President s Letter October 1, 2007 Members of the Board: I am pleased to submit to you and the residents of District 535 the Comprehensive Annual Fina

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8 President s Letter October 1, 2007 Members of the Board: I am pleased to submit to you and the residents of District 535 the Comprehensive Annual Financial Report for Fiscal Year This document presents the record of the College s financial operations for the year just ended. As detailed in Other Information of the following Transmittal Letter, the College continues to receive high marks for its financial reporting, budget preparation, and its Popular Annual Report. For fifteen consecutive years, the Government Finance Officers Association (GFOA) of the United States and Canada awarded the College a Certificate of Achievement for Excellence in Financial Reporting. In recent years the College also has been awarded certificates for Budget Preparation and Popular Financial Reporting. Oakton is one of only a few institutions of higher education to hold all three GFOA awards in one year. At the heart of this past year s achievements lies the collective energy of Oakton students and employees working together to move the College forward. The Oakton community launched its self study in anticipation of the Higher Learning Commission s reaccreditation visit in October Through the dedicated work of faculty, staff, and administrators, we began identifying not only what matters most to the life of the College but also the challenges and opportunities that lie ahead. While Oakton enjoys a reputation as one of the finest community colleges in the nation ( For Achievers, a New Destination, The New York Times, April 22, 2007), we remain mindful that we must continue to raise the bar, stretching all of us to reach even bolder achievements. Learning Matters, our self-study report, documents the results of our two-year examination. As the College continues to build on its current momentum, I believe we must continue our tradition of making imaginative and courageous choices to provide an even better learning experience for our students. As the words of the legendary Les Brown remind us, Shoot for the moon. Even if you miss it, you will land among the stars. These are exciting, challenging, and rewarding times for Oakton. Technological advances, in particular, have opened up opportunities not even imaginable ten years ago. Our substantial efforts in the area of information technology are evidence of our commitment to capitalize on those opportunities to improve the tools we use to bring services to our students and to the communities of our district. Our continuing emphasis on employee education and training affirms that we have not forgotten that, technology notwithstanding, education is ultimately a people-topeople enterprise. Change Matters, Oakton s strategic plan for , sets forth bold and courageous creative goals and objectives. Indeed, we are proud that Oakton and its people have been recognized and honored for excellence in performance in the community, in the state, and in the nation. But more important than all of the institutional recognition and honors are the stories we hear and are able to tell of the success of our students. Our students are diverse: young and old, traditional and non-traditional, pursuing degrees and certificates, or just taking a course or two for personal enrichment. What they all have in common is that they come to Oakton to learn. Nearly 25 percent of students enrolled in credit courses hold bachelor s degrees or higher. As the community s college, Oakton is far more than a place where students can and do spend a year or two before moving on to fouryear institutions in Illinois and across the country. Oakton remains an affordable, accessible, high-quality resource 4

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10 Transmittal Letter October 1, 2007 To President Lee, Members of the Board of Trustees, and Citizens of Oakton Community College District No. 535: The Comprehensive Annual Financial Report (CAFR) of Oakton Community College, Community College District No. 535 (the College), County of Cook, State of Illinois, for the fiscal year ended June 30, 2007, is hereby submitted. Responsibility for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the College. To the best of our knowledge and belief, the enclosed data is accurate in all material respects and is reported in a manner designed to present fairly the financial position and results of operations of the College. All disclosures necessary to enable the reader to gain an understanding of the College's financial activities in relation to its mission have been included. Sikich LLP, Certified Public Accountants, have issued an unqualified (clean) opinion on Oakton Community College, Community College District No. 535 s CAFR for the year ended June 30, The independent auditor s report is located at the front of the financial section of the report. The Management Discussion and Analysis (MD&A) immediately follows the independent auditor s report and provides a narrative introduction, overview, and analysis of the basic financial statements. MD&A complement this letter of transmittal and should be read in conjunction with it. PROFILE OF THE COLLEGE The College is located in northern Cook County approximately 20 miles northwest of Chicago s Loop. It serves a population of approximately 452,100 and covers an area of approximately 102 square miles encompassing all of five townships: Evanston, Maine, Niles, Northfield and New Trier and small portions of Wheeling, Norwood and Jefferson Townships. The District is bordered on the east by Lake Michigan, on the south by the City of Chicago, on the north by the Lake/Cook County line and on the west by Wheeling and Elk Grove Townships. Located within the District are all or part of the Cities and Villages of Des Plaines, 82.4%; Park Ridge, 99.9% Prospect Heights, 17.4%; Deerfield, 11.6%; Evanston, Glencoe, Golf, Glenview, Kenilworth, Lincolnwood, Morton Grove, Niles, Skokie, Wilmette and Winnetka, 100%; Northbrook, 98.9% and Rosemont 27.8%. Very small portions of the Village of Mount Prospect,.06% and the City of Chicago,.02% are also included in the District. The College's mission is determined by the Illinois Public Community College Act, which established the statewide community college system. Simply stated, that mission is to serve the post-secondary educational needs of the residents of District No The College maintains its accounts and prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (GAAP) as set forth by Governmental and Financial Accounting Standards Boards (GASB and FASB), National Association of College and University Business Officers (NACUBO) and the Illinois Community College Board (ICCB). The ICCB requires accounting by funds in order that limitations and restrictions on resources can be easily accounted for. The financial records of the College are maintained on the accrual basis of accounting whereby all revenues are recorded when earned and all expenses are recorded when they have been reduced to a legal obligation to pay. The notes to the financial statements expand and explain the financial statements and the accounting principles applied. 6

