Orangeburg-Calhoun Technical College. Financial Statements with Independent Auditor s Report for the years ended June 30, 2011 and 2010

Transcription

1 Financial Statements with Independent Auditor s Report for the years ended and 2010

2 TABLE OF CONTENTS Pages ORGANIZATIONAL DATA... 1 INDEPENDENT AUDITOR S REPORT... 2 MANAGEMENT S DISCUSSION AND ANALYSIS... 4 BASIC FINANCIAL STATEMENTS Statement of Net Assets Statement of Revenue, Expenses, and Changes in Net Assets Statement of Cash Flows Non-Governmental Discretely Presented Component Unit Statement of Financial Position Statement of Activities Notes to Financial Statements SUPPLEMENTARY INFORMATION: Independent Auditor s Report on Summarized Schedule of Financial Information Summarized Schedule of Financial Information Independent Auditor s Report on State Lottery Tuition Assistance SINGLE AUDIT ACT REQUIREMENTS: Schedule of Expenditures of Federal Awards Notes to the Schedule of Expenditures of Federal Awards Independent Auditor s Report on Internal Control over Financial Reporting And on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A Schedule of Findings and Questioned Costs Summarized Schedule of Prior Audit Findings... 52

3 Organizational Data Area Commission Members and Officers * Orangeburg County Calhoun County Larry Patrick July 2011 Chairman Robert Pauling July 2012 Marikay Harris July 2011 David Rickenbaker July 2011 John Shuler July 2012 Leroy Morant July 2014 Margaret Felder-Wilson, Ph.D. July 2014 Administrative Staff Walt Tobin, Ph. D., President William Hair, Ph.D., Vice President for Academic Affairs (interim) Retta Guthrie, Vice President for Business Affairs Bobbie Felder, Vice President for Student Services Areas Served By Commission Orangeburg and Calhoun Counties Location 3250 St. Matthews Road (Highway 601) Orangeburg, South Carolina Audit Period July 1, 2010 * Area Commission Members and Officers serve until new appointments are made Page 1

4 BROWN CPA, LLC Independent Auditor s Report Orangeburg-Calhoun Commission for Technical Education Orangeburg-Calhoun Technical College Orangeburg, South Carolina We have audited the accompanying financial statements of the business-type activities and the discretely presented component unit of Orangeburg-Calhoun Technical College (the College ), a department of the State of South Carolina, as of and for the year ended June 30, 2011 and June 30, 2010, as listed in the table of contents. These financial statements are the responsibility of the College s management. 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 the 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 of material misstatement. The financial statements of the discretely presented component unit were audited in accordance with generally accepted auditing standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in Note 1, the financial statements of the Orangeburg-Calhoun Technical College are intended to present the financial position, the changes in financial position, and cash flows, of only that portion of the business-type activities of the State of South Carolina financial reporting entity that is attributable to the transactions of the Orangeburg-Calhoun Technical College, a department of the State of South Carolina. They do not purport to, and do not, present the financial position of the State of South Carolina as of and June 30, 2010, and the changes in its financial position and its cash flows, where applicable, for the year ended in conformity with accounting principles generally accepted in the United States of America. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Orangeburg-Calhoun Technical College as of and June 30, 2010, and the changes in its financial position and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. MEMBER: P.O. Box 3288 Irmo, SC AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SOUTH CAROLINA ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS Page 2

5 In accordance with Government Auditing Standards, we have also issued our report dated September 29, 2011, on our consideration of the College s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and is important for assessing the results of our audit. Management s Discussion and Analysis is not a part of the basic financial statements but is supplementary information required by the accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Orangeburg-Calhoun Technical College taken as a whole. The accompanying schedule of expenditures of federal awards is presented for the purpose of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the financial statements. This information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects, in relation to the financial statements taken as a whole. Irmo, South Carolina September 29, 2011 Page 3

6 MANAGEMENT S DISCUSSION AND ANALYSIS As management of Orangeburg-Calhoun Technical College, we offer readers of the College s financial statements this narrative overview and analysis of the financial activities of the College for the fiscal years ended, and June 30, This discussion should be read in conjunction with the financial statements and the notes thereto, which follow this section. Responsibility for the completeness and fairness of this information rests with the College. Financial Highlights The assets ($29,129,025) of Orangeburg-Calhoun Technical College exceeded its liabilities ($2,117,951) at, by $27,011,074 (net assets). Of this amount, $7,749,264 (unrestricted net assets) may be used to meet the College s ongoing obligations. The College experienced an operating loss of $16,935,069 during the fiscal year ended, as reported in the Statement of Revenues, Expenses, and Changes in Net Assets. However, this operating loss was offset by federal and state grants of $11,353,023, state appropriations of $3,585,444 local appropriations of $1,613,231, investment income of $531,442, and other non-operating revenues. The overall increase in the College s net assets during the year was $817,633 or 3.12%. Overview of the Financial Statements The College is engaged only in Business-Type Activities (BTA) which are financed in part by fees charged to students for educational services. Accordingly, its activities are reported using the three financial statements required for proprietary funds: Statement of Net Assets; Statement of Revenues, Expenses, and Changes in Net Assets; and Statement of Cash Flows. The Statement of Net Assets presents the financial position of the College at the end of the fiscal year and classifies assets and liabilities into current and noncurrent. The difference between total assets and total liabilities is net assets, which are displayed in three broad categories: Investment in Capital Assets (net of related debt), Restricted, and Unrestricted. Net assets is one indicator of the current financial condition of the College, while the change in net assets is an indicator of whether the overall financial condition has improved or worsened during the year. The Statement of Revenues, Expenses, and Changes in Net Assets is basically a statement of net income that replaces the fund perspective with the entity-wide perspective. Revenues Page 4

