MT. HOOD COMMUNITY COLLEGE DISTRICT Multnomah, Clackamas and Hood River Counties, Oregon COMPREHENSIVE ANNUAL FINANCIAL REPORT

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1 COMPREHENSIVE ANNUAL FINANCIAL REPORT Year Ended June 30, 2016 Report Prepared by: Jennifer DeMent Chief Operations Officer

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3 COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS Page INTRODUCTORY SECTION: GFOA Certificate of Achievement for Excellence in Financial Reporting Letter of Transmittal Board of Education and Administration Organizational Chart i ii v vi FINANCIAL SECTION: Independent Auditor s Report Management s Discussion and Analysis Basic Financial Statements Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flows Notes to Basic Financial Statements Required Supplementary Information Schedule of Funding Progress Schedule of the Proportionate Share of the Net Pension Liability (Asset) Schedule of Pension Plan Contributions Supplemental Financial Information Budgetary Information Schedule of Revenues, Expenditures and Changes in Fund Balance, Budget and Actual: General Fund Pension Bond Fund Physical Plant Maintenance Fund Technology Projects Fund Student Aid Fund Federal, State and Special Projects Fund Campus Store Fund Aquatic Center Fund Clubs Fund Trusts Fund Associated Student Government Fund

4 COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS (Continued) Page OTHER SCHEDULES: Schedule of Property Tax Transactions Schedule of Debt Service Transactions Schedule of Debt Service Requirements Schedule of Revenues and Expenditures by Project, Federal and State Projects and Student Aid Funds Assessed and Real Market Value of Taxable Property and Tax Collection Record General Fund State Support General Fund Adopted Budget General Fund Balance Sheets General Fund Statements of Revenues, Expenditures and Changes in Fund Balance STATISTICAL SECTION: Financial Trends Net Position Changes in Net Position Revenue Capacity Property Tax Rates, Assessed Value, and Real Market Value Direct and Overlapping Property Tax Rates Principal Property Taxpayers Property Tax Levies and Collections All Funds Debt Capacity Ratio of General Bonded Debt and Legal Debt Margin Direct and Overlapping Gross Bonded Debt Ratio of Outstanding Debt by Types Ratio of Annual Debt Service Expenditures for General Bonded Debt to Operating Expenses/Expenditures Demographic and Economic Information Average Annual Employment Demographic and Economic Indicators Largest Employers within Portland Metropolitan Area Operating Information Average Number of Employees FullTime Equivalent Students Student Population Degrees and Certificates Awarded Historical and Projected Tuition and Fees Campus Facilities Information

5 COMPREHENSIVE ANNUAL FINANCIAL REPORT YEAR ENDED JUNE 30, 2016 TABLE OF CONTENTS (Continued) Page COMPLIANCE SECTION: Independent Auditor s Report Required by Oregon State Regulations 80 Single Audit Compliance Report on Internal Control Over Financial Reporting and on Compliance 82 and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditor s Report Report on Compliance for Each Major Federal Program; and Report on Internal 84 Control Over Compliance Required by the Uniform Guidance Independent Auditor s Report Schedule of Expenditures of Federal Awards 86 Notes to Schedule of Expenditures of Federal Awards 89 Schedule of Findings and Questioned Costs 90 Summary Schedule of Prior Audit Findings 103 Corrective Action Plan 107

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7 INTRODUCTORY SECTION

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9 Lt Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to Mt. Hood Com01unity College Oregon For its Comprehensive Annual Financial Report for the Fiscal Year Ended June 30, 2015 Executive Director/CEO rf i

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11 December 7, 2016 Board of Education Mt. Hood Community College District SE Stark Street Gresham, OR We are pleased to submit the Comprehensive Annual Financial Report (CAFR) of Mt. Hood Community College District (the District) for the fiscal year ended June 30, We believe the financial statements and related information are stated fairly in all material aspects in reflecting the financial position and results of operations of the District. The District is responsible for the accuracy, completeness, and fairness of the data presented in this report. This report consists of management s representations concerning the finances of the District. This letter of transmittal is designed to complement the Management s Discussion and Analysis (MD & A) and should be read in conjunction with it. The District s MD & A can be found immediately following the independent auditor s report in the Financial Section. The District s CAFR has been prepared in accordance with accounting principles generally accepted in the United States of America as set forth by the Governmental Accounting Standards Board, the American Institute of Certified Public Accountants, and other recognized standard setting bodies. A summary of significant accounting policies is found in the notes accompanying the basic financial statements. Internal controls are the attitude, policies and procedures designed to prevent or detect material errors or irregularities in recording and reporting financial activities. Examples include approval of transactions, routine reconciliation of accounts, and managements review of financial reports. Because the costs of internal controls should not outweigh their benefits, controls have been designed to provide reasonable, but not absolute, assurance that the financial statements are free from material misstatement. The District Located within Multnomah County, the District is one of 17 independent Oregon community colleges under the policy and administrative guidance of the Oregon State Department of Education. The District, established in 1966 as a comprehensive community college, is located on more than 120 acres in the eastern region of the County, including satellite campuses at the Bruning Center for Allied Health and the Maywood Park Center. The Bruning Center for Allied Health is a stateof theart learning environment with fully equipped smart classrooms, clinical skills labs, and a stateofthe art nursing simulation center. The Maywood Park Center offers a variety of educational services plus an array of selfpaced instructional courses. In 2016, the District had an average annual student body of 27,397 students, of which 52% were female, 53% were under the age of 30, and 70% attended classes on a parttime basis. Governing Bodies The members of the Board of Education of the District are duly elected representatives of the people, pursuant to the statutes of Oregon and consistent with the rules of the Oregon State Board of Education. The Board of Education comprises of seven qualified members elected for fouryear terms. Members are ii

12 elected from established zones within the community college District. The District is not a component unit of any other entity. Accreditation The District was granted initial accreditation status in 1972 by the Northwest Commission on Colleges and Universities (NWCCU) after a fullscale visit. MHCC s accreditation was reaffirmed most recently in January 2014 on the basis of a Year Three SelfStudy and evaluation completed by the Commission in fall The next evaluation for reaffirmation of accreditation by the Northwest Commission on Colleges and Universities will occur in November 2016, based upon the District submitting a Year Seven SelfStudy Report in 2016 and an onsite visitation by the NWCCU. Higher Education Coordinating Council Effective July 1, 2014, oversight of community colleges moved from the State Board of Education to the Higher Education Coordinating Council. The Commissioner of the Department of Community Colleges and Workforce Development serves as an administrative officer of community college matters. Economy The District is located within Multnomah, Clackamas and Hood River Counties. According to the Office of Economic Analysis (OEA) Oregon s employment growth has accelerated over the past year and a half. The state is now adding jobs about one percentage point faster than the nation. The population growth for the State of Oregon is forecasted to increase by more than one percent each year from now through Budgetary The District monitors spending activity to ensure that expenditures do not exceed the appropriated amounts. From a financial standpoint, the District has been focused on implementing a twoyear process to close a deficit that exceeded thirteen percent of our general fund resources. When fully implemented, this plan will enable the District to maintain and enhance affordable course offerings, provide competitive compensation packages for our employees and support engagement with our community. Everything the District does is for the students, as we guide, teach, mentor and advise them to achieve their specified goals. The District s mission guides every step in the budget process, and every aspect of our daytoday operations. Strategic Plan The District completed an analysis of strategic planning and reaffirmed its mission of transforming lives and building communities and modified the following core themes: Learner Success Community Pride Partner Innovation Initiatives The District continues to emphasize a number of successful initiatives with key highlights listed below: The District is partnering with local manufacturing associations and other community colleges to provide onsite manufacturing and equipment skills training for workforce development, including the development of a mechatronics program. Utilize strategic budget planning for resource allocation and reallocation funding activities like increased advising, marketing and systemic technology improvements to support core themes. iii

13 Teaching and learning key performance indicators are representative of the college s priorities including: student success and completion, economic vitality of our communities, and a culture of excellence. Independent Audit State statutes require an annual audit by independent certified public accountants. The District has selected the accounting firm Talbot, Korvola & Warwick, LLP (TKW) as its auditors. In addition to meeting the requirements set forth in Oregon Statutes, the audit also was designed to meet the requirements of the federal Single Audit and related Uniform Guidance. The Schedule of Expenditures of Federal Awards (SEFA) is required because the District expended more than $750,000 per year in federal grant awards. The SEFA is required by the Federal Government and is organized by CFDA number, which is a numbering system the Federal Government uses to identify and group the types of grants awarded by a variety of federal agencies. Many of these grant awards are for more than one year, so the amounts shown are not the total amounts awarded, but rather the total amounts spent during the fiscal year. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the District for its CAFR for the fiscal year ended June 30, This was the first year that the District has received the award. In order to be awarded a Certificate of Achievement a government must publish an easily readable and efficiently organized CAFR. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe that our current CAFR continues to meet the Certificate of Achievement Program s requirements, and we are submitting it to the GFOA to determine its eligibility for another certificate. We wish to express our appreciation to the entire Business Office staff for their efforts and contributions to our Comprehensive Annual Financial Report. We also thank the Board of Education for its support and dedication to the financial health of the District. Sincerely, Debra A. Derr President Jennifer A. DeMent Chief Operations Officer iv

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15 OFFICIALS JUNE 30, 2016 BOARD OF EDUCATION Official Office Term expires June 30, Susie Jones Chair 2017 James Zordich Vice Chair 2017 Teena Ainslie Member 2019 Tamie Arnold Member 2019 Kenney Polson Member 2019 George 'Sonny' Yellott Member 2017 Michael Calcagno Member 2019 Administration Debra Derr Jennifer DeMent President Chief Operations Officer Address S.E. Stark Street Gresham, Oregon v

16 Mt.HoodCommunityCollege President ExecutiveStaff President Dr.DebraDerr InterimChiefofStaff WilliamBecker ExecutiveAssistant tothepresident PamBenjamin ExecutiveCoordinator: BoardofEducation CarrieToth AssociateVicePresident: Workforce,Innovation, &Partnerships AssociateVicePresident: StudentDevelopmentand Success ExecutiveDirector: Foundation& AlumniRelations ChiefKƉĞƌĂƚŝŽŶƐ Officer Chief InformationOfficer Instructional Administrators JarrodHogue JohnHamblin AlSigala JenniferDeMent LindaVigesaa Director: Marketing& Communications Director: Accreditation BruceBattle SheriMosher vi

17 FINANCIAL SECTION

18 INDEPENDENT AUDITOR'S REPORT Board of Education Mt. Hood Community College District Gresham, Oregon REPORT ON THE FINANCIAL STATEMENTS Talbot, Korvola &Warwick,LLP Certified Pu blic Accountanls. Consultants ACHIEVE HONE 4800 Meadows Road, Suite 200 Lake Oswego, Oregon p f We have audited the accompanying financial statements of the Mt. Hood Community College District (the District), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise the District's basic financial statements as listed in the Table of Contents. MANAGEMENT'S RESPONSIBILITY FOR THE FINANCIAL STATEMENTS Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; th is includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. AUDITOR'S RESPONSIBILITY Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. McG~~ ~;~~,A~~~~ ~~~ 1 I I McGladrey The McGladrey Alliance is a premier affiliation of independent accounting and consulting firms. The McGladrey Alliance member firms maintain their name, autonomy and independence and are responsible for their own client fee arrangements. delivery of services and maintenance of client relationships.

19 Board of Education Mt. Hood Community College District OPINION INDEPENDENT AUDITOR'S REPORT (Continued) In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the District as of June 30, 2016, and the respective changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. OTHER MATTERS Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Required Supplementary Information, such as Management's Discussion and Analysis, Schedule of Funding Progress, Schedule of the Proportionate Share of the Net Pension Liability (Asset), and Schedule of Pension Plan Contributions, as listed in the Table of Contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the District's basic financial statements. As listed in the Table of Contents, the Supplemental Financial Information and the Schedule of Expenditures of Federal Awards as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The Supplemental Financial Information and the Schedule of Expenditures of Federal Awards are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplemental Information and the Schedule of Expenditures of Federal Awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2

20 Board of Education Mt. Hood Community College District OTHER MATTERS (Continued) Other Information (Continued) INDEPENDENT AUDITOR'S REPORT (Continued) The Introductory Section, Other Schedules, and Statistical Section, as listed in the Table of Contents, have not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them. REPORTS ON OTHER LEGAL AND REGULATORY REQUIREMENTS Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 7, 2016 on our consideration of the District's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District's internal control over financial reporting and compliance. Other Reporting Required by Oregon Minimum Standards In accordance with Minimum Standards for Audits of Oregon Municipal Corporations, we have also issued our report dated December 7, 2016, on our consideration of the District's compliance with certain provisions of laws and regulations, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules. The purpose of that report is to describe the scope of our testing of compliance and the results of that testing and not to provide an opinion on compliance. TALBOT, KORVOLA & WARWICK, LLP By~w~ Ah'6eliqUitlow, Partner Lake Oswego, Oregon December 7,

21 MANAGEMENT S DISCUSSION AND ANALYSIS (Required Supplementary Information in $thousands) YEAR ENDED JUNE 30, 2016 The management of Mt. Hood Community College District (District) is responsible for preparing the basic financial statements in accordance with accounting principles generally accepted in the United States of America. This Management s Discussion and Analysis (MD & A) will introduce the District s basic financial statements as of and for the year ended June 30, The following narratives, condensed financial information and analysis are intended to assist readers assessment of the District s financial position at June 30, 2016 and the changes in its financial position and its cash flows for the year then ended. BASIC FINANCIAL STATEMENTS The District has presented its basic financial statements in accordance with Statement Nos. 34 and 35 of the Governmental Accounting Standards Board (GASB). GASB Statement No. 34 stipulates using an economic resources measurement focus and the accrual basis of accounting. All capital assets and related accumulated depreciation are to be reported in the Statement of Net Position. All outstanding debt will reduce net position. Depreciation will be recognized in the Statement of Revenues, Expenses and Changes in Net Position. All revenues will be recognized in the year in which they are earned. Likewise, expenses will be reported in the year the liability is incurred regardless of when the amount is actually paid. Interest on debt will be accrued at June 30 and recorded as an expense in the Statement of Revenues, Expenses and Changes in Net Position. GASB Statement No. 35 applies to public colleges and universities. It stipulates the display and disclosure requirements of the basic financial statements. The financial information is to be presented for the District as a whole, rather than a series of fund types. The display and disclosure requirements are similar to that used by commercial organizations. GASB Statement No. 68 was implemented during the fiscal year ended June 30, 2015, and improves accounting and financial reporting for pensions. The Statement results from a comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions with regard to providing decisionuseful information, supporting assessments of accountability and interperiod equity, and creating transparency. In addition to this discussion and analysis, the financial section of this annual report contains the basic financial statements, required supplementary information, and supplemental financial information, including the schedules of all of the District s funds. The basic financial statements are comprised of: o o o o The Statement of Net Position The Statement of Revenues, Expenses and Changes in Net Position The Statement of Cash Flows The Notes to Basic Financial Statements A Statement of Net Position presents information on all of the District s assets (what it owns) and liabilities (what it owes). The difference between total assets and deferred outflows and total liabilities and deferred inflows is reported as net position. Over time, changes in net position are an indicator of improving or eroding financial health. Nonfinancial indicators, such as enrollment levels and the condition of the District s facilities must also be considered when evaluating the District s financial position. 4

22 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) (Required Supplementary Information in $thousands) BASIC FINANCIAL STATEMENTS (Continued) YEAR ENDED JUNE 30, 2016 The Statement of Revenues, Expenses and Changes in Net Position presents the revenues earned and expenses incurred during the year. As prescribed by GASB, revenues are reported as operating or nonoperating. Operating revenues and expenses generally result from providing services to students. All other revenues and expenses not meeting this definition are reported as non operating. Revenues are presented by source. Expenses are presented by function. GASB stipulates that State support and property taxes are reported as non operating revenues. This results in the display of a significant operating loss. A Statement of Cash Flows is intended to help evaluate the District s ability to meet its financial obligations as they become due. Cash inflows and outflows are identified as operating, noncapital financing, capital and related financing, and investing activities. The nature of operating activities was described in the previous paragraph. Capital financing activities are those items that are clearly attributable to the acquisition, construction, or improvement of capital assets. This includes the repayment of debt associated with these assets. The Notes to Basic Financial Statements provide additional information that is essential to a full understanding of the data provided in the basic financial statements. FINANCIAL HIGHLIGHTS State Support. The Oregon legislature appropriates State support for the State s biennial budget. Oregon Administrative Rules (OAR) prescribes how State support is remitted to Oregon community colleges. Eight payments are remitted throughout the biennium. Five payments are remitted in the first year of the biennium (an evennumbered year) and three payments are remitted in the second year of the biennium (an oddnumbered year). The OAR was adopted during the year ended June 30, This accounts for the rise and fall of State support that can be seen in the Condensed Financial Information and Analysis of this MD & A and the accompanying basic financial statements. Enrollment and Tuition. Tuition was $95.50 per credit hour for summer term and $94 per credit hour for the remaining terms in 2016 which was $3.50 and $2.00 more than the 2015 tuition per credit hour. The Board voted to reduce tuition due to increased State funding. Student fulltime equivalent enrollment (SFTE) is defined as 510 clock hours. Total SFTE decreased by 714 to a total of 8,233 in 2016, which represents 8% enrollment decline from This enrollment decline translated to a 7.2% decrease in tuition and fees because not all enrollment generates tuition and fees. Grants. Related expenditures were in the public service function. Capital and Related Financing. The increase in unrestricted net position in 2016 is primarily due to the receipt of five installments of state support versus three in the prior year and a restatement of beginning net position due to adjusting the actuarial value of preslgrp pooled liability. 5

23 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) (Required Supplementary Information in $thousands) YEAR ENDED JUNE 30, 2016 CONDENSED FINANCIAL INFORMATION AND ANALYSIS Analysis of Statements of Net Position Net Position at June 30 (in $thousands) (restated) Current assets: Cash and cash equivalents $ 20,490 $ 11,551 Other 18,798 18,244 Noncurrent assets: Other Net pension asset 3,754 Capital assets, net 56,152 57,129 Assets 96,354 91,677 Deferred outflows 1, Current liabilities 22,068 18,869 Noncurrent liabilities PreSLGRP pooled liability 6,197 6,374 Net pension liability 8,591 Bonds 70,221 74,624 Liabilities 107,077 99,867 Deferred inflows 2,725 7,405 Net position: Net investment in capital assets 28,803 28,476 Restricted Unrestricted (41,259) (43,447) Net position (deficit) $ (12,379) $ (14,845) Increase (decrease) from 2015 to 2016 $ 8, (85) (3,754) (977) 4, ,199 (177) 8,591 (4,403) 7,210 (4,680) 327 (49) 2,188 $ 2,466 Fiscal year 2016 compared to Cash and cash equivalents increased $8,939 primarily due to the effect of receiving five State support payments in 2016 versus three payments in Changes in bonds and capital assets are discussed in the Capital Assets and Debt Administration section of this Management s Discussion and Analysis. 6

24 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) (Required Supplementary Information in $thousands) YEAR ENDED JUNE 30, 2016 CONDENSED FINANCIAL INFORMATION AND ANALYSIS (Continued) Analysis of Statements of Net Position (Continued) Net position is the difference between total assets and deferred outflows and total liabilities and deferred inflows. This represents what is available to finance future operations after all amounts owed are paid. Total net position as restated at June 30, 2015 was $(14,845). Total net position at June 30, 2016 increased by $2,466. Restricted net position decreased $49 to $77 due to the reduction in outstanding nursing loans as the program is closed out. Unrestricted net position at June 30, 2016 and 2015, are $(41,259) and $(43,447), approximately (342%) and (293%) of total net position. This rise and fall in unrestricted net position is due to the method of receiving state support. The restatement recorded an adjustment to the District s actuarially determined liability prior to joining the SLGRP, which was previously estimated by Oregon Public Employee Retirement System ASSETS Cash & Cash Equivalents, 21% Capital Assets, Net, 58% Current Other, 20% Non Current Other, 1% 2015 ASSETS Cash & Cash Equivalents, 13% Current Other, 20% Capital Assets, Net, 62% Non Current Other, 1% Net Pension Asset, 4% 7

25 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) (Required Supplementary Information in $thousands) YEAR ENDED JUNE 30, 2016 CONDENSED FINANCIAL INFORMATION AND ANALYSIS (Continued) Analysis of Statements of Revenues, Expenses and Changes in Net Position Operating results for the year ended June 30 (in $thousands) Increase (decrease) from 2015 to 2016 Operating revenues: Tuition and fees $ 18,863 $ 20,825 $ (1,962) Grants 35,613 41,190 (5,577) Auxiliary enterprises and other 4,290 5,462 (1,172) Operating revenues 58,766 67,477 (8,711) Operating expenses: Instruction and academic support 42,700 36,894 5,806 Student services 8,482 7, Institutional support and plant operations 18,388 15,733 2,655 Scholarships 19,924 29,054 (9,130) Public service 14,818 11,192 3,626 Auxiliary enterprises and other 2,008 2,945 (937) Depreciation 2,438 2,730 (292) Operating expenses 108, ,237 2,521 Operating loss (49,992) (38,760) (11,232) Nonoperating revenues (expense): State support 33,723 18,964 14,759 Property taxes 11,454 10, Grants and interest income 11,219 15,383 (4,164) Interest expense (3,938) (4,043) 105 Nonoperating revenues (expense) 52,458 41,296 11,162 Increase (decrease) in net position 2,466 2,536 (70) Beginning net position, (as originally stated) (14,845) (18,032) 3,187 Restatement 651 (651) Beginning net position, (as restated) (14,845) (17,381) 2,536 Ending net position $ (12,379) $ (14,845) $ 2,466 8