11 The ALLiance for Lifelong Learning (ALLiance) is a consortium of the College and three high school districts (Maine Township District 207, Niles Township District 219 and Northfield Township District 225) located within the geographical boundaries of the College s district. The ALLiance provides a comprehensive program of adult and continuing education to the community. The College is fiscally responsible for the program and assumes responsibility for ALLiance's operations. The College appoints one half of the representatives on ALLiance's Board of Trustees and the other half is appointed by the three participating high school districts. ALLiance is considered to be an educational program of the College and the results of its financial transactions are included in the College's financial statements. The following table illustrates enrollments over the last five years. FALL Enrollment College 9,892 9,964 9,697 9,779 9,311 Full-time Equivalents 5,354 5,406 5,383 5,491 5,290 Continuing Education (ALLiance) (1) 16,560 20,869 25,386 25,390 26,099 Full-time Equivalents (1) 1,504 1,164 1,208 1,209 1,188 FY2003 FY2004 FY2005 FY2006 FY2007 Total Credit Hours 232, , , , ,887 (1) Estimated for current year. LOCAL ECONOMY The College's district is located just north of Chicago with Lake Michigan as its eastern border and O'Hare airport just outside the southwest corner of the district. It includes all of five townships: Evanston, Maine, Niles, Northfield and New Trier; and one square mile of Wheeling township. The main campus is located in Des Plaines with a second campus (Ray Hartstein) in Skokie. District 535 is one of the most affluent areas of the United States and is an area interested in the highest quality of education at all levels. It is made up primarily of bedroom communities, office buildings, regional and local shopping areas and a small amount of light manufacturing and, therefore, is insulated from major changes in the economy. It includes many major publicly held corporations: Kraft, Allstate, G.D. Searle, Culligan, Illinois Tool Works, Zenith, Federal Mogul, United Stationers, Idex Corporation, Underwriters Laboratories, Inc., Household International and Comdisco, among others. The district has four major regional shopping centers, including Old Orchard, Golf Mill, Village Crossing and Northbrook Court, as well as smaller centers and shopping strip units. It has low unemployment and one of the highest property values per community college student in the country. The College has the resources required to serve student enrollment. In 1998 the North Central Association of Colleges and Schools approved a ten-year accreditation and indicated that fiscal management and resources were strong assets of the College. FINANCIAL INFORMATION In 2006, the College implemented Government Accounting Standards Board (GASB) statement No. 47 Accounting for Termination Benefits and implemented early GASB statements No. 43 and 45 Other Post Employment Benefits. The effects of these changes are addressed in the Management Discussion and Analysis (see pages 16-27). The effects of these changes are also included in the notes to the financial statements (see Note 4). 7

