DELAWARE COUNTY COMMUNITY COLLEGE

Transcription

1 FINANCIAL AND COMPLIANCE REPORT Years Ended

2 TABLE OF CONTENTS Pages INDEPENDENT AUDITOR S REPORT MANAGEMENT S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS Statements of Net Position Statements of Revenues, Expenses, and Changes in Net Position Statements of Cash Flows Notes to Basic Financial Statements REQUIRED SUPPLEMENTARY INFORMATION Schedule of the College s Proportionate Share of the Net Pension Liability - PSERS Pension Plan Schedule of the College s Proportionate Share of the Net Pension Liability - SERS Pension Plan Schedule of College Contributions - PSERS Pension Plan Schedule of College Contributions - SERS Pension Plan Schedule of Funding Progress - Other Postemployment Benefits Plan SUPPLEMENTARY INFORMATION Single Audit 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 FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY UNIFORM GUIDANCE SCHEDULE OF FINDINGS AND QUESTIONED COSTS STATUS OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS... 81

3 Herbein + Company, Inc Century Boulevard Reading, PA P: F: INDEPENDENT AUDITOR S REPORT To the Board of Trustees Delaware County Community College Media, Pennsylvania Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities and the aggregate discretely presented component unit of the Delaware County Community College, as of and for the years ended June 30, 2017 and 2016, and the related notes to the financial statements, which collectively comprise Delaware County Community College s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and the aggregate discretely presented component unit of Delaware County Community College, as of, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Succeed With Confidence 1

4 Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, pension, and other postemployment benefit information on pages 67 through 71 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. Supplementary Information Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise the Delaware County Community College s basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 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 basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 13, 2017, on our consideration of the Delaware County Community 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 Delaware County Community College s internal control over financial reporting and compliance. Reading, Pennsylvania December 13, 2017 Succeed With Confidence 2

5 Delaware County Community College 901 S. Media Line Road Media, PA Management s Discussion and Analysis Academically, Fiscal Year was a great year for the College. Although in the aggregate overall enrollment declined, there were some promising enrollment trends. These included enrollment increases of 27% at the Upper Darby Center; 59% in High School Dual Enrollment; 37% in new Asian students; and 4% in the number of high school graduates who choose to attend the College. Fall-to-Spring and Fall-to-Fall student retention rates of 72% and 51% respectively were close to the College s all-time retention highs. During the year, the College received a number of significant academic grants, particularly in the career and technical areas. These included a National Science Foundation Grant ($765,224) for Electro-Mechanical Technology; a J. P. Morgan Grant ($125,000) to support Electro-Mechanical scholarships; a Pennsylvania Labor and Industry Workforce Development Grant ($534,114) to support Computer Numeric Control Manufacturing; and a Pennsylvania Department of Labor and Industry Advanced High Demand Occupation Education and Training Strategic Innovation Grant ($198,067) for Virtual Reality/Augmented Reality. The College had several successful accreditation visits including the reaccreditation of the Paralegal Program by the American Bar Association, the reaccreditation of the Medical Billing and Coding Program by the American Health Information Management Association, the reaccreditation of the Nursing Program by the Accreditation Commission for Education in Nursing, and the initial accreditation of the Art Department by the National Association of Schools of Art and Design. The academic divisions at the College continued to develop new programs and courses and assess present programs and courses to maintain high educational standards and quality. Four new certificate programs were developed: Web Programming, Network Engineering, Medical Assistant, and First Assistant in Surgery. An additional ten programs were reviewed by the academic areas and the College s governance system. A dozen new courses were developed, and an additional 30 were revised. For the eighth straight year, The Chronicle of Higher Education has recognized the College as One of the Great Colleges to Work For. In addition, the College completed its sixth year as a Leader College of Achieving the Dream, a prestigious national initiative designed to enhance student success, retention, and program completion. 3

