STATE TECHNICAL COLLEGE OF MISSOURI Linn, Missouri INDEPENDENT AUDITORS REPORT & K i1 I 2 I c c -I
TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS REPORT. 1-3 MANAGEMENT S DISCUSSION AND ANALYSIS, 4-12 BASIC FINANCIAL STATEMENTS: Statements of Net Position Statements of Revenues, Expenses, and Changes in Net Position Statements of Cash Flows Discretely Presented Component Unit Statements of Financial Position Statements of Activities Statements of Cash Flows (Indirect Method). Notes to the Financial Statements. REQUIRED SUPPLEMENTARY INFORMATION. 13 14 15-16 17 18 19 20-45 46-50 SUPPLEMENTARY INFORMATION: Schedule of Financial Position by Division - 2017. Schedule of Financial Position by Division - 2016. Schedule of Activity by Division - 2017 Schedule of Activity by Division - 2016 Auxiliary Schedule by Activity - 2017 Auxiliary Schedule by Activity - 2016 51 52 53 54 55 56 FEDERAL COMPLIANCE SECTION: Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Independent Auditors 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 Independent Auditors Report on Compliance For Each Major Program And On Internal Control Over Compliance Required by The Uniform Guidance Schedule of Findings and Questioned Costs 57 58 59-60 61-63 64-65
ievers & Company, CPA s, L.L.C. Certified Public Accountants and Consultants The Board of Regents of State Technical College of Missouri Linn, Missouri Report on the Financial Statements INDEPENDENT AUDITORS REPORT Elmer L. Evers Richard E. Elliott Dale A. Siebeneck Jo L. Moore Wendy M. Renner Eldon H. Becker, Jr. Bruce A. Vanderveld Jessica L. Bridges Bobbie J. Redmon-Murray Jerome L. Kauffman, Emeritus Keith L. Taylor, Emeritus We have audited the accompanying financial statements of State Technical College of Missouri (the College), a component unit of the State of Missouri, and its discretely presented component unit, The Foundation for State Technical College of Missouri, Inc. (the Foundation), as of and for the years ended June 30, 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 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 audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. The financial statements of The Foundation for State Technical College of Missouri, Inc. were not audited in accordance with Government Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from 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 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. 1 520 Dix Road, Suite A Jefferson City, Missouri 65109 573/635-0227 FAX 573/634-3764 Village Green Shopping Center 1021 W. Buchanan Street, Ste. 10 California, Missouri 65018 573/796-3210 FAX 573/796-3452 5886 Osage Beach Pkwy Osage Beach, Missouri 65065 573/348-4141 FAX 573/348-0989
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, the financial statements referred to above present fairly, in all material respects, the respective financial position of State Technical College of Missouri and its discretely presented component unit, The Foundation for State Technical College of Missouri, Inc. as of June 30, 2017 and 2016, and the respective changes in financial position and cash flows, thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters RequiredSupplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, OPEB schedules, schedule of the College s proportionate share of the net pension liability, and schedule of College s contributions, on pages 4 through 12 and 46 through 50 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Government 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 supplemental information in accordance with auditing standards generally accepted in the United States of America, 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the State Technical College of Missouri s basic financial statements. The financial information listed in the table of contents as supplementary information, is presented for purposes of additional analysis and is not a required part of the basic financial statements. The schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements Cost Principles, and Audit Requirementsfor Federal Awards, and is also not a required part of the basic financial statements. The schedule of expenditures of federal awards is the responsibility of management and was derived from and relate 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 of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole. 2
The financial information listed in the table of contents as supplementary information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 30, 2017, on our consideration of the State Technical College of Missouri 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 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 State Technical College of Missouri s internal control over financial reporting and compliance. dy-ÿola- ÿ3, LLC EVERS & COMPANY, CPA s, L.L.C. Jefferson City, Missouri November 30, 2017 3
