MONROE COMMUNITY COLLEGE (A Component Unit of the County of Monroe, New York)

Transcription

1 MONROE COMMUNITY COLLEGE (A Component Unit of the County of Monroe, New York) Financial Statements As of August 31, 2017 and 2016 Together with Independent Auditor s Report

2 MONROE COMMUNITY COLLEGE (A Component Unit of the County of Monroe, New York) TABLE OF CONTENTS AUGUST 31, 2017 AND 2016 Independent Auditor s Report 1-3 Page Management s Discussion and Analysis (Unaudited) 4-14 Basic Financial Statements: Statements of Net Position 15 Statements of Revenues, Expenses, and Changes in Net Position 16 Statements of Cash Flows - Primary Institution Notes to Financial Statements Schedules: I Schedule of Proportionate Share of Net Pension Asset (Liability) 47 II Schedule of Contributions - Pension Plans 48 III Combining Schedule of Net Position - Component Units 49 IV Combining Schedule of Revenues, Expenses, and Changes in Net Position - Component Units 50 V Reconciliation of Revenues and Expenses as Reflected in the Annual Report to the Audited Financial Statements 51 VI Schedule of State Operating Aid 52 VII Schedule of State-Aidable FTE Tuition Reconciliation 53 Independent Auditor s 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 54-55

3 INDEPENDENT AUDITOR S REPORT January 18, 2018 To the Board of Trustees of Monroe Community College: Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities and the aggregate discretely presented component units of Monroe Community College (the College) (a component unit of the County of Monroe, New York) as of and for the years ended August 31, 2017 and 2016, and the related notes to the financial statements, which collectively comprise the College s basic financial statements as listed in the table of contents. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express opinions on these financial statements based on our audits. We did not audit the financial statements of the aggregate discretely presented component units, which represent the foregoing percentages of the total assets, net position, and total revenues of the aggregate discretely presented component units as follows: 2017 Total Net Total Assets Position Revenues Discretely Presented Component Units: MCC Foundation 26% 57% 23% MCC Association 74% 43% 77% Sully s Trail, Suite 201 Pittsford, New York p (585) f (585) Discretely Presented Component Units: MCC Foundation 25% 61% 19% MCC Association 75% 39% 81% Those statements were audited by another auditor whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the aggregate discretely presented component units, is based solely on the reports of the other auditor. (Continued) 1 ALBANY BATAVIA BUFFALO EAST AURORA GENEVA NYC ROCHESTER RUTLAND, VT SYRACUSE UTICA

4 INDEPENDENT AUDITOR S REPORT (Continued) Auditor s Responsibility (Continued) We conducted our audits in accordance with auditing standards generally accepted in the United States 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 from material misstatement. The financial statements of the aggregate discretely presented component units were not audited in accordance with Government Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audits and the reports of the other auditor, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and the aggregate discretely presented component units of Monroe Community College as of August 31, 2017 and 2016, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States. Report on Required Supplementary Information Accounting principles generally accepted in the United States require that the management s discussion and analysis on pages 4 through 14 and the schedule of proportionate share of net pension asset (liability) and schedule of contributions pension plans on pages 47 and 48 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. (Continued) 2

5 INDEPENDENT AUDITOR S REPORT (Continued) Report on Supplementary Information Our audits were conducted for the purpose of forming opinions on the financial statements that collectively comprise the College s basic financial statements. The combining component unit information included in Schedules I and II and the additional supplementary information included in Schedules III through V is presented for purposes of additional analysis and is not a required part of the basic financial statements. The combining component unit information included in Schedules III and IV and the additional supplementary information included in Schedules V through VII is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States by us and the other auditor. In our opinion, based on our audits, the procedures performed as described above, and the reports of the other auditor, the combining component unit information included in Schedules III and IV and the additional supplementary information included in Schedules V through VII, are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 18, 2018, on our consideration of the College s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the College s internal control over financial reporting and compliance. 3