6 Delaware County Community College 901 S. Media Line Road Media, PA Management s Discussion and Analysis The College has made an investment in the use of technology tools to facilitate student success. Starfish, an early alert system that was implemented in the Fall, is designed to intervene and provide help for students who are struggling or at risk of failing. A new online orientation was developed during the year and implemented for Fall The College changed its management learning system from Web Study to Canvas to provide better support for faculty and students for academic courses being offered at the College. Canvas offers students and faculty increased features for faculty presentation of course materials, student/faculty interaction in the learning process, and support from the company for both students and faculty. After the first year of use, faculty, staff, and students have been very positive in their evaluations of Canvas. The College filled a number of senior level positions, including the position of President. Dr. Jerry Parker, President, for 14 years, retired on June 30, 2017, and after a national search, was replace by Dr. L. Joy Gates Black on July 1, Fiscal Year 2016/2017 Financial Highlights The College s net position decreased $332,265 as a result of this year s operations. This amount is net of a depreciation expense of $6,709,639. During Fiscal Year 2016/2017, the College realized revenue from several principal funding sources: The College raised credit tuition rates to $113 from $110 per credit hour, and the basic instructional support fee increased by $3 per credit hour. During Fiscal Year 2016/2017, the College s enrolled credit hours totaled 223,205. The appropriation received from the Commonwealth of Pennsylvania totaled $24,602,755. The appropriation from the Sponsoring School Districts totaled $8,157,221. Total operating expenses, absent of depreciation and financial aid, increased by $4,527. Significant items by object were: In the aggregate, salaries and wages increased by.4%. This increase resulted from a cost of living increase for the Administrative and Support Staff groups, contractual increases for the College s full-time faculty offset by salary savings associated with reductions in manpower. 4

7 Delaware County Community College 901 S. Media Line Road Media, PA Management s Discussion and Analysis The Pennsylvania State Education Association represents the College s full-time faculty. In Fiscal Year 2012/2013, the College entered into a five-year contract with the Association. In Fiscal Year 2016/2017, the contracted increase for faculty was approximately.07%. In Fiscal Year 2015/2016, contractually obligated salaries totaled approximately $13.7 million, in Fiscal Year 2016/2017 that amount approached $13.8 million. Pension Benefits In Fiscal Year 2016/2017, on-going pension costs increased by approximately $161,500 or 3.9%. During the fiscal year, the College made $4.2 million of payments for its share of pension costs for its employees. In the aggregate, other supplies and service costs increased by 9.1% or by $1.3 million. Specific increases follow: o Software License Fees increased by $443,000. o Contracted Instructional Fees increased by $242,000 o Legal Fees and Expenses increased by approximately $110,000. o Special Access Service Fees increased by approximately $99,000. o Advertising Services increased by approximately $157,000. The College earned approximately $1.3 million on investments during the year. With the assistance of the Commonwealth of Pennsylvania, the College s Sponsoring School Districts, and increases in student fees, the College continued to make significant upgrades to its physical plant. What follows is a list of some of the projects that were capitalized this fiscal year: The cafeteria and servery areas on the Marple Campus were completely renovated at a cost of $1.1 million. A Learning Commons was built along with student spaces upgraded on the Downingtown Campus at a cost of $1.5 million. Improvements were made at the College s Southeast Center that totaled $421,000. Significant year-end capital assets consist of the following: 5

8 Delaware County Community College 901 S. Media Line Road Media, PA Management s Discussion and Analysis Land and land improvements $ 9,495,579 $ 8,968,714 Building and building improvements 138,322, ,874,016 Furniture and equipment 28,212,311 26,545,216 Library equipment 1,703,068 1,657,354 Construction in progress 2,438,763 2,670, ,172, ,715,476 Less accumulated depreciation 77,880,718 71,173,934 Total $ 102,291,879 $ 102,541,542 During Fiscal Year 2016/2017, the College received approximately $42,127,000 from various grants and contracts. Approximately 95% of this money was in the form of financial aid funds. The remaining funds were made up of various operating grants, including: Career and Technical Education Community College Allocation 605,467 US Department of Health and Human Services Education KEYS Grant 391,315 Office of Employment and Training Training & Support Services 193,464 Trade Adjustment Assistance 185,975 NSF Electro-Mechanical Technology Grant 182,586 Workforce Development Grant 179,871 PDE Adult Education GED 159,159 ACT 101 State Grant 84,285 PA Department of Labor and Industry New Choices 80,233 6

9 Delaware County Community College 901 S. Media Line Road Media, PA Management s Discussion and Analysis The College presents its financial statements in accordance with accounting principles generally accepted in the United States of America and the standards applicable to financial reporting contained in Governmental Accounting Standards Board (GASB). The following is a description of the statements: The Statement of Net Position includes all assets, deferred outflows and inflows of resources and liabilities. It is prepared under the accrual basis of accounting, whereby revenues and assets are recognized when the service is provided, and expenses and liabilities are recognized when others provide the service, regardless of when cash is exchanged. The Statement of Revenues, Expenses, and Changes in Net Position presents the revenues earned and the expenses incurred during the year. Activities are reported as either operating or non-operating. The financial reporting model classifies Commonwealth and sponsoring school districts distributions, appropriations, and gifts as non-operating revenues. Public colleges dependency on this type of revenue results in an operating deficit. The utilization of long-lived assets, referred to as Capital Assets, is reflected in the financial statements as depreciation, which amortizes the cost of an asset over its expected useful life. The Statement of Cash Flows presents the information related to cash inflows and outflows summarized by operating, capital, and non-capital financing, and investing activities. 7