12 Internal Controls. Management of the College is responsible for establishing and maintaining internal controls designed to protect the assets of the College, prevent loss from theft or misuse and to provide that adequate accounting data are compiled to allow for the preparation of financial statements in conformity with accounting principles generally accepted in the United States of America. The internal controls are designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. As demonstrated by the statements and schedules included in the financial section of this report, the College continues to meet its responsibility for sound financial management. Property Taxes. The following table illustrates the College's property tax levy rates over the most recent three years for which data is available. Levy Rates (Per $100 of assessed valuation): Max. State Avg. Fund Type Auth (1) Current: Education $.1750 $.1190 $.1219 $.1411 $.1937 Operations and Maintenance Liability, Protection and Settlement none Audit Working Cash (2)/Bond and Interest none.0487 Social Security/Medicare none Plant: Operations and Maintenance All Other Total $.1572 $.1608 $.1854 $.3983 (1) For taxes levied in 2002 and collected in 2003, which is latest data available. (2) Subject to limitation that fund balance does not exceed 75% of operating property tax revenue. The College's average collection rate over the past five years, including collection of back taxes, has been percent, as Cook County extends the College s levies up to 103% depending on the tax cap limitation. The District s most recent estimated assessed value of taxable property is $21,252,314,300 for the 2005 tax year. PROSPECTS FOR THE FUTURE The College s financial outlook for the future continues to be positive, albeit with some caution. There are a number of challenges facing the institution, including real estate tax cap legislation, and continued uncertain levels of future State funding. Public Act 89-1 placed limitations on the annual growth of property tax collections of most local governments, including the College, however, the College has the capacity to meet any revenue shortfall as a result of this cap and uncertain levels of future State funding through increased tuition rates and prudent reduction of spending levels. The College s capital improvement plan for fiscal year 2008 and beyond will be substantially designated to the findings in a ten year Facility Condition Assessment report completed in early fiscal year In the ten year period approximately $13.3 million will be expended on capital projects with the funds provided substantially from accumulated reserves. 8

13 CASH MANAGEMENT For the purpose of overall investment of excess funds, the College is governed by the Illinois Public Community College Act (Chapter 110. of Illinois Compiled Statutes Act 805) and the Illinois Public Funds Investment Act (Chapter 30. of Illinois Compiled Statutes Act 235). The fiduciary responsibility for said investments is entrusted to the College Board of Trustees who have delegated this function to the Treasurer of the College as permitted by the Illinois Public Community College Act. In keeping with existing Board policy, all investments of excess funds are made in a prudent, conservative and secure manner and in accordance with the guidelines detailed in the College Investment Policy No Designation of depositories of College funds is approved by the Board of Trustees. In the fiscal year ending June 30, 2007, the College's investments from current funds generated $3,800,882 in investment income. The College invests funds in the Illinois funds, a Money Market fund managed by the Illinois State Treasurer s office for investors of public funds. The College s average rate of return before fair value adjustments was 5.02% in fiscal year 2007 compared to 4.40% in fiscal year As of June 30, 2007, investments were as follows: Investments (000) % GNMA Bonds $24, Illinois Funds Money Market 39, Certificate of Deposit 12, High Yield Money Market 57.1 $76, OTHER INFORMATION Awards. The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to Oakton Community College for its comprehensive annual financial report for the fiscal year ended June 30, The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of state and local government financial reports. In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized Comprehensive Annual Financial Report (CAFR) whose contents conform to program standards. Such CAFR must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. Oakton Community College has received the Certificate of Achievement annually since We believe our current report continues to conform to the Certificate of Achievement program requirements, and we are submitting it to the GFOA. Oakton Community College has also earned GFOA's Award for Distinguished Budget Presentation for its annual budget for the years ending June 30, 1993 through In order to receive this award, a government unit must publish a budget document that meets program criteria as a policy document, an operations guide, a financial plan, and a communications device. In addition, Oakton s Annual Reports to the Community for 1996 through 2006 were awarded GFOA s Certificate for Outstanding Achievement in Popular Annual Financial Reporting. In order to achieve this award, a government unit 9

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21 Management s Discussion and Analysis This section of Oakton Community College s Comprehensive Annual Financial Report presents management s discussion and analysis of the College s financial activity during the fiscal years ended June 30, 2007, and June 30, Since this management s discussion and analysis is designed to focus on current activities, resulting change and currently known facts, please read it in conjunction with the transmittal letter (pages 6-10), the College s basic financial statements (pages 28-44). Responsibility for the completeness and fairness of this information rests with the College. Using This Annual Report The College financial statements (see pages 28-31) are designed to emulate corporate presentation models whereby all College activities are consolidated into one total. The focus of the Statements of Net Assets is to reflect the College s financial position at a certain date. This statement, combines and consolidates, current financial resources (short-term spendable resources) with capital assets. The Statements of Revenues, Expenses, and Changes in Net Assets focuses on both the gross costs and the net costs of College activities which are supported substantially by property taxes, state and federal grants and contracts, student tuition and fees and auxiliary enterprises revenues. This approach is intended to summarize and simplify the user s analysis of cost of various College services to students and the public. Financial Highlights Comparative of Net Assets - Fiscal Years Net Investment in Capital Assets Restricted Unrestricted 16

