Garland County Community College. Hot Springs, Arkansas

Transcription

1 Garland County Community College Hot Springs, Arkansas Annual Financial Report Independent Auditor s Report and Other Reports June 30, 2003 LEGISLATIVE JOINT AUDITING COMMITTEE

2 TABLE OF CONTENTS Independent Auditor's Report Combined Reports on Compliance, Internal Controls and Other Matters Management s Discussion and Analysis FINANCIAL STATEMENTS Exhibit Comparative Statement of Net Assets Comparative Statement of Revenues, Expenses and Changes in Net Assets Comparative Statement of Cash Flows Notes to Financial Statements A B C

3 INDEPENDENT AUDITOR'S REPORT Garland County Community College Legislative Joint Auditing Committee We have audited the accompanying statement of net assets of the Garland County Community College (Institution), an Institution of Higher Education of the State of Arkansas, as of June 30, 2003 and the related statement of revenues, expenditures and changes in net assets and statement of cash flows for the year then ended as listed in the table of contents. These financial statements are the responsibility of the Institution s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Garland County Community College as of June 30, 2003 and changes in its net assets and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Management s discussion and analysis is not a required part of the basic financial statements, but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consist principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. In accordance with Government Auditing Standards, we have also issued our report dated December 17, 2003 on our consideration of the Institution's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. DIVISION OF LEGISLATIVE AUDIT Little Rock, Arkansas December 17, 2003 EDHE17503 Charles L. Robinson, CPA, CFE Legislative Auditor

4 COMBINED REPORTS ON COMPLIANCE, INTERNAL CONTROLS AND OTHER MATTERS Garland County Community College Legislative Joint Auditing Committee The underlying purpose of this letter is to convey certain observations and recommendations regarding state and federal compliance and internal control in conjunction with our audit of the Garland County Community College (Institution). This letter reflects various requirements and pronouncements of the American Institute of Certified Public Accountants (AICPA), the United States General Accounting Office (GAO), and the United States Office of Management and Budget (OMB). We have audited the financial statements of the Garland County Community College, an Institution of Higher Education of the State of Arkansas, as of and for the year ended June 30, 2003, and have issued our report thereon dated December 17, We conducted our audit in accordance with generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the Institution s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of the state constitution, state and federal laws and regulations, and federal contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Institution s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on the internal control over financial reporting. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving the internal control over financial reporting and its operation that we consider to be material weaknesses.

5 GENERAL COMMENTS RELATED ORGANIZATION - There is in existence a nonprofit entity with significant financial resources which is related to the Institution, but whose accounts are appropriately not recorded in the accounting system of the Institution. This related nonprofit entity, Garland County Community College Foundation, Inc., was established, ostensibly, for the benefit of the Institution. The following activities surrounding such organization as that described above should be evaluated to clarify: A. Fund raising activities on behalf of the related nonprofit entity by employees of the Institution. B. The holding of Officer, Director and quasi-employee positions of the related nonprofit entity by employees and/or directors of the Institution. C. Review of expenditures by the related nonprofit entity by appropriate personnel. STUDENT ENROLLMENT DATA - In accordance with Ark. Code Ann , we performed tests of the student enrollment data for the year ended June 30, 2003, as reported to the State Department of Higher Education, to provide reasonable assurance that the data was properly reported. Our testing was limited to the fall and spring terms of the year. The enrollment data reported was as follows: Fall Term Spring Term Student Headcount 2,987 2,865 Student Semester Credit Hours 24,838 23,125 During our review, nothing came to our attention that would cause us to believe that the student enrollment data was not substantially correct. These reports are intended for the information and use of the Legislative Joint Auditing Committee, state executive and oversight management and Institution management, and are not intended to be and should not be used by anyone other than these specific parties. However, this report is a matter of public record and its distribution is not limited. DIVISION OF LEGISLATIVE AUDIT William R. Baum, CPA, CFE Deputy Legislative Auditor Little Rock, Arkansas December 17,