26 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) (Required Supplementary Information in $thousands) YEAR ENDED JUNE 30, 2016 CONDENSED FINANCIAL INFORMATION AND ANALYSIS (Continued) Analysis of Statements of Revenues, Expenses and Changes in Net Position (Continued) State support and tuition and fee revenue were previously discussed. Grant expenditures are reported in the District operating function to which they relate. Reimbursement of grant expenditures, other than PELL grants, is reported as operating revenues. PELL grant proceeds are reported as nonoperating revenues. Increases in property taxes are limited to 3% growth in assessed valuation plus new additions. Fiscal year 2016 compared to Tuition revenue decreased $1,962 due to enrollment declines. Scholarships decreased $9,130 due to reduced enrollment and a reduction in Federal Direct Loan and Federal Pell Grant awards. Increases in remaining expenses generally consist of cost of living and inflationary increases. Property Taxes, 10% 2016 REVENUE Tuition and Fees, 16% State Support, 29% Auxiliary Enterprises, 4% Grants and Interest, 41% 2016 EXPENSE Auxiliary Enterprises, 2% Scholarships, 18% Depreciation, 2% Instruction & Academic Support, 39% Institutional Support & Plant Operations, 17% Student Services, 8% Public Service, 14% 9

27 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) (Required Supplementary Information in $thousands) YEAR ENDED JUNE 30, 2016 CONDENSED FINANCIAL INFORMATION AND ANALYSIS (Continued) The natural classification of operating expenses, in $millions, is: Salaries and wages, payroll taxes and benefits $ 69.8 $ 57.8 Materials and services Scholarships Depreciation $ $ Analysis of the Statements of Cash Flows Cash flows for the year ended June 30, (in $thousands) Cash flows provided (used) by the following activities: Operating Noncapital financing Capital and related financing Investing $ 2016 (39,038) 51,693 (3,858) 142 Increase (decrease) 2015 from 2015 to 2016 $ (39,697) ,088 10,605 (3,531) (327) Net increase (decrease) in cash and cash equivalents 8,939 (2,051) 10,990 Beginning cash and cash equivalents 11,551 13,602 (2,051) Ending cash and cash equivalents $ 20,490 $ 11,551 $ 8,939 Fiscal year 2016 compared to Noncapital financing cash flows increased as a result of receiving five rather than three State support payments in Capital and related financing activities cash flow outflows increased due to an increase in the purchase of capital assets. Change in operating activities cash flows increased due to a reduction in enrollment and fewer scholarships awarded. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets During the year ended June 30, 2016, net capital assets increased due to asset purchases, the completion of construction of the science and geology lab upgrades, offset by depreciation. Additional information on the District s capital assets can be found in the Notes of this report on page

28 MANAGEMENT S DISCUSSION AND ANALYSIS (Continued) (Required Supplementary Information in $thousands) YEAR ENDED JUNE 30, 2016 CAPITAL ASSETS AND DEBT ADMINISTRATION (Continued) Long Term Debt Total debt decreased by $2,640 during the current fiscal year due to scheduled debt repayments. Additional information on the District s longterm debt can be found in the Notes of this report beginning on page 21. Changes in Credit Rating The District has been assigned an Aa3 rating for full faith and credit obligations and an Aa2 issuer or implied unlimited tax general obligation rating. These ratings were reaffirmed by Moody s Investor Service in September ECONOMIC FACTORS AND NEXT YEARS OPERATIONS Statewide reforms to the Oregon Public Employee Retirement System (OPERS) and tax system have resulted in a stable level state support for the current biennium. Property taxes are anticipated to continue increasing due to a strong housing market. Enrollment is expected to stabilize, with possible increases from recruitment and retention initiatives. REQUEST FOR INFORMATION This financial report is designed to provide a general overview of the District s finances for all those with an interest therein. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Chief Operations Officer, Mt. Hood Community College District, S.E. Stark Street, Gresham, OR

29 BASIC FINANCIAL STATEMENTS

30 STATEMENT OF NET POSITION JUNE 30 (in $thousands) 2016 ASSETS: Cash and cash equivalents Receivables Inventories and deferred charges $ 20,490 17, Current assets 39,288 Receivables Net other postemployment benefit Capital assets, net ,152 Noncurrent assets 57,066 Total assets 96,354 DEFERRED OUTFLOWS PENSION 1,069 LIABILITIES: Accounts payable Accrued payroll and taxes Unearned revenue Accrued interest payable Bonds payable, current portion 1,875 9,776 6, ,254 Current liabilities 22,068 PreSLGRP pooled liability Net pension liability Bonds payable 6,197 8,591 70,221 Total liabilities 107,077 DEFERRED INFLOWS PENSION 2,725 NET POSITION: Net investment in capital assets Restricted for student aid Unrestricted 28, (41,259) TOTAL NET POSITION $ (12,379) See notes to basic financial statements. 12

31 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION YEAR ENDED JUNE 30 (in $thousands) 2016 OPERATING REVENUES: Tuition and fees Grants Auxiliary enterprises Other $ 18,863 35,613 2,517 1,773 Total operating revenues 58,766 OPERATING EXPENSES: Instruction Research Public service Academic support Student services Institutional support Plant operations Depreciation Scholarships Auxiliary enterprises 34, ,818 7,866 8,482 13,340 5,048 2,438 19,924 1,464 Total operating expenses 108,758 OPERATING LOSS (49,992) NONOPERATING REVENUES (EXPENSES): State support Property taxes Grants Interest income Interest expense 33,723 11,454 11, (3,938) Total nonoperating revenues (expenses) 52,458 INCREASE IN NET POSITION 2,466 BEGINNING NET POSITION, (as originally stated) (15,496) RESTATEMENT (See Note) 651 BEGINNING NET POSITION, (as restated) (14,845) ENDING NET POSITION $ (12,379) See notes to basic financial statements. 13

32 STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30 (in $thousands) 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Tuition and fees $ 18,451 Grants 35,362 Auxiliary enterprise charges 2,588 Other 1,760 Student loan collections 33 Payments to employees (61,094) Payments to suppliers (16,214) Financial aid and scholarships (19,924) Net cash from operating activities (39,038) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES: State support 33,723 Property taxes 11,412 Grants 11,077 Principal paid on PreSLGRP pooled liability (176) Principal paid on noncapital debt (1,365) Interest paid on noncapital debt (2,978) Net cash from noncapital financing activities 51,693 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES: Purchases of capital assets (1,460) Principal paid on capital debt (1,275) Interest paid on capital debt (1,123) Net cash from capital and related financing activities (3,858) CASH FLOWS FROM INVESTING ACTIVITIES: Interest income 142 DECREASE IN CASH AND CASH EQUIVALENTS 8,939 BEGINNING CASH AND CASH EQUIVALENTS 11,551 ENDING CASH AND CASH EQUIVALENTS $ 20,490 See notes to basic financial statements. 14

33 STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30 (in $thousands) 2016 RECONCILIATION OF OPERATING LOSS TO NET CASH FROM OPERATING ACTIVITIES: Operating loss $ (49,992) Adjustments: Depreciation 2,438 Net pension liability 12,345 Net other postemployment benefit 51 Increase (decrease) in assets: Receivables (682) Inventories and deferred charges 203 Deferred outflows (319) Increase (decrease) in liabilities: Accounts payable 213 Accrued payroll and taxes 1,266 Unearned revenue 119 Deferred inflows (4,680) Net cash from operating activities $ (39,038) See notes to basic financial statements. 14a

34 NOTES TO BASIC FINANCIAL STATEMENTS (In $thousands) YEAR ENDED JUNE 30, 2016 THE DISTRICT Mt. Hood Community College District (the District) is organized under the general laws of the State of Oregon and, as such, is a public institution under the general supervision of the Higher Education Coordinating Council. The District qualifies as a primary government since it has a separately elected governing body, is a legally separate entity, and is fiscally independent. There are various governmental agencies, cities, school districts, and special service districts, which provide services within the District s boundaries. However, since the District is not financially accountable for any of these entities, they do not qualify as a component unit of the District, and therefore are not included in the basic financial statements. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The basic financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These financial statements are based on all applicable Governmental Accounting Standards Board (GASB) pronouncements. The District follows the "businesstype activities" reporting requirements of GASB Statement No. 35. Basis of Accounting The financial statements are accounted for on the flow of economic resources measurement focus and are prepared on the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred. Property taxes are recognized as revenues in the years for which they are levied. State support and grants are recognized as revenues as soon as all eligibility requirements imposed have been met. All significant intradistrict transactions have been eliminated including charges for indirect costs. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the basic financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents are defined as cash on hand, demand deposits and the State of Oregon Treasurer s Local Government Investment Pool (LGIP). The LGIP is stated at cost, which approximates fair value. Fair value of the investment in the LGIP is the same as the value of the pool shares. Receivables All student accounts, grants, student loans and property taxes receivable are shown net of an allowance for uncollectible accounts. The allowance for uncollectible accounts is determined based upon the aged receivable balance. Property taxes are levied on all taxable property as of July 1, the beginning of the fiscal year, and become a lien on that date. Property taxes are payable on November 15, February 15 and May 15. Discounts are allowed if the amount due is received by November 15 or February 15. Taxes unpaid and outstanding on May 16 are considered delinquent. 15

35 NOTES TO BASIC FINANCIAL STATEMENTS (In $thousands) YEAR ENDED JUNE 30, 2016 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Inventories Inventories are stated at the lower of cost or market. Cost is determined by firstin, firstout method for all inventory. Capital Assets Capital assets include land and land improvements, buildings and building improvements, art collection, equipment and furnishings and construction in progress. Art collection and equipment and furnishings with a cost or estimated historical cost of $5 or more and a useful life greater than one year are capitalized. All other capital assets are capitalized if cost or estimated historical cost exceeds $50. Donated capital assets are recorded at fair market value on the date donated. The costs of normal maintenance and repairs that do not add to the value or functionality of the assets lives are not capitalized. With the exception of art collections, which have an inexhaustible life, capital assets are depreciated using the straightline method over the following useful lives: Land improvements Buildings and building improvements Equipment and furnishings 1025 years 4560 years 520 years Other Postemployment Benefit (OPEB) The District is mandated to contribute to Retirement Health Insurance Accounts (RHIAs) for eligible District employees who are members of OPERS, and were plan members before January 1, The plan was established by the Oregon Legislature. A health and welfare program the District provides for retirees is accounted for under the provisions of GASB Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions (OPEB). The OPEB benefit is actuarially determined, is reflected as a longterm asset in the basic financial statements, and reflects both payments for employees and the present value of expected future payments. Compensated Absences District policy permits employees to accumulate earned but unused vacation, holiday pay and sick leave. Sick leave lapses at termination of employment. Therefore, no liability is reported for unpaid accumulated sick leave. Vacation and holiday pay are recognized as an expense and accrued when earned and included in accrued payroll and taxes on the statement of net position. Unearned Revenue Tuition and fees assessed prior to the end of the fiscal year that relate to the subsequent fiscal year are recorded as unearned revenue. Pensions For purposes of measuring the net pension asset (liability), deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Oregon Public Employees Retirement System (OPERS) and additions to/deductions from PERS s fiduciary net position have been determined on the same basis as they are reported by OPERS. PreSLGRP Pooled Liability Actuarially determined liability recorded in the statement of net position based on the District s entry into the OPERS State and Local Government Rate Pool. The transition liability is reduced each year by contributions to OPERS and increased for interest charged by OPERS. Bonds Payable Debt discounts and premiums are deferred and amortized over the life of the bonds using the straightline method, which approximates the effective interest method. 16

36 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Net Position Net position represents the difference between the District s total assets and deferred outflows and total liabilities and deferred inflows. Net position is subdivided into three categories: net investment in capital assets; restricted; and unrestricted. Net investment in capital assets represents capital assets, less accumulated depreciation and outstanding principal of capital asset related debt. Net position subject to externallyimposed restrictions is categorized as restricted net position. This category represents the net position of federal student financial aid programs. When program expenses are incurred and there is both restricted and unrestricted net position available to finance the program, the District s policy is to first apply restricted resources to such programs. The difference between total net position and the two categories just described is reported as unrestricted net position. Operating and Nonoperating Revenues and Expenses Operating revenues and expenses generally result from providing services to students. Significant operating revenues include tuition and fees, grant revenues related to the delivery of educational services, and charges for services or sale of educational materials. Operating expenses include the cost of faculty and support staff, materials and supplies, depreciation and the cost of items purchased for resale. All other revenues and expenses not meeting this definition are reported as non operating revenues and expenses. Scholarship Allowances Financial aid to students is reported in the basic financial statements under the alternative method as prescribed by the National Association of College and University Business Officers (NACUBO). Certain aid such as loans and funds provided to students as awarded by others is accounted for as a third party payment (credited to the student's account as if the student made the payment). All other aid is reflected in the basic financial statements as operating expenses, or scholarship allowances, which reduce revenues. The amount reported as operating expense represents the portion of aid that was provided to the student in the form of cash. Scholarship allowances represent the portion of aid provided to the student in the form of reduced tuition. Tuition and fees are shown net of scholarship allowances of $6,561 for the year ended June 30, Under the alternative method, these amounts are computed on a District basis by allocating the cash payments to students, excluding payments for services, on the ratio of total aid to the aid not considered to be third party aid. Budgetary Information In accordance with Oregon Revised Statutes, the District adopts annual budgets and makes appropriations on a fund basis, using the modified accrual basis of accounting. The resolution authorizing appropriations by fund sets the level by which expenditures cannot legally exceed appropriations. Transfers of appropriations may be made between legally authorized appropriations when authorized by Board resolution. Annual appropriations lapse on June

37 CASH AND CASH EQUIVALENTS Summary of Cash and Cash Equivalents MT. HOOD COMMUNITY COLLEGE DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 Cash on hand Tax receipts with County Treasurer Deposits with financial institutions State of Oregon Treasurer's Local Government Investment Pool $ June 30, ,157 19,207 $ 20,490 Deposits with Financial Institutions The District s combined total bank balance at June 30, 2016, is $2,000. Of these deposits, $250 was covered by federal depository insurance. As required by Oregon Revised Statues, deposits in excess of federal depository insurance were held at a qualified depository for public funds. All qualified depositories for public funds are included in the multiple financial institution collateral pool that is maintained by and in the name of the Office of the State Treasurer. Investments State of Oregon statutes restrict the types of investments in which the District may invest excess cash balances. Authorized investments include general obligations of the United States Government and its agencies, certain bonded obligations of Oregon municipalities, bank repurchase agreements, bankers acceptances, and the State of Oregon Treasurer s Local Government Investment Pool. At June 30, 2016, and for the year then ended, the District was in compliance with the aforementioned State of Oregon statutes. The District s investments which are included in cash and cash equivalents consist of: June 30, 2016 Carrying Fair Amount Value State of Oregon Treasurer's Local Government Investment Pool $ 19,207 $ 19,323 The Oregon State Treasury administers the Local Government Investment Pool (LGIP). It is an openended noload diversified portfolio offered to any agency, political subdivision or public corporation of the state that by law is made the custodian of, or had control of, any fund. The LGIP is not rated. The LGIP is commingled with the State's shortterm funds. In seeking to best serve local governments of Oregon, the Oregon Legislature established the Oregon ShortTerm Fund Board. The purpose of the Board is to advise the Oregon State Treasury in the management and investment options of the LGIP. 18

38 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 CASH AND CASH EQUIVALENTS (Continued) Interest Rate Risk As a means to limit exposure to fair value loss arising from interest rates, the District s investment policy requires that at least 85% of the District s investments mature in less than one year. Investment maturity limitations and actual maturities for the District s investments are as follows: District Policy Actual at June 30, Minimum Maturity less than Investment days 10 % 100 % 90 days days 50 One year months 100 Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the District s investment in a single issuer. District policy permits 100% of the District s investments to be invested in the State of Oregon Treasurer s Local Government Investment Pool. Custodial Credit Risk Custodial credit risk is the risk that, in the event of failure of the counterparty to a transaction, the District will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. At June 30, 2016, the District does not have any investments exposed to custodial credit risk. RECEIVABLES Receivables consist of: June 30, 2016 Current Noncurrent assets assets Tuition $ 11,734 $ Grants 4,963 Trade and other 727 Property taxes 732 Student loans 80 18, Allow ance for uncollectibles (227) (16) $ 17,929 $ 64 19

39 NOTES TO BASIC FINANCIAL STATEMENTS (In $thousands) YEAR ENDED JUNE 30, 2016 CAPITAL ASSETS Changes in capital assets for the year ended June 30, 2016 are: Transfers/ June 30, 2015 Additions Deletions June 30, 2016 Capital assets not being depreciated: Land $ 1,456 $ $ $ 1,456 Art collection Construction in progress (885) 1 Total capital assets not being depreciated 1, (885) 1,671 Capital assets being depreciated: Buildings and improvements 84, ,462 Equipment and furnishings 17, (164) 17,676 Total capital assets being depreciated 101,714 1,588 (164) 103,138 Less accumulated depreciation: Buildings and improvements (30,556) (1,732) (32,288) Equipment and furnishings (15,827) (706) 164 (16,369) Total accumulated depreciation (46,383) (2,438) 164 (48,657) Capital assets being depreciated, net 55,331 (850) 54,481 Total capital assets, net $ 57,129 $ (92) $ (885) $ 56,152 PRESTATE AND LOCAL GOVERNMENT RATE POOL (SLGRP) LIABILITY This amount is the difference between the total unfunded actuarial liability (UAL) and the UAL attributable to the SLGRP for the employers that have joined the rate pool. The liability that existed prior to the District joining the rate pool is the sole responsibility of the District and is separate from the pooled PERS pension liability amount. At June 30, 2016, the District reported a liability of $6,197 for its proportionate share of the preslgrp liability. Annual debt service to maturity is based on the assumed interest rate, currently 7.5% and the rate charged by OPERS, which will be 1.85% of covered payroll for the year ending June 30, 2017 and 1.76% for the year ending June 30,

40 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 BONDS PAYABLE Transactions for the year ended June 30, 2016 are as follows: Original Outstanding Outstanding Due within Debt Amount June 30, 2015 Increase Decrease June 30, 2016 one year Full faith and credit obligation series 2001 $ 6,000 $ 510 $ $ (250) $ 260 $ 260 Full faith and credit obligation series ,200 3,275 (315) 2, Full faith and credit obligation series ,645 5,440 (75) 5, Full faith and credit obligation series ,085 10,165 (275) 9, Full faith and credit obligation series ,000 5,140 (265) 4, Full faith and credit obligation series ,255 3,700 (95) 3, Limited tax pension bond series ,597 37,253 (1,365) 35,888 1,366 Net prior to premiums, 65,483 (2,640) 62,843 2,721 discounts and adjustments deferred interest 11,434 (126) 11,308 1,533 Plus: Bond issuance premiums (31) 407 Less: Bond issuance discounts (183) (91) 8 (83) Premiums, discounts and adjustment 11,781 (149) 11,632 1,533 77,264 (2,789) 74,475 4,254 21

41 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 BONDS PAYABLE (Continued) Future maturities of principal and interest as of June 30, 2016: Full Faith Limited Tax Year ending Total and Credit Obligations Pension Bonds June 30, Principal Interest Principal Interest Principal Interest 2017 $ 2,721 $ 4,275 $ 1,355 $ 1,077 $ 1,366 $ 3, ,718 4,467 1,355 1,036 1,363 3, ,801 4,659 1, ,351 3, ,888 4,857 1, ,348 3, ,087 5,068 1, ,337 4, ,303 16,070 10,175 3,208 19,128 12, ,730 1,807 8,735 1,068 9, Subtotals 62,843 41,249 26,955 9,209 35,888 32,040 Deferred interest 11,308 11,308 Carrying amount $ 74,151 $ 41,249 $ 26,955 $ 9,209 $ 47,196 $ 32,040 The full faith and credit obligations are direct obligations backed by the full faith and credit of the District. The District has issued full faith and credit obligations to provide for the acquisition, construction and improvement of District facilities. Interest rates range from 2.00 to 5.75% in accordance with the terms stated at issuance. On April 23, 2003, the District participated with six community college districts in a pooled issuance of limited tax pension obligation bonds to finance the District s estimated Oregon Public Employees Retirement System (PERS) unfunded actuarial liability. The District issued $50,597 in debt as part of a pooled issuance of $153,582. The $50,597 of debt includes $24,132 Series 2003A deferred interest bonds and $26,465 Series 2003B current interest bonds. Interest on the deferred interest bonds is accreted semiannually at yields ranging from 1.40% to 6.25%. Interest on the current coupon bonds is payable semiannually at rates ranging from 5.60% to 5.68%. Except for the payment of its pension bond payments and additional charges when due, each community college district has no obligation or liability to any other participating district s pension bonds or liability to Oregon PERS. Bond proceeds were paid to the Oregon Public Employees Retirement System. An intercept agreement with the State of Oregon was required as a condition of issuance; therefore a portion of the Community College Support Fund support is withheld on August 15, October 15 and January 15 to repay debt. Funds are accumulated and invested by a trust officer and annual principal payments are made each June 30, and interest payments are made each June 30 and December 30, beginning December 2003 and ending June Interest rates range from 1.09% to 6.25% in accordance with the terms stated at issuance. The District recorded the amount deposited with PERS as a prepayment of its unfunded actuarial liability, and accounts for the payment of principal and interest as pension expense annually. The prepayment is being amortized over the life of the bonds based on the straightline method. The District anticipates the total cost of financing the District s unfunded actuarial liability in this manner will result in significant savings to the District when compared to paying for such costs as additional contribution rates to PERS. 22