7 and expenses are categorized by operating and non-operating, and expenses are reported by object type. The Statement of Cash Flows will aid readers in identifying the sources and uses of cash by the major categories of operating, capital and related financing, noncapital financing, and investing activities. This statement also emphasizes the importance of State and County appropriations by displaying them separately from operating cash flows. Financial Analysis Net assets may serve over time as a useful indicator of an entity s financial position. In the case of the College, assets exceeded liabilities by $27,011,074 at the close of the most recent fiscal year. This represents an increase of $817,633 over last year s amount of $26,193,441. Over half of the College s net assets (62%) reflect its investment in capital assets (e.g., land, buildings, machinery, and equipment). The College uses these capital assets to provide services to students and industry. Consequently, these assets are not available for future spending. Currently, the College has no outstanding debt on any of these assets. Approximately 9% of the College s net assets represent endowment resources that are subject to external restrictions on how they may be used. The remaining 29% of the College s net assets are unrestricted and may be used to meet the College s ongoing obligations. Charts and graphs follow that present specific areas of the College s financial condition on and June 30, Page 5

8 Net Assets As of and June 30, Current Assets $ 8,916,434 $8,455,157 Non-Current Assets Capital Assets, Net of Depreciation 16,849,126 17,424,082 Accounts Receivable, Net 38, ,331 External Investment Pool 3,325,364 2,793,922 Total Assets 29,129,025 28,781,492 Current Liabilities 1,173,759 1,669,091 Non-Current Liabilities- Compensated Absences 944, ,960 Total Liabilities 2,117,951 2,588,051 Net Assets Investment in Capital Assets, Net of Related Debt 16,849,126 17,424,082 Restricted 2,412,684 2,146,963 Unrestricted 7,749,264 6,622,396 Total Net Assets $27,011,074 $ 26,193,441 This schedule is prepared from the College s statement of net assets, which is presented on an accrual basis of accounting whereby assets are capitalized and depreciated. Please note that assets substantially exceed liabilities, denoting a sound financial position for the College. Net Assets at Net Assets at June 30, 2010 Restricted 9% Restricted 8% Unrestricted 29% Unrestricted 25% Invested in Capital Assets 62% Invested in Capital Assets 67% Page 6

9 Revenues, Expenses, and Changes in Net Assets For the Years Ended Increase Percent June 30, 2010 (Decrease) Change Operating Operating Revenue Tuition and Fees $4,488,644 $4,716,571 ($227,927) -4.83% Federal and State Grants 3,753,340 4,121,431 (368,091) -8.93% Auxiliary 742, ,378 (83,106) % Other 97,727 56,472 41, % Total Operating Revenue 9,081,983 9,719,852 (637,869) -6.56% Less: Operating Expenses (26,017,052) (25,561,538) (455,514) 1.78% Total Operating Income (Loss) (16,935,069) (15,841,686) (1,093,383) 6.90% Non-Operating State Appropriations 3,585,444 4,209,644 (624,200) % Orangeburg County 1,313,231 1,373,230 (59,999) -4.37% Calhoun County 300, ,327 (13,327) -4.25% Federal and State Grants 11,353,023 10,411, , % Investment Income 531, , , % Interest Income 41,714 77,364 (35,650) % Other 627, ,401 (124,553) % Total Non-Operating 17,752,702 17,372, , % Net Income (Loss) Before Other Revenue, Expenses, 817,633 1,530,527 (712,894) % Gains, or Losses Other Revenue, Expenses, Gains, or Losses Federal Capital Grants 0 1,500,000 (1,500,000) % State Capital Appropriations % Orangeburg County Capital Appropriations 0 160,000 (160,000) % Capital Grants and Gifts 0 21,174 (21,174) % Total Capital Contributions 0 1,681,174 (1,681,174) % Increase in Net Assets 817,633 3,211,701 (2,394,068) Net Assets, Beginning of Year 26,193,441 22,981,740 3,211, % Net Assets, End of Year $27,011,074 $26,193,441 $817, % Operating revenues as of decreased by $637,869 over the previous fiscal year. Tuition revenue showed a decrease of $227,927 over the prior year and auxiliary showed a decrease of $83,106. The amounts for tuition and auxiliary are not reported as gross revenues. They are shown as a net amount, after a deduction has been made for the amount covered by scholarships. Both categories had increases in gross revenue. There was also a decrease in federal and state operating grants of $368,091 compared to last fiscal year. Operating expenses as of, increased by $455,514 over the same period in the previous fiscal year. Factors contributing to this overall increase were an increase in Supplies and Other Services of $400,231. There was also an increase in Salaries and Benefits of $42,504, an increase in Depreciation Expense of $36,267, and an increase in Page 7