6 MONROE COMMUNITY COLLEGE (A Component Unit of the County of Monroe, New York) MANAGEMENT S DISCUSSION AND ANALYSIS (UNAUDITED) AS OF AND FOR THE YEARS ENDED AUGUST 31, 2017 AND 2016 Introduction The following management s discussion and analysis (MD&A) provides a comprehensive overview of Monroe Community College s (the College) financial position as of August 31, 2017 and 2016 and the changes in its financial position for the years then ended. Management has prepared the financial statements and related footnote disclosures along with this MD&A. The MD&A should be read in conjunction with the audited financial statements and related footnotes of the College, which directly follow the MD&A. For financial reporting purposes, the College s reporting entity includes the Monroe Community College Association, Inc. and the Monroe Community College Foundation, Inc. (collectively, the Component Units). Requests for those financial statements should be addressed in writing to the Monroe Community College Association, Inc. at 1000 East Henrietta Rd, Rochester, New York and the Monroe Community College Foundation, Inc. at 1057 East Henrietta Rd, Rochester, New York The MD&A presents financial information solely for the College and does not include the component units. Overview of Financial Statements The financial statements of the College have been prepared in accordance with accounting principles generally accepted in the United States as prescribed by the Governmental Accounting Standards Board (GASB). The College complies with GASB pronouncements, which establish accounting and financial reporting standards for public colleges and universities. The objective of these standards is to enhance the understandability and usefulness of the external financial reports issued by public colleges and universities. Additionally, the financial statements focus on the College as a whole, rather than on individual affiliated entities, funds, or activities. The financial statements consist of Statements of Net Position, Statements of Revenues, Expenses, and Changes in Net Position, Statements of Cash Flows Primary Institution, and accompanying notes. These statements provide information on the financial position, the financial activities and change in financial position and cash flows of the College during the year. A description of these statements follows. The Statement of Net Position presents information on all of the College s assets and liabilities, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the College is improving or deteriorating. The Statement of Revenues, Expenses, and Changes in Net Position presents the changes in the College s financial position for the fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. The Statement of Cash Flows Primary Institution provides information on the major sources and uses of cash during the year. The cash flow statement portrays net cash from operating, investing, capital and related financing activities, and noncapital financing activities. 4

7 Financial Highlights Assets, Liabilities, and Net Position The College s current ratio was 3.1 to 1.0 at August 31, 2017, 3.2 to 1.0 at August 31, 2016, and 3.1 to 1.0 at August 31, The current ratio was calculated excluding deferred inflows as presented below. The following Condensed Schedule of Assets, Liabilities and Net Position depicts the key components of financial position as of August 31: Primary Institution (In Millions) Current assets $ 51.4 $ 48.9 $ 47.4 Noncurrent assets: Capital assets, net of depreciation Other assets Total noncurrent assets Deferred outflows Total assets and deferred outflows Current liabilities Noncurrent liabilities Total liabilities Deferred inflows Total liabilities and deferred inflows Net position: Invested in capital assets Restricted Unrestricted (28.4) (16.1) (2.2) Total net position $ $ $ Current Assets Current assets include cash, short-term investments, amounts owed to the College which are expected to be received within the ensuing year, and advance payments made by the College for goods and/or services which will be consumed during the following year. Cash The College maintains four demand accounts at Manufacturers Traders and Trust Company (M & T), its primary financial institution. Another demand account is maintained at JPMorgan Chase Bank (Chase). Designation of depositories of College funds is approved by the Board of Trustees. 5

8 Financial Highlights (Continued) M & T The College has entered into a compensating balance agreement with the bank whereby a portion of the bank service charges are satisfied by maintaining an agreed upon monthly average balance. The demand accounts maintained at this institution are:! Depository Account - This account serves as the College s primary repository for receipts. All cash and checks received by the College and the majority of electronic wire transfers are deposited into this account. During the year, the average bank balance in the depository account was approximately $34,611,000. The College determined that the majority of excess cash would remain in this account due to the fact that the earnings allowance on this account was 75 basis points as compared to the 5 to 7 basis points earned in money market investments. Although the depository account does not accrue interest, the bank provides an earnings allowance that is used as an offset to bank service charges. The average monthly earnings allowance for the year was $32,000, whereas the average monthly bank service charges were $40,000.! Operating Account - This serves as the College s disbursement account for all obligations other than payroll. The College draws checks on this account to satisfy vendor, student, and nonpayroll employee obligations. During the year, the average bank balance in the operating account was approximately $17,336,000. The net cash requirements for cash disbursement cycles are transferred into this account from the depository account.! Payroll Account - Checks are drawn on this account to satisfy employees net pay. The net amount of the payroll is electronically transferred to this account from the depository account on a bi-weekly basis.! Federal Funds Account - As with the depository account, this account is used as a repository, primarily for federal student scholarships and grants. As scholarships are credited to students accounts and grant funds are used for programmatic purposes, the ownership of the funds transfers from the respective federal agency to the College. The College then transfers the funds to the depository account. Chase! Depository Account - This account serves as a repository of interest on investments held with Chase. The account is imprest at $50,000 and interest earnings are automatically deposited on a monthly basis into this account. The College immediately transfers the interest amount from this bank to its operating account at M & T. Investments During the year, the College s funds were invested in money market funds with M&T and Chase. The annual average amount invested in money market funds was approximately $.1 million, $.1 million, and $1.7 million in 2017, 2016 and 2015, respectively. In fiscal years ended August 31, 2017, 2016, and 2015, the College s investments from current funds generated approximately $50, $40, and $1,000, respectively. Receivables Accounts receivable are comprised of three major receivable categories: students, governments, and other. At August 31, 2017, 2016, and 2015, the total net receivables aggregated $9.8 million, $10.9 million, and $10.2 million, respectively. 6

