ST. CHARLES COMMUNITY COLLEGE FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2018 AND 2017
ST. CHARLES COMMUNITY COLLEGE CONTENTS PAGE INDEPENDENT AUDITORS REPORT 1 MANAGEMENT S DISCUSSION AND ANALYSIS 3 FINANCIAL STATEMENTS: Statements Of Net Position - Primary Government 9 Statements Of Financial Position - Component Unit 10 Statements Of Revenues, Expenses And Changes In Net Position - Primary Government 11 Statements Of Activities - Component Unit 12 Statements Of Cash Flows - Primary Government 14 Statements Of Cash Flows - Component Unit 16 Notes To The Financial Statements 18 REQUIRED SUPPLEMENTARY INFORMATION: Schedules Of Proportionate Share of the Net Pension Liabilities And Related Ratios - PSRS And PEERS 45 Schedules of Employer Contributions - PSRS And PEERS 46 Schedule Of Funding Progress - Other Post-Employment Benefits 47 Schedule Of Employer Contributions - Other Post-Employment Benefits 48
INDEPENDENT AUDITORS REPORT The Board of Trustees ST. CHARLES COMMUNITY COLLEGE We have audited the accompanying financial statements of the business-type activities and the aggregate discretely presented component unit of St. Charles Community College as of and for the years ended June 30, 2018 and 2017, which collectively comprise the College s basic financial statements as listed in the table of contents, 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 of America; 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. Auditors Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audits 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors 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. -1-
ST. CHARLES COMMUNITY COLLEGE MANAGEMENT S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2018 INTRODUCTION Management s discussion and analysis is an overview of the financial position and activities of St. Charles Community College (the College). It should be read in conjunction with the financial statements and notes that follow. The financial statements include the St. Charles Community College Foundation, Inc. (the Foundation) as a discretely presented component unit. The Foundation issues separate financial statements, which can be obtained by contacting the Foundation office. There are three financial statements presented: the Statement of Net Position; the Statement of Revenues, Expenses and Changes in Net Position; and, the Statement of Cash Flows. The emphasis of the discussion concerning the financial statements is on the current year data. Summarized prior year information is available in this report for comparative analysis. STATEMENT OF NET POSITION The Statement of Net Position presents the assets, liabilities and net position of the College as of June 30, 2018. The purpose of the Statement of Net Position is to present a snapshot of the financial condition of the College. Total net position, which is total assets and deferred outflows less total liabilities and deferred inflows, is one of the indicators of the current financial condition of the College. Assets and liabilities are categorized as current or non-current. Current assets and liabilities mature or become payable within the current twelve-month accounting cycle versus non-current, which mature or become payable after the current twelve-month accounting cycle. At June 30, 2018, the current assets consist primarily of cash, cash equivalents, short-term investments, accounts receivable, taxes receivable, bookstore inventory, and other assets. Non-current assets consist primarily of property and equipment. Property and equipment are the capital assets owned by the College. Net position is presented in three categories: invested in capital assets, net of related debt, restricted and unrestricted. Restricted net position is generally those assets that are restricted for various grant projects and services. Unrestricted net position is available to meet current expenses for any lawful purpose. - 3 -
The following table shows the College s net assets at June 30, 2018, 2017 and 2016: 2018 2017 2016 Current assets $ 26,226,206 $ 26,836,094 $ 29,037,849 Non-current assets 64,897,194 67,067,797 59,428,764 Total Assets 91,123,400 93,903,891 88,466,613 Deferred outflows 12,079,866 13,957,787 9,546,631 Current liabilities 7,650,535 10,174,210 7,836,293 Non-current liabilities 63,753,453 63,602,362 50,744,693 Total Liabilities 71,403,988 73,776,572 58,580,986 Deferred inflows 1,900,514 2,428,461 6,246,720 Invested in capital assets, net of related debt 36,876,692 36,087,440 32,342,543 Restricted 1,276,776 627,672 918,181 Unrestricted (8,254,704) (5,058,467) (75,186) Total Net Position $ 29,898,764 $ 31,656,645 $ 33,185,538 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION The Statement of Revenues, Expenses and Changes in Net Position reflects the financial results for the fiscal year. This statement includes revenues and expenses, both operating and non-operating. Operating revenues and expenses are those for which there is a direct exchange of goods and services. Nonoperating revenues and expenses are those that exclude the specific, direct exchange of goods and services. Local property tax revenue and state aid are examples of non-operating revenues where the local taxpayers and the state legislature, respectively, do not receive goods and services directly for the revenue. Examples of operating revenues are tuition and fees and auxiliary revenues where students and patrons receive a direct benefit in exchange for goods and services provided. - 4 -