10 Utilities of $76,720. The college had a slight decrease in Scholarships, which dropped $100,208. Non-operating revenues increased from last fiscal year to the current year by $380,489. There was an increase in federal and state non-operating grants of $941,537 and an increase in investment income of $296,681. State appropriations decreased $624,200, Orangeburg County funding decreased $59,999 and Calhoun County funding decreased $13,327. Other areas netted to a decrease of $160,203. The college received no capital funding from external sources in During the fiscal year, the college received $1,500,000 in capital funding toward the construction of a new building and an additional $181,174 in capital funding for other projects. Following are several charts that show the college s revenues and expenditures by major categories. In some instances separate charts are provided for the last two fiscal years. Other charts may include both years to show easier comparisons. Operating Revenue Tuition and Fees 49.4% Federal & State Grants 41.3% Other Income 1.1% Auxiliary 8.2% Operating Revenue Tuition and Fees 48.5% Federal & State Grants 42.4% Other Income 0.6% Auxiliary 8.5% Page 8

11 Non Operating Revenue/Capital Contributions County Appropriations, 9.1% State Appropriations, 20.2% Interest Income, 0.2% Federal & State Grants, 64.0% Investment Income 3.0% Other Income, 3.5% Non Operating Revenue/Capital Contributions County Appropriations, 8.9% Interest Income, 0.4% State Appropriations, 22.1% Federal & State Grants, 54.6% Capital Grants and Gifts, 0.1% Investment Income (Loss), 1.2% Federal Capital Grants, 7.9% Local Capital Appropriations, 0.8% Other Income, 3.9% Page 9

12 Salaries Benefits Scholarships Utilities Supplies & Other Depreciation Operating Expenses (By Natural Classification) $474,820 $398,100 $1,140,138 $1,103,871 $3,088,598 $3,028,668 $4,470,430 $4,453,869 $5,628,993 $5,345,531 $11,214,073 $11,231, Salaries Benefits Scholarships Utilities Supplies & Other Depreciation Operating Expenses (By Natural Classification) $398,100 $404,753 $1,103,871 $837,653 $3,028,668 $3,077,052 $4,453,869 $3,173,940 $5,345,531 $4,046,117 $11,231,499 $11,138, Page 10

13 Cash Flows For the Years Ended and June 30, Cash Flows from Operating Activities $(16,445,154) $(15,002,053) Cash Flows from Non-Capital Financing Activities 17,110,139 17,051,494 Cash Flows from Capital and Related Financing Activities (255,239) (889,881) Cash Flows from Investing Activities 571,758 (1,432,129) Net Increase (Decrease) in Cash 981,504 (272,569) Cash Beginning of Year 1,651,994 1,924,563 Cash End of Year $2,633,498 $1,651,994 Capital Asset and Debt Administration The College began two large projects this year: renovating an old welding lab and roofing the Health Sciences Building. Both are scheduled to be completed during the first quarter of fiscal year Local funds were used to finance both projects. The college expects to begin the following projects during fiscal year : installation of new parking lot lights; renovation and expansion of a math lab; renovation of the chemistry lab; installation of a simulated nursing lab; installation of a canopy for welding and automotive outdoor labs, and renovation of space for IET and AUT programs. Again, local funds will be used to finance these projects. The College has no long-term debt as of. Capital Assets, Net of Accumulated Depreciation At Land Improvments Vehicles Machinery & Equipment Buildings & Improvements Land $104,930 $51,830 $822,409 $105,678 $15,764, ,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 Page 11

14 Capital Assets, Net of Accumulated Depreciation At June 30, 2010 Land Improvments $112,425 Vehicles $76,671 Machinery & Equipment $615,426 Buildings & Improvements $16,513,882 Land $105, ,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 Economic Factors In the past few years the college has experienced significant reductions in funding from the State of South Carolina. State funds are primarily allocated for personnel expenditures, even though there have also been reductions in program specific funding such as Allied Health and lottery technology. Orangeburg County significantly reduced its funding for physical plant operations, and most federal ARRA funds expired as of. To counter balance these losses, the college has taken a multi-tiered approach in an effort to maintain services to a growing student population. First, the college has increased its pursuit of various federal and private grants. Grants do not replace lost operating funds, but they do provide a variety of opportunities for enhanced academic instruction and improved services to students. The college continues to carefully monitor its spending and has undertaken a number of cost cutting measures. The third approach to balancing the budget has been to increase tuition for fall While no other increases are scheduled, additional reductions in state and /or county revenue may necessitate future increases. Tuition will also be increased periodically for increases in the Higher Education Price Index. Page 12