9 Financial Highlights (Continued) Receivables (Continued)! Student Receivables - This account includes amounts owed by students primarily for tuition and fees. Delinquent student accounts are written off after eight years. Additionally, the College records a provision for uncollectible accounts receivable each year based on the estimated probability of collection and current economic conditions.! Government Receivables - The majority of the funds reflected in this account consists of appropriations made at the state and local governmental levels for sponsorships of various academic and other programs and for student aid.! Other Receivables - All accounts receivable not identified above are included in this account. This includes private sponsorship of students, academic and other programs, and rental revenues, etc. Other Assets! Funds designated for other postemployment benefits - This fund was established in 2011 by the Board of Trustees with the intention of funding other postemployment benefit obligations. As of the date of these financial statements, New York State has not yet adopted legislation that would enable government entities to establish a qualifying trust for the purpose of funding Other Postemployment Benefit Plan (OPEB) benefits. Capital Assets The following condensed schedule of capital assets, net, depicts the assets that comprise the College s plant and facilities for the years ended August 31: Primary Institution (In Millions) Capital Assets: Land and improvements $ 14.7 $ 14.7 $ 14.6 Buildings and improvements Infrastructure Furnishings, equipment and vehicles Construction-in-progress Total Less: Accumulated depreciation (98.2) (91.9) (85.8) Capital assets, net $ $ $ The College s efforts to improve and expand its facilities are illustrated above in the condensed schedule of capital assets, net. Expenditures were $32.0 million for 2017, $36.4 million for 2016 and $14.5 million for The current and prior year expenditures are primarily for the downtown campus and campus property preservation. As of August 31, 2017, the College s new downtown campus which was a $78 million capital project was placed in service for the Fall 2017 semester.

10 Financial Highlights (Continued) Net Pension Obligation The College reported a liability for its proportionate share of the New York State Employees Retirement System s net pension obligation of $8,861,178 and $16,392,442 at August 31, 2017 and 2016, respectively. The College reported an asset (liability) for its proportionate share of the New York State Teachers Retirement System s net pension asset (obligation) of $522,423 and ($773,809) at August 31, 2017 and 2016, respectively. Other Postemployment Benefit Obligation The College reported a liability for retiree health insurance benefits of $69,280,189 and $56,394,457 at August 31, 2017 and 2016, respectively. Deferred Outflows and Inflows Deferred outflows of resources represent a consumption of net position that applies to a future period. The College reported deferred outflows of resources of $12,537,601 and $22,153,935 as of August 31, 2017 and 2016, respectively, related to its cost-sharing pension plans. Deferred inflows of resources represent acquisition of net position that applies to a future period. The College reported deferred inflows of $3,886,555 and $3,441,443 as of August 31, 2017 and 2016, respectively, related to payments received under the New York State Tuition Assistance Program (TAP). The College reported deferred inflows of $4,092,709 and $3,366,101 as of August 31, 2017 and 2016, respectively, related to its cost-sharing pension plans. Change in Application of Accounting Principle In fiscal 2015, the College adopted GASB Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27 (GASB 68) and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date (GASB 71). The following schedule details the impact of adoption on the College s assets, liabilities and net position (in millions): Net pension asset $ 7.4 Deferred outflows $ 2.6 Net pension liability ($ 3.2) Deferred inflows ($ 3.1) Net Position The College s net position consists of net position Invested in Capital Assets, Restricted net position and Unrestricted net position.! Invested in Capital Assets - Consists of capital assets, net of accumulated depreciation. Capital assets include land and improvements, buildings and improvements, infrastructure, equipment, furnishing, vehicles, and construction-in-progress. 8

11 Financial Highlights (Continued) Net Position (Continued)! Restricted - The restricted net position is comprised of: Public Safety Training Facility - The College entered into an agreement with Monroe County and the City of Rochester whereby training for law enforcement, fire, and other emergency personnel is provided. The training of state, county, and local personnel occurs in the Public Safety Training Facility operated by the College and jointly owned by the County and City of Rochester, New York. Scholarships - This consists of resources held for awards to students in subsequent fiscal periods. Capital Programs - This consists of the Monroe County parking program, which is administered by the College. The College maintains the program on a calendar year basis in accordance with the County s fiscal year.! Unrestricted - The unrestricted net position represents the accumulated balance of financial operations for the operating fund of the College. The three major revenue sources for operations are student tuition, state aid, and sponsor aid. Expenses of these resources are for education and general purposes. The unrestricted net position recorded in the statement of net position includes accruals for OPEB and pension obligations. However, the College manages its operations based upon the fund balance in the SUNY Annual Report which excludes these obligations due to their non-cash nature. 9