6 (as of July 1, 2003 National Park Community College) Management Discussion and Analysis June 30, 2003 Garland County Community College is pleased to present its financial statements for the fiscal year ending June 30, Garland County Community College is a modern comprehensive community based two-year postsecondary institution, coordinated by the Arkansas Higher Education Coordinating Board and the Arkansas Department of Higher Education. The College is governed by a nine-member Board of Trustees elected by the voters of Garland County. This Board is responsible for the final approval of all budgets and expenditures of the College. The President of the College, as the chief executive officer, is responsible to the Board for the administration and execution of its financial policies. In June 1999, the Governmental Accounting Standards Board (GASB) issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. In November 1999, GASB issued Statement No. 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities. In September 2001, a directive received from the Arkansas Department of Higher Education stated that all Arkansas public institutions of higher education must implement the requirements of GASB Statements 34 and 35 in the same year as the primary government of the State of Arkansas, which was the fiscal year. The financial statement presentation required by GASB 34 and 35 provides a comprehensive, entity-wide perspective of the College s assets, liabilities, net assets, revenues, expenses, changes in net assets, and cash flows. Significant accounting changes reflected in these statements include: (1) the adoption of depreciation on capital assets; and (2) the separation of student accounts receivable into tuition, fees, and textbook categories. For financial reporting purposes, the College is considered a special purpose governmental unit engaged only in business-type activities. Accordingly, the Statement of Cash Flows considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Capital assets are recorded at cost at the date of acquisition. For equipment, the College s capitalization policy includes all items with a unit cost of $2500 or more, and an estimated useful life of greater than one year. Exceptions to the policy are computers, computer-related items, cameras, and microscopes. These items are capitalized at $500 per unit cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 30 years for buildings, 15 years for infrastructure and land improvement, 10 years for library holdings, and 5 to 7 years for equipment

7 The College s net assets are classified as follows: Invested in capital assets, net of related debt: - the College s total investment in capital assets, net of outstanding debt obligations related to these assets. Restricted net assets expendable: - resources in which the College is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties. Unrestricted net assets: - resources used for transactions relating to the general operations of the College used at the discretion of the governing board for any purpose. The College has classified its revenues as either operating or nonoperating based on the following criteria: Operating revenues: - includes activities that have the characteristics of exchange transactions, such as student tuition and fees and sales and services of auxiliary enterprises. Non-operating revenues: - includes activities that have the characteristics of non-exchange transactions, such as state appropriations and local millage receipts. Student tuition and fee revenues, as well as textbook sales, are reported net of scholarship discounts and allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship discounts and allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the student s behalf. Federal PELL grants and other federal and state grants are recorded as revenues in the College s financial statements. To the extent that revenues from such programs are used to satisfy tuition, fee, and book charges, the College has recorded a scholarship discount and allowance, thereby eliminating the double counting of revenue. The College experienced several state revenue reductions during Comparable reductions in expense budgets were made to offset this decrease. 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 for future years. With a record growth in student enrollment and the blending of Garland County Community College with Quapaw Vocational Technical Institute, the College anticipates a strong and fiscally sound It is the opinion of the College s management that the following financial statements accurately measure the fiscal performance of the College s activities during the period July 1, 2002 through June 30, Susan Holsomback Controller - 5 -

