences, such as sick pay, do not vest; accordingly, no liability is accrued. Pensions: For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the South Carolina Retirement System (SCRS) and the South Carolina Police Officers Retirement System (PORS) and additions to/deductions from SCRS and PORS fiduciary net position have been determined on the accrual basis of accounting as they are reported by SCRS and PORS in accordance with generally accepted accounting principles (GAAP). For this purpose, revenues are recognized when earned and expenses are recognized when incurred. Benefit and refund expenses are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value. 18

21 Notes to the Financial Statements June 30, 2018 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Postemployment Benefits Other Than Pensions (OPEB): For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the South Carolina Retiree Health Insurance Trust Fund (SCRHITF) and additions to/deductions from the SCRHITF s fiduciary net position have been determined on the accrual basis of accounting as they are reported by the SCRHITF in accordance with generally accepted accounting principles (GAAP). For this purpose, revenues are recognized when earned and expenses and benefits are recognized when incurred. Claims liabilities are reported when it is probable that a loss has occurred and the amount can be reasonably estimated. Investments are reported at fair value. Deferred Outflows of Resources and Deferred Inflows of Resources: Deferred outflows of resources represent consumption of net position that is applicable to a future period. Deferred inflows of resources represent acquisition of net position that is applicable to a future period. Changes in net pension and net OPEB liabilities not included in expenses are reported as deferred outflows of resources or deferred inflows of resources. Employer contributions subsequent to the measurement date of the net pension and net OPEB liabilities are reported as deferred outflows of resources. Net Position: The College s net position is displayed in three components: net investment in capital assets, restricted (with expendable and nonexpendable components separately displayed), and unrestricted. Net Investment in Capital Assets: This component consists of the College s capital assets, net of accumulated depreciation, and reduced by outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of net investment in capital assets. Deferred outflows of resources and deferred inflows of resources, if any, attributable to the acquisition, construction, or improvement of those assets or related debt are also included. Restricted: This component consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Restricted - expendable: The restricted expendable component includes resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Restricted - nonexpendable: The nonexpendable restricted component consists of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. Unrestricted: The unrestricted component is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position. This includes resources derived from student tuition and fees, appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College and may be used at the discretion of the governing board to meet current expenses for any purpose. The resources also include auxiliary enterprises which are substantially self-supporting activities that provide services for students, faculty and staff. The College s policy is to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted resources are available. 19

22 Notes to the Financial Statements June 30, 2018 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Non-Exchange Transactions: Non-exchange transactions involving financial or capital resources are transactions in which the college either gives value to another party without directly receiving equal value in exchange or receives value from another party without directly giving equal value in exchange. The types of non-exchange transactions the college engages in include Voluntary non-exchange transactions (certain grants and donations), and Imposed non-exchange revenue (fines and penalties), and Government-mandated non-exchange transactions. Voluntary non-exchange transactions usually involve eligibility requirements that must be met before transactions are recognized. The eligibility requirements can include one or more of the following: a. The recipient has the characteristics specified by the provider. b. Time requirements specified by the provider have been met. c. The provider offers resources on a reimbursement basis and allowable costs have been incurred under the applicable program. d. The provider s offer of resources is contingent upon a specified action of the recipient and that action occurred. Assets from imposed non-exchange revenues are recognized when an enforceable legal claim to the assets arise or when the resources are received. Classification of Revenues: The College has classified its revenues as either operating or non-operating revenues according to the following criteria: Operating revenues: Operating revenues generally result from exchange transactions to provide goods or services related to the College s principal ongoing operations. These revenues include (1) student tuition and fees received in exchange for providing educational services, and other related services to students; (2) receipts for scholarships where the provider has identified the student recipients; (3) fees received from organizations and individuals in exchange for miscellaneous goods and services provided by the College; and (4) grants and contracts that are essentially the same as contracts for services that finance programs the College would not otherwise undertake. Non-operating revenues: Non-operating revenues include activities that have the characteristics of nonexchange transactions. These revenues include gifts and contributions, appropriations, investment income, and any grants and contracts that are not classified as operating revenue or restricted by the grantor to be used exclusively for capital purposes. Scholarship discounts and allowances: Student tuition and fee revenues are reported net of scholarship discounts and allowances in the statement of revenues, expenses and changes in net position. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students behalf. Certain grants, such as Pell and other Federal, state or nongovernmental programs are recorded as either operating or non-operating revenues in the College s financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded a scholarship discount and allowance. 20

23 Notes to the Financial Statements June 30, 2018 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Classification of Expenses: The College has classified its expenses as either operating or non-operating expenses according to the following criteria: Operating expenses: Operating expenses generally result from the purchasing of goods or services related to the College s principal ongoing operations. These expenses include (1) salaries and benefits paid to employees for providing educational services and other related services to students; (2) utilities to maintain the educational buildings; (3) supplies and services for goods and services provided to the College; (4) scholarship expenses for student financial assistance; and (5) depreciation expense for capital items. Non-operating expenses: Non-operating expenses include activities that have the characteristics of non-exchange transactions. These expenses include interest expense and capital items purchased. Auxiliary Enterprises and Internal Service Activities: revenues generated by bookstores and vending. Auxiliary enterprise revenues primarily represent Capitalized Interest: The College s policy is to capitalize as a component of construction in progress interest cost in excess of earnings on debt associated with capital projects that will be capitalized in the applicable capital asset categories upon completion. During the fiscal year ended June 30, 2018, no interest costs were capitalized. Income Taxes: The College is a political subdivision of the State of South Carolina and is, therefore, generally exempt from federal and state income taxes under applicable federal and state statutes and regulations on related income. Certain activities of the College may be subject to taxation as unrelated business income. Restricted Cash and Investments: The College has funds which were donated by private citizens as a nonexpendable endowment to the College. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Allowances for losses for student accounts receivable are established and based upon actual losses experienced in prior years and evaluations of the current account. Adoption of New Accounting Standard: Effective for the fiscal year ending June 30, 2018, the College adopted GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, which amended reporting and disclosure requirements for governments providing postemployment benefits other than pensions (other postemployment benefits or OPEB). This Statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures for other postemployment benefits (including medical and dental insurance) that are provided to employees through a trust. For defined benefit OPEB, this Statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. 21

24 Notes to the Financial Statements June 30, 2018 NOTE 2 CASH, DEPOSITS, AND INVESTMENTS The following schedule reconciles cash and investments as reported on the Statement of Net Position to footnote disclosure provided for deposits and investments. Statement of Net Position: Primary Government Cash and Cash Equivalents $ 7,900,807 Short-Term Investments (Restricted) 7,081 Short-Term Investments 1,666,658 Total Cash and Investments on Statement of Net Position $ 9,574,546 Disclosure, Deposits and Investments Plus Reconciling Items: Carrying Value Deposits: Held by Financial Institutions $ 9,574,546 DEPOSITS State law requires that a bank or savings and loan association receiving State funds must secure the deposits by deposit insurance, surety bonds, collateral securities, or letters of credit to protect the State against any loss. Custodial Credit Risk Custodial credit risk for deposits is the risk that a government will not be able to recover deposits if the depository financial institution fails or to recover the value of collateral securities that are in the possession of an outside party if the counterparty to the deposit transaction fails. The College s policy requires all banks that receive deposits of the College to secure the deposits with collateral securities to protect the College against any loss. The bank balances on deposit for Williamsburg Technical College at June 30, 2018, were $9,987,813. Of these, $8,987,813 were exposed to custodial credit risk as uninsured and collateralized with securities held by the pledging institutions in the College s name. The carrying value of these deposits was $9,574,546. All certificates of deposit, regardless of maturity are reported as deposits for custodial credit risk categorization. Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment. Williamsburg Technical College does not maintain deposits that are denominated in a currency other than the United States dollar; therefore, the college is not exposed to this risk. INVESTMENTS The College is authorized, by the South Carolina Code of Laws, Section , to invest in obligations of the United States and its agencies, obligations of the State of South Carolina and its political subdivisions, collateralized or federally insured certificates of deposit, and collateralized repurchase agreements. Temporary cash investments of the College are short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near maturity that they present insignificant risks of changes in value because of changes in interest rates. Restricted investments include $7,081 held for endowment. 22