10 Delaware County Community College 901 S. Media Line Road Media, PA Management s Discussion and Analysis The following pages highlight condensed financial information: Condensed Statement of Net Position June 30, ASSETS Current assets $ 31,808,310 $ 34,315,545 Noncurrent Assets Capital Assets, net of Depreciation 102,291, ,541,542 Investments 52,290,415 41,170,427 TOTAL ASSETS $ 186,390,604 $ 178,027,514 DEFERRED OUTFLOWS OF RESOURCES 7,425,441 6,434,253 LIABILITIES Current liabilities $ 17,862,007 $ 16,043,338 Noncurrent liabilities 90,877,778 83,235,962 Total liabilities 108,739,785 99,279,300 DEFERRED INFLOWS OF RESOURCES 1,600,400 1,374,342 NET POSITION Net investment in capital assets 32,769,183 35,287,863 Restricted expendable 14,078 14,078 Restricted for capital projects 3,439, ,895 Unrestricted 47,252,826 48,037,289 Total net position $ 83,475,860 $ 83,808,125 8

11 Delaware County Community College 901 S. Media Line Road Media, PA Management s Discussion and Analysis Condensed Statement of Revenues, Expenses and Change in Net Position For the Years Ending June 30, Operating revenues Tuition and fees $ 24,825,222 $ 23,547,825 Auxiliary enterprises 534, ,747 Grants, gifts and contracts 4,708,722 4,482,599 Other Operating revenues 1,423,389 1,148,549 Total operating revenues 31,491,712 29,720,720 Operating expenses 101,549, ,685,983 Operating loss (70,057,424) (72,965,263) Nonoperating revenues (expenses) Appropriations 27,126,761 26,429,384 Federal Grants and Contracts 37,418,276 39,765,549 Other nonoperating income 1,274,432 1,395,401 Other nonoperating expense (2,967,342) (2,992,755) Net nonoperating revenues (expenses) 62,852,127 64,597,579 Net loss before other revenues (7,205,297) (8,367,684) Other Revenues Capital appropriations 5,633,215 5,352,549 Capital gifts, grants and transfers 1,239,817 1,179,027 Total other revenues 6,873,032 6,531,576 Increase in net position (332,265) (1,836,108) Beginning net position 83,808,125 85,644,233 Ending net position $ 83,475,860 $ 83,808,125 9

12 Delaware County Community College 901 S. Media Line Road Media, PA Management s Discussion and Analysis Operating Expenses by Function Instruction $ 44,344,309 $ 43,612,673 Academic Support 5,010,982 5,314,252 Student Services 11,058,927 11,427,873 Institutional support 10,935,501 10,707,367 Operating and maintenance of plant 8,109,453 8,369,637 Financial Aid 15,081,034 16,479,138 Depreciation 6,709,639 6,452,909 Auxiliary Services 299, ,134 Total operating expenses by functional classification $ 101,549,136 $ 102,685,983 Operating Expenses by Object Salaries and wages $ 46,985,954 $ 46,805,670 Benefits 16,119,989 17,421,878 Scholarships and Fellowships 14,708,677 16,318,357 Utilities 1,014,643 1,018,373 Other supplies and services 16,010,234 14,668,796 Depreciation 6,709,639 6,452,909 Total operating expenses by object classification $ 101,549,136 $ 102,685,983 The Statement of Cash Flows provides information about cash receipts and cash payments during the year. This statement also helps users assess the College s ability to generate net cash flow and its ability to meet obligations as they become due. The primary cash receipts from operating activities consist of tuition and fees, auxiliary enterprises, and grants and contracts. Major cash outlays in operating activities consist of salaries and benefits and other services. State and local appropriations are the primary source of non-capital financing activities. Purchases of capital assets are the primary use of capital financing activities. Cash flows from investment activities represent income earned on money management accounts and cash invested in the Pennsylvania Local Government Investment Trust (PLGIT). 10

