RHODE ISLAND COLLEGE (a Component Unit of the State of Rhode Island and Providence Plantations)

Transcription

1 (a Component Unit of the State of Rhode Island and Providence Plantations) INDEPENDENT AUDITORS' REPORTS AS REQUIRED BY THE UNIFORM GUIDANCE AND GOVERNMENT AUDITING STANDARDS AND RELATED INFORMATION JUNE 30, 2017

2 Independent Auditors' Reports as Required by the Uniform Guidance and Government Auditing Standards and Related Information C O N T E N T S Independent Auditors' Report on Compliance for Each Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance 1-3 Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 4-5 Schedule of Expenditures of Federal Awards 6-7 Notes to the Schedule of Expenditures of Federal Awards 8-9 Schedule of Findings and Questioned Costs Required Auditee Information: Management s Summary Schedule of Prior Audit Finding 18 Management s Corrective Action Plan 19-20

3 INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE To the Board of Education of State of Rhode Island and Providence Plantations Providence, Rhode Island Report on Compliance for Each Major Federal Program We have audited Rhode Island College s (a component unit of the State of Rhode Island and Providence Plantations) (the "College") compliance with the types of compliance requirements described in the U.S. Office of Management and Budget ( OMB ) Compliance Supplement that could have a direct and material effect on each of the College s major federal programs for the year ended. The College s major federal programs are identified in the summary of auditors 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. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of the College 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 (the Uniform Guidance ). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the College s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. 25 Braintree Hill Office Park Suite 102 Braintree, MA P: F: Church Street Winchester, MA P: F:

4 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 College s compliance. Opinion on Each Major Federal Program In our opinion, the College complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended. 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 Findings and Our opinion on each major federal program is not modified with respect to these matters. The College s responses to the noncompliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The College s responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. Report on Internal Control over Compliance Management of the College is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the College s internal control over compliance with the types of requirements that could have a direct and material effect on 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 College s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

5 Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses; however, material weaknesses may exist that have not been identified. We identified deficiencies in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as Findings and that we consider to be significant deficiencies. The College s responses to the internal control over compliance findings identified in our audit are described in the accompanying schedule of findings and questioned costs. The College's responses were not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the responses. 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. Schedule of Expenditures of Federal Awards We have audited the financial statements of the College, as of and for the year ended June 30, We issued our report thereon dated September 29, 2017, which contained an unmodified opinion on those financial statements. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. Certified Public Accountants Braintree, Massachusetts November 22, 2017 (except for the Schedule of Expenditures of Federal Awards, for which the date is September 29, 2017)

6 INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Education of State of Rhode Island and Providence Plantations Providence, Rhode Island We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Rhode Island College (the College ), which comprise the statement of net position as of June 30, 2017, the related statements of revenues, expenses and changes in net position and cash flows for the year then ended, and the related notes to the financial statements, which collectively comprise Rhode Island College s basic financial statements and have issued our report thereon dated September 29, Our report includes a reference to other auditors who audited the financial statements of Rhode Island College Foundation, as described in our report on Rhode Island College s financial statements. This report does not include the results of the other auditors testing of internal control over financial reporting or compliance and other matters that are reported on separately by those auditors. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Rhode Island College s internal control over financial reporting ( internal control ) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the College s internal control. Accordingly, we do not express an opinion on the effectiveness of the College s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 25 Braintree Hill Office Park Suite 102 Braintree, MA P: F: Church Street Winchester, MA P: F:

7 Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Rhode Island College s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the College s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the College s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Certified Public Accountants Braintree, Massachusetts September 29, 2017

