George C. Wallace Community College

Transcription

1 Report on the Dothan, Alabama October 1, 2010 through September 30, 2011 Filed: June 22, 2012 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 Exhibit #4 Statements of Financial Position 7 Exhibit #5 Statements of Activities 8 Dothan, Alabama

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7 Table of Contents Page Notes to the Financial Statements 10 Foundation 25 Supplementary Information 36 Contains financial information and notes relative to federal financial assistance. Exhibit #6 Schedule of Expenditures of Federal Awards 37 Notes to the Schedule of Expenditures of Federal Awards 41 Additional Information 42 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. 43 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. 44 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. 46 Dothan, Alabama

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9 Table of Contents Page Exhibit #10 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 Dothan, Alabama

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11 Department of Examiners of Public Accounts SUMMARY October 1, 2010 through September 30, 2011 Foundation January 1, 2008 through December 31, 2010 (the College ) provides general education at the freshman and sophomore levels leading to the Associate in Arts and Associate in Science degrees, that is designated to facilitate transfer to a senior college or university. also 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 in Applied Science degrees: Air Conditioning/Refrigeration; Associate Degree Nursing (RN); Automotive Service Technology; Auto Body Repair; Business and Office Information Processing; Cabinetmaking; Carpentry; Child Development; Computer Information Science; Cosmetology; Cosmetology-Nail Technology; Criminal Justice; Drafting and Design Technology; Electrical Technology; Emergency Medical Services; Industrial Electronics Technology; Industrial Systems Technology; Nuclear Technology; Masonry; Plumbing; Medical Assisting; Medical Transcription; Phlebotomy; Physical Therapist Assistant; Practical Nursing; Radiologic Technology; Respiratory Therapist; Small Engine Repair; and Welding Technology. 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. Foundation (the Foundation ) was organized to promote the study and teaching of all subjects that may be offered at or under the auspices of 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 s 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 s 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, 2011 and December 31, 2010 and 2009, respectively. There were no findings in the prior audit. Tests performed during the audit did not disclose any significant instances of noncompliance with applicable state laws and regulations; however, an incident was brought to the attention of the Examiners by the College in regards to the Human Resources Director taking and being paid for unearned leave. The incident was also reported to the Ethics Commission which did its own investigation. The result of the College review and Commission s investigation was the dismissal of the Human Resources Director and repayment of the unearned leave in the amount of $6, The following officials/employees were invited to an exit conference to discuss the results of the audit: Dr. Linda C. Young, President and Lynn Bell, Dean of Business Affairs. The following individuals attended the exit conference: Dr. Linda C. Young, President and Lynn Bell, Dean of Business Affairs. Representing the Department of Examiners of Public Accounts was Annette G. Williams, Audit Manager B

13 Department of Examiners of Public Accounts COMMENTS October 1, 2010 through September 30, 2011 George C. Wallace State Technical Trade School was established by the Alabama Regional Trade School Act of The name of the institution was changed to George C. Wallace State Vocational Trade School in On May 3, 1963, the Alabama State Legislature, approved Act Numbers 92, 93 and 94 of Acts of Alabama Act Number 92 on page 257 provided funds to pay the principal and interest on bonds, not exceeding $15,000,000, issued and sold by the public corporation known as the Alabama Trade School and Junior College Authority. Act Number 93 on page 259 authorized the Governor, the Director of Finance, and the State Superintendent of Education to become a corporation, to be known as the Alabama Trade School and Junior College Authority, for the objective of providing for the construction and equipment of educational institutions within the state known as junior colleges and trade schools. Act Number 94 on page 268 vested in the Alabama State Board of Education the authority and responsibility for the operation, management, control, supervision, maintenance, regulation, upkeep, improvement, equipment, and enlargement of, and additions to, education institutions known as trade schools and junior colleges. As a result of the passage of these acts, the institution became George C. Wallace State Technical Junior College. In 1969, the technical school and junior college were united to form South Alabama s first comprehensive community college. The Southern Association of Colleges and Schools first accredited George C. Wallace State Community College to award associate degrees and certificates in In 1997, merged with Alabama Aviation and Technical College in Ozark and Mobile. Alabama Aviation and Technical College was initially formed in 1955 as Alabama Institute of Aviation Technology under contract of the Ozark City School System. The school was to train mechanics for rotary aircraft in Fort Rucker. The aviation school was located in buildings constructed on Highway 231 in Ozark. The authority of the school was transferred to the two-year college system in 1962 and became certified by the Federal Aviation Administration. A year later the aviation school graduated its first class. The name of the school was changed to Alabama Aviation and Technical College in By 2003, it was decided to transfer the aviation college to Enterprise State Junior College. Another merger was completed in 1999 between and Sparks State Technical College in Eufaula. Sparks State Technical College was founded in 1966 as Sparks State Technical School. The school was named for former Barbour county native Chauncey Sparks who served as governor from The school was renamed Sparks State Technical College in 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 George C. Wallace Community College, as of and for the year ended September 30, 2011, 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, 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 George C. Wallace Community College Foundation 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 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, 2011, and George C. Wallace Community College Foundation, as of December 31, 2010 and 2009, 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 May 8, 2012 on our consideration of s internal control over financial reporting and 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 Management s Discussion and Analysis is a public, comprehensive community college dedicated to meeting the changing needs of citizens in the Southeast Alabama service area. By offering a broad spectrum of programs, the College provides students with opportunities for educational, personal, and professional advancement. A wide range of academic courses prepares students to transfer to four-year institutions. Technical programs equip students to master certain skills as well as to prepare them to be contributing members of the workforce. Workforce Development courses, programs, and services prepare students for college entry, provide customized training for business and industry and offer special interest education. The institution received an unqualified opinion upon examination of the fiscal records by the State of Alabama Examiners of Public Accounts. Presented in this document are the financial statements for fiscal year The emphasis of discussions about these statements will be on current year data. 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. The report of the College s financial statements provides an overview of its financial activities for the year and comparative amounts for the prior year. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. 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 fair presentation of the fiscal condition of George C. Wallace Community College. The Statement of Net Assets presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Assets (Assets less Liabilities). H