22 Financial Analysis of the College as a Whole Increase Increase (Decrease) (Decrease) Current assets $102.0 $89.3 $12.7 $76.2 $13.1 Non-current assets Capital assets, net of depreciation (0.3) Other (2.1) 46.8 (6.0) Total assets Current liabilities Non-current liabilities Total liabilities Net assets Net Assets As of June 30 (in millions) Investment in capital assets (0.3) Restricted for: expendable (0.4) 24.6 (2.5) Unrestricted Total Net Assets $132.4 $126.2 $6.2 $124.9 $1.3 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. Fiscal Year 2007 Compared to 2006 Current Assets have increased by approximately $12.7 million due primarily to the College increasing its short term investments gradually during the year as interest rates continued to increase. Property Tax Receivables increased due to an increase in the current levy. Other Accounts Receivables decreased due to a decrease in Government Contracts Receivables at fiscal year end. Inventory and prepaid expenses, predominately for items for resale in the Bookstore and prepaid salaries have increased due to timing issues of when these items were recorded in the years presented. Non-Current Assets decreased approximately $2.4 million primarily due to the reallocation of long term investments to short term investments. Investment in Capital Assets Net of Accumulated Depreciation decreased approximately $0.3 million due to a significant write off of building improvements this fiscal year. Current Liabilities increased by $2.6 million primarily due to an increase in Unearned Property Tax revenue and Unearned Tuition and Fees revenue. The increase in Unearned Property Tax revenue was based on an estimated tax levy increase in the forthcoming year. Unearned Tuition and Fees revenue increased due to the recording of Summer 2007 tuition reflecting an increase in the tuition rate of $7.00 per credit hour for in district students. Non-Current Liabilities increased approximately $1.4 million due to an increase in Unearned Property Tax revenue and Other Accrued Liabilities. Unearned Property Tax revenue increased due to an estimated tax levy increase in the forthcoming year. Other Accrued Liabilities increased primarily due to the recording of other postretirement employee benefits for medical coverage reimbursement. The College had a current ratio of 2.2 times at June 30, The current ratio is total Current Assets divided by total Current Liabilities. This means that for every dollar of Current Liabilities the College has $2.2 in Current Assets. This ratio is one indicator of the College s ability to pay its debt in a timely manner. The change in Net Assets is explained on Page

23 Fiscal Year 2006 Compared to 2005 Current Assets have increased by $13.1 million due primarily to the investment of surplus funds in short term investments as long term investments matured. The College with this strategy has been able to reinvest at higher rates than many long term investment options. Property Tax Receivables increased due to an increase in the current tax levy. Student tuition and fees have been recorded on an accrual basis in fiscal year 2006 rather than on a cash basis which had been the past accounting practice. Other Receivables increased due to an increase in Government Contracts Receivables at fiscal year end. Non- Current Assets decreased approximately $4.8 million due substantially to the reallocation of long term investments to short term investments and the use of restricted cash and cash equivalents to finance the Ray Hartstein Campus addition. In addition, accumulated depreciation decreased substantially due to the write off of fully depreciated assets building improvements. Current Liabilities increased by $4.2 million due to an increase in Unearned Property Tax Revenues and Unearned Tuition and Fees Revenues and a decrease in Accrued Salaries. The increase in Unearned Property Tax Revenue was based on an estimated tax levy increase in the forthcoming year. Unearned Tuition and Fees Revenue increased due to the recording of Summer tuition and fees on an accrual basis versus a cash basis which had been the past accounting practice. The Accrued Salaries Liability decreased due to a reduction in the number of days required to be accrued in the current year salaries. Non-Current Liabilities increased approximately $2.8 million due to an increase in Unearned Property Tax Revenue and other Accrued Liabilities. Unearned Property Tax Revenue increased due to an estimated tax levy increase in the forthcoming year. Other Accrued Liabilities increased primarily due to the recording of other postretirement employee benefits for medical coverage reimbursement. Operating Results for the Year Ended June 30 (in millions) Increase Increase (Decrease) (Decrease) Operating revenue Tuition and fees $ 12.9 $ 11.5 $ 1.4 $ 11.3 $ 0.2 Auxiliary (0.6) Other (0.2) Total Operating Revenue (0.3) Non-operating revenue State grants and contracts (0.9) Federal and local grants and contracts Property and replacement taxes Investment income (0.6) Total Non - Operating Revenue Total Revenues Less operating expenses Net income before capital contributions (1.3) Capital appropriations (0.1) 2.4 (2.3) Capital grants and gifts Increase in net assets (3.6) Net assets, beginning of year Net assets, end of year $ $ $ 6.2 $ $