MANAGEMENT S DISCUSSION AND ANALYSIS _ (unaudited) _ Introduction The following discussion provides an overview of the financial position of State Technical College of Missouri for the years ended June 30, 2017 and June 30, 2016 and includes an analysis of the College s financial statements. These financial statements are prepared in accordance with Government Accounting Standards Board (GASB) pronouncements. Effective July 1, 2001, the College adopted GASB Statement No. 14, The Financial Reporting Entity, as amended by GASB 39; Determining Whether Certain Organizations are Component Units and GASB 61, The Financial Reporting Entity: Omnibus an Amendment of GASB Statements No. 14 and No. 34. The Foundation for State Technical College of Missouri, Inc. (Foundation) is a legally separate, tax exempt, entity which meets the criteria set forth for component units under GASB Statement No. 39. The Foundation provides financial support for the objectives, purposes, and programs of the College. Although the College does not control the timing, purpose, or amount of receipts from the Foundation, the resources (and income thereon) which the Foundation holds and invests are restricted to the activities of the College. Because these resources held by the Foundation can only be used by, or for the benefit of the College, the Foundation is considered a component unit of the College and is discretely presented in the College s financial statements. The Foundation is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications for these differences have been made to the Foundation s audited financial information as it is presented in the College s financial reporting entity. Complete financial statements for the Foundation may be obtained by mailing a request to The Foundation for State Technical College of Missouri, Inc. Treasurer, One Technology Drive, Linn, MO 65051. The discussion and analysis (which excludes the Foundation) has been prepared by management along with the financial statements and related footnote disclosures and should be read in conjunction with and is qualified in its entirety by the financial statements and footnotes. Financial Overview and Highlights This discussion and analysis of State Technical College of Missouri s financial statements provides an overview of the College s financial performance during the years ended June 30, 2017 and June 30, 2016. Since Management s Discussion and Analysis is designed to focus on current activities, resulting changes and current known facts, it should be read in conjunction with the College s basic financial statements and the footnotes. 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 about the financial statements is a comparative analysis of College wide data. The College s significant accounting policies are summarized in Note 1 to the financial statements of this report, including further information on the financial reporting entity. Statement of Net Position The Statement of Net Position presents the financial position of the College at the end of the fiscal year and includes all assets and liabilities of the College. The Net Position presents the current financial condition of the College. Assets and liabilities are generally measured using current values, with certain exceptions, such as capital assets, which are stated at cost less accumulated depreciation, and accounts receivable reported net of estimated uncollectible accounts. 4
MANAGEMENT S DISCUSSION AND ANALYSIS _ (unaudited) _ The assets and liabilities are categorized between current and noncurrent. The difference is current assets and liabilities mature or become payable within the normal 12 month accounting cycle versus noncurrent which mature or become payable after 12 months. For example, at June 30, 2017 and 2016, the College s current assets consist primarily of cash and accounts receivables, while noncurrent assets consist primarily of capital assets. Capital assets are the property, plant, and equipment owned by the College, net of any related depreciation. Net Position is presented in three major categories. The first is net investment in capital assets, which represents the College s equity in property, plant, and equipment, net of any related debt and accumulated depreciation. The remaining two categories are restricted and unrestricted. Restricted net position is funds that are limited in terms of the purpose and time for which the funds can be spent. Restricted net position is further categorized between expendable and non-expendable. Restricted expendable net position is available to be spent by the College after externally imposed stipulations have been fulfilled or after the passage of time. Restricted non-expendable net position is endowments for which only the interest portion can be spent. Unrestricted net position is not subject to externally imposed stipulations, however these resources may be designated for specific purposes by the College s management or Board of Regents. Unrestricted net position not designated is available for the College s instructional and public service missions and its general operations. The table below is a summary of the College s assets, liabilities and net positions at June 30, 2017, 2016, and 2015 respectively (in millions). Condensed Summary of Net Position June 30, 2017, 2016, and 2015 (in millions) 2017 2016 2015 Current Assets Noncurrent Assets Total Assets $10.5 $12.5 $11.4 49.3 42.6 43.3 59.8 55.1 54.7 Deferred Outflows of Resources 8.0 2.7 1.4 Current Liabilities Noncurrent Liabilities Total Liabilities 2.5 2.5 2.1 33.0 21.0 18.6 35.5 23.5 20.7 Deferred Inflows of Resources.2.3 2.8 Net Investment in Capital Assets Restricted Expendable Unrestricted, (deficit) Total Net Position 37.3 35.4 34.0.9 (5.2) (1.4) (2.3) $32.1 $34.0 $32.6 5