8 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

9 Rhode Island College Schedule of Expenditures of Federal Awards Year Ended Passed CFDA Pass-Through Entity Federal Through to Number Pass-Through Entity Award Number Expenditures Subrecipients STUDENT FINANCIAL ASSISTANCE CLUSTER U.S. Department of Education: Direct Awards: Federal Supplemental Educational Opportunity Grant N/A N/A $ 799,348 $ - Federal Work-Study Program N/A N/A 799,910 - Federal Perkins Loan Program (beginning of year) N/A N/A 4,653,355 - Federal Perkins Loan Program (current year expenditures) N/A N/A 257,074 - Federal Pell Grant Program N/A N/A 13,189,107 - Federal Direct Student Loans N/A N/A 32,591,600 - Total Student Financial Assistance Cluster 52,290,394 - RESEARCH AND DEVELOPMENT CLUSTER National Science Foundation: Pass-through Awards: Office of International Science and Engineering Brown University N/A 34,835 - Office of Experimental Program to Stimulate Competitive Research University of Rhode Island N/A 32,778 - Total Research and Development Cluster 67,613 - TRIO CLUSTER U.S. Department of Education: Direct Awards: TRIO - Upward Bound N/A N/A 691,461 - NON-CLUSTER U.S. Department of Agriculture: Pass-through Awards: Specialty Crop Block Grant Program - Farm Bill Rhode Island Department of Environmental Management N/A 8,725 - U.S. Department of Energy: Pass-through Awards: Office of Science Financial Assistance Program Brown University N/A 23,875 - U.S. Department of Education: Direct Awards: Special Education - Technical Assistance and Dissemination to Improve Services and Results for Children with Disabilities Transition Programs for Students with Intellectual Disabilities into Higher Education N/A N/A 81, N/A N/A 393,634 - Subtotal - Direct Awards 475,604 - The accompanying notes are an integral part of this schedule

10 NON-CLUSTER - CONTINUED U.S. Department of Education - Continued: Pass-through Awards: Federal Loan Guarantees for Innovative Energy Technologies Research in Special Education Special Education - Personnel Development to Improve Services and Improve Services and Results for Children with Disabilities Teacher Quality Partnership Grants Rhode Island College Schedule of Expenditures of Federal Awards - Continued Year Ended Passed CFDA Pass-Through Entity Federal Through to Number Pass-Through Entity Award Number Expenditures Subrecipients Rhode Island Department of Human Services N/A $ 9,799 $ University of Kansas Center for Research N/A 28, University of Connecticut Health Center N/A 14, North Providence School Department N/A 91,687 - Supporting Effective Instruction State Grant Rhode Island Office of Higher Education N/A 51,346 - College Access Challenge Grant Program Rhode Island Office of Higher Education N/A 208,228 - Race to the Top - Early Learning Challenge Rhode Island Department of Education N/A 360,739 - Subtotal - Pass-through Awards 765,281 - U.S. Department of Health and Human Services: Direct Awards: Substance Abuse and Mental Health Services - Projects of Regional and National Significance N/A N/A 156,010 - University Centers for Excellence in Developmental Disabilities Education, Research, and Service N/A N/A 511,017 - Child Health and Human Development Extramural Research N/A N/A 10,022 - Subtotal - Direct Awards 677,049 - Pass-through Awards: Lifespan Respite Care Program Rhode Island Department of Human Services N/A 30,907 - Maternal and Child Health Federal Consolidated Programs Rhode Island Hospital N/A 126,063 - Substance Abuse and Mental Health Services - Projects of Regional and National Significance Brown University N/A 28,681 - Substance Abuse and Mental Health Services - Projects of Rhode Island Department of Behavioral Healthcare, Regional and National Significance Developmental Diabilities and Hospitals N/A 53,381 - Refugee and Entrant Assistance - State Administered Programs Rhode Island Department of Human Services N/A 3,527 - Biomedical Research and Research Training University of Rhode Island N/A 638,437 - HIV Care Formula Grants Rhode Island Executive Office of Health and Human Services N/A 32,410 - PPHF Geriatric Education Centers University of Rhode Island N/A 28,791 - Subtotal - Pass-through Awards 942,197 - Social Security Administration: Direct Awards: Social Security - Work Incentives Planning and Assistance Program N/A N/A 179,457 - Total Non-Cluster 3,072,188 - Total Federal Funds $ 56,121,656 $ - The accompanying notes are an integral part of this schedule

