FLORENCE - DARLINGTON TECHNICAL COLLEGE FLORENCE, SOUTH CAROLINA INDEPENDENT AUDITOR'S REPORT FINANCIAL STATEMENTS AND SCHEDULES

Transcription

1 INDEPENDENT AUDITOR'S REPORT FINANCIAL STATEMENTS AND SCHEDULES FOR THE YEAR ENDED JUNE 30, 2017

2 Table of Contents PAGE Organizational Data... i Independent Auditor s Report Management s Discussion and Analysis Financial Statements: Statements of Net Position...8 Statements of Revenues, Expenses and Changes in Net Position...9 Statements of Cash Flows Component Unit - Statement of Financial Position and Statement of Activities...12 Notes to Financial Statements Required Supplementary Information: Schedule of the College s Proportionate Share of the Net Pension Liability...44 Schedule of the College Contributions...45 Notes to Required Supplementary Information...46 Single Audit Act Requirements: Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Independent Auditor s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs Schedule of Prior Audit Findings...58

3 Florence-Darlington Technical College Florence, South Carolina Organizational Data June 30, 2017 AREA COMMISSION MEMBERS AND OFFICERS Willie E. Boyd, Chairperson, Darlington County Missy Jay, Vice-Chairperson, Florence County Alvin Heatley, Secretary, Darlington County Leroy Robinson, Member, Darlington County Alvin DeWitt, Member, Darlington County Joseph L. Griffin, Member, Florence County Paul Seward, Member, Florence County Annie L. Jett, Member, Darlington County Charlene G. Lowery, Member, Florence County Hood Temple, Member, Florence County ADMINISTRATIVE STAFF Dr. Ben Dillard, President Douglas Lange, Vice-President Business Affairs Florence-Darlington counties contribute financially to the operations of the College. AREA SERVED BY COLLEGE Darlington County Florence County Marion County i

4 Robert D. Harper, Jr. CPA Stacey C. Moree CPA P. O. Box Wall Street, Litchfield Pawleys Island, SC Tel (843) Fax (843) H P Robin B. Poston CPA P. O. Box Church Street Georgetown, SC Tel (843) Fax (843) H P INDEPENDENT AUDITOR'S REPORT Florence Darlington Commission for Technical Education Florence Darlington Technical College Florence, South Carolina Report on the Financial Statements We have audited the accompanying financial statements of Florence Darlington Technical College, a component unit of the State of South Carolina, as of and for the years ended June 30, 2017 and June 30, 2016 and the related notes to the financial statements, which collectively comprise the College s basic financial statements as listed in the table of contents. We did not audit the financial statements of Florence Darlington Technical College Educational Foundation, Inc. which represents 100 percent of the discretely presented component unit presented in the financial statements. 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 audits. We did not audit the financial statements of Florence Darlington Technical College Educational Foundation, Inc. which represents 100 percent of the discretely presented component unit presented in the financial statements. Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion on the basic financial statements insofar as it relates to the amounts included for Florence Darlington Technical College Educational Foundation, Inc. as a discretely presented component unit, is based solely on the report of other auditors. We conducted our audits 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. 1 MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SOUTH CAROLINA ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS

5 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our report and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the Florence Darlington Technical College, as of June 30, 2017 and June 30, 2016, and the respective changes in the financial position and, where applicable, cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 4 through 7 and supplementary pension information on pages 44 through 46 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 the Florence - Darlington Technical College s basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and is also not a required part of the basic financial statements. 2

6 The accompanying schedule of expenditures of federal awards is the responsibility of management and was derived from and relates 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, based on our report and the report of other auditors, 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 28, 2017 on our consideration of the College s internal control over financial reporting and on our tests of its compliance with certain provision of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on internal control 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. Harper, Poston & Moree, P.A. Certified Public Accountants Georgetown, South Carolina September 28,

7 MANAGEMENT S DISCUSSION AND ANALYSIS

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9 investment in capital assets (e.g., land, buildings, machinery and equipment), less any related debt used to acquire those assets that is still outstanding. $9.4 million of the College s net position represents resources that are subject to external restrictions on how they may be used. Unrestricted net position as of June 30, 2017 decreased $6.9 million to ($29.6) million from the prior fiscal year balance of ($22.7) million as a result of our investment in a new instructional Automotive/HVAC building and recording the College s proportionate share of the state pension liability as we continue to implement GASB 68. This schedule is a condensed presentation prepared from the College s Statements of Net Position as of June 30, 2017 and 2016 (in millions): Increase (Decrease) Current Assets $ 8.35 $ $ (8.06) Non Current Assets Capital Assets, Net Other (1.37) Deferred Outflows Total Assets & Deferred Outflows $ $ $ (.15) Current Liabilities (2.70) Non Current Liabilities Deferred Inflows Total Liabilities & Deferred Inflows $ $ $.36 Net Position Net Investment in Capital Assets Restricted: Expendable (1.32) Unrestricted (29.60) (22.75) (6.85) Total Net Position $ $ $ (.52) Non current liabilities increased $2.23 million primarily as a result of GASB Statement No. 68 Accounting and Financial Reporting for Pensions. The following schedule summarizes the operating results for the two fiscal years (in millions): Increase (Decrease) Operating Revenue Tuition and Fees $ $ $ (1.61) Grants and Contracts Auxiliary (.42) Other (.26) Total Operating Revenue $ $ $ (1.55) Less Operating Expenses Net Operating Loss (31.29) (29.58) (1.71) Non Operating Revenue and Expenses State and County Appropriations Other (.16) Increase (Decrease) in Net Position (.50) (.82).32 Net Position, Beginning of Year Net Position, End of Year $ $

10 The College implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions, in the financial statements for fiscal year ended June 30, This new GASB requirement does not directly impact the funding of the pension plans. Participating employers previously reported an expense for employer contributions actually paid during the fiscal year as required by state law, referred to as the annual required contribution (ARC). As long as the ARC was paid, there was no corresponding liability to report. GASB 68 now requires participating employers to report a proportionate share of the Net Pension Liability (NPL) in the employer s financial statements regardless of the funding progress. In addition, employers are required by GASB 68 to include significantly expanded note disclosures and required supplementary information regarding their participation in the plans. Regardless of the NPL reported on an employer s financial statements, the employer is responsible only for making the pension contributions (ARC) required by state law during any given year. Employers cannot pay down or pay off their proportionate share of the NPL with additional contributions as the plans are unable to accept contributions in excess of those required by state law. Note 18 of the accompanying notes to the financial statements identifies operating expenses by their functional classifications. The following graph illustrates the natural class categories of the operating expenses from the condensed operating results above (in millions) Benefits Utilities Depreciation Salaries Scholarships Supplies/Other The schedule below summarizes the cash flows for the fiscal years ended June 30, 2017 and 2016 for the College (in millions).. Increase (Decrease) Cash provided (used) by Operating Activities $ (29.02) $ (25.00) $ (4.02) Non Capital Financing Activities Capital and Related Financing (8.84) (3.72) (5.12) Investing Activities Net (Decrease) Increase in Cash $ (8.51) $.56 $ (9.07) 6

11 Cash used for operating activities (tuition and fees, grants and contracts and auxiliary enterprise charges less payments to employees and vendors) is offset by cash provided from noncapital financing activities which includes state and local appropriations and federal student aid. Payments on debt and purchases of capital assets are included in the capital and related financing category. Capital Asset and Debt Administration The College has completed construction of a new Automotive, Auto Body and HVAC technologies training building. This project was funded with a combination of State, College Foundation and College funds. The project was approved by the state and is needed because the enrollment in these technical programs was constrained by our existing facilities. Classes were held in this facility beginning with the Spring 2017 term. Long-Term Debt July 1, 2016 Additions Reductions June 30, 2017 Revenue Bonds and Premiums $ 15,649,877 $ 0 $ 872,134 $ 14,777,743 Capital Assets July 1, 2016 Additions Reductions June 30, 2017 Land and Improvements $ 2,109,927 $ 601,969 $ 0 $ 2,711,896 Construction in Progress 1,587,255 8,753,343 9,725, ,436 Buildings and Improvements 63,754,159 9,123, ,877,352 Machinery and Vehicles 16,594, , ,341 16,434,015 Accumulated Depreciation (40,384,293) (2,643,046) (831,004) (42,196,335) Net Capital Assets $ 43,661,171 $ 16,510,692 $ (9,729,499) $ 50,442,364 Economic Factors Appropriations from the State of South Carolina increased during fiscal year 2017 over the prior year. The state appropriation for fiscal year 2018 will increase, in part due to legislation to shore up the state s defined benefit retirement plan. The College continues to benefit from a history of consistent financial support from Darlington and Florence counties. The College has managed to adjust to changes in state funding and enrollment by implementing marginal tuition increases, soliciting grant funding, and conservative budget practices. College enrollment remains steady, counter to national and regional trends. Our enrollment among the 16- institutions in the state technical college system also remains strong. The College continues to operate on a sound fiscal basis and projects that adequate mission funding from appropriations and tuition revenues will be available in the coming year. 7