42 OPERATING LEASES MT. HOOD COMMUNITY COLLEGE DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 The District leases classroom space and copier equipment under operating leases. The total cost of such leases for 2016 was $375. The future minimum lease payments are: Year Ending June 30, $ $ 1,438 PENSION PLANS Oregon Public Employees Retirement System Plan Description Employees of the District are provided with pensions through the Oregon Public Employees Retirement System (OPERS) a costsharing multipleemployer defined benefit pension plan, the Oregon Legislature has delegated authority to the Public Employees Retirement Board to administer and manage the system. All benefits of the System are established by the legislature pursuant to ORS Chapters 238 and 238A. OPERS issues a publicly available Comprehensive Annual Financial Report and Actuarial Valuation that can be obtained at: Tier One/Tier Two Retirement Benefit plan, established by ORS Chapter 238, is closed to new members hired on or after August 29, The Pension Program, established by ORS Chapter 238A, provides benefits to members hired on or after August 29, Benefits Provided Tier One/Tier Two Retirement Benefit ORS Chapter 238 Pension Benefits The PERS retirement allowance is payable monthly for life. It may be selected from 13 retirement benefit options. These options include survivorship benefits and lumpsum refunds. The basic benefit is based on years of service and final average salary. A percentage (2.0 percent for police and fire employees, 1.67% for general service employees) is multiplied by the number of years of service and the final average salary. Benefits may also be calculated under either a formula plus annuity (for members who were contributing before August 21, 1981) or a money match computation if a greater benefit results. A member is considered vested and will be eligible at minimum retirement age for a service retirement allowance if he or she has had a contribution in each of five calendar years or has reached at least 50 years of age before ceasing employment with a participating employer. Tier One general service employee benefits are reduced if retirement occurs prior to age 58 with fewer than 30 years of service. Tier Two members are eligible for full benefits at age 60. The ORS Chapter 238 Defined Benefit Pension Plan is closed to new members hired on or after August 29,

43 PENSION PLANS (Continued) Benefits Provided (Continued) MT. HOOD COMMUNITY COLLEGE DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 Tier One/Tier Two Retirement Benefit ORS Chapter 238 (Continued) Death Benefits Upon the death of a nonretired member, the beneficiary receives a lumpsum refund of the member s account balance (accumulated contributions and interest). In addition, the beneficiary will receive a lumpsum payment from employer funds equal to the account balance, provided one or more of the following conditions are met: the member was employed by a PERS employer at the time of death, the member died within 120 days after termination of PERScovered employment, the member died as a result of injury sustained while employed in a PERScovered job, or the member was on an official leave of absence from a PERScovered job at the time of death. Disability Benefits A member with 10 or more years of creditable service who becomes disabled from other than dutyconnected causes may receive a nonduty disability benefit. A disability resulting from a jobincurred injury or illness qualifies a member (including PERS judge members) for disability benefits regardless of the length of PERScovered service. Upon qualifying for either a nonduty or duty disability, service time is computed to age 58 when determining the monthly benefit. Benefit Changes After retirement, members may choose to continue participation in a variable equities investment account after retiring and may experience annual benefit fluctuations due to changes in the market value of equity investments. Under ORS monthly benefits are adjusted annually through costofliving changes. Under current law, the cap on the COLA in fiscal year 2015 and beyond will vary based on 1.25% on the first $60,000 of annual benefit and 0.15 percent on annual benefits above $60,000. OPSRP Pension Program (OPSRP DB) Pension Benefits The Pension Program (ORS Chapter 238A) provides benefits to members hired on or after August 29, This portion of OPSRP provides a life pension funded by employer contributions. Benefits are calculated with the following formula for members who attain normal retirement age: General Service: 1.5% is multiplied by the number of years of service and the final average salary. Normal retirement age for general service members is age 65, or age 58 with 30 years of retirement credit. A member of the OPSRP Pension Program becomes vested on the earliest of the following dates: the date the member completes 600 hours of service in each of five calendar years, the date the member reaches normal retirement age, and, if the pension program is terminated, the date on which termination becomes effective. Death Benefits Upon the death of a nonretired member, the spouse or other person who is constitutionally required to be treated in the same manner as the spouse, receives for life 50 percent of the pension that would otherwise have been paid to the deceased member. 24

44 PENSION PLANS (Continued) Benefits Provided (Continued) MT. HOOD COMMUNITY COLLEGE DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 OPSRP Pension Program (OPSRP DB) (Continued) Disability Benefits A member who has accrued 10 or more years of retirement credits before the member becomes disabled or a member who becomes disabled due to jobrelated injury shall receive a disability benefit of 45 percent of the member s salary determined as of the last full month of employment before the disability occurred. Benefit Changes after Retirement Under ORS 238A.210 monthly benefits are adjusted annually through costofliving changes. Under current law, the cap on the COLA in fiscal year 2015 and beyond will vary based on 1.25 percent on the first $60 of annual benefit and 0.15% on annual benefits above $60,000. Net Pension Asset, Liability, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2016, the District reported a liability of $8,591 for its proportionate share of the net pension asset/liability. The net pension asset/liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension asset/liability was determined by an actuarial valuation as of December 31, 2013 rolled forward to June 30, The District s proportion of the net pension asset/liability was based on a projection of the District s longterm share of contributions to the pension plan relative to the projected contributions of all participating entities, actuarially determined. At fiscal year June 30, 2016, the District's proportion was %, which was less than its proportion measured as of fiscal year June 30, 2015 of %. For the year ended June 30, 2016, the District recognized pension expense (income) of $8,240. At June 30, 2016, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources Differences between expected and actual experience $ 463 $ Changes in assumptions Net difference between projected and actual earnings on pension plan investments (1,801) Changes in District's proportionate share (274) Differences between District contributions and proportionate share of system contributions (650) District contributions subsequent to the measurement date 606 Total $ 1,069 $ (2,725) 25

45 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 PENSION PLANS (Continued) Net Pension Asset, Liability, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions (Continued) $606 reported as deferred outflows of resources related to pensions resulting from District contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year ending June 30 Total Total $ $ (970) (970) (970) 679 (31) (2,262) Contributions PERS funding policy provides for monthly employer contributions at actuarially determined rates. These contributions, expressed as a percentage of covered payroll, are intended to accumulate sufficient assets to pay benefits when due. This funding policy applies to the PERS Defined Benefit Plan and the Other Postemployment Benefit Plans. Employer contribution rates during the period were based on the December 31, 2013 actuarial valuation as subsequently modified by 2013 legislated changes in benefit provisions. The rates based on a percentage of payroll, first became effective July 1, Employer contributions for the year ended June 30, 2016 were approximately $606, excluding amounts to fund employer specific liabilities. The rates in effect for the fiscal year ended June 30, 2016 were 5.38 percent for Tier One/Tier Two General Service Member, 0.45 percent for OPSRP Pension Program General Service Members, and 6 percent for OPSRP Individual Account Program. Actuarial Assumptions The employer contribution rates effective July 1, 2015 through June 30, 2017, were set using the entry age normal actuarial cost method. For the Tier One/Tier Two component of the PERS Defined Benefit Plan, this method produced an employer contribution rate consisting of (1) an amount for normal cost (the estimated amount necessary to finance benefits earned by the employees during the current service year), (2) an amount for the amortization of unfunded actuarial accrued liabilities, which are being amortized over a fixed period with new unfunded actuarial accrued liabilities being amortized over 20 years. For the OPSRP Pension Program component of the PERS Defined Benefit Plan, this method produced an employer contribution rate consisting of (a) an amount for normal cost (the estimated amount necessary to finance benefits earned by the employees during the current service year), (b) an amount for the amortization of unfunded actuarial accrued liabilities, which are being amortized over a fixed period with new unfunded actuarial accrued liabilities being amortized over 16 years. 26

46 PENSION PLANS (Continued) MT. HOOD COMMUNITY COLLEGE DISTRICT NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 Actuarial Assumptions (Continued) The total pension liability in the December 31, 2013 actuarial valuation was determined using the following actuarial assumptions: Valuation Date December 31, 2013 Measurement Date June 30, 2015 Experience Study Report 2014, published September 2015 Actuarial Cost Method Amortization Method Entry Age Normal Amortized as a level percentage of payroll as layered amortization bases over a closed period; Tier One/Tier Two UAL is amortized over 20 years and OPSRP pension UAL is amortized over 16 years. Asset Valuation Method Actuarial Assumptions: Inflation Rate Longterm Expected Rate of Return Discount Rate Projected Salary Increases Market value of assets 2.75 percent 7.75 percent 7.75 percent 3.75 percent Cost of living adjustments (COLA) Blend of 2.00% COLA and graded COLA (1.25%/0.15%) in accordance with Moro decision; blend based on service. Mortality Health retirees and beneficiaries: RP2000 Sexdistinct, generational per Scale AA, with collar adjustments and setbacks as described in the valuation. Active Members: Mortality rates are a percentage of healthy retiree rates that vary by group, as described in the valuation. Disabled retirees: Mortality rates are a percentage (65% for males, 90% for females) of the RP2000 statistic combined disabled mortality sexdistinct table. Actuarial valuations of an ongoing plan involve estimates of the value of projected benefits and assumptions about the probability of events far into the future. Actuarially determined amounts are subject to continual revision as actual results are compared to past expectations and new estimates are made about the future. Experience studies are performed as of December 31 of even numbered years. The methods and assumptions shown above are based on the 2014 Experience Study, which reviewed experience for the fouryear period ending on December 31, Discount rate The discount rate used to measure the total pension liability was 7.75 percent for the Defined Benefit Pension Plan. The projection of cash flows used to determine the discount rate assumed that contributions from plan members and those of the contributing employers are made at the contractually required rates, as actuarially determined. Based on those assumptions, the pension plan s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the longterm expected rate of return on pension plan investments for the Defined Benefit Pension Plan was applied to all periods of projected benefit payments to determine the total pension liability. 27

47 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 PENSION PLANS (Continued) Longterm expected rate of return To develop an analytical basis for the selection of the longterm expected rate of return assumption, in July 2013 the PERS Board reviewed longterm assumptions developed by both Milliman s capital market assumptions team and the Oregon Investment Council s (OIC) investment advisors. The table below shows Milliman s assumptions for each of the asset classes in which the plan was invested at that time based on the OIC longterm target asset allocation. The OIC s description of each asset class was used to map the target allocation to the asset classes shown below. Each asset class assumption is based on a consistent set of underlying assumptions, and includes adjustment for the inflation assumption. These assumptions are not based on historical returns, but instead are based on a forwardlooking capital market economic model. Compounded Annual Asset Class Target Allocation Return (Geometric) Core Fixed Income 7.20% 4.50% ShortTerm Bonds Intermediate Term Bonds High Yield Bonds Large Cap US Equities Mid Cap US Equities Small Cap US Equities Developed Foreign Equities Emerging Market Equities Private Equities Opportunity Funds/Absolute Return Real Estate (Property) Real Estate (REITS) Commodities Total % Assumed Inflation Mean 2.75% 28

48 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 PENSION PLANS (Continued) Sensitivity of the District s proportionate share of the net pension liability to changes in the discount rate The following presents the District s proportionate share of the net pension liability calculated using the discount rate of 7.75 percent, as well as what the District s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1percentagepoint lower (6.75 percent) or 1 percentagepoint higher (8.75 percent) than the current rate: 1% Decrease (6.75%) Discount Rate (7.75%) 1% Increase (8.75%) District s proportionate share of the net pension liability (asset) $ 20,735 $ 8,591 $ (1,642) Pension plan fiduciary net position Detailed information about the pension plan's fiduciary net position is available in the separately issued OPERS financial report that can be obtained at OPSRP Individual Account Program (OPSRP IAP) Plan Description Employees of the District are provided with pensions through OPERS. All the benefits of OPERS are established by the Oregon legislature pursuant to Oregon Revised Statute (ORS) Chapters 238 and 238A. Chapter 238 Defined Benefit Pension Plan is closed to new members hired on or after August 29, Chapter 238A created the Oregon Public Service Retirement Plan (OPSRP), which consists of the Defined Benefit Pension Program and the Individual Account Program (IAP). Membership includes public employees hired on or after August 29, PERS members retain their existing defined benefit plan accounts, but member contributions are deposited into the member s IAP account. OPSRP is part of OPERS, and is administered by the OPERS Board. Pension Benefits Participants in OPERS defined benefit pension plans also participate in their defined contribution plan. An IAP member becomes vested on the date the employee account is established or on the date the rollover account was established. If the employer makes optional employer contributions for a member, the member becomes vested on the earliest of the following dates: the date the member completes 600 hours of service in each of five calendar years, the date the member reaches normal retirement age, the date the IAP is terminated, the date the active member becomes disabled, or the date the active member dies. Upon retirement, a member of the OPSRP IAP may receive the amounts in his or her employee account, rollover account, and vested employer account as a lumpsum payment or in equal installments over a 5, 10, 15, 20year period or an anticipated life span option. Each distribution option has a $200 minimum distribution limit. Death Benefits Upon the death of a nonretired member, the beneficiary receives in a lump sum the member s account balance, rollover account balance, and vested employer optional contribution account balance. If a retired member dies before the installment payments are completed, the beneficiary may receive the remaining installment payments or choose a lumpsum payment. 29

49 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 PENSION PLANS (Continued) OPSRP Individual Account Program (OPSRP IAP) (Continued) Contributions Employees of the college pay 6 percent of their covered payroll. The college did not make any optional contributions to member IAP accounts for the year ended June 30, Included in accrued liabilities at June 30, 2016 is approximately $1,056 for employee contributions owed to the plan. Early Retirement Benefits Plan Description The District maintains a single employer defined benefit early retirement program for its employees. Fulltime faculty, classified and administrative personnel are eligible. Established under separate collective bargaining agreements, the program is available for employees who are at least 55 years of age, or have 30 or more years of PERS service regardless of age, and who have at least ten years of continuous service with the District. The program generally provides the employee with a severance payment ranging from $0.7 to $25.3 depending upon the employee s classification and age at retirement. The District does not issue a separate publicly available financial report for the early retirement program. Funding Policy and Annual Benefit Cost The benefits from this program are fully paid by the District. Employee contributions are not required. There is no obligation on the part of the District to fund these benefits in advance. The District covers this obligation through annual appropriations on a payasyougo basis. For the years ended June 30, 2016, 2015 and 2014, expenses under the plan were $79, $54 and $77, respectively. OTHER POST EMPLOYMENT BENEFITS (OPEB) District Plan Plan Description The District maintains a single employer defined benefit other postemployment benefits program for its employees. The District provides continuation of medical, dental, vision and/or life insurance coverage to its retirees who were offered coverage as an employee. OPEB obligations include explicit and implicit subsidy liabilities. Explicit subsidy liabilities are created when the district provides a direct (explicit) subsidy toward the cost of retiree healthcare coverage. Implicit subsidy liabilities are created when the District provides medical, dental, vision, and life insurance coverage to retirees in plans offered through Oregon Educators Benefit Board. For medical coverage, the claims experience of active employees and premedicare retirees are comingled in setting the monthly premiums and the expectation is that retiree medical claims will exceed retiree premiums. Implicit subsidy medical liability is determined as the difference between projected retiree medical claim costs by age and premiums expected to be charged for retirees. The program is available for employees who are at least 55 years of age, or have 30 or more years of PERS services regardless of age. Subsidies towards premiums are established under separate collective bargaining agreements and employee handbooks. Fulltime faculty, staff and administrative personnel are eligible for a subsidy with at least ten years of continuous service with the District. The program generally provides the employee with payment of group medical and dental insurance premiums from retirement date until age 65. The District does not issue a separate publicly available financial report for the early retirement program. 30

50 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) District Plan (Continued) Funding Policy The benefits from this program are fully paid by the District. Employee contributions may be required, depending on retirement date and employee group. There is no obligation on the part of the District to fund these benefits in advance. The District covers this obligation through annual appropriations on a payasyougo basis. For the years ended June 30, 2016, 2015 and 2014, expenses under the plan were $806, $903, and $928 respectively. Annual OPEB Cost and Net OPEB Obligation (Asset) The District s annual other postemployment benefit cost (expense) is reflected on the Statement of Revenues, Expenses and Changes in Net Position on the accrual basis and is calculated based on the annual required contribution (ARC) of the District, an amount actuarially determined in accordance with the parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The District s most recent actuarial valuation date was June 30, 2015, and the following table shows the components of the District s annual OPEB cost for June 30, 2016, the amount actually contributed to the plan, and changes in the District s net OPEB obligation (asset): Annual required contribution (ARC) $ 1,235 Interest on net OPEB obligation (36) Adjustm ent to ARC 42 Annual OPEB cost (expense) 1,241 Contributions made (806) Current year's implicit subsidy (384) Decrease in net OPEB obligation (asset) 51 Net OPEB obligation (asset), beginning of year (901) Net OPEB obligation (asset), end of year $ (850) The District s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB asset for 2016, 2015 and 2014 were as follows: Fiscal Year Ended Annual OPEB Cost OPEB Contributions Annual OPEB Cost Contributed Net OPEB Asset 6/30/2016 6/30/2015 6/30/2014 $ 1,241 1, $ 1,190 1, % % % $

51 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) District Plan (Continued) Actuarial Methods and Assumptions (Continued) Funded Status and Funding Progress As of June 30, 2015, the most recent actuarial valuation date, the actuarial accrued liability for benefits was $12.79 million, and the actuarial value of assets was $0, resulting in an unfunded actuarial accrued liability (UAAL) of $12.79 million. The covered payroll (annual payroll of active employees covered by the plan) was $30.4 million, and the ratio of the UAAL to the covered payroll was 42.1 percent. Using a 30 year closed amortization period, the ARC for the year ended June 30, 2016, has been actuarially determined to be $1,235, representing $639 for normal cost and $595 for the UAAL. Actuarial Methods and Assumptions Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of shortterm volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the longterm perspective of the calculations. In the June 30, 2015, actuarial valuation, the entry age normal, level percent of pay cost method was used. The actuarial assumptions included a 4.0% investment rate of return (net of administrative expenses), which is a blended rate of the expected longterm investment returns on plan assets and on the employer s own investments calculated based on the funded level of the plan at the valuation date, and an annual healthcare cost trend rate of 4.5% for dental and vision premiums. Medical plan premiums, health savings account subsidies and subsidy caps are assumed to increase once each year based on the table below: Effective Premium Effective Premium October 1 Increase October 1 Increase 2015 Actual % % % % % % % % % % % % % % % 32

52 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 OTHER POST EMPLOYMENT BENEFITS (OPEB) (Continued) District Plan (Continued) Actuarial Methods and Assumptions (Continued) Rates included a 3.75% salary inflation assumption. The UAAL is being amortized as a level percentage of projected payroll on a closed basis. The remaining amortization period at June 30, 2016, was twenty three years. Retirement Health Insurance Account Plan Description As a member of PERS, the District makes contributions to the Retirement Health Insurance Account (RHIA) for each of its eligible employees. RHIA is a cost sharing multipleemployer defined benefit other postemployment benefit plan administered by PERS. RHIA pays a monthly contribution toward the cost of Medicare companion health insurance premiums of eligible retirees. Oregon Revised Statutes (ORS) established this trust fund. The Oregon legislature has the ability to establish and amend the benefit provisions of the RHIA. The plan is closed to new entrants after January 1, PERS issues a publicly available financial report that includes financial statements and required supplementary information which may be obtained by writing to Public Employees Retirement System, P.O. Box 23700, Tigard, Oregon, , or by calling Because RHIA was created by enabling legislation (ORS ), contribution requirements of the plan members and the participating employers were established and may be amended only by the Oregon Legislature. Funding Policy ORS require that an amount equal to $60 or the total monthly cost of Medicare companion health insurance premium coverage, whichever is less, shall be paid from the RHIA established by the employer, and any monthly cost in excess of $60 shall be paid by the eligible retired member in the manner provided in ORS To be eligible to receive this monthly payment the member must 1) have eight years or more of qualifying service in PERS at the time of retirement or receive a disability allowance as if the member has eight years or more of creditable service in PERS, 2) receive both Medicare Parts A and B coverage, and 3) enroll in a PERS sponsored health plan. A surviving spouse or dependent of a deceased PERS retiree who was eligible to receive the subsidy is eligible to receive the benefit if he or she is receiving a retirement benefit or allowance from PERS or was insured at the time the member died and the member retired before May 1, Participating employers are contractually required to contribute to RHIA at a rate assessed each year by PERS, currently.53% of annual covered OPERF payroll and.45% of OPSRP payroll. The PERS board sets the employer contribution rate based on the annual required contribution (ARC) of the employers, an amount actuarially determined in accordance with GASB Statement No. 45. The ARC represents a level of funding that if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years. The District s contributions to RHIA for the years ended June 30, 2016, 2015 and 2014 were approximately, $144, $157, and $206, respectively. RISK MANAGEMENT The District is exposed to various risks of loss related to torts; theft, damage or destruction of assets; errors and omissions; and natural disasters for which the District carries commercial insurance. The District does not engage in risk financing activities where the risk is retained (selfinsurance). There was not a significant reduction in insurance coverage during the year ended June 30, Settlements have not exceeded insurance coverage for any of the three years ended June 30,