11 Notes to the Schedule of Expenditures of Federal Awards Year Ended Note 1 - Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards (the Schedule ) includes the federal award activity of Rhode Island College (the College ) under programs of the Federal Government for the year ended. The information on this Schedule is prepared 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 presents only a selected portion of the operations of the College, it is not intended to and does not present the financial position, changes in net position or cash flows of the College. Note 2 - Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance. Note 3 - Indirect Cost Rate The College has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. Note 4 - Federal Student Loan Programs Perkins Loan Program The Federal Perkins Loan Program ( Perkins ) is administered by the College and balances and transactions relating to this program are included in the College s basic financial statements. During the year ended, $257,074 of loans were advanced under the Perkins program and no administrative costs were incurred. As of, loan balances receivable under Perkins was $4,310,047. There was no federal capital contribution or match by the College during the current year

12 Notes to the Schedule of Expenditures of Federal Awards - Continued Year Ended Note 4 - Federal Student Loan Programs - Continued Perkins Loan Program - Continued The Federal Perkins Loan Program Extension Act of 2015 (the Extension Act ), enacted on December 18, 2015, extended the Perkins Loan Program through September 30, The Extension Act states that new Perkins Loans cannot be disbursed to students after September 30, Students that received a fall semester Perkins loan disbursement before October 1, 2017 can receive a spring semester Perkins loan disbursement. The College is currently evaluating alternative methods of financial aid for students affected by the Extension Act for the academic year. Federal Direct Student Loans The College disbursed $32,591,600 of loans under the Federal Direct Student Loans program, which include Stafford Subsidized and Unsubsidized Loans and Parent Plus Loans. The College is only responsible for the performance of certain administrative duties and, accordingly, there are no significant continuing compliance requirements and these loans are not included in the College s financial statements

13 Schedule of Findings and Questioned Costs Year Ended Section I Summary of Auditors Results: Financial Statements Type of auditors report issued: Unmodified Internal control over financial reporting: Material weaknesses identified? yes x no Significant deficiencies identified that are not considered to be material weaknesses? yes x no Noncompliance material to the financial statements noted? yes x no Federal Awards Type of auditors report issued on compliance for major programs: Unmodified Internal control over major programs: Material weaknesses identified? yes x no Significant deficiencies identified that are not considered to be material weaknesses? x yes no Any audit findings disclosed that are required to be reported in accordance with the Uniform Guidance? x yes no

14 Schedule of Findings and Questioned Costs - Continued Year Ended Identification of Major Programs Name of Federal Program or Cluster CFDA Number Student Financial Assistance Cluster Federal Supplemental Educational Opportunity Grant Federal Work-Study Program Federal Perkins Loan Program Federal Pell Grant Program Federal Direct Student Loans (Note 4) Dollar threshold used to distinguish between type A and type B programs: $14,600,000 Auditee qualified as a low-risk auditee? x yes no

15 Schedule of Findings and Questioned Costs - Continued Year Ended Section II Financial Statement Findings: None

16 Schedule of Findings and Questioned Costs - Continued Year Ended Section III Federal Award Findings and Questioned Costs: Finding number: Federal agency: U.S. Department of Education ( ED ) Program: Student Financial Assistance Cluster CFDA # s: and Award year: 2017 Criteria According to 34 C.F.R. Section (b)(2): A school shall, unless it expects to submit its next student status confirmation report to the Secretary within the next sixty days, notify the Secretary within thirty days if it discovers that a Direct Subsidized, Direct Unsubsidized, or Direct PLUS Loan has been made to or on behalf of a student who: i. Enrolled at that school but has ceased to be enrolled on at least a half-time basis; ii. Has been accepted for enrollment at that school but failed to enroll on at least a halftime basis for the period for which the loan was intended; or iii. Has changed his or her permanent address. Also, The Dear Colleague Letter GEN-12-6 (the Letter ) issued by ED on March 30, 2012 states that in addition to student loan borrowers, Enrollment Reporting files will include two additional groups of students: Pell Grant and Perkins Loan recipients. Condition The Federal government requires the College to report student enrollment changes to the National Student Loan Data System ( NSLDS ) within sixty days. In a sample of forty students who either graduated, withdrew from the institution, or became enrolled on less than half-time basis, we noted the following: Three students that graduated were never reported to NSLDS. One student that graduated was not reported to NSLDS within the required time frame. The time frame to report the status change was 170 days, which was 110 days late. Cause Our procedures disclosed that, although the College had policies and procedures for transmitting information to the National Student Clearinghouse ( NSC ) on at least a monthly basis to ensure reporting of all students is done in a timely manner, there were instances in which the College failed to correct enrollment files within an adequate time frame to ensure timely reporting