MANAGEMENT S DISCUSSION AND ANALYSIS _ (unaudited) _ Analysis of Fiscal Years During 2017, Total Assets increased by $4.7 million. Current Asset, cash, decreased by $2 million due to the utilization of reserves to construct the Welding Technology Center completed in February 2017. Noncurrent assets, restricted cash and capital assets both increased significantly. Series 2017 revenue bonds in the amount of $5.1 million were issued in May 2017, but only $.3 million of cash was utilized and distributed leaving the remaining $4.8 million in restricted cash. Noncurrent assets increased by $1.9 million due to $4 million in buildings and equipment being placed in service and a combined net increase in construction in progress of $.6 million during fiscal year 2017 offset by $2.7 million in total depreciation. During 2016, Total Assets increased by 1%. Current Assets, cash and accounts receivable, were both higher at June 30, 2016 compared to June 30, 2015. The increase in cash was due to conservative fiscal management and the increase in accounts receivable was due to billings for special projects recorded at June 30, 2016. Noncurrent Assets, fixed assets placed in service and construction in progress, exceeded depreciation expense for the fiscal year ended June 30, 2016. Deferred Outflows of Resources increased by $5.3 million from 2016 to 2017 and by $1.3 million from 2015 to 2016. This reflects the increase in the College s proportionate share of net differences between projected and actual investment earnings on pension plan investments recorded based on the information provided by Missouri State Employee s Retirement System (MOSERS) due to the implementation of GASB Statement No. 68, Accounting and Financial Reportingfor Pensions. Total Liabilities increased by $12 million during 2017. Current Liabilities remained at $2.5 million from 2016 to 2017. Noncurrent Liabilities increased $12 million total. $4.6 million of the increase was due to the $5.1 million of Series 2017 revenue bonds issued in May 2017 offset by the principal payment of $.3 million made on the Series 2015 revenue bonds less the $.2 million increase in the current portion classified as a current liability. The remaining $7.4 million increase was in the College s proportionate share of net pension liability recorded based on information provided by MOSERS due to the implementation of GASB Statement No. 68, Accounting and Financial Reportingfor Pensions. Total Liabilities increased by $2.8 million during 2016. The change in Current Liabilities and Noncurrent Liabilities from 2015 to 2016 was approximately $.4 million and $2.4 million respectively. Current Liabilities increased due to liabilities related to special projects. The change in Noncurrent Liabilities reflects a $3.6 million increase in the College s proportionate share of net pension liability recorded based on information provided by MOSERS and a $1.2 million decrease in Revenue Bonds resulting from principal payments made during the year and the refinancing that took place in September 2015. Deferred Inflows of Resources decreased by $.1 million from 2016 to 2017 and $2.5 million from 2015 to 2016. This decrease reflects changes in differences between expected and actual experience and changes in assumptions related to the pension plan recorded based on information provided by MOSERS all related to the implementation of GASB Statement No. 68, Accounting and Financial Reportingfor Pensions. Total Net Position decreased by $1.9 million during the fiscal year ended June 30, 2017 primarily attributable to the increase in buildings and equipment placed in service, the issuance of Series 2017 revenue bonds, and the impact of recording information provided by Missouri State Employee s Retirement System (MOSERS) due to the implementation of GASB Statement No. 68, Accounting and Financial Reportingfor Pensions. During the fiscal year ended June 30, 2016, the Total Net Position increased by $1.4 million. This was the net impact of all of the abovementioned changes recorded based on information provided from MOSERS attributable to the implementation of GASB Statement No. 68, Accounting and Financial Reportingfor Pensions. 6
MANAGEMENT S DISCUSSION AND ANALYSIS _ (unaudited) _ Analysis of Capital Assets (in millions) 2017 2016 2015 Land Construction Progress Land Improvements Infrastructure Buildings Library Books Software Equipment Total Capital Assets Less Accumulated Depreciation Capital Assets $ 1.2 $ 1.2 $ 1.2 1.1.5.1 4.8 4.7 4.3.5.5.5 49.8 47.2 46.9.6.6.6 1.3 1.3 1.4 18.8 17.8 16.3 78.1 73.8 71.3 33.6 31.2 28.9 $ 44.5 $ 42.6 $ 42.4 During fiscal year ended June 30, 2017, the College capitalized $4.3 million in buildings, equipment, and construction in progress, net of $.2 million in disposals. Capitalizations include the completed Welding Technology Center, Airport Hangar and $1 million in equipment. Construction in Progress includes costs related to buildings and improvements not yet placed in service as of June 30, 2017 including the Health Sciences Center, Eagle Manor, Eagle s Nest, and the elevator replacement in the Nilges Technology Center. During fiscal year ended June 30, 2016, the College capitalized $.4 million more in equipment than fiscal year ended June 30, 2015. Capitalizations included expenses related to three special projects: Welding Technology Center, Health Sciences Center, and Airport Hangar. Capitalizations also include equipment purchased for the new Advanced Manufacturing Technician program in St. Charles, MO. The depreciation expense for years ended June 30, 2017, June 30, 2016 and June 30, 2015 was $2.7 million, $2.6 million and $2.6 million respectively. Statement of Revenues, Expenses, and Changes in Net Position The Statement of Revenues, Expenses, and Changes in Net Position presents the College s financial results of operations for the fiscal year. The statement distinguishes revenues and expenses between operating and nonoperating categories, and provides a view of the College s operating margin. Operating revenues and expenses are those for which the College directly exchanges goods and services. Nonoperating revenues and expenses are those that exclude specific, direct exchanges of goods and services. State appropriations are an example of nonoperating revenues where the state legislature does not directly receive goods and services for the revenue. 7