25 Notes to the Financial Statements June 30, 2018 NOTE 2 CASH, DEPOSITS, AND INVESTMENTS (Continued) INVESTMENTS (Continued) The College s investments and maturities at June 30, 2018, none of which are with the State Treasurer s Office are presented below. Investment Maturities (in years) Fair Value Less More Investment Type Amount Than Than 10 Certificate of Deposit... $1, 673,739 $1,673,739 $ - $ $ Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the College will not be able to recover the investments value or collateral securities that are in the possession of the outside party. The College does not have an investment policy regarding credit risk. The College does not currently have investments that are exposed to credit risk. Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The College does not have an investment policy regarding credit risk. The College does not currently have investments that are exposed to credit risk. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government s investment in a single issuer. The College places no limits on the amount the College may invest in any one issuer. Currently the College has no investments which are exposed to concentration of credit risk. Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. It occurs because potential purchasers of debt securities will not agree to pay face value for those securities if interest rates subsequently increase, thereby affording potential purchasers more favorable rates on essentially equivalent securities. The College does not have an investment policy regarding interest rate risk. The College has no formal policy regarding interest rate risk, but manages it by limiting investments to short-term Certificates of Deposit. Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment. Williamsburg Technical College does not maintain investments that are denominated in a currency other than the United States dollar; therefore, the college is not exposed to this risk. 23

26 Notes to the Financial Statements June 30, 2018 NOTE 3 ACCOUNTS RECEIVABLE Accounts receivable as of June 30, 2018, including applicable allowances, are summarized as follows: Student Accounts $ 590,161 Federal Grants and Contracts 158,658 State Grants and Contracts 127,414 County Appropriations 57,724 Interest Receivable 122,325 Gross Receivables 1,056,282 Less: Allowance for Doubtful Accounts - Students (408,480) Receivables, Net $ 647,802 Allowances for losses for student accounts receivable are established based upon actual losses experienced in prior years and evaluations of the current account portfolio. NOTE 4 CAPITAL ASSETS Capital assets activity for the year ended June 30, 2018 was as follows: Balance 7/1/2017 Increases Decreases Balance 6/30/2018 Capital Assets not being Depreciated: Land $ 127,190 $ - $ - $ 127,190 Construction in Progress - 334, ,149 Total Capital Assets not being Depreciated 127, , ,339 Other Capital Assets: Depreciable Land Improvements 124, ,416 Buildings and Improvements 3,128, ,128,862 Machinery, Equipment, and Other 1,375, ,517-1,586,400 Vehicles 109, ,305 Intangibles 308, ,720 Total Other Capital Assets at Historical Cost 5,047, ,517-5,257,703 Less Accumulated Depreciation for: Depreciable Land Improvements (12,442) (12,442) - (24,884) Buildings and Improvements (2,954,635) (19,358) - (2,973,993) Machinery, Equipment, and Other (1,136,575) (111,075) - (1,247,650) Vehicles (67,615) (8,007) - (75,622) Intangibles (308,720) - - (308,720) Total Accumulated Depreciation (4,479,987) (150,882) - (4,630,869) Other Capital Assets, Net 567,199 59, ,834 Capital Assets, Net $ 694,389 $ 393,784 $ - $ 1,088,173 24

27 Notes to the Financial Statements June 30, 2018 NOTE 5 PENSION PLANS The South Carolina Public Employee Benefit Authority (PEBA), which was created July 1, 2012, administers the various retirement systems and retirement programs managed by its Retirement Division. PEBA has an 11-member Board of Directors, appointed by the Governor and General Assembly leadership, which serves as co-trustee and co-fiduciary of the systems and the trust funds. By law, the State Fiscal Accountability Authority (SFAA), which consists of five elected officials, also reviews certain PEBA Board decisions regarding the funding of the South Carolina Retirement Systems (Systems) and serves as a co-trustee of the Systems in conducting that review. Effective July 1, 2017, the Retirement System Funding and Administration Act of 2017 assigned the PEBA Board of Directors as the Custodian of the Retirement Trust Funds and assigned SC PEBA and the Retirement Systems Investment Commission (RSIC) as co-trustees of the Retirement Trust Funds. PEBA issues a Comprehensive Annual Financial Report (CAFR) containing financial statements and required supplementary information for the Systems Pension Trust Funds. The CAFR is publicly available through the Retirement Benefits link on PEBA s website at or a copy may be obtained by submitting a request to PEBA, 202 Arbor Lake Drive, Columbia, SC PEBA is considered a division of the primary government of the state of South Carolina and, therefore, retirement trust fund financial information is also included in the comprehensive annual financial report of the state. Plan Description: The South Carolina Retirement System (SCRS), a cost-sharing multiple-employer defined benefit pension plan, was established effective July 1, 1945, pursuant to the provisions of Section of the South Carolina Code of Laws for the purpose of providing retirement allowances and other benefits for employees of the state, its public school districts and political subdivisions. The State Optional Retirement Program (State ORP) is a defined contribution plan that is offered as an alternative to SCRS to certain newly hired state, public school, and higher education employees. State ORP participants direct the investment of their funds into a plan administered by one of four investment providers. The South Carolina Police Officers Retirement System (PORS), a cost-sharing multiple-employer defined benefit pension plan, was established effective July 1, 1962, pursuant to the provisions of Section of the South Carolina Code of Laws for the purpose of providing retirement allowances and other benefits for police officers and firemen of the state and its political subdivisions. Membership: Membership requirements are prescribed in Title 9 of the South Carolina Code of Laws. A brief summary of the requirements under each system is presented below. SCRS - Generally, all employees of covered employers are required to participate in and contribute to the system as a condition of employment. This plan covers general employees and teachers and individuals newly elected to the South Carolina General Assembly beginning with the November 2012 general election. An employee member of the system with an effective date of membership prior to July 1, 2012, is a Class Two member. An employee member of the system with an effective date of membership on or after July 1, 2012, is a Class Three member. 25