17 Schedule of Findings and Questioned Costs - Continued Year Ended Finding number: Continued Federal agency: U.S. Department of Education Program: Student Financial Assistance Cluster CFDA # s: and Award year: 2017 Effect Student enrollment status changes were not reported accurately and within the required time frame, which may result in the students entering repayment status later than the required time frame. Questioned Costs Not applicable Perspective Our sample was not, and was not intended to be, statistically valid. Of 40 students selected for testing, 4 students or 10% of our sample was determined to have either no status change reported to NSLDS or a status change not reported timely to NSLDS. Identification as a Repeat Finding, if applicable Not applicable Recommendation We recommend that management strengthen their oversight of the NSLDS reporting to ensure that timely and accurate reporting of enrollment information is made to the NSLDS in order for them to be in compliance with the requirements. We also recommend that management establish and enforce specific administrative procedures, according to which students who unofficially withdraw from the College will be identified and subsequently reported to the NSLDS within prescribed time frames. We recommend that the College discuss the reason(s) for the delay in reporting from the NSC to NSLDS with the NSC audit resource team. Submitting additional roster files would also reduce the likelihood of this finding occurring in the future

18 Schedule of Findings and Questioned Costs - Continued Year Ended Finding number: Continued Federal agency: U.S. Department of Education Program: Student Financial Assistance Cluster CFDA # s: and Award year: 2017 Views of Responsible Officials Management concurs with audit finding

19 Schedule of Findings and Questioned Costs - Continued Year Ended Finding number: Federal agency: U.S. Department of Education Program: Student Financial Assistance Cluster CFDA #: Award year: 2017 Criteria The Higher Education Act of 1965, as amended Section 471 states that except as otherwise provided therein, the amount of need of any student for financial assistance under this title (except subparts 1 or 2 or part A) is equal to - (1) the cost of attendance of such student, minus (2) the expected family contribution for such student, minus (3) estimated financial assistance not received under this title (as defined in section 480(j)). Condition The Financial Aid Office is responsible for awarding student federal, state and institutional financial aid. The Federal Government requires the College to compare the students Cost of Attendance ( COA ) with the students Estimated Family Contribution ( EFC ) and Estimated Financial Assistance ( EFA ). EFA must include all grants and scholarships the College anticipates the student will receive regardless of the source. The total aid awarded to a student cannot exceed the students COA. Federal, state and institutional aid is awarded by the Financial Aid Office. Testing revealed that 1 student was over-awarded Title IV aid. A student had a COA of $17,166, was awarded $5,815 of Pell, a Subsidized Direct Loan for $5,500, $6,500 of outside scholarships, and had an EFC of $-0-. Cause The student received an over-award of Title IV financial aid due to the unanticipated increase of an outside scholarship. Therefore, the student received aid that they were not entitled to receive. Effect Of the 40 students selected for testing, one student was over-awarded Title IV aid. Questioned Costs $

20 Schedule of Findings and Questioned Costs - Continued Year Ended Finding number: Continued Federal agency: U.S. Department of Education Program: Student Financial Assistance Cluster CFDA #: Award year: 2017 Perspective Our sample was not, and was not intended to be, statistically valid. Of 40 students selected for testing, one student or 2.5% of our sample was awarded financial aid in excess of the students cost of attendance. Identification as a Repeat Finding, if applicable Not applicable Recommendation The College should strengthen the review of packaging and disbursing aid to ensure that financial aid is not awarded in excess of the students cost of attendance. Views of Responsible Officials Management concurs with audit finding

21 Management s Summary Schedule of Prior Audit Finding Year Ended Finding number: Federal agency: U.S. Department of Education Program: Student Financial Assistance Cluster CFDA # s: Award year: 2016 Condition The Federal Government requires an institution to pay students federal work-study compensation at least once per month. Our testing of twenty-five students revealed one student who was not paid at least once per month. Current Year Status The College took corrective action and strengthened the controls in place over federal work study student payments as described in the prior year Management s Corrective Action Plan. The auditor did not have a finding in the current year