MANAGEMENT S DISCUSSION AND ANALYSIS _ (unaudited) _ The following is a summarized version of the College s Revenues, Expenses, and Changes in Net Position for the years ended June 30, 2017, 2016, and 2015, respectively (in millions). Condensed Summary of Revenues, Expenses and Changes in Net Position For the Years Ended June 30, 2017, 2016, and 2015 (in millions) 2017 2016 2015 Operating Revenues Operating Expenses Operating Loss Nonoperating Revenues (Expenses) Other Revenues (Expenses) (Decrease) Increase in Net Position Net Position, Beginning of Year Adjustment Applicable to Prior Years* Net Position, Beginning of the Year Restated Net Position, End of the Year $13.5 $14.0 $13.3 (24.8) (22,7) (20.8) (113) (8.7) (7.5) 8.1 8.9 7.2 1.3 1.2.7 (1.9) 1.4.4 34.0 32.6 43.7 (11.5) 34.0 32.6 32.2 $32,1 $34.0 $32,6 * The Adjustment Applicable to Prior Years is due to the implementation of GASB Statement No. 68, Accounting and Financial Reportingfor Pensions. Revenues Operating Revenues decreased by $.5 million in fiscal year 2017. This was due to a slight decrease in enrollment as well as the Make it in America and MoManufacturingWins Grants ending offset by the increase in reimbursements from the TechHire and MoStemWins grants. Fiscal year 2017 nonoperating and other revenues decreased by $.7 million. This was the combined impact of an initial $.6 million increase in appropriations, a $.4 million mid year appropriations cut, $1 million decrease in prior year one time funding from Missouri Works Job Development and a $.1 increase in in kind donations. For fiscal year 2016, operating revenues were $.7 million more than fiscal year 2015. The increase was a result of an increase in tuition and the restoration of MO Works Job Development customized training program funding as a result of legislative actions. Fiscal year 2016 nonoperating and other revenues increased by approximately $2.2 million. This increase is attributable to an increase in state appropriations as a result of meeting all of the State s established performance funding measures as well as an increase related to equity funding allocated to higher education institutions. The increase also includes $1 million from Missouri Works Job Development Fund to fund new and expanding industry training programs and basic industry retraining programs, $1 million of which was dedicated for an advanced manufacturing technician training program offered by the State Technical College of Missouri. 8
MANAGEMENT S DISCUSSION AND ANALYSIS _ (unaudited)_ One of the financial strengths of the College is the diverse stream of revenues, which supplement its student tuition and fees. The following is the College s revenue sources for the years ended June 30, 2017, 2016, and 2015, respectively (in millions). Operating Revenues Student Tuition and Fees Grants and Contracts Auxiliary Activities Other Operating Revenues Total Operating Revenues Nonoperating Revenues State Appropriations Investment Income Gifts & Grants Total Nonoperating Revenues Other Revenues, Gains or Losses Grants and Contracts Total Other Revenues, Gains or Losses 2017 2016 2015 $7.2 $7.5 $7.2 3.6 3.6 3.2 2.3 2.5 2.3.4.4.6 $13.5 $14.0 $13.3 $5.8 $6.6 $4.8.01.01.01 2.4 2.5 2.8 $8.21 $9.11 $7.61 $1.3 $1.25 $0.73 $1.3 $1.25 $0.73 Expenses Operating Expenses increased $2.1 million from 2016 to 2017. This increase includes a fiscal year 2017 2% increase to the faculty and staff compensation pool and the costs of related benefits of $.2 million as well as $1.9 million of additional benefit expense recorded based on the information provided by Missouri State Employee s Retirement System (MOSERS) due to the implementation of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. Operating Expenses increased $1.9 million from 2015 to 2016. Increased appropriations and equity funding from the State of Missouri made market value adjustments possible for faculty and staff at the College. These adjustments and the costs of related benefits contributed to the increase in Operating Expenses. In addition, the restoration of MO Works Job Development training is reflected in the increase in contractual services. The College successfully works with many manufacturing businesses providing customized training. The following chart shows the total operating expenses for the College by natural classification for the years ended June 30, 2017, 2016, and 2015, respectively (in millions). Operating Expenses Compensation and Employee Benefits Contractual Services Supplies and Materials Utilities Travel Communications Other Operating Expenses Scholarships and Fellowships Depreciation and Amortization Total operating Expenses 2017 2016 2015 $14.6 $12.6 $11.4 1.9 2.1 1.4 2.9 2.6 2.8.6.6.6.1.1.1.3.3.3 1.0 1.0.8.7.8.8 2.7 2.6 2.6 $24.8 $22.7 $20.8 9