12 Financial Highlights (Continued) The following schedule reconciles the unrestricted net position per the financial statements to the unrestricted fund balance in the SUNY Annual Report, for the years ended August 31: Primary Institution (In Millions) Operating Revenues Unrestricted $ $ $ Operating Expenses Unrestricted (120.5) (120.6) (120.6) SUNY Annual Report Change in Unrestricted Fund Balance (1.7) SUNY Annual Report Unrestricted Fund Balance - beginning of year SUNY Annual Report Unrestricted Fund Balance - end of year Adjustments for OPEB Benefits* (43.8) (31.0) (18.1) Adjustments for Pension Plans Unrestricted Net Position - end of year $ (28.4) $ (16.1) $ (2.2) SUNY Annual Report Unrestricted Fund Balance as a % of Unrestricted Operating Expenses 11.2% 9.5% 8.7% * Excludes impact of OPEB benefit obligations for years prior to , which have been reflected in the SUNY Annual Report unrestricted fund balance. 10

13 Financial Highlights (Continued) Expenses, and Changes in Net Position for the College for the years ended August 31: Primary Institution (In Millions) Operating revenues: Student tuition, net $ 24.5 $ 23.8 $ 21.7 Grants and contracts Other Total operating revenue Operating expenses (161.5) (167.9) (160.7) Operating loss (114.8) (119.4) (112.8) Nonoperating revenue: State appropriations Local appropriations Federal and state financial aid Total Change in net position - before capital appropriations (17.5) (18.7) (10.3) State and County capital appropriations Change in net position Net position - beginning of year, as previously reported Change in application of accounting principle Net position - beginning of year, as restated Net position - end of year $ $ $

14 Financial Highlights (Continued) Operating Revenues Student Tuition, Net - Student tuition is reported, net of scholarship allowances and estimated bad debt for uncollectible student receivables. The provision for uncollectible accounts receivable is based on the estimated probability of collection of all accounts that are more than one year old, and balances from the immediate past fall, spring and summer semesters. The following is a condensed schedule of student tuition for the years ended August 31: Primary Institution (In Millions) Gross student tuition $ 53.3 $ 52.1 $ 49.0 Scholarship allowances (26.3) (26.6) (26.2) Uncollectible student receivable allowances (2.5) (1.7) (1.1) Student tuition, net $ 24.5 $ 23.8 $ 21.7 Full-time equivalent (FTE) enrollments for the five-year period 2013 through 2017 are shown in the following schedule: Enrollment Full-time 7,544 7,839 8,274 9,114 9,472 Part-time 4,100 4,310 4,479 4,549 4,831 Noncredit Total FTE 11,814 12,306 12,944 13,869 14,496 Annual unduplicated headcount 30,110 31,412 32,841 35,188 34,593 The $1.2 million increase in gross student tuition from the prior year is primarily due the 8% increase in tuition rates. The increase in tuition rates was partially offset by the decrease in total FTE s of 492. This enrollment decrease was primarily due to demographics. Other Operating Revenues - Service fees, rental income, and sponsored program fees are examples of other operating revenues. Nonoperating Revenues Appropriations - Amounts represent operating aid provided by the State of New York (basic state aid) and Monroe County (local sponsor contributions) and operating chargebacks from other New York State counties. State aid is determined by enrollment computations related to the prior year, while the sponsor contribution is an agreed-upon amount appropriated by the County government. 12

15 Financial Highlights (Continued) Nonoperating Revenues (Continued) Federal and State Financial Aid - Federal financial aid (primarily Pell) and State financial aid (primarily TAP) decreased by $3.0 million or 7.4% over the prior year. The decrease in enrollment was the primary reason for the decline. State and County Capital Appropriations - Amounts represent payments made by New York State and Monroe County for capital projects on behalf of the College. Appropriations for capital projects are recorded when capital assets are purchased by the State or the County on behalf of the College. The College recorded $25.9 million and $32.9 million in capital appropriations for the new downtown campus in 2017 and 2016, respectively. Operating Expenses Of the total $161.5 million operating expenses for the year ended August 31, 2017, $95.5 million, or 59%, was expended for direct services to students. Of the total $167.9 million operating expenses during the year ended August 31, 2016, $101.5 million, or 60%, was expended for direct services to students. In 2015, the amount expended for direct services to students aggregated $101.4 million or 63% of total operating expenses. Primary Institution (In Millions) Function: Instruction $ 47.6 $ 48.2 $ 45.9 Academic support Library Student services Scholarships Direct services to students Indirect services to students Other Post-Employment Benefit adjustment Pension adjustment Total operating expenses $ $ $ Other Post-Employment Benefit Adjustment Costs incurred related to health care insurance benefits provided to eligible retired employees. Pension Adjustment Costs incurred related to pension benefits provided to eligible retired employees. 13