21 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. 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, nonexpendable and expendable. The corpus of nonexpendable restricted resources is available for investment purposes only. 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 Assets: Current Assets $32,905, $29,381, Noncurrent Assets 28,140, ,972, Total Assets 61,045, ,353, Liabilities: Current Liabilities 5,438, ,980, Noncurrent Liabilities 7,773, ,237, Total Liabilities 13,211, ,217, Net Assets: Invested in Capital Assets, Net of Debt 20,520, ,858, Restricted Nonexpendable 107, , Restricted Expendable 298, , Debt Service 1,056, ,057, Unrestricted 25,850, ,449, Total Net Assets $47,833, $44,136, I

22 Capital assets include those with an acquisition cost of $5,000 or more. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instructional and public service missions of the institution. The following narrative is a synopsis of the campus-wide renovations that began with the 2003 bond issue and continued through the use of Unexpended Plant Funds and grant funding. The college continued its initiative to provide standing seam, pitched metal roofs to all facilities on the Wallace campus. Renovation continued on restrooms at the Sparks campus. Repairs were completed on the drainage system for the Sparks campus. Construction began on an Interactive Digital Center to house all open computer learning labs on the Dothan campus. For fiscal year , net assets totaled $47,833, This figure is comprised of Invested in Capital Assets, Net of Debt, Restricted Nonexpendable, Restricted Expendable, and Unrestricted. 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 shown 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 nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. J

23 In general terms, operating revenues are received for providing goods and services to 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. Nonoperating revenues are revenues received for which goods and services are not provided. State appropriations are considered nonoperating revenues because they are provided by the State of Alabama 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 Operating Revenues $11,698, $12,177, Operating Expenses 38,007, ,525, Operating Loss (26,308,457.44) (26,347,966.77) Nonoperating Revenues and Expenses 29,507, ,898, Income (Loss) Before Other Revenues, Expenses, Gains, or Losses 3,198, ,550, Other Revenues, Expenses, Gains or Losses 483, , Increase in Net Assets 3,682, ,130, Net Assets at Beginning of Year 44,136, ,971, Restatements 14, , Net Assets at End of Year $47,833, $44,136, The Statement of Revenues, Expenses, and Changes in Net Assets reflects an increase in the institution s net assets at the end of year. K

24 The following chart displays the operating revenues by type and their relationship to the total operation of the college. Operating Revenues Tuition and Fees 0.16% 0.48% 6.46% 8.34% Federal Grants and Contracts State & Local Grants and Contracts 32.09% 52.47% Sales and Services of Educational Activities Nongovernmental grants and contracts Auxiliary Services Student tuition and fees represent the largest revenue source followed by federal grants and contracts. The College tuition rate increased to $107 per credit hour for Fall semester This represents an increase of $17 over the previous fall semester. The sum of all other types of revenue represents approximately 15% of the total operating revenue. Sales and Services of Educational Activities revenues represent revenues generated by work orders performed by students in the course of their normal instructional programs. Auxiliary Services revenues represent revenues generated by the Bookstore, Food Services, Vending and Farm Activities. The auxiliary services are generally selfsupporting functions. L