22 Management s Corrective Action Plan Year Ended Finding number: Federal agency: U.S. Department of Education Program: Student Financial Assistance Cluster CFDA # s: and Award year: 2017 Corrective Action Plan The Records Office will work directly with the Management Information System (MIS) Office to develop a report showing students that have graduated after their expected graduation date. Currently, MIS uploads degree conferrals approximately two weeks after the graduation date into the National Student Clearinghouse database. Records will run the new report regularly and monitor students that graduated late, typically due to late grade submissions. Records will then manually enter those students into the National Student Clearinghouse database. Timeline for Implementation of Corrective Action Plan The College plans to implement the corrective action plan by June 30, Contact Person Stephen J Nedder Jr. Controller

23 Management s Corrective Action Plan - Continued Year Ended Finding number: Federal agency: U.S. Department of Education Program: Student Financial Assistance Cluster CFDA #: Award year: 2017 Corrective Action Plan The Financial Aid and Bursar s Offices, in collaboration with Management Information Systems (MIS), are currently in the process of developing a report that will include all outside scholarships and waivers credited by the Bursar s Office to students accounts. This report will be available to both offices and can be generated at any time to provide the most current information. The new report will be run regularly by the Financial Aid Office in order to ensure the tracking of all sources of external financial assistance. Timeline for Implementation of Corrective Action Plan The College plans to implement the corrective action plan immediately. Contact Person Ken Ferus Director of Financial Aid

24 (a Component Unit of the State of Rhode Island and Providence Plantations) FINANCIAL STATEMENTS JUNE 30, 2017

25 Financial Statements C O N T E N T S Independent Auditors Report 1-2 Management s Discussion and Analysis (Unaudited) 3-17 Financial Statements: Statement of Net Position 18 Statements of Revenues, Expenses and Changes in Net Position 19 Statement of Cash Flows 20 Notes to the Financial Statements Required Supplementary Information: Schedule of Proportionate Share of the Net Pension Liability (Unaudited) 53 Schedule of Contributions (Unaudited) 54 Notes to the Required Supplementary Information (Unaudited) 55 Independent Auditors' Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 56-57

26 INDEPENDENT AUDITORS' REPORT The Board of Education of State of Rhode Island and Providence Plantations Providence, Rhode Island Report on the Financial Statements We have audited the accompanying financial statements of Rhode Island College (a component unit of the State of Rhode Island and Providence Plantations) (the "College") which comprise the statement of net position as of, and the related statements of revenues, expenses and changes in net position and cash flows for the year then ended, and the related notes to the financial statements, which collectively comprise the College's basic financial statements as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We did not audit the financial statements of Rhode Island College Foundation (the "Foundation") as of June 30, 2017 as discussed in Note 1. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the Foundation, is based solely upon the report of the other auditors. 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 of America. 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 auditors' 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 auditors consider 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. 25 Braintree Hill Office Park Suite 102 Braintree, MA P: F: Church Street Winchester, MA P: F:

27 Opinion In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the net position of Rhode Island College as of June 30, 2017, and the changes in net position, and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of Matter As discussed in Note 1, GASB Statement 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions, is effective for fiscal year 2018 and will require the College to restate beginning net position at July 1, 2017 to recognize its proportionate share of the net postemployment benefits other than pension obligations determined for the Rhode Island Retiree Health Care Benefit Plan and the Rhode Island Board of Education Health Care Insurance Retirement Plan. Our opinion is not modified with respect to that matter. Required Supplementary Information Accounting principles generally accepted in the United States of America require that management's discussion and analysis on pages 3-17, the schedule of proportionate share of the net pension liability on page 54, the schedule of contributions on page 55, and the notes to the required supplementary information on page 56 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2017, on our consideration of Rhode Island College's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Rhode Island College's internal control over financial reporting and compliance. Certified Public Accountants Braintree, Massachusetts September 29, 2017