53 NOTES TO BASIC FINANCIAL STATEMENTS (Continued) (In $thousands) YEAR ENDED JUNE 30, 2016 COMMITMENTS AND CONTINGENCIES Amounts received, or receivable from grantor agencies, principally the federal government, are subject to audit and adjustment by these agencies. Any disallowed claims, including amounts already collected, may constitute a liability to the District. The amount, if any, of costs which may be disallowed is presently indeterminable. District management expects such amounts, if any, to be immaterial to the basic financial statements. SUBSEQUENT EVENT On October 6, 2016, the District issued $19,440 Full Faith and Credit Refunding Obligations, Series The issue refunded Series 2004, 2008, 2009 and 2010 Full Faith and Credit Obligations with a net present value savings of $1,981. RELATED ORGANIZATION The Mt. Hood Community College District Foundation (the Foundation) is a legally separate, taxexempt related organization of the District. Although the District does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon that the Foundation holds is restricted for scholarships for students of the District by the donors. The Foundation is not considered a component unit of the District, as defined by GASB Statement No. 61. Summarized financial information from the Foundation s income tax basis financial statements as of and for the year ended June 30, 2016, is: 2016 Total assets $ 5,531 Total net assets 5,395 Total revenues, gains and other support 925 Total expenses 832 The District provides the facilities and use of certain staff for the operation and administration of the Foundation s activities. The Foundation is also covered under the District s insurance policies. For the year ended June 30, 2016, the Foundation reimbursed the District $514, for expenses paid on behalf of the Foundation for staff salaries and benefits, insurance coverage, other expenses and scholarships. RESTATEMENT The net position as of June 30, 2015 was restated by $651 to adjust the District s actuarially determined liability prior to joining the SLGRP, which was estimated by PERS at the fiscal year ended June 30, 2015 reporting date. Net position as of June 30, 2015 (as reported) Restatement of prior year position PreSLGRP liability Net position as of June 30, 2015 (restated) $ $ (15,496) 651 (14,845) 34

54 ~ MT HOOD C OMMUNITY COLLEGE ~ KN O WLEDGE /<r SU CCESS

55 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Funding Progress Schedule of the Proportionate Share of the Net Pension Liability (Asset) Schedule of Pension Plan Contributions

56 SCHEDULE OF FUNDING PROGRESS (In $thousands) OTHER POSTEMPLOYMENT BENEFIT Unfunded Actuarial Actuarial UAAL as a Actuarial Value of Actuarial Accrued Funded Covered Percentage of Valuation Assets Accrued Liability Liability Ratio Payroll Covered Payroll Date (a) (b) (ba) (a/b) (c ) ((ba)/c) 6/30/2015 $ $ 12,787 $ 12,787 % $ 30, % 6/30/2013 8,611 8,611 28, /30/2011 8,727 8,727 33,

57 SCHEDULE OF THE PROPORTIONATE SHARE OF THE NET PENSION LIABILITY (ASSET) (In $thousands) District's proportionate share of the District's net pension District's proportionate liablity Plan fiduciary proportion of share of the District's (asset) as a net position as Year the net pension net pension covered percentage of a percentage of Ended liability (asset) liability (asset) payroll 1 covered payroll the total pension June 30, (a) (b) (c) (b/c) liability % $ 8,591 $ 37, % 91.88% (3,754) 37,703 (9.96) ,451 38, Amounts for covered payroll use the prior year s data to match the measurement date used by the pension plan (Oregon Public Employees Retirement System) for each fiscal year presented. The amounts presented for each fiscal year were actuarial determined at December 31 and rolled forward to the measurement date. This schedule is presented to illustrate the requirements to show information for 10 years. However, until a full 10year trend has been compiled, information is presented only for the years for which the required supplementary information is available. Changes in Plan Provisions A summary of key changes in plan provisions are described in the Oregon Public Employees Retirement System s GASB Statement No. 68 Disclosure Information which can be found at: vised.pdf Changes of Assumptions A summary of key changes implemented since the December 31, 2013 valuation are described in the Oregon Public Employees Retirement System s GASB Statement No. 68 Disclosure Information which can be found at: vised.pdf Additional details and a comprehensive list of changes in methods and assumptions can be found in the 2012 Experience Study for the System, which was published on September 18, 2013, and can be found at: 36

58 SCHEDULE OF PENSION PLAN CONTRIBUTIONS (In $thousands) Contributions in Contributions Statutorily relation to the Contribution District's as a percent Year required statutorily required deficiency covered of covered Ended contribution contribution (excess) payroll payroll June 30, (a) (b) (ab) (c) (b/c) 2016 $ 606 $ 606 $ $ 39, % ,343 1,343 37, ,332 1,332 37, The amounts presented for each fiscal year were actuarial determined at December 31 and rolled forward to the measurement date. Statutorily required contribution includes all contributions to PERS. This schedule is presented to illustrate the requirements to show information for 10 years. However, until a full 10year trend has been compiled, information is presented only for the years for which the required supplementary information is available. 37

59 SUPPLEMENTAL FINANCIAL INFORMATION

60 BUDGETARY INFORMATION YEAR ENDED JUNE 30, 2016 Oregon Administrative Rules require an individual Schedule of Revenues, Expenditures and Changes in Fund Balance, Budget and Actual, be prepared for each fund which the District is legally required to budget. MEASUREMENT FOCUS AND BASIS OF ACCOUNTING The District focuses on changes in current financial resources in the preparation, adoption and execution of annual budgets for the District s funds. The modified accrual basis of accounting is used to account for transactions or events that have increased or decreased the resources available for spending in the near future. The budget schedules include all transactions or events that affect the fund s current financial resources, even though these transactions may not affect net position. Such transactions include: Issuance of debt Debt service principal payments Capital outlay Revenues are recognized when they are susceptible to accrual. To be susceptible to accrual, the revenue must be both measurable and available. Measurable means the amount of the transaction can be determined. Available means collectible within the current period or soon enough thereafter to pay liabilities of the current period. The District deems revenues received within 60 days of the end of the fiscal year to be available and subject to accrual. Expenditures are recorded when the related fund liability is incurred, except for unmatured interest on general longterm debt, which is recognized when due, and certain compensated absences and claims and judgments, which are recorded only when expected to be liquidated with available expendable financial resources. State support is recorded at the time of receipt or earlier if the susceptible to accrual criteria are met. Expendituredriven grant revenue is recognized when the qualifying expenditures have been incurred and all other grant requirements have been met. Other receipts, including property taxes, become measurable and available when cash is received by the District and recognized as revenue at that time. DESCRIPTION OF FUNDS The District has the following funds: The General Fund accounts for the financial operations of the District not accounted for in any other fund. Principal sources of revenue are state support, tuition and fees, and property taxes. Expenditures are made for instruction, research, academic support, student services, pubic services, institutional support, debt service, operation and maintenance of plant facilities and financial aid. The Pension Bond Debt Service Fund provides for the payment of principal and interest on limited tax pension obligation bonds. Principal revenue sources are charges to other funds. The Physical Plant Maintenance Fund accounts for resources from energy rebates and debt proceeds used to maintain the physical plant of the District. The Technology Projects Fund accounts for resources, provided by student technology fees, which are used to meet the changing technological needs of the District. The Student Aid Fund accounts for revenues and expenditures for various programs providing grants, loans, or wages for students from federal or state funds. Some of these programs require local revenues which are usually provided by transfers from the General Fund. The Federal, State and Special Projects Fund accounts for the financial operations of the various programs of the District funded primarily by federal revenues, other than student aid. These programs include specialized programs for dislocated workers, disadvantaged, handicapped, or vocational students and youth. 38

61 BUDGETARY INFORMATION (Continued) YEAR ENDED JUNE 30, 2016 The Campus Store Fund is used to account for the operations of the District s campus store. This operation is financed and operated in a manner that is similar to private business, where the Board of Education has decided that the determination of revenues earned, costs incurred and/or net income is necessary for management accountability. The Aquatic Center Fund is used to account for the operations of the aquatics center. This is an enterprise fund, established in fiscal year to account for the financial operations in the District s aquatics facility. The Clubs Fund accounts for the revenues and expenditures of various clubs and organizations designed to complement the various curricular and cocurricular programs of the District. The principal revenue source is participant fees. The Trusts Fund accounts for assets held by the District under the terms of the various trust agreements. The Associated Student Government Fund accounts for activities of the Associated Student Government. The principal revenue source is student fees. 39

62 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) 2016 Final Budget Variance Prior Years Actual Budget Positive Adopted Final Actual (Negative) Revenues $ 23,327 $ 24,935 State support $ 27,062 $ 27,062 $ 27,751 $ ,367 26,450 Tuition and fees 26,431 26,431 23,297 (3,134) Property taxes 9,993 10,697 Current 10,639 10,639 11, Prior years' (33) Interest ,405 Sales Rentals Other income Indirect cost recovery ,928 64,922 Total revenues 65,499 65,499 64,559 (940) Expenditures Instruction 29,089 28,969 Personal services 29,930 29,682 28,234 1,448 1,625 1,504 Materials and services 1,967 1,930 1, Capital outlay Research Personal services Materials and services Academic support 6,319 6,415 Personal services 6,872 6,784 6, Materials and services Capital outlay (2) Student services 5,671 5,480 Personal services 5,173 4,980 4, Materials and services Capital outlay Public services Personal services Materials and services (24) Institutional support 8,368 7,424 Personal services 8,017 7,908 7, ,673 2,462 Materials and services 2,891 2,920 2, Capital outlay Debt service 2,718 2,360 Principal and interest 2,397 2,397 2,397 Operation and maintenance of plant 2,657 2,655 Personal services 2,552 2,547 2, ,695 1,777 Materials and services 2,020 2,046 2,112 (66) 184 Capital outlay 13 (13) Financial aid 1,327 1,207 Scholarships 1,308 1,308 1, Contingency/reserves 2,005 2,650 2,650 65,339 62,320 Total expenditures 67,334 67,334 61,565 5,769 (411) 2,602 Revenues over (under) expenditures (1,835) (1,835) 2,994 4, Continued on page 40a

63 GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) 2016 Final Budget Variance Prior Years Actual Budget Positive Adopted Final Actual (Negative) Other financing sources (uses) $ 200 $ 79 Transfers in $ 200 $ 200 $ 96 $ (104) (203) (613) Transfers out (925) (925) (675) 250 Total other financing (3) (534) sources (uses) (725) (725) (579) 146 Revenues over (under) expenditures (414) 2,068 and other finance sources (uses) (2,560) (2,560) 2,415 4,975 4,678 4,264 Beginning fund balance 3,900 3,900 6,332 2,432 $ 4,264 $ 6,332 Ending fund balance $ 1,340 $ 1,340 $ 8,747 $ 7,407 Continued from page 40 40a Concluded

64 PENSION BOND FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) Prior Years Actual Budget Adopted and Final 2016 Actual Final Budget Variance Positive (Negative) $ 4,927 $ 4,883 Revenues Bond assessment $ 4,344 $ 3,729 $ (615) 1,348 2,580 1,360 2,774 Expenditures Bond principal Bond interest 1,365 2,978 1,365 2,978 3,928 4,134 Total expenditures 4,344 4, Revenues over (under) expenditures (615) (615) 237 1,236 Beginning fund balance 1,985 1,985 $ 1,236 $ 1,985 Ending fund balance $ 1,985 $ 1,370 $ (615) 41

65 PHYSICAL PLANT MAINTENANCE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) Prior Years Actual Final Budget Budget Adopted Variance and Positive Final Actual (Negative) $ 4 $ Revenues Energy rebates $ $ $ Property insurance recovery Interest Total revenues 1 2, Expenditures Personal services Materials and services (183) Capital outlay , (2,751) (106) (2,751) 294 2,751 $ $ 294 Total expenditures Revenues over (under) expenditures (900) (605) (295) Other financing sources Transfers from General Fund Total other financing sources Revenues over (under) expenditures and other finance source (500) (205) 295 Beginning fund balance (206) Ending fund balance $ $ 89 $ 89 42

66 TECHNOLOGY PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) Prior Years Actual Budget Adopted and Final 2016 Actual Final Budget Variance Positive (Negative) Revenues $ 1,354 $ 1,234 Technology fee Other income 1,755 1,624 Total revenues Expenditures 1,362 1,584 Materials and services Capital outlay 1,362 1,584 Total expenditures Revenues over (under) expenditures $ 1, ,538 2,162 2,162 (624) $ 1,054 $ (95) 388 (1) 1,442 (96) 1, (229) 2, (675) (51) Beginning fund balance $ 993 $ 1,033 Ending fund balance 624 $ 1, $ 358 $

67 STUDENT AID FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) Prior Years Actual Budget Adopted and Final 2016 Actual Final Budget Variance Positive (Negative) $ 42, $ 36, Revenues Grants Loan collections Other income Interest $ 84,684 $ 25, (58,889) (38) (10) (8) 42,509 36,192 Total revenues 84,777 25,832 (58,945) , ,865 Expenditures Personal services Materials and services Grants and loans , , (54) 58,900 43,164 36,384 Total expenditures 85,027 25,817 59,210 (655) (192) Revenues over (under) expenditures (250) (41) 213 (143) Other financing source (use) Transfer in Transfer out 250 (100) (30) (250) (494) (122) Total other financing source (use) 150 (30) (180) Revenues over (under) expenditures and other finance source (use) (100) (15) Beginning fund balance (72) $ 150 $ 28 Ending fund balance $ $ 13 $ 13 44

68 FEDERAL, STATE AND SPECIAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) Prior Years Actual Budget Adopted and Final 2016 Actual Final Budget Variance Positive (Negative) Revenues $ 15,984 $ 18,597 Government grants 1,881 2,500 Other grants 17,865 21,097 Total revenues Expenditures 13,223 13,701 Personal services 4,547 6,241 Materials and services Capital outlay Scholarships Contingency 17,890 20,387 Total expenditures (25) 710 Revenues over (under) expenditures Other financing source Transfers in Revenues over expenditures and other finance source 2,635 2,651 Beginning fund balance $ 2,651 $ 3,504 Ending fund balance $ 50,000 7,000 57,000 26,500 20,000 10, ,000 57,800 (800) 100 (700) 700 $ $ 18,615 $ (31,385) 3,117 (3,883) 21,732 (35,268) 13,933 12,567 6,533 13, , ,000 21,220 36, , (70) 542 1,242 3,504 2,804 $ 4,046 $ 4,046 45

69 CAMPUS STORE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) 2016 Final Budget Budget Adopted Variance Prior Years Actual and Positive Final Actual (Negative) Revenues $ 3,644 $ 3,177 Sales $ 3,340 $ 2,486 $ (854) Other ,705 3,213 Total revenues 3,367 2,518 (849) Expenditures 2,549 2,330 Cost of sales 2,343 1, Personal services Materials and services ,594 3,259 Total expenditures 3,167 2, (46) Revenues over (under) expenditures (104) Other financing use (200) (79) Transfer out (200) (96) 104 Revenues over (under) expenditures (89) (125) and other finance use Beginning fund balance $ 910 $ 785 Ending fund balance $ $ 785 $

70 AQUATIC CENTER FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) 2016 Final Budget Budget Adopted Variance Prior Years Actual and Positive Final Actual (Negative) Revenues $ $ Aquatic fees $ 58 $ 57 (1) Rental income Other income (6) Total revenues Expenditures Personal services Materials and services Total expenditures Revenues over (under) expenditures (275) (196) 79 Other financing sources Transfers from General Fund Total other financing sources Revenues over (under) expenditures and other finance source Beginning fund balance $ $ Ending fund balance $ $ 79 $ 79 47

71 CLUBS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) Prior Years Actual Budget Adopted and Final 2016 Actual Final Budget Variance Positive (Negative) Revenues $ 92 $ 88 Fees and activities $ 180 $ 56 $ (124) Expenditures Personal services Materials and services Capital outlay Total expenditures (19) 12 Revenues over (under) expenditures Beginning fund balance $ 29 $ 41 Ending fund balance 250 (70) 70 $ (12) (29) $ 29 $ 29 48

72 TRUSTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) 2016 Final Budget Budget Adopted Variance Prior Years Actual and Positive Final Actual (Negative) Revenues $ 245 $ 202 Fees and activities $ 250 $ 235 $ (15) Expenditures 6 10 Personal services Materials and services Capital outlay Total expenditures Revenues over (under) expenditures (200) Beginning fund balance $ 227 $ 249 Ending fund balance $ $ 289 $

73 ASSOCIATED STUDENT GOVERNMENT FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2016 AND ACTUAL FOR THE YEARS ENDED JUNE 30, 2014 AND 2015 (in $thousands) 2016 Final Budget Budget Adopted Variance Prior Years Actual and Positive Final Actual (Negative) Revenues $ 774 $ 705 Student fees $ 669 $ 602 $ (67) 18 Activities Facilities rental Interest Total revenues (37) Expenditures Personal services (24) Materials and services Capital outlay Total expenditures 1, (122) 56 Revenues over (under) expenditures (276) (36) Beginning fund balance $ 380 $ 436 Ending fund balance $ $ 400 $

74 OTHER SCHEDULES

75 SCHEDULE OF PROPERTY TAX TRANSACTIONS YEAR ENDED JUNE 30, 2016 (in $thousands) Year ended Taxes receivable June 30, Current levy as extended by Add (deduct) June 30, 2015 assessor Adjustments Discounts Interest $ $ 11,748 $ (29) (9) (1) $ (303) $ and prior 92 (1) 2 $ 691 $ 11,748 $ (40) $ (303) $ 49 Taxes receivable June 30, Collections 2016 $ (11,165) (124) (49) (45) (24) (6) $ $ (11,413) $

76 SCHEDULE OF DEBT SERVICE TRANSACTIONS YEAR ENDED JUNE 30, 2016 (in $thousands) Principal Outstanding Outstanding beginning end Issue Interest of year of year Debt type date rates Unmatured Issued Matured Paid Unmatured Full Faith and Credit Obligations Series /15/ % $ 510 $ $ 250 $ 250 $ 260 Series /01/ , ,960 Series /07/ , ,365 Series /18/ , ,890 Series /9/ , ,875 Series /26/ , ,605 Limited Tax Pension Bond Series /23/ ,253 1,365 1,365 35,888 $ 65,483 $ $ 2,640 $ 2,640 $ 62, Continued on page 52a

77 Interest Outstanding Outstanding beginning end of year of year Matured Matured Paid Matured $ $ 19 $ 19 $ ,978 2,978 $ $ 4,101 $ 4,101 $ Continued from page 52 52a Concluded

78 SCHEDULE OF DEBT SERVICE REQUIREMENTS JUNE 30, 2016 (in $thousands) Payable from: General Fund Full Faith and Credit Obligations Series 2001 Series 2004 Series 2008 Year All Debt Requirements Principal Interest Principal Interest Principal Interest end Annual due due 7/15 due due 7/15 due due 12/1 6/30 total Principal Interest 7/15 and 1/15 1/15 and 1/15 6/1 and 6/ $ 6,996 $ 2,721 $ 4,275 $ 260 $ 6 $ 325 $ 117 $ 80 $ ,185 2,718 4, ,460 2,801 4, ,745 2,888 4, ,155 3,087 5, ,453 3,175 5, ,783 3,293 5, ,098 6,960 2, ,343 7,565 1, ,696 8,310 1, ,068 9, ,156 5, ,973 1, ,017 1, $ 104,092 $ 62,843 $ 41,249 $ 260 $ 6 $ 2,960 $ 560 $ 5,365 $ 1, Continued on page 53a

79 General Fund Pension Bond Fund Limited Tax Full Faith and Credit Obligations Pension Bonds Series 2009 Series 2010 Series 2013 Series 2003 Principal Interest Principal Interest Principal Interest Principal Interest due due 12/1 due due 12/1 due due 12/1 due due 12/30 6/1 and 6/1 6/1 and 6/1 6/1 and 6/1 12/30 and 6/30 $ 305 $ 408 $ 275 $ 178 $ 110 $ 157 $ 1,366 $ 3, ,363 3, ,351 3, ,348 3, ,337 4, ,330 4, ,328 4, ,890 1, ,475 1, , , , , , , $ 9,890 $ 3,800 $ 4,875 $ 1,437 $ 3,605 $ 1,698 $ 35,888 $ 32,040 Continued from page 53 53a Concluded

80 SCHEDULE OF REVENUES AND EXPENDITURES BY PROJECT FEDERAL, STATE AND SPECIAL PROJECTS AND STUDENT AID FUNDS YEAR ENDED JUNE 30, 2016 Project Revenue Grants Loan Collections Operating Total Federal State Other and Interest Transfers Federal and State Projects Fund Administrative Costs $ 882, ,055 30,306 Adult Basic Ed Accountability Grant 47,644 47,644 Adult Basic Ed English Language Civics Grant 100, ,894 Adult Basic Ed ESL Grant 130, ,885 Adult Basic Ed Grant 232, ,103 Adult Basic Ed Learning Standards 8,000 8,000 Adult Basic Ed Program Improvement 20,650 20,650 BMCC Redesign Group Childcare Resource & Referral 670, ,148 Childcare Resource & Referral, DHS 197, ,689 Childcare Resource & Referral, Program Income 125, ,259 Cooperative Work Experience, Metro ESHM Program 19,636 19,636 Cooperative Work Experience, OR Fish & Wildlife Prior 2,009 2,009 Cooperative Work Experience, OR Fish & Wildlife 3,931 3,931 Cooperative Work Experience, Port of Portland 16,386 16,386 Cooperative Work Experience, Washington Fish & Wildlife 13,748 13,748 East County Pathway Consortium 48,309 48,309 FEMA Mitigation 5,778 5,778 Future Connect Scholar 44,362 44,362 Future Connect Student Assist Head Start Car Seat Grant Head Start Childrens Investment Fund Levy 280, ,707 Head Start CHIF Childcare Project 167, ,279 Head Start CHIF Gateway 378, ,500 Head Start Early Expansion 74,043 74,043 Head Start Early Head Start 1,382,944 1,382,944 Head Start Early Head Start CC Partners 1,303,974 1,303,974 Head Start Federal 4,250,687 4,250,687 Head Start CCR&R FCCN United Way 110, ,205 Head Start MIECHV 228, ,717 Head Start Migrant Ed 5,943 5,943 Head Start MMT Head Start on Engineering 11,168 11,168 Head Start Parent Child Development Services 322, ,987 Head Start Ready to Learn Head Start State 5,161,669 5,161,669 Head Start Training 75,674 75,674 Head Start US Department of Agriculture 555, ,216 Head Start, Childcare 205, ,387 IALS ,200 36,200 IRCO Upward Bound Kaiser Transitions NSF Science Department 3,024 3,024 OHSU Dental Grant 13,513 13,513 OHSU Lease 12,960 12,960 OR Home Care Commission 2,000 2,000 Oregon Metro Connect 15,329 15,329 OR Developmental Ed Redesign Workgroup PDC Rosewood 15,000 15,000 Perkins Oregon PIPE 5,000 5,000 Perkins Regional Alliance 35,000 35,000 Perkins Regional Coordinator 2,800 2,800 Perkins Reserve Accountability 9,000 9,000 Perkins Reserve Professional Develop 7,652 7,652 Perkins Reserve Student Support 23,713 23,713 Perkins Reserve Alignment 13,481 13,481 Perkins Special Projects 10,000 10,000 Perkins STEM HUB 7,702 5,202 2,500 Perkins Reserve Grant, Prior Year 40,000 40,000 Perkins Vocational Education 659, ,282 Perkins Vocational Education, Alignment 55,930 55,930 Perkins Vocational Education, Prior Year 82,277 82,277 Perkins Vocational Education, Special Populations 60,330 60,330 Perkins Vocational Education, 122, ,003 Perkins Vocational Education, Support Services 112, ,195 Perkins Vocational Education, Tutorial Services 2,268 2,268 Presidential Funds 62,431 62,431 Project Yess 260, ,158 Project Yess, Alternative Education Services 72,277 72,277 Project Yess, BLM #2 13,522 13, Continued on page 54a