15 ORANGEBURG-CALHOUN TECHNICAL COLLEGE STATEMENT OF NET ASSETS Assets Current assets Cash and equivalents Investments Accounts receivable, net Inventories Interest receivable Due from component unit Prepaid expenses Other assets Total current assets Noncurrent assets External investment pool Accounts receivable, net Capital assets, net Total noncurrent assets Total assets Liabilities Current liabilities Accounts payable Accrued payroll and related liabilities Compensated absences Unearned revenue Total current liabilities Noncurrent liabilities Compensated absences Total noncurrent liabilities Total liabilities Net assets Invested in capital assets Restricted for: Nonexpendable endowment Unrestricted Total net assets June 30, 2010 $ 2,633,498 $ 1,651,994 4,000,000 4,500,000 2,042,587 1,870, , ,750 6,788 36, , ,713 4,425 4,425 8,916,434 8,455,157 3,325,364 2,793,922 38, ,331 16,849,126 17,424,082 20,212,591 20,326,335 29,129,025 28,781, , , , , ,091 93, , ,520 1,173,759 1,669, , , , ,960 2,117,951 2,588,051 16,849,126 17,424,082 2,412,684 2,146,963 7,749,264 6,622,396 $ 27,011,074 $ 26,193,441 See accompanying notes to the financial statements Page 13

16 ORANGEBURG-CALHOUN TECHNICAL COLLEGE STATEMENT OF REVENUE, EXPENSES, AND CHANGES IN NET ASSETS June 30, 2010 Operating Revenue Student tuition and fees (net of scholarship allowances of $6,306,172 for 2011 and $5,737,407 for 2010) $ 4,488,644 $ 4,716,571 Federal grants and contracts 1,161,295 1,553,565 Federal grants and contracts, American Recovery & Reinvestment Act 368,087 59,212 State grants and contracts 2,223,958 2,508,654 Auxiliary enterprises (net of scholarship allowances of $1,208,215 for 2011 and $1,202,943 for 2010) 742, ,378 Other operating income 97,727 56,472 Total operating revenue 9,081,983 9,719,852 Operating Expenses Salaries 11,214,073 11,231,499 Benefits 3,088,598 3,028,668 Scholarships 4,470,430 4,453,869 Utilities 474, ,100 Supplies and other services 5,628,993 5,345,531 Depreciation 1,140,138 1,103,871 26,017,052 25,561,538 Operating loss (16,935,069) (15,841,686) Nonoperating Revenue (Expenses) State appropriations 3,585,444 4,209,644 County appropriations 1,613,231 1,686,557 Federal grants and contracts 9,832,690 9,194,398 Federal grants and contracts, American Recovery & Reinvestment Act 1,206, ,901 State grants and contracts 314, ,187 Other nonoperating revenue 628, ,401 Investment income (loss) 531, ,761 Interest income 41,714 77,364 Loss on disposal of assets (1,010) - Total nonoperating revenue 17,752,702 17,372,213 Income (loss) before contributions and transfers 817,633 1,530,527 Federal capital grant - 1,500,000 Local capital appropriations - 160,000 Capital grants and gifts - 21,174 Change in net assets 817,633 3,211,701 Net Assets Beginning of year 26,193,441 22,981,740 End of year $ 27,011,074 $ 26,193,441 See accompanying notes to the financial statements Page 14

17 ORANGEBURG-CALHOUN TECHNICAL COLLEGE STATEMENT OF CASH FLOWS June 30, 2010 Cash flows from operating activities Tuition and fees (net of scholarship allowances) $ 4,896,824 $ 4,749,052 Federal, State and local grants and contracts 3,023,971 3,792,133 Auxiliary enterprise charges (net of scholarship allowances) 742, ,378 Other receipts 139,090 (21,448) Payments to suppliers (6,506,927) (5,621,084) Payments to employees (11,219,682) (11,236,792) Payment for benefits (3,050,271) (3,035,422) Payments to students (4,470,431) (4,453,870) Student loan receipts from lendors 4,448,045 4,837,922 Disbursements to or on behalf of student borrowers (4,448,045) (4,837,922) Net cash used in operating activities (16,445,154) (15,002,053) Cash flows from noncapital financing activities State appropriations 3,515,026 4,201,050 County appropriations 1,613,231 1,686,557 State, local and federal grants and contracts - nonoperating 11,353,023 10,411,486 Other income - nonoperating 628, ,401 Net cash provided by noncapital financing activities 17,110,139 17,051,494 Cash flows from capital and related financing activities Federal capital grant 310,953 1,189,047 Local appropriations - 160,000 Purchase of capital assets (566,192) (2,238,928) Net cash used in capital and related financing activities (255,239) (889,881) Cash flows from investing activities Proceeds from sales and maturities of investments 6,500,000 3,000,000 Interest on investments 71,758 67,871 Purchase of investments (6,000,000) (4,500,000) Net cash (used in) provided by investing activities 571,758 (1,432,129) Net increase in cash 981,504 (272,569) Cash and cash equivalents Beginning of year 1,651,994 1,924,563 End of year $ 2,633,498 $ 1,651,994 See accompanying notes to the financial statements Page 15