24 Fiscal Year 2007 Compared to 2006 Total revenues and expenses (Operating and Non-Operating) for the year 2007 were $76.0 million and $69.8 million. Total revenues and expenses (Operating and Non-Operating) for the year 2006 were $69.2 million and $68.1 million. Operating revenue increased $1.2 million primarily due to an increase in tuition from $69 per credit hour to $75 per credit hour for in-district tuition. Non-Operating revenue increased $5.6 million. The major factors contributing to the increase in Non-Operating revenue were the investment income earned during the year and Property Taxes revenue realized. Interest rate increases during the year in combination with an increase in investable funds produced significant interest income for the College. In addition, the fair value adjustment on the College s investment portfolio was significantly less than last year. Property Tax revenue increased $1.9 million due to an increased levy and minor growth in the College district. State Grants and Contracts increased approximately $1.0 million due to a substantial increase in the on behalf payments by the State toward employee s pension obligation. Operating expenses as of June 30, 2007 increased $1.7 million or approximately 2.4 percent over fiscal year The most significant Operating expense is Instruction which increased $2.0 million in fiscal year The primary contributor to this increase is an increase in wages paid. Institutional Support expenses decreased by $0.8 million due to the recognition of prior and current post retirement employee benefits in fiscal year 2006 which resulted in a much larger expense in fiscal year 2006 versus fiscal year Academic Support expenses decreased by $0.5 million due to a decrease in the receipt of grant funds pertaining to Academic Support activities. Student Services expenses increased by $0.5 million due to an increase in the receipt of grant funds pertaining to Student Services activities and salaries and direct expenses pertaining to the delivery of Student Services. Public Services expenses increased by $0.4 million primarily due to an increase in grant funds pertaining to Public Services activities. The College in fiscal year 2007 successfully completed negotiations with the Adjunct Faculty Association. Contracts with the Faculty Association, Classified Association and the Fraternal Order of Police will expire at June 30, During fiscal year 2007 the College begun the implementation of the Sunguard Higher Education Finance/HR Data System. The go live target date for the Finance portion of the system was met on July 1, The HR portion has a targeted go live date of January 1, The College during fiscal year 2007 completed a self study report preparing for the Higher Learning Commission (HLC) reaccreditation visit in October The self study report serves a dual purpose. The report fulfills the HLC requirements for reaccreditation, and represents a two-year research effort of the College to think carefully and critically about who we are and who we want to be as a public community college. In addition, during fiscal year 2007, the College s Board of Trustees approved a Strategic Plan for fiscal years This plan document contains nine strategic goals and 29 objectives, which together comprise an ambitious agenda for change that will require multiple years, the work of many individuals, and a substantial amount of resources. Fiscal Year 2006 Compared to 2005 Total revenues and expenses (Operating and Non-Operating) for the year 2006 were $69.2 million and $68.1 million. Total revenues and expenses (Operating and Non-Operating) for the year 2005 were $69.1 million and $66.7 million. Operating revenue decreased $0.3 million due to a decrease of $0.6 million in Auxiliary Revenues which was partially offset by an increase of $0.2 million in tuition and fees income, and an increase of $0.1 million in the Other Revenues. The decrease in Auxiliary Revenues was primarily due to a reduction in the ICCB grants received by the College for credit hours generated in its Continuing Education area. Bookstore sales were also down slightly contributing to the overall revenue decrease. Non-Operating revenue increased $0.4 million due to an increase in Property Taxes Revenue. This increase was generated by the current tax levy. Investment income decreased by $0.6 million due to the steady increase in interest rates which generated a large adjustment in the fair value of the College s long term investments which offset an extremely good year in interest earned. The College in fiscal year 2006 had interest earned of $2.9 million versus $2.2 million in fiscal year 2005, an increase of $661,000 approximately. The fair value adjustment to long term investments was a decrease of approximately $1.3 million versus an actual increase in fiscal year 2005 of approximately $143,000. The College has no intention to sell its long term investments prematurely, therefore, this fair value adjustment does not equate to an actual dollar loss. State grants 19