28 Notes to the Financial Statements June 30, 2018 NOTE 5 PENSION PLANS (Continued) Membership (Continued) State ORP - As an alternative to membership in SCRS, newly hired state, public school, and higher education employees and individuals newly elected to the S.C. General Assembly beginning with the November 2012 general election have the option to participate in the State Optional Retirement Program (State ORP), which is a defined contribution plan. State ORP participants direct the investment of their funds into a plan administered by one of four investment providers. PEBA assumes no liability for State ORP benefits. Rather, the benefits are the liability of the investment providers. For this reason, State ORP programs are not part of the retirement systems trust funds for financial statement purposes. Employee and employer contributions to the State ORP are at the same rates as SCRS. A direct remittance is required from the employers to the member s account with investment providers for the employee contribution and a portion of the employer contribution (5 percent). A direct remittance is also required to SCRS for the remaining portion of the employer contribution and an incidental death benefit contribution, if applicable, which is retained by SCRS. PORS - To be eligible for PORS membership, an employee must be required by the terms of his employment, by election or appointment, to preserve public order, protect life and property, and detect crimes in the state; to prevent and control property destruction by fire; or to serve as a peace officer employed by the Department of Corrections, the Department of Juvenile Justice, or the Department of Mental Health. Probate judges and coroners may elect membership in PORS. Magistrates are required to participate in PORS for service as a magistrate. PORS members, other than magistrates and probate judges, must also earn at least $2,000 per year and devote at least 1,600 hours per year to this work, unless exempted by statute. An employee member of the system with an effective date of membership prior to July 1, 2012, is a Class Two member. An employee member of the system with an effective date of membership on or after July 1, 2012, is a Class Three member. Benefits: Benefit terms are prescribed in Title 9 of the South Carolina Code of Laws. PEBA does not have the authority to establish or amend benefit terms without a legislative change in the code of laws. Key elements of the benefit calculation include the benefit multiplier, years of service, and average final compensation. A brief summary of the benefit terms for each system is presented below. SCRS - A Class Two member who has separated from service with at least five or more years of earned service is eligible for a monthly pension at age 65 or with 28 years credited service regardless of age. A member may elect early retirement with reduced pension benefits payable at age 55 with 25 years of service credit. A Class Three member who has separated from service with at least eight or more years of earned service is eligible for a monthly pension upon satisfying the Rule of 90 requirement that the total of the member s age and the member s creditable service equals at least 90 years. Both Class Two and Class Three members are eligible to receive a reduced deferred annuity at age 60 if they satisfy the five- or eightyear earned service requirement, respectively. An incidental death benefit is also available to beneficiaries of active and retired members of employers who participate in the death benefit program. The annual retirement allowance of eligible retirees or their surviving annuitants is increased by the lesser of one percent or five hundred dollars every July 1. Only those annuitants in receipt of a benefit on July 1 of the preceding year are eligible to receive the increase. Members who retire under the early retirement provisions at age 55 with 25 years of service are not eligible for the benefit adjustment until the second July 1 after reaching age 60 or the second July 1 after the date they would have had 28 years of service credit had they not retired. 26

29 Notes to the Financial Statements June 30, 2018 NOTE 5 PENSION PLANS (Continued) Benefits (Continued) PORS - A Class Two member who has separated from service with at least five or more years of earned service is eligible for a monthly pension at age 55 or with 25 years of service regardless of age. A Class Three member who has separated from service with at least eight or more years of earned service is eligible for a monthly pension at age 55 or with 27 years of service regardless of age. Both Class Two and Class Three members are eligible to receive a deferred annuity at age 55 with five or eight years of earned service, respectively. An incidental death benefit is also available to beneficiaries of active and retired members of employers who participate in the death benefit program. Accidental death benefits are also provided upon the death of an active member working for a covered employer whose death was a natural and proximate result of an injury incurred while in the performance of duty. The retirement allowance of eligible retirees or their surviving annuitants is increased by the lesser of one percent or five hundred dollars every July 1. Only those annuitants in receipt of a benefit on July 1 of the preceding year are eligible to receive the increase. Contributions: Contributions are prescribed in Title 9 of the South Carolina Code of Laws. The PEBA Board may increase the percentage rate in SCRS and POR employer and employee contribution rates on the basis of the actuarial valuations, but any such increase may not result in a differential between the employee and total employer contribution rate that exceeds 2.9 percent of earnable compensation for SCRS and 5 percent for PORS. An increase in the contribution rates adopted by the Board may not provide for an increase of more than one-half of one percent in any one year. If the scheduled employee and employer contributions provided in statute or the rates last adopted by the Board are insufficient to maintain a thirty year amortization schedule of the unfunded liabilities of the plans, the Board shall increase the contribution rates in equal percentage amounts for the employer and employee as necessary to maintain the thirty-year amortization period; this increase is not limited to one-half of one percent per year. If the most recent annual actuarial valuation of the Systems for funding purposes shows a ratio of the actuarial value of system assets to the actuarial accrued liability of the system (the funded ratio) that is equal to or greater than ninety percent, then the Board, effective on the following July first, may decrease the then current contribution rates upon making a finding that the decrease will not result in a funded ratio of less than ninety percent. Any decrease in contribution rates must maintain the 2.9 and 5 percent differentials between the SCRS and PORS employer and employee contribution rates, respectively. If contribution rates are decreased pursuant to this provision, and the most recent annual actuarial valuation of the system shows a funded ratio of less than ninety percent, then effective on the following July first, and annually thereafter as necessary, the Board shall increase the then current contribution rates until a subsequent annual actuarial valuation of the system shows a funded ratio that is equal to or greater than 90 percent. The Retirement System Funding and Administration Act increases employer contribution rates to percent for SCRS and percent for PORS, effective July 1, It also removes the 2.9 percent and 5 percent differential and increases and establishes a ceiling on employee contribution rates at 9 percent and 9.75 percent for SCRS and PORS, respectively. The employer contribution rates will continue to increase annually by 1 percent through July 1, The legislation s ultimate scheduled employer rate is percent for SCRS and percent for PORS. The amortization period is scheduled to be reduced one year for each of the next 10 years to a twenty year amortization schedule. The recent pension reform legislation also changes the long term funded ratio requirement from ninety to eighty-five. 27

30 Notes to the Financial Statements June 30, 2018 NOTE 5 PENSION PLANS (Continued) Contributions (Continued) Required employee contribution rates 1 are as follows: Fiscal Year 2018 Fiscal Year 2017 SCRS Employee Class Two 9.00% 8.66% Employee Class Three 9.00% 8.66% State ORP Employee 9.00% 8.66% PORS Employee Class Two 9.75% 9.24% Employee Class Three 9.75% 9.24% Required employer contribution rates 1 are as follows: Fiscal Year 2018 Fiscal Year 2017 SCRS Employer Class Two 13.41% 11.41% Employer Class Three 13.41% 11.41% Employer Incidental Death Benefit 0.15% 0.15% State ORP Employer Contribution % 11.41% Employer Incidental Death Benefit 0.15% 0.15% PORS Employer Class Two 15.84% 13.84% Employer Class Three 15.84% 13.84% Employer Incidental Death Benefit 0.20% 0.20% Employer Accidental Death Program 0.20% 0.20% 1 Calculated on earnable compensation as defined in Title 9 of the South Carolina Code of Laws. 2 Of this employer contribution, 5% of earnable compensation must be remitted by the employer directly to the ORP vendor to be allocated to the member s account with the remainder of the employer contribution remitted to the SCRS. Contributions to SCRS and PORS from the College were $415,670 and $1,258, respectively, for the year ended June 30,

31 Notes to the Financial Statements June 30, 2018 NOTE 5 PENSION PLANS (Continued) Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions: The collective net pension liability (NPL) is calculated separately for each system and represents that particular system s total pension liability determined in accordance with GASB No. 67 less that System s fiduciary net position. NPL totals, as of June 30, 2017, for SCRS and PORS are presented below. Total Plan Employers' Plan Fiduciary Pension Fiduciary Net Net Pension Net Position as a Percentage of System Liability Position Liability (Asset) the Total Pension Liability SCRS $ 48,244,437,494 $ 25,732,829,268 $ 22,511,608, % PORS $ 7,013,684,001 $ 4,274,123,178 $ 2,739,560, % The collective total pension liability is calculated by the Systems actuary, and each plan s fiduciary net position is reported in the Systems financial statements. The NPL is disclosed in accordance with the requirements of GASB 67 in the Systems notes to the financial statements and required supplementary information. Liability calculations performed by the Systems actuary for the purpose of satisfying the requirements of GASB Nos. 67 and 68 are not applicable for other purposes, such as determining the plans funding requirements. At June 30, 2018, the College reported $6,713,637 and $12,355 for its proportionate shares of the net pension liabilities of SCRS and PORS, respectively. The College s proportion of the net pension liability was based on the College s share of contributions to the pension plan relative to the contributions of all participating entities. At June 30, 2017, the College s SCRS proportion was %, which was a decrease of percent from its proportion measured as of June 30, The College s PORS proportion of the net pension liability at June 30, 2017 was %, which was a decrease of percent from its proportion measured as of June 30, For the year ended June 30, 2018, the College recognized pension expenses of $532,824 for SCRS and ($13,476) for PORS. At June 30, 2018, the College reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: South Carolina Retirement System (SCRS) Description Deferred Outflows of Resources Deferred Inflows of Resources Difference between Expected and Actual Experience $ 29,929 $ 3,721 Changes of Assumptions 393,011 Net Difference Between Projected and Actual Investment Earnings 187,414 Changes in Proportionate Share and Difference between College Contributions and Proportionate Share of Total Plan Employer Contributions 290,321 College Contributions Subsequent to the Measurement Date 415,670 Total Outflows and Inflows of Resources $1,026,024 $294,042 29