18 ORANGEBURG-CALHOUN TECHNICAL COLLEGE STATEMENT OF CASH FLOWS June 30, 2010 Reconciliation of operating loss to net cash used in operating activities: Operating loss $ (16,935,069) $ (15,841,686) Adjustments to reconcile operating loss to net cash used in operating activities: Depreciation expense 1,140,138 1,103,871 Provision for bad debts 243, ,185 Loss on sale of capital assets 1,010 - Changes in assets and liabilities: Receivables, net (616,799) (594,015) Inventories 100,332 (132,377) Interest receivable 30,043 (9,494) Due from component unit (315) 783 Deferred charges and prepaid expenses 62,606 (8,305) Accounts and other payables (471,224) 167,260 Accrued payroll and related liabilities (104) (11,932) Compensated absences 32,823 (662) Unearned revenue (31,595) 12,319 Net cash used in operating activities $ (16,445,154) $ (15,002,053) Supplemental Information Changes in fair value of external investment pool Equipment transferred from other State Agency $ 603,200 $ 302,632 $ - $ 66,696 See accompanying notes to the financial statements Page 16

19 ORANGEBURG-CALHOUN TECHNICAL COLLEGE FOUNDATION, INC. NON-GOVERNMENTAL COMPONENT UNIT STATEMENT OF FINANCIAL POSITION June 30, 2010 Assets Current assets: Cash and cash equivalents $ 516,276 $ 588,369 Accounts receivable 4, Contributions Receivable 75, ,644 Investments 900, ,837 Assets held for sale 14,000 14,000 Total current assets 1,510,138 1,522,189 Noncurrent assets College pool of investments 3,325,364 2,793,922 Total noncurrent assets 3,325,364 2,793,922 Total assets $ 4,835,502 $ 4,316,111 Liabilities and Net Assets Current liabilities Accounts payable $ 33 $ 393 Due to the college Noncurrent liabilities Funds held for others 3,325,364 2,793,922 Total liabilities 3,326,009 2,794,611 Net assets Unrestricted Board designated 132, ,190 Unrestricted 1,010,172 1,001,844 Total unrestricted 1,142,898 1,185,034 Temporarily restricted 178, ,450 Permanently restricted 188, ,016 Total net assets 1,509,493 1,521,500 Total liabilities and net assets $ 4,835,502 $ 4,316,111 The accompanying notes are an integral part of these financial statements. Page 17

20 ORANGEBURG-CALHOUN TECHNICAL COLLEGE FOUNDATION, INC. NON-GOVERNMENTAL COMPONENT UNIT STATEMENT OF ACTIVITIES Temporarily Permanently Unrestricted Restricted Restricted Total Support and Revenues Contributions $ 19,385 $ 107,054 $ - $ 126,439 Contributions scholarships - 15,697-15,697 Total support other than event income 19, , ,136 Event income 69, ,828 Direct event expenses (16,702) - - (16,702) Net support from events 53, ,126 Interest and dividends 18,119 5,945-24,064 Net realized gain (loss) from investments 5, ,853 Net unrealized gain from investments 123,168 30, ,005 Other income 1, ,829 Total revenues, gains, and other support 221, , ,013 Net assets released from: Program restrictions - Nonscholarships 109,018 (109,018) - - Program restrictions - Scholarships 20,539 (20,539) - - Total revenues, gains, and other support 350,884 30, ,013 Expenses Program services Scholarships 77, ,939 Faculty support 230, ,319 Other program services 29, ,014 Total program services 337, ,272 Support Services Management and general 49, ,995 Fund-raising expenses 5, ,753 Total support services 55, ,748 Total expenses 393, ,020 Change in net assets (42,136) 30,129 - (12,007) Net assets beginning of year 1,185, , ,016 1,521,500 Net assets at end of year $ 1,142,898 $ 178,579 $ 188,016 $ 1,509,493 The accompanying notes are an integral part of these financial statements. Page 18