12 FINANCIAL STATEMENTS

13 STATEMENTS OF NET POSITION JUNE 30, 2017 AND JUNE 30, ASSETS Current Assets Cash and Cash Equivalents $ 1,452,070 $ 8,642,371 Accounts Receivable, Net 5,679,435 6,476,568 Inventories 1,070,216 1,154,689 Prepaid Expense 149, ,498 Total Current Assets $ 8,350,798 $ 16,414,126 Noncurrent Assets Restricted Cash and Cash Equivalents $ 9,415,025 $ 10,736,259 Loans Receivable, Net 257, ,694 Capital Assets, Net of Accumulated Depreciation 50,442,364 43,661,171 Total Noncurrent Assets $ 60,114,540 $ 54,700,124 Total Assets $ 68,465,338 $ 71,114,250 DEFERRED OUTFLOW OF RESOURCES Deferred Outflow of Resources - Pension $ 6,975,396 $ 4,448,793 Deferred Loss on Refunding Bonds 348, ,277 Total Deferred Outflow of Resources $ 7,323,867 $ 4,824,070 LIABILITIES Current Liabilities Accounts Payable $ 405,824 $ 1,201,909 Accrued Payroll and Related Liabilities 349, ,185 Interest Payable 186, ,996 Compensated Absences Payable 158, ,427 Restricted Unearned Revenue 800,235 2,609,158 Operating Unearned Revenue 1,302,522 1,405,156 Funds Held for Others 152, ,710 Revenue Bond - Current Portion 820, ,000 Total Current Liabilities $ 4,174,527 $ 6,872,541 Noncurrent Liabilities Compensated Absences Payable $ 1,173,579 $ 1,339,997 Perkins Loan Program - Federal Liability 419, ,648 Revenue Bond - Long Term Portion 13,957,743 14,864,877 Net Pension Liability 39,693,655 36,380,726 Total Noncurrent Liabilities $ 55,244,625 $ 53,005,248 Total Liabilities $ 59,419,152 $ 59,877,789 DEFERRED INFLOW OF RESOURCES Deferred Inflow of Resources - Pension $ 886,484 $ 65,209 NET POSITION Net Investment in Capital Assets $ 35,664,621 $ 28,011,295 Restricted for: Loans 72,148 32,385 Debt Service 9,342,877 10,703,874 Unrestricted (29,596,077) (22,752,232) Total Net Position $ 15,483,569 $ 15,995,322 The Accompanying Notes are an Integral Part of this Statement 8

14 STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE YEARS ENDED JUNE 30, 2017 AND JUNE 30, REVENUES Operating Revenues Student Tuition & Fees (Net of Scholarship Allowance of $12,089,805 for 2017 and $11,037,914 for 2016) $ 8,146,512 $ 9,657,531 Student Tuition & Fees (Pledged as Security for Revenue Notes) 2,532,820 2,628,693 Federal Grants and Contracts 3,261,212 3,399,734 State Grants and Contracts 6,145,527 5,272,267 Auxiliary Enterprise Charges (Net of Scholarship Allowance of $1,802,277 for 2017 and $1,821,282 for 2016) 2,130,793 2,551,991 Sales and Services of Education Departments 23,220 24,534 Other Operating Income 889,073 1,143,234 Total Operating Revenue $ 23,129,157 $ 24,677,984 EXPENSES Operating Expenses Salaries $ 21,875,849 $ 21,815,067 Benefits 8,499,325 7,692,999 Scholarships 5,936,896 7,204,252 Utilities 1,160,275 1,172,391 Supplies and Other Services 14,327,052 13,599,507 Depreciation 2,625,448 2,775,341 Total Operating Expenses $ 54,424,845 $ 54,259,557 Operating Income (Loss) $ (31,295,688) $ (29,581,573) NONOPERATING REVENUES (EXPENSES) State Appropriations (See Note 17) $ 10,359,048 $ 8,887,575 County Appropriations 6,096,528 5,379,839 Investment Income 105,918 96,293 Interest Expense on Capital Asset Related Debt (580,521) (606,187) Federal Grants and Contracts 12,252,960 14,079,949 Private Grants and Support 150, ,678 Gain (Loss) on Disposal of Capital Assets (4,337) (4,131) Other Nonoperating Revenues 491, ,120 Total Nonoperating Revenues (Expenses) $ 28,871,651 $ 28,446,136 Income (Loss) Before Other Revenues, Expenses, Gains or Losses $ (2,424,037) $ (1,135,437) State Capital Appropriations $ 1,849,683 $ 353,055 Donated Capital Assets 92,113 0 Paid to Other State Agencies (29,512) (41,821) Increase (Decrease) in Net Position $ (511,753) $ (824,203) Net Position - Beginning of Year (As Restated- Note 22) $ 15,995,322 $ 16,819,525 Net Position - End of Year $ 15,483,569 $ 15,995,322 The Accompanying Notes are an Integral Part of this Statement 9

15 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2017 AND JUNE 30, CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees (Net of Scholarship Allowances) $ 11,240,755 $ 10,839,362 Federal, State and Local Grants and Contracts 7,716,087 9,494,396 Auxiliary Enterprise Charges (Net of Scholarship Allowances) 2,325,916 2,774,832 Sales and Services of Education Departments 23,220 24,534 Other Receipts 889,073 1,143,234 Student Loans Proceeds 9,496,097 12,141,244 Student Loan Disbursements (9,496,097) (12,141,244) Payments to Vendors (29,152,298) (27,564,973) Payments to Employees (22,063,482) (21,708,902) Net Cash Provided (Used) by Operating Activities $ (29,020,729) $ (24,997,517) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations $ 10,359,048 $ 8,887,575 County Appropriations 6,056,247 5,327,638 State, Local and Federal Grants, Gifts and Contracts - Nonoperating 12,833,151 14,964,983 Net Cash Provided (Used) by Noncapital Financing Activities $ 29,248,446 $ 29,180,196 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES State Capital Appropriations $ 1,849,683 $ 353,055 Principal Payment on Bonds Payable (785,000) (760,000) Interest Paid on Bonds Payable and Capital Leases (590,988) (613,787) Purchase of Capital Assets (9,318,865) (2,695,104) Net Cash Provided (Used) by Capital and Related Financing Activities $ (8,845,170) $ (3,715,836) CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments $ 105,918 $ 96,293 Net Cash Provided (Used) by Investing Activities $ 105,918 $ 96,293 Net Increase (Decrease) in Cash $ (8,511,535) $ 563,136 Cash - Beginning of Year 19,378,630 18,815,494 Cash - End of Year $ 10,867,095 $ 19,378,630 The Accompanying Notes are an Integral Part of this Statement 10

16 RECONCILIATION OF NET OPERATING REVENUES (EXPENSES) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (Loss) $ (31,295,688) $ (29,581,573) Adjustments to Reconcile Net Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Loss on Disposal of Assets 4,337 4,131 Depreciation and Amortization Expense 2,565,120 2,715,012 Change in Assets, Liabities, and Deferred Resources: Operational Receivables, Net 865,429 (1,148,545) Loans Receivable, Net 45,543 24,153 Inventories 84, ,021 Deferred Charges and Prepaid Expenses (8,579) 263,553 Change in Net Pension Liability and Related Deferred Resources 1,607,601 1,151,961 Accounts Payable & Sales Tax Payable (796,085) 767,045 Accrued Payroll and Related Liabilities (10,117) (353,319) Funds Held for Others 16,427 20,966 Compensated Absences (187,633) 86,476 Unearned Revenue (1,911,557) 548,602 Net Cash Provided (Used) by Operating Activities $ (29,020,729) $ (24,997,517) SUPPLEMENTAL DISCLOSURES FLORENCE - DARLINGTON TECHNICAL COLLEGE STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2017 AND JUNE 30, 2016 Noncash Capital and Related Financing Activities Amortization of Bond Premium $ 87,134 $ 87,134 Total Noncash Capital and Related Financing Activities $ 87,134 $ 87,134 The Accompanying Notes are an Integral Part of this Statement 11

17 EDUCATIONAL FOUNDATION, INC. COMPONENT UNIT STATEMENT OF FINANCIAL POSITION JUNE 30, ASSETS Cash $ 863,518 Pledges Receivable 346,500 Investments 1,761,329 Inventory 10,286 Other Receivables 26,246 Prepaid Expenses 13,329 Capital Assets, Net of Accumulated Depreciation 3,906,089 Cash Restricted to Investment in Capital Assets 949,304 Deposits & Closing Cost Net 14,992 Total Assets $ 7,891,593 LIABILITIES Accounts Payable $ 94,128 Due to Florence - Darlington Technical College 116,477 Accrued Expenses 69,493 Deferred Revenue 11,429 Refundable Advance 1,040,041 Total Liabilities 1,331,568 NET ASSETS Net Investment in Capital Assets $ 3,906,089 Unrestricted (263,649) Temporarily Restricted 2,449,906 Permanently Restricted 467,679 Total Net Assets $ 6,560,025 Total Liabilities and Net Assets $ 7,891,593 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, SUPPORT AND REVENUE Contributions $ 1,075,413 Special Events 797 Grants 4,079,959 Loss on Disposal of Equipment (375,690) Hotel Revenue, Net (79,437) Rental (Loss), Net 4,962 Marketable Securities Investments (Loss) Return 156,095 Miscellaneous Revenue 6,063 Total Support and Revenue $ 4,868,162 EXPENSES Program Expenses $ 1,063,959 Scholarships 185,752 Fund Raising 10,283 Administrative Expenses 68,119 Total Expenses $ 1,328,113 Change in Net Assets $ 3,540,049 Net Assets - Beginning of Year 3,019,976 Net Assets - End of Year The Accompanying Notes are an Integral Part of this Statement $ 6,560,025 12

18 NOTES TO FINANCIAL STATEMENTS

19 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations: Florence - Darlington 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 Florence, Darlington and Marion counties. Included in this range of programs are technical and occupational associate degree, diploma and certificate curricula that are consistent with the needs of employers in the College s service area. As an integral part of this mission, the College provides a program of continuing education designed to satisfy the occupational demands of employers through retraining and upgrading skills of individual employees. The College also provides a variety of developmental education programs, support services and offerings to assist students in meeting their personal and professional educational objectives. Reporting Entity: The financial reporting entity, as defined by the Governmental Accounting Standards Board (GASB) 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 incomplete. Accordingly, the financial statements include the accounts of Florence-Darlington Technical College, as the primary government, and the accounts of Florence-Darlington Technical College Educational Foundation, Inc (the Foundation ), its component unit. The College is considered a discretely presented component unit of the State of South Carolina as required by GASB No. 61. However, based on the nature and significance of the Foundation s relationship with the State of South Carolina, the Foundation is not a component unit of the State of South Carolina. The Foundation is a legally separate, tax-exempt component unit of the College. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The 37 member board of the Foundation is a self-perpetuating entity which consists of the president, one member of the area commission and graduates and friends of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources, or income thereon, that the Foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of, the College, the Foundation is considered a component unit of the College. The Foundation is reported in separate financial statements because of the difference in its reporting model, as further described below. The Foundation is a private not-for-profit organization that reports its financial results under Financial Accounting Standards Board (FASB) Statements. Most significant to the Foundation s operations and reporting model are FASB Statement No. 116, Accounting for Contributions Received and Contributions Made, and FASB Statement No. 117, Financial Reporting for Not-for-Profit Organizations. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation s financial information in the College s financial reporting entity for these differences. However, significant note disclosures to the Foundation s financial statements have been incorporated into the College s notes to the financial statements. Financial statements for the Foundation can be obtained by mailing a request to Florence-Darlington Technical College Educational Foundation, P.O. Box , Florence, South Carolina,