28 (A Component Unit of the State of Rhode Island and Providence Plantations) Management s Discussion and Analysis (Unaudited) Introduction The following management discussion and analysis (MD&A) provides management s view of the financial position of Rhode Island College (the College) as of and the results of operations for the year then ended, with selected comparative information for the year ended June 30, The purpose of the MD&A is to assist readers in understanding the accompanying financial statements by providing an objective and understandable analysis of the College s financial activities based on currently known facts, decisions, and conditions. This analysis has been prepared by management, which is responsible for the completeness and fairness of the information, and it should be read in conjunction with the College s financial statements and notes thereto that follow this section. The College, founded in 1854, is the oldest of the three public institutions of higher education that is governed by the Board of Education (the BOE ). The Rhode Island Office of Postsecondary Commissioner, which operates under the direction of the Commissioner of Postsecondary Education, is the administrative and research arm of the BOE. The College s primary mission is to make its academic programs available to any qualified students who can benefit from its educational services. The College fulfills its educational mission by offering undergraduate programs in liberal arts and sciences, and in a variety of professional and pre-professional fields. The College also offers a range of selected graduate programs in arts and sciences, education, and in areas of social, public and community service. The College offers its academic programs to undergraduates of traditional age as well as to older students who often study and or work part-time while earning undergraduate or advanced degrees. The majority of students are from Rhode Island. The College also contributes directly to the cultural life of the State through ongoing theatre and concert performances, art exhibits, lectures, and films, which are all open to the public. The College was established in 1854 as the Rhode Island Normal School, focusing on teacher education. Due to diminished state support, the College was closed for a period between 1865 and 1869, when it reopened as the Rhode Island State Normal School. In 1920, the Normal School became the Rhode Island College of Education, offering a four-year program leading to the degree of Bachelor of Education. The graduate program originated in the early 1920s. During the academic year, the College was relocated from the downtown location to its current 180-acre campus on the border of Providence and North Providence. In 1959, the mission of the College was expanded to that of a comprehensive college. In 1960, the name of the institution was changed to Rhode Island College to reflect its expanded mission. The College now serves approximately 8,500 students in a variety of courses and programs both on and off campus

29 (A Component Unit of the State of Rhode Island and Providence Plantations) Management s Discussion and Analysis (Unaudited) - Continued Introduction - Continued The College is part of the Rhode Island system of public higher education that includes the Community College of Rhode Island and the University of Rhode Island, with which articulation agreements for matriculation exist for student transfers within the system. The Rhode Island Council on Postsecondary Education became the governing body for the college in Financial Highlights The College s financial position remained strong as of. At, the College s assets of $211.4 million exceeded its liabilities of $103.4 million by $108.0 million, an increase over the prior year of $17.0 million. The resulting net position is summarized into the following categories (in $ millions) for the fiscal years ended and 2016: Net Investment in Capital Assets Restricted-Expendable Unrestricted Restricted expendable net position may be expended only for the purposes authorized by the creditor, grantor, or enabling legislation. Unrestricted net position represents all other funds that do not meet the definition of Net Investment in Capital Assets or Restricted funds. For fiscal year 2017 operating revenues decreased by 3.7%, or $3.6 million, from $97.7 million in fiscal year 2016 to $94.1 million in fiscal year In addition, operating expenses increased by 2.5%, or $3.6 million from $144.1 million in fiscal year 2016 to $147.7 million in fiscal year

30 (A Component Unit of the State of Rhode Island and Providence Plantations) Management s Discussion and Analysis (Unaudited) - Continued Financial Highlights - Continued The following chart provides a graphical breakdown of total revenues (in $ millions) by category for the fiscal years ending and 2016: Total Operating Net Nonoperating Total Other Revenue Cash flow continued to be adequate for operations with a cash balance of $33.7 million at June 30, Overview of the Financial Statements The financial statements focus on the College as a whole, rather than upon individual funds or activities, and have two primary components: 1) the financial statements and 2) the notes to the financial statements. Rhode Island College Foundation (the Foundation ) is a legally separate tax-exempt component unit of Rhode Island College. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs. The Board of the Foundation is self-perpetuating and primarily consists of graduates and friends of the College. Although the College does not control the timing or the amount of receipts from the Foundation, the majority of resources received or held by the Foundation are restricted to the activities of the College by the donors. Because these resources held by the Foundation can only be used by or are for the benefit of the College, the Foundation is considered a component unit of the College and is discretely presented in the College s financial statements. Management s Discussion and Analysis is required to focus on the College, not its component unit