21 Notes to Financial Statements Note 1 Summary of Significant Accounting Policies The financial statements of Orangeburg-Calhoun Technical College (the College ) were prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to governmental entities. The Government Accounting Standards Board (GASB) is the accepted standard-setting body in the United States of America for establishing governmental accounting and financial reporting principles. The more significant of the College s accounting policies are described below. Nature of Operations Orangeburg-Calhoun Technical College, a member institution of the South Carolina Technical College System, provides a range of educational programs to meet the needs of the adult population of Orangeburg and Calhoun counties. Included in this range of programs are technical and occupational associate degree, diploma and certificate curricula that are consistent with the needs of employers in the College s service area. As an integral part of this mission, the College provides a program of continuing education designed to satisfy the occupational demands of employers through retraining and upgrading skills of individual employees. The College also provides a variety of developmental education programs, support services and offerings to assist students in meeting their personal and professional educational objectives. Reporting Entity The core of the financial reporting entity is the primary government which has a separately elected governing body. As required by generally accepted accounting principles, the financial reporting entity includes both the primary government and all of its component units. Component units are legally separate organizations for which the elected officials of the primary government are financially accountable. In turn component units may have component units. The financial reporting entity, as defined by Governmental Accounting Standards Board ( GASB ) Statement No. 14. The Financial Reporting Entity, as amended by GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, consists of the primary government, organizations for which the primary government is financially accountable and other organizations for which the nature and significance of their relationship with the primary government are such that exclusion could cause the financial statements to be misleading or incomplete. As a member institute of the South Carolina Technical College System, the College is reported as a part of the primary government of the State of South Carolina (the State ) in the State s Comprehensive Annual Financial Report. In addition, the accompanying financial statements present the College as the primary government with its component unit. The College has identified the Orangeburg Ca1houn Technical College Foundation (the Foundation ) as a discretely presented component unit. However, based on the nature and significance of the Foundation s relationship with the State, the Foundation is not a component unit of the State. Page 19

22 Notes to Financial Statements The Foundation is a legally separate eleemosynary organization with a self-perpetuating Board of Trustees. It was chartered to receive private funds for the exclusive benefit and support of the College. Although the College does not control the timing or amount of receipts from the Foundation, the majority of resources or income thereon are restricted to solely support activities of the College. Therefore, the Foundation qualifies as a discretely presented component unit. As a non-governmental not-for-profit organization the Foundation s reports are prepared under guidance issued by the Financial Accounting Standards Board ( FASB ), which differs from the reporting guidance of GASB. No modifications have been made to the Foundation s financial statements included in the College s statements for these differences. Complete financial statements for the Foundation may be obtained at its administrative offices 3250 Saint Matthews Road, Orangeburg, South Carolina Financial Statements The financial statements of the College are presented in accordance with GASB Statement No. 34, Basic Financial Statements and Management s Discussion and Analysis for State and Local Governments, and GASB Statement No. 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities; The financial statement presentation required by these statements provides a comprehensive, entity-wide perspective of the College s net assets, revenues, expenses and changes in net assets and cash flows. Basis of Accounting For financial reporting purposes, the College is considered a special purpose government engaged only in business-type activities. Accordingly, the College s financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Student tuition and auxiliary enterprise fees are presented net of scholarships and fellowships applied to student accounts, while stipends and other payments made directly are presented as scholarship expenses. All significant intrainstitutional transactions have been eliminated. The College has elected not to apply FASB statements, codification additions / modifications, and interpretations issued after November 30, The Foundation s statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America for Not-for-Profit Organizations through guidance from FASB. The Foundation s revenue and expenses are recognized as increases and decreases in one of three net asset classifications, unrestricted, temporarily restricted and permanently restricted. Permanently restricted net assets consist of contributions and other inflows of assets whose use is limited in perpetuity by donor imposed stipulations. Temporarily restricted net assets consist of contributions and other transactions whose use is limited by time or purpose by donor imposed stipulations. Unrestricted net assets Page 20

23 Notes to Financial Statements are transactions which are neither temporarily nor permanently restricted. The use of temporarily restricted net assets through satisfaction of time or purpose restriction is recognized in the Statement of Activities as a simultaneous increase and decrease in the classes of net assets thereby as a release from restrictions. Cash and Cash Equivalents For purposes of the statement of cash flows, the College considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Funds invested through the State of South Carolina State Treasurer s Office are also considered cash equivalents. The Area Commission, governing board of the College, has established policies regarding the custodial credit risk of the deposits with financial institutions that require the collateralization of all deposits with obligations of the United States or its agencies. The policies require that all deposits be denominated in United States dollars. Investments Deposits and investments for the College are governed by the South Carolina Code of Laws, Section , Investment of Funds. The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain or loss on the carrying value of investments are reported as a component of investment income in the statement of revenue, expenses, and changes in net assets. Disclosures related to deposit risks, such as custodial credit risk, and investment risks, such as credit risks (including custodial credit risk and concentrations of credit risks) and interest rate risk are required by GASB Statement No. 40, Deposits and Investment Risk Disclosures an amendment to GASB Statement No. 3. The Area Commission has established investment policies allowing the investment in overnight repurchase agreements or certificates of deposits. The certificates of deposit are required to be guaranteed by obligations of the United States or collateralized by pledged securities by a third party. Furthermore the investments must be in accordance with the Code of Laws of South Carolina. The policy states that the most competitive yield available should be selected for investment purchases. The investment policy does not specifically address diversification of investments. The College is authorized by the Code of Laws of South Carolina to invest in obligations of the United States and its agencies, obligations of the State of South Carolina and its political subdivisions, collateralized or federally insured certificates of deposit, certain rated obligations of corporations within the United States, and collateralized repurchase agreements. The Foundation accounts for its investments at fair value in accordance with Financial Accounting Standards Codification section 958 Not-for-Profit Entities section 320 Investments- Page 21