25 Within the nonoperating revenues, the College received contributions totaling $14,979, for state appropriations, $14,796, in PELL Grant Revenues, interest income of $113,264.95, endowment income of $16,841.16, gifts of $2, and other nonoperating income of $68, State appropriations were reduced by an additional $120,000 during the fiscal year as a result of proration. Over the past three years, proration has reduced the college s state appropriation by almost $5,000,000. Falling interest rates on certificates of deposit have reduced investment income by more than $800,000 over the past four years, a decrease of 88%. The operating expenses by function are displayed in the following exhibit. Operating Expenses 5.38% 3.33% Instruction Academic Support Student Services 17.61% 7.64% 11.29% 8.84% 3.81% 42.11% Institutional Support Operation and Maintenance of Plant Scholarships Auxiliary Enterprises Depreciation As reflected in the previous chart, operating expenses are divided into functional areas defined by the Alabama College System Fiscal Procedures Manual. Instructional expenses represent the largest single functional area expense. Scholarships, Institutional Support, Student Services, Operation and Maintenance of Plant, Auxiliary Enterprises, and Academic Support represent, in declining order, the next largest group of functional area expenses. Depreciation expense represents three percent of the total college expenses. M

26 Statement of Cash Flows The final statement 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 noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section reflects cash used for the acquisition and construction of capital and related items. The fourth section shows the cash flows from investing activities and the purchases, proceeds, and interest received from those 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 Year Ended September 30, Cash provided (used) by: Operating Activities ($23,855,672.99) ($25,518,448.75) Noncapital Financing Activities 29,720, ,166, Capital and Related Financing Activities (1,787,766.23) (2,152,449.98) Investing Activities 117, ,628, Net Change in Cash 4,193, ,123, Cash, Beginning of Year 21,446, ,322, Cash, End of Year $ 25,640, $21,446, N

27 The following chart visually depicts the cash flow figures used to generate the Net Change in Cash for the year Cash Flow Investing Activities 0.12 Capital and Related Financing Activities Noncapital Financing Activities Operating Activities (23.86) (1.79) (40.00) (20.00) Millions Economic Outlook The economic forecast for the fiscal year indicates a slight recovery. State funding may be reduced further as the state struggles through the economic difficulties facing the rest of the global market. In addition, the college will no longer receive almost one million dollars in American Recovery and Reinvestment Act funds that has supplemented the budget for the past two years. The institution s enrollment remains very strong although enrollments at other colleges within the Alabama Community College System appear to be declining. In spite of the less than optimistic economic outlook, the College s overall financial position remains strong. The College will monitor revenues and expenses and make adjustments where necessary. O

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29 Basic Financial Statements 1

30 Statement of Net Assets September 30, 2011 ASSETS Current Assets Cash and Cash Equivalents $ 25,640, Deposit with Bond Trustee 1,056, Short-Term Investments 1,622, Accounts Receivable, Net 3,858, Inventories 713, Bond Issuance Costs 13, Total Current Assets 32,905, Noncurrent Assets Endowment Investments 93, Bond Issuance Costs 145, Capital Assets: Land 842, Buildings 35,235, Improvements Other Than Buildings 3,097, Equipment and Furniture 5,111, Library Holdings 952, Construction in Progress 391, Less: Accumulated Depreciation (17,730,249.06) Total Capital Assets, Net of Depreciation 27,900, Total Noncurrent Assets 28,140, Total Assets $ 61,045, The accompanying Notes to the Financial Statements are an integral part of this statement. Dothan, Alabama 2 Exhibit #1

31 LIABILITIES Current Liabilities Accounts Payable and Accrued Liabilities $ 689, Deposits Refundable 232, Deferred Revenue 3,945, Leases Payable 9, Bonds Payable 500, Compensated Absences 62, Total Current Liabilities 5,438, Noncurrent Liabilities Leases Payable 6, Bonds Payable 7,030, Compensated Absences 736, Total Noncurrent Liabilities 7,773, Total Liabilities 13,211, NET ASSETS Invested in Capital Assets, Net of Related Debt 20,520, Restricted for: Nonexpendable: Scholarships and Fellowships 107, Expendable: Instructional 298, Debt Service 1,056, Unrestricted 25,850, Total Net Assets $ 47,833, Dothan, Alabama 3 Exhibit #1