81 Project Expenditures Materials Personal and Capital Grants Operating Total Services Services Outlay and Loans Transfers 499, , ,205 47,644 47, ,894 84,313 16, , ,297 1, , , ,000 7, ,650 15,248 5,402 7,875 7, , , , , ,412 36,277 75,916 4,385 71,531 19,636 15,683 3,953 2,009 1, ,931 3, ,386 14,249 2,137 13,747 11,955 1,792 48,309 33,957 14,352 5,778 2,928 2,850 44,362 42,116 2,246 22,876 21,254 1, , ,026 60, ,279 80,457 86, , , ,102 74,043 67,260 6,783 1,382,944 1,151, ,962 1,303, , ,471 32,450 4,250,687 3,307, , ,205 93,451 16, , ,027 32,690 5,943 5, ,991 41,991 11,168 10,153 1, , ,252 67,734 5,000 5,000 5,161,669 4,027,735 1,120,988 12,946 75,674 19,395 56, ,393 17, ,246 79, , ,188 36, ,326 6,144 1,182 3,024 2, ,513 12,284 1,229 4,563 4,563 2,000 1, ,329 15,329 3,410 3,410 5,000 5,000 44,392 33,837 10,555 2,800 2,800 9,000 9,000 7,652 7, ,713 1,050 22,663 13,481 13,481 10,000 4,088 5,912 5,202 5,202 40,000 40, , , ,730 55,930 54,890 1,040 82,276 45,846 36,430 60,330 60, , , ,195 64,003 48,192 2, ,635 62,431 18,447 38,566 5, , ,473 64,685 38,997 18,556 20,441 13,522 11,910 1,612 Continued from page 54 54a Continued on page 55

82 SCHEDULE OF REVENUES AND EXPENDITURES BY PROJECT FEDERAL AND STATE PROJECTS AND STUDENT AID FUNDS (CONTINUED) YEAR ENDED JUNE 30, 2016 Total Project Revenue Grants Federal State Other Loan Collections and Interest Operating Transfers Project Yess, OYEI Youth #1 Project Yess, OYEI Youth #2 Project Yess, OYEI Youth #3 Project Yess, Partners in Conservation Reboot PCC Metro Step SEED Cycle 2013 Small Business Administration Federal Small Business Administratoin Federal II Small Business Administration, Program Income Federal Small Business Development Center Small Business Development Center Self Employ State CTE Capital Funding Student Success Grant TRIO Student Support Grant, Year 1 TRIO Student Support Grant, Year 5 TRIO Talent Search, Year 4 TRIO Talent Search, Year 5 UCore Workforce Connections Adult English Lang Learn Workforce Connections Back to Work Oregon Workforce Connections Career Pathways Workforce Connections CASE Workforce Connections NEG Dislocated Worker Workforce Connections NEG Sector Partnership Workforce Connections Community Health Worker Workforce Connections DWP/WIA Workforce Connections ECE Career Workforce Connections English Language Learn Workforce Connections Foundation Skills Workforce Connections Grant Writer Workforce Connections Health Careers NW Workforce Connections Housing Works Workforce Connections Job Driven NEG Workforce Connections Liaison services Adult Workforce Connections Metro Project Workforce Connections Participant Training Workforce Connections Reboot NW Workforce Connections Title IIA Implementation/One Stop Total Federal and State Projects Fund Student Aid Fund Federal Pell Grant Federal Work Study Job Location Development Program Federal Direct Loans Federal Supplemental Ed Opportunity Grant Nursing Student Loan Federal Perkins Loan Oregon Opportunity Grant Total Student Aid Fund $ 15,000 9,599 1,681 12,280 21,508 7,800 20,372 20,153 98,156 41,619 3, , , ,301 36,647 3, ,476 56,226 73,521 33,283 14, , ,269 49,112 53,634 20,370 (7,500) 96,594 18,286 90,075 91, ,343 20, , ,876 21,761,664 11,076, ,830 12,464, ,580 36,760 1,573,267 25,832,087 $ 47,593,751 21,508 7,800 20,372 20, , , ,301 36,647 3, ,476 56,226 73,521 33,283 14, , ,269 49,112 53,634 20,370 96,594 18,286 90,075 68, , ,876 12,566,319 6,048,026 11,076, ,555 12,464, ,580 1,573,267 24,221,785 1,573,267 36,788,104 7,621,293 15,000 9,599 1,681 12,280 98,156 41,619 3,255 (7,500) 22, ,343 20,275 3,117,013 3,117,013 36,760 36,760 36,760 30, ,581 Continued from page Continued on page 55a

83 Project Expenditures Materials Personal and Capital Grants Operating Total Services Services Outlay and Loans Transfers 15,000 12,739 2,261 9,599 7,192 2,407 1,681 1, ,280 8,335 3,945 21,508 18,682 2,826 7,800 7, ,372 20,372 20,153 20,153 88,091 26,971 61,120 41,619 41,619 3,255 3, , ,689 21,411 2,245 19, , ,080 15,221 36,647 32,454 4,193 3, , , ,555 49, ,226 50,784 5,442 73,521 29,508 44,013 33,283 29,886 3,397 14,213 13,160 1, , ,916 23,826 6,843 16, , ,059 56,210 49,112 26,211 22,901 53,634 48,587 5,047 20,370 18,285 2,085 96,594 41,154 55,440 18,286 18,286 90,075 46,459 43,616 91,779 81,468 10, ,343 74,967 41,376 34,165 22,263 11, ,352 45,292 63, , ,714 94,162 21,219,788 13,933,056 6,533, ,627 11,076,829 11,076, , ,534 30,306 43,990 43,990 12,464,821 12,464, , ,580 53,689 53,689 1,571,167 1,571,167 25,846, ,524 53,689 25,363,397 30,306 47,066,704 14,332,580 6,586, ,627 25,363,397 30,306 Continued from page 55 55a Concluded

84 ASSSESSED AND REAL MARKET VALUE OF TAXABLE PROPERTY AND TAX COLLECTION RECORD YEAR ENDED JUNE 30, 2016 (Unaudited) County Real Market Value (in $thousands) Percent of total Amount value Assessed Value (in $thousands) Amount Percent of total value Property Tax Rate Per $1,000 of Assessed Value Operations Total Tax collection record Multnomah Clackamas Hood River $ 27,876, % 5,280, , $ 19,934, % 4,091, , $ $ % $ 33,320, % $ 24,156, % 56

85 GENERAL FUND STATE SUPPORT LAST TEN FISCAL YEARS (Unaudited) (in $thousands) Final payment of each biennium Fiscal deferred until July 15 year end Budgetary of next biennum GAAP June 30 basis Add (Less) basis 2016 $ 27,751 $ 5,971 $ $ 33, ,935 (5,971) 18, ,327 5,023 28, ,238 (5,023) 14, ,675 5,517 26, ,545 (5,516) 15, ,574 6,283 28, ,505 (6,283) 18, ,161 5,257 29, ,562 (5,257) 15,305 57

86 GENERAL FUND ADOPTED BUDGET LAST THREE FISCAL YEARS (Unaudited) (in $thousands) (1) 2015 (1) Resources: Beginning fund balance Current property taxes Prior years' taxes Tuition and fees Interest income State community college support Other income $ 6,024 $ 3,900 11,743 10, ,016 26, ,592 27,062 1,536 1,218 $ 2,700 9, , ,042 1,776 Total resources $ 70,278 $ 69,599 $ 67,826 Expenditures: Instruction 31,811 $ 31,612 $ 31,467 Academic support and research 8,812 8,388 8,175 Student services 6,027 5,467 6,332 Public services Institutional support 11,014 10,864 10,668 Debt service 2,432 2,397 2,360 Operation and maintenance of plant 4,657 4,593 4,432 Financial aid 1,311 1,308 1,265 Transfers Contingency/reserves 3,311 3,990 2,384 Total expenditures $ 70,278 $ 69,599 $ 67,826 (1) Final 58

87 GENERAL FUND BALANCE SHEETS LAST TEN FISCAL YEARS (Unaudited) (in $thousands) Assets: Equity in cash and cash equivalents Receivables Due from other funds Inventory and deferred charges $ 16,475 12, $ 6,289 17,985 1, $ 9,314 $ 4,789 $ 9,882 $ 2,222 12,947 18,046 12,778 17, ,190 3,684 1,049 1, $ 8,223 10, $ , $ 6,552 5, $ 9,697 2, Total assets $ 30,062 $ 25,920 $ 24,209 $ 24,660 $ 25,484 $ 24,261 $ 19,638 $ 15,226 $ 13,155 $ 12,759 Liabilities and fund equity: Deficit in pooled cash and cash equivalents Accounts payable Accrued payroll and related taxes Deferred revenue $ 573 9,244 11,498 $ 566 8,029 10,993 $ 597 7,741 11,682 $ 765 7,617 11,600 $ 723 7,254 11,068 $ 633 6,981 10,175 $ 808 7,023 8,555 $ 1,493 6,737 6,120 $ 981 6,359 4,566 $ 1, ,776 3,974 Total liabilities 21,315 19,588 20,020 19,982 19,045 17,789 16,386 14,350 11,906 11,501 Fund equity: Fund balance Reserved for inventory and deferred charges Unreserved Undesignated 237 8, ,031 1,049 3,215 1,215 3, , , , Total fund equity 8,747 6,332 4,264 4,678 6,439 6,472 3, ,249 1,258 Total liabilities and fund equity $ 30,062 $ 25,920 $ 24,284 $ 24,660 $ 25,484 $ 24,261 $ 19,638 $ 15,226 $ 13,155 $ 12,759 59

88 GENERAL FUND STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE LAST TEN FISCAL YEARS (Unaudited) (in $thousands) Revenues: State support $ 27,751 $ 24,935 $ 23,327 $ 19,238 $ 20,675 $ 20,545 $ 22,574 $ 24,505 $ 24,161 $ 20,562 Tuition and fees 23,297 26,450 28,367 30,566 28,341 25,760 22,221 16,828 14,614 14,173 Property taxes 11,412 10,965 10,294 10,053 9,908 9,890 9,671 9,191 8,947 8,567 Other 2,099 2,572 2,940 1,743 2,272 2,048 3,409 1,999 2,041 2,309 Total revenues 64,559 64,922 64,928 61,600 61,196 58,243 57,875 52,523 49,763 45,611 Expenditures: Instruction and academic support 37,258 37,846 38,030 37,259 35,905 35,238 33,555 31,268 28,750 26,804 Student services 5,223 5,933 6,169 6,373 5,638 5,258 5,137 4,383 4,252 3,807 Institutional support and plant operations 14,996 14,392 16,605 16,032 15,944 15,080 13,656 13,277 12,829 12,220 Scholarships 1,122 1,207 1,327 1,237 1,284 1,242 1,193 1, ,130 Other Debt service 2,397 2,360 2,718 2,065 2,221 1,732 1,517 1,180 1,022 1,382 Total expenditures 61,565 62,320 65,339 63,364 61,580 59,098 55,529 51,607 48,177 45,676 Revenues over (under) expenditures 2,994 2,602 (411) (1,764) (384) (855) 2, ,586 (65) Other financing sources (uses): Proceeds from debt issuance 121 Transfers in ,291 1, Transfers out (675) (613) (203) (197) (203) (216) (1,316) (1,489) (1,795) (1,731) Total other financing sources (uses) (579) (534) (3) , (1,289) (1,595) (1,531) Revenues and other financing sources over (under) expenditures and other financing uses 2,415 2,068 (414) (1,761) (33) 3,220 2,376 (373) (9) (1,596) Beginning fund balance 6,332 4,264 4,678 6,439 6,472 3, ,249 1,258 2,854 Ending fund balance $ 8,747 $ 6,332 $ 4,264 $ 4,678 $ 6,439 $ 6,472 $ 3,252 $ 876 $ 1,249 $ 1,258 60

89 STATISTICAL SECTION

90 STATISTICAL SECTION This part of the Mt. Hood Community College District's Comprehensive Annual Financial Report presents detailed information as a context for understanding the information in the basic financial statements, notes to the basic financial statements, and supplementary financial information about the District's overall financial health. The information is categorized as follows: Financial trend schedules contain trend information to help the reader understand how the District s financial performance and wellbeing have changed over time. Net Position Changes in Net Position Revenue capacity schedules contain trend information to help the reader assess the District s local revenue source, property taxes. Property Tax Rates, Assessed Value, and Real Market Value Direct and Overlapping Property Tax Rates Principal Property Taxpayers Property Tax Levies and Collections All Funds Debt capacity schedules present information to help the reader assess the affordability of the District's current levels of outstanding debt and the District's ability to issue additional debt in the future. Ratio of General Bonded Debt and Legal Debt Margin Direct and Overlapping Gross Bonded Debt Ratio of Outstanding Debt by Types Ratio of Annual Debt Service Expenditures for General Bonded Debt to Operating Expenses/Expenditures Demographic and economic information provides background on the environment in which the District operates. Average Annual Employment Demographic and Economic Indicators Largest Employers Within Portland Metropolitan Area Operating information includes historical data on the students served and the resources used to deliver those services. Average Number of Employees Full Time Equivalent Students Student Population Degrees and Certificates Awarded Historical and Projected Tuition and Fees Campus Facilities Information Sources: Unless otherwise noted, the information in these schedules is derived from the annual financial reports for the relevant year.

91 FINANCIAL TRENDS

92 NET POSITION LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) (in $thousands) NET POSITION: Net investment in capital assets Restricted Unrestricted $ 28,803 $ 28,476 $ 29, (41,259) (43,447) (47,614) $ 30, (332) $ 31,089 2,505 4,459 TOTAL NET POSITION $ (12,379) $ (14,845) $ (18,032) $ 30,717 $ 38,053 Note: Restated in 2015, 2014, 2013, 2012, 2011, and Total Net Position $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $ $(5,000) $(10,000) $(15,000) $(20,000)

93 $ 30,635 2,793 (654) $ 27,528 3,644 4,243 $ 23,858 6,718 (5,388) $ 25,082 3,719 4,008 $ 23,939 4, $ 32,774 $ 35,415 $ 25,188 $ 32,809 $ 28,639 61a

94 CHANGES IN NET POSITION LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) (in $thousands) OPERATING REVENUES: Tuition and fees Grants Auxiliary enterprises Other $ 18,863 $ 20,825 $ 22,420 35,613 41,190 42,363 2,517 2,931 3,396 1,773 2,531 2,159 $ 24,821 48,199 3, $ 23,970 46,998 3,452 1,255 Total operating revenues 58,766 67,477 70,338 77,078 75,675 NONOPERATING REVENUES: State support Property taxes Grants Interest income 33,723 11,454 11, ,964 10,992 15, ,350 10,310 17, ,215 10,051 19, ,192 10,018 17, Total nonoperating revenues 56,396 45,339 56,234 44,022 53,796 Total revenues 115, , , , ,471 OPERATING EXPENSES: Instruction Research Public service Academic support Student services Institutional support Plant operations Depreciation Scholarships Auxiliary enterprises 34, ,818 7,866 8,482 13,340 5,048 2,438 19,924 1,464 30, ,192 6,572 7,689 11,039 4,694 2,730 29,054 2,512 32, ,221 7,070 8,719 12,362 5,231 2,813 35,526 2,817 32, ,373 7,197 9,151 12,198 5,189 2,657 41,410 3,200 31, ,998 6,854 8,145 12,064 5,610 2,486 37,326 2,798 Total operating expenses 108, , , , ,988 NONOPERATING EXPENSES: Interest expense 3,938 4,043 3,748 3,454 3,369 Total expenses 112, , , , ,357 TOTAL INCREASE (DECREASE) IN NET POSITION $ 2,466 $ 2,536 $ 4,682 $ (7,336) $ 6,114 Note: Restated in 2014, 2013, 2012, 2011, and

95 $ 21,867 52,659 3,628 1,340 $ 18,405 33,892 3,335 4,066 $ 14,990 28,956 5,335 2,079 $ 13,653 29,397 5,261 1,813 $ 13,313 27,294 4,845 1,832 79,494 59,698 51,360 50,124 47,284 15,029 9,861 17, ,858 9,683 13, ,222 9,315 6, ,418 8,992 4, ,305 8,572 4, ,541 52,535 34,845 43,970 28, , ,233 86,205 94,094 76,264 30, ,392 6,891 8,412 12,159 4,962 2,113 32,738 3,090 29, ,700 6,520 9,025 11,785 5,147 1,902 12,816 2,522 30, ,117 2,798 8,133 10,645 5,749 1,736 6,828 5,260 32, ,716 25,090 10,198 5,161 1,798 4,605 5,234 31, ,790 22,567 10,465 4,830 2,017 4,144 5, ,185 99,124 91,448 87,806 83,500 3,203 2,882 2,378 2,118 2, , ,006 93,826 89,924 85,531 $ (3,353) $ 10,227 $ (7,621) $ 4,170 $ (9,267) 62a

96 ~ MT HOOD C OMMUNITY COLLEGE ~ KN O WLEDGE /<r SU CCESS

97 REVENUE CAPACITY

98 PROPERTY TAX RATES, ASSESSED VALUE, AND REAL MARKET VALUE LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) (in $thousands) Permanent Rate $ $ $ $ General Bond Obligation Rate Total Direct Rate (1) $ $ $ $ Assessed Value by Property Type Real Property $ 22,436,406 $ 21,662,022 $ 20,725,157 $ 20,105,276 Manufactured Structures 124, , , ,193 Personal Property 708, , , ,222 Public Utility 1,808,075 1,717,064 1,468,344 1,411,851 Total Assessed Value $ 25,077,158 $ 24,173,971 $ 22,932,381 $ 22,252,542 Real Market Value $ 33,320,820 $ 30,441,346 $ 27,454,418 $ 26,998,870 Ratio of Assessed Value to Real Market Value 75.26% 79.41% 83.53% 82.42% Net Assessed Value (2) $ 24,156,677 $ 23,315,288 $ 22,147,078 $ 21,518,774 Value Increase (Decrease) 841,389 1,168, , ,085 Net Assessed Value Percentage Change 3.48% 5.01% 2.84% 0.86% $26,000,000 Net Assessed Value of Taxable Property $24,000,000 $22,000,000 $20,000,000 $18,000,000 $16,000, (1) Rates per $1,000 of assessed value. (2) Property taxes reflect taxable assessed value. This is defined as the lower of maximum assessed value (MAV) or real market value. MAV is limited to 3% annual increases. The net levy is the actual imposed tax after adjustments and property tax limitations due to passing Measure 5 in 1990 and Measure 50 in Voter approved bond levies are not subject to these limitations. Sources: Oregon Department of Revenue, Property Tax Statistics Supplement Tax Supervising and Conservation Commission Oregon, Annual Report 63

99 $ $ $ $ $ $ $ $ $ $ $ $ $ 19,817, , ,141 1,422,934 $ 22,025,722 $ 19,438, , ,362 1,275,797 $ 21,557,855 $ 18,906, , ,261 1,261,212 $ 21,006,221 $ 18,235, , ,368 1,288,875 $ 20,381,645 $ 17,328, , ,434 1,342,338 $ 19,507,870 $ 16,504, , ,343 1,314,897 $ 18,573,027 $ 27,731,264 $ 30,348,889 $ 31,891,385 $ 33,814,141 $ 31,948,917 $ 27,845, % 71.03% 65.87% 60.28% 61.06% 66.70% $ 21,332,689 $ 20,886,665 $ 20,390,370 $ 19,689,119 $ 18,925,145 $ 18,062, , , , , , , % 2.38% 3.44% 3.88% 4.56% 4.50% 63a

100 DIRECT AND OVERLAPPING PROPERTY TAX RATES (1) LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) Overlapping Rates Fiscal Year MHCC Cities Fire Districts School Districts Water Other (1) Rates per $1,000 of assessed value. Sources: Multnomah County Department of Assessment and Taxation Clackamas County Department of Assessment and Taxation Hood River County Department of Records and Assessment 64

101 PRINCIPAL PROPERTY TAXPAYERS CURRENT YEAR AND NINE YEARS AGO (unaudited) (in $thousands) Percent of Percent of total District total District Assessed Assessed Assessed Assessed Company Name Value Rank Value Value Rank Value Port of Portland Alaska Airlines Inc Portland General Electric Co $ 335, , , % 1.15% 0.96% $ 168, , , % 0.59% 0.99% Comcast Corporation 221, % Boeing Company Microchip Technology Inc Semiconductor Components Southwest Airlines Co United Airlines Inc 164, , , ,600 99, % 0.59% 0.56% 0.53% 0.41% 174, ,273 98,100 89, , % 0.60% 0.54% 0.49% 0.73% Delta Air Lines Inc 98, % Verizon Wireless VAW LLC FEDEX Express #V % 0.00% 90,753 73, % 0.41% All other taxpayers $ 22,323, % $ 16,843, % Total $ 24,156, % $ 18,062, % Sources: Multnomah County Department of Assessment and Taxation Clackamas County Department of Assessment and Taxation Hood River County Department of Records and Assessment 65