16 Financial Highlights (Continued) Direct Services to Students! Instruction - This function includes costs that are directly related to the teaching faculty. The importance of providing sufficient funding is evidenced by the fact that this function represents the majority of direct services to students.! Academic Support - Costs incurred in direct support of instruction comprise this expense function. Examples of these costs include, but are not limited to, the academic deans offices, Electronic Learning Center, Instructional Technology, etc.! Library - Costs in this function include books, periodicals, personnel, and other contractual expenses required to operate the College s libraries.! Student Services - This function encompasses the funds expended for areas such as admissions, financial aid, health services, registration and other activities or support that contribute to the students development outside the context of formal instructional settings.! Scholarships - Amounts represent the funds expended for financial assistance to students, which are in excess of amounts required for tuition and fees. The $2.6 million decrease from the prior year is primarily attributable to the decrease in enrollment. Indirect Services to Students Costs incurred in general support of the educational activities of the College are included in this category. Examples of indirect costs include the operation and maintenance of the College s physical plant, depreciation, and administrative departments, such as Human Resources, Research, Public Safety and all finance and executive offices that serve the entire campus community. Amounts included as indirect services for the years ended August 31 are shown in the following schedule: Primary Institution (In Millions) Operation and maintenance of plant $ 22.0 $ 20.5 $ 20.7 Institutional support Public service Depreciation and amortization Total indirect services to students $ 51.6 $ 51.5 $

17 MONROE COMMUNITY COLLEGE (A Component Unit of the County of Monroe, New York) STATEMENTS OF NET POSITION AUGUST 31, 2017 AND Primary Component Primary Component Institution Units Institution Units ASSETS CURRENT ASSETS: Cash $ 41,346,267 $ 2,234,766 $ 37,696,980 $ 1,288,464 Short-term investments 100, ,000 - Accounts receivable, net 9,761, ,858 10,948, ,958 Prepaid expenses and other assets 189,545 1,110, ,531 1,163,244 Total current assets 51,396,985 4,092,986 48,922,758 3,116,666 NONCURRENT ASSETS: Restricted cash - 2,750,636-2,178,145 Investments - 31,711,634-32,947,299 Investments designated for other postemployment benefits 16,551,091-16,551,091 - Capital assets, net 194,933,264 23,617, ,457,470 24,811,865 Net pension asset 522, Other assets - 2,737,550-4,404,432 Total noncurrent assets 212,006,778 60,816, ,008,561 64,341,741 DEFERRED OUTFLOWS: Pension 12,537,601-22,153,935 - LIABILITIES Total assets and deferred outflows 275,941,364 64,909, ,085,254 67,458,407 CURRENT LIABILITIES: Accounts payable and accrued liabilities 7,285,136 2,070,457 7,744,103 2,578,490 Current portion of bonds payable - 915, ,000 Unearned revenues 7,052, ,323 7,212, ,617 Current portion of other liabilities 516,078 33, ,627 1,877,287 Total current liabilities 14,853,506 3,308,756 15,463,680 5,680,394 NONCURRENT LIABILITIES: Bonds payable, net of current portion - 31,322,909-32,089,298 Other noncurrent liabilities 81,609,422 2,367,339 76,947,900 2,659,174 Total noncurrent liabilities 81,609,422 33,690,248 76,947,900 34,748,472 DEFERRED INFLOWS: Pension 4,092,709-3,366,101 - Deferred Tuition Assistance Program 3,886,555-3,441,443 - NET POSITION Total deferred inflows 7,979,264-6,807,544 - Total liabilities and deferred inflows 104,442,192 36,999,004 99,219,124 40,428,866 Invested in capital assets 194,933, ,457,470 - Restricted 5,025,800 16,776,188 4,501,078 17,111,224 Unrestricted (28,459,892) 11,134,643 (16,092,418) 9,918,317 Total net position $ 171,499,172 $ 27,910,831 $ 157,866,130 $ 27,029,541 The accompanying notes are an integral part of these statements. 15