The following summarizes the College s revenues, expenses, and changes in net position for the years ended June 30, 2018, 2017 and 2016: 2018 2017 2016 Operating revenues $ 29,934,381 $ 29,621,835 $ 31,336,942 Operating expenses 54,844,386 56,156,490 52,488,643 Operating Loss (24,910,005) (26,894,655) (21,151,701) Non-Operating revenues (expenses) 26,296,020 25,365,762 23,727,042 Change in Net Position 1,386,015 ( 1,528,893) 2,575,341 Net position, beginning of the year 31,656,645 33,185,538 30,610,197 Change in accounting principle ( 3,143,896) - - Net position, end of the year $ 29,898,764 $ 31,656,645 $ 33,185,538 One of the financial strengths of the College is the diversity of resources that support student tuition and fees. The following table reflects the revenues, both operating and non-operating for the years ended June 30, 2018, 2017 and 2016: 2018 2017 2016 Operating Revenues Tuition and fees $ 16,914,172 $ 16,182,530 $ 15,900,100 Grants and contracts 10,023,823 10,154,660 12,375,060 Auxiliary enterprises 2,027,138 2,029,484 2,074,859 Other revenues 969,248 895,161 986,923 Total Operating Revenues 29,934,381 29,261,835 31,336,942 Non-operating Revenues Local property tax revenues 18,237,055 17,619,213 16,161,976 State appropriations 8,606,865 8,634,564 8,588,785 Investment income 243,498 145,996 84,970 Gain on disposal of assets - - - Total Non-operating Revenues $ 27,087,418 $ 26,399,773 $ 24,835,731 Operating revenues increased overall from fiscal year 2017 to fiscal year 2018. This was primarily due to additional tuition revenue resulting from increased tuition rates for fiscal year 2018. Non-operating revenues increased in fiscal year 2018 compared to the prior year. Local property tax revenues increased on the strength of new commercial and residential construction in St. Charles County. - 5 -
Listed below are the components of expenses, both operating and non-operating, for the College during fiscal years 2018, 2017 and 2016 by their natural classification: 2018 2017 2016 Operating Expenses Salaries and benefits $ 37,260,459 $ 39,135,858 $ 36,408,290 Supplies and materials 10,026,225 9,700,023 8,373,710 Utilities and insurance 1,457,111 1,328,041 1,290,272 Student aid 3,305,775 3,355,277 3,766,378 Depreciation 2,794,816 2,637,291 2,649,993 Total Operating Expenses 54,844,386 56,156,490 52,488,643 Non-operating Expenses Interest on capital asset related debt 1,003,646 930,560 1,198,553 Amortization ( 212,248) 103,451 ( 89,864) Total Non-operating Expenses $ 791,398 $ 1,034,011 $ 1,108,689 Expenses for salaries and benefits decreased in fiscal year 2018, primarily due to amounts recorded in accordance with GASB Statements 68 and 75. Expenses related to operating the Dardenne Creek Campus, which was acquired in February 2017, impacted supplies, materials, utilities and insurance. The following shows the functions of operating expense for the College for the fiscal years 2018, 2017 and 2016: 2018 2017 2016 Instruction $ 25,268,133 $ 26,556,940 $ 24,437,201 Institutional support 8,037,101 7,948,792 7,977,601 Operation and maintenance of plant 7,145,652 7,376,222 5,909,525 Student services 4,006,274 3,768,055 3,464,888 Academic support 1,166,245 1,179,783 1,160,277 Library 987,863 1,028,234 934,089 Student aid 3,305,775 3,355,277 3,766,378 Auxiliary services 2,132,527 2,305,896 2,188,691 Depreciation 2,794,816 2,637,291 2,649,993 Total Operating Expenses $ 54,844,386 $ 56,156,490 $ 52,488,643 STATEMENT OF CASH FLOWS The Statement of Cash Flows presents the cash activity for the fiscal year. This statement shows the major sources and uses of cash. The following is a summary of the statement of cash flows for the years ended June 30, 2018, 2017 and 2016: - 6 -
2018 2017 2016 Cash provided (used) by: Operating activities $ (21,159,266) $ (20,402,788) $ ( 19,265,271) Non-capital financing activities 26,837,778 26,199,163 24,875,045 Capital financing activities ( 4,259,598) ( 8,891,383) ( 5,773,736) Investing activities ( 2,818,508) 5,299,034 ( 960,507) Net change in cash and cash equivalents ( 1,399,594) 2,204,026 ( 1,124,469) Cash and cash equivalents, beginning of year 4,395,784 2,191,758 3,316,227 Cash and cash equivalents, end of year $ 2,996,190 $ 4,395,784 $ 2,191,758 CAPITAL ASSETS AND DEBT ADMINISTRATION During 2018, the College completed the replacement of a parking lot at a total cost of $574,598. The College had $20,545,000 in General Obligation Refunding Bonds outstanding at June 30, 2018. Principal retirement payments of $2,390,000 were made on outstanding bond issues resulting in the retirement of the Series 2005 General Obligation Bonds. Further information related to the bonds payable can be found in the footnotes to the financial statements. ECONOMIC OUTLOOK Budgeted revenue for general operations for fiscal year 2019 is 1.1% higher than the previous fiscal year budget. The downward pressure on enrollment and state funding are countered by program expansion and anticipated growth in property tax collections. Student enrollment is projected to decline by approximately 1.0% in the total number of credit hours for fiscal year 2019 compared to actual results for fiscal year 2018. This follows enrollment for fiscal year 2018 that was approximately 3.0% below fiscal year 2017. New and expanded program offerings in welding, manufacturing/production/logistics, agriculture, medical assisting, occupational therapy, nursing, dualcredit and online learning are expected to have a positive impact on credit hours in fiscal year 2019. For fiscal year 2019, there is no change in the regular and online tuition rates. The regular tuition rates are $103 per credit hour for in-district students, $154 per credit hour for out-of-district students and $216 per credit hour for out-of-state students. The online tuition differential of $15 per credit hour added to the regular tuition rates, which was implemented for fiscal year 2018, is unchanged. The College adopted a new dual-credit tuition rate of $67 per credit hour for fiscal year 2019. The College s fiscal year 2019 appropriation from the State of Missouri is budgeted to decrease by approximately 2.6% from the fiscal year 2018 budgeted amount. The fiscal year 2019 budget for local property tax revenues anticipates an increase of 3.5% from the fiscal year 2018 budgeted amount. Commercial and residential construction is robust in St. Charles County, leading to the expected increase in property tax collections. - 7 -