25 and contracts decreased primarily as a result of the State s portion of the construction costs for the Ray Hartstein Campus addition being paid in prior years and the College s State credit hour funding being reduced. Operating expenses as of June 30, 2006 increased $1.4 million or approximately two percent over fiscal year Academic Support Expenses increased $0.4 million due to an increase in cost for Student Learning Center services and the receipt of additional grant funds pertaining to academic support activities. Operations and Maintenance of Plant Expenses increased $0.5 million due to an increase in plant utilities, salaries and general supplies all effected by the opening of the 59,000 square foot Ray Hartstein Campus addition. Institutional Support Expenses increased by $1.0 million due to an increase in health care costs and recognition of post retirement employee benefits per early implementation of Governmental Accounting Standards Board (GASB) Statements NO. 43 and 45. A reduction of $0.4 million in Auxiliary Fund Expenses, was due substantially to a reduction of support costs eliminated with the replacement of the Student Services System, which offset the above increases in Operating Expenses. Capital appropriations decreased $2.3 million due to the reduction of construction costs associated with the Ray Hartstein Campus addition which was opened during fiscal year The College, in partnership with the Capital Development Board opened the 59,000 square foot addition at the Ray Hartstein Campus in Fall The estimated cost of the addition upon completion was $14.9 million of which the State of Illinois has provided $8.0 million and the College has provided $6.9 million. Revenue by Source June 30, 2007 Tuition and Fees 17.0% Auxiliary 12.4% Other 0.3% Investment Income 5.5% State Grants/Contracts 13.4% Federal/Local Grants/Contracts 5.5% Property Taxes 45.9% 20

26 Operating Expenses For the Year Ended June 30 (in millions) Net Net Increase Increase (Decrease) (Decrease) Operating expense Instruction $ 30.6 $ 28.6 $2.0 $ 28.7 ($0.1) Academic support (0.5) Student services (0.1) Public service Operations and maintenance plant General administration Institutional support (0.8) Financial aid Auxiliary (0.2) 9.8 (0.4) Depreciation (0.3) Total $ 69.8 $ 68.1 $ 1.7 $ 66.7 $ 1.4 The following is a graphic illustration of operating expenses Operating Expenses June 30, 2007 Financial Aid 2.2% Institutional Support 5.7% General Administration 5.4% Auxiliary 13.2% Depreciation 4.0% Operations and Maintenance of Plant 8.0% Instruction 43.8% Public Services Student Services 8.2% Academic Support 5.9% 21

27 Comparison of Operating Expenses Fiscal Years 2006 and Instruction Academic Support Student Services Public Service Operations and Ma int of P la nt Ge ne ra l Administration Inst it ut iona l Support Financial Aid Auxiliary Depreciation Fiscal Year 2007 Compared to 2006 Operating expenses for fiscal year 2007 increased by $1.7 million. Instructional expenses increased $2.0 million due primarily to an increase in instructional salary costs and purchases of materials and equipment related to classroom instruction. Academic Support, Student Services and Public Services expenses either increased or decreased primarily due to the receipt of grant funds. Depreciation decreased due to the significant write off of site improvements in fiscal year Institutional Support expenses decreased by $0.8 million primarily due to the estimated liability for post employment benefits being reduced significantly versus last years initial recognition of this expense. Fiscal Year 2006 Compared to 2005 Operating expenses for fiscal year 2006 increased by $1.4 million. Institutional Support expenses increased by $1.0 million due to an increase in health care costs and recognition of postretirement employee benefits. Academic Support expenses increased by $0.4 million due to an increase in cost for the Student Learning Center Services and the receipt of additional grant funds pertaining to academic support activities. Operations and Maintenance expenses increased by $0.5 million due to an increase in plant utilities, salaries, and general supplies all effected by the opening of the Ray Hartstein Campus addition. Auxiliary expenses decreased by $0.4 million due to a reduction of support costs associated with the replaced Student Services Registration System and the reduction of technology purchases and their cost. 22