MANAGEMENT S DISCUSSION AND ANALYSIS _ (unaudited) _ Expenses by Functional Classification A comparison of operating expenses for fiscal years ended June 30, 2017, 2016, and 2015, respectively (in millions). 2017 2016 2015 Operating Expenses Instruction Public Service Academic Support Student Services Institutional Support Operations and Maintenance of Plant Scholarships and Fellowships Auxiliary Services Depreciation and Amortization Total Operating Expenses $10.6 $9.1 $8.2 1.7 2.1 1.8.9.7.7 1.9 1.7 1.4 2.4 2.3 2.0 1.7 1.2 1.3.8.8.9 2.1 2.2 1.9 2.7 2.6 2.6 $24.8 $22.7 $20.8 Statement of Cash Flows The Statement of Cash Flows provides a view of the sources and uses of the College s cash resources. Cash used in operating activities reflects the continued need for funding from the State of Missouri, as funding received from tuition and fees and related sales and services of auxiliary and educational activities are not sufficient to cover operational needs. The following is a condensed summary of the Statement of Cash Flows for the years ended June 30, 2017, 2016, and 2015, respectively. Condensed Summary of Cash Flow For the Years Ended June 30, 2017, 2016, and 2015 (in millions) 2017 2016 2015 Net Cash Provided (Used) by: Operating Activities Noncapital Financing Activities Capital & Related Financing Activities Investing Activities Net Increase (Decrease) in cash Cash, Beginning of Year Cash, End of Year $(6.8) $(5.9) $(5.1) 8.2 9.1 7.6 1.3 2.7 (2.9) (1).2 (1.8).7 9.8 9.6 8.9 $ 12.5 $ 9.8 $ 9.6 The College s cash increase by 28% in fiscal year 2017. This was due to the issuance of Series 2017 revenue bonds offset by decreases in state appropriations. The College s cash increased 2% in fiscal year 2016. This was due to conservative fiscal management. 10
MANAGEMENT S DISCUSSION AND ANALYSIS _ (unaudited) _ Debt Administration The College s Statement of Net Position reflects $11,940,000 in revenue bonds payable. These bonds do not constitute general obligations or an indebtedness of the State of Missouri, the College, the governing body of the College or the individual members of the governing body within the meaning of any constitutional or statutory debt limitation or restriction. Auxiliary revenue is pledged up to 120% of the amount of annual debt requirements for the Series 2015 outstanding revenue bonds in the amount of $6,840,000. All revenue bonds were refinanced on September 3, 2015 in order to achieve economic savings and implement a unified plan of finance. Series 2017 revenue bonds in the amount of $5,100,000 were issued on May 10, 2017 for the purpose of constructing, furnishing and equipping the Allied Health Sciences Center to house the educational programs offered by the College and to make miscellaneous capital improvements to educational facilities on the Linn campus. Debt (in millions) Beginning of Yr. Balance Amount Repaid Amount Issued Amount Refinanced End of Yr. Balance Due Within One Year 2017 2016 $ 7.17 $ 8.30 (8.77) 2015 $ 8.57 (.33) (.27) 5.10 7.64 $ 11.94 $ 7.17 $ 8.30 $ _.53 $_33 $.28 Economic Outlook It is imperative that the State Technical College of Missouri maintain a healthy financial position so it can successfully maintain and grow the current level of enrollment through recruiting and retaining graduates and meeting the performance funding measures established by the State. Performance funding measures for the College include: Fall to Fall Retention; Graduation Rate; Graduate Placement; Quality of Student Learning and Completion Ratio. The College has met all five funding measures in the years ended June 30, 2012-2016. Furthermore, the College s retention and graduation rate of 83% and 64% respectively, are the highest among all Missouri public two year colleges and among the highest when compared to select peer groups. Fall 2016 enrollment decreased 4% from fall 2015 enrollment. The College currently enrolls students from 84% of Missouri counties. Strategic enrollment management initiatives continue to be reviewed to maximize enrollment. The College projects 2018 enrollment to remain stable based on the number of Missouri high school graduates and increased course and program placement standards. The College is a labor intensive organization. As such, the College must compete with industry to attract and retain quality faculty and staff. This ability to be competitive is vital to the College s success. In addition to securing quality faculty and staff, the College will consistently pursue increased enrollment while maintaining its retention, graduation, and placement rates and offering exceptional educational opportunities through highly specialized and advanced technical education and training in both emerging and traditional technologies. While it is not possible to predict the ultimate results, management believes that by focusing on these objectives, the College will remain strong and withstand economic uncertainties. Management will continue to maintain a close watch over its resources and expenses to ensure its ability to plan and react to future internal and external issues. 11
MANAGEMENT S DISCUSSION AND ANALYSIS _ (unaudited) _ Requests for Information Additional information or questions concerning any of the information provided should be requested from the Chief Financial Officer at State Technical College of Missouri, One Technology Drive, Linn, MO 65051 or Jennv.iacobs@statetechmo.edu 12
BASTC FINANCIAL STATEMENTS