The expenditure budget for fiscal year 2019 includes a 2.0% general cost of living salary increase. There are no new staff or faculty positions in the fiscal year 2019 budget. As a cost-saving measure, 1 full-time faculty and 13 full-time staff positions will be left vacant for fiscal year 2019. Vacancies were realized through attrition. A Memorandum of Understanding (MOU) is in place with the full-time faculty association effective at the start of fiscal year 2015 (effective July 1, 2014) and continuing through fiscal year 2020 (ending June 30, 2020). In accordance with the MOU, compensation terms were reopened in Spring 2018 and an addendum to the MOU was agreed to in May 2018. The addendum allows for a limited number of items to be discussed in Spring 2019. A Memorandum of Understanding (MOU) is in place with the new part-time faculty bargaining unit. The agreement is effective from August 1, 2017 to July 31, 2021. The compensation section includes pay increases for Fall 2017 and Fall 2018. In the Spring 2019, there will be a reopener of the compensation article for fiscal years 2020 and 2021. Current and foreseeable financial resources support the College s educational mission. The financial plan continues to allow students to receive a quality education at an affordable cost. The College continues to operate from a strong financial base. CONTACTING THE COLLEGE S FINANCIAL MANAGEMENT This financial report is designed to provide the citizens, taxpayers, patrons, investors, and creditors with a general overview of the College s finances. If you have any questions about this report or need additional information, contact: Vice President for Administrative Services 4601 Mid Rivers Mall Drive Cottleville, MO 63376-2865 - 8 -
ST. CHARLES COMMUNITY COLLEGE STATEMENTS OF NET POSITION - PRIMARY GOVERNMENT JUNE 30, 2018 AND 2017 ASSETS 2018 2017 CURRENT ASSETS Cash and cash equivalents $ 2,996,190 $ 4,395,784 Investments 20,271,576 17,267,886 Accounts receivable 1,254,208 3,340,586 Interest receivable 126,884 68,568 Taxes receivable 461,607 455,465 Inventory 457,536 643,458 Prepaid expenses 658,205 664,347 TOTAL CURRENT ASSETS 26,226,206 26,836,094 NONCURRENT ASSETS Capital assets, net 64,897,194 67,067,797 TOTAL NONCURRENT ASSETS 64,897,194 67,067,797 TOTAL ASSETS 91,123,400 93,903,891 DEFERRED OUTFLOWS Pension related deferred outflows 10,802,891 12,516,041 Deferred outflows - refunding 1,276,975 1,441,746 TOTAL DEFERRED OUTFLOWS 12,079,866 13,957,787 LIABILITIES CURRENT LIABILITIES Accounts payable 660,389 1,929,505 Accrued payroll expenses 1,424,241 2,154,057 Interest payable 337,181 386,084 Advance student fees 1,787,064 1,804,247 Retainage payable - 358,748 Deposits 3,092 2,668 Current portion of compensated absences 552,773 579,046 Current portion of bond premium 327,959 377,019 Current portion of long-term debt 2,557,836 2,582,836 TOTAL CURRENT LIABILITIES 7,650,535 10,174,210 NONCURRENT LIABILITIES Compensated absences 675,611 707,724 Other post-employment benefits obligation 8,323,270 4,365,276 Net pension liability 29,619,865 30,508,860 Bond premium, net 2,301,871 2,629,829 Long-term debt 22,832,836 25,390,673 TOTAL NONCURRENT LIABILITIES 63,753,453 63,602,362 TOTAL LIABILITIES 71,403,988 73,776,572 DEFERRED INFLOWS Pension related deferred inflows 1,900,514 2,428,461 NET POSITION Invested in capital assets, net of related debt 36,876,692 36,087,440 Restricted for special projects 1,276,776 627,672 Unrestricted (8,254,704) (5,058,467) TOTAL NET POSITION $ 29,898,764 $ 31,656,645 The accompanying notes are an integral part of these financial statements. -9-
ST. CHARLES COMMUNITY COLLEGE ST. CHARLES COMMUNITY COLLEGE FOUNDATION, INC. - COMPONENT UNIT STATEMENTS OF FINANCIAL POSITION JUNE 30, 2018 AND 2017 ASSETS 2018 2017 CURRENT ASSETS Cash $ 507,917 $ 752,606 Investments 1,089,984 732,020 Accounts receivable 13,057 9,500 TOTAL CURRENT ASSETS 1,610,958 1,494,126 OTHER ASSETS Contributions receivable 67,240 80,349 Cash surrender value 31,967 31,158 TOTAL OTHER ASSETS 99,207 111,507 TOTAL ASSETS $ 1,710,165 $ 1,605,633 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 125,955 $ 109,954 Unearned revenue 11,412 6,770 TOTAL CURRENT LIABILITIES 137,367 116,724 NET ASSETS Unrestricted Board designated 865,600 879,260 Undesignated 262,851 110,179 Temporarily restricted 360,674 418,485 Permanently restricted 83,673 80,985 TOTAL NET ASSETS 1,572,798 1,488,909 TOTAL LIABILITIES AND NET ASSETS $ 1,710,165 $ 1,605,633 The accompanying notes are an integral part of these financial statements. -10-