24 Notes to Financial Statements Debt and Equity Securities. Changes in unrealized gain or loss are reported as increases or decreases in unrestricted net assets unless donor stipulation restricts the use of these changes for specific purposes or reinvestment in the corpus which would he reported as temporarily or permanently restricted net assets, respectively. Accounts Receivable Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students. Accounts receivable also includes amounts due from the Federal government, State and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College s grants and contracts. The College has established an allowance for uncollectible accounts receivable based upon past collection experience, current market conditions, and other factors known to management. Generally speaking the allowance has been calculated as follows: June 30, 2010 All debts over 4 years % % Debts 2-3 yrs old % 80.00% Debts 1-2 yrs old 85.00% 70.00% Debts last 3 semesters 75.00% 50.00% Next semester and beyond 15.00% 0.00% Receivables for the Foundation include contributions receivable recognized as a receivable at the date of notification of the promise to give. The amount reported net of allowance and discount for time value is the present value of the estimated future cash flows expected to be collected. Inventories Inventories for internal use are valued at cost. Inventories for resale are carried at the lower of cost or market on the first-in, first-out ( FIFO ) basis. Capital Assets Capital assets are recorded at cost at the date of acquisition or fair value at the date of donation in the case of gifts. The College follows capitalization guidelines established by the State of South Carolina. All land is capitalized, regardless of cost. Qualifying improvements that rest in or on the land itself are recorded as depreciable land improvements. Major additions and renovations and other improvements that add to the usable space, prepare existing buildings for new uses, or extend the useful life of an existing building are capitalized. The College capitalizes movable personal property with a unit value in excess of $5,000 and a useful life in excess of two years and depreciable land improvements, buildings and improvements, and intangible assets costing in excess of $100,000. Routine repairs and maintenance and library materials, except individual items costing in excess of $5,000, are charged to operating expenses in the year in which the expense was incurred. Page 22

25 Notes to Financial Statements Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally fifteen to fifty years for buildings and improvements and land improvements and two to twenty-five years for machinery, equipment and vehicles. A full year of depreciation is taken the year the asset is placed in service and no depreciation is taken in the year of disposition Unearned Revenue and Deposits Unearned revenue includes amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Unearned revenue also includes amounts received from exchange type grants and contract sponsors that have not yet been earned. Compensated Absences Employee vacation pay expense is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as a component of current and long-term liabilities in the statement of net assets and as a component of salary and benefit expenses in the statement of revenue, expense, and changes in net assets. Net Assets The College s net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been included but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted net assets expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Restricted net assets nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, appropriations, and auxiliary enterprises. These are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for any purpose. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. Page 23

26 Notes to Financial Statements The College s policy for applying expenses that can use both restricted and unrestricted resources is to first apply the expense to restricted resources and then to unrestricted resources. Classification of Revenue The College has classified its revenue as either operating or nonoperating revenue according to the following criteria: Operating revenue: Operating revenue generally results from exchange transactions to provide goods or services related to the College s principal ongoing operations. These revenue include (1) student tuition and fees received in exchange for providing educational services and other related services to students; (2) receipts for scholarships where the provider has identified the student recipients; (3) fees received from organizations and individuals in exchange for miscellaneous goods and services provided by the College; and (4) grants and contracts that are essentially the same as contracts for services that finance programs the College would not otherwise undertake. Nonoperating revenue: Nonoperating revenue includes activities that have the characteristics of nonexchange transactions. These revenue include gifts and contributions, appropriations, investment income, and any grants and contracts that are not classified as operating revenue or restricted by the grantor or to be used exclusively for capital purposes. Auxiliary Enterprises and Internal Service Activities Auxiliary enterprise revenue primarily represents revenue generated by the bookstore and cafeteria services. Revenue of internal service and auxiliary enterprise activities and the related expenditures of college departments have been eliminated. Nonexchange Transactions Nonexchange transactions involving financial or capital resources are transactions in which the College either gives value to another party without directly receiving equal value in exchange or receives value from another party without directly giving equal value in exchange. The types of nonexchange transactions the College engages in include Voluntary nonexchange transactions (certain grants and donations), Imposed nonexchange revenue (fines and penalties), and Government-mandated nonexchange transactions. Voluntary nonexchange transactions usually involve eligibility requirements that must be met before transactions are recognized. The eligibility requirements can include one or more of the following: a) The recipient has the characteristics specified by the provider. b) Time requirements specified by the provider have been met. c) The provider offers resources on a reimbursement basis and allowable costs have been incurred under the applicable program. Page 24