8 COMPARATIVE STATEMENT OF NET ASSETS Exhibit A June 30, ASSETS Current assets: Cash and cash equivalents $ 3,457,670 $ 3,194,691 Accounts receivable (less allowances of $32,510) 279, ,207 Other receivables 283, ,526 Inventories 351, ,123 Prepaid expenses 37,737 34,626 Due from other funds 190, ,241 Total current assets 4,599,876 4,197,414 Noncurrent assets: Restricted cash and cash equivalents 38,527 29, bond discount 19,835 21,286 Notes receivable 72,555 74,189 Capital assets (net of accumulated depreciation of $6,787,785) 7,840,482 8,294,725 Total noncurrent assets 7,971,399 8,419,533 TOTAL ASSETS 12,571,275 12,616,947 LIABILITIES Current liabilities: Accounts payable and accrued liabilities 273,354 44,287 Deferred revenue 235, ,039 Due to other funds 190, ,241 Funds held in trust for others 24,980 17,258 Other liabilities 107, ,824 Total current liabilities 830, ,649 Noncurrent liabilities: Bonds payable 3,240,000 3,395,000 Compensated absences 267, ,066 Total noncurrent liabilities 3,507,361 3,633,066 TOTAL LIABILITIES 4,338,359 4,164,715 NET ASSETS Invested in capital assets, net of related debt 4,600,482 4,899,725 Restricted for: Nonexpendable: Loans 75,147 74,373 Expendable: Scholarships and instruction 22,216 21,979 Capital projects 7,032 7,785 Debt service 250, ,000 Other 250, ,000 Unrestricted 3,028,039 2,948,370 TOTAL NET ASSETS $ 8,232,916 $ 8,452,232 The accompanying notes are an integral part of these financial statements

9 COMPARATIVE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED Exhibit B Year Ended June 30, OPERATING REVENUES Student tuition and fees (net of scholarship allowances of $1,069,550) $ 1,545,400 $ 1,377,694 Federal grants and contracts 1,319,514 3,496,742 State and local grants and contracts 52, ,902 Indirect cost allowance 89,700 76,010 Auxiliary enterprises: Bookstore (net of scholarship allowances of $467,981) 568, ,845 Student center (minor activity) 7,936 3,932 Other operating revenues 13,234 14,867 TOTAL OPERATING REVENUES 3,596,655 5,790,992 OPERATING EXPENSES Personal services 8,154,217 7,776,669 Scholarships and fellowships 211,300 2,616,438 Supplies and services 1,739,782 1,413,942 Auxiliary enterprise expenses 1,154, ,244 Other operating expenses 42,129 25,923 Depreciation 784, ,447 TOTAL OPERATING EXPENSES 12,086,089 13,502,663 OPERATING INCOME (LOSS) (8,489,434) (7,711,671) NON-OPERATING REVENUES (EXPENSES) State appropriations 6,229,771 6,409,761 Federal grants 1,685, ,216 State grants 70,202 Investment income 54,972 60,171 Interest on capital asset - related debt (145,950) (151,428) Gain or loss on disposal of capital assets (279,329) (515,245) Transfers to auxiliary - type agency funds (53,864) (43,584) Local tax millage 704, ,776 Expended for plant facilities (36,542) Other revenue 75,973 2,743 Other expense (1,451) (1,451) NET NON-OPERATING REVENUES (EXPENSES) 8,270,118 7,458,619 INCOME BEFORE OTHER REVENUES, EXPENSES, GAINS OR LOSSES (219,316) (253,052) Adjustments to prior year revenues and expenses 6,154 INCREASE (DECREASE) IN NET ASSETS (219,316) (246,898) NET ASSETS - BEGINNING OF YEAR - AS ORIGINALLY REPORTED 8,452,232 14,108,492 Cumulative effects of changes in accounting principles (5,409,362) NET ASSETS - BEGINNING OF YEAR - RESTATED 8,452,232 8,699,130 NET ASSETS - END OF YEAR $ 8,232,916 $ 8,452,232 The accompanying notes are an integral part of these financial statements