ST. CHARLES COMMUNITY COLLEGE STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION - PRIMARY GOVERNMENT FOR THE YEARS ENDED JUNE 30, 2018 AND 2017 2018 2017 OPERATING REVENUES Tuition and fees, net of scholarship allowances of $2,338,910 and $2,333,571, respectively $ 16,914,172 $ 16,182,530 Auxiliary enterprise revenues, net of scholarship allowances of $32,843 and $36,586, respectively 2,027,138 2,029,484 Governmental grants and contracts 10,023,823 10,154,660 Private gifts and contributions 181,866 87,898 Other operating revenues 787,382 807,263 TOTAL OPERATING REVENUES 29,934,381 29,261,835 OPERATING EXPENSES Educational and General: Instruction 25,268,133 26,556,940 Institutional support 8,037,101 7,948,792 Operation and maintenance of plant 7,145,652 7,376,222 Student services 4,006,274 3,768,055 Academic support 1,166,245 1,179,783 Library 987,863 1,028,234 Student aid 3,305,775 3,355,277 Total Educational And General 49,917,043 51,213,303 Auxiliary enterprise expenditures 2,132,527 2,305,896 Depreciation 2,794,816 2,637,291 TOTAL OPERATING EXPENSES 54,844,386 56,156,490 OPERATING INCOME (LOSS) (24,910,005) (26,894,655) NONOPERATING REVENUES (EXPENSES) Taxes 18,237,055 17,619,213 State appropriations 8,606,865 8,634,564 Investment income 243,498 145,996 Interest on capital asset-related debt (1,003,646) (930,560) Amortization 212,248 (103,451) TOTAL NONOPERATING REVENUES (EXPENSES) 26,296,020 25,365,762 CHANGE IN NET POSITION 1,386,015 (1,528,893) NET POSITION, BEGINNING OF YEAR, AS PREVIOUSLY STATED 31,656,645 33,185,538 Change in accounting principle (3,143,896) - NET POSITION, BEGINNING OF YEAR, AS RESTATED 28,512,749 33,185,538 NET POSITION, END OF YEAR $ 29,898,764 $ 31,656,645 The accompanying notes are an integral part of these financial statements. -11-
ST. CHARLES COMMUNITY COLLEGE ST. CHARLES COMMUNITY COLLEGE FOUNDATION, INC. - COMPONENT UNIT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2018 Temporarily Permanently Unrestricted Restricted Restricted Total PUBLIC SUPPORT Contributions $ 143,241 $ 117,322 $ 2,688 $ 263,251 Special events 80,871 - - 80,871 Change in value of split-interest agreements - (13,109) - (13,109) In-kind contributions 173,167 - - 173,167 TOTAL OPERATING REVENUES 397,279 104,213 2,688 504,180 OTHER INCOME Unrealized gain on investments 41,596 13,355-54,951 Investment income 1,693 - - 1,693 TOTAL OTHER INCOME 43,289 13,355-56,644 NET ASSETS RELEASED FROM RESTRICTIONS Satisfaction of purpose restrictions 175,379 (175,379) - - TOTAL PUBLIC SUPPORT AND OTHER INCOME 615,947 (57,811) 2,688 560,824 EXPENSES Program 307,657 - - 307,657 Administrative 58,697 - - 58,697 Fundraising 110,581 - - 110,581 476,935 - - 476,935 CHANGE IN NET ASSETS 139,012 (57,811) 2,688 83,889 NET ASSETS, BEGINNING OF YEAR 989,439 418,485 80,985 1,488,909 NET ASSETS, END OF YEAR $ 1,128,451 $ 360,674 $ 83,673 $ 1,572,798 The accompanying notes are an integral part of these financial statements. -12-
ST. CHARLES COMMUNITY COLLEGE ST. CHARLES COMMUNITY COLLEGE FOUNDATION, INC. - COMPONENT UNIT STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 Temporarily Permanently Unrestricted Restricted Restricted Total PUBLIC SUPPORT Contributions $ 245,694 $ 98,936 $ 1,930 $ 346,560 Special events 92,256 - - 92,256 Change in value of split-interest agreements - (12,469) - (12,469) In-kind contributions 211,946 - - 211,946 TOTAL OPERATING REVENUES 549,896 86,467 1,930 638,293 OTHER INCOME Unrealized gain on investments 17,797 14,964-32,761 Investment income 2,205 - - 2,205 TOTAL OTHER INCOME 20,002 14,964-34,966 NET ASSETS RELEASED FROM RESTRICTIONS Satisfaction of purpose restrictions 65,503 (65,503) - - TOTAL PUBLIC SUPPORT AND OTHER INCOME 635,401 35,928 1,930 673,259 EXPENSES Program 227,498 - - 227,498 Administrative 75,974 - - 75,974 Fundraising 122,142 - - 122,142 TOTAL EXPENSES 425,614 - - 425,614 CHANGE IN NET ASSETS 209,787 35,928 1,930 247,645 NET ASSETS, BEGINNING OF YEAR 779,652 382,557 79,055 1,241,264 NET ASSETS, END OF YEAR $ 989,439 $ 418,485 $ 80,985 $ 1,488,909 The accompanying notes are an integral part of these financial statements. -13-
ST. CHARLES COMMUNITY COLLEGE STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2018 AND 2017 2018 2017 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from tuition and fees $ 16,849,571 $ 16,188,363 Cash received from grants and contracts 10,570,027 10,660,289 Cash received from auxiliary enterprise charges 3,812,415 4,060,449 Cash paid to suppliers (20,101,808) (20,606,732) Cash paid to employees (29,771,078) (28,155,532) Cash paid as grants (3,305,775) (3,355,277) Other receipts 787,382 805,652 NET CASH USED BY OPERATING ACTIVITIES (21,159,266) (20,402,788) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Cash received from taxes collected 18,230,913 17,564,599 Cash received from state appropriations 8,606,865 8,634,564 Direct loan receipts 2,502,244 2,871,811 Direct loan disbursements (2,502,244) (2,871,811) NET CASH PROVIDED BY NONCAPITAL FINANCING ACTIVITIES 26,837,778 26,199,163 CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES Proceeds from issuance of Certificates of Participation - 5,010,430 Purchases of capital assets (624,213) (10,244,979) Principal payments on debt and capital leases (2,582,836) (2,692,836) Interest payments on debt and capital leases (1,052,549) (963,998) NET CASH USED BY CAPITAL FINANCING ACTIVITIES (4,259,598) (8,891,383) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of investments 29,081,088 37,548,758 Interest on investments 185,182 138,098 Purchase of investments (32,084,778) (32,387,822) NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (2,818,508) 5,299,034 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,399,594) 2,204,026 CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR 4,395,784 2,191,758 CASH AND CASH EQUIVALENTS, END OF THE YEAR $ 2,996,190 $ 4,395,784 The accompanying notes are an integral part of these financial statements. -14-