28 June 30 Analysis of Net Assets (in millions) Increase Increase (Decrease) (Decrease) Net Assets Net Investment in Capital Assets $ 62.0 $ 62.3 ($0.3) $ 61.1 $1.2 Restricted Expendable (0.4) 24.6 (2.5) Unrestricted Total $ $ $ 6.2 $ $ 1.3 Fiscal Year 2007 Compared to 2006 The increase in total net assets of $6.2 million was substantially due to the $6.9 million increase in Unrestricted Net Assets. This category of Net Assets increased due to a tuition rate increase of $6.00 per credit hour, property tax revenue growth, and significant increase in interest income to the College. In addition, the College s continual conservative spending policy which resulted in actual Operating Expenses raising less than two percent also contributed to the Unrestricted Net Assets growth. Net Investment in Capital Assets decreased primarily due to the significant write off of site improvements. Restricted Expendable Net Assets decreased due to the completion of Life Safety projects during the fiscal year using fund balance accumulated in prior years and building improvements and infrastructure improvements made during the year by the College. Fiscal Year 2006 Compared to 2005 The increase in total net assets of $1.3 million was primarily due to the completion of the Ray Hartstein Campus addition, which also had the effect of reducing the Restricted Expendable category of Net Assets. The addition was substantially completed in fiscal year 2006 with classes being held in the Pavilion for the Fall 2005 semester. Unrestricted Net Assets were increased $2.6 million due to a tuition rate increase of $7.00 per credit hour, property taxes revenues increasing and the continued conservative spending policy which resulted in actual Operating Expenses raising less than two percent. 23

29 Analysis of Net Assets June 30, 2007 Net Investment in Capital Assets 47% Unrestricted 37% Restricted 16% 24

30 Increase Increase (Decrease) (Decrease) Capital Assets Land and Improvements $ 12.0 $ 11.7 $ 0.3 $ 11.7 $ - Building (1.3) Equipment Computer Technology (0.5) Construction-in-progress (11.4) Total (0.7) 88.6 (0.4) Less Accumulated Depreciation (25.5) (25.9) 0.4 (27.5) 1.6 Net Capital Assets $ 62.0 $ 62.3 $ (0.3) $ 61.1 $ 1.2 Detailed information on capital asset activity may be found on page 30 in the #3 notes to financial statements Capital Assets. Fiscal Year 2007 Compared to 2006 As of June 30, 2007, the College had recorded $87.5 million invested in Capital Assets, $25.5 million in Accumulated Depreciation and $62.0 million in Net Capital Assets. The College continued to add building improvements, science labs and further recognition of improvements to its Pavilion addition, ($0.7 million) which was offset by the write off of ($2.0 million) of improvements made in 1998 to campus buildings. The College also during the year invested in its infrastructure, parking lot repaving, sidewalk repairs and roadway repairs significantly. These improvements approximately $0.7 million, were offset by the write off of improvements of approximately $0.4 million. Various equipment and computer technology purchases and disposals during the year resulted in the addition of $0.3 million invested in these categories of assets and a net decrease in accumulated depreciation of $0.4 million. 25

31 Fiscal Year 2006 Compared to 2005 As of June 30, 2006, the College had recorded $88.2 million invested in Capital Assets, $25.9 million in Accumulated Depreciation and $62.3 million in Net Capital Assets. The College s Ray Hartstein Campus addition of approximately 59,000 square feet was opened during fiscal year 2006 and was recorded as an addition to the Capital Assets Building Category. As a result of this recognition, the Construction In-Progress Category of Capital Assets was eliminated. Technology Equipment of $1.1 million that was fully depreciated was written off in fiscal year In addition, the price of technology equipment has continued to decrease slightly and the College continues to replace portions of each computer station rather than the entire station. These factors lead to the Computer Technology of Capital Assets to reflect a decrease of $0.5 million from its prior year total. The Equipment Category of Capital Assets increased by $0.4 million due primarily to the purchase of equipment for the Ray Hartstein Campus addition. The College had no long-term debt in fiscal years 2007, 2006 or

32 CONTACTING THE COLLEGE S FINANCIAL MANAGEMENT This financial report is designed to provide our constituents with a general overview of Oakton Community College s finances and to demonstrate the College s accountability for the resources it receives. Questions concerning this report or requests for additional financial information should be directed to George L. Chirempes, Vice President for Business and Finance, 1600 E. Golf Road, Des Plaines, IL

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