13 Delaware County Community College 901 S. Media Line Road Media, PA Management s Discussion and Analysis In January 2017, the College sold a bond. Proceeds from that sale are being used to support a STEM building on our Downingtown Campus along with classroom renovations, student walkways, and roof replacements on our Marple Campus. It should be noted, included in the Fiscal Year 2016/2017 Current Assets figure of $31,808,310 is $10,737,553 of Restricted Cash and Cash Equivalents related to the Series of 2014 and 2017 Bond issuance proceeds. Statement of Cash Flows Summary For the Years Ended June Cash provided by (used for): Operating activities $ (63,354,330) $ (68,179,775) Noncapital financing activities 64,863,542 65,440,939 Capital and related financing activities 6,187,643 (7,155,008) Investing activities (9,845,556) (27,981,026) Net increase (decrease ) in cash (2,148,701) (37,874,870) Cash, beginning of year 31,094,943 68,969,813 Cash, end of year $ 28,946,242 $ 31,094,943 In June 30, 2017, the College had $81.3 million in debt outstanding compared to the $72.9 million and $77.2 million on June 30, 2016 and 2015, respectively. The table below summarizes the amount by type of debt instrument. 11

14 Delaware County Community College 901 S. Media Line Road Media, PA Management s Discussion and Analysis Outstanding Debt, for the Years Ended June Lease Obligations $ - $ 26,824 $ 60,963 Notes Payable 2,077,838 35,961 - Bonds Payable, net 79,197,249 72,877,050 77,126,278 Totals $ 81,275,087 $ 72,939,835 $ 77,187,241 This financial report is designed to provide a general overview of the College s financial position. The success from past fiscal years have continued to give the College the ability to make several much needed infrastructure improvements to its Marple and Downingtown Campuses along with providing the opportunity of affordable access to other underserved areas in both Delaware and Chester Counties. In closing, the management of Delaware County Community College is committed to having the College remain both academically and financially strong. Management continues to be steadfast in its commitment to the mission of Delaware County Community College which is to facilitate learning by providing quality educational programs and services that are student focused, accessible, comprehensive, and flexible to meet the educational needs of the diverse communities it serves. In doing so, the College will enable its students to develop themselves to the limit of their desires and capabilities, and to be successful. Contacting the College s Financial Management If you have questions about this report or require additional financial information, contact Delaware County Community College, Administration Office, 901 South Media Line Road, Media, Pennsylvania John A. Glavin, Jr. Vice President for Administration and Treasurer 12

15 STATEMENTS OF NET POSITION ASSETS Delaware County Delaware County Community College Community College Educational Foundation June 30 June CURRENT ASSETS Cash and investments $ 18,208,689 $ 29,732,400 $ 311,511 $ 267,769 Restricted cash for capital projects 10,737,553 1,362,543 Receivables: Commonwealth of Pennsylvania 401, ,731 Federal and state agencies 1,102,961 2,431,421 Student and other, net 1,174, , Contributions receivable, current portion 12,111 8,965 Prepaid expenses 163, ,962 Other current assets 19,239 25,222 TOTAL CURRENT ASSETS 31,808,310 34,315, , ,764 NONCURRENT ASSETS Capital assets: Land 2,042,033 2,042,033 Construction in progress 2,438,763 2,670,176 Depreciable assets, net 97,811,083 97,829,333 Capital assets, net 102,291, ,541,542 Other assets: Contributions receivable noncurrent, net 6,507 6,589 Charitable Lead Annuity Trust Receivable, net 206, ,407 Investments 52,290,415 41,170,427 4,160,026 4,562,979 TOTAL NONCURRENT ASSETS 154,582, ,711,969 4,372,675 4,799,975 TOTAL ASSETS 186,390, ,027,514 4,696,327 5,076,739 DEFERRED OUTFLOWS OF RESOURCES Deferred charge on bond refunding 4,454,611 4,792,508 Deferred outflows of resources for pension 2,074, ,205 Pension contributions made subsequent to the measurement date 896, ,540 TOTAL DEFERRED OUTFLOWS OF RESOURCES 7,425,441 6,434,253 See accompanying notes. 13