20 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial Statements: The financial statements are presented in accordance with Governmental Accounting Standards Board ( GASB ) Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments, and GASB Statement No. 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities. The financial statement presentation required by GASB Statements No. 34 and No. 35 provides a comprehensive, entity-wide perspective of the College s net position, revenues, expenses, changes in net position and cash flows that replaces the fund-group perspective previously required. The College implemented the provisions of GASB Statement No. 77, Tax Abatement Disclosures during the year ended June 30, The requirements of this statement improve financial reporting by giving users of financial statements essential information that is not consistently or comprehensively reported to the public at present. This statement discloses the nature and magnitude of tax abatements that will make these transactions more transparent to financial statement users. There are no changes to the financial statements as a result of implementation. Basis of Accounting: For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Student tuition and auxiliary enterprise fees are presented net of scholarships and fellowships applied to student accounts, while stipends and other payments made directly are presented as scholarship expenses. All significant intra-institutional transactions have been eliminated. 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. Funds invested through the South Carolina State Treasurer s Office are considered cash equivalents. Investments: Deposits and investments for the College are governed by the South Carolina Code of Laws, Section , Investment of Funds. The College has implemented GASB Statement No. 40, Deposits and Investment Risk Disclosures - an amendment to GASB Statement No. 3. This statement requires disclosures related to deposits 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. 72, Fair Value Measurement and Application. Changes in unrealized gain (loss) on the fair value of investments are reported as a component of investment income in the statement of revenues, expenses and changes in net position. Fair Value: The fair value measurement and disclosure framework provides for a three-tier fair value hierarchy that gives highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy are described below: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the College can access at the measurement date. 14

21 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Level 2 Inputs to the valuation methodology, other than quoted prices included in Level 1, that are observable for an asset or liability either directly or indirectly and include: Quoted prices for similar assets and liabilities in active markets. Quoted prices for identical or similar assets or liabilities in inactive markets. Inputs other than quoted market prices that are observable for the asset or liability. Inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 Inputs to the valuation methodology that are unobservable for an asset or liability and include: Fair value is often based on developed models in which there are few, if any, observable inputs. The asset s or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable values or reflective of future fair values. The College believes that the valuation methods used are appropriate and consistent with GAAP. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no significant changes from the prior year in the methodologies used to measure fair value. Accounts Receivable: Accounts receivable consists of tuition and fee charges to students, gift pledges, 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. 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 acquisition value at the date of donation in the case of gifts. Acquisition value is the price that would be paid to acquire an asset with equivalent service capacity in an orderly market transaction at the acquisition date. 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. 15

22 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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. Deposits represent student fee refunds, and other miscellaneous deposits. Student deposits are recognized as revenue during the semester for which the fee is applicable and earned when the deposit is nonrefundable to the student under the forfeit terms of the agreement. Deferred Outflows/Inflows of Resources: In addition to assets and liabilities, the statement of net position will sometime report a separate section for deferred outflows and deferred inflows of resources. These separate financial statement elements represent consumption or acquisition of net position that applies to a future period(s) and so will not be recognized as an outflow/inflow of resources (expense/revenue) until that time. Pensions: For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, pension expense, information about the pension plan s fiduciary net position and additions to/deductions from the plan s fiduciary net position have been determined on the same basis as they are reported by the plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Compensated Absences: Employee vacation pay expense is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as a component of current and longterm liabilities in the statement of net position and as a component of salary and benefit expenses in the statement of revenues, expenses, and changes in net position. Net Position: The College s net position is classified as follows: Net Investment in capital assets: This represents the College s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of net investment of capital assets. Restricted net position - expendable: Restricted expendable net position includes resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Restricted net position - nonexpendable: Nonexpendable restricted net position 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. 16

23 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Unrestricted net position: Unrestricted net position represents 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. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. The College policy for applying expenses that can use both restricted and unrestricted resources is delegated to the departmental administrative level. General practice is to first apply the expense to restricted resources and then to unrestricted resources. Income Taxes: The College is exempt from income taxes under the Internal Revenue Code. Classification of Revenues: The College has classified its revenues as either operating or nonoperating 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 non-exchange 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. Sales and Services of Educational and Other Activities: Revenues from sales and services of educational and other activities generally consist of amounts received from instructional, laboratory, research, and public service activities that incidentally create goods and services which may be sold to students, faculty, staff, and the general public. The College receives such revenues primarily from the following programs: Dental Hygiene and Cosmetology. Auxiliary Enterprises and Internal Service Activities: Auxiliary enterprise revenues primarily represent revenues generated by the bookstore and food services. Revenues of internal service and auxiliary enterprise activities and the related expenditures of college departments have been eliminated. Nonexchange Transactions: Nonexchange transactions involving financial or capital resources are transactions in which the College either gives value to another party without directly receiving equal value in exchange or receives value from another party without directly giving equal value in exchange. The types of nonexchange transactions the College engages in include Voluntary nonexchange transactions (certain grants and donations), and Imposed nonexchange transactions (fines and penalties), and Government-mandated nonexchange transactions. 17

24 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Voluntary nonexchange transactions usually involve eligibility requirements that must be met before transactions are recognized. The eligibility requirements can include one or more of the following: a. The recipient has the characteristics specified by the provider. b. Time requirements specified by the provider have been met. c. The provider offers resources on a reimbursement basis and allowable costs have been incurred under the allowable program. d. The provider s offer of resources is contingent upon a specified action of the recipient and that action occurred. Resources transmitted before the eligibility requirements are met are reported as advances by the provider and as unearned revenue by recipients. Assets from imposed nonexchange revenues are recognized when an enforceable legal claim to the assets arise or when the resources are received, whichever occurs first. Capitalized Interest: The College capitalizes 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 years ended June 30, 2017 and June 30, 2016, none of the interest cost met the criteria for capitalization. Restricted Cash: The restricted cash on the financial statements represents funds held at June 30, 2017 and June 30, 2016 that are restricted for the following purposes: June 30, 2017 June 30, 2016 Federal Perkins Loan $ 72,148 $ 32,385 Debt Service 9,342,877 10,703,874 Total Restricted Cash $ 9,415,025 $ 10,736,259 Component Unit: Florence-Darlington Technical College Educational Foundation, Inc. maintains its accounts in accordance with the principles and practices of fund accounting. Fund accounting is the procedure by which resources for various purposes are classified for accounting purposes in accordance with activities or objectives specified by donors. Accordingly, net assets and changes therein are classified as follows: Permanently Restricted Net Assets: Permanently Restricted Net Assets is subject to donorimposed stipulations that require them to be maintained permanently by the Foundation. Generally, the donors of these assets permit the Foundation to use all or part of the income earned on related investments for general or specific purposes. Temporarily Restricted Net Assets: Temporarily Restricted Net Assets is subject to donorimposed stipulations that will be met by actions of the Foundation and/or passage of time. Unrestricted Undesignated Net Assets: Unrestricted Undesignated Net Assets is not subject to donor-imposed stipulations that will be met by actions of the Foundation and/or passage of time. Unrestricted Designated Net Assets: Unrestricted Designated Net Assets is not subject to donorimposed restrictions but subject to Foundation Board imposed stipulations. 18

25 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Revenues are reported as increases in unrestricted net assets classification unless use of the related assets is limited by donor-imposed restrictions. Contributions, including unconditional promises to give, are recognized as revenue in the period received. Conditional promises to give are not recognized as revenue until the conditions on which they depend are substantially met. Contributions for in-kind gifts from outside sources are not recorded in the Foundation s financial records, but are accounted for and acknowledged separately. From time to time, the fair value of the assets associated with individual donor-restricted endowment funds may fall below the level that the donor or the UPMIFA requires the Foundation to retain as a fund of perpetual duration. As of June 30, 2017, the Foundation held certain restricted endowment funds in which the asset values had fallen below the original gift amounts. The deficiencies resulted from market conditions and spending that were in excess of the earnings allocated to the fund. The total deficiencies of this nature for all donor-restricted endowment funds totaled $400 as of June 30, Expenses are reported as decreases in unrestricted undesignated or unrestricted designated net assets as appropriate. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted undesignated or unrestricted designated net assets unless their use is restricted by explicit donor stipulation or by law. Investments are reported at fair value. NOTE 2 DEPOSITS AND INVESTMENTS Deposits: State Law requires that a bank or savings and loan association receiving State funds must secure 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 does not have a deposit policy for custodial credit risk. The deposits for the College at June 30, 2017 were $2,425,499 and were fully insured or collateralized by securities held in the College s name. Temporary cash investments 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. 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. The following schedule reconciles deposits, investments, and petty cash funds to the Statement of Net Position amounts: Primary Government: Deposits Not With State Cash and Investments Treasurer Petty Cash Totals Petty Cash $ 0 $ 24,048 $ 24,048 Demand Deposits 1,500, ,500,170 $ 1,500,170 $ 24,048 $ 1,524,218 19