31 (A Component Unit of the State of Rhode Island and Providence Plantations) Management s Discussion and Analysis (Unaudited) - Continued The Financial Statements The financial statements are designed to provide readers with a broad overview of the College s finances and are comprised of three basic statements. These statements present financial information in a form similar to that used by private institutions of higher education and corporations. The Statement of Net Position presents information on all of the College s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the College is improving or deteriorating. Other factors are also relevant to assessing the College s overall financial health. These include: the trend, quality, and retention and size of student enrollments; diversification of revenue streams; management of costs; and condition of facilities. The Statements of Revenues and Expenses and Changes in Net Position show how the College s net position changed during the most recent fiscal year. This statement reports total operating revenues and expenses, non-operating revenues and expenses, and capital additions and deletions. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows only in future fiscal periods (e.g. the payment for accrued compensated absences, or the receipt of amounts due from students and others for services rendered). The Statement of Cash Flows is reported on the direct method. The direct method of cash flow reporting portrays net cash flows from operations as major classes of operating receipts (e.g. tuition and fees) and disbursements (e.g. cash paid to employees for services). The financial statements can be found on pages 18 to 20 of this report. The College reports its operations as a business-type activity using the economic measurement focus and full accrual basis of accounting. The College is a component unit of the State of Rhode Island and Providence Plantations. Therefore, the results of the College s operations, its net position and its cash flows are also summarized in the State s Comprehensive Annual Financial Report in its government-wide financial statements

32 (A Component Unit of the State of Rhode Island and Providence Plantations) Management s Discussion and Analysis (Unaudited) - Continued Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. They also provide information regarding both the accounting policies and procedures the College has adopted as well as additional detail of certain amounts contained in the financial statements. The notes to the financial statements and supplementary information can be found on pages 21 to 53 of this report. Financial Analysis As noted earlier, the difference between total assets and total liabilities may serve over time as a useful indicator of the College s financial position. For fiscal year 2017, assets exceeded liabilities by $108.0 million and for fiscal year 2016 assets exceeded liabilities by $91.0 million, as shown in the chart below: Condensed Statement of Net Position (Dollars in millions) Assets: Current assets $ 44.5 $ 46.4 Noncurrent assets Total assets $ $ Deferred outflows of resources $ 6.5 $ 3.2 Liabilities: Current liabilities $ 22.2 $ 22.5 Noncurrent liabilities Total liabilities $ $ Deferred inflows of resources $ 1.3 $ 0.8 Net position: Net investment in capital assets $ $ Restricted: Expendable Unrestricted (23.0) (19.7) Total net position $ $

33 (A Component Unit of the State of Rhode Island and Providence Plantations) Management s Discussion and Analysis (Unaudited) - Continued Financial Analysis - Continued The largest portion of the College s net position, $132.1million and $113.6 million in fiscal year 2017 and 2016, respectively, reflects its investment in capital assets (such as land, buildings, machinery, and equipment), less any related outstanding debt used to acquire those assets. The College uses these capital assets to provide services to students, faculty, and administration; consequently, these assets are not available for future spending. Although the College s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. Also, in addition to the debt noted above, which is reflected in the College s financial statements, the State of Rhode Island regularly provides financing for certain capital projects through the issuance of general obligation bonds and appropriations from the Rhode Island Capital Fund. Additional financing for certain capital projects is provided by the issuance of revenue bonds by the Rhode Island Health and Educational Building Corporation, a quasi-public state agency. The liabilities-to-assets ratio was 49% in fiscal year 2017, down from 53% in fiscal year 2016, primarily driven by an increases in total assets year-over-year of $16.8 million, or 8.6%. Net pension liability at of $42.5 million and $39.8 at June 30, 2016 is the College s largest liability

34 (A Component Unit of the State of Rhode Island and Providence Plantations) Management s Discussion and Analysis (Unaudited) - Continued Financial Analysis - Continued Condensed Statement of Revenues, Expenses and Changes in Net Position Years Ended and 2016 (Dollars in millions) Operating revenues: Tuition and fees $ 69.1 $ 70.1 Auxiliary enterprises Less: scholarship allowances (23.8) (23.0) Grants, contracts, and other Total operating revenues Operating expenses: Salaries and benefits Scholarships, grants, and contracts Other expenses Depreciation and amortizaton Total operating expenses Net operating loss (53.6) (46.3) Nonoperating revenues (expenses): State appropriations Other nonoperating revenues, net 0.4 (0.4) Net nonoperating revenues Increase (decrease) in net position before other revenues, expenses, gains, or losses (6.2) (1.9) Capital appropriations Capital gifts and grants Total other revenues Increase in net position $ 19.7 $