STATEMENTS OF NET POSITION JUNE 30, 2017 AND 2016 Assets Current Assets Cash Certificate of Deposit Accounts Receivable (Net) Related Party Accounts Receivable Accrued Interest Receivable Prepaid Expenses Inventory Total Current Assets 2017 2016 $ 7,751,410 1,000,000 887,301 483,097 $ 9,749,769 1,000,000 749,758 814,994 370 247 66,753 287,573 10,476,504 26,778 196,591 12,538,137 Noncurrent Assets Restricted Assets Cash Capital Assets Depreciable, Net of Accumulated Depreciation Non-Depreciable Total Noncurrent Assets 4,773,923 42,168,404 2,332,798 49,275,125 42,681 40,872,995 1,718,917 42,634,593 Total Assets 59,751,629 55,172,730 Deferred Outflows of Resources Deferred Outflows Related to Pensions Deferred Charge on Refunding Total Deferred Outflows of Resources 7,966,987 53,488 8,020,475 2,599,424 61,129 2,660,553 Liabilities Current Liabilities Accounts Payable Related Party Accounts Payable Deposits Unearned Revenues Other Payables Retainage Payable Contracts Payable Deposits Held for Others Long-Term Liabilities - Current Portion Current Liabilities Payable from Restricted Assets Accrued Interest Payable Retainage Payable Total Current Liabilities 610,549 6,767 67,125 710,219 90,385 5,740 358,601 34,397 525,000 33,490 15,908 2,458,181 806,999 7,021 63,700 697,455 159,793 21,385 371,569 33,962 330,000 14,938 2,506,822 Noncurrent Liabilities Accrued Compensated Absences Revenue Bonds OPEB Obligation Net Pension Liability Total Noncurrent Liabilities 394,547 11,415,000 564,000 20,705,167 33,078,714 369,719 6,840,000 544,000 13,310,786 21,064,505 Total Liabilities 35,536,895 23,571,327 Deferred Inflows of Resources Deferred Inflows Related to Pensions Total Deferred Inflows of Resources 184,948 184,948 263,268 263,268 Net Position Net Investment in Capital Assets Restricted Expendable Debt Service Unrestricted, (deficit) Total Net Position $ 37,270,633 28,594 (5,248,966) 32,050,261 35,400,527 42,681 (1,444,520) $ 33,998,688 See accompanying notes to financial statements. 13
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION FOR THE YEARS ENDED JUNE 30, 2017 and 2016 Revenues Operating Revenues Student Tuition and Fees (Net of Scholarship Allowance of $1,985,514 and $2,046,898; and Bad Debt Expenses of $ 34,626 and $54,352) Government Grants and Contracts Federal State Nongovernmental Grants and Contracts Sales and Services of Educational Departments Auxiliary Activities (Net of Scholarship Allowance of $21,768 and $21,683) Pledged as Security for Revenue Bonds Other Operating Revenues Total Operating Revenues 2017 2016 $ 7,161,469 $ 7,476,592 554,732 2,340,818 692,664 132,330 2,346,194 229,251 13,457,458 851,253 2,503,855 277,861 174,658 2,447,662 231,420 13,963,301 Expenses Operating Expenses Compensation and Employee Benefits Contractual Services Supplies and Materials Utilities Travel Communications Other Operating Expenses Scholarships and Fellowships Depreciation and Amortization Total Operating Expenses Operating (Loss) Nonoperating Revenues (Expenses) State Appropriations Federal Grants State Grants Investment Income Interest Expense Nonoperating Revenues (Expenses) Gain (Loss) Before Other Revenues, Expenses Gains or Losses Other Revenues, Expenses, Gains or Losses Government Grants and Contracts Federal State Nongovernmental Grants and Contracts (Loss) on Disposal of Plant Assets Total Other Revenue, Expenses, Gains or Losses 14,558,543 1,903,844 2,887,580 619,995 136,168 269,883 976,121 734,492 2,714,466 24,801,092 (11,343,634) 5,833,132 2,056,065 367,873 21,983 (186,204) 8,092,849 (3,250,785) 584,201 533,894 215,985 (31,722) 1,302,358 12,567,210 2,137,391 2,610,626 572,304 171,203 264,488 1,050,739 751,432 2,615,080 22,740,473 (8,777,172) 6,613,773 2,136,555 358,525 16,548 (225,937) 8,899,464 122,292 195,500 975,217 80,199 (3,689) 1,247,227 Increase (Decrease) in Net Position (1,948,427) 1,369,519 Net Position Beginning of Year 33,998,688 32,629,169 Net Position - End of Year $ 32,050,261 $ 33,998,688 See accompanying notes to financial statements. 14
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2017 and 2016 2017 2016 Cash Flows from Operating Activities Student Tuition and Fees Government Grants and Contracts Auxiliary Activities Sales and Services of Educational Departments Other Operating Revenues Payments to Suppliers for Goods and Services Payments to Employees Payments for Scholarships and Fellowships Other Operating Expenses Amounts Provided to Students-Govemmental Student Loan Program Amounts Provided from Lenders Net Cash (Used) by Operating Activities Cash Flows from Noncapital Financing Activities State Appropriations State and Federal Grants, Gifts and Contracts - Nonoperating Net Cash Provided by Noncapital Financing Activities Cash Flows from Capital and Related Financing Activities Government Grants and Contracts Nongovernmental Grants and Contracts Purchases of Capital Assets Proceeds from Capital Debt Principal Paid on Capital Debt Interest Paid on Capital Debt Net Cash Provided (Used) by Capital and Related Financing Activities Cash Flows from Investing Activities Proceeds from maturity of Certificate of Deposit Purchase of Certificate of Deposit Interest on Investments Net Cash Provided (Used) by Investing Activities $ 7,380,443 3,167,817 2,337,764 132,330 229,251 (5,793,707) (12,578,185) (734,492) (976,121) (2,401,615) 2,401,615 (6,834,900) 5,833,132 2,423,938 8,257,070 1,118,095 43,485 (4,482,716) 5,100,000 (330,000) (160,011) 1,288,853 21,860 21,860 $ 7,335,910 3,536,183 2,464,020 174,658 231,420 (5,224,601) (12,630,756) (751,432) (1,050,739) (2,477,637) 2,477,637 (5,915,337) 6,613,773 2,495,080 9,108,853 1,170,717 22,924 (2,763,865) 7,635,000 (8,765,000) (233,759) (2,933,983) 882,540 (1,000,000) 16,571 (100,889) Net Increase in Cash Cash - Beginning of Year Cash - End of Year 2,732,883 158,644 9,792,450 9,633,806 $ 12,525,333 $ 9,792,450 See accompanying notes to financial statements. 15