26 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 2 DEPOSITS AND INVESTMENTS (continued) Statement of Net Position Cash and Cash Equivalents (Current) $ 1,452,070 $ 8,642,371 Restricted Cash and Cash Equivalents (Noncurrent) 9,415,025 10,736,259 Total Cash and Investments $ 10,867,095 $ 19,378,630 (On the Statement of Net Position) Disclosure of Deposits and Investments Carrying Value of Deposits $ 1,500,170 $ 8,651,335 Cash on Hand 24,048 23,421 Short Term Investments 9,342,877 10,703,874 Total Cash, Deposits, and Investments $ 10,867,095 $ 19,378,630 Foreign Currency Risk: Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment. Florence-Darlington 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. Interest Rate Risk: Interest Rate Risk is the risk that changes in the interest rates of debt instruments will adversely affect the fair value of an investment. Currently, the college is not exposed to interest rate risk. The College does not have a formal investment policy that limits maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. Credit Risk: Credit risk is the risk that an issuer or other counter-party to an investment will not fulfill its obligations. The college does not have an investment policy regarding credit risk. The College s rated investments at June 30, 2017 totaled $9,342,877 in money market mutual funds that were rated AAA by Standard and Poor s using the Standard and Poor s rating scale. 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 100 percent investments which are exposed to concentration of credit risk in money market mutual funds. Discretely Presented Component Unit: Deposits Not With State Cash and Investments Treasurer Totals Demand Deposits $ 863,518 $ 863,518 $ 863,518 $ 863,518 20

27 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 2 DEPOSITS AND INVESTMENTS (continued) Deposits: The carrying amount of the Organization s deposits with financial institutions at June 30, 2017 was $863,518 and the bank balance was $770,700. The bank balance was secured as follows: Cash in Bank, June 30, 2017 $ 770,700 Less: FDIC insured amount (250,000) Uninsured Cash (Custodial Credit Risk) $ 520,700 Investments at market value as of June 30, 2017 are summarized as follows: Investment Type Fair Value Amount Debt Securities: Fixed Income $ 641,708 Money Market Mutual Funds 425,247 Total Debt Securities $ 1,066,955 Other Investments: Real Estate Investment Trust $ 195,098 Equity Funds 1,182,034 Alternative Investments 266,546 Total Other Investments $ 1,643,678 TOTAL INVESTMENTS $ 2,710,633 The methodology used for valuing the investment at fair value are quoted market prices in active markets for identical assets. Florence-Darlington Technical College Foundation does not follow standards set by the Governmental Accounting Standards Board and accordingly has not disclosed interest rate risk, credit risk, and concentration of credit risk. The remainder of this page intentionally left blank. 21

28 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 3 FAIR VALUE MEASUREMENTS Florence Darlington Technical College Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs June 30, 2017 (Level 1) (Level 2) (Level 3) Investments by Fair Value Level Debt Securities Money Market Mutual Funds $ 9,342,877 $ 9,342,877 $ 0 $ 0 Total Debt Securities $ 9,342,877 $ 9,342,877 $ 0 $ 0 Florence Darlington Technical College holds investments that are measured at fair value on a recurring basis. The College categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles, as stated above. The College considers the money market mutual funds to be cash equivalents because of its high liquidity nature. The following table sets forth by level, within the fair value hierarchy, the Foundation s assets at fair value as of June 30, 2017: Discretely Presented Component Unit Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs June 30, 2017 (Level 1) (Level 2) (Level 3) Investments by Fair Value Level Debt Securities Money Market Funds $ 425,247 $ 425,247 $ 0 $ 0 Debt Securities 641, , Equity Funds 1,182,035 1,182, Real Estate Investment Trusts 195, , Alternative Investments 266, ,546 Total Debt Securities $ 2,710,633 $ 2,444,087 $ 0 $ 266,546 The Foundation invests in alternative investments that pursue multiple strategies to diversify risks and reduce volatility. The investments focus on achieving long-term capital appreciation with moderate to lower levels of volatility. As stated above, the Foundation believes the Level 3 investments assist the Foundation in diversifying its portfolio and reducing risks while still allowing for capital appreciation. 22

29 NOTE 4 ACCOUNTS RECEIVABLE FLORENCE - DARLINGTON TECHNICAL COLLEGE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 Accounts receivable for the years ended June 30, 2017 and June 30, 2016, includes applicable allowances for doubtful accounts, are summarized as follows: Current Receivables: Student Accounts $ 3,109,969 $ 3,117,432 Industry and Other Sponsor Accounts 1,170,716 1,985,646 County Governments 331, ,918 Foundation 116,477 25,566 Federal Grants and Contracts 873,748 1,091,279 State Grants and Contracts 258,692 53,878 Other 279, ,459 Gross Receivables $ 6,140,672 $ 7,029,178 Less: Allowance for Doubtful Accounts (461,237) (552,610) Net Accounts Receivable $ 5,679,435 $ 6,476,568 Allowances for losses of student accounts receivable are established based upon actual losses experienced in prior years and evaluations of the current account portfolio. At June 30, 2017, the allowance for uncollectible student accounts is valued at $461,237 and $552,610 for June 30, NOTE 5 LOANS RECEIVABLE Student loans made through the Federal Perkins Loan Program and Nursing Student Loan Program comprise substantially all of the loans receivable as of June 30, The Perkins Loan Program provides various repayment options; students have the right to repay the loans over periods of up to 10 years depending on the amount of the loan and loan cancellation privileges the student may exercise. The remaining payments are classified as long-term loans receivable. As the College determines that Perkins loans are uncollectible, the loans are written off and assigned to the US Department of Education. The loans receivable as of June 30, 2017 and June 30, 2016 are summarized below: Perkins Loans $ 274,200 $ 318,638 Nursing Loans 8,198 9,303 Gross Loans Receivable $ 282,398 $ 327,941 Less: Allowance for Doubtful Accounts (25,247) (25,247) Net Loans Receivable $ 257,151 $ 302,694 23

30 NOTE 6 - PLEDGES RECEIVABLE FLORENCE - DARLINGTON TECHNICAL COLLEGE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 The composition of Discretely Presented Component Unit Pledges Receivable at June 30, 2017 is summarized as follows: Pledges receivable due in less than one year $ 89,500 Pledges receivable due from one to five years 275,000 Pledges receivable due in more than five years 29,000 Less: Present value discount (20,400) Allowance for Uncollectible Pledges (26,600) Net Pledges Receivable $ 346,500 Pledges receivable represent an unconditional promise to give at June 30, This amount is recorded as contributions based upon the net present value of the amounts expected to be collected. The Foundation used a discount rate of 2.0% for June 30, 2017 on the pledges to determine the present value of pledges receivable. Management established a 7.0% allowance for uncollectible pledges for the year ended June 30, NOTE 7 CAPITAL ASSETS Primary Government: Beginning Ending Balance Balance June 30, June 30, 2016 Increases Decreases 2017 Capital Assets not being Depreciated: Land $ 1,910,053 $ 601,969 $ 0 $ 2,512,022 Construction in Progress 1,587,255 8,753,343 (9,725,162) 615,436 Total Capital Assets not being Depreciated $ 3,497,308 $ 9,355,312 $ (9,725,162) $ 3,127,458 Other Capital Assets: Buildings and Improvements $ 63,754,159 $ 9,123,193 $ 0 $ 72,877,352 Land Improvements 199, ,874 Machinery, Equipment, and Other 16,297, ,233 (835,341) 16,137,634 Vehicles 296, ,381 Total Other Capital Assets at Historical Cost $ 80,548,156 $ 9,798,426 $ (835,341) $ 89,511,241 Less Accumulated Depreciation for: Buildings and Improvements $ (25,516,122) $ (1,738,350) $ 0 $ (27,254,472) Land Improvements (19,988) (9,993) 0 (29,981) Machinery, Equipment, and Other (14,588,557) (877,421) 831,004 (14,634,974) Vehicles (259,626) (17,282) 0 (276,908) Total Accumulated Depreciation $ (40,384,293) $ (2,643,046) $ 831,004 $ (42,196,335) Other Capital Assets, Net $ 40,163,863 $ 7,155,380 $ (4,337) $ 47,314,906 Total Capital Assets, Net $ 43,661,171 $ 16,510,692 $ (9,729,499) $ 50,442,364 State Inventory listing Movable Equipment $ 16,434,015 Total Equipment per Books 16,434,015 Difference $ 0 24

31 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 7 CAPITAL ASSETS (continued) Capital asset additions include assets totaling $17,598 that were fully depreciated that had previously been recorded as disposals. Asset additions include $92,113 of donated assets. Total depreciation expense for the year ended June 30, 2017 was $2,625,448 and $2,775,341 for June 30, The decrease in Machinery, Equipment and Other includes assets valued at $4,337 which were assets disposed of. Florence Darlington Technical College Foundation Property and equipment are stated at cost and consist of the following at June 30, 2017 and 2016: Estimated Life in Description Years Land $ 0 $ 462,164 Easements 0 7,500 Furniture and Fixtures 7 426, ,271 Signs 7 0 6,686 Machinery and Equipment 7 182,422 0 Vehicles 5 34,964 0 Building Improvements ,197 1,415 Building 40 3,149,921 1,631,582 4,036,490 2,375,618 Less Accumulated Depreciation 130, ,354 Property and Equipment (Net) $ 3,906,089 $ 1,663,264 Total depreciation expense for the year ended June 30, 2017 was $130,401. NOTE 8 - PENSION AND RETIREMENT PLAN Plan Descriptions 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 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. 25

32 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 - PENSION AND RETIREMENT PLAN (continued) 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. 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 Budget and Control Board, 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 cotrustee of the Systems in conducting that review. 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, PO Box 11960, 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. 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. State ORP As an alternative to membership in SCRS, newly hired state, public school, and higher education employees and individuals newly elected to the South Carolina 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. 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 (8.66 percent) 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 (6.41 percent) and an incidental death benefit contribution (.15 percent), if applicable, which is retained by SCRS. 26

33 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 - PENSION AND RETIREMENT PLAN (continued) Benefits 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. 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 services 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 eight-year earned service requirement, respectively. An incidental death benefit is also available to beneficiaries of active or 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. The remainder of this page intentionally left blank. 27

34 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 - PENSION AND RETIREMENT PLAN (continued) Contributions 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 area 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 are prescribed in Title 9 of the South Carolina Code of Laws. The PEBA Board may increase the SCRS and PORS 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 the 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 provide in statute of 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; and, this increase is not limited to one-half of one percent per year. Required employee contribution rates 1 are as follows: SCRS Employee Class Two Employee Class Three % 8.66% 8.16% 8.16% State ORP Employee 8.66% 8.16% PORS Employee Class Two Employee Class Three 9.24% 9.24% 8.74% 8.74% 28