10 COMPARATIVE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED Exhibit C Year Ended June 30, CASH FLOW FROM OPERATING ACTIVITIES Student tuition and fees $ 1,560,746 $ 1,377,694 Grants and contracts 1,349,002 3,786,644 Auxiliary enterprises revenues: Bookstore 1,012, ,845 Bookstore charges (838,021) Student union 38,157 3,932 Student union charges (32,223) Collection of student loans (net) (989) (5,895) Other receipts 13,234 14,867 Payments to employees for salaries and benefits (8,225,762) (7,776,669) Payments to suppliers (2,767,391) (1,413,942) Scholarships and fellowships (211,300) (2,616,438) Net cash provided by operating activities (7,231,739) (6,968,206) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State appropriations 6,229,771 6,393,270 Other agency funds - net 24,980 17,333 Net cash provided by noncapital financing activities 6,254,751 6,410,603 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital appropriations - state and local 702, ,267 Proceeds from sale of capital assets 1,439 2,743 Purchases of capital assets (609,136) (730,905) Principal paid on capital debt (155,000) (155,000) Interest paid on capital debt (145,950) (151,428) Net cash provided by capital and related financing activities (205,741) (325,323) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales and maturities of investments 3,949,930 3,303,847 Interest on investments 54,972 7,736 Purchases of investments (2,550,000) (2,173,694) Net cash provided by investing activities 1,454,902 1,137,889 Net increase (decrease) in cash and cash equivalents 272, ,963 Cash and cash equivalents - beginning of year 3,224,024 2,969,061 Cash and cash equivalents - end of year $ 3,496,197 $ 3,224,

11 Reconciliation of net operating revenues (expenses) to net cash provided (used) by operating activities: GARLAND COUNTY COMMUNITY COLLEGE COMPARATIVE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED Year Ended June 30, Exhibit C Operating income (loss) $ (8,489,434) $ (7,711,671) Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities: Depreciation expense 784, ,447 Uncollectible accounts expenses 41,140 Indirect cost allowance (76,010) Change in assets and liabilities: Receivables, net (8,024) 20,028 Inventories 125,074 Prepaid expenses 3,111 Accounts payable 229,067 Deferred revenue 50,749 Compensated absences 29,295 Other liabilities 3,233 Net cash provided (used) by operating activities $ (7,231,739) $ (6,968,206) The accompanying notes are an integral part of these financial statements

12 NOTES TO FINANCIAL STATEMENTS NOTE 1: Reporting Entity The Garland County Community College Board of Trustees is a nine (9) member board elected at large by the residents of Garland County and is the level of government having responsibility over all activities related to the College s operations. NOTE 2: Summary of Significant Accounting Policies Financial Statement Presentation In June 1999, the Governmental Accounting Standards Board (GASB) issued Statement No. 34, Basic Financial Statements - and Management Discussion and Analysis - for State and Local Governments. GASB Statement No. 35, Basic Financial Statements - and Management s Discussion and Analysis - for Public Colleges and Universities, followed this in November The financial statement presentation required by GASB No. 34 and No. 35 provides a comprehensive, entity-wide perspective of the Institution s assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund-group perspective previously required. Basis of Accounting For financial reporting purposes, the Institution is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institution s financial statements have been presented using the economic resources focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation is incurred. All significant intra-agency transactions have been eliminated. All Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, are applied, except for those that conflict with or contradict the GASB. Capital Assets and Depreciation Land, buildings, improvements and infrastructure, equipment and construction in progress are reported at cost or estimated historical cost if actual data is not available. Donated capital assets are reported at fair market value when received. The Institution follows the State guidelines for equipment capitalization. Depreciation is computed using the straight-line method over the estimated lives of the assets, generally 30 years for buildings, 15 years for infrastructure and land improvements, 10 years for library books, and 5 to 7 years for equipment. Operating and Nonoperating Revenues The Institution has classified revenues as either operating or nonoperating revenues according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship discounts and allowances, (2) sales and services of auxiliary enterprises, net of scholarship discounts and allowances, and (3) most federal, state and local grants and contracts and federal appropriations. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating by GASB Statement No. 34, such as state appropriations and investment income