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2017 and 2016 Reconciliation of Net Operating Revenues (Expenses) to Net Cash (Used) by Operating Activities Operating (Loss) Adjustments to Reconcile Operating (Loss) to Net Cash (Used) by Operating Activities Depreciation Expense and Amortization Changes in Assets and Liabilities Accounts Receivables (Net) Inventory Prepaid Expenses Deferred Outflows Related to Pensions Accounts Payable Deposits Unearned Revenues Accrued Compensated Absences Other Payables Deferred Inflows Related to Pensions Net Pension Liability Contracts Payable Deposits Held for Others OPEB Obligation Net Cash (Used) by Operating Activities 2017 2016 $ (11,343,634) $ (8,777,172) 2,714,466 2,615,080 194,354 (90,982) (39,975) (5,367,563) (196,704) 3,425 12,765 24,828 (69,408) (78,320) 7,394,381 (12,968) 435 20,000 (136,461) 46,110 99,726 (1,199,635) 264,303 (8,650) 20,787 (6,192) 29,760 (2,560,186) 3,627,339 48,128 (5,274) 27,000 $ (6,834,900) $ (5,915,337) Noncash Transactions Noncash Capital Gifts Noncash Operating Gifts $ 172,500 $ 420,397 57,275 96,786 See accompanying notes to financial statements. 16
THE FOUNDATION FOR, INC. (A Nonprofit Component Unit of State Technical College of Missouri) STATEMENTS OF FINANCIAL POSITION JUNE 30, 2017 AND 2016 2017 Assets Cash and Cash Equivalents Certificate of Deposit Pledges Receivable Interest Receivable Investments Property and Equipment, net Total Assets Liabilities Accounts Payable Deferred Grant Revenue Total Liabilities Unrestricted Temporarily Restricted Permanently Restricted Total $ (6,626) $ 179,200 $ 5,526 $ 178,100 82,782 105,424 83,147 82,782 188,571 67 67 245,817 161,106 96,474 503,397 4,099 4,099 $ 431,563 $ 423,453 $ 102,000 $ 957,016 _ $ 2,209 $ 1,620 $ $ 3,829 45,000-45,000 47,209 1,620 48,829 Net Assets Total Net Assets Total Liabilities and Net Assets 384,354 421,833 102,000 908,187 384,354 421,833 102,000 908,187 $ 431,563 $ 423,453 $ 102,000 $ 957,016 2016 Assets Cash and Cash Equivalents Certificate of Deposit Accounts Receivable Pledges Receivable Interest Receivable Investments Property and Equipment, net Total Assets Unrestricted Temporarily Restricted Permanently Restricted Total $ (71,123) $ 189,676 S 5,506 $ 124,059 82,534 35,400 176,682 3,000 144,844 82,534 38,400 321,526 67 67 118,595 8,197 209,341 96,494 424,430 8,197 $ 350,352 $ 546,861 $ 102,000 $ 999,213 Liabilities Accounts Payable Deferred Grant Revenue Total Liabilities S 41 $ 577 $ 41-25,000 _ 25,577 $ 618 25,000 25,618 Net Assets Total Net Assets Total Liabilities and Net Assets 350,311 521,284 102,000 973,595 350,311 521,284 _ 102,000 _ 973,595 $ 350,352 $ 546,861 $ 102,000 $ 999,213 See accompanying notes to financial statements. 17
THE FOUNDATION FOR, INC. (A Nonprofit Component Unit of State Technical College of Missouri) STATEMENTS OF ACTIVITIES 2017 Revenues, Gains, and Other Support Grants and Contributions Investment Income Net Assets Released from Restriction Total Revenues, Gains, and Other Support Unrestricted $ 736,505 16,195 220,218 972,918 Temporarily Restricted $ 94,411 $ 26,356 (220,218) _ (99,151 1 _ Permanently Restricted Total $ 830,916 42,551 873,467 Expenses Program Services College Support Student Support Supporting Services Management and General Fundraising Services Total Expenses 812,133 57,967 33,110 35,665 938,875 812,133 57,967 33,110 35,665 938,875 Change in Net Assets 34,043 (99,451) (65,408) Net Assets, Beginning of Year 350,311 521,284 102,000 973,595 Net Assets, End of Year $ 384,354 $ 421,833 S 102,000 $ 908,187 2016 Revenues, Gains, and Other Support Grants and Contributions Investment Income Net Assets Released from Restriction Total Revenues, Gains, and Other Support Unrestricted $ 340,359 1,066 140,617 482,042 Temporarily Restricted $ 200,563 $ 289 (140,617) 60,235 Permanently Restricted Total $ 540,922 1,355 542,277 Expenses Program Services College Support Student Support Supporting Services Management and General Fundraising Services Total Expenses 246,064 66,350 34,108 94,896 441,418 246,064 66,350 34,108 94,896 441,418 Change in Net Assets 40,624 60,235 100,859 Net Assets, Beginning of Year 309,687 461,049 102,000 872,736 Net Assets, End of Year $ 350,311 $ 521,284 $ 102,000 S 973,595 See accompanying notes to financial statements. 18
THE FOUNDATION FOR, INC (A Nonprofit Component Unit of State Technical College of Missouri) STATEMENTS OF CASH FLOWS (INDIRECT METHOD) FOR THE YEARS ENDED JUNE 30, 2017 AND 201 2017 2016 Cash Flows from Operating Activities Increase (Decrease) in Net Assets $ (65,408) $ 100,859 Adjustments to Reconcile Change in Net Assets to Net Cash Provided (Used) by Operating Activities Depreciation (Gain)/Loss on Sale of Investments Decrease (Increase) in Prepaid Expenses Accounts Receivable Pledges Receivable Accounts Payable Deferred Grant Revenue Total Adjustments 4,098 (36,960) 4,099 (160) 8,000 38,400 (37,100) 132,955 62,202 3,211 (13,638) 20,000 25,000 161,704 48,403 Net Cash Provided (Used) by Operating Activities 96,296 149,262 Cash Flows From Investing Activities Purchase of Investments Purchase of Certificates of Deposit Proceeds from Sale of Investments (338,983) (183,765) (248) (248) 296,976 Net Cash Provided (Used) by Investing Activities (42,255) Net (Decrease) Increase in Cash and Cash Equivalents 54,041 (184,013) (34,751) Cash and Cash Equivalents - Beginning of Year 124,059 158,810 Cash and Cash Equivalents - End of Year $ 178,100 $ 124,059 Supplemental Disclosures of Cash Flows Information Cash paid during the year for: Interest Taxes $ -0- $ -0- Noncash investing and financing transactions: During the years ended June 30, 2017 and 2016, the Foundation received donations of equipment valued at $592,897 and $154,061 respectively. The Foundation subsequently donated the equipment to State Technical College of Missouri. The Foundation also received donated services valued at $83,419 and $87,467 for the years ended June 30, 2017 and 2016. See accompanying notes to financial statements. 19