35 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 - PENSION AND RETIREMENT PLAN (continued) Required employer contribution rates 1 are as follows: SCRS Employer Class Two 11.41% 10.91% Employer Class Three 11.41% 10.91% Employer Incidental Death Benefit 0.15% 0.15% State ORP 2 Employer Contribution 11.41% 10.91% Employer Incidental Death Benefit 0.15% 0.15% PORS Employer Class Two 13.84% 13.34% Employer Class Three 13.84% 13.34% 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 SCRS. Contributions to the pension plan from the College were as follows for the years ended June 30, 2017 and June 30, 2016: SCRS $ 1,968,108 $ 1,836,159 PORS $ 91 $ 0 ORP Remitted to SCRS $ 181,483 $ 151,385 ORP Remitted to Vendor $ 138,325 $ 127,172 Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2017, the College reported $39,693,655 and $0 for its proportionate shares of the net pension liabilities of SCRS and PORS, respectively. The net pension liability of each defined benefit pension plan was determined based on the July 1, 2015 actuarial valuations, using membership data as of July 1, 2015, projected forward to June 30, 2016, and financial information of the pension trust funds as of June 30, 2016, using generally accepted actuarial procedures. 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 SCRS proportion was percent measured as of June 30, The State s PORS proportion of the net pension liability at June 30, 2016 was percent. The proportionate share of net pension liability for the year ended June 30, 2016, was percent for the SCRS and percent for the PORS. 29

36 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 - PENSION AND RETIREMENT PLAN (continued) Pension Expense Components of collective pension expense reported in the Schedules of Pension Amounts by Employer for the fiscal year ended June 30, 2017, are presented below: Description SCRS PORS Service cost (annual cost of current service) $ 1,418,570 $ 0 Interest on the total pension liability 6,005,326 0 Changes in plan benefits 0 0 Plan administrative costs 24,435 0 Plan member contributions (1,401,465) 0 Expected return on plan assets (3,435,140) 0 Recognition of current year amortization Difference between expected and actual experience 281,586 0 Recognition of current year amortization Difference between projected and actual investment earnings 638,892 0 Other 1,852 0 Change in proportionate share 0 0 Total Pension Expense $ 3,534,056 $ 0 The total pension expense for the fiscal year ending June 30, 2016, totaled $3,139,334 for the SCRS and ($39) for the PORS. Additional items included in Total Employer Pension Expense in the Schedules of Pension Amounts by Employer are the current period amortized portions of deferred outflows and/or inflows of resources related to changes in employers proportionate share of the collective net pension liability and differences between actual employer contributions and proportionate share of total plan employer contributions. These two deferrals are specific to cost-sharing multiple-employer defined benefit pension plans as discussed in paragraphs 54 and 55 of GASB 68. At June 30, 2017, the College reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: SCRS PORS Deferred Outflows of Resources: Difference between expected and actual experience $ 411,471 $ 0 Net difference between projected and actual earnings 3,339,511 0 Deferred amounts from changes in proportionate share and difference between employer contributions and proportionate share of total plan employer contributions 1,074,732 0 College contributions subsequent to measurement date 2,149, $ 6,975,305 $ 91 30

37 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 - PENSION AND RETIREMENT PLAN (continued) Deferred Inflows of Resources: SCRS PORS Net difference between expected and actual experience $ 43,107 $ 0 Deferred amounts from changes in proportionate share and difference between employer contributions and proportionate share of total plan employer contributions 843, $ 886,374 $ 110 College contributions subsequent of the measurement date of $2,149,591 and $91 reported as deferred outflow of resources for the SCRS and PORS, will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Payable to Pension Plan Year Ending June 30: SCRS PORS 2018 $ 1,146,494 $ (39) ,415 (39) ,141,877 (32) ,554 0 Thereafter 0 0 $ 3,939,340 $ (110) At June 30, 2017, the College had $380,000 in outstanding payables to the plans for legally required contributions. This amount is reported in the statement of net position with withholdings and benefits payable. Actuarial Assumptions and Methods Actuarial valuations 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 during the valuation process 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. The last experience study was performed on data through June 30, 2016 using generally accepted actuarial principles. 31

38 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 - PENSION AND RETIREMENT PLAN (continued) The following table provides a summary of the actuarial assumptions and methods used in the July 1, 2015, valuations for SCRS and PORS. SCRS PORS Actuarial cost method Entry age normal Entry age normal Investment rate of return 1 7.5% 7.5% Projected salary increases Benefit adjustments 1 includes inflation at 2.75% 3.5% to 12.5% (varies by service) 1 lesser of 1% or $500 annually 4.0% to 10.0% (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. This assumption includes base rates which are automatically adjusted for future improvement in mortality using published Scale AA projected from the year Assumptions used in the July 1, 2015, valuations for SCRS and PORS are as follows: Former Job Class Males Females Educators General Employees and Members of the General Assembly Public Safety and Firefighters RP-2000 Males (with White Collar adjustment) multiplied by 110% RP-2000 Males multiplied by 100% RP-2000 Males (with Blue Collar adjustment) multiplied by 115% RP-2000 Females (with White Collar adjustment) multiplied by 95% RP-2000 Females multiplied by 90% RP-2000 Females (with Blue Collar adjustment) multiplied by 115% Long-term Expected Rate of Return The long-term expected rate of return on pension plan investments, as used in the July 1, 2015, actuarial valuations, was based upon the 30 year capital market outlook at the end of the third quarter 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 remainder of this page intentionally left blank. 32

39 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 - PENSION AND RETIREMENT PLAN (continued) The expected returns, along with the expected inflation rate, form the basis for the revised target asset allocation adopted beginning January 1, The long-term expected rate of return is produced by weighing the expected future real rates of return by the target allocation percentage and adding expected inflation and is summarized in the table below. For actuarial purposes, the 7.50 percent assumed annual investment rate of return used in the calculation of the total pension liability includes a 4.75 percent real rate of return and a 2.75 percent inflation component. Target Expected Arithmetic Long Term Expected Portfolio Asset Class Asset Allocation Real Rate of Return Real Rate of Return Global Equity 43.0% Global Public Equity 34.0% 6.52% 2.22% Private Equity 9.0% 9.30% 0.84% Real Assets 8.0% Real Estate 5.0% 4.32% 0.22% Commodities 3.0% 4.53% 0.13% Opportunistic 20.0% GTAA/Risk Parity 10.0% 3.90% 0.39% HF (Low Beta) 10.0% 3.87% 0.39% Diversified Credit 17.0% Mixed Credit 5.0% 3.52% 0.17% Emerging Markets Debt 5.0% 4.91% 0.25% Private Debt 7.0% 4.47% 0.31% Conservative Fixed Income 12.0% Core Fixed Income 10.0% 1.72% 0.17% Cash and Short Duration (Net) 2.0% 0.71% 0.01% Total Expected Real Return 100.0% 5.10% Inflation for Actuarial Purposes 2.75% Total Expected Nominal Return 7.85% Discount Rate The discount rate used to measure the total pension liability was 7.50 percent. The projection of cash flows used to determine the discount rate assumed that the funding policy specified in the South Carolina Code of Laws will remain unchanged in future years. Based on those assumptions, the System s fiduciary net position was projected to be available to make all 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. 33

40 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 8 - PENSION AND RETIREMENT PLAN (continued) Sensitivity Analysis The following table presents the collective net pension liability of the participating employers calculated using the discount rate of 7.50 percent, as well as what the employers net pension liability would be if it were calculated using the discount rate that is 1.00 percent lower (6.50 percent) or 1.00 percent higher (8.50 percent) than the current rate. System Sensitivity of the Net Pension Liability to Changes in the Discount Rate 1% Decrease (6.50%) Current Discount Rate (7.50%) 1% Increase (8.50%) SCRS $ 49,514,889 $ 39,693,655 $ 31,516,300 PORS $ $ 0 $ 0 $ 0 Deferred Retirement Option Plans The Teacher and Employee Retention Incentive (TERI) program, established by State law, became effective January 1, The program is a deferred retirement option available to SCRS members eligible for services retirement. Upon entering the TERI program, a member s status changes from active to retired. A TERI participant agrees to continue employment with an employer participating in the system for a specified period, not to exceed five years. TERI participants retain the same status and employment rights they held upon entering the program but are not considered active employees for purposes of the disability retirement programs. A TERI retiree s monthly benefits are accrued and remain in the SCRS trust account during the TERI participation period, but no interest is accrued or paid thereon. Upon termination of employment or at the end of the TERI participation period (whichever is earlier), a retiree may roll over some or all of the accumulated TERI balance into a qualified, tax-sheltered retirement plan and/or receive a lump-sum distribution. Optional Retirement Program As an alternative to membership in SCRS, certain State, public school, and higher education employees and individuals newly elected to the South Carolina General Assembly beginning with the November 2012 general election have the option to participate in the State Optional Retirement Program. Participants in the State ORP direct the investment of their funds into a plan administered by one of four investment providers and are governed by the terms of the contracts that those providers issue. Under State law, College contributions to the ORP are at the same rates as of the SCRS (see Subsection c, Funding Policies). A direct remittance is required from the employers to the investment providers for the employee contribution (8.66%) and a portion of the employer contribution (5.00%), which is immediately vested to the employee. A direct remittance is also required to the SCRS for a portion of the employer contribution (6.41%) and a group life contribution (.015%), which is retained by the SCRS. The activity for the College participation in the State ORP is as follows: Covered payroll.. $ 2,766,503 Employee contributions to providers. 239,579 Employer contributions to providers.. 138,325 Payments to SCRS. 181,483 34