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES 2018 2017 OPERATING INCOME (LOSS) $ (24,910,005) $ (26,894,655) ADJUSTMENTS TO RECONCILE OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES: Depreciation 2,794,816 2,637,291 (Increase) decrease in assets: Accounts receivable 2,086,378 (729,096) Inventory 185,922 61,370 Prepaid expenses 6,142 (24,917) (Increase) decrease in deferred outflows 1,713,150 (2,969,410) Increase (decrease) in liabilities: Accounts payable (1,269,116) 1,256,238 Accrued payroll expenses (729,816) 637,756 Compensated absences (58,386) 20,525 Advance student fees (17,183) 31,534 Retainage payable (358,748) 250,926 Deposits 424 363 Other post employment benefits obligation 814,098 750,258 Net pension liability (888,995) 8,387,288 Increase (decrease) in deferred inflows (527,947) (3,818,259) TOTAL ADJUSTMENTS 3,750,739 6,491,867 NET CASH USED BY OPERATING ACTIVITIES $ (21,159,266) $ (20,402,788) The accompanying notes are an integral part of these financial statements. -15-
ST. CHARLES COMMUNITY COLLEGE ST. CHARLES COMMUNITY COLLEGE FOUNDATION, INC. - COMPONENT UNIT STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2018 AND 2017 2018 2017 CASH FLOWS FROM OPERATING ACTIVITIES Public support and donations received $ 344,398 $ 459,161 Cash paid to suppliers (50,900) (59,755) Cash paid as grants (171,813) (109,957) Cash paid for educational activities (72,499) (71,965) Interest received 1,693 2,205 NET CASH PROVIDED BY OPERATING ACTIVITIES 50,879 219,689 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (304,501) (470,524) Proceeds from sale of investments 8,933 - NET CASH USED BY INVESTING ACTIVITIES (295,568) (470,524) NET DECREASE IN CASH (244,689) (250,835) CASH - BEGINNING OF THE YEAR 752,606 1,003,441 CASH - END OF THE YEAR $ 507,917 $ 752,606 The accompanying notes are an integral part of these financial statements. -16-
RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES 2018 2017 CHANGE IN NET ASSETS $ 83,889 $ 247,645 ADJUSTMENTS TO RECONCILE CHANGE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Unrealized gain on investments (54,951) (32,761) (Increase) decrease in assets: Accounts receivable (3,557) 1,900 Contributions receivable 13,109 37,469 Cash surrender value (809) (883) Increase (decrease) in liabilities: Accounts payable 8,556 (28,009) Unearned revenue 4,642 (5,672) TOTAL ADJUSTMENTS (33,010) (27,956) NET CASH PROVIDED BY OPERATING ACTIVITIES $ 50,879 $ 219,689 SUPPLEMENTAL INFORMATION Donated services $ 173,167 $ 211,946 The accompanying notes are an integral part of these financial statements. -17-
ST. CHARLES COMMUNITY COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2018 AND 2017 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The College, formed in 1986, is governed by a six member Board of Trustees and administered by the President. The College is accredited by the State of Missouri and by the Higher Learning Commission, a voluntary organization. GASB Statement 14, as amended by GASB Statement 39 and 61, has been applied in determining the financial reporting entity of the College. GASB requires the financial reporting entity to include the following: the primary government; other organizations for which the primary government is financially accountable; any for-profit corporations of which the primary government holds a majority ownership for the purpose of directly facilitating provision of government services; and any other organization whose exclusion would cause the reporting entity s financial statements to be misleading or incomplete. In evaluating the College as a reporting entity, management has addressed all potential component units which may or may not fall within the College s reporting entity because of the significance of their operational or financial relationships with the College. Included in these financial statements is the financial data of St. Charles Community College Foundation, Inc., a discretely presented component unit. The College is not included in any other governmental reporting entity as defined by GASB pronouncements, since Board members are elected by the public and have decision making authority, the authority to levy taxes, the power to designate management, the ability to significantly influence operations and primary accountability for fiscal matters. Discretely Presented Component Unit St. Charles Community College Foundation, Inc. (the Foundation) is a nonprofit organization formed to support the mission of the St. Charles Community College and activities in the field of education. The Foundation is a legally separate, tax exempt component unit of the College. The Foundation receives revenue primarily through fundraising efforts and contributions, which are used to provide scholarships to students attending the College and grants to the College for various educational purposes. The Foundation has issued separate financial statements for the fiscal year ended June 30, 2018 and 2017. These statements may be obtained by contacting the St. Charles Community College Foundation. - 18 -
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Basis of Presentation For financial reporting purposes, the College is considered a special purpose governmental agency engaged only in business-type activities, as defined by GASB Statement No. 34, Basic Financial Statements Management s Discussion and Analysis for State and Local Governments, as amended by Statement No. 35, Basic Financial Statements Management s Discussion and Analysis for Public Colleges and Universities; Statement No. 37, Basic Financial Statements Management s Discussion and Analysis for State and Local Governments: Omnibus; and Statement No. 38, Certain Financial Statement Disclosures. Accordingly, the College s financial statements have been presented on the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements have been met. Classification of Net Position The College s net position is classified as follows: Net investment in capital assets represents the College s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. Restricted, expendable net position includes resources that the College