35 (A Component Unit of the State of Rhode Island and Providence Plantations) Management s Discussion and Analysis (Unaudited) - Continued Operating Revenues Total operating revenues for fiscal year 2017 were $94.1 million, a decrease of $3.6 million, or 3.7%, over the prior year. The most significant sources of operating revenue for the College are tuition and fees, grants and contracts, and auxiliary services. Significant changes in operating revenue resulted from: For fiscal year 2017, the College did not seek a tuition increase. In addition, enrollments declined slightly from 2016 levels, resulting in a decrease in tuition and fee revenues year over year. Auxiliary revenues declined $1.3 million from $21.2 million in fiscal year 2016 to $19.9 million in fiscal year This was primarily driven by the privatization of the College s bookstore in fiscal year This decrease in revenue (and a corresponding decrease in supplies and services) was offset by commissions revenue received by the new bookstore contract. Revenues associated with grants and contracts decreased $0.5 million from $29.4 million in fiscal year 2016 to $28.9 million in fiscal year The decrease is primarily attributed to lower indirect cost recovery received by the College related to its mix of federal and non-federal sponsored awards

36 (A Component Unit of the State of Rhode Island and Providence Plantations) Management s Discussion and Analysis (Unaudited) - Continued Operating Revenues - Continued The following summary shows major grant and contract expenses, including indirect cost charges, for the fiscal years ending, and 2016 ($ in thousands): Agency Grant/Contract/Program RI Department of Education Vision Services $ 2,202 $ 1,813 University of Rhode Island INBRE US Department of Education Upward Bound RI Department of Education RI State Personnel Development RI Department of Human Services Early Intervention US Department of Health and Human University Center on Developmental Disabilities Services RI Department of Education Education Advocates (Surrogate Parents) US Department of Education Comprehensive Transition to Post Secondary Education for Students with Intellectual Disability RI Department of Education Institute for Early Childhood Development at Rhode Island College RI Behavioral Healthcare, Sheltered Workshop Conversion Institute Developmental Disabilities and Hospitals RI Office of Higher Education Learning for Life Social Security Administration Rhode Island College's Work Incentives Planning and Assistance Project US Department of Health and Human Behavioral Health Workforce Education & Services Training for Professionals & Paraprofessionals Rhode Island Hospital Leadership Education in Neurodevelopmental and Related Disorders Training Program US Department of Education Dual Sensory Impairment RI Office of Higher Education Depth over Breadth equals Student Success University of Rhode Island EPSCoR US Department of Health and Human R15 - Neonatal Brain Injury: Mediating Factors for Services Improved Neurobehavioral Outcome RI Department of Children, Youth and RI Child Welfare Institute Families RI Department of Education RI Technical Assistance Project RI Department of Children, Youth and Families Medicaid Implementation Grant

37 (A Component Unit of the State of Rhode Island and Providence Plantations) Management s Discussion and Analysis (Unaudited) - Continued Operating Expenses Fiscal year 2017 operating expenses totaled $147.7 million, an increase of $3.6 million, or 2.5% from $144.1 million in the prior year. Of this total, $77.1 million, or 52.2% was used for instruction, academic support, student support and scholarships in fiscal year 2017 compared to $73.4 million or 51.0% in fiscal year Depreciation and amortization expense totaled $8.9 million and $8.6 million in fiscal years 2017 and 2016, respectively. The following chart provides a graphical breakdown of significant operating categories of expenses (in $ millions) for fiscal years ending and 2016: Salaries Scholarships Other Expenses Depr. Non-Operating Revenues and Expenses Net non-operating revenues for fiscal years 2017 and 2016 were $47.4 million and $44.4 million, respectively, consisting of the state appropriations, gifts, and net investment earnings. These figures represent an increase of $3.0 million over the prior year