41 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 9 POSTEMPLOYMENT AND OTHER EMPLOYEE BENEFITS In accordance with the South Carolina Code of Laws and the annual Appropriation Act, the State of South Carolina provides certain health care, dental and life insurance benefits to certain active and retired State employees and certain surviving dependents of retirees. All permanent full-time and certain permanent part-time employees of the College are eligible to receive these benefits. The State provides postemployment health and dental benefits to employees who retire from State service or who terminated with at least 20 years of State service who meet one or more of the eligibility requirements, such as age, length of service and hire date. Generally those who retire must have at least 10 years of retirement service credit to qualify for these State-funded benefits. Benefits are effective at date of retirement when the employee is eligible for retirement benefits. These benefits are provided through annual appropriations by the General Assembly to the College for its active employees and to the State Budget and Control Board for all participating State retirees except the portions funded through the pension surcharge and provided from other applicable fund sources of the College for its active employees who are not funded by State General appropriations. The State finances health and dental plan benefits on a pay-as-you-go basis. The College recorded benefit expenses for these insurance benefits for active employees in the amount of $1,779,682 for the year ended June 30, 2017 and $1,668,579 for the year ended June 30, The College paid $1,054,930 applicable to the 5.33 percent surcharge included with the employer contributions for retirement benefits for For 2016, the College paid $1,020,441 applicable to the 5.00 percent surcharge included with the employer contributions for retirement benefits. These amounts were remitted to the South Carolina Retirement Systems for distribution to the Office of Insurance Services for retiree health and dental insurance benefits. Information regarding the cost of insurance benefits applicable to the College s retirees is not available. By State law, the College has no liability for retirement benefits. Accordingly the cost of providing these benefits for retirees is not included in the accompanying financial statements. In addition, the State General Assembly periodically directs the Retirement Systems to pay supplemental (cost of living) increases to retirees. Such increases are primarily funded from the Systems earnings; however a portion of the required amount is appropriated from the State General Fund annually for the SCRS benefits. NOTE 10 CONTINGENCIES, LITIGATION, AND PROJECT COMMITMENTS The College is party to various lawsuits arising out of the normal conduct of its operations. In the opinion of College management, there are no material claims or lawsuits against the College that are not covered by insurance or whose settlement would materially 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. Such audits could lead to requests for reimbursement to the grantor agency for expenditures disallowed under terms of the grant. Management believes disallowances, if any, will not be material. Necessary funding has been obtained for the acquisition, construction, renovation, and equipping of certain facilities, which will be capitalized in the applicable capital asset categories upon completion. Other capital projects, which are not to be capitalized when completed, are for replacements, repairs, and/or renovations to existing facilities. 35

42 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 10 CONTINGENCIES, LITIGATION, AND PROJECT COMMITMENTS (continued) At June 30, 2017, the College had construction in progress expenditures totaling $615,436 on the following outstanding project commitments: Expenditures Estimated Estimated Project To Date Total Project Completion Date Hartsville Site $ 4,500 $ 8,000,000 Fiscal Year Building Renovation 158, ,000 Fiscal Year 2018 Academic/Workforce 1000 Building 452,738 30,750,000 Fiscal Year 2019 $ 615,436 $ 39,500,000 The College anticipates funding these projects out of current resources. The State has issued capital improvement bonds to fund improvements and expansion of State facilities. The College is not obligated to repay these funds to the State. Authorized funds can be requested as needed once State authorities have given approval to begin specific projects and project expenditures have been incurred. The College has expended all authorized State Capital Improvement Bonds available to draw at June 30, NOTE 11 LEASE OBLIGATIONS Operating Operating lease payments during the fiscal year ended June 30, 2017, totaled $51,312 to the discretely presented component unit. The College rents 30 copiers that meet the definition of contingent rentals plus 24 student print stations. During the fiscal year ending June 30, 2017 the College expended $131,702 to external parties for these contingent rentals which are based upon the copier machine usage. NOTE 12 BONDS PAYABLE Bonds Payable consisted of the following at June 30, 2017: Revenue Bonds Interest Rate Maturity Date Balance Series 2014 Special Fee Refunding Bond 2.00% to 5.00% 03/01/30 $ 13,645,000 Total Bonds Payable $ 13,645,000 Revenue Bonds are payable from and secured solely by a pledge of special fee revenue derived from the fees charged by the College to fund capital additions. The Series 2014 Special Fee Refunding Bond refunded the 2005 Special Fee Revenue Bond. The refunding resulted in a net loss on refunding totaling $428,888 which is being amortized over the life of the new bond because the maturity of the refunding bond is the same as the refunded bond. The balance of the deferred loss on refunding of $348,471 is reported as a deferred outflow of resources at June 30, 2017, the outstanding portion of the 2005 bond that is considered defeased is $15,610,000. The net economic gain on the 2014 Special Fee Refunding Bond was $2,279,

43 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 12 BONDS PAYABLE (continued) The scheduled maturities of the bonds payable are as follows: Revenue Bond Total Series 2005A Principal Interest Payable 2018 $ 820,000 $ 559,587 $ 1,379, , ,587 1,378, , ,387 1,376, , ,387 1,381, , ,937 1,378, ,400,000 1,484,335 6,884, ,835, ,600 4,125,000 $ 13,645,000 $ 4,259,820 $ 17,904,820 NOTE 13 LONG-TERM LIABILITIES Primary Government: June 30, 2016 June 30, Due within (As Restated) Additions Reductions 2017 One Year Bonds Payable: 2014 Special Fee Revenue Bond $ 14,430,000 $ 0 $ 785,000 $ 13,645,000 $ 820,000 Plus Unamortized Premium 1,219, ,134 1,132,743 0 Total Bonds Payable 15,649, ,134 14,777, ,000 Accrued Compensated Absences 1,519,424 1,331,791 1,519,424 1,331, ,212 TOTAL $ 17,169,301 $ 1,331,791 $ 2,391,558 $ 16,109,534 $ 978,212 Discretely Presented Component Unit: June 30, June 30, Due within 2016 Additions Reductions 2017 One Year Notes Payable $ 1,670,105 $ 0 $ 1,670,105 $ 0 $ 0 Total Notes Payable $ 1,670,105 $ 0 $ 1,670,105 $ 0 $ 0 NOTE 14 RELATED ORGANIZATIONS, RELATED PARTY TRANSACTIONS, AND TRANSACTIONS WITH DISCRETELY PRESENTED COMPONENT UNITS 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 program. Financial statements for these entities are audited by independent auditors retained by them. They include the Florence- Darlington Technical College Educational Foundation, Inc. and SCATE, Inc. Following is a more detailed discussion of these two entities and a summary of significant transactions between them and the College for the year ended June 30, SCATE, Inc. Management reviewed its relationship with SCATE, Inc. under the existing guidance of GASB Statement No. 14, as amended by GASB Statement No. 39 and GASB Statement No. 61. The College excluded this organization from the reporting entity because it is not financially accountable for it, and SCATE Inc. s assets are not significant to the College s overall assets. 37

44 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 14 RELATED ORGANIZATIONS, RELATED PARTY TRANSACTIONS, AND TRANSACTIONS WITH DISCRETELY PRESENTED COMPONENT UNITS (continued) SCATE, Inc. is a separately chartered corporation organized exclusively for educational purposes for the support of the SCATE Center of Excellence located at Florence-Darlington Technical College. The College s statements include contractual payments of 27,000 to SCATE, Inc. during the fiscal year. SCATE, Inc. s assets as of June 30, 2017 were $329,440. At June 30, 2017 there were no payables due to SCATE, Inc. and no receivables due from SCATE, Inc. The Florence-Darlington Technical College Foundation, Inc. Management reviewed its relationship with the Foundation under the existing guidance of GASB Statement No. 14, as amended by GASB Statement No. 39 and GASB Statement No. 61. Because of the nature and the significance of its relationship with the College, the Foundation is considered a component unit of the College. 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. The College recorded non-governmental gifts receipts of $134,789 for June 30, 2017 and $147,547 from the Foundation in non-operating revenues for the fiscal year ending June 30, These funds were used to support College programs such as scholarships. The Foundation reimburses the College for any purchases made by the College on behalf of the Foundation. The College provides office space, administrative and support services to the Foundation. The value of this office space and these services was approximately $60,571 for the year ended June 30, 2017 and $55,164 for the year ended June 30, The Foundation s assets as of June 30, 2017 were $7,891,593. Amounts due from the Foundation as of June 30, 2017 are $116,477. NOTE 15 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 group-life insurance benefits Employees elect health insurance coverage through either a health maintenance organization or through the State s self-insured plan. 38

45 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 15 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 16 AGENCY FUNDS The agency fund accounts for Federal Direct Loan flow through transactions and Student Activity Funds. The Student Activity Fund is used to account for assets held by the College as an agent for others, such as student organizations. These organizations exist with the explicit approval of and are subject to revocation by the College. Student Activity Funds are custodial in nature (assets equal liabilities). The following is a summary of the changes in the Student Activity Fund and Federal Direct Loan Funds: June 30, 2016 June 30, 2017 Balance Receipts Disbursements Balance Federal Direct Loans $ 0 $ 9,343,035 $ 9,343,035 $ 0 Student Activity $ 135,710 $ 367,112 $ 350,685 $ 152,137 Third Party Loans $ 0 $ 153,062 $ 153,062 $ 0 NOTE 17 STATE APPROPRIATIONS State General funds for the South Carolina Technical College System are appropriated to the State Board for Technical and Comprehensive Education (the Board), and the Board allocates funds budgeted for the technical colleges in a uniform and equitable manner. Appropriations are recognized as revenue when received and available. Amounts that are not expended by fiscal year-end lapse and are required to be returned to the General Fund of the State unless the Board receives authorization from the General Assembly to carry the funds over to the next year. The remainder of this page intentionally left blank. 39