16 STATEMENTS OF NET POSITION CONTINUED LIABILITIES Delaware County Delaware County Community College Community College Educational Foundation June 30 June CURRENT LIABILITIES Accounts payable 2,638,442 2,024,721 14,005 Accounts payable to the College 122, ,192 Accrued compensation and benefits 4,226,075 3,951,062 Accrued interest payable 819, ,389 Unearned revenue 4,333,572 3,635,699 Other current liabilities 308, ,435 Capital lease obligations current 26,824 Notes payable current 593,847 35,961 Bonds payable, net current 4,941,755 4,398,028 Postemployment benefits obligation 836,221 TOTAL CURRENT LIABILITIES 17,862,007 16,043, , ,192 NONCURRENT LIABILITIES Notes payable 1,483,991 Bonds payable, net 74,255,494 68,479,022 Net pension liability 13,535,865 12,265,441 Other postemployment benefits obligation 1,602,428 2,491,497 TOTAL NONCURRENT LIABILITIES 90,877,778 83,235,960 TOTAL LIABILITIES 108,739,785 99,279, , ,192 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources for pension 1,600,400 1,374,342 NET POSITION Net investment in capital assets 32,769,183 35,287,863 Restricted expendable 14,078 14,078 Restricted for capital projects 3,439, ,895 Unrestricted 47,252,826 48,037,289 92, ,975 Temporarily restricted 2,484,015 2,952,995 Permanently restricted 1,983,899 1,874,577 TOTAL NET POSITION $ 83,475,860 $ 83,808,125 $ 4,559,955 $ 4,933,547 See accompanying notes. 14

17 STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION OPERATING REVENUES Student tuition and fees (net of scholarship allowance of $25,136,147 in 2017 and $25,976,631 in 2016) 24,825,222 Delaware County Delaware County Community College Community College Educational Foundation June 30 June $ $ 23,547,825 $ $ Auxiliary enterprises 534, ,747 Federal grants and contracts 1,781,628 1,522,525 Commonwealth of PA grants and contracts 2,467,803 2,536,277 Other gifts, grants, and contracts 459, ,797 1,651,377 1,269,877 Investment income 91, ,871 Realized gains (losses) on investments 121,115 86,072 Unrealized gains (losses) on investments 135,411 (249,928) Other operating revenues 1,423,389 1,148,549 TOTAL OPERATING REVENUES 31,491,712 29,720,720 1,998,946 1,246,892 OPERATING EXPENSES Instruction 44,344,309 43,612,673 Academic support 5,010,982 5,314,252 Student services 11,058,927 11,427, , ,939 Institutional support 10,935,501 10,707,367 2,033,374 1,911,408 Operations and maintenance of plant 8,109,453 8,369,637 Financial aid 15,081,034 16,479,138 Depreciation 6,709,639 6,452,909 Auxiliary services 299, ,134 Other expenses 154, ,080 TOTAL OPERATING EXPENSES 101,549, ,685,983 2,481,860 2,431,427 OPERATING LOSS (70,057,424) (72,965,263) (482,914) (1,184,535) NONOPERATING REVENUES (EXPENSES) Appropriations: Commonwealth of Pennsylvania 19,133,486 18,635,522 Commonwealth of Pennsylvania benefits 1,690,871 1,659,740 Sponsoring school districts 6,302,404 6,134,122 Federal grants and contracts 37,418,276 39,765,549 Investment income, net 1,274,432 1,395,401 Interest expense on capital asset related debt (2,967,342) (2,992,755) NET NONOPERATING REVENUES (EXPENSES) 62,852,127 64,597,579 LOSS BEFORE OTHER REVENUES (7,205,297) (8,367,684) (482,914) (1,184,535) OTHER REVENUES State capital appropriations 3,778,398 3,481,547 Local capital appropriations 1,854,817 1,871,002 Capital gifts and grants 1,239,817 1,179,027 Long term gifts and grants 109,322 92,335 TOTAL OTHER REVENUES 6,873,032 6,531, ,322 92,335 CHANGE IN NET POSITION (332,265) (1,836,108) (373,592) (1,092,200) NET POSITION BEGINNING OF YEAR 83,808,125 85,644,233 4,933,547 6,025,747 NET POSITION END OF YEAR $ 83,475,860 $ 83,808,125 $ 4,559,955 $ 4,933,547 See accompanying notes. 15