102 PROPERTY TAX LEVIES AND COLLECTIONS ALL FUNDS LAST TEN FISCAL YEARS (unaudited) (in $thousands) Current tax levy as extended by assessor $ 11,748 $ 11,273 $ 10,555 $ 10,315 Current tax collections $ 11,165 $ 10,697 $ 9,994 $ 9,741 Current tax collected as percentage of current levy 95.0% 94.9% 94.7% 94.4% Delinquent tax collections $ 248 $ 264 $ 300 $ 313 Total tax collections $ 11,413 $ 10,961 $ 10,294 $ 10,054 Total tax collected as percentage of current levy 97.1% 97.2% 97.5% 97.5% Uncollected tax $ 732 $ 691 $ 663 $ 647 Uncollected tax as percentage of current levy 6.2% 6.1% 6.3% 6.3% 66

103 $ 10,257 $ 10,161 $ 9,940 $ 9,600 $ 9,233 $ 8,796 $ 9,611 $ 9,555 $ 9,342 $ 8,988 $ 8,711 $ 8, % 94.0% 94.0% 93.6% 94.3% 94.6% $ 297 $ 335 $ 326 $ 208 $ 249 $ 239 $ 9,908 $ 9,890 $ 9,668 $ 9,196 $ 8,960 $ 8, % 97.3% 97.3% 95.8% 97.0% 97.3% $ 649 $ 539 $ 568 $ 556 $ 431 $ % 5.3% 5.7% 5.8% 4.7% 4.4% 66a

104 ~ MT HOOD C OMMUNITY COLLEGE ~ KN O WLEDGE /<r SU CCESS

105 DEBT CAPACITY

106 RATIO OF GENERAL BONDED DEBT AND LEGAL DEBT MARGIN LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) General Bonded Outstanding Debt: General obligation bonds (1) Amounts set aside to repay debt $ $ $ $ Total net general bonded debt $ $ $ $ Legal Debt Margin: Real market property value (RMV) (2) Less net debt applicable to legal limit $ 499,812 $ 456,620 $ 411,816 $ 404,983 Legal debt margin $ 499,812 $ 456,620 $ 411,816 $ 404,983 Real market property value (2) General obligation bond debt to RMV $ 33,320, % $ 30,441, % $ 27,454, % $ 26,998, % Population (estimate) (3) Debt per capita (2) $ 389 $ 327 $ 319 $ 317 Legal debt margin as a percentage of the debt limit % % % % Legal Debt Margin Calculation for FY2016 Real market property value Applicable debt limit percentage Legal debt limit $ 33,320, % $499,812 (1) MHCC district has no general obligation bond debt (2) in $thousands (3) in thousands Source: Annual Financial Report: Ratio of net general obligation bonded debt to real market value and net general obligation bonded debt per capita 67

107 $ $ $ $ $ $ $ $ $ $ $ $ $ 415,969 $ 455,233 $ 478,371 $ 507,212 $ 479,234 $ 417,684 $ 415,969 $ 455,233 $ 478,371 $ 507,212 $ 479,234 $ 417,684 $ 27,731, % $ 30,348, % $ 31,891, % $ 33,814, % $ 31,948, % $ 27,845, % $ 315 $ 310 $ 309 $ 302 $ 270 $ % % % % % % 67a

108 DIRECT AND OVERLAPPING GROSS BONDED DEBT JUNE 30, 2016 (unaudited) Overlapping District Real Market Value Percent Overlap Gross Overlapping Debt Direct Debt: Mt. Hood Community College District $ 33,320,819, % $ 74,474,191 Overlapping Debt: City of Fairview 912,658, ,335 City of Gresham 10,148,318, ,706,567 City of Happy Valley 2,957,465, ,320 Real market property value (RMV) (2) 105,293,841, ,130,062 City of Sandy 1,057,981, ,700,415 City of Troutdale 1,740,566, ,378,000 Clackamas County 58,446,871, ,112,298 Clackamas County ESD 55,513,229, ,605,063 Real market property value (2) 24,037,263, ,195 Clackamas County SD 46 (Oregon Trail) 3,884,203, ,234,741 Corbett Water District 387,674, ,107,325 Hood River County 3,351,937, ,473 Hood River City SD (Hood River) 3,351,937, ,734,136 Hood River Valley Parks & Rec District 3,228,152, ,538 Lusted Water District 219,252, ,000 Metro 238,253,176, ,815,169 Multnomah County 122,513,328, ,831,366 Legal Debt Margin Calculation for FY ,896, ,550,825 Multnomah County SD 10J (GreshamBarlow) 8,411,886, ,319,289 Multnomah County SD 1J (Portland) 92,962,995, ,234 Multnomah County SD 28J (Centennial) 3,297,795, ,641,858 Multnomah County SD 3 (Parkrose) 5,553,089, ,702,858 Multnomah County SD 39 (Corbett) 518,060, ,986,875 Multnomah County SD 40 (David Douglas) 5,110,135, ,943,547 Multnomah County SD 7 (Reynolds) 7,712,996, ,866,522 Multnomah ESD 124,400,452, ,353,188 North Clackamas Parks & Rec District 16,922,811, ,166 Northern Oregon Regional Corrections 7,773,686, ,239 Pleasant Home Water District 188,726, ,650,000 Port of Cascade Locks 165,050, ,572 Port of Portland 259,090,246, ,491,403 Rockwood Water PUD 4,934,227, ,425,000 Total Overlapping Debt 1,173,213,917, ,185,579 TOTAL DIRECT AND OVERLAPPING DEBT $ 963,028,371 Source: Oregon State Treasury report compiled for MHCC District. Overlapping Gross Bonded Debt includes all General Obligation and Full Faith & Credit bonds, and is determined by the percentage of overlap within the other districts. 68

109 ~ MT HOOD C OMMUNITY COLLEGE ~ KN O WLEDGE /<r SU CCESS

110 RATIO OF OUTSTANDING DEBT BY TYPES LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) Outstanding Debt: General obligation bonds (1) Full faith and credit obligations Limited tax pension bonds $ 27,349 47,126 $ $ 28,653 29,425 48,611 38,613 $ 30,940 39,962 Total Debt $ 74,475 $ 77,264 $ 68,038 $ 70,902 Ratios of Outstanding Debt: Real market property value (RMV) (2) Total debt to RMV Population (estimate) (3) Debt per estimated population (3) $ 33,320,820 $ 30,441,346 $ 27,454, % 0.22% 0.25% $ 162 $ 200 $ 213 $ $ 26,998, % (1) District has no general obligation bond debt (2) in $thousands (3) in thousands Source: Annual Financial Report: Notes to Basic Financial Statements Long Term Debt/Bonds 69

111 $ 27,670 41,299 $ 28,675 42,612 $ 23,485 43,892 $ 13,065 45,134 $ 13,705 46,328 $ 8,761 47,473 $ 68,969 $ 71,287 $ 67,377 $ 58,199 $ 60,033 $ 56,234 $ $ 27,731, % $ $ 30,348, % $ $ 31,891, % $ $ 33,814, % $ $ 31,948, % $ $ 27,845, % a

112 RATIO OF ANNUAL DEBT SERVICE EXPENDITURES FOR GENERAL BONDED DEBT TO OPERATING EXPENSES / EXPENDITURES LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) (in $thousands) Percentage of Debt Total Operating Service to Operating Total Debt Expenses / Expenses / Fiscal Year Principal Interest Service Expenditures Expenditures 2016 $ 2,640 $ 4,101 $ 6,741 $ 108, % ,555 3,939 6, , ,864 3,784 6, , ,322 3,476 5, , ,317 3,452 5, , ,091 3,015 5, , ,907 2,460 4,367 97, ,834 2,379 4,213 91, ,846 2,062 3,908 87, ,091 2,019 4,110 83, Percentage of Debt Service to Operating Expenses / Expenditures Real market property value (2) % % % % Legal Debt Margin Calculation for FY % % % 0.00% 70

113 DEMOGRAPHIC AND ECONOMIC INFORMATION

114 AVERAGE ANNUAL EMPLOYMENT (1) LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) 2016 (4) Nonfarm employment by supersector Mining and logging N/A Construction N/A 29,980 30,030 28,110 Manufacturing N/A 54,650 52,800 51,860 Trade, transportation, and utilities N/A 123, , ,450 Information N/A 13,030 12,640 12,540 Financial activities N/A 41,030 39,230 38,820 Professional and business services N/A 96,330 91,990 87,410 Educational and health services N/A 95,360 91,840 90,730 Leisure and hospitality N/A 72,040 69,140 66,910 Other services N/A 24,530 23,840 23,220 Government Federal, State and Local N/A 96,350 94,020 92,830 Total nonfarm employment (2) N/A 647, , ,080 Total employed (3) 637, , , ,809 Civilian labor force 666, , , ,675 Unemployed 28,540 32,645 38,836 42,866 Unemployment rate 4.28% 5.06% 6.12% 6.88% (1) Specific data for the District is not available. Data represents estimates from all of Clackamas, Hood River, and Multnomah Counties. (2) Employment estimates represent the number of full and parttime employees, plus the number of proprietors of unincorporated businesses. People holding more than one job are counted for each job they hold. This means estimates represent a job count, not a numberofpeople employed count. Also, employment is by placeofwork, rather than by placeofresidence. Therefore, the jobs held by residents living outside Clackamas County but who commute to work in Clackamas County are included in the employment (or job) count for Clackamas County. (3) Total employed represents each employee and is based on placeofresidence. Total employed includes each person only once even if the person has two or more jobs. (4) 2016 industry data not available at the time of this report. All other 2016 data includes average for January 2016 through June 2016 Sources: State of Oregon Employment Department, Current Employment Estimates (CES) State of Oregon Employment Department, Local Area Unemployment Statistics (LAUS) 71

115 ,130 51, ,760 12,230 38,210 84,170 89,520 64,130 23,120 92, , ,140 49, ,090 11,720 38,010 80,560 87,590 61,670 22,600 92, , ,550 48, ,070 11,640 38,310 77,650 84,890 60,270 22,270 93, , ,010 49, ,380 12,140 40,320 76,950 82,410 59,990 22,660 93, , ,190 57, ,310 13,940 42,830 84,750 81,440 63,000 23,970 92, , ,810 57, ,430 13,830 44,830 84,500 78,540 62,000 23,470 90, , , , , , , , , , , , , ,442 49,070 54,538 61,874 63,657 35,025 28, % 8.49% 9.73% 10.44% 5.82% 4.76% 71a

116 DEMOGRAPHIC AND ECONOMIC INDICATORS LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) District Population (estimated) (1) 388, , , ,381 Total Personal Income (in millions) (2) N/A N/A 56,771 53,448 Average Per Capita Income (in dollars) (2) N/A N/A 47,524 45,408 FTE Student Enrollment (3) 8, , , , Average Unemployment Rate (4) 4.28% 5.06% 6.12% 6.88% (1) District population includes parts of Multnomah, Clackamas, and Hood River Counties. (2) Personal income and per capita income is not available for the District. Data represents all of Clackamas County, Hood River County, and Multnomah County. Data for fiscal year 2016 and 2015 was not available at the time of this report. Average per capita personal income was computed using Census Bureau midyear population estimates. Estimates for reflect county population estimates available as of March (3) FTE represents Full Time Equivalency enrollment. This FTE includes reimbursable and nonreimburseable FTE. (4) Unemployment Rate represents all of Clackamas, Hood River, and Multnomah Counties. Sources: State of Oregon Employment Department, Local Area Unemployment Statistics (LAUS) Mt. Hood Community College Analytics and Institutional Research (AIR), MHCC Fact Book 72

117 , , , , , ,000 52,312 49,235 46,256 45,671 46,824 44,953 44,897 42,800 40,696 40,639 42,349 41,398 9, , , , , , % 8.49% 9.73% 10.44% 5.82% 4.76% 72a

118 MT. HOOD COMMUNITY COLLEGE LARGEST EMPLOYERS WITHIN PORTLAND METROPOLITAN AREA (1) CURRENT YEAR AND NINE YEARS AGO (unaudited) 2016 (3) 2008 Metro Area Percent of Metro Area Percent of Company Name Employees Rank Total Employees Rank Total Intel Corporation 19, % 15, % Providence Health & Services 17, , Oregon Health & Science University 15, , Fred Meyer 11, , Kaiser Permanente 10, , Legacy Health System 9, , Nike Inc. 8, , Portland Public Schools 7, Multnomah County 6, , City of Portland 5, , Wells Fargo 5, SUBTOTAL 111, , ALL OTHER EMPLOYERS 1,092, ,002, TOTAL (2) 1,203, ,099, (1) Specific Data for the District is not available. The Portland Vancouver Hillsboro Metropolitan Statistical Area (MSA) consists of Multnomah, Washington, Clackamas, Columbia and Yamhill counties in Oregon, as well as Clark and Skamania counties in Washington. The area includes Portland and the neighboring cities of Beaverton, Gresham, Hillsboro, Milwaukie, Lake Oswego, Oregon City, Fairview, Wood Village, Troutdale, Tualatin, Tigard, West Linn, Vancouver, Camas and Washougal. (2) 2016 total represents average number of employed for January 2016 through June 2016 (3) We are required to report 9 years prior data, however, data for 2007 was not available from The Portland Business Journal. Sources: State of Oregon Employment Department, Local Area Unemployment Statistics (LAUS) Portland Business Journal, July 1, 2016 and December 19,

119 OPERATING INFORMATION

120 AVERAGE NUMBER OF EMPLOYEES LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) Employee FTE (fulltime equivalents) Administration Full Time Support Staff Full Time Faculty Part Time Faculty Part Time Hourly Students Total 1,505 1,435 1,548 1,611 1,750 AVERAGE NUMBER OF EMPLOYEES 1,700 1,650 1,708 1,690 1,674 1,600 1,586 1,611 1,550 1,500 1,497 1,519 1,548 1,505 1,450 1,400 1,435 1,350 Note: Data is from the month of Oct for each year. Exceptions Year 2004, number for Support Staff is from April. Year 2005, number for Part Time Hourly is from September and number for Students is from December. Support Staff includes managers, classified and confidential positions. Source: MHCC Human Resource Department and MHCC Fact Book 74

121 ,674 1,690 1,708 1,586 1,519 1,497 74a

122 FULLTIME EQUIVALENT STUDENTS LAST TEN FISCAL YEARS ENDED JUNE 30 (Unaudited) Adult basic education General equivalency diploma Lower division transfer courses 4, , , , , , Professional technical 2, , , , , , Self improvement All other reimbursable Total reimbursable FTE 1, , , , , , , , , , , Nonreimbursable Total FTE , , , , , , Note: Nonreimbursable includes credit and noncredit. Source: MHCC Analytics and Institutional Research (AIR), Division of IT 75

123 , , , , , , , , , , , , , , , , a

124 STUDENT POPULATION * (by Percentage) LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) Students Statistics 0 Credits 43% 43% 23% 28% PartTime 27% 55% 41% 36% FullTime 8% 2% 36% 36% Special Programs 18% 0% 0% 0% Ethnicity Hispanic/Latino 14% 13% 12% 10% American Indian 1% 1% 1% 1% Asian 7% 6% 7% 7% African American 4% 4% 5% 5% Hawaiian 0% 0% 1% 1% Caucasian 46% 46% 57% 59% International Student 0% 0% 0% 0% Multi Race 3% 3% 6% 4% No Response 26% 27% 11% 13% Gender Male 46% 45% 43% 43% Female 52% 50% 55% 55% Not Reported 2% 4% 1% 2% Age Distribution 19 Or Less 21% 21% 22% 17% % 31% 39% 39% % 17% 19% 18% % 10% 10% 10% 50 or More 15% 14% 8% 11% Age Unavailable 4% 6% 2% 4% Residency InDistrict Resident 56% 56% 69% 68% OutofDistrict Resident 36% 36% 26% 26% Border State 8% 7% 5% 6% Other OutofState 0% 0% 0% 0% International 0% 0% 0% 0% Note: Percentages may not add to 100% due to rounding. * Demographic information from Fact Book for years 0607 through 1415 is gathered and reported for Fall term only. Source: 0607 through 1314 data is from MHCC Fact Book 2013, 2009, 2008, 1415 and 1516 data is from the MHCC Analytics and Institutional Research (AIR) Division of IT who publishes the MHCC Fact book and is based on annual numbers rather than Fall term only. "Special Programs" student status category was added by MHCC AIR Division for FY

125 % 38% 35% 0% 27% 38% 35% 0% 27% 39% 34% 0% 29% 40% 30% 0% 31% 41% 28% 0% 36% 37% 27% 0% 10% 1% 7% 5% 0% 62% 0% 3% 12% 11% 1% 7% 5% 0% 65% 0% 1% 9% 10% 1% 6% 4% 0% 68% 0% 0% 10% 12% 1% 8% 4% 0% 66% 0% 0% 9% 12% 1% 6% 3% 0% 67% 0% 0% 10% 12% 1% 6% 3% 0% 70% 0% 0% 9% 43% 55% 2% 41% 58% 1% 39% 60% 1% 40% 60% 1% 42% 58% 1% 43% 56% 1% 20% 38% 18% 10% 11% 3% 21% 39% 17% 11% 11% 1% 23% 39% 17% 10% 11% 1% 24% 39% 16% 9% 11% 1% 25% 39% 15% 9% 11% 1% 21% 40% 15% 10% 12% 1% 69% 26% 5% 0% 0% 73% 23% 4% 0% 0% 75% 21% 3% 0% 0% 74% 22% 4% 0% 0% 73% 22% 4% 0% 0% 71% 24% 4% 0% 0% 76a

126 DEGREES AND CERTIFICATES AWARDED LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) Degrees Associate of Science Associate of Science Oregon Transfer Associate of Applied Science Associate of Arts Oregon Transfer Associate of General Studies Total Degrees 1,152 1,245 1,171 1,224 1, Certificates Certificates (Less Than One Year) Total Certificates Oregon Transfer Module High School Completions Total Awards 1,944 2,205 1,449 1,700 1,219 1,063 4,000 Trend of Degrees to Total Awards 3,500 3,000 2,500 2,000 1,500 1, Total Degrees Total Awards Source: MHCC Analytics and Institutional Research (AIR) Division of IT 77

127 , a

128 HISTORICAL AND PROJECTED TUITION AND FEES LAST TEN FISCAL YEARS ENDED JUNE 30 (Unaudited) 2017 (1) General fund tuition per credit hour $ $ $ $ Activity and technology fees College service and access fee (2) Annualized student tuition (3) 4,943 4,841 4,751 4,579 Total tuition and fees (in thousands) 23,016 23,297 26,450 28,367 Total SFTE (4) 7, , , , Unduplicated headcount 27,370 27,370 28,960 27,150 (1) Projected. (2) Fees are per term. College service fee is assessed to students registered for a minimum of one credit and the access fee is assessed to students registered for a minimum of two credits. The College service fee was first implemented in summer term The access fee was implemented in year (3) Annualized tuition and fees for an instate student based on 15 credit hours per term for three terms (Fall, Winter and Spring). (4) Total student fulltime equivalent (SFTE) as reported in the MHCC Fact Book at the time of publishing. Actual SFTE may vary based on insignificant post publishing variables. Source: MHCC Analytics and Institutional Research (AIR) Division of IT, MHCC Fact Book 2013, 2008, and MHCC Annual Financial Report 78

129 $ $ $ $ $ ,579 4,129 3,769 3,521 3,380 3,240 30,566 28,341 21,112 18,405 14,990 13,653 9, , , , , , ,988 29,350 32,433 32,742 31,338 27,671 78a

130 CAMPUS FACILITIES INFORMATION LAST TEN FISCAL YEARS ENDED JUNE 30 (unaudited) Gresham Campus Number of Buildings Square Feet 733, , , , , , ,730 Campus Student FTE 7,698 8,400 8,707 9,225 9,353 9,855 9,700 Bruning Campus Number of Buildings Square Feet 16,770 16,770 16,770 16,770 16,770 16,770 16,770 Campus Student FTE Maywood Campus Number of Buildings Square Feet 40,624 40,624 40,624 40,624 40,624 40,624 40,624 Campus Student FTE Source: MHCC Analytics and Institutional Research (AIR) Division of IT & MHCC Facilities Department 79

131 , ,730 8,679 7, ,730 7, ,770 16, , ,624 40, , a

132 COMPLIANCE SECTION

133 INDEPENDENT AUDITOR'S REPORT REQUIRED BY OREGON STATE REGULATIONS Board of Education Mt. Hood Community College District Gresham, Oregon Talbot, Korvola &Warwick, LLP Certified Public Accountants &Consultants ACHIEVE HONE 4800 Meadows Road,Suite 200 Lake Oswego, Oregon p F We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the basic financial statements of the Mt. Hood Community College District (the District) as of and for the year ended June 30, 2016, and have issued our report thereon dated December 7, COMPLIANCE As part of obtaining reasonable assurance about whether the District's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules through of the Minimum Standards for Audits of Oregon Municipal Corporations, 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. We performed procedures to the extent we considered necessary to address the required comments and disclosures which included, but were not limited to the following: Deposit of public funds with financial institutions (ORS Chapter 295). Indebtedness limitations, restrictions and repayment. Budgets legally required (ORS Chapter 294). Insurance and fidelity bonds in force or required by law. Programs funded from outside sources. Authorized investment of surplus funds (ORS Chapter 294 ). Public contracts and purchasing (ORS Chapters 279A, 279B, 279C). In connection with our testing, nothing came to our attention that caused us to believe the District was not in substantial compliance with certain provisions of laws, regulations, contracts, and grants, including the provisions of Oregon Revised Statutes as specified in Oregon Administrative Rules through of the Minimum Standards for Audits of Oregon Municipal Corporations. The McGladrey Alliance is a p remier affiliation o f independent account ing and consulting firms. The McGladrey A lliance member firms maintain their name, autonomy and independence and are responsible for their own c lient fee arrangements, delivery of services and m aintenance of client relationships.