46 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 17 STATE APPROPRIATIONS (continued) The following is a detail schedule of State General appropriations revenue reported in the financial statements for the fiscal years ended June 30, 2017 and June 30, 2016: CAPITAL APPROPRIATIONS Current Year s Appropriations Automotive/HVAC Building $ 1,396,946 $ 353,055 Academic/Workforce Building 452,737 0 Total capital appropriations recorded as current year revenue $ 1,849,683 $ 353,055 NON-CAPITAL APPROPRIATIONS Current Year s Appropriations Appropriations per State Board Allocation $ 7,248,188 $ 6,621,373 Entrepreneurial Operations 1,209,088 1,209,088 Lottery Technology funds 180, ,389 Nursing Faculty Salary Supplemental Funds 22,374 22,374 Pathways to Prosperity 37,784 37,784 Critical Equipment Needs 891, ,085 STEM Critical Needs Workforce 0 205,748 Lottery Critical Training Equipment 172,236 0 System Outreach Initiative 8,777 1,223 Career Pathways 104,362 84,554 Workforce Scholarships 484, ,957 Total non-capital appropriations recorded as current year revenue $ 10,359,048 $ 8,887,575 NOTE 18 OPERATING EXPENSES BY FUNCTION Operating expenses by functional classification for the years ended June 30, 2017 and June 30, 2016 is summarized as follows: June 30, 2017 Salaries Benefits Scholarships Utilities Supplies and Other Services Depreciation Total Instruction $ 9,773,679 $ 4,004,089 $ 0 $ 0 $ 3,622,568 $ 0 $ 17,400,336 Academic Support 4,086,317 1,268, ,904, ,260,162 Student Services 2,699,336 1,041, ,470, ,211,282 Operation and Maintenance of Plant 955, , ,151,759 2,717, ,259,222 Institutional Support 4,105,384 1,650, ,455, ,210,943 Scholarships 0 0 5,936, ,936,896 Auxiliary Enterprises 255,540 99, ,516 3,156, ,520,556 Depreciation ,625,448 2,625,448 Total Operating Expenses $ 21,875,849 $ 8,499,325 $ 5,936,896 $ 1,160,275 $ 14,327,052 $ 2,625,448 $ 54,424,845 40

47 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 18 OPERATING EXPENSES BY FUNCTION (continued) June 30, 2016 (As Restated) Salaries Benefits Scholarships Utilities Supplies and Other Services Depreciation Total Instruction $ 10,586,039 $ 3,844,033 $ 0 $ 0 $ 4,019,598 $ 0 $ 18,449,670 Academic Support 3,482,161 1,014, ,608, ,105,817 Student Services 2,688, , ,549, ,132,309 Operation and Maintenance of Plant 969, , ,163,819 1,727, ,267,302 Institutional Support 3,830,105 1,441, ,198, ,470,102 Scholarships 0 0 7,204, ,204,252 Auxiliary Enterprises 258,892 91, ,572 3,495, ,854,764 Depreciation ,775,341 2,775,341 Total Operating Expenses $ 21,815,067 $ 7,692,999 $ 7,204,252 $ 1,172,391 $ 13,599,507 $ 2,775,341 $ 54,259,557 NOTE 19 - PURCHASES WITH OTHER SC HIGHER EDUCATION INSTITUTIONS The College received goods and/or services from other South Carolina higher education institutions for a fee during the fiscal year ended June 30, 2017: Institution: Amount: Research Institution: University of South Carolina $ 6,070 Teaching Institution: Francis Marion University $ 9,347 Technical Colleges: Central Carolina Technical College $ 5,245 Greenville Technical College 117,423 Midlands Technical College 7,250 Spartanburg Community College 2,400 Total $ 147,735 NOTE 20 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; check preparation, banking, bond trustee, and investment services from the State Treasurer; and legal services from the Attorney General. Other services received at no cost from the various offices of the State Budget and Control Board include pension plan administration, insurance plans administration, 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. 41

48 NOTE 21 - ACCOUNTS PAYABLE FLORENCE - DARLINGTON TECHNICAL COLLEGE NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 Accounts payable as of June 30, 2017 and June 30, 2016 are summarized as follows: Payables Accounts Payable $ 343,003 $ 684,537 Accounts Payable from Federal and State Grants 60, ,951 Accounts Payable Student Refunds 2,328 40,421 Total Accounts Payable $ 405,824 $ 1,201,909 NOTE 22 RESTATEMENT OF PRIOR YEAR FUND EQUITY A prior period adjustment was made to correct an error in the compensated absence liability. The compensated absence liability was overstated by $231,336 in the prior year. Net Position, June 30, 2016, As Originally Reported $ 15,763,986 Compensated Absence Overstatement 231,336 Net Position, June 30, 2016 As Restated $ 15,995,322 NOTE 23 TAX ABATEMENTS The College does not negotiate or enter into an agreement for tax abatements. The College is subject to any tax abatement agreements entered by Florence County. Florence County provides tax abatement incentives through three programs to encourage economic development, attract new businesses, and retain existing businesses Fee in Lieu of Tax, Special Source Revenue Credits, and Multi-County Business Parks: A Fee in Lieu of Tax (FILOT) is authorized under South Carolina Code Title 12, Chapter 44, Title 4, Chapter 29, or Title 4, Chapter 12. The FILOT is used to encourage investment and provides a reduction of property tax when a business invests a minimum of $2,500,000 within a 5-6 year investment period (beginning with date property is placed in service, ending five years after the last day of the property tax year in which the property is initially placed in service). The reduction in property taxes is accomplished by a reduction of assessed value, reduction in millage rate and elimination of (or reduction in) number of times millage rates are changed. In addition, an agreement may allow the possible use of net present value method over term of FILOT to equalize payments. Repayment of incentive is required by state law if taxpayer fails to meet statutory minimum investment requirement. Other recapture provisions may be negotiated (such as a pro rata clawback for failure to meet and/or maintain jobs/investment). A Special Source Revenue Credit (SSRC) is authorized under South Carolina Code Sections , , and The SSRC is used to encourage investment and provides a credit against property taxes in the form of a percentage reduction or a dollar amount reduction. County manually applies SSRC to reduce applicable property tax bill. To receive the credit, a business must incur costs of designing, acquiring, constructing, improving, or expanding improved or unimproved real estate or personal property used in the operation of a manufacturing or commercial enterprise, infrastructure servicing the project, or certain aircraft. 42

49 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 NOTE 23 TAX ABATEMENTS (continued) A Multi-County Business Park (MCBP) is authorized under Article VIII, Section 13(d) of the Constitution of South Carolina, as amended and South Carolina Title 4, Chapter 1. A MCBP is used to promote the economic welfare of their citizens by inducing businesses to invest in the Counties through the offer of benefits available under South Carolina law pursuant to multicounty business park arrangements. The designation as a MCBP provides that all real and personal property located in the Park shall be exempt from all ad valorem taxation. This is typically used in the creation of a FILOT or SSRC, but also has the additional benefit of exemption of property from the rollback taxes when the property was previously taxed as agricultural property. When agricultural real property is applied to a use other than agricultural, it is subject to additional taxes, referred to as rollback taxes. The amount of the rollback taxes is equal to the sum of the differences, if any, between the taxes paid or payable on the basis of the fair market value for agricultural purposes and the taxes that would have been paid or payable if the real property had been valued, assessed, and taxed as other real property in the taxing district (except the value of standing timber is excluded), for the current tax year (the year of change in use) and each of the immediately preceding five tax years. For the fiscal year ended June 30, 2017, the County abated College property tax revenues of $288,549 under agreements entered into by the County. The table below summarizes the tax abatements by program: Florence County Abatement Tax Abatement Program Fee In Lieu of Tax (FILOT) $ 240,705 Special Source Revenue Credit (SSRC) 47,844 Multi-County Business Park (Rollback Taxes) 0 Total $ 288,549 As of the date of the report, we were unable to obtain tax abatement information from Darlington County. NOTE 24 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS GASB has issued Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. This standard significantly expands the financial accounting and reporting for OPEB and is intended to give a clearer picture of the cost of providing these benefits to employees upon retirement. This statement is effective for fiscal years beginning after June 15, The College has not yet determined the impact implementation of this statement will have on its financial statements. 43

50 REQUIRED SUPPLEMENTARY INFORMATION

51 College's proportionate share of the net pension liability (asset) $ 36,693,655 $ 36,380,726 $ 31,066,819 $ $ $ $ $ $ $ College's covered payroll $ 14,431,024 $ 14,463,674 $ 13,415,835 $ $ $ $ $ $ $ College's proportionate share of the net pension liability (asset) $ 0 $ 0 $ 172 $ $ $ $ $ $ $ College's covered payroll $ 0 $ 0 $ 103 $ $ $ $ $ $ $ FLORENCE - DARLINGTON TECHNICAL COLLEGE SCHEDULE OF THE COLLEGE'S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY SOUTH CAROLINA RETIREMENT SYSTEM LAST 10 FISCAL YEARS South Carolina Retirement System (SCRS) Fiscal Year College's proportion of the net pension liability (asset) % % % 44 College's proportionate share of the net pension liability (asset) as a percentage of its covered payroll % % % Plan fiduciary net position as a percentage of the total pension liability 52.90% 57.00% 59.90% South Carolina Police Officer Retirement System (PORS) College's proportion of the net pension liability (asset) % % % College's proportionate share of the net pension liability (asset) as a percentage of its covered payroll 0.00% 0.00% % Plan fiduciary net position as a percentage of the total pension liability 0.00% 0.00% 67.50% Notes: The amounts presented above for each fiscal year were determined as of the measurement date of the plan's fiscal year end. The College is retroactively reporting data back to the year of GASB Statement No. 68 implementation, which was fiscal year ending Information on the proportionate share of net position liability is not available prior to that fiscal year.

52 Contractually required contribution $ 2,149,591 $ 1,987,544 $ 1,960,681 $ 1,736,510 $ 1,719,470 $ 1,457,065 $ 1,439,955 $ 1,434,352 $ 1,442,892 $ 1,389,160 Contributions in relation to the contractually required contribution (see note) (2,149,591) (1,987,544) (1,960,681) (1,736,510) (1,719,470) (1,457,065) (1,439,955) (1,434,352) (1,442,892) (1,389,160) Contribution deficiency (excess) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 College's covered payroll $ 19,791,664 $ 19,145,233 $ 18,983,463 $ 17,255,922 $ 16,859,821 $ 15,913,528 $ 15,825,462 $ 15,598,452 $ 15,623,107 $ 15,188,423 Contributions as a percentage of covered payroll 10.86% 10.38% 10.33% 10.06% 10.19% 9.10% 9.10% 9.19% 9.24% 9.15% Contributions in relation to the contractually required contribution (91) 0 0 (13) Contribution deficiency (excess) $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 College's covered payroll $ 640 $ 0 $ 0 $ 105 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Contributions as a percentage of covered payroll 14.22% 0.00% 0.00% 12.38% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% FLORENCE - DARLINGTON TECHNICAL COLLEGE SCHEDULE OF THE COLLEGE CONTRIBUTION SOUTH CAROLINA RETIREMENT SYSTEM LAST 10 FISCAL YEARS South Carolina Retirement System (SCRS) Fiscal Year South Carolina Police Officer Retirement System (PORS) 45 Contractually required contribution $ 91 $ 0 $ 0 $ 13 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Note: The amounts reported as contributions to the South Carolina Retirement System (SCRS) include the contractually required percentage of the ORP contributions that are remitted to SCRS.