32 Notes to the Financial Statements June 30, 2018 NOTE 5 PENSION PLANS (Continued) Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) Police Officers Retirement System (PORS) Description Deferred Outflows of Resources Deferred Inflows of Resources Difference between Expected and Actual Experience $ 110 $ Changes of Assumptions 1,173 Net Difference Between Projected and Actual Investment Earnings 440 Changes in Proportionate Share and Difference between College Contributions and Proportionate Share of Total Plan Employer Contributions 4,899 46,630 College Contributions Subsequent to the Measurement Date 1,258 Total Outflows and Inflows of Resources $7,880 $46,630 The $415,670 for SCR and $1,258 for PORS reported as deferred outflows of resources related to pensions resulting from the College s contributions subsequent to the measurement date will be recognized as reductions 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 for the SCRS and PORS plans, respectively: Year Ended June 30, SCRS PORS Totals 2019 $ 35,927 $(14, 496) $ 21, ,335 (14,760) 176, ,007 (10,918) 133, (54,957) 166 ( 54,791) 2023 Net Balance of Deferred Outflows / (Inflows) of Resources $316,312 $(40,008) $276,304 Actuarial Assumptions and Methods: Actuarial valuations of the ongoing plan involve estimates of the reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and future salary increases. Amounts determined regarding the net pension liability are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. South Carolina state statute requires that an actuarial experience study be completed at least once in each five-year period. An experience report on the Systems was most recently issued as of July 1,

33 Notes to the Financial Statements June 30, 2018 NOTE 5 PENSION PLANS (Continued) Actuarial Assumptions and Methods (Continued) The June 30, 2017, total pension liability (TPL), net pension liability (NPL), and sensitivity information shown in this report were determined by the consulting actuary, Gabriel, Roeder, Smith and Company (GRS) and are based on an actuarial valuation performed as of July 1, The total pension liability was rolled-forward from the valuation date to the plans fiscal year end, June 30, 2017, using generally accepted actuarial principles. The Retirement System Funding and Administration Act of 2017 was signed into law April 25, 2017, and included a provision to reduce the assumed rate of return from 7.50% to 7.25%, effective July 1, As a result of this legislation, GRS made an adjustment to the calculation of the roll-forward total pension liability for this assumption change as of the measurement date of June 30, The following table provides a summary of the actuarial assumptions and methods used to calculate the TPL as of June 30, Actuarial cost method Investment rate of return 1 Projected salary increases Benefit adjustments 1 Includes inflation at 2.25% SCRS Entry age normal 7.25% 3.0% to 12.5% (varies by service) 1 lesser of 1% or $500 annually PORS Entry age normal 7.25% 3.5% to 9.5% (varies by service) 1 lesser of 1% or $500 annually The post-retiree mortality assumption is dependent upon the member s job category and gender. The base mortality assumptions, the 2016 Public Retirees of South Carolina Mortality table (2016 PRSC), was developed using the Systems mortality experience. These base rates are adjusted for future improvement in mortality using published Scale AA projected from the year Assumptions used in the determination of the June 30, 2017, TPL are as follows. Former Job Class Males Females Educators 2016 PRSC Males multiplied by 92% 2016 PRSC Females multiplied by 98% General Employees and Members of the General Assembly 2016 PRSC Males multiplied by 100% 2016 PRSC Females multiplied by 111% Public Safety and Firefighters 2016 PRSC multiplied by 125% 2016 PRSC Females multiplied by 111% 31

34 Notes to the Financial Statements June 30, 2018 NOTE 5 PENSION PLANS (Continued) Long-Term Expected Rate of Return: The long-term expected rate of return on pension plan investments is based upon 30 year capital market assumptions. The long-term expected rate of returns represent assumptions developed using an arithmetic building block approach primarily based on consensus expectations and market based inputs. Expected returns are net of investment fees. The expected returns, along with the expected inflation rate, form the basis for the revised target asset allocation adopted at the beginning of the 2017 fiscal year. The long-term expected rate of return is produced by weighting the expected future real rates of return by the target allocation percentage and by adding expected inflation and is summarized in the table on the following page. For actuarial purposes, the 7.25 percent assumed annual investment rate of return used in the calculation of the total pension liability includes a 5.00 percent real rate of return and a 2.25 percent inflation component. Target Asset Allocation Expected Arithmetic Real Rate of Return Long Term Expected Portfolio Real Rate of Return Asset Class Global Equity 45.0% Global Public Equity 31.0% 6.72% 2.08% Private Equity 9.0% 9.60% 0.86% Equity Options Strategies 5.0% 5.91% 0.30% Real Assets 8.0% Real Estate (Private) 5.0% 4.32% 0.22% Real Estate (REITs) 2.0% 6.33% 0.13% Infrastructure 1.0% 6.26% 0.06% Opportunistic 17.0% GTAA/Risk Parity 10.0% 4.16% 0.42% Hedge Funds (non-pa) 4.0% 3.82% 0.15% Other Opportunistic Strategies 3.0% 4.16% 0.12% Diversified Credit 18.0% Mixed Credit 6.0% 3.92% 0.24% Emerging Markets Debt 5.0% 5.01% 0.25% Private Debt 7.0% 4.37% 0.31% Conservative Fixed Income 12.0% Core Fixed Income 10.0% 1.60% 0.16% Cash and Short Duration (Net) 2.0% 0.92% 0.02% Total Expected Real Return 100.0% 5.31% Inflation for Actuarial Purposes 2.25% Total Expected Nominal Return 7.56% Discount Rate: The discount rate used to measure the total pension liability was 7.25 percent. The projection of cash flows used to determine the discount rate assumed that contributions from participating employers in SCRS and PORS will be made based on the actuarially determined rates based on provisions in the South Carolina State Code of Laws. Based on those assumptions, the System s fiduciary net position was projected to be available to make all the projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 32