13 NOTES TO FINANCIAL STATEMENTS NOTE 2: Summary of Significant Accounting Policies (Continued) Cash Equivalents For purposes of the statement of cash flows, the Institution considers all highly liquid investments with an original maturity of six months or less to be cash equivalents. Accounts Receivable Accounts Receivable consists of tuition and fee charges to students and auxiliary enterprises provided to students, faculty and staff. Accounts Receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institution s grant and contracts. Inventories Inventories are valued at cost with cost being generally determined on a first-in, first-out (FIFO) basis. Noncurrent Cash and Investments Cash and investments that are externally restricted to make debt service payments, maintain sinking or reserve funds, or to purchase or construct capital or other nonrecurring assets, are classified as noncurrent assets in the statement of net assets. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. Compensated Absences Payable Compensated absences payable represents the accrual of a liability for employees rights to receive compensation for future absences. Accumulated unpaid annual leave is accrued at the employees daily pay rate up to a maximum of thirty (30) days. Noncurrent Liabilities Noncurrent liabilities include (1) principal amounts of revenue bonds payable, notes payable, and capital lease obligations with contractual maturities greater that one year; (2) estimated amounts for accrued compensated absences and other liabilities that will not be paid within the next fiscal year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets. Property Taxes Property taxes are levied in November based on property assessment made between January 1 and May 31 and are an enforceable lien on January 1 for real property and June 1 for personal property. The tax records are opened on the first business day of March of the year following the levy date and are considered delinquent after October 10 of the same calendar year

14 NOTES TO FINANCIAL STATEMENTS NOTE 2: Summary of Significant Accounting Policies (Continued) Accounting Changes As a result of the adoption of GASB Statement No. 34, the Institution was also required to make certain changes in accounting principles, specifically the adoption of depreciation on capital assets and recording certain summer semester revenues between fiscal years rather than the fiscal year in which the semester was predominantly conducted. NOTE 3: Public Fund Deposits and Investments Cash deposits are carried at cost. The Institution s cash deposits at year-end are shown below: Carrying Amount Bank Balance Insured (FDIC) $ 100,000 $ 100,000 Uninsured, Collateralized 3,374,543 3,626,654 Total Deposits $ 3,474,543 $ 3,726,654 The above deposits do not include cash on deposit in the state treasury or cash on hand in the amounts of $19,829 and $1,825 for the year ended June 30, 2003, respectively. NOTE 4: Income Taxes The Institution is tax exempt under Internal Revenue Service code. It is also exempt from state income taxes under Arkansas law. Accordingly, no provision for income taxes is made in the financial statements. NOTE 5: Capital Assets Following are the changes in capital assets for the year ended June 30, 2003: Balance Balance July 1, 2002 Additions Retirements June 30, 2003 Capital assets not being depreciated: Land and improvements $ 468,130 $ 468,130 Total capital assets not being depreciated $ 468,130 $ 0 $ 0 $ 468,130 Other capital assets: Improvements and infrastructure $ 425,759 $ 158,283 $ 584,042 Buildings 10,301,971 25,727 $ (134,505) 10,193,193 Equipment 2,829, ,671 (329,311) 2,880,982 Library materials 478,052 44,455 (20,587) 501,920 Total other capital assets 14,035, ,136 (484,403) 14,160,

15 NOTES TO FINANCIAL STATEMENTS NOTE 5: Capital Assets (Continued) Balance Balance July 1, 2002 Additions Retirements June 30, 2003 Other capital assets: Less accumulated depreciation for: Improvements and infrastructure $ (321,728) $ (30,735) $ (352,463) Buildings (4,228,778) (376,036) (4,604,814) Equipment (1,565,063) (330,659) $ 205,074 (1,690,648) Library materials (93,240) (46,620) (139,860) Total accumulated depreciation (6,208,809) (784,050) 205,074 (6,787,785) Other capital assets, net $ 7,826,595 $ (174,914) $ (279,329) $ 7,372,352 Capital Asset Summary: Capital assets not being depreciated $ 468,130 $ 468,130 Other capital assets, at cost 14,035,404 $ 609,136 $ (484,403) 14,160,137 Total cost of capital assets 14,503, ,136 (484,403) 14,628,267 Less accumulated depreciation (6,208,809) (784,050) 205,074 (6,787,785) Capital Assets, net $ 8,294,725 $ (174,914) $ (279,329) $ 7,840,482 NOTE 6: Long-Term Liabilities Debt payments on bonds amounted to $300,950 for the fiscal year ended June 30, A summary of long-term liabilities is as follows: Amount Debt Maturities Date of Final Rate of Authorized Outstanding To Date of Issue Maturity Interest and Issued June 30, 2003 June 30, /1/1998 3/1/ % $ 3,960,000 $ 3,240,000 $ 720,000 The changes in long-term liabilities are as follows: Amounts Balance Balance Due Within July 1, 2002 Issued Retired June 30, 2003 One Year Bonds payable $ 3,395,000 $ 0 $ 155,000 $ 3,240,000 $ 165,