is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties. Restricted, nonexpendable net position includes resources in which the principal must remain in perpetuity. Unrestricted net position represents resources derived from student tuition and fees, state appropriations, and auxiliary enterprises. While unrestricted net position may be designated for specific purposes by action of management or the Board of Trustees, it is available for use, at the discretion of the governing board, to meet current expenses for any purpose. The statement of net position is presented in a classified format to distinguish between current and noncurrent assets and liabilities. When both restricted and unrestricted resources are available to fund certain programs, it is the College s policy to first apply the restricted resources to such programs followed by the use of the unrestricted resources. Contributions All contributions received by the Foundation are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily or permanently restricted support that increases those net asset classes. Donated Services Donated services for the Foundation are recorded as contributions if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Foundation. In addition, a number of volunteers have donated their time to further the mission of the Foundation. The value of these volunteer services is not reflected in the accompanying statements of activities for the component unit. Cash and Cash Equivalents The College and Foundation consider all highly liquid debt instruments with an original maturity of three months or less from the date of acquisition to be cash equivalents. - 19 -
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Supplemental Cash Flow Information The Foundation made no cash payments for interest or taxes during 2018 or 2017. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Scholarship Allowances and Student Financial Aid Student tuition and fees, and certain other revenues from students, 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 students behalf. Financial aid to students is reported in the financial statements under the alternative method as prescribed by the National Association of College and University Business Officers (NACUBO). The alternative method is a simple proportionality method that computes scholarship discounts and allowances on a college-wide basis by allocating the cash payments to students, excluding payments for services, on the ratio of total aid to the aid not considered to be third party aid. Certain governmental grants, such as Pell grants and other federal, state or nongovernmental programs, are recorded as either operating or non-operating revenues in the College s financial statements. To the extent that revenues for such programs are used to satisfy tuition and fees and certain other student charges, the College has recorded a scholarship discount and allowance. Budget Policy The budget is prepared under the direction of the College President. The budget is based upon information provided by the various department heads through the planning process and results in a college-wide plan being submitted and approved. The Office of Administrative Services is responsible for preparing the preliminary budget and submitting it to the President. The President submits the preliminary budget to the Board of Trustees for final approval in June. The Board of Trustees may revise items contained in the final budget. Investments The College s investment policies are governed by the Treasurer of the State of Missouri, which authorizes the College to invest in obligations of the U.S. Treasury and U.S. Government agencies, State Governments, local governments within Missouri and collateralized certificates of deposit. Investments in marketable securities with readily determinable fair values are stated at fair market value. The Foundation s investments in marketable securities with readily determinable fair values are stated at fair market value. Investments that do not have readily determinable fair market values are recorded at cost, the equity method or the fair market value at the date of the gift depending on the Foundation ownership interest. Inventory Inventory consists of textbooks and related bookstore items as well as food service items held for resale. The inventory is stated at the lower of cost or market value on a first-in, first-out basis. Prepaid items Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. Cash surrender value of life insurance The cash surrender value of two Universal Life insurance policies, included in the Statements of Financial Position for the years ending June 30, 2018 and 2017, amounted to $31,967 and $31,158, respectively. The policies, owned by the Foundation, were established during 2010 by a member of the board of directors and a former Executive Director as the insured parties. These individuals contribute an amount to the Foundation equal to the premiums paid by the Foundation for the policies. The death benefit on the policies will be paid to the Foundation as the beneficiary. - 20 -