35 Notes to the Financial Statements June 30, 2018 NOTE 5 PENSION PLANS (Continued) Sensitivity Analysis: The following table presents the College s proportionate share of the net pension liability using the discount rate of 7.25 percent, as well as what the College s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1.00 percent lower (6.25 percent) or 1.00 percent higher (8.25 percent) than the current rate: System 1.00% Decrease (6.25%) Current Discount Rate (7.25%) 1.00% Increase (8.25%) SCRS $8,652,956 $6,713,637 $5,536,926 PORS 16,682 12,355 8,947 Totals $8,669,638 $6,725,992 $5,545,873 Additional Financial and Actuarial Information: Detailed information regarding the fiduciary net position of the plans administered by PEBA is available in the Systems audited financial statements for the fiscal year ended June 30, 2017 (including the unmodified audit opinion on the financial statements. Additional actuarial information is available in the accounting and financial reporting actuarial valuation as of June 30, Deferred Retirement Option Plans: Beginning January 1, 2001, a deferred retirement option program (DROP was available to SCRS members eligible for service retirement. The DROP was commonly referred to as the Teacher and Employee Retention Incentive (TERI program. Effective July 1, 2012, the TERI program was not available to new hires. Further, Act 278 of 2012 closed the TERI program, effective June 30, 2018, and a member s participation could not continue after that date. Upon entering the TERI program, a member s status changed from active to retired. A TERI participant agreed to continue employment with an employer participating in the system for a specified period, not to exceed five years. TERI participants retained the same status and employment rights they held upon entering the program but were not considered active employees for purposes of the disability retirement programs. A TERI retiree s monthly benefits were accrued and remained in the SCRS trust account during the TERI participation period, but no interest was accrued or paid thereon. Upon termination of employment or at the end of the TERI participation period (whichever was earlier, each retired member s funds were immediately due and payable. The College had three employees participating in the TERI program during the year ending June 30, NOTE 6 DEFERRED COMPENSATION PLANS Several optional deferred compensation plans are available to State employees and employers of its political subdivisions. Certain employees of the College have elected to participate. The multiple-employer plans, created under Internal Revenue Code Sections 457, 401(k, and 403(b, are administered by third parties and are not included in the financial statements of the College. Compensation deferred under the plans is placed in trust for the contributing employee. The College has no liability for losses under the plans. Employees may withdraw the current value of their contributions when they terminate State employment. Employees may also withdraw contributions prior to termination if they meet requirements specified by the applicable plan. 33

36 Notes to the Financial Statements June 30, 2018 NOTE 7 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) Plan Description: In accordance with the South Carolina Code of Laws and the annual Appropriations Act, the State provides postemployment health and dental benefits to retired State and school district employees and their covered dependents. The South Carolina Retiree Health Insurance Trust Fund (SCRHITF) was created to fund and account for the employer costs of the State s retiree health and dental plans. In accordance with Act 195 of 2008, the SCRHITF is administered by the South Carolina Public Employee Benefit Authority (PEBA), Insurance Benefits, and the State Treasurer is the custodian of the funds held in trust. The Board of Directors of PEBA has been designated as the Trustee. The SCRHITF is a cost-sharing multipleemployer defined benefit plan. Article 5 of the State Code of Laws defines the plan and authorizes the Trustee to at any time adjust the plan, including its benefits and contributions, as necessary, to ensure the fiscal stability of the plan. The State Fiscal Accountability Authority (SFFA), which consists of five elected officials, also reviews certain PEBA Board decisions in administering the SCRHITF. Benefits Provided: Generally, retirees are eligible for the health and dental benefits if they have established at least ten years of retirement service credit. For new hires on May 2, 2008 and after, retirees are eligible for benefits if they have established twenty-five years of service for 100% employer funding and fifteen through twenty-four years of service for 50% employer funding. Benefits become effective when the former employee retires under a State retirement system, including the optional retirement plan. PEBA Insurance Benefits annually sets the employer and retiree premiums, which are the same for active employees and retirees. The amount of premium that a retiree pays depends mainly on the plan and dependent option elected. Supplemental health insurance is provided for Medicare-eligible retirees. Contributions: These postemployment healthcare benefits are funded primarily through a pension surcharge. Employers participating in the healthcare plan are mandated by State statute to contribute at a rate assessed each year by the Executive Budget Office of the Department of Administration, which was 5.50% of annual covered payroll for The College s contributions to the OPEB plan for the year ending June 30, 2018 were $176,341, applicable to the surcharge included with the employer contribution for retirement benefits. Other contributions to the SCRHITF include State appropriations and mandatory transfers of cash reserves accumulated in the employee insurance program operating accounts. The College s portion of contributions in 2017 from these non-employer contributing entities was $28,910, which is reported by the College as State operating grants revenue for the year ended June 30, OPEB Liabilities, OPEB Expenses, and Deferred Outflows Of Resources and Deferred Inflows Of Resources Related to OPEB The collective net OPEB liability, measured as of June 30, 2017, is presented below. Total Plan Employers Plan Fiduciary OPEB Fiduciary Net Net OPEB Net Position as a Percentage of Liability Position Liability (Asset) the Total OPEB Liability $ 14,659,610,970 $ 1,114,774,760 $ 13,544,836, % 34

37 Notes to the Financial Statements June 30, 2018 NOTE 7 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (Continued) OPEB Liabilities, OPEB Expenses, and Deferred Outflows Of Resources and Deferred Inflows Of Resources Related to OPEB (Continued) The collective total OPEB liability is calculated by the plan s actuary and the plan s fiduciary net position is reported in the plan s financial statements. The net OPEB liability is disclosed in accordance with the requirements of GASB 74 in the plan s notes to the financial statements and required supplementary information. Liability calculations performed by the Systems actuary for the purpose of satisfying the requirements of GASB 74 are not applicable for other purposes, such as determining the plan s funding requirements. At June 30, 2018, the College reported a liability of $4,937,499 for its proportionate share of the net OPEB liability. The net OPEB liability was measured as of June 30, The total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation performed as of June 30, The total OPEB liability was rolled-forward from the valuation date to the plan s fiscal year end, June 30, 2017, using generally accepted actuarial principles. The College s proportion of the net OPEB liability was based on the College s share of contributions to the OPEB plan relative to the contributions of all participating entities. At June 30, 2017, the College s proportion was %, which was the same as its proportion measured as of June 30, For the year ended June 30, 2018, the College recognized OPEB expense of $300,516. At June 30, 2018, the College reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Description Deferred Outflows of Resources Deferred Inflows of Resources Difference between Expected and Actual Experience $ $ 2,143 Changes of Assumptions 464,596 Net Difference Between Projected and Actual Investment Earnings 8,484 Changes in Proportionate Share and Difference between College Contributions and Proportionate Share of Employer Contributions 69 College Contributions Subsequent to the Measurement Date 172,416 Total Outflows and Inflows of Resources $180,900 $466,808 35

38 Notes to the Financial Statements June 30, 2018 NOTE 7 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (Continued) The $172,416 (net of implicit subsidy of $3,925) reported as deferred outflows of resources related to OPEB resulting from the College s contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expenses as follows: Year Ended June 30, 2019 $ ( 72,616) 2020 ( 72,616) 2021 ( 72,616) 2022 ( 72,616) 2023 ( 74,737) Thereafter ( 93,123) Net Balance of Deferred Outflows / (Inflows) of Resources $(458,324) Actuarial Assumptions and Methods: Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Actuarially determined amounts are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. South Carolina state statute requires that an actuarial experience study be completed at least once in each five-year period. An experience report on the OPEB was most recently issued as of July 1, Projections of benefits for financial reporting purposes are based on the substantive plan (as understood by the employer and plan participants) and include the types of benefits provided at the time the valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of shortterm volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. The discount rate changed from 2.92% as of June 30, 2016 to 3.56% as of June 30, The June 30, 2017, total OPEB liability, net OPEB liability, and sensitivity information were determined by the consulting actuary, Gabriel, Roeder, Smith and Company (GRS) and are based on an actuarial valuation performed as of June 30, The total OPEB liability was rolled-forward from the valuation date to the plan s fiscal year end, June 30, 2017, using generally accepted actuarial principles. 36