27 Notes to Financial Statements d) The provider s offer of resources is contingent upon a specified action of the recipient and that action occurred. Resources transmitted before the eligibility requirements are met are reported as advances by the provider and as deferred revenue by recipients. Assets from imposed nonexchange revenue are recognized when an enforceable legal claim to the assets arises or when the resources are received, whichever occurs first. Income Taxes The College is exempt from income taxes under the Internal Revenue Code. The Foundation is exempt from income taxes under section 50l(c)(3) of the Internal Revenue Code. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and affect disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. Reclassification Certain prior year amounts have been reclassified to conform with the current year presentation. Note 2 Deposits and Investments Deposits The College s policies regarding the risk of financial instruments are included in Note 1. The College is exposed to certain custodial credit risks from the use of local financial institutions for its depository accounts. At a total of $7,465,994 was on deposit with local institutions in the name of the College. These deposits are covered by the Federal Deposit Insurance Corporation up to $250,000 per institution. Of the $6,465,994 in excess of the insurance coverage, collateral securities have been pledged by the financial institution in the College s name in the amount of $6,981,240. The College did not recognize any losses due to default by counterparties relating to depository relationships. The Foundation s uninsured cash balances were $152,526 as of. Investments For the years ended and 2010 the College held no debt or equity securities. See below for a reconciliation of the investment classification differences for statement and note disclosure presentation. Page 25

28 Notes to Financial Statements The Foundation s investments included the following pools: June 30, 2010 Cost Fair Value Cost Fair Value Scholarship Endowment $ 200,635 $ 218,301 $ 203,153 $ 185,574 Term Endowment 590, , , ,263 College Pool of Investments 3,364,117 3,325,364 3,307,064 2,793,922 Total $ 4,155,097 $ 4,225,696 $ 4,144,555 $ 3,586,759 Securities held by the pool as of include the following: Cost Unrealized Gains Unrealized Losses Fair Value Money market $ 94,481 $ $ $ 94,481 Equity funds 2,906, ,801 (45,438) 2,968,475 Mutual bond funds 1,154,504 8,251 (15) 1,162,740 General Investments $ 4,155,097 $ 116,052 $ (45,453) $ 4,225,696 Securities held by the pool as of June 30, 2010 include the following: Cost Unrealized Gains Unrealized Losses Fair Value Money market $ 72,263 $ $ $ 72,263 Equity funds 2,890,619 25,642 (594,267) 2,321,995 Mutual bond funds 1,165,888 10,851 (213) 1,168,093 Corporate bonds 20, ,190 General Investments $ 4,148,770 $ 36,682 $ (594,480) $ 3,582,544 Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the investor will not be able to recover the value of the investments or collateral securities that are in the possession of the outside party. All of the investment pool assets are uninsured and unregistered, held by the counter party s trust department or agent in the investor s name. The Foundation has not experienced any losses resulting from custodial credit risk or credit risk. Credit Risk Credit risk is managed through the diversification of securities and types of securities within the investment pools. Credit ratings are not available for investments in debt securities. Page 26

29 Notes to Financial Statements Interest Rate Risk Interest rate risk is managed through the diversification of securities and types of securities within the investment pools. Liquidity Risk Liquidity risk is managed through the diversification of types of securities, issuers, and issues within the investment pools. The following schedule reconciles cash and investments as reported in the Statement of Net Assets to the footnote disclosures provided for deposits and investments: Statement of net assets June 30, 2010 Cash and cash equivalents $ 2,633,498 $ 1,651,994 Investments 4,000,000 4,500,000 Total College 6,633,498 6,151,994 Statement of financial position Current assets: Cash and cash equivalents 516, ,369 Investments 900, ,837 Noncurrent assets: Investments 3,325,364 2,793,922 Total component unit 4,741,972 4,175,128 Total reporting entity $ 11,375,470 $ 10,327,122 Note disclosure Cash on hand $ 2,375 $ 2,375 Deposits with banks 6,631,123 6,149,619 Total College 6,633,498 6,151,994 Deposits with banks 516, ,369 Investments 4,225,696 3,586,759 Total component unit 4,741,972 4,175,128 Total reporting entity $ 11,375,470 $ 10,327,122 Page 27