18 STATEMENTS OF CASH FLOWS Delaware County Community College June CASH FLOWS FROM OPERATING ACTIVITIES Student tuition and fees $ 24,218,614 $ 23,639,262 Nonsponsoring plant fees 294, ,484 Grants, gifts, and contracts 5,572,554 3,437,870 Payments to suppliers for goods and services (16,170,530) (17,426,316) Payments to employees (64,388,823) (63,507,014) Payments for financial aid (14,838,876) (16,318,357) Auxiliary enterprises 534, ,747 Other receipts 1,423,389 1,148,549 NET CASH USED FOR OPERATING ACTIVITIES (63,354,330) (68,179,775) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Federal grants 37,882,904 39,210,438 State appropriations 20,678,234 20,096,379 Local appropriations 6,302,404 6,134,122 NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES 64,863,542 65,440,939 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital appropriations: State appropriations 3,778,398 3,481,547 Sponsor appropriations 1,854,817 1,871,002 Capital grants 1,239,817 1,179,027 Purchases of capital assets (6,474,249) (6,921,278) Proceeds from bonds payable 10,742,817 Proceeds from notes payable 2,677, ,641 Principal paid on bonds payable (4,018,359) (3,863,182) Principal paid on notes payable (635,482) (286,680) Principal paid on capital lease obligations (26,824) (34,139) Interest paid on capital debt (2,950,650) (2,903,946) NET CASH PROVIDED BY (USED FOR) CAPITAL AND RELATED FINANCING ACTIVITIES 6,187,643 (7,155,008) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (26,001,333) (141,443,005) Proceeds from the sale of investments 15,078, ,821,755 Interest on investments 1,077, ,224 NET CASH USED FOR INVESTING ACTIVITIES (9,845,556) (27,981,026) NET DECREASE IN CASH AND CASH EQUIVALENTS (2,148,701) (37,874,870) CASH AND CASH EQUIVALENTS BEGINNING OF YEAR 31,094,943 68,969,813 CASH AND CASH EQUIVALENTS END OF YEAR $ 28,946,242 $ 31,094,943 See accompanying notes. 16

19 STATEMENTS OF CASH FLOWS CONTINUED Delaware County Community College June 30 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH USED FOR OPERATING ACTIVITIES Operating income (loss) $ (70,057,424) $ (72,965,263) Adjustments to reconcile operating income (loss) to net cash used for operating activities: Depreciation expense 6,709,639 6,452,909 Bad debt expense 1,134,211 1,239,164 Loss on sale of capital asset 14,274 Changes in operating assets and deferred outflows and liabilities and deferred inflows: Accounts receivable (1,279,897) (1,121,465) Prepaid expenses 212,732 (89,345) Other assets (27,017) 43,197 Deferred outflows of resources for pension (1,329,085) (989,327) Accounts payable 613,721 (1,501,722) Accrued expenses 275, ,854 Unearned revenue 697,873 (766,507) Other liabilities (89,562) (191,278) Net pension liability 1,270,424 1,597,604 Other postemployment benefits obligation (1,725,290) 185,189 Deferred inflows of resources for pension 226,058 (584,785) NET CASH USED FOR OPERATING ACTIVITIES $ (63,354,330) $ (68,179,775) See accompanying notes. 17

20 Delaware County Community College (the College ) is a public, comprehensive, two-year, co-educational institution with its main campus located in Media, Pennsylvania. The College is funded through a diversified financial support system from 12 sponsoring school districts, the Commonwealth of Pennsylvania, and the students. The College was organized on March 1, 1967, by certain sponsoring school districts of Delaware County and was approved under provisions of the Community College Act of The major accounting principles and practices followed by the College are presented below to assist the reader in evaluating the financial statements and the accompanying notes. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Reporting Entity As required by generally accepted accounting principles, the financial statements of the reporting entity include those of the College (the primary government) and its component units. The College used guidance contained in generally accepted accounting principles to evaluate the possible inclusion of related entities (foundations, boards, councils, etc.) within its reporting entity. The criteria used by the College for inclusion are financial accountability and the nature and significance of the relationships. In determining financial accountability in a given case, the College reviews the applicability of the following criteria. The College is financially accountable for: Organizations that make up the legal College entity. Legally separate organizations if College officials appoint a voting majority of the organization s governing body and the College is able to impose its will on the organization, or if there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the College as defined below. Impose its will - If the College can significantly influence the programs, projects or activities of, or the level of services performed or provided by the organization. Financial benefit or burden - exists if the College (1) is entitled to the organization's resources; (2) is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide support to the organization; or (3) is obligated in some manner for the debt of the organization. Organizations that are fiscally dependent on the College. Fiscal dependency is established if the organization is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval by the College. 18

21 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED A. Reporting Entity - continued Based on the foregoing criteria, the reporting entity has been defined to include all criteria for which the College is financially accountable or for which there is another significant relationship. Specific information on the nature of the various potential component units and a description of how the aforementioned criteria have been considered in determining whether or not to include or exclude such units in the College's financial statements are provided in the following paragraphs. 1. Discretely Presented Component Unit - Delaware County Community College Educational Foundation Component units which are not blended as part of the primary government are discretely presented, which entails reporting component unit financial data in a column separate from the financial data of the primary government. The component unit presented in this way is the Delaware County Community College Educational Foundation (the Foundation ). The Foundation is a legally separate, tax-exempt entity, which acts primarily as a fundraising organization to supplement the resources that are available to the College in support of its programs. Although the College does not control the timing or amount of receipts from the Foundation, the majority of the Foundation s resources are restricted for the use or for the benefit of the College. The Foundation s financial statements are discretely presented in the College s financial statements. The financial activity of the Foundation is presented as of and for the years ended. Complete financial statements for the Foundation may be obtained at the College s Institutional Advancement office. During the years ended, the College provided accounting and administrative services to the Foundation. The Foundation paid fees of $7,500 in both 2017 and Contributed services for salaries and benefits of $86,618 and $123,825 were recognized for the years ended June 30, 2017 and 2016, respectively. The Foundation provided institutional support to College related activities of $2,008,513 and $1,851,895 in the years ended, respectively. At June 30, 2017 and 2016, $122,367 and $143,192, respectively, was payable to the College. 19

22 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED B. Basis of Presentation The College s financial statements are presented on the full accrual basis in accordance with accounting principles generally accepted in the United States of America. For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. All activities of the College are accounted for within a single proprietary (enterprise) fund. Proprietary funds are used to account for operations that are (a) financed and operated in a manner similar to private business enterprises where the intent of the governing body is that the cost (expenses, including depreciation) of providing goods or services to the general public on a continuing basis be financed or recovered primarily through user charges; or (b) where the governing body has decided that periodic determination of revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance, public policy, management control, accountability, or other purposes. C. Measurement Focus and Basis of Accounting The accounting and financial reporting treatment is determined by the applicable measurement focus and basis of accounting. Measurement focus indicates the type of resources being measured such as current financial resources or economic resources. The basis of accounting indicates the timing of transactions or events for recognition in the financial statements. The College s activity is reported using the economic resources measurement focus and the accrual basis of accounting. Accordingly, all assets and all liabilities associated with operations are included on the statement of net position. Net position (i.e. total assets and deferred outflows net of total liabilities) is segregated into net investment in capital assets, restricted expendable, and unrestricted elements. D. Budgetary Information Budgetary Accounting The College adopts flexible annual operating and capital budgets. Budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. The current operating budget details the College s plans to earn and expend funds for charges incurred for operation, maintenance, certain interest and general functions, and other charges for the year. The capital budget details the plan to receive and expend cash-basis capital contribution fees, special assessments, grants, borrowings, and certain revenues for capital projects. All unexpended and unencumbered appropriations in the operating budget lapse at the end of the year. No appropriation for a capital project in the capital budget lapses until the purpose for which the funds were appropriated has been accomplished or abandoned. 20

23 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED D. Budgetary Information continued Budgetary Accounting continued Management submits a proposed budget to the College s Board of Trustees and the budget is adopted prior to July 1. Budgetary revisions are approved by the board during the fiscal year. During the year, management is authorized to transfer budgeted amounts between line items within the College s divisions. E. Assets, Liabilities, Deferred Inflows/Outflows of Resources, and Net Position 1. Cash and Investments For purposes of the statement of cash flows, the College considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Investments are valued at fair value in accordance with Governmental Accounting Standards Board Statement No. 72, Fair Value Measurement and Application, except for investments in external investment pools, which are valued at amortized costs if required criteria are met as outlined in Governmental Accounting Standards Board Statement No. 79, Certain External Investment Pools and Pool Participants. The College categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. 2. Accounts Receivable Accounts receivable and students and other are reported at net realizable value. Accounts are written off when they are determined to be uncollectible based upon management s assessment of individual accounts. The allowance for doubtful accounts is estimated based on the College s historical losses and periodic review of individual accounts. Bad debt expense is netted against student tuition and fees. Bad debt expense was $1,134,211 and $1,239,164 in 2017 and 2016, respectively. 3. Prepaid Expenses Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid expenses. The costs of prepaid items are recorded as expenses when consumed rather than when purchased. 21

24 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED E. Assets, Liabilities, Deferred Inflows/Outflows of Resources, and Net Position continued 4. Capital Assets, Depreciation, and Amortization The College generally capitalizes assets with cost of $2,500 or more as purchase and construction outlays occur. Assets purchased or constructed with long term debt may be capitalized regardless of the threshold established. The costs of normal maintenance and repairs that do not add to the asset value or materially extend useful lives are not capitalized. Capital assets, including those of component units, are depreciated using the straight line method. When capital assets are disposed, the cost and applicable accumulated depreciation are removed from the respective accounts, and the resulting gain or loss is recorded in operations. In the case of donations, the College values these capital assets at the estimated fair value of the item at the date of its donation. Estimated useful lives, in years, for depreciable assets are as follows: Years Land improvements Buildings and building improvements Furniture and equipment Network equipment Library books years years 5 25 years 4 5 years 7 years Interest costs incurred during the construction phase of capital assets are capitalized when incurred on debt where proceeds were used to finance the construction of assets. Interest earned on proceeds of tax exempt borrowing arrangements restricted to the acquisition of qualifying assets is offset against interest costs in determining the amount to be capitalized. 22

25 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED E. Assets, Liabilities, Deferred Inflows/Outflows of Resources, and Net Position - continued 5. Deferred Outflows/Inflows of Resources In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The College has three items that qualify for reporting in this category, which are a deferred charge on bond refunding, a deferred pension contribution, and deferred outflows of resources for pension which are reported in the statement of net position. A deferred charge on bond refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. A deferred pension contribution results from contributions made to the pension plan subsequent to the measurement date and prior to the College s year end. The contributions will be recognized as a reduction in net pension liability in the following year. Deferred outflows of resources for pension relates to the College s net pension liability and pension expense and arises from changes in assumptions, actual versus expected results, changes in benefits, variances in expected versus actual investment earnings, changes in the employer s proportion, differences between employer contributions and the proportionate share of total contributions reported by the pension plan, or changes in the internal allocation of the net pension liability between governmental and businesstype activities. These amounts are deferred and amortized over either a closed five-year period or the average remaining service life of all employees depending on what gave rise to the deferred outflow. In addition to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The College has one item that qualifies for reporting in this category, which is deferred inflows of resources for pension. The deferred inflows of resources for pension relates to the College s net pension liability and pension expense and arises from changes in assumptions, actual versus expected results, changes in benefits, variances in expected versus actual investment earnings, changes in the employer s proportion, or differences between employer contributions and the proportionate share of total contributions reported by the pension plan. These amounts are deferred and amortized over either a closed fixed-year period or the average remaining service life of all employees depending on what gave rise to the deferred inflow. 6. Unearned Revenue Revenues that are received but not earned are reported as unearned revenues in the statement of net position. Unearned revenues arise when resources are received prior to the incurrence of qualifying expenses. The College considers both tuition received in advance and unearned revenue from sponsorship as unearned revenue. In subsequent periods, when both revenue recognition criteria are met, or when the College has legal claim to the resources, the liability for unearned revenue is removed and revenue is recognized. 23

26 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED E. Assets, Liabilities, Deferred Inflows/Outflows of Resources, and Net Position - continued 7. Net Position and Flow Assumptions Net position represents the difference between assets and deferred outflows of resources less liabilities and deferred inflows of resources. Net investment in capital assets component of net position is comprised of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. In addition, any deferred outflows of resources and/or deferred inflows of resources related to such capital assets or liabilities associated with the capital assets should also be added to or deducted from the overall net investment in capital assets. The restricted component of net position is used when there are limitations imposed on their use either through the enabling legislation adopted by a higher governmental authority or through external restrictions imposed by creditors, grantors, or laws or regulations of other governments. The remaining component of net position is unrestricted. Reserve Practice - In November 2009, the College s Board of Trustees adopted a Reserve Practice. The Reserve Practice is comprised of the following cost elements: Ten percent of the College s Current Unrestricted Fund operating expenses. This figure was based on the prior year s audited financial statements approved by the Board of Trustees. This amount totaled $7,826,030 and $7,838,415 for the years ended, respectively. One year debt service obligations. This figure is based on the College s debt service obligations as stated in the current year budget. In this instance, the College s debt service obligations as stated in the budgets were $8,261,741 and $7,515,618, respectively. One year noncancelable facility lease obligations. The figure is based on the College s noncancelable facility leases as stated in the current year budget. In this instance, the College s noncancelable facility leases as stated in the budgets, were $1,479,528 and $1,499,537, respectively. The Reserve Balance as of, totaled $17,567,299 and $16,853,570, respectively. The Reserve will be funded 50 percent or $8,783,649 for 2017 and $8,426,785 for 2016 by cash and investments. The other requirement of the Reserve Practice states that funds will reside in the Unrestricted Net Position. Sometimes the College will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted - net position and unrestricted - net position in the financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. When both restricted and unrestricted resources are available for expenses, the decision as to which resources to use first is left to the discretion of the College. 24