39 Notes to the Financial Statements June 30, 2018 NOTE 7 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (Continued) The following table provides a summary of the actuarial assumptions and methods used to calculate the total OPEB liability as of June 30, Methods and Assumptions Valuation Date June 30, 2016 Actuarial Cost Method Inflation 2.25% Investment Rate of Return Entry Age Normal Single Discount Rate 3.56% as of June 30, %, net of OPEB plan investment expense, including inflation Demographic Assumptions Based on the experience study performed for the South Carolina Retirement Systems for the 5- year period ending June 30, 2015 Mortality Assumptions Health Care Trend Rates Participation Assumptions RP-2000 Mortality (White Collar Adjustment for Educators), projected using Scale AA from Year Male rates multiplied by 100% for non-educators and 110% for educators. Female rates multiplied by 90% for non-educators and 95% for educators. Initial trend starting at 7.00% and gradually decreasing to an ultimate trend rate of 4.15% over a period of 15 years 79% participation for retirees who are eligible for Funded Premiums 59% participation for retirees who are eligible for Partial Funded Premiums 20% participation for retirees who are eligible for Non-Funded Premiums Aging factors Expenses Based on plan specific experience The investment return assumption is net of the investment expenses; Administrative expenses related to the health care benefits are included in the age-adjusted claims costs The long-term expected rate of return represents assumptions developed using an arithmetic building block approach primarily based on consensus expectations and market-based inputs. The expected return, along with the expected inflation rate, form the basis for the target asset allocation adopted at the beginning of the 2017 fiscal year. The long-term expected rate of return is produced by weighting the expected future real rate of return by the target allocation percentage and adding expected inflation. 37

40 Notes to the Financial Statements June 30, 2018 NOTE 7 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (Continued) This information is summarized in the following table: Asset Class Target Allocation Long Term Expected Real Rate Allocation-Weighted Long-Term Expected Real Rate of Return U.S. Domestic Fixed Income 80.00% 2.09% 1.67% Cash 20.00%.84% 0.17% Total % 1.84% Expected Inflation 2.25% Total Return 4.09% Investment Return Assumption 4.00% The annual money-weighted rate of return on the plan investments was 1.36%. Discount Rate: The Single Discount Rate of 3.56% was used to measure the total OPEB liability. The accounting policy for this plan is to set the Single Discount Rate equal to the prevailing municipal bond rate. Due to the plan s investment and funding policies, the difference between a blended discount rate and the municipal bond rate would be less than several basis points (several hundredths of one percent). In addition, the plan does not intend to ever use a Single Discount Rate which is less than the municipal bond rate. Sensitivity of the College s Proportionate Share of the Net OPEB Liability to Changes in the Discount Rate: The following table presents the College s proportionate share of the net OPEB liability using the single discount rate of 3.56 percent, as well as what the College s proportionate share of the net OPEB liability would be if it were calculated using a discount rate that is 1.00 percent lower (2.56 percent) or 1.00 percent higher (4.56 percent) than the current rate: 1.00% Decrease (2.56%) Current Discount Rate (3.56%) 1.00% Increase (4.56%) Net OPEB Liability $5,814,978 $4,937,499 $4,230,036 Sensitivity of the College s Proportionate Share of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates: The following table presents the College s proportionate share of the net OPEB liability calculated using the assumed rates, as well as what the College s proportionate share of the net OPEB liability would be if it were calculated using a trend rate that is 1.00 percent lower or 1.00 percent higher: 1.00% Decrease Current Healthcare Cost 1.00% Increase Trend Rate Assumption Net OPEB Liability $4,048,954 $4,937,499 $6,087,952 38

41 Notes to the Financial Statements June 30, 2018 NOTE 7 POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS (OPEB) (Continued) OPEB Plan Fiduciary Net Position: PEBA issues a Comprehensive Annual Financial Report (CAFR) containing financial statements and required supplementary information for the OPEB Trust Fund. The CAFR is publicly available through the Insurance Benefits link on PEBA s website at or a copy may be obtained by submitting a request to: South Carolina Public Employee Benefit Authority Insurance Benefits 202 Arbor Lake Drive Columbia, South Carolina PEBA is considered a division of the primary government of the state of South Carolina and, therefore, the OPEB trust fund financial information is also included in the comprehensive annual financial report of the state. NOTE 8 CONTINGENCIES, LITIGATION, AND PROJECT COMMITMENTS The College is not currently involved in any active claims or lawsuits, nor is it aware of any pending claims or litigation that would affect the College s financial position. The College participates in certain Federal grant programs. These programs are subject to financial and compliance audits by the grantor or its representative. The College is not aware of any contingent liabilities related to the Federal grant programs. The College has obtained the necessary State capital funding for the construction of a building to house a facilities shop, storage space, and work space. The building will be capitalized upon completion. The approximate cost to construct the building is $738,000, and the remaining commitment balance with engineering firms and construction contractors was approximately $404,000 at June 30, The College also used State capital appropriations to repair and equip facilities. These costs are not capitalized, and the College had no outstanding commitments at June 30, 2018 for these building repairs. NOTE 9 LEASE OBLIGATIONS The College rents copiers that meet the definition of contingent rentals. During the fiscal year ending June 30, 2018, the College expended $19,866 to external parties for these contingent rentals which are based upon the copier machine usage. 39

42 Notes to the Financial Statements June 30, 2018 NOTE 10 LONG-TERM LIABILITIES Long-term liabilities activity for the year ended June 30, 2018 was as follows: Balance July 1, 2017 (As Restated) Additions Reductions Balance June 30, 2018 Due Within One Year Net Long-Term Compensated Absences Payable $ 242,863 $ 73,745 $ 24,136 $ 292,472 $29,740 $ 262,732 Net OPEB Liability 5,274, , ,565 4,937,499-4,937,499 Net Pension Liability 6,569,594 2,168,601 2,012,203 6,725,992-6,725,992 Total Long Term Liabilities $ 12,086,707 $ 2,565,160 $ 2,695,904 $ 11,955,963 $ 29,740 $ 11,926,223 NOTE 11 UNEARNED REVENUE Unearned revenue as of June 30, 2018, is summarized as follows: Unearned Revenue Student Tuition and Fees $ 199,199 Federal Grants and Contracts 2,897 State Grants and Contracts 263,887 Private Grants and Contracts 15,000 State Appropriations 394,007 State Capital Appropriations 1,182,413 Total Unearned Revenue $ 2,057,403 NOTE 12 RISK MANAGEMENT The College is exposed to various risks of loss and maintains State or commercial insurance coverage for each of those risks. Management believes such coverage is sufficient to preclude any significant uninsured losses for the covered risks. Settlement claims have not exceeded this coverage in any of the past three years. The State of South Carolina believes it is more economical to manage certain risks internally and set aside assets for claim settlement. Several state funds accumulate assets and the State itself assumes substantially all the risk for the following claims of covered employees: Unemployment compensation benefits Worker s compensation benefits for job-related illnesses or injuries Health and dental insurance benefits Long-term disability and incidental death benefits Employees elect health insurance coverage through either a health maintenance organization or through the State s self-insured plan. 40