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33 Statement of Revenues, Expenses and Changes in Net Assets For the Year Ended September 30, 2011 OPERATING REVENUES Student Tuition and Fees (Net of Scholarship Allowances of $8,564,117.94) $ 6,138, Federal Grants and Contracts 3,754, State and Local Grants and Contracts 755, Nongovernmental Grants and Contracts 19, Sales and Services of Educational Departments 56, Auxiliary Enterprises: Bookstore (Net of Scholarship Allowance of $1,577,286.66) 909, Vending 48, Other 17, Total Operating Revenues 11,698, OPERATING EXPENSES Instruction 16,003, Academic Support 1,447, Student Services 3,359, Institutional Support 4,292, Operation and Maintenance 2,902, Scholarships 6,693, Depreciation 1,264, Auxiliary Enterprises: Bookstore 2,044, Total Operating Expenses 38,007, Operating Income (Loss) (26,308,457.44) NONOPERATING REVENUES (EXPENSES) State Appropriations 14,979, Federal Grants 14,796, Investment Income 130, Interest on Capital Asset Related Debt (346,767.57) Bond Surety Fee Expense (94,731.07) Noncash Gifts/Revenue 2, Other Nonoperating Revenues/(Expenses) 39, Net Nonoperating Revenues 29,507, Income Before Other Revenues, Expenses, Gains or Losses 3,198, Capital Grants 470, Noncapital Grants 13, Changes in Net Assets 3,682, Total Net Assets - Beginning of Year, as Restated (See Note 15) 44,151, Total Net Assets - End of Year $ 47,833, The accompanying Notes to the Financial Statements are an integral part of this statement. Dothan, Alabama 4 Exhibit #2

34 Statement of Cash Flows For the Year Ended September 30, 2011 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees $ 6,402, Grants and Contracts 5,529, Sales and Services of Educational Departments 56, Payments to Suppliers (6,035,335.72) Payments to Employees (16,611,028.63) Payments for Benefits (5,563,510.91) Payments for Scholarships (6,693,020.51) Auxiliary Enterprise Charges: Bookstore (1,007,155.23) Other Auxiliary Operating Revenues 66, Net Cash Provided (Used) by Operating Activities (23,855,672.99) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations 14,979, Federal Grants 14,796, Noncapital Grants 13, Private Gifts for Educational Purposes 2, Other (72,573.06) Net Cash Provided (Used) by Noncapital Financing Activities 29,720, CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Bond Issuance Cost 13, Purchases of Capital Assets (1,430,506.71) Principal Paid on Capital Debt and Leases (493,939.73) Interest Paid on Capital Debt and Leases (346,767.57) Capital Grants 470, Deposit with Trustee Net Cash Provided (Used) by Capital and Related Financing Activities (1,787,766.23) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments 1,703, Interest on Investments 130, Purchase of Investments (1,716,106.06) Net Cash Provided (Used) by Investing Activities 117, Net Increase (Decrease) in Cash and Cash Equivalents 4,193, Cash and Cash Equivalents - Beginning of Year 21,446, Cash and Cash Equivalents - End of Year $ 25,640, The accompanying Notes to the Financial Statements are an integral part of this statement. Dothan, Alabama 5 Exhibit #3

35 Reconciliation of Net Operating Revenues (Expenses) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) $ (26,308,457.44) Adjustments to Reconcile Net Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense 1,264, Changes in Assets and Liabilities: (Increase)/Decrease in Receivables, Net 839, (Increase)/Decrease in Inventories (155,825.34) Increase/(Decrease) in Accounts Payable 82, Increase/(Decrease) in Deferred Revenue 399, Increase/(Decrease) in Compensated Absences (3,172.36) Increase/(Decrease) in Deposits Held for Others 25, Net Cash Provided (Used) by Operating Activities $ (23,855,672.99) Dothan, Alabama 6 Exhibit #3

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37 Statements of Financial Position George C. Wallace State Community College Foundation December 31, 2010 and Assets Cash and Cash Equivalents $ 324, $ 379, Investments 3,708, ,228, Pledge Receivables, Net of Allowance for Doubtful Accounts 169, , Total Assets 4,202, ,971, Liabilities and Net Assets Liabilities - Unrestricted 1,090, , Temporarily Restricted 2,631, ,718, Permanently Restricted 481, , Total Liabilities and Net Assets $ 4,202, $ 3,971, The accompanying Notes to the Financial Statements are an integral part of this statement. Dothan, Alabama 7 Exhibit #4