18 MONROE COMMUNITY COLLEGE (A Component Unit of the County of Monroe, New York) STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE YEARS ENDED AUGUST 31, 2017 AND Primary Component Primary Component Institution Units Institution Units OPERATING REVENUES: Student tuition (net of approximately $28.8 million and $28.3 million of scholarship and bad debt allowances in 2017 and 2016, respectively) $ 24,477,878 $ - $ 23,758,386 $ - Federal grants and contracts 4,885,289-8,502,453 - State and County grants and contracts 3,072,077-2,521,696 - Nongovernmental grants and contracts 2,335,297-2,622,830 - Auxiliary enterprises - 17,765,368-18,541,004 Other revenues 11,965, ,261 11,053,164 1,072,962 Total operating revenues 46,735,733 18,729,629 48,458,529 19,613,966 OPERATING EXPENSES: Instruction 52,355,276-52,684,411 - Academic support 16,729,458-19,559,352 - Library 2,094,511-2,285,840 - Student services 19,216,045-19,293,005 - Operation and maintenance of plant 24,095,560-22,805,589 - Public service 353, ,725 - Institutional support 26,867,527 2,356,927 28,211,629 2,205,217 Scholarships and fellowships 13,355,080-16,023,956 - Auxiliary enterprises - 14,662,733-15,748,727 Depreciation and amortization 6,484,063 1,335,191 6,674,955 1,592,679 Total operating expenses 161,550,878 18,354, ,865,462 19,546,623 Operating income (loss) (114,815,145) 374,778 (119,406,933) 67,343 NONOPERATING REVENUE (EXPENSES): State appropriations 36,548,296-36,994,202 - County appropriations 23,267,506-23,198,858 - Federal and state financial aid 37,504,288-40,591,253 - Gifts and donations - 3,352,033-2,994,229 College support - (3,134,732) - (2,319,010) Investment income, net 52 1,700, ,800 Interest and financing expense - (1,684,764) - (1,557,245) Loss on disposal of capital assets (22,729) (1,637) (25,911) (4,851) Other, net - 274,914 - (418,029) Total nonoperating revenue (expenses), net 97,297, , ,758,445 (765,106) LOSS BEFORE OTHER REVENUES AND GAINS (17,517,732) 881,290 (18,648,488) (697,763) STATE AND COUNTY CAPITAL APPROPRIATIONS 31,150,774-35,281,954 - CHANGES IN NET POSITION 13,633, ,290 16,633,466 (697,763) NET POSITION - beginning of year 157,866,130 27,029, ,232,664 27,727,304 NET POSITION - end of year $ 171,499,172 $ 27,910,831 $ 157,866,130 $ 27,029,541 The accompanying notes are an integral part of these statements. 16

19 MONROE COMMUNITY COLLEGE (A Component Unit of the County of Monroe, New York) STATEMENTS OF CASH FLOWS - PRIMARY INSTITUTION FOR THE YEARS ENDED AUGUST 31, 2017 AND CASH FLOW FROM OPERATING ACTIVITIES: Tuition and fees $ 33,577,315 $ 32,555,552 Grants, contracts, and scholarships 10,978,113 13,625,521 Other cash receipts 5,867,852 5,103,079 Return of scholarship funds (21,453) (11,727) Payments to suppliers (26,080,319) (27,119,843) Payments to employees (105,218,127) (105,479,972) Payments to students (12,696,415) (16,319,601) Refunds - Third-party sponsors (12,299) (116,037) Net cash flow from operating activities (93,605,333) (97,763,028) CASH FLOW FROM NONCAPITAL FINANCING ACTIVITIES: Appropriations - State 36,735,701 36,782,773 County 19,130,000 19,067,500 Federal and state financial aid 38,088,286 40,031,578 William D. Ford direct lending, net 55,282 (117,279) County chargebacks, net 4,075,401 4,024,113 Net cash flow from noncapital financing activities 98,084,670 99,788,685 CASH FLOW FROM CAPITAL AND RELATED FINANCING ACTIVITIES: County chargebacks - capital, net (7,124) (5,502) Purchases of capital assets (837,753) (1,369,684) Other nonoperating receipts 14,775 51,718 Net cash flow from capital and related financing activities (830,102) (1,323,468) CASH FLOW FROM INVESTING ACTIVIITES: Proceeds from maturities and sales of investments Purchases of investments - (43) Net cash flow from investing activities Change in cash 3,649, ,231 Cash - beginning of year 37,696,980 36,994,749 Cash - end of year $ 41,346,267 $ 37,696,980 (Continued) 17

20 MONROE COMMUNITY COLLEGE (A Component Unit of the County of Monroe, New York) STATEMENTS OF CASH FLOWS - PRIMARY INSTITUTION FOR THE YEARS ENDED AUGUST 31, 2017 AND 2016 (Continued) RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES: Operating loss $ (114,815,145) $ (119,406,933) Adjustments to reconcile operating loss to net cash flow from operating activities: Depreciation 6,484,063 6,674,955 Bad debt expense 2,467,476 1,744,148 Changes in assets and liabilities: Accounts receivable (1,359,776) (2,264,611) Deferred outflows - pension 11,480,797 (19,599,547) Prepaid expenses and other assets (12,014) (10,931) Net pension asset (522,423) 7,354,360 Accounts payable and accrued liabilities (2,435,294) 665,531 Unearned revenues (160,658) (270,379) Deferred Tuition Assistance Program (173,545) 335,287 Deferred inflows - pension 726, ,808 Other liabilities 4,714,578 26,776,284 Net cash flow from operating activities $ (93,605,333) $ (97,763,028) SUPPLEMENTAL DISCLOSURE OF CAPITAL AND RELATED FINANCING ACTIVITIES - NONCASH ITEMS: Capital assets funded by State and County $ 31,150,774 $ 35,272,524 Capital assets in accounts payable and accrued liabilities $ 45,838 $ 216,558 The accompanying notes are an integral part of these statements. 18