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Amortization of Bond Discount/Premium Bond discounts and premiums are amortized over the life of the bonds. Amortization for the years ended June 30, 2018 and 2017 amounted to $377,019 and $20,129, respectively. Amortization of Deferred Outflows Bond Refunding Deferred items related to the refunding of bonds are amortized over the life of the new bonds or refunded bond, whichever is shorter. Amortization for the years ended June 30, 2018 and 2017 were ($164,771) and ($123,578), respectively. Accounts Receivable Accounts receivable consists of balances due from students for tuition and other fees as well as government and other businesses for various other program related charges. Very few accounts are written off because the College has the potential to collect outstanding debts through the State of Missouri s Debt Offset Program. The allowance for doubtful accounts totals $869,870 and $808,542 at June 30, 2018 and 2017, respectively. Capital Assets All capital expenditures of $5,000 or more having an estimated life of more than one year are capitalized at cost or fair market value, if donated. Depreciation is recorded using the straight-line method over the estimated service lives as follows: Major Group Buildings Land improvements Equipment and furniture Vehicles Leased equipment Life 40 years 15 years 5-10 years 5 years 5 years Depreciation expense for the years ended June 30, 2018 and 2017 was $2,794,816 and $2,637,291, respectively. Advertising The College and Foundation follow the policy of charging the cost of advertising to expense as incurred. Advertising expense for the primary government was $380,787 and $412,552 for the years ended June 30, 2018 and 2017, respectively. For the component unit, advertising expense amounted to $3,763 and $2,136 for the years ended June 30, 2018 and 2017, respectively. Income Taxes The Foundation qualifies as a nonprofit organization and is exempt from Federal and State income taxes pursuant to Internal Revenue Code Section 501(c)(3). The Foundation does not have unrelated business income, excise taxes, or activities that would threaten the Foundation s tax-exempt status. Accordingly, no provision for Federal or State income taxes is provided. The Foundation files an information return, IRS Form 990. The Foundation has also been classified as an entity that is not a private foundation within the meaning of Section 509(a). The Foundation adopted the provisions relating to Accounting for Uncertainty in Income Taxes and management is not aware of any uncertain tax provisions of the Foundation related to tax filings. - 21 -
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Pensions Financial reporting information pertaining to the College's participation in the Public School Retirement System of Missouri a n d the Public Education Employee Retirement System of Missouri ( PSRS and "PEERS", also referred to as the Systems) is prepared in accordance with Governmental Accounting Standards Board ("GASB) Statement No. 68, Accounting and Financial Reporting for Pensions, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, by GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, and by GASB Statement No. 82, Pension Issues. The fiduciary net position, as well as additions to and deductions from the fiduciary net position, of PSRS and PEERS have been determined on the same basis as they are reported by the Systems. The financial statements were prepared using the accrual basis of accounting. Member and employer contributions are recognized when due, pursuant to formal commitments and statutory requirements. Benefits and refunds of employee contributions are recognized when due and payable in accordance with the statutes governing the Systems. Expenses are recognized when the liability is incurred, regardless of when payment is made. Investments are reported at fair value. The fiduciary net position is reflected in the measurement of the College's net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense. A Comprehensive Annual Financial Report ( CAFR ) can be obtained at www.psrs-peers.org. Postemployment Benefits Other Than Pensions (OPEB) For the purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense have been determined on the same basis as they are reported by the College. Benefit payments are recognized when due and payable in accordance with the benefit terms. Operating and Nonoperating activities Operating activities are transactions that result from exchange transactions, such as payments received for providing services and payments made for services or goods received. Federal grant revenue consisting primarily of Pell grants and SEOG grants are reported as operating revenue as these funds replace an equal amount of tuition revenue and/or directly related to the principal operations of the College. Nonoperating activities include state appropriations, property taxes and interest. Expense Allocation The costs of providing various programs and other activities for the Foundation have been summarized on a functional basis in the Statement of Revenues, Expenses and Changes in Net Assets. Accordingly, certain costs have been allocated among the programs and supporting services benefited. The Foundation allocates salaries based on an analysis of time spent in each function. 2. CASH AND INVESTMENTS Primary government: Custodial credit risk For an investment, custodial credit risk is the risk that in the event of the failure of the counterparty, the College will not be able to recover the value of its investments or collateral securities that are in possession of an outside party. The College s cash balance is held at one financial institution. Collateral is required for demand and time deposits. Obligations that may be pledged as collateral are of the same type in which the College may invest. Obligations to secure deposits are held by the College s agent bank or in the agent bank s joint-custody account at the Federal Reserve Bank. All of the bank balance was insured by federal depository insurance or collateralized by securities as follows at June 30, 2018. - 22 -