43 Notes to the Financial Statements June 30, 2018 NOTE 12 RISK MANAGEMENT (Continued) The College and other entities pay premiums to the State s Insurance Reserve Fund (IRF), which issues policies, accumulates assets to cover the risk of loss, and pays claims incurred for covered losses relating to the following activities: Theft, damage to, or destruction of assets Real property, its contents, and other equipment Motor vehicles and watercraft Torts Natural disasters The IRF is a self-insurer and purchases reinsurance to obtain certain services and to limit losses in certain areas. The IRF s rates are determined actuarially. The College obtains coverage through a commercial insurer for employee fidelity bond insurance for all employees for losses arising from theft or misappropriation. NOTE 13 OPERATING EXPENSES BY FUNCTION Operating expenses by functional classification for the year ended June 30, 2018 are summarized as follows: Salaries Benefits Scholarships Utilities Supplies and Other Services Depreciation Total Instruction $ 1,351,556 $ 546,430 $ - $ - $ 977,002 $ - $ 2,874,988 Academic Support 489, , , ,588 Student Services 461, , , ,547 Operation and Maintenance of Plant 273, , , , ,501 Institutional Support 672, , ,396-1,079,599 Scholarships , ,460 Auxiliary Enterprises 43,403 15, , ,624 Depreciation , ,882 Total Operating Expenses $ 3,290,668 $ 1,329,567 $ 487,460 $ 110,459 $ 2,062,153 $ 150,882 $ 7,431,189 NOTE 14 RELATED PARTIES Certain separately chartered legal entities, whose activities are related to those of the College, exist primarily to provide financial assistance and other support to the College and its educational programs. This includes the Williamsburg Technical College Foundation, Inc. Management reviewed its relationship with the Foundation under GASB Statement No. 14, as amended by GASB Statements No. 39 and No. 61. The College excluded this organization from the reporting entity, because it is not financially accountable for it. Further, in management s professional judgment it is not necessary to include the Foundation to prevent the reporting entity s financial statements from being misleading. 41

44 Notes to the Financial Statements June 30, 2018 NOTE 14 RELATED PARTIES Following is a more detailed discussion of this entity and a summary of significant transactions (if any) between this entity and the College for the year ended June 30, Williamsburg Technical College Foundation, Inc. The Foundation is a separately chartered corporation organized exclusively to receive and manage private funds for the exclusive benefit and support of the College. The Foundation s activities are governed by its Board of Directors who are not members of the College s Board of Directors. The College recorded non-governmental gifts receipts of $10,242 from the Foundation in non-operating revenues for the fiscal year ending June 30, These funds were used to support the College by way of scholarships and program development grants. The Foundation reimburses the College for any purchases made by the College on behalf of the Foundation. The College provides staffing support and facilities space to the Foundation. It has determined that these services and facilities are nominal and therefore are not reflected in the financial statements of the Foundation for the current year. The Foundation s assets as of June 30, 2018 were $503,299. There are no receivables or payables between the College and the Foundation as of June 30, NOTE 15 TRANSACTIONS WITH OTHER AGENCIES The College had significant transactions with the State of South Carolina and various agencies. Services received at no cost from State agencies include maintenance of certain accounting records by the Comptroller General; banking, bond trustee, and investment services from the State Treasurer; legal services from the Attorney General; and pension and insurance plans administration from the Public Employee Benefit Authority. Other services received at no cost from the various offices of the South Carolina Department of Administration (formerly the State Budget and Control Board) include audit services, grant services, personnel management, assistance in the preparation of the State Budget, review and approval of certain budget amendments, procurement services, and other centralized functions. NOTE 16 DONOR RESTRICTED ENDOWMENTS Assets at June 30, 2018, consist of $7,081 short-term investments, restricted for endowments. The donor has provided specific instructions to authorize the interest on the investment of endowment funds to be spent on scholarships. The endowment is included in a certificate of deposit as shown in Note 2 in the investments section. At June 30, 2018, the endowment had no net appreciation. All is restricted and included in the restricted net position. This is in compliance with SC Code of Laws Sections , , and

45 Notes to the Financial Statements June 30, 2018 NOTE 17 CHANGE IN ACCOUNTING PRINCIPLE The College recorded a prior period adjustment to restate beginning net position for the provisions of Governmental Accounting Standards Board (GASB) Statement No. 75 Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This Statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures for other postemployment benefits (including medical and dental insurance) that are provided to employees through a trust. The provisions of GASB Statement No. 75 are effective for financial statement periods beginning after June 15, The accounting changes adopted to conform to the provisions of GASB Statement No. 75 were applied retroactively by restating beginning net position. The College s proportionate share of the net OPEB liability at June 30, 2017 (measurement date of June 30, 2016) was $5,274,250, and the College s deferred outflows of resources resulting from the College s 2017 contributions, which were made subsequent to the measurement date, were $150,033 (net of implicit subsidy of $13,814). The following is a summary of the prior period adjustment. Net Position at June 30, 2017, as previously presented $ 2,306,508 Effect of Adopting GASBS No. 75: Net OPEB Liability at June 30, 2017 (Measurement Date of June 30, 2016) (5,274,250) Deferred Outflows of Resources 2017 Contributions 150,033 Adjustment to Net Position at June 30, 2017 (5,124,217) Net Position (Deficit) at June 30, 2017, as restated $(2,817,709) NOTE 18 SUBSEQUENT EVENTS Subsequent events were evaluated through September 14, 2018, which is the date the financial statements were available to be issued. 43

46 REQUIRED SUPPLEMENTARY INFORMATION Schedule of the College's Proportionate Share of the SCRS and PORS Net Pension Liabilities For the Year Ended June 30, 2018 Last 10 Fiscal Years* SCRS - South Carolina Retirement System College's Proportion of the Net Pension Liability College's Proportionate Share of the Net Pension Liability College's Covered-Employee Payroll During the Measurement Period College's Proportionate Share of the Net Pension Liability as a Percentage of its Covered-Employee Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability % % % % % $6,713,637 $6,559,397 $5,990,247 $5,697,173 $5,935,345 $2,931,595 $2,918,430 $2,911,931 $2,942,532 $2,971, % % % % % 53.30% 52.90% 56.99% 59.92% 56.39% PORS - South Carolina Police Officers Retirement System College's Proportion of the Net Pension Liability College's Proportionate Share of the Net Pension Liability College's Covered-Employee Payroll During the Measurement Period College's Proportionate Share of the Net Pension Liability as a Percentage of its Covered-Employee Payroll Plan Fiduciary Net Position as a Percentage of the Total Pension Liability % % % % % $12,355 $10,197 $92,977 $71,714 $77,654 $ 6,069 $ 5,129 $ 52,854 $45,053 $ % % % % 10,111.20% 60.90% 60.40% 64.57% 67.55% 62.98% *The amounts presented for each fiscal year were determined as of July 1 of two years prior, using membership data as of that day, projected forward to June 30 of the previous year. Additionally, the College implemented GASB 68 during fiscal year As such, only five years of information is available. 44

47 REQUIRED SUPPLEMENTARY INFORMATION Schedule of College Contributions For the Year Ended June 30, 2018 Last 10 Fiscal Years* SCRS - South Carolina Retirement System Statutorily Required Contribution $ 415,670 $ 347,840 $ 328,896 $ 322,801 $ 318,452 Contributions Recognized by the Plan $ 415,670 $ 347,840 $ 328,896 $ 322,801 $ 318,452 Contributions Deficiency (Excess) $ - $ - $ - $ - $ - College's Covered-Employee Payroll Contributions as a Percentage of Covered Payroll $3,065,415 $2,931,595 $2,918,430 $2,911,931 $2,942, % 11.87% 11.27% 11.09% 10.82% PORS - South Carolina Police Officers Retirement System Statutorily Required Contribution $ 1,257 $ 864 $ 705 $ 7,088 $ 5,785 Contributions Recognized by the Plan $ 1,257 $ 864 $ 705 $ 7,088 $ 5,785 Contributions Deficiency (Excess) $ - $ - $ - $ - $ - College's Covered-Employee Payroll Contributions as a Percentage of Covered Payroll $ 7,743 $6,069 $5,129 $52,854 $45, % 14.24% 13.75% 13.41% 12.84% *The College implemented GASB 68 during fiscal year As such, only five years of information is available. 45