38 Statements of Activities George C. Wallace State Community College Foundation For the Years Ended December 31, 2010 and 2009 Temporarily Permanently Unrestricted Restricted Restricted Revenue and Other Support Contributions $ 32, $ 16, $ 50, Dividend Income 101, , Interest Income 3, Realized (Loss) on Investments 79, Unrealized Gain (Loss) on Investments 191, Total 407, , , Net Assets Released from Donor Restrictions: Satisfaction of Usage Restrictions 104, (104,207.00) Total Revenues and Other Support 511, (87,400.00) 52, Expenses General and Administrative 22, Investment Fees 24, Advancement 28, Bencze Theatre Expense 6, Donor and Staff Recognition 1, Health and Life Sciences Program 16, Humanities Program 1, Scholarships 87, Work Keys Program 16, Total Expenses 206, Other Bad Debt Recovery (38,936.00) Change in Net Assets 265, (87,400.00) 52, Net Assets - Beginning of Year 824, ,718, , Net Assets - End of Year $ 1,090, $ 2,631, $ 481, The accompanying Notes to the Financial Statements are an integral part of this statement. Dothan, Alabama 8 Exhibit #5

39 Totals $ 98, $ 21, , , , , , (551,936.00) 191, , , , , , , , , , , , , , , , , , , , , , , (38,936.00) 3, , , ,971, ,577, $ 4,202, $ 3,971, Dothan, Alabama 9 Exhibit #5

40 Notes to the Financial Statements For the Year Ended September 30, 2011 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 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 Unit 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). Dothan, Alabama 10

41 Notes to the Financial Statements For the Year Ended September 30, 2011 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 assets 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 grants, 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 at the lower of cost or market. All inventories are valued using the first in/first out (FIFO) method. Dothan, Alabama 11

42 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 Dothan, Alabama 12

43 5. Long-Term Obligations Notes to the Financial Statements For the Year Ended September 30, 2011 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. 6. Compensated Absences 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, 2011 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. Dothan, Alabama 13

44 Notes to the Financial Statements For the Year Ended September 30, 2011 Unrestricted Net assets that are not subject to externally imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of management or the State Board of Education. 9. Federal Financial Assistance Programs 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 to determine the amount of scholarship allowances and discounts. Note 2 Deposits and Investments A. Deposits The College s 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. Dothan, Alabama 14

45 Notes to the Financial Statements For the Year Ended September 30, 2011 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. The Statement of Net Assets investments classification consists primarily of non-negotiable certificates of deposit which are not subject to risk categorization because they are considered deposits for the purpose of this note. The Statement of Net Assets Deposit with Trustee classification consists of accounts administered by a bond trustee. As of September 30, 2011, the College had $1,056, in accounts administered by its bond trustee. In accordance with the College s revenue bonds, the trustee is permitted to invest these funds in direct general obligations of the United States or securities, the payment of which is unconditionally guaranteed by the United States. The College holds endowment investments which consist largely of non-negotiable certificates of deposit not subject to risk categorizations; however, a portion of the endowment investments include amounts invested with mutual funds. As of September 30, 2011, the College had the following investments and maturities: Investment Type Fair Value Less Than No Maturity Mutual Funds $24, $ $ $ $24, Total $24, $ $ $ $24, Dothan, Alabama 15

46 Notes to the Financial Statements For the Year Ended September 30, 2011 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) Credit Risk Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligation. The College does not have a policy regarding credit risk or minimum credit quality ratings for its investments. The College s investment in its mutual funds was unrated. Note 3 Receivables Receivables are reported net of uncollectible amounts and are summarized as follows: Accounts Receivable Federal $3,068, State 236, Other 639, Less: Allowance for Doubtful Accounts (86,280.36) Total Accounts Receivable, Net 3,858, Interest Receivable Total Receivables $3,858, Dothan, Alabama 16

47 Note 4 Capital Assets Notes to the Financial Statements For the Year Ended September 30, 2011 Capital asset activity for the year ended September 30, 2011, was as follows: Beginning Balance Additions Deductions Adjustments Ending Balance Land $ 842, $ $ $ $ 842, Buildings 33,747, , ,281, ,235, Improvements Other Than Buildings 3,008, , , ,097, Equipment 4,966, , , ,111, Construction in Progress 1,114, , (1,304,203.90) 391, Library Holdings 970, , , , Total 44,649, ,430, , , ,631, Less: Accumulated Depreciation Buildings 11,481, , ,111, Improvements Other Than Buildings 1,250, , ,364, Equipment 3,497, , , ,578, Library Holdings 700, , , , Total Accumulated Depreciation 16,929, ,264, , ,730, Capital Assets, Net $27,719, $ 166, $ $ 15, $27,900, 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 George C. Wallace 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. Dothan, Alabama 17