Fayetteville Road Office Park 6114 Fayetteville Road, Suite 101 Durham, North Carolina 27713

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1 Fayetteville Road Office Park 6114 Fayetteville Road, Suite 101 Durham, North Carolina / Phone 919/ Fax 866/ Toll Free Certified Public Accountants and Consultants February 22, 2013 Gayle Sims Executive Director Durham Technical Community College Foundation, Inc Lawson Street Durham, NC Dear Ms. Sims: Please find enclosed final documents relating to our audit of Durham Technical Community College Foundation, Inc. (the Foundation ) for the year ended June 30, The following documents are enclosed: 1. Audited financial statements 2. Report to the Foundation s Board of Directors SAS No. 114 This report relates to communications required under Statement on Auditing Standards (SAS) No. 114, The Auditor s Communication With Those Charged with Governance. SAS No. 114 applies to all nonpublic entities and requires auditors to communicate matters that are significant and relevant to those charged with governance and overseeing the financial reporting process. 3. Report to the Foundation s Board of Directors SAS No. 115 This report relates to communications required under Statement on Auditing Standards (SAS) No. 115, Communicating Internal Control Related Matters Identified in an Audit. This Statement establishes standards and provides guidance on the auditor s responsibilities for identifying, evaluating, and communicating matters related to an entity s internal control over financial reporting identified in an audit of the financial statements. 4. Management letter comments The management letter communicates other matters noted during an audit that do not rise to the level of those required to be communicated in the SAS No. 115 report described above. The two (2) management letter comments for the year ended June 30, 2012 are enclosed. 5. Audit adjustments The two (2) audit adjustments made to the original trial balance presented to us to begin our audit for the year ended June 30, 2012 are enclosed. 1

2 6. Uncorrected misstatements (passed adjustments) Professional standards require us to communicate all known and likely misstatements identified during an audit, other than those that are trivial, and communicate them to the appropriate level of management. There were no uncorrected misstatements (passed adjustments) for the year ended June 30, Adjusted trial balance (Grouping Schedule Report) This report, which supports balances reported in the June 30, 2012 audited financial statements, presents the Foundation s trial balance after inclusion of the two (2) audit adjustments. 8. Form 990 for the year ended June 30, 2012 The due date for the Foundation s Form 990 is May 15, A draft of the Form 990 will be sent to you for your review and approval upon completion. In accordance with our payment arrangements, we have enclosed our invoice number 10097, dated February 22, 2013, in the amount of $2,500 representing professional services rendered to date on this year s engagement. We have also enclosed invoice number 10098, in the amount of $79.02 representing our out-of-pocket expenses. We truly appreciate the courtesy and professionalism exhibited by the Foundation s management team and staff throughout this engagement. Please call me or Diane Haley if you have any questions about this memorandum. I can be reached at , extension 105. Diane can be reached at extension 110. Sincerely, Bruce L. Thomas, CPA, Esq. Audit Partner Enclosures cc: Diane Haley, CPA Engagement Manager 2

3 DURHAM TECHNICAL COMMUNITY COLLEGE FOUNDATION, INC. Durham, North Carolina Audited Financial Statements Years Ended June 30, 2012 and 2011

4 TABLE OF CONTENTS Years Ended June 30, 2012 and 2011 Page(s) Report of Independent Auditors... 1 Audited Financial Statements Statements of Financial Position... 2 Statements of Activities Statements of Cash Flows... 5 Notes to Financial Statements

5 Fayetteville Road Office Park 6114 Fayetteville Road, Suite 101 Durham, North Carolina / Phone 919/ Fax 866/ Toll Free Certified Public Accountants and Consultants Report of Independent Auditors Board of Directors Durham Technical Community College Foundation, Inc. Durham, North Carolina We have audited the accompanying statements of financial position of Durham Technical Community College Foundation, Inc. (the Foundation ) (a nonprofit organization) as of June 30, 2012 and 2011 and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Foundation s management. Our responsibility is to express an opinion 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. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Durham Technical Community College Foundation, Inc. as of June 30, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Durham, North Carolina February 22,

6 STATEMENTS OF FINANCIAL POSITION June 30, 2012 and Assets Cash and cash equivalents $ 774,443 $ 761,658 Contributions receivable 27,304 14,595 Investments, at market (note 5) 1,773,983 1,643,529 Software, net of depreciation 9,119 10,132 Total assets $ 2,584,849 $ 2,429,914 Liabilities and net assets Accounts payable $ 5,117 $ 10,132 Total liabilities 5,117 10,132 Net assets Unrestricted 201, ,226 Temporarily restricted (note 8) 1,902,040 1,790,630 Permanently restricted (note 7) 476, ,926 Total net assets 2,579,732 2,419,782 Total liabilities and net assets $ 2,584,849 $ 2,429,914 The accompanying notes are an integral part of the financial statements. 2

7 STATEMENTS OF ACTIVITIES Year Ended June 30, 2012 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues, gains and other support Contributions $ 270,735 $ 184,339 $ 35,644 $ 490,718 Interest and dividends 3,999 41,119-45,118 Realized gains on investments 2,558 20,205-22,763 Unrealized gains on investments ,890-26,170 Total revenues 277, ,553 35, ,769 Net assets released from restrictions 160,143 (160,143) - - Total revenues, gains and other support 437, ,410 35, ,769 Expenses: Program services: Scholarships 73, ,930 Grants 34, ,357 Total program services (note 9) 108, ,287 Supporting services Management and general 316, ,532 Total supporting services 316, ,532 Total expenses 424, ,819 Changes in net assets 12, ,410 35, ,950 Net assets, beginning of year 188,226 1,790, ,926 2,419,782 Net assets, end of year $ 201,122 $ 1,902,040 $ 476,570 $ 2,579,732 The accompanying notes are an integral part of the financial statements. 3

8 STATEMENTS OF ACTIVITIES Year Ended June 30, 2011 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues, gains and other support Contributions $ 198,951 $ 66,062 $ 21,338 $ 286,351 Interest and dividends 3,723 29,080-32,803 Realized gains on investments - 6,806-6,806 Unrealized gains on investments 15, , ,189 Total revenues and losses 217, ,991 21, ,149 Net assets released from restrictions 131,494 (131,494) - - Total revenues, gains and other support 349, ,497 21, ,149 Expenses: Program services: Scholarships 80, ,921 Grants 46, ,013 Total program services (note 9) 126, ,934 Supporting services Management and general 237, ,198 Total supporting services 237, ,198 Total expenses 364, ,132 Changes in net assets (14,818) 191,497 21, ,017 Net assets, beginning of year 203,044 1,599, ,588 2,221,765 Net assets, end of year $ 188,226 $ 1,790,630 $ 440,926 $ 2,419,782 - The accompanying notes are an integral part of the financial statements. 4

9 STATEMENTS OF CASH FLOWS Years Ended June 30, 2012 and Operating activities Changes in net assets $ 159,950 $ 198,017 Adjustments to reconcile changes in net assets to net cash provided (used) by operating activities: Depreciation expense 1,013 - Net realized gains on investments (22,763) (6,806) Net unrealized gains on investments (26,170) (236,189) (Increase) decrease in operating assets: Contributions receivable (12,709) (14,595) (Decrease) increase in operating liabilities: Accounts payable (5,015) 10,132 Net cash provided (used) by operating activities 94,306 (49,441) Investing activities Purchases of software - (10,132) Transfers of securities - (5,039) Proceeds from sales or maturities of investments 715,394 1,062,976 Purchases of investments (796,915) (1,570,612) Net cash used by investing activities (81,521) (522,807) Net increase (decrease) in cash and cash equivalents 12,785 (572,248) Cash and cash equivalents, beginning of year 761,658 1,333,906 Cash and cash equivalents, end of year $ 774,443 $ 761,658 The accompanying notes are an integral part of the financial statements. 5

10 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 1 - Organization and other matters Durham Technical Community College Foundation, Inc. (the Foundation) is incorporated as a nonprofit corporation, organized to maximize economic and human development in Durham and Orange counties by cultivating and generating resources for Durham Technical Community College (the College) and by educating the public on the benefits of investing in their community college. The Foundation s primary activities are to solicit and acquire donations on behalf of Durham Technical Community College and administer scholarships and grants to the College s students. Note 2 - Summary of significant accounting policies Basis of accounting - The Foundation uses the accrual basis of accounting; therefore, revenues are recognized when earned and expenses are recognized when incurred. This basis of accounting conforms to accounting principles generally accepted in the United States of America. Basis of presentation - The Foundation s financial statement presentation follows the provisions of the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 205 Financial Statement Presentation. Under FASB ASC 205, the Foundation is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. The Foundation has the following net assets: Unrestricted Unrestricted net assets include resources available for the support of the Foundation s operating activities. Temporarily restricted Temporarily restricted net assets include resources that have been donated to the Foundation subject to restrictions as defined by the donor. These restrictions are met by the actions of the Foundation and/or the passage of time. Permanently restricted Permanently 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 in perpetuity. Advertising expense Advertising and publicity costs are expensed as incurred. For the years ended June 30, 2012 and 2011, advertising and publicity expenses were nominal. 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 and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 6

11 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 2 - Summary of significant accounting policies (continued) Property and equipment The Foundation capitalizes property and equipment that exceeds $500 in value at the acquisition date. Contributed property and equipment is recorded at fair value at the date of donation. If donors stipulate how long the assets must be used, the contributions are recorded as restricted support. In the absence of such stipulations, contributions of property and equipment are recorded as unrestricted support. Depreciation is provided over the estimated useful lives (5-7 years) of the respective assets on a straight-line basis. Tax status The Foundation is exempt from federal and state income taxes under Section 501(c)(3) of the U.S. Internal Revenue Code and the applicable state tax statutes. Consequently, no provision for income taxes has been made in the accompanying statements. Uncertain tax positions In June 2006, the Financial Accounting Standards Board (FASB) released FASB ASC , Income Taxes, that provides guidance for reporting uncertainty in income taxes. For the year ended June 30, 2012, the Foundation has considered FASB ASC , as amended by Accounting Standards Update (ASU) , and determined that no material uncertain tax positions qualify for either recognition or disclosure in the financial statements. The Foundation s federal Return of Organization Exempt from Income Tax (Form 990) for 2008 through 2011 are subject to examination by the IRS, generally for three years after they were filed. Statements of cash flows - For purposes of reporting cash flows, the Foundation considers cash and cash equivalents to include cash on hand, amounts held by banks and certificates of deposit with a maturity date of six months or less and investments in shares of money market funds. Investments - The Foundation reports marketable securities in accordance with FASB ASC Topic Accounting for Certain Investments Held By Not-For-Profit Organizations (FASB ASC ). ASC requires investments in equity securities with readily determinable fair values and all investments in debt securities to be measured at fair value at the balance sheet date. Gains and losses on investments are reported in the statement of activities as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by explicit donor stipulations. The Foundation reports gains and losses on investments restricted for scholarships and grants in the statement of activities as increases or decreases in temporarily restricted net assets. The stated fair value of investments at June 30, 2012 and 2011 were $1,773,983 and $1,643,529, respectively. Contributions receivable - Unconditional promises to give that are expected to be collected within one year are recorded at their net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of estimated future cash flows. The discounts on those amounts are computed using a risk-free interest rate applicable to the year in which the promise is received. Amortization of the discount is included in contribution revenue. 7

12 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 2 - Summary of significant accounting policies (continued) Conditional promises to give are not included in support until such time as the conditions are substantially met. At June 30, 2012 and 2011, contributions receivable were $27,304 and $14,595, respectively. Contributions Contributions received are recognized as revenues at their fair values when they are or become unconditional. Unconditional promises to give in the form of pledges are recognized at the time that the pledge is made. Contributions of assets other than cash are recorded at their estimated fair value. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. Contributed services Volunteeers have contributed significant amounts of time in support of the Foundation s activities. However, the value of these services is not reflected in the foregoing financial statements, as these services do not meet the criteria for recognition as set forth under accounting principles generally accepted in the United States of America. Recent accounting pronouncements In May 2011, FASB issued ASU No Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. This update provides guidance to ASC 820 on the convergence in U.S. GAAP and IFRS on fair value measurements and disclosures. The amended guidance changes several aspects of the fair value measurement guidance in ASC 820, Fair Value Measurement, including the following provisions: Application of the concepts of highest and best use and valuation premise Introduction of an option to measure groups of offsetting assets and liabilities on a net basis Incorporation of certain premiums and discounts in fair value measurements Measurement of the fair value of certain instruments classified in shareholders equity The amended guidance includes several new fair value disclosure requirements, including, information about valuation techniques and unobservable inputs used in Level 3 fair value measurements and a narrative description of Level 3 measurements sensitivity to changes in unobservable inputs. Some of the new disclosures are not required for nonpublic entities. The amended guidance must be applied prospectively and is effective for periods beginning on or after December 15,

13 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 3 Concentration of credit risk The Foundation maintains cash balances at several financial institutions in North Carolina. As of June 30, 2012 and 2011, these deposits were insured by the Federal Deposit Insurance Corporation up to $250,000. At June 30, 2012 and 2011, the Foundation s uninsured cash balances totaled $284,601 and $277,370, respectively. The remaining cash and investment accounts are insured by the Securities Investor Protection Corporation up to $500,000 for securities and $100,000 for cash. This coverage does not protect against losses from any change in market values of investments. Note 4 Fair value measurements FASB ASC , Fair Value Measurements and Disclosures, provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair-value hierarchy are described as below: Level 1: Financial instruments with unadjusted, quoted prices listed on an active market exchange. Level 2: Financial instruments determined using prices for recently traded financial instruments with similar underlying terms as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3: Financial instruments that are not actively traded on an active exchange. This category includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques. The following table sets forth by level, within the fair value hierarchy, the Foundation s assets at fair value as of June 30, 2012: Type Fair Value Measurements at Reporting Date Total Fair Value Level I Level II Level III Equity securities $ 898,445 $ 898, U.S. Treasuries securities 250, , Corporate bonds 251, , Mutual funds Equities 210, , International 163, , Total $ 1,773,983 $ 1,773,983 $ - $ - 9

14 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 4 Fair value measurements (continued) The following table sets forth by level, within the fair value hierarchy, the Foundation s assets at fair value as of June 30, 2011: Type Fair Value Measurements at Reporting Date Total Fair Value Level I Level II Level III Equity securities $ 799,882 $ 799, U.S. Treasuries securities 185, , Corporate bonds 316, , Mutual funds Equities 193, , International 147, , Total $ 1,643,529 $ 1,643, Note 5 Investments Investments, at market, consist of the following as of June 30: Asset Description Equity securities $ 898,445 $ 799,882 U.S. Treasuries securities 250, ,896 Corporate bonds 251, ,253 Mutual funds Equities 210, ,649 International 163, ,849 Total investments, at market $ 1,773,983 $ 1,643,529 10

15 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 5 Investments (continued) At June 30, 2012 and 2011, the unrealized gains and losses, and market value of investments were as follows: Aggregate fair value $ 1,773,983 $ 1,643,529 Aggregate amortized cost 1,670,784 1,566,500 Unrealized gains (losses) $ 103,199 $ 77,029 For the years ended June 30, 2012 and 2011, the change in unrealized gains and losses on investments carried at market value was an increase of $26,170 and $236,189, respectively. For the years ended June 30, 2012 and 2011, brokerage fees included in management and general expenses were $14,462 and $13,677, respectively. Note 6 Property and equipment Property and equipment consists of the following as of June 30: Software $ 10,132 $ 10,132 10,132 10,132 Less: accumulated depreciation 1,013 - $ 9,119 $ 10,132 Depreciation expense was $1,013 and $-0- for the years ended June 30, 2012 and 2011, respectively. 11

16 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 7 - Endowment funds Durham Technical Community College Foundation s endowment consists of 27 individual funds established primarily to provide scholarships to students at Durham Technical Community College. Its endowment includes both donor-restricted endowment funds and funds designated by the Board of Directors to function as endowments. As required by GAAP, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. Endowment net assets classified as unrestricted net assets include unrestricted gifts from donors and other funds designated by the Foundation as quasi-endowment for the long term support of the Foundation. Temporarily restricted endowment net assets include gifts from donors that are restricted to a particular purpose and designated by the Foundation as quasi-endowments as well as accumulated income and appreciation on permanently restricted endowment funds. Permanently restricted endowment net assets consist of those funds designated by donors to be invested in perpetuity to provide a permanent source of income. The Board of Directors of Durham Technical Community College Foundation, Inc. has interpreted the North Carolina Prudent Management of Institutional Funds Act (NCPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, The Foundation classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, and (b) the original value of subsequent gifts to the permanent endowment. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Foundation in a manner consistent with the standard of prudence prescribed by NCPMIFA. In accordance with NCPMIFA, the Foundation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) The duration and preservation of the fund (2) The purposes of the Foundation and the donor-restricted endowment fund (3) General economic conditions (4) The possible effect of inflation and deflation (5) The expected total return from income and the appreciation of investments (6) Other resources of the Foundation (7) The investment policies of the Foundation 12

17 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 7 - Endowment funds (continued) The following schedule summarizes endowment fund activity: Unrestricted Temporarily Restricted Permanently Restricted Total Balance, June 30, 2010 $ 146,413 $ 1,083,012 $ 419,588 $ 1,649,013 Interest and dividends 3,577 29,744-33,321 Net gain/(loss) 15, , ,144 Contributions - 1,867 21,338 23,205 Appropriated for expenditure (1,267) (30,331) - (31,598) Balance, June 30, ,869 1,339, ,926 1,944,085 Interest and dividends 3,990 40,007-43,997 Net gain/(loss) 2,838 37,865-40,703 Contributions - 7,931 35,644 43,575 Appropriated for expenditure (5,661) (67,178) - (72,839) Balance, June 30, 2012 $ 165,036 $ 1,357,915 $ 476,570 $ 1,999,521 Composition of endowment net assets by fund type as of June 30, 2012: Unrestricted Temporarily Restricted Permanently Restricted Total Donor restricted $ (1,368) $ 364,810 $ 476,570 $ 840,012 Board-designated 166, ,105-1,159,509 Total funds $ 165,036 $ 1,357,915 $ 476,570 $ 1,999,521 13

18 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 7 - Endowment funds (continued) Composition of endowment net assets by fund type as of June 30, 2011: Unrestricted Temporarily Restricted Permanently Restricted Total Donor restricted $ (1,977) $ 353,556 $ 440,926 $ 792,505 Board-designated 165, ,734-1,151,580 Total funds $ 163,869 $ 1,339,290 $ 440,926 $ 1,944,085 Description of Amounts Classified as Permanently Restricted Net Assets and Temporarily Restricted Net Assets (Endowment Only) at June 30: The portion of perpetual endowment funds required to be retained permanently $ 476,570 $ 440,926 Total classified as permanently restricted $ 476,570 $ 440,926 The portion of perpetual endowment funds subject to a time or purpose restriction $ 1,357,915 $ 1,339,290 Total classified as temporarily restricted $ 1,357,915 $ 1,339,290 Funds with deficiencies From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or NCPMIFA requires the Foundation to retain as a fund of perpetual duration. In accordance with GAAP, deficiencies of this nature that are reported in unrestricted net assets were $1,368 as of June 30, These deficiencies resulted from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions and continued appropriation for certain programs that were deemed prudent by the Board of Directors. As of June 30, 2011, deficiencies totaled $1,977. Return objectives and risk parameters The Foundation has adopted an investment policy for endowment assets that attempts to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. 14

19 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 7 - Endowment funds (continued) Endowment assets include those assets of donor-restricted funds that the Foundation must hold in perpetuity or for a donor-specified period(s) as well as board-designated funds. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a diversified mix of investments consisting of approximately 55% equity and 35% fixed income securities, with the remainder of approximately 10% to be held in cash or cash equivalents. Strategies employed for achieving objectives - To satisfy its long-term rate-of-return objectives, the Foundation relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Foundation targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. Spending policy and how the investment objectives relate to spending policy - The Foundation investment policy anticipates annual spending to approximate 5% of the endowment balance, but the Board has not adopted any formal spending policy. Rather, the maximum amount of scholarships to be awarded and other expenditures to be made from endowment and other funds is set out in the Foundation s annual spending plan. Note 8 Temporarily restricted net assets Temporarily restricted net assets are available for scholarships, grants, and related management and general expenses of the College and the Foundation. Temporarily restricted net assets of $1,902,040 and $1,790,630 were available for these purposes at June 30, 2012 and 2011, respectively. Note 9 Related party transactions and program services The Durham Technical Community College (the College ) is affiliated with the Durham Technical Community College Foundation, Inc. During the years ended June 30, 2012 and 2011, the College provided facilities, utilities and support staff to the Foundation without charge. The College donated services with an estimated value of $222,630 and $176,915 to the Foundation during the years ended June 30, 2012 and 2011, respectively. This amount has been reported as both in-kind contributions and in-kind management and general expenses on the statement of activities. For the years ended June 30, 2012 and 2011, scholarships, gifts and grants provided by the Foundation to the College, the College s staff and its students totaled $108,287 and $126,934, respectively. 15

20 NOTES TO FINANCIAL STATEMENTS June 30, 2012 and 2011 Note 9 Related party transactions and program services (continued) The following schedule summarizes the Foundation s expenses associated with related party scholarships, gifts and grants for the years ended June 30: Descriptions Scholarships $ 73,930 $ 80,921 Grants 34,357 46,013 Total $ 108,287 $ 126,934 Note 10 Subsequent events The Foundation has evaluated subsequent events through February 22, 2013, which is the date the financial statements were available to be issued, and determined that no subsequent events have occurred that require adjustment to or disclosure in the financial statements. The Foundation has not evaluated subsequent events after that date. 16

21 F Fayetteville Road Office Park 6114 Fayetteville Road, Suite 101 Durham, North Carolina / Phone 919/ Fax 866/ Toll Free Certified Public Accountants and Consultants To the Board of Directors Durham Technical Community College Foundation, Inc. Durham, North Carolina This letter is intended to inform the Board of Directors of Durham Technical Community College Foundation, Inc. (the Foundation ) about significant matters related to the conduct of the annual audit so that it can appropriately discharge its oversight responsibility, and that we comply with our professional responsibilities to the Board of Directors. In addition to our report on your financial statements, we have provided under separate cover a report dated February 22, 2013, required under Statement on Auditing Standards (SAS) No. 115, Communicating Internal Control Related Matters Identified in an Audit. This statement establishes standards and provides guidance on the auditor s responsibilities for identifying, evaluating, and communicating matters related to an entity s internal control over financial reporting identified in an audit of the financial statements. We have also communicated suggestions for improvements in internal control to management in a separate management comments letter dated February 22, The following summarizes various matters which must be communicated to you under auditing standards generally accepted in the United States of America. Our responsibilities under U.S. Generally Accepted Auditing Standards (GAAS) As stated in our engagement letter dated May 18, 2012, our responsibility, as described by professional standards, is to express an opinion about whether the financial statements prepared by management with your oversight are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your responsibilities. As part of our audit, we considered the internal control of the Foundation. Such considerations were solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, we performed tests of the Foundation s compliance with certain provisions of laws, regulations, contracts, and grants. However, the objective of our tests was not to provide an opinion on compliance with such provisions. Independence We are familiar with Rule 101 of the AICPA s Code of Conduct and its interpretations and rulings. As far as the Foundation is concerned, our Firm has been, for the year covered by the financial statements under report and thereafter to date, in fact independent as contemplated by such Rule.

22 Management judgments and accounting estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management s current judgment. The process used by management encompasses their knowledge and experience about past and future events. Management has informed us that they used all relevant facts available to them at the time to make the best judgments about accounting estimates, and we consider this information in the scope of our audit. We did not identify any estimates significant to the financial statements. Audit adjustments For purposes of this letter, professional standards define an audit adjustment as a proposed correction of the financial statements that, in our judgment, may not have been detected except through our auditing procedures. An audit adjustment may or may not indicate matters that could have a significant effect on the Foundation s financial reporting process (that is, cause future financial statements to be materially misstated). In our judgment, except for the adjustments noted on the attached exhibit, none of the adjustments we proposed, whether recorded or unrecorded by the Foundation, either individually or in the aggregate, indicate matters that could have a significant effect on the Foundation s financial reporting process. There were two (2) audit adjustments made to the original trial balance presented to us to begin our audit. None of the adjustments that were recorded could, in our judgment, either individually or in the aggregate, have a significant effect on the Foundation s financial reporting process. Uncorrected misstatement passed adjustment Professional standards require us to communicate all known and likely misstatements identified during an audit, other than those that are trivial, and communicate them to the appropriate level of management. There were no uncorrected misstatements noted during our audit. Accounting policies and alternative trends The Board of Directors and management have the ultimate responsibility for the appropriateness of the accounting policies used by the Foundation. Note 2 to the financial statements of the Foundation contain a summary of significant accounting policies. During the year ended June 30, 2012, no new significant accounting policies were adopted and the application of existing policies was not changed. We noted no transactions entered into by the Foundation during the year that were significant and unusual or any significant transactions for which there is a lack of authoritative guidance or consensus. Other information in documents containing audited financial statements We are not aware of any other documents that contain the audited financial statements. If such documents were to be published, we would have a responsibility to determine that such financial information was not materially inconsistent with the audited financial statements of the Foundation. Disagreements with management For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, 2

23 or auditing matter that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of our audit. Consultations with other accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the Foundation s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has the relevant facts. To our knowledge, there were no such consultations with other accountants. Major issues discussed with management prior to retention No major issues were discussed with management prior to our retention to perform the audit. Difficulties encountered in performing the audit On October 26, 2012, we communicated in a letter to the Board that we had been unable to begin the audit and that a revised time line for performance of the audit was required. Other than as communicated in that letter, we did not encounter any difficulties during our performance of the audit. Management representations We have requested representations from management that are included in the management representation letter dated February 22, Closing We will be pleased to respond to any questions you have about the foregoing. We appreciate the opportunity to be of service to Durham Technical Community College Foundation, Inc. * * * * * * This report is intended solely for the information and use of the Board of Directors and management of Durham Technical Community College Foundation, Inc. and is not intended to be and should not be used by anyone other than these specified parties. Durham, North Carolina February 22, 2013 Enclosed: June 30, 2012 audit adjustments 3

24 Fayetteville Road Office Park 6114 Fayetteville Road, Suite 101 Durham, North Carolina / Phone 919/ Fax 866/ Toll Free Certified Public Accountants and Consultants To the Board of Directors Durham Technical Community College Foundation, Inc. Durham, North Carolina In planning and performing our audit of the financial statements of Durham Technical Community College Foundation, Inc. (the Foundation ) as of June 30, 2012, in accordance with auditing standards generally accepted in the United States of America, we considered the Foundation s internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Foundation s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Foundation s internal control over financial reporting. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency or combination of deficiencies in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be significant deficiencies or material weaknesses and, therefore, there can be no assurance that all such deficiencies have been identified. We did not identify any deficiencies in internal control that we consider to be material weaknesses. This communication is intended solely for the information and use of management, the Board of Directors, and others within Durham Technical Community College Foundation, Inc. and is not intended to be and should not be used by anyone other than these specified parties. Durham, North Carolina February 22,

25 Fayetteville Road Office Park 6114 Fayetteville Road, Suite 101 Durham, North Carolina / Phone 919/ Fax 866/ Toll Free Certified Public Accountants and Consultants To the Board of Directors Durham Technical Community College Foundation, Inc. Durham, North Carolina In planning and performing our audit of the financial statements of Durham Technical Community College Foundation, Inc. as of and for the year ended June 30, 2012, in accordance with auditing standards generally accepted in the United States of America, we considered its internal control over financial reporting (internal control) as a basis for designing our auditing procedures for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of Durham Technical Community College Foundation, Inc. s internal control. Accordingly, we do not express an opinion of the effectiveness of Durham Technical Community College Foundation, Inc. s internal control. While we issued an unqualified ( clean ) opinion on Durham Technical Community College Foundation, Inc. s financial statements, during our audit, we became aware of certain matters that present opportunities for strengthening internal control and operating efficiency. This letter summarizes our comments and suggestions regarding these matters. Item #1 Segregation of duties We noted that the same staff member handles checks, prepares deposit slips, records receipts to the general ledger and reconciles the bank statement. Recommendation: We recommend that management institute a mitigating control wherein the bank reconciliation and bank statement are reviewed by someone other than the staff member performing the reconciliation. This review should be documented by initialing and dating the original bank statement and reconciliation. Item #2 Bank reconciliations We noted that the bank reconciliations contain outstanding checks dated 2011 and earlier. Recommendation: We recommend that these old outstanding items be evaluated for validity, whether provisions under North Carolina s escheat laws apply and that they be appropriately disposed of according to the result of this evaluation. ************** This communication is intended solely for the information and use of management, the Board of Directors, and others within Durham Technical Community College Foundation, Inc. and is not intended to be and should not be used by anyone other than these specified parties. Durham, North Carolina February 22,

26 2/22/ :51 PM Client: NC Durham Technical Community College Foundation, Inc. Engagement: AUD Durham Technical Community College Foundation, Inc. Period Ending: 6/30/2012 Trial Balance: TB Workpaper: Adjusting Journal Entries Report Account Description W/P Ref Debit Credit Adjusting Journal Entries JE # To fully record in kind salaries OFFICE SUPPORT 69, CONTRIBUTIONS 69, Total 69, , Adjusting Journal Entries JE # To adjust net assets per the PY financial statements and record gains on investments CHANGE IN FUND BALANCE 26, CHANGE IN FUND BALANCE 59, FUND BALANCE 249, CHANGE IN FUND BALANCE 76, UNREALIZED GAINS/LOSSES ON INVEST Undistributed 7, FUND BALANCE 208, Unrealized (gains)/losses Unrestricted realized gains/losses 2, FUND BALANCE 162, UNREALIZED GAINS/LOSSES ON INVEST. 25, REALIZED GAINS/LOSSES ON INVESTMENT 20, Total 419, , of 1

27 2/22/ :52 PM Client: NC Durham Technical Community College Foundation, Inc. Engagement: AUD Durham Technical Community College Foundation, Inc. Period Ending: 6/30/2012 Trial Balance: TB Workpaper: Reclassifying Journal Entries Report - 2 Account Description W/P Ref Debit Credit Reclassifying Journal Entries JE # To reclassify cash held at Merrill Lynch from investments to cash CASH EQUIVALENTS 165, CASH EQUIVALENTS 83, INVESTMENT ACCOUNT 165, INVESTMENT ACCOUNT 83, Total 248, , Reclassifying Journal Entries JE # To reclassify interest and dividends recorded as temporarily restricted to unrestricted for financial statement presentation Interest and dividends 3, DIVIDENDS 3, Total 3, , Reclassifying Journal Entries JE # 6 To record the release of temporarily restricted net assets for financial statement presentation Released from restrictions 160, Released from restrictions 160, Total 160, , of 1

28 2/22/ :53 PM Client: NC Durham Technical Community College Foundation, Inc. Engagement: AUD Durham Technical Community College Foundation, Inc. Period Ending: 6/30/2012 Trial Balance: TB Account Description UNADJ JE Ref # AJE ADJ JE Ref # RJE FINAL 6/30/2012 6/30/2012 6/30/ BANK OFFSET ACCOUNT CASH IN BANK-CHECKING (2,108.00) (2,108.00) (2,108.00) CASH EQUIVALENTS 12, , , A/R-STUDENT LOANS FIXED ASSETS 10, , , ACCUMULATED DEPRECIATION - FIXED ASSETS (1,013.00) (1,013.00) (1,013.00) BANK OFFSET ACCOUNT ACCOUNTS PAYABE (347.00) (347.00) (347.00) FUND RESERVE FUND BALANCE 20, (208,752.00) (188,226.00) (188,226.00) AJE - 4 (208,752.00) CHANGE IN FUND BALANCE (26,384.00) 26, AJE , CONTRIBUTIONS (180,674.00) (69,926.89) (250,600.89) (250,600.89) AJE - 1 (69,926.89) INTEREST EARNED (9.00) (9.00) (9.00) DIVIDENDS (3,990.00) (3,990.00) RJE - 5 (3,990.00) CAMPUS FUND DRIVE (20,134.00) (20,134.00) (20,134.00) Unrealized (gains)/losses 0.00 (280.00) (280.00) (280.00) AJE - 4 (280.00) Unrestricted realized gains/losses 0.00 (2,558.00) (2,558.00) (2,558.00) AJE - 4 (2,558.00) Released from restrictions , , RJE , SCHOLARSHIPS BANK SERVICE CHARGE GRANTS 5, , , PROFESSIONAL DEVELOPMENT 5, , , FACULTY & STAFF APPRECIATION 2, , , TRAVEL AUDIT FEES 7, , , MEMBERSHIP FEES / DUES OFFICE SUPPORT 152, , , , AJE , CONTRACTUAL SERVICES 17, , , PRINTING AND BINDING SPECIAL EVENTS MISCELLANEOUS EXPENSE COMPUTER SYSTEM SOFTWARE (884.00) (884.00) (884.00) POSTAGE AND DELIVERY SUPPLIES AND MATERIALS DEPRECIATION EXPENSE 1, , , TRANSFERS OUT (IN) (6,703.00) (6,703.00) (6,703.00) BANK OFFSET ACCOUNT CASH IN BANK-CHECKING 451, , , CASH EQUIVALENTS 57, , , , RJE , STOCKS UNREALIZED GAIN/LOSS BONDS AND NOTES INVESTMENT ACCOUNT 1,180, ,180, (165,539.00) 1,014, RJE - 3 (165,539.00) UNRESTRICTED GAIN/LOSS 76, , , ACCOUNTS RECEIVABLE 27, , , PLEDGE RECEIVABLE DISCOUNT ON PLEDGE RECEIVABLE BANK OFFSET ACCOUNT ACCOUNTS PAYABE (4,770.00) (4,770.00) (4,770.00) FUND RESERVE FUND BALANCE (1,628,425.00) (162,205.00) (1,790,630.00) (1,790,630.00) AJE - 4 (162,205.00) CHANGE IN FUND BALANCE (59,288.00) 59, AJE , CONTRIBUTIONS (127,789.00) (127,789.00) (127,789.00) FD MATCHING GIFTS (56,550.00) (56,550.00) (56,550.00) INTEREST EARNED (28,321.00) (28,321.00) (28,321.00) DIVIDENDS Interest and dividends , , RJE - 5 3, UNREALIZED GAINS/LOSSES ON INVEST (25,890.00) (25,890.00) (25,890.00) AJE - 4 (25,890.00) REALIZED GAINS/LOSSES ON INVESTMENT 0.00 (20,205.00) (20,205.00) (20,205.00) AJE - 4 (20,205.00) Other gains/losses Released from restrictions (160,143.00) (160,143.00) RJE - 6 (160,143.00) SCHOLARSHIPS 50, , , BANK SERVICE CHARGE 8, , , GRANTS 28, , , PRINTING AND BINDING SPECIAL EVENTS 20, , , MISCELLANEOUS EXPENSE COMPUTER SYSTEM SOFTWARE 14, , , SPECIFIC ASST-INDIVIDUAL BENEFIT EXPENSE 1, , , TRANSFERS OUT (IN) (14,003.00) (14,003.00) (14,003.00) COMMISSION/BROKERAGE FEES OTHER EXPENSE of 2