48 REQUIRED SUPPLEMENTARY INFORMATION Schedule of the College's Proportionate Share of the Net OPEB Liability For the Year Ended June 30, 2018 Last 10 Fiscal Years* South Carolina Retiree Health Insurance Trust Fund (SCRHITF) College's Proportion of the Net OPEB Liability College's Proportionate Share of the Net OPEB Liability College's Covered-Employee Payroll During the Measurement Period College's Proportionate Share of the Net OPEB Liability as a Percentage of its Covered-Employee Payroll Plan Fiduciary Net Position as a Percentage of the Total OPEB Liability % % $4,937,499 $5,274,250 $3,074,057 $3,024, % % 7.60% 6.62% *The amounts presented for each fiscal year were determined as of July 1 of two years prior, using membership data as of that day, projected forward to June 30 of the previous year. Additionally, the College implemented GASB 75 during fiscal year As such, only two years of information is available. 46

49 REQUIRED SUPPLEMENTARY INFORMATION Schedule of College Contributions For the Year Ended June 30, 2018 Last 10 Fiscal Years* South Carolina Retiree Health Insurance Trust Fund (SCRHITF) Statutorily Required Contribution $ 176,341 $ 163,847 Contributions Recognized by the Plan $ 176,341 $ 163,847 Contributions Deficiency (Excess) $ - $ - College's Covered-Employee Payroll Contributions as a Percentage of Covered Payroll $ 3,206,201 $ 3,074, % 5.33% *The College implemented GASB 75 during fiscal year As such, only two years of information is available. 47

50 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 To the President and Members of the Area Commission of Williamsburg Technical College Kingstree, South Carolina We have audited, 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, the financial statements of Williamsburg Technical College (the College ), as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise Williamsburg Technical College s basic financial statements, and have issued our report thereon dated September 26, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the College s internal 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 the 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 entity 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. 508 HAMPTON STREET, 1 ST FLOOR COLUMBIA, SOUTH CAROLINA FAX MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 48

51 Compliance and Other Matters As part of obtaining reasonable assurance about whether the College s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Columbia, South Carolina September 26,

52 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the President and Members of the Area Commission of Williamsburg Technical College Kingstree, South Carolina Report on Compliance for Each Major Federal Program We have audited Williamsburg Technical College s (the College ) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the College s major federal programs for the year ended June 30, The College s major federal program is identified in the summary of audit results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for the College s major federal program 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; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance 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 the major federal program occurred. An audit includes examining, on a test basis, evidence about the 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 the major federal program. However, our audit does not provide a legal determination of the College s compliance. Opinion on Each Major Federal Program In our opinion, the College complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, HAMPTON STREET, 1 ST FLOOR COLUMBIA, SOUTH CAROLINA FAX MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 50

53 Report on Internal Control Over Compliance Management of the College is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the College s internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the College s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Columbia, South Carolina September 26,

54 WILLIAMSBURG TECNICAL COLLEGE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 Federal Grant Passed Federal Grantor/Pass-through CFDA Identification Through to Grantor/Program Title Number Number Expenditures Subrecipients U.S. Department of Education TRIO Cluster TRIO Program - Upward Bound 16/ A P047A $ 108,566 $ - TRIO Program - Upward Bound 17/ A P047A ,633 - Total TRIO Cluster 384,199 - Student Financial Aid Cluster Federal College Work-Study Program P033A ,527 - Federal Supplementary Educational Opportunity Grant P007A ,983 - Federal PELL Grant Program P063P ,602,274 - Total Student Financial Aid Cluster 1,667,784 - (Passed through South Carolina Department of Education) Career and Technical Education - Basic Grants to States (Perkins IV) VA416 27,024 - (Passed through South Carolina Commission on Higher Education) Gaining Early Awareness and Readiness for N/A 3,784 - Undergraduate Programs (GEAR UP) Total U.S. Department of Education 2,082,791 - U.S. Department of Health and Human Services (Passed through Greenville Technical College) Child Care and Development Grant N/A 7,589 - Total U.S. Department of Health and Human Services 7,589 - U.S. Department of Agriculture Rural Cooperative Development Grants N/A 99,500 - (Passed through South Carolina Department of Social Services) SNAP2WORK Program N/A 25,335 - Total U.S. Department of Agriculture 124,835 - U.S. Department of Labor (Passed through the South Carolina Department of Employee Workforce) Pipeline WIOA Grant N/A 53,375 - (Passed through the State Board for Technical and Comprehensive Education) H-1B Jobs Training Grant N/A 15,700 - Total U.S. Department of Labor 69,075 - Total Expenditures of Federal Awards $ 2,284,290 $ - 52

55 NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS NOTE 1. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Schedule of Expenditures of Federal Awards includes the federal grant activity of Williamsburg Technical College and is prepared on the accrual basis of accounting. Program Type Determination Type A programs are defined as federal programs with federal expenditures exceeding $750,000. The threshold of $750,000 was used in distinguishing between Type A and Type B programs. Method of Major Program Selection The risk-based approach was used in the selection of federal programs to be tested as major programs. The College did qualify as a low-risk auditee for the fiscal year ended June 30, NOTE 2. FEDERAL NON-CASH ASSISTANCE Williamsburg Technical College did not receive or expend federal awards in the form of non-cash assistance and had no federal loan guarantees at June 30, NOTE 3. RECONCILIATION OF CURRENT FUND REVENUES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Total per Schedule of Expenditures of Federal Awards $ 2,284,290 Total Federal Revenue per financial statement Federal Grants Operating 496,217 Federal Grants Non-operating 1,688,573 Federal Grants Capital 99,500 $ 2,284,290 53

56 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 SECTION I SUMMARY OF AUDIT RESULTS Financial Statements Type of auditor s report issued Unmodified Internal control over financial reporting: Material weaknesses identified? Yes X No Significant deficiencies identified not considered to be material weaknesses? Yes X None Reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major programs: Material weaknesses identified? Yes X No Significant deficiencies identified not considered to be material weaknesses? Yes X No Type of auditor s report issued on compliance for major programs Unmodified Any audit findings disclosed that are required to be reported in accordance with Uniform Guidance Yes X No Identification of major programs: CFDA Number Name of Federal Program or Cluster Student Financial Aid Cluster U.S. Department of Education Federal College Work Study Grant Federal Supplemental Education Opportunity Grant Federal Pell Grant Program Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as low-risk auditee? X Yes No 54

57 SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE FISCAL YEAR ENDED JUNE 30, 2018 SECTION II FINANCIAL STATEMENT FINDINGS AND RESPONSES None reported. SECTION III FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS None reported. SECTION IV SCHEDULE OF PRIOR YEAR FINDINGS None reported. 55

58 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR THE STATE LOTTERY TUITION ASSISTANCE PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE To the President and Members of the Area Commission of Williamsburg Technical College Kingstree, South Carolina Report on Compliance for the State Lottery Tuition Assistance Program We have audited Williamsburg Technical College s (the College ) compliance with the types of compliance requirements described in the State Lottery Tuition Assistance Program Policy and procedure , issued by the State Board for Technical and Comprehensive Education, that could have a direct and material effect on the College s State Lottery Assistance Program for the year ended June 30, Management s Responsibility Management is responsible for compliance with the requirements of State Law and Policy and procedure related to its State Lottery Tuition Assistance Program. Auditor s Responsibility Our responsibility is to express an opinion on compliance for the College s State Lottery Tuition Assistance Program 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; and State Lottery Tuition Assistance Program Policy and procedure , issued by the State Board for Technical and Comprehensive Education. Those standards and policy 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 the State Lottery Assistance Program occurred. An audit includes examining, on a test basis, evidence about the 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 the State Lottery Tuition Assistance program. However, our audit does not provide a legal determination of the College s compliance. Opinion In our opinion, the College complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on the State Lottery Tuition Assistance program for the year ended June 30, HAMPTON STREET, 1 ST FLOOR COLUMBIA, SOUTH CAROLINA FAX MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS 56