16 NOTES TO FINANCIAL STATEMENTS NOTE 6: Long-Term Liabilities (Continued) Total long-term debt principal and interest payments are as follows: Year ended June 30, 2003 Principal Interest Total 2004 $ 165,000 $ 138,855 $ 303, , , , , , , , , , , , , ,165, ,250 1,578, ,155, ,745 1,286,745 Totals $ 3,240,000 $ 1,169,095 $ 4,409,095 NOTE 7: Commitments The Institution was contractually obligated for the following at June 30, 2003: Operating Leases Copiers and related maintenance (a) Future minimum rental payments (aggregate) at June 30, 2003: $37,749 (b) Rental payments are determined by estimated volume of each machine, ranging from 14,000 to 25,000 copies per month. (c) Future minimum rental payments for the two (2) succeeding fiscal years: Year Ended June 30, Amount 2004 $ 22, ,753 NOTE 8: Retirement Plans Teachers Insurance and Annuity Association/College Retirement Equities Fund (TIAA/CREF) Plan Description. The Institution participates in TIAA/CREF, a defined contribution plan. The plan is a 403(b) program as defined by Internal Revenue Service Code of 1986 as amended. TIAA is an insurance company offering participants a traditional annuity with guaranteed principle and a specific interest rate plus the opportunity for additional growth through dividends. CREF is an investment company which offers a variable annuity. Arkansas law authorizes participation in the plan. Funding Policy. TIAA/CREF has contributory and non-contributory plans. Contributory members contribute 6% of earnings to the plan. The Institution contributes 10% of earnings for contributory and non-contributory members. The Institution's and participants' contributions for the year ended June 30, 2003 were $265,203 and $268,881, respectively

17 NOTES TO FINANCIAL STATEMENTS NOTE 8: Retirement Plans (Continued) Arkansas Teacher Retirement System Plan Description. The Institution contributes to the Arkansas Teacher Retirement System (ATRS), a cost-sharing multiple-employer defined benefit pension plan for employees who do not elect a qualified alternative retirement plan. ATRS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit and contribution provisions are established by State law and can be amended only by the Arkansas General Assembly. The Arkansas Teacher Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for ATRS. That report may be obtained by writing to Arkansas Teacher Retirement System, 1400 West Third Street, Little Rock, Arkansas or by calling Funding Policy. ATRS has contributory and non-contributory plans. Contributory members are required by law to contribute 6% of their salaries. Each participating employer is required by law to contribute at a rate established the by Arkansas General Assembly. The current employer rate is 12%. The Institution s contributions to ATRS for the years ended June 30, 2003, 2002 and 2001 were $157,157, $153,192 and $157,488, respectively, equal to the required contributions for each year. Arkansas Public Employees Retirement System Plan Description. The Institution contributes to the Arkansas Public Employees Retirement System (APERS), a cost-sharing multiple-employer defined benefit pension plan. Employees may elect coverage under APERS as a qualified retirement system. APERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. Benefit and contribution provisions are established by State law and can be amended only by the Arkansas General Assembly. The Arkansas Public Employees Retirement System issues a publicly available financial report that includes financial statements and required supplementary information for APERS. That report may be obtained by writing to Arkansas Public Employees Retirement System, One Union National Plaza, 124 W. Capitol, Little Rock, Arkansas or by calling Funding Policy. APERS has contributory and non-contributory plans. Contributory members are required by law to contribute 6% of their salaries. Each participating employer is required by law to contribute at a rate established by the Arkansas General Assembly. The current statutory employer rate is 10% of annual covered payroll. The Institution s contributions to APERS for the years ended June 30, 2003, 2002 and 2001 were $72,311, $72,642 and $71,866, respectively, equal to the required contributions for each year. Jefferson Pilot Insurance Plan Description. The Institution contributes to the Jefferson-Pilot Pension Plan, a defined contribution plan. The plan is a 403(b) program as defined by Internal Revenue Service Code of 1986 as amended. The administrator provides insurance policies and annuity contracts and when they are issued they become the property of the participant. Act 480 of 1983 authorizes participation in the plan. Funding Policy. The participants' contributions are tax-sheltered and amount to 6% of compensation. The Institution's contribution rate is 10%. Participants become vested after one year. The participants' and the Institution's contributions for the year ended June 30, 2003 were $43,617 and $49,293, respectively