53 FLORENCE DARLINGTON TECHNICAL COLLEGE NOTES TO REQUIRED SUPPLEMENTARY INFORMATION JUNE 30, 2017 The table below provides a summary of the actuarial methods and assumptions used in calculations of the actuarially determined contributions for the South Carolina Retirement System (SCRS) and South Carolina Police Officer Retirement System (PORS). This information was obtained from the financial statements of the SCRS, which is administered by the retirement division of the South Carolina Public Employee Benefit Authority (PEBA) for the year ended June 30, Summary of Actuarial Methods and Significant Assumptions SCRS PORS Valuation date 07/01/15 07/01/15 Actuarial cost method Entry Age Normal Entry Age Normal Amortization method Level percent of pay Level percent of pay Amortization period 30 years, open 30 years, open Asset Valuation method 20% difference 20% difference recognition method recognition method Inflation rate 2.75% 2.75% Projected salary increases 3.5% plus step-rate 4.0% plus step-rate increases for members increases for members with less than 25 years with less than 12 years of service of services Investment rate of return 7.50% 7.50% Benefit adjustments lesser of 1.0% or $500 annually lesser of 1.0% or $500 annually 46

54 SINGLE AUDIT ACT REQUIREMENTS

55 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2017 Federal Federal Grantor/Pass-Through Project CFDA Grantor/Program Title Number Number Expenditures U.S. Department of Education Direct Programs TRIO Cluster TRIO - Upward Bound P047A $ 340,100 TRIO - Student Support Services P042A ,429 Total - Trio Cluster $ 567,529 Student Financial Aid Cluster Federal Work Study P033A $ 212,403 SEOG P007A ,139 SEOG P007A ,125 PELL P063P ,442 PELL P063P ,338,947 Federal Stafford Loans Direct Loans P268K ,343,035 Federal Stafford Loans Third Party Lenders None ,062 Federal Perkins Loan Program None ,348 Total - Student Financial Aid Cluster $ 21,794,501 RUSH P382A A $ 651,224 $ 651,224 Total U.S. Department of Education Direct Programs $ 23,013,254 Pass Through SC Commission on Higher Education Gear Up P334S S $ 134,142 Total Pass Through SC Commission on Higher Education $ 134,142 Pass Through State Dept. of Education Perkins IV 17VA A $ 335,498 Total Pass Through State Dept. of ED. $ 335,498 Total U.S. Department of Education $ 23,482,894 U.S. Department of Labor Direct Programs BOOST - Better Occupational Outcomes with Simulation Training TC A $ 533,082 Total U.S. Department of Labor Direct Programs $ 533,082 Pass Through SC Technical College Systerm SC Department of Employment & Workforce (WOIA) N/A $ 24,900 SC Apprenticeship Initiative N/A ,071 Total Pass Through SCDEW $ 35,971 Total U.S. Department of Labor $ 569,053 Nuclear Regulatory Commission Direct Programs Professional Pipe Welders NRC-HQ G $ 61,025 Total Nuclear Regulatory Commison Direct Programs $ 61,025 47

56 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2017 Federal Federal Grantor/Pass-Through Project CFDA Grantor/Program Title Number Number Expenditures U.S. Department of Defense Pass through SC Adjutant Office for Public Assistance Funding October 2015 Flood 4241-DR-SC $ 58,292 Total U.S. Department of Defense $ 58,292 National Science Foundation Direct Programs ATE - Advancing Faculty Development & Program Improvement $ 187,236 ATE - Cyber Gen Tech Stars ,135 ATE - Mentor Connect ,689 ATE - Mentor Connect ,760 Total National Science Foundation Direct Programs $ 812,820 Pass Through Clemson University Center of Aviation & Automotive Virtual E-School $ 21,856 Clemson CA2VES Subaward ,280 Total Pass Through Clemson University $ 145,136 Pass Through Collin City Community College Education & Human Resources $ 23,692 Total Pass Through Colline City Community College $ 23,692 Pass Through Center for Occupational Research & Development - Necessary Skills Now $ 19,806 Total Pass Through Center of Occupational Research & Development $ 19,806 Total National Science Foundation $ 1,001,454 U.S. Department of Health and Human Services Pass Through Greenville Technical College Teach Early Childhood Scholars None $ 1,376 Total Pass Through Greenville Technical College $ 1,376 Total U.S. Department of Health & Human Services $ 1,376 Small Business Administration Pass Through Winthrop College Small Business None $ 859 Total Small Business Administration $ 859 U.S. Department of Agriculture Direct Programs Distance Learning & Telemedicine RUS Grant None $ 143,734 Total U.S. Department of Agriculture Direct Programs $ 143,734 48

57 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2017 Federal Federal Grantor/Pass-Through Project CFDA Grantor/Program Title Number Number Expenditures U.S. Department of Agriculture (continued) Pass Through SC Department of Social Service SNAP Employment and Training Program None $ 544,464 SNAP2WORK None ,222 Total Pass Through SC Department of Social Service $ 640,686 Total U.S. Deparment of Agriculture $ 784,420 Total Federal Programs $ 25,959,373 49

58 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal grant activity of Florence - Darlington Technical College and is presented on the accrual basis, the same basis of accounting used to prepare the basic financial statements as described in Note 1 to the financial statements. The information in this schedule is presented in accordance with the requirements of Office of Management and Budget (OMB) s Uniform Guidance. Therefore, some amounts presented in this schedule may differ from amounts used in the preparation of the basic financial statements (or reported in the federal financial reports). 2. FEDERAL NON-CASH ASSISTANCE Florence - Darlington 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, DETERMINATION OF MAJOR PROGRAMS Major federal programs were determined in accordance with the Uniform Guidance. For the year ended June 30, 2017, the following programs were determined to be major programs in accordance with the Uniform Guidance: Student Financial Aid Cluster, National Science Foundation and SNAP. Since the Student Financial Aid Cluster included U.S. Department of Education, the direct loan program, it was deemed to be a large loan program for single audit major program determination. The dollar threshold for Type A programs was $750, FEDERAL LOAN PROGRAMS The College has students who have been approved for Federal Family Education Loan Program s loans which were received by those students during the current year. The College is not the lender of the loans; it only processes them for the lender the student chooses. The total loans received and accounted for in an agency fund were as follows: Direct Loans - $9,343,035, and Third Party Stafford Loans - $153,062. These loans have been recorded on the schedule of expenditures of federal awards; however, the responsibility for administration and collection passes to the U.S. Department of Education or other lending agencies after the loans are disbursed. The College also administers the following campus - based federal loan programs: CFDA Outstanding Number Balance Perkins Student Loans $ 274,200 Perkins Revolving Loan Fund 72,148 Total Federal Perkins Loan $ 346,348 50

59 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, RECONCILIATION OF REVENUE TO SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE Total per Expenditures of Federal Awards $25,959,373 Total Federal Revenue: Federal Operating Grants $ 3,261,212 Federal Non-operating Grants 12,252,960 Disaster Assistance Funds that Reduced Repair Expense 58,292 SNAP Revenue Included in Continuing Education Revenue 544,464 $16,116,928 Total Loans: Perkins Student Loans and Loan Fund $ 346,348 Federal Direct Loans 9,343,035 Federal Stafford Third Party Loans 153,062 $ 9,842, INDIRECT COST The College has not elected to use the 10% de minimus indirect cost rate. 7. PASS THROUGH GRANT Florence Darlington Technical College did not have any federal funds that were passed through to sub recipients during the year ended June 30,

60 Robert D. Harper, Jr. CPA Stacey C. Moree CPA P. O. Box Wall Street, Litchfield Pawleys Island, SC Tel (843) Fax (843) H P Robin B. Poston CPA P. O. Box Church Street Georgetown, SC Tel (843) Fax (843) H P 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 Florence Darlington Commission for Technical Education Florence Darlington Technical College Florence, South Carolina We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Florence Darlington Technical College, as of and for the year ended June 30, 2017 and the related notes to the financial statements which collectively comprise Florence Darlington Technical College s basic financial statements and have issued our report thereon dated September 28, Our report includes a reference to other auditors who audited the financial statements of Florence Darlington Technical College Educational Foundation, Inc., as described in our report on Florence Darlington Technical College s financial statements. The financial statements of Florence Darlington Technical College Educational Foundation, Inc. were not audited in accordance with Government Auditing Standards, and accordingly, this report does not include reporting on internal control over financial reporting or instances of reportable noncompliance associated with Florence Darlington Technical College Educational Foundation. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Florence Darlington Technical 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 opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Florence Darlington Technical 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 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. 52 MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SOUTH CAROLINA ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS

61 Our consideration of the internal control over financial reporting 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 weakness may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the College s financial statements are free of 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 College 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. Harper, Poston & Moree, P.A. Certified Public Accountants Georgetown, South Carolina September 28,

62 Robert D. Harper, Jr. CPA Stacey C. Moree CPA P. O. Box Wall Street, Litchfield Pawleys Island, SC Tel (843) Fax (843) H P Robin B. Poston CPA P. O. Box Church Street Georgetown, SC Tel (843) Fax (843) H P INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Florence Darlington Commission for Technical Education Florence Darlington Technical College Florence, South Carolina Report on Compliance for Each Major Federal Program We have audited Florence Darlington Technical College s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Florence Darlington Technical College s major federal programs for the year ended June 30, The College s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of 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 each of Florence Darlington Technical College s major programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; 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 a major federal program occurred. An audit includes examining, on a test basis, evidence about Florence Darlington Technical College s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Florence Darlington Technical College s compliance. 54 MEMBERS: AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SOUTH CAROLINA ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS