John C. Calhoun Community College

Transcription

1 Report on the Decatur, Alabama October 1, 2009 through September 30, 2010 Filed: February 11, 2011 Department of Examiners of Public Accounts 50 North Ripley Street, Room 3201 P.O. Box Montgomery, Alabama Website: Ronald L. Jones, Chief Examiner

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5 Table of Contents Page Summary A Contains items pertaining to state and federal legal compliance, College operations, and other matters. Comments C Contains information pertaining to the history of the College. Independent Auditor s Report D Reports on whether the financial information constitutes a fair presentation of the financial position and results of financial operations in accordance with generally accepted accounting principles (GAAP). Management s Discussion and Analysis G Provides information required by the Governmental Accounting Standards Board (GASB) that is prepared by management of the College introducing the basic financial statements and providing an analytical overview of the College s financial activities for the year. This information has not been audited, and no opinion is provided about the information. Basic Financial Statements 1 Provides the minimum combination of financial statements and notes to the financial statements that is required for the fair presentation of the College s financial position and results of operations in accordance with GAAP. Exhibit #1 Statement of Net Assets 2 Exhibit #2 Statement of Revenues, Expenses and Changes in Net Assets 4 Exhibit #3 Statement of Cash Flows 5 Foundation, Inc. Exhibit #4 Statement of Financial Position 7 Exhibit #5 Statement of Activities 8 Decatur, Alabama

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7 Table of Contents Page Notes to the Financial Statements 10 Foundation, Inc. 26 Supplementary Information 31 Contains financial information and notes relative to federal financial assistance. Exhibit #6 Schedule of Expenditures of Federal Awards 32 Notes to the Schedule of Expenditures of Federal Awards 40 Additional Information 41 Provides basic information related to the College, including reports and items required by generally accepted government auditing standards and/or U. S. Office of Management and Budget (OMB) Circular A-133 for federal compliance audits. Exhibit #7 College Officials a listing of the College officials. 42 Exhibit #8 Exhibit #9 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 a report on internal controls related to the financial statements and on whether the College complied with laws and regulations which could have a direct and material effect on the College s financial statements. 43 Report on Compliance With Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A-133 a report on internal controls over compliance with requirements of laws, regulations, contracts, and grants applicable to major federal programs and an opinion on whether the College complied with laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on each major program. 45 Decatur, Alabama

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9 Table of Contents Page Exhibit #10 Exhibit #11 Schedule of Findings and Questioned Costs a schedule summarizing the results of audit findings relating to the financial statements as required by Government Auditing Standards and findings and questioned costs for federal awards as required by OMB Circular A Summary Schedule of Prior Audit Findings a report, prepared by the management of the College, which provides the status of all audit findings relative to federal awards included in the prior audit report s Schedule of Findings and Questioned Costs as well as unresolved findings included in the prior audit report s Summary Schedule of Prior Audit Findings. 50 Decatur, Alabama

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11 Department of Examiners of Public Accounts SUMMARY October 1, 2009 through September 30, 2010 Foundation, Inc. July 1, 2009 through June 30, 2010 (the College ) provides general education at the freshman and sophomore levels leading to the Associate of Art Degrees and Associate of Science Degrees that is designated to facilitate transfers to a senior college or university. provides the following technical, vocational, and career education programs that prepare students for employment in an occupational field and leads to certificates and/or Associate of Applied Science degrees: Industrial Maintenance; Automation/Robotics; Barbering; Cosmetology; Fire Science; Massage Therapy; Security; Surgical Technology; Auto Body Repair; Auto Mechanics; Carpentry; Horticulture; Masonry; Upholstery; Welding; Aerospace Technology; Air Conditioning and Refrigeration; Business Administration; Child Development; Clinical Laboratory Technology; Computer Graphics, Computer Information Systems; Dental Assisting; Design Drafting Technology; Electrical Technology; Emergency Medical Services; Machine Tool Technology; Missile and Munitions Technology; Music Industry Communications; Music-Church Music; Nursing; Nursing/Career Mobility; Practical Nursing; Physical Therapist Assistant; and Process Technology. Foundation Inc. is an Alabama non-profit corporation organized on July 30, The Foundation s purpose is to promote the advancement of, its students, and its faculty through scientific, literary and educational endeavors. is a publicly supported institution in the Alabama Community College System. The College is under the direction and control of the Alabama State Board of Education through the Department of Postsecondary Education A

12 This report presents the results of an audit, the objectives of which were to determine whether the financial statements present fairly the financial position and results of financial operations and whether the College complied with applicable laws and regulations, including those applicable to its major federal financial assistance programs. This report also presents the results of an audit of the College s component unit, the Foundation, which was audited by other auditors. The College audit was conducted 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, as well as, the requirements of the Department of Examiners of Public Accounts under the authority of the Code of Alabama 1975, Section The Foundation audit was conducted in accordance with auditing standards generally accepted in the United States of America. An unqualified opinion was issued on the basic financial statements of the College and its component unit, which means the financial statements present fairly, in all material respects, the financial positions and the results of operations for the fiscal years ending September 30, 2010 and June 30, 2010, respectively. Tests performed during the audit did not disclose any significant instances of noncompliance with applicable state laws and regulations. The following officials/employees were invited to an exit conference to discuss the findings and recommendations appearing in this report: Dr. Marilyn C. Beck, President; Mr. Jack Burrow, Dean of Business and Finance; Dr. Freida H. Hill, Chancellor of the Department of Postsecondary Education; and Ms. Mary Scott Hunter, District VIII Board Member. The following individuals attended the exit conference: Dr. Marilyn C. Beck, President; Mr. Jack Burrow, Dean of Business and Finance; Ms. Sandra McDole, Comptroller; Ms. Jenny Sewell, Director of Accounting; Ms. Janette Knight-Spencer, Student Financial Services Assistant Director. Representing the Department of Examiners of Public Accounts were Ms. Andrea Anderson, Audit Manager; Ms. Tiffany Mason and Ms. Lola Fuqua-Haney, Examiners B

13 Department of Examiners of Public Accounts COMMENTS October 1, 2009 through September 30, 2010 is the result of the consolidation of the Tennessee Valley State Technical School and John C. Calhoun State Technical Junior College. The Tennessee Valley State Technical School was instituted by the Wallace-Patterson Trade School Act of John C. Calhoun State Technical Junior College was established under the Alabama Trade School Authority Act of The two schools were merged into a comprehensive institution to become John C. Calhoun State Technical Junior College and Technical School in September Both the Technical School and the Junior College are under the supervision of the Alabama State Board of Education. The president is directly responsible to the State Board through the Chancellor of the Department of Postsecondary Education. The present designation as a community college was formalized by a State Board of Education resolution of September 23, C

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15 Independent Auditor s Report D

16 Independent Auditor s Report We have audited the accompanying basic financial statements of John C. Calhoun Community College, as of and for the year ended September 30, 2010, as listed in the table of contents as Exhibits 1 through 3. These basic financial statements are the responsibility of s management. Our responsibility is to express an opinion on these basic financial statements based on our audit. We did not audit the financial statements of Foundation, Inc., a component unit. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for Foundation, Inc., is based on the report of other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. The financial statements of Foundation, Inc. were not audited in accordance with Government Auditing Standards. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall basic financial statement presentation. We believe that our audit and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of, as of September 30, 2010, and John C. Calhoun Community College Foundation, Inc., as of June 30, 2010, and the respective changes in financial position and cash flows, where applicable, thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated January 11, 2011 on our consideration of s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit E

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19 Management s Discussion and Analysis (Required Supplementary Information) G

20 JOHN C. CALHOUN COMMUNITY COLLEGE Management s Discussion and Analysis Overview of the Financial Statements and Financial Analysis This section of s Annual Financial Report represents management s discussion and analysis of the College s financial activity during the fiscal years ended September 30, 2009, and September 30, There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses, and Changes in Net Assets; and, the Statement of Cash Flows. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), Liabilities (current and non-current), and Net Assets (Assets minus Liabilities). The difference between current and non-current assets will be discussed in the financial statement disclosures. From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors, investors and lending institutions. Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution s equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, non-expendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets which are available to the institution for any appropriate purpose of the institution. Statement of Net Assets (thousand of dollars) Increase Percent (Decrease) Change Assets: Current assets $37,662 $35,509 $ 2, Other Noncurrent Assets (19) (7.17) Capital assets, net 67,264 66,147 1, Total Assets 105, ,921 3, Liabilities: Current Liabilities 13,152 13, Noncurrent Liabilities 29,535 31,078 (1,543) (4.96) Total Liabilities 42,687 44,083 (1,396) (3.17) Net Assets Invested in capital assets, net of debt 37,329 34,739 2, Restricted for Debt Service 1,341 1,344 (3) (.22) Unrestricted 23,815 21,755 2, Total Net Assets $ 62,485 $ 57,838 $ 4, H

21 This schedule is prepared from the College s Statement of Net Assets which is presented on an accrual basis of accounting whereby assets are capitalized and depreciated. Statement of Revenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and non-operating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example, state appropriations are non-operating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. Statement of Revenues, Expenses and Changes in Net Assets (thousands of dollars) Increase Percent (Decrease) Change Operating revenues $26,327 $23,499 $ 2, Operating expenses (59,719) (50,648) (9,071) (17.91) Operating loss (33,392) (27,149) (6,243) (23.00) Non-operating revenues and expenses 37,797 30,636 7, Other Revenues 184 3,675 (3,491) (94.99) Increase in Net Assets 4,589 7,162 (2,573) (35.93) Net Assets at Beginning of Year 57,838 50,676 7, Restatements Net Assets at End of Year $62,485 $57,838 $ 4, I

22 The Statement of Revenues, Expenses, and Changes in Net Assets reflects a positive year with an increase in net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are the following: Revenue (in thousands of dollars) 1, ,637 17,205 Tuition Federal Contracts State & Local Contracts Educational Activities Auxiliary The above chart displayed in thousands of dollars, the operating revenues by type and their relationship with one another. Student tuition represents the largest type of revenue followed by federal revenue. The operating expenses by function stated in thousands are displayed in the following exhibit. Expenses (in thousands of dollars) 117 Instruction 11,189 Public Service Academic Support 2,857 7,607 22,459 Student Services Institutional Support Plant Maintenance 7,037 4, ,839 Depreciation Student Aid Auxiliary J

23 Statement of Cash Flows The final statement presented is the Statement of Cash Flows which presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-capital financing activities. This section reflects the cash received and spent for non-operating, non-investing, and non-capital financing purposes. The third section deals with cash flows from capital and related activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash Flows for the Years ended September 30 (thousands of dollars) Increase Percent (Decrease) Change Cash provided (used) by Operating activities $(29,651) $(21,500) $(8,151) (37.91) Non-operating activities 39,534 25,449 14, Capital Activities (6,519) (5,416) (1,103) (20.37) Investing activities 5,079 3,405 1, Net Change in Cash 8,443 1,937 6, Cash, beginning of year 16,902 14,965 1, Cash, end of year $25,345 $16,902 $ 8, Economic Outlook The college is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College s overall financial position is strong. The College anticipates the current fiscal year will be similar to the last and will continue to maintain a close watch over resources to maintain the College s ability to react to unknown internal and external issues. K

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25 Basic Financial Statements 1

26 Statement of Net Assets September 30, 2010 ASSETS Current Assets Cash and Cash Equivalents $ 25,345, Deposit with Bond Trustee 1,341, Accounts Receivable, Net 10,610, Inventories 34, Bond Issuance Cost 18, Other Assets 311, Total Current Assets 37,662, Noncurrent Assets Bond Issuance Cost 245, Capital Assets: Land 1,089, Improvements Other Than Buildings 9,242, Buildings 71,020, Construction in Progress 114, Equipment and Furniture 9,075, Library Holdings 1,250, Less: Accumulated Depreciation (24,530,216.11) Total Capital Assets, Net of Depreciation 67,264, Total Noncurrent Assets 67,509, Total Assets $ 105,171, The accompanying Notes to the Financial Statements are an integral part of this statement. Decatur, Alabama 2 Exhibit #1

27 LIABILITIES Current Liabilities Deposits $ 144, Accounts Payable and Accrued Liabilities 3,481, Deferred Revenue 7,896, Bonds Payable 1,475, Compensated Absences 96, Bond Premium 57, Total Current Liabilities 13,151, Noncurrent Liabilities Bonds Payable 27,920, Bond Premium 747, Compensated Absences 868, Total Noncurrent Liabilities 29,535, Total Liabilities 42,687, NET ASSETS Invested in Capital Assets, Net of Related Debt 37,328, Restricted for: Expendable: Debt Service 1,341, Unrestricted 23,814, Total Net Assets $ 62,484, Decatur, Alabama 3 Exhibit #1

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29 Statement of Revenues, Expenses and Changes in Net Assets For the Year Ended September 30, 2010 OPERATING REVENUES Student Tuition and Fees (Net of Scholarship Allowances of $11,490,892.51) $ 17,204, Federal Grants and Contracts 6,636, State Grants and Contracts 1,311, Sales and Services of Educational Departments 197, Auxiliary Enterprises: Student Activities 10, Vending 95, Bookstore 811, Other 58, Total Operating Revenues 26,327, OPERATING EXPENSES Instruction 22,459, Institutional Support 7,036, Public Service 923, Academic Support 2,838, Student Services 4,690, Operation and Maintenance 7,607, Scholarships and Financial Aid 11,188, Depreciation 2,856, Auxiliary Enterprises 117, Total Operating Expenses 59,719, Operating Income (Loss) (33,392,154.10) NONOPERATING REVENUES (EXPENSES) State Appropriations 20,041, Federal Grants 18,595, Gifts 203, Investment Income 74, Interest Debt Payments (1,499,076.61) Sale of Property 226, Other Nonoperating Revenues 155, Net Nonoperating Revenues 37,797, Income Before Other Revenues, Expenses, Gains, or Losses 4,405, Capital Grants 184, Changes in Net Assets 4,589, Total Net Assets - Beginning of Year, as Restated (See Note 13) 57,895, Total Net Assets - End of Year $ 62,484, The accompanying Notes to the Financial Statements are an integral part of this statement. Decatur, Alabama 4 Exhibit #2

30 Statement of Cash Flows For the Year Ended September 30, 2010 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees $ 17,801, Federal Grants and Contracts 7,503, State and Local Grants and Contracts 1,291, Sales and Services of Educational Departments 197, Auxiliary 1,006, Payments to Employees (24,554,966.39) Payments for Benefits (7,291,119.49) Payments to Suppliers (12,769,082.17) Utilities (1,648,780.91) Payments for Scholarships (11,188,956.52) Net Cash Provided (Used) by Operating Activities (29,651,991.80) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations 20,041, Federal Grants 20,054, Gifts 3, Loan Receipts 11,250, Loan Disbursements (10,799,939.00) Deposit Liabilities (1,191,627.37) Other Nonoperating Revenues 175, Net Cash Provided (Used) by Noncapital Financing Activities 39,534, CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Appropriations 184, Purchases of Capital Assets (3,940,417.47) Deposits with Trustees 2, Principal Paid on Capital Debt (1,435,000.00) Interest Paid on Capital Debt (1,556,474.88) Sale of Property 226, Net Cash Provided (Used) by Capital and Related Financing Activities (6,518,990.41) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments 4,994, Interest on Investments 85, Net Cash Provided (Used) by Investing Activities 5,079, Net Increase (Decrease) in Cash and Cash Equivalents 8,442, Cash and Cash Equivalents - Beginning of Year 16,902, Cash and Cash Equivalents - End of Year $ 25,345, The accompanying Notes to the Financial Statements are an integral part of this statement. Decatur, Alabama 5 Exhibit #3

31 Reconciliation of Net Operating Revenues (Expenses) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) $ (33,392,154.10) Adjustments to Reconcile Net Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense 2,856, Changes in Assets and Liabilities: (Increase)/Decrease in Receivables, Net (107,586.92) (Increase)/Decrease in Other Assets (311,655.83) (Increase)/Decrease in Inventory (4,264.81) Increase/(Decrease) in Accounts Payable (233,109.75) Increase/(Decrease) in Deferred Revenue 1,551, Increase/(Decrease) in Compensated Absences (11,017.97) Net Cash Provided (Used) by Operating Activities $ (29,651,991.80) Decatur, Alabama 6 Exhibit #3

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33 Statement of Financial Position Foundation, Inc. June 30, 2010 and ASSETS Cash and Cash Equivalents $ 2,615, $ 5,863, Unconditional Promises to Give, Net of Unamortized Discounts - Restricted Purpose 158, , Other Receivables 1, , Investments 3,962, Property and Equipment, Net of Depreciation 7, , Total Assets 6,745, ,115, LIABILITIES AND NET ASSETS NET ASSETS Unrestricted 3,245, ,673, Temporarily Restricted 1,042, ,028, Permanently Restricted 2,457, ,413, Total Net Assets 6,745, ,115, Total Liabilities and Net Assets $ 6,745, $ 6,115, The accompanying Notes to the Financial Statements are an integral part of this statement. Decatur, Alabama 7 Exhibit #4

34 Statement of Activities Foundation, Inc. For the Years Ending June 30, 2010 and 2009 Unrestricted 2010 Temporarily Restricted Revenues, Gains and Other Support Contributions $ 49, $ 160, Donated Goods, Services and Facilities 115, Interest and Dividends 47, , Net Realized and Unrealized Investment Gains/(Losses) (52,817.00) (2,899.00) Net Asset Reclassifications (483,660.00) 23, Net Assets Released from Restrictions 185, (185,300.00) Total Revenues, Gains and Other Support (138,735.00) 14, Expenses Program Services 257, Management and General 23, Fundraising 8, Total Expenses 289, Operating Income (Loss) (428,281.00) 14, Net Assets - Beginning of Year 3,673, ,028, Net Assets - End of Year $ 3,245, $ 1,042, The accompanying Notes to the Financial Statements are an integral part of this statement. Decatur, Alabama 8 Exhibit #5

35 Permanently 2009 Restricted Total Total $ 13, $ 223, $ 742, , , , , , , , ,044, , , , , , , , , , , ,044, , , ,413, ,115, ,548, $ 2,457, $ 6,745, $ 6,115, Decatur, Alabama 9 Exhibit #5

36 Notes to the Financial Statements For the Year Ended September 30, 2010 Note 1 Summary of Significant Accounting Policies The financial statements of are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant accounting policies of the College are described below. A. Reporting Entity For financial reporting purposes, is part of the primary government of the State of Alabama. The State of Alabama, through the State Board of Education, governs the Department of Postsecondary Education. The Department of Postsecondary Education, through its Chancellor, has the authority and responsibility for the operation, management, supervision and regulation of. B. Component Units Foundation, Inc., (the Foundation ) is organized exclusively for charitable, scientific and educational purposes for the benefit of the College. Because of the significance of the relationship between the College and the Foundation, the Foundation is considered a component unit of the College. The Foundation s financial statements and accompanying notes are reported separately because of the difference in the reporting model for the Foundation. The Foundation follows the Financial Accounting Standards Board (FASB) rather than the Governmental Accounting Standards Board (GASB). As a result, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation s financial statements for these differences. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The financial statements of have been prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The College follows all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989 unless those pronouncements conflict with or contradict GASB pronouncements: Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board (APB) Opinions, and Accounting Research Bulletins (ARBs). Decatur, Alabama 10

37 Notes to the Financial Statements For the Year Ended September 30, 2010 It is the policy of the College to first apply restricted resources when an expense is incurred and then apply unrestricted resources when both restricted and unrestricted net asset are available. The Statement of Revenues, Expenses, and Changes in Net Assets distinguishes between operating and nonoperating revenues. Operating revenues, such as tuition and fees, result from exchange transactions associated with the principal activities of the College. Exchange transactions are those in which each party to the transactions receives or gives up essentially equal values. Nonoperating revenues arise from exchange transactions not associated with the College s principal activities, such as investment income and from all nonexchange transactions, such as state appropriations. D. Assets, Liabilities, and Net Assets 1. Deposits and Investments Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Statutes authorize the College to invest in the same type of instruments as allowed by Alabama law for domestic life insurance companies. This includes a wide range of investments, such as direct obligations of the United States of America, obligations issued or guaranteed by certain federal agencies, and bonds of any state, county, city, town, village, municipality, district or other political subdivision of any state or any instrumentality or board thereof or of the United States of America that meet specified criteria. Investments are reported at fair value based on quoted market prices, except for money market investments and repurchase agreements, which are reported at amortized cost. 2. Receivables Accounts receivable relate to amounts due from federal grants, state appropriations, student receivables and third party tuition. The receivables are shown net of allowance for doubtful accounts. 3. Inventories The inventories are comprised of (1) consumable supplies, (2) items held for resale, and (3) any other significant inventories. Inventories are valued using the first in/first out (FIFO) method. Decatur, Alabama 11

38 Notes to the Financial Statements For the Year Ended September 30, Capital Assets Capital assets, other than intangibles, with a unit cost of over $5,000 and an estimated useful life in excess of one year, and all library books, are recorded at historical cost or estimated historical cost if purchased or constructed. The capitalization threshold for intangible assets such as capitalized software and internally generated computer software is $1 million and $100,000 for easements and land use rights and patents, trademarks and copyrights. In addition, works of art and historical treasures and similar assets are recorded at their historical cost. Donated capital assets are recorded at fair market value at the date of donation. Land, Construction in Progress and intangible assets with indefinite lives are the only capital assets that are not depreciated. Depreciation is not allocated to a functional expense category. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until completion of the project with interest earned on invested proceeds over the same period. Maintenance and repairs are charged to operations when incurred. Betterments and major improvements which significantly increase values, change capacities or extend useful lives are capitalized. Upon the sale or retirement of fixed assets being depreciated using the straight-line method, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the results of operation. The method of depreciation and useful lives of the capital assets are as follows: Assets Depreciation Method Useful Lives Buildings and Improvements Straight-Line 50 years Improvements Other Than Buildings Composite 25 years Equipment Composite 5 10 years Library Materials Composite 20 years Capitalized Software Straight-Line 10 years Internally Generated Computer Software Straight-Line 10 years Easement and Land Use Rights Straight-Line 20 years Patents, Trademarks, and Copyrights Straight-Line 20 years 5. Long-Term Obligations Long-term debt and other long-term obligations are reported as liabilities in the statement of net assets. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds. Decatur, Alabama 12

39 6. Compensated Absences Notes to the Financial Statements For the Year Ended September 30, 2010 No liability is recorded for sick leave. Substantially all employees of the College earn 12 days of sick leave each year with unlimited accumulation. Payment is not made to employees for unpaid sick leave at termination or retirement. All non-instructional employees earn annual leave at a rate which varies from 12 to 24 days per year depending on duration of employment, with accumulation limited to 60 days. Instructional employees do not earn annual leave. Payment is made to employees for unused leave at termination or retirement. 7. Deferred Tuition and Fee Revenue Tuition and fee revenues received but related to the period after September 30, 2010 have been deferred. 8. Net Assets Net assets are required to be classified for accounting and reporting purposes into the following net asset categories: Invested in Capital Assets, Net of Related Debt Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction or improvement of those assets. Any significant unspent related debt proceeds at year-end related to capital assets are not included in this calculation. Restricted: Nonexpendable Net assets subject to externally imposed stipulations that they be maintained permanently by the College. Such assets include the College s permanent endowment funds. Expendable Net assets whose use by the College is subject to externally imposed stipulations that can be fulfilled by actions of the College pursuant to those stipulations or that expire by the passage of time. These include funds held in federal loan programs. Unrestricted Net assets that are not subject to externally imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of management. Decatur, Alabama 13

40 9. Federal Financial Assistance Programs Notes to the Financial Statements For the Year Ended September 30, 2010 The College participates in various federal programs. Federal programs are audited in accordance with the Single Audit Act Amendments of 1996, the U. S. Office of Management and Budget Revised Circular A-133, Audits of States, Local Governments and Non-Profit Organizations, and the Office of Management and Budget (OMB) Compliance Supplement. 10. Scholarship Allowances and Student Aid Student tuition and fees are reported net of scholarship allowances and discounts. The amount for scholarship allowances and discounts is the difference between the stated charge for goods and services provided by the College and the amount that is paid by the student and/or third parties making payments on behalf of the student. The College uses the case-by-case method as prescribed by the National Association of College and University Business Officers (NACUBO) in their Advisory Report to determine the amount of scholarship allowances and discounts. Note 2 Deposits and Investments A. Deposits The College deposits at year-end were held by financial institutions in the State of Alabama s Security for Alabama Funds Enhancement (SAFE) Program. The SAFE Program was established by the Alabama Legislature and is governed by the provisions contained in the Code of Alabama 1975, Sections 41-14A-1 through 41-14A-14. Under the SAFE Program all public funds are protected through a collateral pool administered by the Alabama State Treasurer s Office. Under this program, financial institutions holding deposits of public funds must pledge securities as collateral against those deposits. In the event of failure of a financial institution, securities pledged by that financial institution would be liquidated by the State Treasurer to replace the public deposits not covered by the Federal Depository Insurance Corporation (FDIC). If the securities pledged fail to produce adequate funds, every institution participating in the pool would share the liability for the remaining balance. The Statement of Net Assets classification cash and cash equivalents includes all readily available cash such as petty cash, demand deposits, and certificates of deposits with maturities of three months or less. Decatur, Alabama 14

41 Notes to the Financial Statements For the Year Ended September 30, 2010 B. Investments The College may invest its funds in securities and investments authorized by the Code of Alabama 1975, Section , Sections and , and Sections through These laws provide that the College may invest in the same type of instruments as allowed by Alabama law for domestic life insurance companies. This includes a wide range of investments, such as direct obligations of the United States of America, obligations issued or guaranteed by certain federal agencies, and bonds of any state, county, city, town, village, municipality, district or other political subdivision of any state or any instrumentality or board thereof of the United States of America that meet specified criteria. The College s investment policy permits investments in the following: 1) U. S. Treasury bills, notes, bonds, and stripped Treasuries 2) U. S. Agency notes, bonds, debentures, discount notes and certificates, 3) certificates of deposit (CDs), checking and money market accounts of savings and loan associations, mutual savings banks, or commercial banks whose accounts are insured by FDIC/FSLIC, and who are designated a Qualified Public Depository (QPD) under the SAFE Program; 4) mortgage backed securities (MBSs), 5) mortgage-related securities including collateralized mortgage obligations (CMOs) and real estate mortgage investment conduits (REMIC) securities, 6) repurchase agreements, and 7) stocks and bonds which have been donated to the institution. Investments, as shown on the Statement of Net Assets, consist of non-negotiable certificates of deposit and are considered deposits in the context of this disclosure and are not subject to risk categorization. However, the Deposits with Trustee are subject to risk categorization. As of September 30, 2010, the College had $1,341, held by its bond trustee, Regions Bank. The funds for the 2003 Bond Series are invested in Regions Morgan Keegan Select Treasury Money Market Fund. The Select Treasury Money Market Fund invests primarily in U. S. Treasury obligations. The funds for the Revenue Bonds Series 1998 and 2005 are invested in Regions Bank Trust Money Market Deposit Fund. The Trust Money Market Deposit Fund is used strictly for trust department deposits and is secured with U. S. Treasuries and U. S. Agency securities. Interest Rate Risk Is the risk that changes in interest rates will adversely affect the fair value of an investment. As a means of limiting its exposure to fair value losses arising from rising interest rates, the College s investment policy limits its investment maturities as follows: Investment Maximum Maturity U. S. Treasury Bills, Notes, Bonds and Stripped Treasuries 10 yrs. U. S. Agencies 10 yrs. Certificates of Deposit 5 yrs. Mortgage-Backed Securities and Mortgage-Related Securities 7 yrs. (aggregate average life) 10 yrs. (average life maturity of any one security) Decatur, Alabama 15

42 Notes to the Financial Statements For the Year Ended September 30, 2010 Credit Risk The Regions Morgan Keegan Select Treasury Money Market Fund is rated AAA by Standard and Poor s Fitch Ratings. The Regions Bank Trust Money Market Deposit Fund did not have a rating available. However, the fund is used strictly for trust department deposits and is secured with U. S. Treasuries and U. S. Agency securities. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government s investment in a single issuer. The College did not have a formal investment policy which limited investment in any one issuer to less than 5%. However, the College s investments were in investment pools. Note 3 Receivables Receivables are reported net of uncollectible amounts and are summarized as follows: Accounts Receivable: Federal $ 7,570, State 178, Other 2,455, Allowance for Doubtful Accounts (65,789.99) Total Accounts Receivable 10,138, Student Receivables: Current 471, Total Student Receivables 471, Total Receivables $10,610, Decatur, Alabama 16

43 Note 4 Capital Assets Notes to the Financial Statements For the Year Ended September 30, 2010 Capital asset activity for the year ended September 30, 2010, was as follows: Beginning Balance Additions Deductions Reclass/ Adjustments Ending Balance Land $ 1,089, $ $ $ $ 1,089, Improvements Other Than Buildings 9,042, , , ,242, Buildings 66,229, ,273, ,518, ,020, Construction in Progress 1,573, , (1,573,590.08) 114, Equipment 8,741, , (57,000.00) 9,075, Library Holdings 1,204, , (2,537.36) 1,250, Total 87,880, ,973, (59,537.36) 91,794, Less: Accumulated Depreciation Improvements Other Than Buildings 2,154, , ,518, Buildings 13,002, ,576, ,578, Equipment 5,732, , (57,000.00) (3,499.00) 6,528, Library Holdings 844, , (2,537.36) 904, Total Accumulated Depreciation 21,732, ,860, (59,537.36) (3,499.00) 24,530, Total Capital Assets, Net $66,147, $1,113, $ $ 3, $67,264, Note 5 Defined Benefit Pension Plan A. Plan Description The College contributes to the Teachers Retirement System of Alabama, a cost-sharing multiple-employer public employee retirement system for the various state-supported educational agencies and institutions. This plan is administered by the Retirement Systems of Alabama. Substantially all employees of the College are members of the Teachers Retirement System. Membership is mandatory for covered or eligible employees of John C. Calhoun Community College. Benefits vest after 10 years of creditable service. Vested employees may retire with full benefits at age 60 or after 25 years of service. Retirement benefits are calculated by two methods with the retiree receiving payment under the method which yields the highest monthly benefit. The methods are (1) Minimum Guaranteed, or (2) Formula, of which the Formula method usually produces the highest monthly benefit. Under this method retirees are allowed % of their average final salary (best three of the last ten years) for each year of service. Disability retirement benefits are calculated in the same manner. Pre-retirement death benefits in the amount of the annual salary for the fiscal year preceding death are provided to plan members. Decatur, Alabama 17

44 Notes to the Financial Statements For the Year Ended September 30, 2010 The Teachers Retirement System was established as of October 1, 1941, under the provisions of Act Number 419, Acts of Alabama 1939, for the purpose of providing retirement allowances and other specified benefits for qualified persons employed by state-supported educational institutions. The responsibility for general administration and operation of the Teachers Retirement System is vested in the Board of Control (currently 14 members). Benefit provisions are established by the Code of Alabama 1975, Sections through , as amended, and Sections 36-27B-1 through 36-27B-6, as amended. The Retirement Systems of Alabama issues a publicly available financial report that includes financial statements and required supplementary information for the Teachers Retirement System of Alabama. That report may be obtained by writing to The Retirement Systems of Alabama, 135 South Union Street, Montgomery, Alabama B. Funding Policy Employees, with the exception of full-time law enforcement officers, are required by statute to contribute 5 percent of their salary to the Teachers Retirement System. As of January 1, 2001, full-time law enforcement officers (as defined by Act Number , Acts of Alabama, page 1335) are required by statute to contribute 6 percent of their salary to the Teachers Retirement System. is required to contribute the remaining amounts necessary to fund the actuarially determined contributions to ensure sufficient assets will be available to pay benefits when due. Each year the Teachers Retirement System recommends to the Legislature the contribution rate for the following fiscal year, with the Legislature setting this rate in the annual appropriation bill. The percentages of the contributions and the amount of contributions made by the College and its employees equal the required contributions for each year as follows: Fiscal Year Ended September 30, Total Percentage of Covered Payroll 17.51% 17.07% 16.75% Contributions: Percentage Contributed by the College 12.51% 12.07% 11.75% Percentage Contributed by the Employees 5.00% 5.00% 5.00% Contributed by College $2,495, $2,413, $2,262, Contributed by Employees 1,000, ,002, , Total Contributions $3,495, $3,416, $3,228, Decatur, Alabama 18

45 Notes to the Financial Statements For the Year Ended September 30, 2010 Note 6 Other Postemployment Benefits (OPEB) A. Plan Description The College contributes to the Alabama Retired Education Employees Health Care Trust (the Trust ), a cost-sharing multiple-employer defined benefit postemployment healthcare plan. The Trust provides health care benefits to state and local school system retirees and was established in 2007 under the provisions of Act Number , Acts of Alabama, as an irrevocable trust fund. Responsibility for general administration and operations of the Trust is vested with the Public Education Employees Health Insurance Board (PEEHIB) members. The Code of Alabama 1975, Section 16-25A-4, provides the PEEHIB with the authority to amend the benefit provisions in order to provide reasonable assurance of stability in future years. The Trust issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained at the Public Education Employees Health Insurance Plan website, under the Trust Fund Financials tab. The provisions of GASB Statement Number 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions were implemented prospectively. B. Funding Policy The Public Education Employees Health Insurance Fund (PEEHIF) was established in 1983 under the provisions of Act Number 255, Acts of Alabama, to provide a uniform plan of health insurance for current and retired employees of state educational institutions. The plan is administered by the PEEHIB. Any Trust fund assets used in paying administrative costs and retiree benefits are transferred to and paid from the PEEHIF. The PEEHIB periodically reviews the funds available in the PEEHIF and if excess funds are determined to be available, the PEEHIB authorizes a transfer of funds from the PEEHIF to the Trust. Retirees are required to contribute monthly as follows: Fiscal Year 2010 Individual Coverage Non-Medicare Eligible $ Individual Coverage Medicare Eligible $ 1.14 Family Coverage Non-Medicare Eligible Retired Member and Non-Medicare Eligible Dependent(s) $ Family Coverage Non-Medicare Eligible Retired Member and Dependent Medicare Eligible $ Family Coverage Medicare Eligible Retired Member and Non-Medicare Eligible Dependent(s) $ Family Coverage Medicare Eligible Retired Member and Dependent Medicare Eligible $ Surviving Spouse Non-Medicare Eligible $ Surviving Spouse Non-Medicare Eligible and Dependent Non-Medicare Eligible $ Surviving Spouse Non-Medicare Eligible and Dependent Medicare Eligible $ Surviving Spouse Medicare Eligible $ Surviving Spouse Medicare Eligible and Dependent Non-Medicare Eligible $ Surviving Spouse Medicare Eligible and Dependent Medicare Eligible $ Decatur, Alabama 19