21 MONROE COMMUNITY COLLEGE (A Component Unit of the County of Monroe, New York) NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2017 AND THE ORGANIZATION Monroe Community College (the College) is a two-year community college founded in The College is part of a statewide system of two-year institutions designed to provide technical, para-professional and university parallel education. The College is one of thirty community colleges within the State University of New York (SUNY). SUNY community colleges are financed by New York State, student tuition and a local sponsor. The College is accredited by the Middle States Commission on Higher Education. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The College - Primary Institution Basis of Presentation The accompanying financial statements have been prepared using the economic resources measurement focus and the accrual basis of accounting in accordance with accounting principles generally accepted in the United States, as prescribed by the Governmental Accounting Standards Board (GASB). The College reports as a special purpose government engaged in business-type activities, as defined by generally accepted accounting principles (GAAP) to include public colleges and universities. Business-type activities are those that are financed in whole or in part by fees charged to external parties for goods or services. The financial statements of the College consist of management s discussion and analysis; classified statements of net position; statements of revenues, expenses, and changes in net position that distinguishes between operating and nonoperating activities; and statements of cash flows, using the direct method of presentation. The College s policy for defining operating activities in the statements of revenues, expenses, and changes in net position are those that generally result from exchange transactions such as the payment received for services and payment made for the purchase of goods and services. Certain other transactions are reported as nonoperating activities in accordance with GAAP. Those nonoperating activities include the College s operating appropriations from the State and County, and federal and state financial aid. Financial Dependency The College is economically dependent on appropriations from New York State and the County of Monroe, New York, to carry out its operations. These appropriations represented significant nonoperating revenue sources for the years ended August 31, 2017 and

22 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial Reporting Entity The College is a discretely presented component unit of the County of Monroe, New York. The financial statements of the College include the College and its component units, which are defined as legally separate organizations that are financially accountable to the College. Financial accountability to the College is determined on the basis of fiscal dependency, appointment of a voting majority of a governing board, ability to impose the College s will or potential for the component unit to provide specific financial benefits to, or to impose specific financial burdens on, the College. Based on these criteria, Monroe Community College Association, Inc. (MCC Association) and Monroe Community College Foundation, Inc. (MCC Foundation) are included in the financial reporting entity as discrete component units. Net Position Generally accepted accounting principles require the College to report its classification of net position into the following three categories:! Invested in capital assets This classification of net position consists of capital assets, net of accumulated depreciation.! Restricted - This classification of net position represents amounts whose use is subject to externally imposed conditions that the College must maintain the funds in perpetuity or that can be fulfilled by the actions of the College or by the passage of time.! Unrestricted - All other categories of net position. Unrestricted net position may be designated by actions of the College s Board of Trustees. The College has adopted a practice of generally utilizing restricted funds, when available, prior to unrestricted funds. Short-Term Investments By regulation of SUNY, the College may invest in money market funds, time deposits and certificates-of-deposit issued by a bank or trust company and in certain government obligations. These deposits are required to be secured, for amounts in excess of depository insurance, by a pledge of securities of the United States or New York State governments, municipal corporations, school districts or district corporations and eligible letters of credit. Investments of the College consist of deposits in money market funds which are stated at cost and are available to the College on demand. Accounts Receivable! Student Receivables - Student receivables include amounts owed by students primarily for tuition and fees. Delinquent student accounts are written off after eight years. Additionally, the College records a provision for uncollectible accounts receivable each year based on the estimated probability of collection and current economic conditions. 20