134 INDEPENDENT AUDITOR'S REPORT REQUIRED BY OREGON STATE REGULATIONS (Continued) Board of Education Mt. Hood Community College District OAR INTERNAL CONTROL In planning and performing our audit of the financial statements, we considered the District's internal control over financial reporting to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control. Deficiencies in internal control were communicated separately. RESTRICTIONS ON USE This report is intended solely for the information and use of the Board of Education, Oregon Secretary of State Audits Division, and management and is not intended to be and should not be used by anyone other than these specified parties. Lake Oswego, Oregon December 7,

135 SINGLE AUDIT COMPLIANCE

136 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 Board of Education Mt. Hood Community College District Gresham, Oregon Talbot,Korvola &Warwick, LLP Certified Public Accountants " Consultan ts ACHIEVE HOllE 4800 Meadows Road,Suite 200 lake Oswego, Oregon p F 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 Mt. Hood Community College District (the District), as of and for the year ended June 30, 2016, and the related notes to financial statements, which collectively comprise the District's basic financial statements, and have issued our report thereon dated December 7, INTERNAL CONTROL OVER FINANCIAL REPORTING In planning and performing our audit of the financial statements, we considered the District'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 the District's internal control. Accordingly, we do not express an opinion on the effectiveness of the District's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, as described in the accompanying Schedule of Findings and Questioned Costs as item , we identified a deficiency in internal control that we consider to be a material weakness. COMPLIANCE AND OTHER MATTERS As part of obtaining reasonable assurance about whether the District's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. McG~~~~;~,A~~;~~~~ j! McGladrey 82 The McGladrey Alliance is a premier affiliation of independent accounting and consulting firms. The McG1adrey Alliance member firms maintain their name, autonomy and independence and are responsible for their own client fee arrangement s, delivery of services and maintenance of client relationships.

137 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 (CONTINUED) THE DISTRICT'S RESPONSE TO FINDING INDEPENDENT AUDITOR'S REPORT (CONTINUED) The District's response to the finding identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. The District's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. 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 District'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 District's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Lake Oswego, Oregon December 7,

138 1 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE INDEPENDENT AUDITOR'S REPORT Board of Education Mt. Hood Community College District Gresham, Oregon REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM Talbot, Korvola &Warwick, LLP Certifi ed PublicAccount an ts " Consull on ts ACHIEVE HONE 4800 Meadows Road, Suite 200 Lake Oswego, Oregon p F We have audited Mt. Hood Community College District's (the District) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the District's major federal programs for the year ended June 30, The District'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 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 the District's major federal 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 aud it includes examining, on a test basis, evidence about the District'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 the District's compliance. OPINION ON EACH MAJOR FEDERAL PROGRAM In our opinion, the District complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, OTHER MATTERS The results of our auditing procedures disclosed instances of noncompliance, which are required to be reported in accordance with the Uniform Guidance and which are described in the accompanying Schedule of Findings and Questioned Costs as items , , , , and Our opinion on each major federal program is not modified with respect to these matters. McGL~ ~;~; 0 A~~;~ ;~~ 84 I! McGladrey The McGladrey Alliance is a premier affiliation of independent accounting and consulting firms. The McGladrey Alliance member firms maintain their name, autonomy and independence and are responsible for their own client fee arrangements. delivery of services and maintenance of client relationships.

139 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE OTHER MATTERS (CONTINUED) INDEPENDENT AUDITOR'S REPORT (CONTINUED) The District's response to the noncompliance findings identified in our audit are described in the accompanying Schedule of Findings and Questioned Costs. The District's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. REPORT ON INTERNAL CONTROL OVER COMPLIANCE Management of the District is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the District's internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we identified certain deficiencies in internal control over compliance, as described in the accompanying Schedule of Findings and Questioned Costs as items , , , , , , , and that we consider to be significant deficiencies. The District's response to the internal control over compliance findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. The District's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Lake Oswego, Oregon December 7,

140 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 Federal Grantor/PassThrough Grantor/Program or Cluster Title Federal CFDA Number PassThrough Entity Identifying Number Passed Through to Subrecipents Total Federal Expenditures NATIONAL SCIENCE FOUNDATION: Passed Willamette University: Mathematical and Physical Sciences WUNSFRCN $ $ 3,024 Passed through Institute for Learning Innovation Education and Human Resources ,168 TOTAL NATIONAL SCIENCE FOUNDATION 14,192 U.S. DEPARTMENT OF EDUCATION: Direct Programs: TRIO Cluster: TRIO_Student Support Services N/A 227,948 TRIO_Talent Search N/A 265,291 Total TRIO Cluster 493,239 Student Financial Assistance Cluster: Federal Supplemental Educational Opportunity Grants N/A 250,580 Federal WorkStudy Program N/A 429,555 Federal Pell Grant Program N/A 11,076,829 Federal Direct Student Loans N/A 12,464,821 Total Student Financial Assistance Cluster 24,221,785 Total Direct Programs 24,715,024 Passed Through State of Oregon, Department of Education: / / Career and Technical Education Basic Grants to States ,209,445 Total passed Through State of Oregon, Department of Education 1,209,445 Passed Through State of Oregon, Department of Community College & Workforce Development: Adult Education Basic Grants to States EE / IGRA ,176 Total passed through State of Oregon, Department of Community College & Workforce Development 540,176 Passed Through Oregon Child Care Network: Race to the Top Early Learning Challenge / ,279 Total passed through Oregon Child Care Network 142,279 TOTAL U.S. DEPARTMENT OF EDUCATION 26,606,924 U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES: Direct Programs: Head Start: Head Start N/A 7,013,279 Total Head Start 7,013,279 Passed Through Oregon Child Care Network: CCDF Cluster: Child Care and Development Block Grant / ,670 Passed Through Oregon Health & Science University: Ryan White HIV/AIDS Dental Reimbursement and Community Based Dental Partnership Grants H65HA ,513 Passed Through State of Oregon: Affordable Care Act (ACA) Maternal, Infant, and Early Childhood Home Visiting ,717 Passed Through WSI: Affordable Care Act (ACA) Health Profession Opportunity Grants ,594 TOTAL U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES 8,124,773 86

141 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE YEAR ENDED JUNE 30, 2016 Federal Grantor/PassThrough Grantor/Program or Cluster Title Federal CFDA Number PassThrough Entity Identifying Number Passed Through to Subrecipents Total Federal Expenditures U.S. DEPARTMENT OF LABOR: Passed Through Worksystems, Inc.: WIA/WIOA Cluster: WIA/WIOA Adult Program WIA/WIOA Youth Activities WIA/WIOA Dislocated Worker Formula Grants $ $ 399, , ,576 Total Passed Through Worksystems, Inc. 1,016,966 Passed Through Portland Community College: WIA/WIOA Cluster: WIA/WIOA Adult Program WIA/WIOA Dislocated Worker Formula Grants ,438 9,932 Total Passed Through Portland Community College 20,370 Total WIA/WIOA Cluster 1,037,336 Passed Through Clackamas Community College: Trade Adjustment Assistance Community College and Career Training (TAACCCT) Grants Total Passed Through Clackamas Community College Passed Through Portland Community College: H1B Job Training Grants Total Passed Through Portland Community College TC A ,213 14,213 21,508 21,508 Passed Through Worksystems, Inc: Workforce Innovation Fund H1B Job Training Grants Workforce Innovation and Opportunity Act (WIOA) National Dislocated Worker Grants/ WIA National Emergency Grants / / , , ,991 Total Passed Through Worksystems, Inc. 342,629 TOTAL U.S. DEPARTMENT OF LABOR 1,415,686 U.S. DEPARTMENT OF AGRICULTURE: Passed Through State of Oregon: Child and Adult Care Food Program Passed Through Georgetown University: Cochran Fellowship ProgramInternational TrainingForeign Participant TOTAL U.S. DEPARTMENT OF AGRICULTURE U.S. DEPARTMENT OF HOMELAND SECURITY: Passed Through State of Oregon: Disaster Grants Public Assistance (Presidentially Declared Disasters) TOTAL U.S. DEPARTMENT OF HOMELAND SECURITY U.S. DEPARTMENT OF THE INTERIOR BUREAU OF LAND MANAGEMENT Direct Programs: Recreation Resource Management Total Direct Programs RX M FEMADR4258OR PA B N/A 565,393 7, ,193 5,778 5,778 13,522 13,522 TOTAL U.S. DEPARTMENT OF INTERIOR BUREAU OF LAND MANAGEMENT 13,522 87

142 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (Continued) FOR THE YEAR ENDED JUNE 30, 2016 Federal Grantor/PassThrough Grantor/Program or Cluster Title Federal CFDA Number PassThrough Entity Identifying Number Passed Through to Subrecipents Total Federal Expenditures U.S. SMALL BUSINESS ADMINISTRATION: Passed Through Lane Community College: Small Business Development Centers $ $ 40,525 TOTAL U.S. SMALL BUSINESS ADMINISTRATION 40,525 TOTAL EXPENDITURES OF FEDERAL AWARDS $ $ 36,794,593 See Notes to Schedule of Expenditures of Federal Awards. 88

143 NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2016 NOTE 1 BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards (the "Schedule") includes the federal award activity of Mt. Hood Community College District under programs of the federal government for the year ended June 30, The information in this Schedule is presented in accordance with the 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). Because the Schedule only a selected portion of the operations of Mt. Hood Community College District, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Mt. Hood Community College District. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Mt Hood Community College District has a Federally Negotiated indirect cost agreement of 20% of modified total direct costs. NOTE 3 RELATIONSHIP TO FEDERAL FINANCIAL REPORTS The regulations and guidelines governing the preparation of Federal financial reports vary by Federal agency and among programs administered by the same agency. Accordingly, the amounts reported in the Federal financial reports do not necessarily agree with the amounts reported in the accompanying Schedule which is prepared on the basis explained in Note 1. NOTE 4 LOANS DISBURSED Total disbursements for student loans through Mt. Hood Community College District which are federally guaranteed in the event of default are listed below: Federal CFDA Number New Loans Direct Loan Program $ 12,464,821 NOTE 5 LOANS RECEIVABLE Mt. Hood Community College District had the following gross loan balances outstanding at June 30, Federal CFDA Number Loans Receivable Nursing Student Loans $ 80,584 NOTE 6 FWS AND FSEOG Mt. Hood Community College has a Title II waiver for the 2015/16 eligible Federal match amounts. 89

144 SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I SUMMARY OF AUDITOR'S RESULTS Financial Statements: YEAR ENDED JUNE 30, 2016 Type of auditor's report issued: Unmodified Internal control over financial reporting : Material weakness(es) identified? Significant deficiency(ies) identified? Noncompliance material to financial statements noted? Yes None reported No Federal Awards: Internal control over major programs: Material weakness( es) identified? Significant deficiency(ies) identified? Type of auditor's report issued on compliance for major programs: Any audit findings disclosed that are required to be reported in accordance with section 2 CFR (a)? No Yes Unmodified Yes Identification of major programs: CFDA Number(s) ; ; ; ; Name of Federal Program or Cluster Student Financial Assistance Cluster TRIO Cluster Dollar threshold used to distinguish between type A and type B programs: Auditee qualified as lowrisk auditee? $ 1,103,838 No 90

145 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION 11 FINANCIAL STATEMENT FINDING Finding Criteria: Condition : The District should have a system of internal controls such that misstatements of the payroll accounting records would be prevented, or detected and corrected by management or employees in the normal course of their duties. Duties should be segregated to the extent possible in order to separate the initiation, authorization and review of transactions. We noted that PERS information was not being entered on a monthly basis into the PERS online system, therefore PERS has not billed the District approximately $935,000 and the District has not remitted any amounts, including the employee portion withheld, to PERS since June We also noted that employee personal information, including hire date, date of birth, termination date and other vital information, was not always entered into the HR system correctly which lead to errors in PERS reporting. Context: The payroll employee who was responsible for reporting payroll to PERS did not report all payroll and did not resolve all of the issues that arose with data transmittals. This resulted in an underpayment of contributions to PERS. The issue arose from the absence of controls over the contributions reporting process. The payroll employee who was responsible for inputting the data accurately was put on a work plan once the District realized errors were being made. The person who performed the data entry should have known the importance of accurate information entered into the system, but did not possess the necessary authority or competence to perform the process effectively. Effect: Cause: Recommendation: View of Responsible Officials: The lack of controls and oversight over the payroll process exposes the District to risk of material errors or misstatement in financial reporting, and potential misappropriation of funds. The District has experienced turnover in the payroll function, and job duties have been left uncompleted by other department personnel. The District has not implemented processes and controls to detect errors or omissions in data files. We recommend that management consider implementing processes and controls for reviewing data entry of vital employee information into the HR and PERS systems and ascertain that all job functions, including proper input of PERS online information, are completed on a timely basis. The District understands and concurs with the finding and recommendation. 91

146 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION 111 FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS Finding Federal Program : Federal Agency: Award Year: Criteria: CFDA Federal Supplemental Education Opportunity Grants (FSEOG) CFDA Federal WorkStudy Program (FWS) CFDA Federal Pell Grant Program (PELL) CFDA Federal Direct Student Loan Program (DIRECT LOAN) Department of Education The Compliance Supplement 2016, Part 5 Section N.3 requires that institutions may not disburse or deliver the first installment of Direct Student Loans to firstyear undergraduates who are first time borrowers until 30 days after the student's first day of classes (34 CFR section (f)(3)). Per 34 CFR (e) "Whenever an institution disburses title IV, Higher Education Act (HEA) program funds by crediting a student's account and the total amount of all title IV, HEA program funds credited exceeds the amount of tuition and fees, room and board, and other authorized charges the institution assessed the student, the institution must pay the resulting credit balance directly to the student or parent as soon as possible but (1) no later than 14 days after the balance occurred if the credit balance occurred after the first day of class of a payment period; or (2) no later than 14 days after the first day of class of a payment period if the credit balance occurred on or before the first day of class of that payment period." Condition: From a population of 4,269 students that received federal assistance, 60 were selected for testing. The first time borrower rule applied to 11 of those students, three of which were first time borrowers who were disbursed Direct Student Loans without a 30 day delay. Additionally, from this same population the refund time requirement applied to 53 students, of which 2 of the students were not released within the required 14 day timeframe. Both of the student's refunds were mailed 19 days after the credit balance was created by the District. Questioned Costs: Context: Effect: Cause: There are no questioned costs as the allowability of the costs is determined separately from the timing of the disbursements and refunds. The District did not identify all students subject to the 30 day delay, and therefore did not perform the 30 day delay for all students subject to the requirement. Failure to delay the disbursement of the first installment of Direct Student Loans to firstyear undergraduates who are first time borrowers by 30 days puts the District out of compliance with 34 CFR section (f)(3). The computer application was programmed to flag students for the delay only when they had no prior credits in the system due to the Director of Financial Aid misunderstanding the definition of a first year student. A first year student is a student with less than 45 earned credits. Therefore, if a student had earned three 92

147 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION 111 FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS (Continued) Finding (Continued) credits without the use of a Direct Loan, the system did not flag the student for the 30 day delay. The District outsources refunds to Higher One, a third party service provider, and therefore the cause of the delay is unknown to the District. Recommendation: We recommend management perform the 30 day delay for all firsttime borrowers with less than 45 earned credits. We recommend that management discuss the issue with Higher One and on a test basis review the service provider's timeliness for compliance. View of Responsible Officials: The District understands and concurs with the finding and recommendation. Finding Federal Program : Federal Agency: CFDA Federal Supplemental Education Opportunity Grants (FSEOG) CFDA Federal WorkStudy Program (FWS) CFDA Federal Pell Grant Program (PELL} CFDA Federal Direct Student Loan Program (DIRECT LOAN) Department of Education Award Year: Criteria: Per 34 CFR (d} Other information. If an applicant is selected to verify other information specified in the annual Federal Register notice, the applicant must provide the documentation specified for that information in the Federal Register notice. Per 34 CFR (b)(1) If an applicant fails to provide the requested documentation within a reasonable time period established by the institution (i) The institution may not (A) Disburse any additional Federal Perkins Loan or FSEOG Program funds to the applicant; (B) Employ, continue to employ or allow an employer to employ the applicant under FWS; or (C) Originate the applicant's Direct Subsidized Loan or disburse any additional Direct Subsidized Loan proceeds for the applicant; and (ii) The applicant must repay to the institution any Federal Perkins Loan or FSEOG received for that award year; Per 34 CFR (c) "If an institution disbursed subsidized student financial assistance to an applicant under (a)(3), and did not receive the valid SAR or valid ISIR reflecting corrections within the deadlines established under , the institution must reimburse the appropriate program account by making restitution from its own funds. The applicant must still be paid for all work performed under the institution's own payroll account." 93

148 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION Ill FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS {Continued) Finding (Continued) Condition : Questioned Costs: Context: Effect: Cause: Recommendation: View of Responsible Officials: From a population of 1,749 students that received federal assistance and were selected for verification, 60 were selected for testing. It appears that verification for four of the 60 tested was not properly performed. There are known questioned costs of $9,865 and projected questioned costs of $282,683. The verification process was not properly performed by District staff on certain items tested. In the case of one student, all of the documents required during the verification process were not received and the staff member marked the student as verified in the District's system, which allowed the student's loans to be disbursed. In other cases, the information received from students was not properly updated in the District's system. Projections resulted in $232,041 of needbased aid erroneously awarded and $50,642 of nonneed based aid erroneously awarded for a projected combined error of $282,683. Known errors amount to $9,865. The cause appears to be that the staff members made errors in completing the verification and these errors were not detected. The Director of Financial Aid was in charge of reviewing the verifications performed by eight staff members. Based on the amount of responsibility of the Director's position and the amount of other work performed in the department, this does not appear to be a realistic control that can consistently operate effectively. We recommend that the District implement a more effective review control that determines whether verifications are completed accurately and completely. The District understands and concurs with the finding and recommendation. Finding Federal Program: Federal Agency: CFDA Federal Supplemental Education Opportunity Grants (FSEOG) CFDA Federal WorkStudy Program (FWS) CFDA Federal Pell Grant Program (PELL) CFDA Federal Direct Student Loan Program (DIRECT LOAN) Department of Education Award Year: Criteria: Per 34 CFR {b)(5), the District must on a monthly basis, reconcile institutional records with Direct Student Loan funds received from the Department of Education and Direct Student Loan disbursement records submitted to and accepted by the Department of Education. 94

149 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION Ill FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS (Continued) Finding (Continued) Condition: Questioned Costs: Context: Effect: Cause: Recommendation: View of Responsible Officials: We note that it appears this reconciliation is being performed by the Director of Financial Aid ; however, the process used to reconcile the balances does not generate a reconciliation that shows the specific values used in the reconciliation or the date that the reconciliation was performed. Since the Director's work is not reviewed by another staff member, it is not formatted to be reperformed. As such, we are not able to determine whether reconciliations were performed, were timely, or achieved the results required by the Department of Education. There does not appear to be any questioned costs related to this finding as it relates to reporting and reconciliation of Common Origination and Disbursement (COD) and District records. The District cannot currently demonstrate that reconciliations are being performed accurately and on a monthly basis. If the reconciliation is not performed on a monthly basis and/or accurately, the result could be an interruption in the cash draw process. The interruption could affect the cash cycle for the District and, depending on the timing of the draw, it could mean the delay of receiving funding. Additionally, an error made during reporting may not be caught on a timely basis or at all, which could lead to questioned costs. The Director performs the reconciliation as the statements are received and the reconciliation format does not provide a snapshot of each month that is being reconciled. We recommend that District management perform a monthly reconciliation, on a timely basis, of the School Account Statement to the general ledger that utilizes the dollars reported to COD and the dollars recognized in the District's general ledger. The preparer should date and sign/initial the reconciliation on the date that it is completed. In addition to providing evidence that the District is in compliance with 34 CFR (b)(5}, the reconciliation can be used in the cash draw process conducted by the District's Business Department and it will provide better documentation for succession in the event that there is turnover in the District's Financial Aid Department. The District understands and concurs with the finding and recommendation. Finding Federal Program : Federal Agency: CFDA Federal Pell Grant Program (PELL) Department of Education Award Year:

150 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION 111 FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS (Continued) Finding (Continued) Criteria: Condition: Questioned Costs: Context: Effect: Cause: Recommendation: View of Responsible Officials: The Compliance Supplement 2016, Part 5 Section L.1 requires that schools must submit Pell origination records and disbursement records to the COD. Institutions must report student payment data within 15 calendar days after the school makes a request. From a population of 8,371 Pell disbursements, a sample of 60 were selected for testing. One disbursement of the 60 was found not to have been reported to the COD within 15 calendar days after the disbursement. There are no questioned costs. The disbursement records for one of 60 Pell disbursements was not reported to COD within the required timeframe. The District's failure to submit Pell disbursement records within the required time frame may result in the Department of Education rejecting all or part of the reported disbursement. Without timely reporting, Lifetime Eligibility Used (LEU) information is delayed. A student may exceed the limitations and be required to repay overpayments. Additionally, the delay may result in a fine or penalty from the Department of Education. It appears the cause was a programming flaw that allowed the posting to the student account in two different ways: before releasing to COD or after releasing to COD. The system allowed the transaction to be released to COD and posted to the student's account on different days. In May 2016, the program was updated, and the release date for Pell awards is not allowed to differ from the posting date. We recommend management submit Pell disbursement records to the COD within 15 days of Pell disbursements. In May of 2016, the District changed reporting procedures, and now does not disburse Pell funds until disbursement is reported to the COD and a response is received from the COD. This change will prevent future disbursements from being reported to the COD outside of the required 15 days. The District understands and concurs with the finding and recommendation. Finding (repeat of finding ) Federal Program : Federal Agency: CFDA Federal Supplemental Education Opportunity Grants (FSEOG) CFDA Federal WorkStudy Program (FWS) CFDA Federal Pell Grant Program (PELL) CFDA Federal Direct Student Loan Program (DIRECT LOAN) Department of Education Award Year:

151 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION Ill FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS (Continued) Finding (repeat of finding ) (Continued) Criteria: Condition: Questioned Costs: Context: Effect: Cause: Recommendation: View of Responsible Officials : The A102 Common Rule and OMB Circular A110 (2 CFR part 215) require that nonfederal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Under provisions of the Higher Education Act, the Department's regulations, and related guidance, schools are required to confirm and report the enrollment status of students who receive most types of Federal student aid, including aid from the Federal Pell Grant Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Schools are to report the enrollment status of students who received Title IV aid to the National Student Loan Data System for Students (NSLDS). This enrollment information is updated in NSLDS and, as appropriate, is reported to guarantors, lenders, and servicers of federal student loans. During our review of the changes reported on the NSLDS website, it was noted that eleven students' enrollment changes were either not reported on the NSLDS website or varied by more than twentyone days. As this finding relates to the timely and accurate reporting of enrollment status, there are no amounts of questioned costs identified. The enrollment status changes for 50 of 60 students tested were incorrect, not timely reported, or reported at all. Lack of review of status changes to NSLDS resulted in untimely or inaccurate reporting of student enrollment changes. A student's enrollment status determines eligibility for inschool status as well as deferment and grace periods for loans. Enrollment reporting is not only critical for effective administration of the Title IV student loan programs, but is also required so that the District can engage in budgetary and policy analysis. The District doesn't have procedures in place for verifying enrollment changes uploaded to NSLDS are recorded, complete or accurate. We recommend that management develop and implement procedures to verify enrollment changes uploaded to NSLDS are recorded, complete and accurate on at least a sample basis. Verification that the first and last students in the data file are uploaded and are accurate would satisfy the upload is complete. A selection of student changes from the data file verified to both the District's records and NSLDS would satisfy the upload and underlying data were accurate. The District understands and concurs with the finding and recommendation. 97

152 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION Ill FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS (Continued) Finding Federal Program : Federal Agency: Award Year: Criteria: Condition: Questioned Costs: Context: CFDA Federal Supplemental Education Opportunity Grants (FSEOG) CFDA Federal WorkStudy Program (FWS) CFDA Federal Pell Grant Program (PELL} CFDA Federal Direct Student Loan Program (DIRECT LOAN) Department of Education The Compliance Supplement, Part 5 Section N.4 requires that institutions determine the amount of Title IV aid earned by the student as of the student's withdrawal date. If the total amount of Title IV assistance earned by the student is less than the amount that was disbursed to the student or on his or her behalf as of the date of the institution's determination that the student withdrew, the difference must be returned to the Title IV program. Determination of the student's withdrawal date must be made within 45 days of the withdrawal, and funds must be returned within 45 days of that determination. Per the Federal Student Aid Handbook , for a student in a nonterm or nonstandard term program offered in modules who ceases attendance, the student is considered to have withdrawn for Title IV purposes unless the school obtains written confirmation from the student at the time of the withdrawal that he or she will attend a module that begins later in the same payment period or period of enrollment. If a school obtains a written confirmation of future attendance but the student does not return as scheduled, the student is considered to have withdrawn from the payment period or period of enrollment. The student's withdrawal date and the total number of calendar days in the payment period or period of enrollment are the withdrawal date and total number of calendar days as of the student's last day of attendance (those that would have applied if the student had not provided written confirmation of future attendance). From a population of 189 R2T4 calculations, 19 were selected for testing. One of the 19 tested calculations was found not to have been performed accurately, and therefore were not performed timely upon correction. There are no questioned costs noted as the correct withdrawal date was determined, calculation was made, and R2T4 funds returned, however outside of the 45 day requirement. The District did not correctly determine the withdrawal date for a student who attended a portion of termlength classes, but then failed to attend a course which began at a midterm date. Therefore, the amount of Title IV aid to be returned was not calculated correctly, and not returned within 45 days of the determination of the withdrawal date. Although the determination and calculation was corrected subsequent to auditor testing, the return of funds did not occur within 90 days (45 days to determine withdrawal date plus 45 days to return funds) of the date the student failed to attend the midterm course. 98

153 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION Ill FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS (Continued) Finding (Continued) Effect: Cause: Recommendation: View of Responsible Officials: Lack of accuracy in the determination of withdrawal date may result in errors involving the calculation of funds to be returned and/or netted against awards in reimbursement requests sent through the G5 system. If R2T 4 is not cal cu lated correctly, it could result in errors involving cash receipts and disbursements going unresolved indefinitely. Transactions between the District and Department of Education, students and the Department of Education, and students and the District may be affected. The determination of the withdrawal date is the first step in calculating R2T4 funds, which may result in return of funds, charges to students, and holds on student accounts to prevent enrollment for future terms until charges are resolved. It appears that this process was impacted by a lack of knowledge of the appropriate withdrawal date when a student withdraws from termlength courses and subsequently fails to begin attendance in a course with a midterm start date. R2T 4 was calculated for the student, however the wrong withdrawal date was used, and therefore the amount due to the Department of Education was incorrect. We recommend management accurately determine withdrawal date for all students in order to accurately calculate the amount of Title IV funds to be returned to ED. The District understands and concurs with the finding and recommendation. Finding (repeat finding ) Federal Program: Federal Agency: CFDA Career and Technical Education Basic Grants to States Department of Education Award Year: Criteria: Condition: Questioned Costs: Section 3(29) of Perkins IV and other student categories described in Section 1111(h)(1)(C)(i) of ESEA (20 USC 6311(h)(1)(C)(i)) (Section 113(b)(4)(C) of Perkins IV (20 USC 2323(b)(4)(C) requires that the District report annually to the state the District's achievements in its local adjusted levels of performance on the core indicators of performance, including the levels of performance achieved by the special population categories. The District does not have a process for review of the annual Continuing Technical Education (CTE) course and student information provided to the state by the consortium high schools or the District. In addition, the District does not have a control in place to monitor compliance with the state's data requirement. As this finding relates to the timely and accurate reporting of CTE course and student information, there are no amounts of questioned costs identified. 99

154 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION Ill FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS (Continued) Finding (repeat finding ) (Continued) Context: Effect: Cause: Recommendation: View of Responsible Officials: Program management acknowledged that there wasn't oversight over the consortium high schools or the District's CTE course and student information provided to the state. Data is pulled directly from Synergy and uploaded to the state. In addition, program management acknowledged that there is no control in place to monitor the timeliness or completion of the data required submission. The lack of review of the CTE course and student information to the state could result in inaccurate or incomplete data being reported. The lack of control over data submission could result in the District not meeting its reporting requirements and potentially losing all or part of its funding for the subsequent year. The District doesn't have procedures and controls in place related to its special reporting requirement to the state. We recommend that management develop and implement procedures for review of the CTE course and student information uploaded to the state for accuracy and completeness. In addition, the District should implement a control over the submission of the required data to ensure all consortium schools are in compliance with the special reporting requirement. The District understands and concurs with the finding and recommendation. Finding Federal Program: Federal Agency: Award Year: Criteria: Condition: Questioned Costs: Context: CFDA Career and Technical Education Basic Grants to States Department of Education Section (a) of the Carl D. Perkins Career and Technical Education Improvement Act Fiscal Requirements Supplement not Supplant funds made available under this Act for career and technical education activities shall supplement, and shall not supplant, nonfederal funds expended to carry out career and technical education activities and tech prep program activities. District initially determined specific staff in the Learning Support Center who supported the placement of career technical and education program students were qualified expenditures. During their review, the Oregon Department of Education determined grant funds used to cover these salaries was supplanting. Oregon Department of Education determined this finding needed correction by the beginning of the school year and therefore no amounts of questioned costs were identified. Finding is the result of Oregon Department of Education's review and therefore the context is unknown. 100

155 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION 111 FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS (Continued) Finding (Continued) Effect: Cause: Recommendation: Federal funds are used for inappropriate expenses or to supplant nonfederal funds. District initially determined specific staff in the Learning Support Center who supported the placement of career technical and education program students were qualified expenditures. During their review, the Oregon Department of Education determined grant funds used to cover these salaries was supplanting. We recommend that management cease supplanting salary expenses to employ staff in the Learning Support Center no later than July 1, View of Responsible Officials: The District understands and concurs with the finding and recommendation. Finding Federal Program: Federal Agency: CFDA Federal Supplemental Education Opportunity Grants (FSEOG) CFDA Federal WorkStudy Program (FWS) CFDA Federal Pell Grant Program (PELL) CFDA Federal Direct Student Loan Program {DIRECT LOAN) Department of Education Award Year: Criteria: Condition: Questioned Costs: Context: 34 CFR Section requires institutions to file an application to participate in the FWS and FSEOG programs. The application must contain the information needed to determine the institution's allocation or reallocation of funds. The Compliance Supplement 2016, Part 5 Student Financial Assistance, requirement L.3. Special Reporting, requires the Fiscal Operations Report and Application to Participate (FISAP) to be submitted annually to receive funds for campusbased programs. The District must report its expenditures for the previous award year and apply for the following year. The FISAP is submitted annually to report award expenditures for the previous year and apply to participate in the following year. The report submitted by September 30, 2016, which reports the award expenditures for FY16 and applies for funds for FY18, was inaccurate. The amount reported for total Federal Pell Grant expenditures was overstated by approximately $99 million. As this is a reporting error, there are no likely questioned costs. The District is able to correct errors until December 15, 2016 and corrected the error after it was brought to their attention. This finding relates only to reporting of prior year costs, therefore no amounts of questioned costs identified. A lack of control over the review and submission process for the FISAP resulted in inaccurate costs reported. 101

156 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) YEAR ENDED JUNE 30, 2016 SECTION Ill FINDINGS AND QUESTIONED COSTS FOR FEDERAL AWARDS (Continued) Finding (Continued) Effect: Cause: Recommendation: View of Responsible Officials: Inaccurate reporting of Student Financial Assistance expenditures, if not corrected, may lead to erroneous allocation of Federal funds for FY18. Errors in reporting may effect funding status of Federal programs. As the auditor discovered the error prior to the due date for edit corrections, the District was able to correct the FISAP before December 15, 2016, and therefore has corrected reported amounts for the fiscal year. It appears that the control in place was not effective. The report is prepared by two separate departments. The Financial Services performed a review over their section of the report. However, the report used for submission did not match the approved draft prepared by Financial Services. It appears that there was not an adequate review of the final draft prior to submission. The electronic signature by the President was made by proxy, eliminating one level of review. The President's Two Factor Authentication (TFA) token has been given to the Director of Financial Aid in order to sign the FISAP by proxy. We recommend that management implement a final review process for the submission of the FISAP. We also recommend that TFA tokens remain with the individual to which the token is assigned, in order to preserve the integrity of the identity when signing the FISAP. The District understands and concurs with the finding and recommendation. 102

157 Finding (repeated as finding ) SUMMARY OF PRIOR AUDIT FINDINGS YEAR ENDED JUNE 30, 2016 Audit Finding: Corrective Action Taken : The District should have a system of internal controls such that misstatements of the payroll accounting records would be prevented, or detected and corrected by management or employees in the normal course of their duties. Duties should be segregated to the extent possible in order to separate the initiation, authorization and review of transactions. We noted several errors in the calculation of employee compensation, accrued vacation, preparation and review of data files, and uploads used by third parties for purposes of calculating material estimates. These errors were not detected through processes or controls over payroll. Repeated as finding Finding Audit Finding : Corrective Action Taken : The A102 Common Rule and OMB Circular A110 (2 CFR part 215) require that nonfederal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Under provisions of the Higher Education Act, the Department's regulations, and related guidance, schools are required to confirm and report the enrollment status of students who receive most types of Federal student aid, including aid from the Federal Pell Grant Program and the William D. Ford Federal Direct Loan (D irect Loan) Program. Schools are to report the enrollment status of students who received Title IV aid to the National Student Loan Data System for Students (NSLDS). This enrollment information is updated in NSLDS and, as appropriate, is reported to guarantors, lenders, and servicers of federal student loans. The District lacks physical evidence over timely reporting of student enrollment changes to NSLDS. The District implemented the recommendation in December The District has created a report that identifies differences each time an enrollment report is submitted to verify that all students with enrollment changes are being reported. 103

158 SUMMARY OF PRIOR AUDIT FINDINGS (Continued) Finding (repeated as finding ) YEAR ENDED JUNE 30, 2016 Federal Program : Federal Agency: Award Year: Criteria: Condition: Questioned Costs: Context: Effect: Cause: CFDA Federal Supplemental Education Opportunity Grants (FSEOG) CFDA Federal WorkStudy Program (FWS) CFDA Federal Pell Grant Program (PELL) CFDA Federal Direct Student Loan Program (DIRECT LOAN) Department of Education The A102 Common Rule and OMB Circular A110 (2 CFR part 215) require that nonfederal entities receiving Federal awards establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Under provisions of the Higher Education Act, the Department's regulations, and related guidance, schools are required to confirm and report the enrollment status of students who receive most types of Federal student aid, including aid from the Federal Pell Grant Program and the William D. Ford Federal Direct Loan (Direct Loan) Program. Schools are to report the enrollment status of students who received Title IV aid to the National Student Loan Data System for Students (NSLDS). This enrollment information is updated in NSLDS and, as appropriate, is reported to guarantors, lenders, and servicers of federal student loans. During our review of the changes reported on the NSLDS website, it was noted that 11 out of 65 students' enrollment changes were either not updated on the NSLDS website or varied by more than twentyone days. As this finding relates to the timely and accurate reporting of enrollment status, there are no amounts of questioned costs identified. The enrollment status of one student was not reported to NSLDS. The enrollment status changes for ten students were incorrect. Lack of review of status changes to NSLDS resulted in untimely or inaccurate reporting of student enrollment changes. A student's enrollment status determines eligibility for inschool status as well as deferment and grace periods for loans. Enrollment reporting is not only critical for effective administration of the Title IV student loan programs, but is also required so that the District can engage in budgetary and policy analysis. The District doesn't have procedures in place for verifying enrollment changes uploaded to NSLDS are recorded, complete or accurate. 104

159 SUMMARY OF PRIOR AUDIT FINDINGS (Continued) YEAR ENDED JUNE 30, 2016 Finding (repeated as finding ) (Continued) Recommendation : Corrective Action Taken: We recommend that management develop and implement procedures to verify enrollment changes uploaded to NSLDS are recorded, complete and accurate on at least a sample basis. Verification that the first and last students in the data file are uploaded and are accurate would satisfy the upload is complete. A selection of student changes from the data file verified to both the District's records and NSLDS would satisfy the upload and underlying data were accurate. Repeated as Finding Finding Audit Finding : Corrective Action Taken: In accordance with 34 CFR section (a)(1 )(i), schools are required to confirm eligibility of students, including enrollment in an eligible program and eligible courses. Also, in accordance with 34 CFR sections O(c)(2), SFA funds can be awarded only to students enrolled in an eligible program and eligible courses to be allowed. A student was enrolled in an aid ineligible course during the spring 2015 term. Consistent with the District's financial aid policy, the student was placed on warning, but was not required to return the financial aid funds expended for the course. The Financial Aid Ineligible Courses Report: Enrolled in Ineligible Classes is run by the term to ensure students are not receiving Title IV aid for ineligible courses. When students are enrolled in these classes while also enrolled in eligible classes, the ineligible credits are removed prior to the calculation of aid. The Director of Financial Aid noted that IT is working on the stored procedure, which will hopefully also take into account repeat courses. Finding (repeated as Finding ) Federal Program : Federal Agency: Award Year: Criteria: CFDA Career and Technical Education Basic Grants to States Department of Education Section 3(29) of Perkins IV and other student categories described in Section 1111(h)(1)(C)(i) of ESEA (20 USC 6311(h}(1}(C)(i)) (Section 113(b)(4)(C) of Perkins IV (20 USC 2323(b)(4)(C) requires that the District report annually to the State the District's achievements in its local adjusted levels of performance on the core indicators of performance, including the levels of performance achieved by the special population categories. 105

160 SUMMARY OF PRIOR AUDIT FINDINGS (Continued) YEAR ENDED JUNE 30, 2016 Finding (repeat finding ) (Continued) Condition: Questioned Costs: Context: Effect: Cause: Recommendation : Corrective Action Taken: The District does not have a process for review of the annual Career Technical Education {CTE} Course and Student Information provided to the State by the consortium high schools or the District. In addition, the District does not have a control in place to monitor compliance with the State's data requirement. As this finding relates to the timely and accurate reporting of CTE Course and Student Information, there are no amounts of questioned costs identified. Program management acknowledged that there wasn't oversight over the consortium high schools or the District's CTE Course and Student Information provided to the State. Data is pulled directly from student records and uploaded to the State. In addition, program management acknowledged that there is no control in place to monitor the timeliness or completion of the data required submission. The lack of review of the CTE Course and Student Information to the State may result in inaccurate or incomplete data being reported. The lack of internal control over data submission could result in the District not meeting its reporting requirements and potentially losing all or part of its funding for the subsequent year. The District does not have procedures and internal controls in place related to this special reporting requirement to the State. We recommend that management develop and implement procedures for review of the CTE Course and Student Information uploaded to the State for accuracy and completeness. In addition, the District should implement a control over the submission of the required data to ensure all consortium schools are in compliance with the special reporting requirement. Repeated as Finding

161 CORRECTIVE ACTION PLAN YEAR ENDED JUNE 30, 2016 Finding The District has retained a temporary employee with PERS expertise to focus on the PERS reporting issues. In that role, the employee is addressing all delayed employee demographic and salary reporting data. In addition, the employee will be documenting and training the entire payroll staff on the processes. The temporary employee is working with PERS employees to standardize the reporting of older data in order to address the significant amount of time spent by payroll personnel researching historical pay and time data. The position will be filled with a regular employee, however, the focus will remain on the PERS processes. The IT department will be providing documentation on the automated PERS reporting procedures. These will include exactly what information is gathered, when each step occurs, and how corrections are reported. A recommended order of operation will be created. Finally, HR will develop onboarding and off boarding procedures to ensure that employee data is fully populated in HR systems, accurately and in a timely manner. Finding The District will create a stored procedure to verify that those students who have earned less than 46 credits (either MHCC credits or transfer credits) and are first time loan borrowers are identified in CX. These students will have a 30 day delay contact which will stop the first loan disbursement from being requested from COD until the 30 th day. The District is no longer holding student refunds if the student owes a prior term balance. All funds are released to disbursement vendor within two business days to ensure students receive the disbursement within the 30 day window. Additionally, the District will monitor the vendor and ensure disbursements are released to students within the required timeline. Finding The District will create a new form to have the Financial Aid advisers double check each others work. This will ensure that two advisers are verifying that the correct forms have been submitted by students, all corrections that have been identified as needing to be made have been sent, and the correct transaction has been received to pay the student on. Any discrepancies an adviser finds will be given to the director to review and act upon. Finding Instead of performing the loan reconciliation in CX (Disbursement Exceptions report), the District will create a spreadsheet with two tabs. One tab will be for the direct loan actual disbursements from COD for the month, and the other tab will be the direct loan disbursements from CX. The two tabs should match when totaled for the month. This spreadsheet will be sent to the Business Office to allow for reconciliation of disbursements in the general ledger with COD and the financial aid side records. 107

162 Finding The District s ERP vendor changed the Pell Grant reporting method the end of April Prior to that date, Pell Grants would post to student accounts if students met all compliance and then the Pell Grant was reported to COD. Now Pell Grants are reported to COD like direct loans. This means COD needs to approve and release the Pell Grant disbursement before the Pell Grant can disburse in the ERP. This will ensure all Pell Grants are reported in a timely fashion and have been reported to COD before being disbursed through the ERP. Finding The District s Financial Aid Office has requested IT create a program to allow us to report enrollment directly to NSLDS rather than using Clearinghouse as a third party servicer. The previous years proposed corrective action proved ineffective because all students are reported to the Clearinghouse, so a sample may not include any Title IV recipients to test in NSLDS. Finding The District s Grants and Contracts department is responsible for the R2T4 calculations and has implemented a peer review process. The R2T4 calculations are completed by one staff member and are now checked by another staff member to ensure data entered is verified to be reported correctly and that proper dates are carried forward correctly. Finding The program coordinator will review the District s submission of the required data to ensure accuracy and compliance prior to submission. Finding Effective July 1, 2016 the College is no longer allocating employee time and effort from the Learning Success Center to the Perkins grant program. Finding The District s FISAP report can be corrected through December 15 th each year. A message is sent through NASFAA News is the beginning of November as a reminder, and at that point in time the most current FISAP is reviewed to see if adjustments need to be made. In the past when we had the Perkins Loan program, the cash on hand as of 10/31 had to be reported as an update on FISAP and that is when the review of the entire FISAP was done. Now the review is done when the reminder is sent, which is typically the first Wednesday in November. The reminder was received on 11/02/16 so the FISAP was reviewed and updated. Another adjustment was made to FISAP on 11/10/16 and submitted with the president signing it as acknowledgement of the changes made. The president now has the two factor authentication token to sign the FISAP. The College will investigate whether an alternate designee can be assigned by the Department of Education with their own token, so if the president is unable to login, review and approve, someone other than the financial aid director will be able to do so. 108

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