18 NOTES TO FINANCIAL STATEMENTS NOTE 8: Retirement Plans (Continued) Lincoln National Insurance Plan Description. The Institution contributes to the Lincoln National Pension Plan, a defined contribution plan. The plan is a 403(b) program as defined by Internal Revenue Service Code of 1986 as amended. The administrator provides insurance policies and annuity contracts and when they are issued they become the property of the participant. Act 480 of 1983 authorizes participation in the plan. Funding Policy. The participants' contributions are tax-sheltered and amount to 6% of compensation. The Institution s contribution rate is 10%. Participants become vested after one year. The participants' and the Institution's contributions for the year ended June 30, 2003 were $3,306 and $5,510, respectively. The Variable Annuity Life Insurance Company (VALIC) Plan Description. The Institution contributes to the Variable Annuity Life Insurance Company (VALIC), a defined contribution plan. The plan is a 403(b) program as defined by Internal Revenue Service Code of 1986 as amended. The administrator provides insurance policies and annuity contracts and when they are issued they become the property of the participant. Act 480 of 1983 authorizes participation in the plan. Funding Policy. The participants' contributions are tax-sheltered and amount to 6% of compensation. The Institution's contribution rate is 10%. Participants become vested after one year. The participants' and the Institution's contributions for the year ended June 30, 2003 were $36,651 and $28,795, respectively. NOTE 9: Natural classifications with functional classifications The Institution s operating expenses by functional classifications were as follows: Scholarships Supplies Other Personal and and Operating Auxiliary Services Fellowships Services Expenses Depreciation Enterprises Total Instruction $ 4,351,886 $ 542,969 $ 4,894,855 Public service 144,656 41, ,908 Academic support 343,853 98, ,664 Student services 1,577,080 $ 38, ,029 $ 42,129 2,099,615 Institutional support 1,386,373 76,706 1,463,079 Scholarships and fellowships 6, ,923 4, ,012 Operations and maintenance of plant 343, , ,295 Auxiliary enterprises $ 1,154,611 1,154,611 Depreciation $ 784, ,050 Total $ 8,154,217 $ 211,300 $ 1,739,782 $ 42,129 $ 784,050 $ 1,154,611 $ 12,086,

19 NOTES TO FINANCIAL STATEMENTS NOTE 10: Related Organizations The financial statements do not include assets, liabilities, fund balances, and changes in fund balances, relating to the Garland County Community College Foundation, Inc. The Institution operates as a nonprofit benevolent corporation for charitable educational purposes. A summary of the Foundation's financial condition as of December 31, 2002, follows: ASSETS Cash and investments $ 608,982 Other 75,228 TOTAL ASSETS $ 684,210 NET ASSETS Restricted $ 284,488 Unrestricted 399,722 TOTAL LIABILITIES AND FUND BALANCES $ 684,210 Major components of the changes in net assets during 2002 consisted of: Contributions $ 70,724 Other revenue and additions (62,986) Total 7,738 Expenditures 50,379 Other deductions 14,706 Total 65,085 Net Increase/(Decrease) in Net Assets $ (57,347) NOTE 11: Subsequent Event As required by Act 678 of 2003, the Institution will be merging with Quapaw Technical Institute July 1, The merged Institution will be named National Park Community College