NOTES TO THE FINANCIAL STATEMENTS NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations: State Technical College of Missouri (the College) is a specialized public institution of higher education that offers to the diverse population of Missouri associate degree level advanced technical education in both emerging and traditional technologies and supports economic development in the state. The College is located in Linn, Missouri with an additional location in St. Charles, Missouri. The College operates under the jurisdiction of a seven member Board of Regents, appointed by the governor and confirmed by the Senate of the State of Missouri. Major federally funded student financial aid programs in which the College participates include the Federal Pell Grant, Federal Supplemental Educational Opportunity Grant, Federal College Work-Study, and Federal Direct Student Loans. The College extends unsecured credit to students. Reporting Entity: As defined by generally accepted accounting principles established by the Governmental Accounting Standards Board (GASB), the financial reporting entity consists of the primary government and its component unit. Component units are legally separate organizations for which the primary government is financially accountable or the nature and significance of their relationships with the primary government are such that exclusion would cause the primary government s financial statements to be misleading or incomplete. The Foundation for State Technical College of Missouri, Inc. (the Foundation) is considered a discretely presented component unit of the College. The Foundation is a legally separate, tax-exempt entity. The Foundation acts primarily as a fund-raising organization to supplement the resources that are available to the College in support of its programs and to provide scholarships to the students attending the College. The Board of the Foundation is self-perpetuating and consists of community members and friends of the College. Although the College does not control the timing, purpose, or amount of receipts from the Foundation, the resources and income that the Foundation holds and invests, are restricted by the donors to activities of the College or for scholarships for students attending the College. Because these restricted resources held by the Foundation can only be used by, or for the benefit of the College or its students, the Foundation is considered a component unit of the College and is discreetly presented in the College s financial statements. The Foundation is a private nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation s audited financial information as it is presented. In addition, the Foundation s significant notes are summarized in Note 18. Complete financial statements for the Foundation may be obtained by mailing a request to The Foundation for State Technical College of Missouri, Inc. Treasurer, One Technology Drive, Linn, MO 65051. The College is a component unit of the state of Missouri and is included in the basic financial statements of the State of Missouri. 20
NOTES TO THE FINANCIAL STATEMENTS NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont d.) Financial Statement Presentation: The financial statements of the College have been prepared on the accrual basis of accounting. Revenues are recognized when the exchange takes place, while those from government-mandated non-exchange transactions (principally federal and state grants and state appropriations) are recognized when all applicable eligibility requirements are met. Internal activity and - balances are eliminated in preparation of the financial statements. Operating revenues and expenses include exchange transactions and program-specific, government-mandated non-exchange transactions. Government-mandated non-exchange transactions that are not program specific (such as state appropriations), investment income and interest on capital assets-related debt are included in nonoperating revenues and expenses. The College first applies restricted net assets when an expense or outlay is incurred for purposes for which both the restricted and unrestricted net asset are available. Use of Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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. Cash and Cash Equivalents: For purposes of the Statements of Cash Flows, the College considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Accounts Receivable: Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty, and staff. Accounts receivable also include amounts due from the Federal Government, state government, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College s grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Inventory: Inventory consists of bookstore merchandise and consumable supplies. Inventories are stated at lower cost or market. Cost is determined using the first in, first out (FIFO) method. Restricted Noncurrent Cash: Cash that is externally restricted to make debt service payments, maintain sinking or reserve funds, or to purchase or construct capital or other noncurrent assets, are classified as restricted noncurrent assets in the Statements of Net Position. Capital Assets: Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College s capitalization policy includes all items with a unit cost of $5,000 or more and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Interest incurred on construction in progress is capitalized. The total amount of interest capitalized for the years ended June 30, 2017 and 2016 was $19,240 and $0 respectively. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 39 years for buildings, 5 to 39 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. 21