23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounts Receivable (Continued)! Government Receivables - Government receivables consist of appropriations made at the state and local governmental levels for sponsorships of various academic and other programs and for federal student aid.! Other Receivables - Other receivables include accounts receivable not identified above. This includes private sponsorship of students, academic and other programs, and rental revenues, etc. Investments Designated for Other Postemployment Benefits Investments designated for other postemployment benefits were established in 2011 by the Board of Trustees for the intention of funding other postemployment benefit obligations (OPEB). As of the date of these financial statements, New York State has not yet adopted legislation that would enable government entities to establish a qualifying trust for the purpose of funding OPEB benefits. Deferred Outflows of Resources Deferred outflows of resources represent a consumption of net position that applies to a future period. The College reported deferred outflows of resources of $12,537,601 and $22,153,935 as of August 31, 2017 and 2016, respectively, related to its cost-sharing pension plans. Capital Assets The primary cost of capital assets for the College is shared equally by the County and the State. Pursuant to New York State Education Law relative to community colleges, title to real property rests in and is held by the local sponsor (the County) in trust for the use and purposes of the College. The College has a stewardship responsibility and these assets are integral to the operations of the College. Therefore, all plant facility activity is recorded by the College. Capital assets, including improvements, are stated at cost or, in the case of gifts, at acquisition value at the date of donation. In accordance with the College s capitalization policy, only those items with a unit cost of more than $2,500 are capitalized. Capital assets, with the exception of land and construction in progress, are depreciated on a straight-line basis over their estimated useful lives, which range from 5 to 50 years. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Net Pension Asset Net pension asset consists of the College s proportional share of the New York State Teachers Retirement System s (TRS) net pension asset. Fringe Benefits The College provides fringe benefit programs to eligible faculty and staff, including health and life insurance, unemployment, retirement and workers compensation benefits. Health insurance, life insurance, unemployment, and pension costs are billed directly to the College by external agencies/carriers. Workers compensation costs are assessed based on several factors including the College s actual experience. 21

24 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Compensated Absences Employees earn the right to be compensated during absences for vacation leave and sick leave. Accrued vacation is the amount earned by all eligible employees through August 31, 2017 and The accrued sick leave balance, for employees not participating in the New York State Teachers and Employees Retirement Systems, ranges from 12% to 15% of amounts earned by those employees through August 31, 2017 and 2016, based on employee tier levels. Upon retirement, this accrued balance is deposited into the employee s retirement fund. Unearned Revenues Deposits and advance payments received for tuition and fees related to the subsequent academic year are unearned and are recorded as revenues as earned in the subsequent year. Deferred Inflows of Resources Deferred inflows of resources represent acquisition of net position that applies to a future period. The College reported deferred inflows of $3,886,555 and $3,441,443 as of August 31, 2017 and 2016, respectively, related to payments received under the New York State Tuition Assistance Program (TAP). The College reported deferred inflows of $4,092,709 and $3,366,101 as of August 31, 2017 and 2016, respectively, related to its cost-sharing pension plans. Student Tuition Student tuition is presented net of scholarship allowances and estimated bad debt applied to students accounts. Certain other scholarship amounts are paid directly to, or refunded to, the student and are generally reflected as expenses. Revenues Revenues are recognized in the accounting period when earned. Revenues and expenses arising from nonexchange transactions are recognized when all eligibility requirements are met. Appropriations Government appropriations are reported on an accrual basis. Appropriations for capital projects are recorded when capital assets are purchased by the State or the County for the benefit of the College. Income Taxes The College is a unit of the SUNY, which is a unit of the State of New York and is, therefore, generally exempt from income taxes under Section 115 of the Internal Revenue Code. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the 2016 financial statements to conform to the current year presentation. 22

25 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Component Units The following represents the significant accounting policies of the College s component units. The component units financial statements have been prepared in accordance with accounting principles generally accepted in the United States, as prescribed by the Financial Accounting Standards Board (FASB). MCC Association Investments Investments consist of invested cash and mutual funds. Invested cash is maintained in money market accounts at a financial institution and an investment company located in Rochester, New York and St. Louis, Missouri, and is valued at cost. Mutual funds are stated at fair value based on quoted market prices. Unrealized gains or losses on securities result from differences between the cost and fair value of securities on a specified valuation date. The investments are exposed to a variety of uncertainties, including interest rate, market, currency and credit risks. Due to the level of risk associated with certain investments, it is possible that changes in the values of these investments could occur in the near term. Uninsured balances in money market accounts and certificates-of-deposit approximated $10,500,000 and $11,500,000 at June 30, 2017 and 2016, respectively. The MCC Association has not experienced any losses in such accounts and management believes it is not exposed to any significant risk on invested cash. Capital Assets Capital assets, including improvements, are stated at cost or, in the case of gifts, at estimated fair value at the date of donation. Capital assets are depreciated on a straight-line basis over their estimated useful lives, which range from 3 to 40 years. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. MCC Foundation Investments Investments consist of common stock and mutual funds, stated at fair value, based on quoted market prices, and portfolio funds, stated at net asset value. Unrealized gains or losses on securities result from differences between the cost and fair value of securities on a specified valuation date. The investments in common stock, mutual funds and other investments are exposed to a variety of uncertainties, including interest rate, market, currency and credit risks. Due to the level of risk associated with certain investments, it is possible that changes in the values of these investments could occur in the near term. Endowment MCC Foundation s endowment consisted of 131 and 127 individual funds as of August 31, 2017 and 2016, respectively, established for a variety of purposes. As required by GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Net assets are restricted until amounts are appropriated for expenditure by the MCC Foundation in a manner consistent with the standard of prudence prescribed by New York Prudent Management of Institutional Funds Act (NYPMIFA). 23