2. CASH AND INVESTMENTS (continued) Total bank deposits $ 10,743,034 FDIC insured ( 250,000) Pledged collateral held by pledging institution (10,493,034) Uninsured bank deposits $ - The College follows the Missouri Model Investment Policy as its formal investment policy. Interest rate risk The College minimizes the risk that the market value of securities in the portfolio will fall due to changes in general interest rates by (1) structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity and; (2) investing operating funds primarily in shorter-term securities. The College s investment balances and maturities at June 30, 2018 are as follows: Fair Less than 6-12 More than Investment Type Value 6 months months 1 year U.S. Agency securities $ 6,643,577 $ 5,651,316 $ 992,261 $ - U.S. Treasury securities 10,905,999 6,943,930 3,962,069 - Certificates of deposit 2,722,000 2,500,000 222,000 - TOTAL $ 20,271,576 $ 15,095,246 $ 5,176,330 $ - The College s investment balances and maturities at June 30, 2017 were as follows: Fair Less than 6-12 More than Investment Type Value 6 months months 1 year U.S. Agency securities $ 7,974,761 $ 7,974,761 $ - $ - U.S. Treasury securities 2,018,125 2,018,125 - - Certificates of deposit 7,275,000, 4,775,000 1,500,000 1,000,000 TOTAL $ 17,267,886 $ 14,767,886 $ 1,500,000 $ 1,000,000 Credit risk The College s investment policies are governed by the Treasurer of the State of Missouri, which authorizes the College to invest in obligations of the U.S. Treasury and U.S. Government agencies, State Governments, local governments within Missouri and collateralized certificates of deposit. These investments are rated AA+ by Standard & Poor s. Concentration of credit risk The College s policy is to diversify investments to minimize the risk of loss resulting from over concentration of assets in specific maturity, specific issuer, or specific class of security. At a minimum, the maximum security type and issuer shall be: U.S. Treasuries and securities having principal and/or interest guaranteed by the U.S. government 100% Collateralized time and demand deposits 100 U.S. Government agencies, and government-sponsored enterprises 60 Collateralized repurchase agreements 50 U.S. Government agency callable securities 30-23 -
2. CASH AND INVESTMENTS (continued) Investments in any one issuer that represent 5% or more of total College investments are as follows: 2018 2017 Percentage Percentage Investment Type Of Investments Of Investments Certificates of deposit 13 % 42 % U.S. Treasury securities 54 % 12 % U.S. Agency securities 33% 46 % Component unit: The Foundation maintains its cash in one financial institution located in St. Charles County. The carrying amount of the cash at June 30, 2018 was $468,491 and the bank balance was $469,291. The account is guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per bank. The amount of uninsured cash is $219,291 as of June 30, 2018. The Foundation also has cash on deposit in a brokerage account. At June 30, 2018, the balance was $39,426, all of which was FDIC insured. The Foundation has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. The Foundation s investments consist of the following at June 30: 2018 2017 Market Unrealized Market Unrealized Cost Value Gain Cost Value Gain Mutual funds & ETF $ 941,950 $ 1,089,984 $ 148,034 $ 638,936 $ 732,020 $ 93,084 Investment revenues are reported net of related expenses of $7,096 and $2,082 for the years ended June 30, 2018 and 2017, respectively. 3. ACCOUNTS RECEIVABLE The College s accounts receivable reported in the Statements of Net Position at June 30 are as follows: - 24-2018 2017 Tuition receivable $ 571,832 $ 507,231 Grants and contracts receivable 326,344 690,682 Other accounts receivable 356,032 2,142,673 TOTAL $ 1,254,208 $ 3,340,586 Approximately, 26% and 59%, respectively, of the College s outstanding accounts receivable are due from one local company, the Missouri Department of Elementary and Secondary Education and the State of Missouri. 4. CONTRIBUTIONS RECEIVABLE The Foundation has been named the beneficiary in a Charitable Remainder Unitrust. This unconditional promise to give will be received upon the death of the donor. Based on the life expectancy of the donor, the contribution is expected to be received in approximately 7 years. The contribution has been recorded at the present value of the estimated future cash flows using a discount rate of 5% at June 30, 2018.
5. FAIR VALUE MEASUREMENTS Financial assets valued using level 1 inputs are based on unadjusted quoted market prices within active markets. Financial assets valued using level 2 inputs are based primarily on quoted prices for similar assets in active or inactive markets. Financial assets valued using level 3 inputs are based primarily on assumptions about the marketability of the assets. Fair values of assets measured on a recurring basis at June 30, 2018 are as follows: Quoted Prices In Active Significant Markets For Other Significant Identical Observable Unobservable Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) Primary government: U.S. Agency securities $ 6,643,577 $ - $ 6,643,577 $ - U.S. Treasury securities 10,905,999-10,905,999 - TOTAL $ 17,549,576 $ - $ 17,549,576 $ - Component unit: Mutual Funds & ETF $ 1,089,984 $ 1,089,984 $ - $ - Contributions Receivable 67,240 - - 67,240 TOTAL $ 1,157,224 $ 1,089,984 $ - $ 67,240 Fair values of assets measured on a recurring basis at June 30, 2017 are as follows: Quoted Prices In Active Significant Markets For Other Significant Identical Observable Unobservable Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) Primary government: U.S. Agency securities $ 7,974,761 $ - $ 7,974,761 $ - U.S. Treasury securities 2,018,125-2,018,125 - TOTAL $ 9,992,886 $ $ 9,992,886 $ - Component unit: Mutual Funds & ETF $ 732,020 $ 732,020 $ - $ - Contributions Receivable 80,349 - - 80,349 TOTAL $ 812,369 $ 732,020 $ - $ 80,349-25 -