FINANCIAL STATEMENTS
TABLE OF CONTENTS YEARS ENDED INDEPENDENT AUDITORS REPORT 1 MANAGEMENT S DISCUSSION AND ANALYSIS 3 FINANCIAL STATEMENTS STATEMENTS OF NET POSITION (DEFICIT) 12 STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (DEFICIT) 13 STATEMENTS OF CASH FLOWS 14 STATEMENTS OF FINANCIAL POSITION COMPONENT UNIT 15 STATEMENT OF ACTIVITIES COMPONENT UNIT- YEAR ENDED JUNE 30, 2016 16 STATEMENT OF ACTIVITIES COMPONENT UNIT- YEAR ENDED JUNE 30, 2015 17 NOTES TO FINANCIAL STATEMENTS 18 REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF FUNDING PROGRESS AND EMPLOYER CONTRIBUTIONS FOR OTHER POSTEMPLOYMENT BENEFITS 45 SCHEDULE OF COLLEGE S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY 46 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION 47 REPORT REQUIRED BY GOVERNMENT AUDITING STANDARDS 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 48
CliftonLarsonAllen LLP CLAconnect.com INDEPENDENT AUDITORS REPORT Board of Trustees Carroll Community College Westminster, Maryland Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities and the discretely presented component unit of Carroll Community College (the College), a component unit of Carroll County, Maryland, as of and for the years ended June 30, 2016 and 2015, 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 audits. 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. The financial statements of Carroll Community College Foundation, 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 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. An independent member of Nexia International (1)
Board of Trustees Carroll Community College Opinions In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities and the discretely presented component unit of the College as of June 30, 2016 and 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis, schedule of funding progress and employer contributions for the other post-employment benefits, and the schedule of the College s proportionate share of the net pension liability, as listed in the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States 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 Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 6, 2016 on our consideration of the College s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting and compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in consideration of the College s internal control over financial reporting and compliance. a CliftonLarsonAllen LLP Baltimore, Maryland October 6, 2016 (2)
MANAGEMENT S DISCUSSION AND ANALYSIS The following discussion and analysis provides an overview of the financial activities of Carroll Community College (the College). The Financial Statements and Management s Discussion and Analysis include a comparative analysis to the prior two years financial statements. As required by GASB 35, the annual financial statement consists of three basic financial statements that provide financial information on the College as a whole. Statements of Net Position Statements of Revenues, Expenses and Changes in Net Position Statements of Cash Flows Management s Discussion and Analysis includes comments on each of the three statements. In addition, the College has implemented Governmental Accounting Standards Board (GASB) Statement No. 39, Determining Whether Certain Organizations are Component Units and GASB Statement No. 61, The Financial Reporting Entity Omnibus, an amendment of GASB Statements No. 14 and No. 34. It has been determined that the Carroll Community College Foundation (the Foundation) is a component unit, whose sole purpose is to serve the institution by providing resources for scholarships and other College projects. The Foundation statements for June 30, 2016 and 2015 are displayed in the financial statements section of the report. Financial and Enrollment Highlights Federal Direct Loans issued to students totaled $2.33 million in fiscal year 2016. This amount represents an decrease of 12% when compared to awards issued in fiscal year 2015 which totaled $2.65 million. The Federal Direct Lending Program was initiated in fiscal year 2014. Self-insured healthcare has resulted in a cost savings of approximately $400,096 for fiscal year 2016. State appropriations for fiscal year 2016 increased.5% when compared to fiscal year 2015 with total appropriations for operations of $7,745,631 and $7,705,441 respectively. Fiscal year 2015 when compared to fiscal year 2014 reflected an increase of approximately 3.2%. County appropriations for operations and capital improvements remained flat for fiscal year 2016 when compared to fiscal year 2015. Total appropriations for fiscal years 2016 and 2015 were $9,309,140 and $9,327,614 respectively. Fiscal year 2015 when compared to fiscal year 2014 showed an increase of approximately 3.0%. Federal financial aid, Title IV, for fiscal year 2016 was approximately $2.861 million, which represents an decrease of 11.7% when compared to fiscal year 2015. The funding levels of federal financial aid for fiscal years 2015 and 2014 were $3.239 and $3.118 million respectively. Title IV programs for the College includes College Work Study, Supplemental Education Opportunity Grant, and Pell Grant. The decreases in aid for the prior periods was attributable to declining enrollment and less students applying and being accepted into the Pell Program. (3)
MANAGEMENT S DISCUSSION AND ANALYSIS The chart below reflects credit and non-credit student FTE for the last five years. Statements of Net Position The Statements of Net Position include all assets and liabilities of the College using the accrual basis of accounting, which is similar to the accounting methods used by most private-sector institutions. Net position measures the difference between assets and liabilities and is one way to measure the financial health of the College. Net position is divided into three major categories, as follows: Investment in Capital Assets represents property, plant and equipment owned by the College net of accumulated depreciation and related debt. The College had no capital asset related debt as of June 30, 2016 and 2015. Restricted Net Position represents assets available to the College but, reserved for a specific purpose. The College has no restricted net position. Unrestricted Net Position represents assets available to the College with no restrictions. For fiscal year 2016, the College experienced a decrease in total net position of $1,962,494. Decreases in net position for fiscal years 2015 and 2014 were $2,394,739 and $2,667,304, respectively. These continued decreases are primarily due to the College s Other Postemployment Benefits (OPEB), which remains unfunded and is presented as a liability on the Statements of Net Position in accordance with General Accounting Standards Board pronouncement 45. Increases in the OPEB liability for these periods were $2,625,439, $2,481,513 and $2,369,741, respectively. The College experienced increases in both current assets and current liabilities in the amounts of $305,855 and $94,181, respectively, for the fiscal year. The increases in current assets is attributable to prepaid expenses which includes a prepayment for health care and prepayment to the bank for the (4)
MANAGEMENT S DISCUSSION AND ANALYSIS college payroll of July 1, 2016. The prepayment for health care and the subsequent payroll as of June 30, 2016 totaled $745,786 and $484,588 respectively. The prepayment of self-funded health care requires an estimated two months of benefits and a prepayment for a hospital deposit. The increase in current liabilities is attributable to accounts payable for health care claims which grew $202,511 when compared to June 30 th of last year. The outstanding balances for health care includes actual claims payable for May and June and an estimate of Incurred But Not Reported claims (IBNR) of $327,210 when compared to an outstanding balance in fiscal year 2015 of $264,774. Other areas of increase include payments due to suppliers of $245,272 and the increase of net deferred revenues for tuition and fees not earned of $150,576. Capital assets for the period represent a net increase of $462,484 when compared to an increase of $216,380 and a decrease of $127,342 for fiscal years 2015 and 2014, respectively. This category consists of renovations, equipment in excess of $2,500, and library books. These items are depreciated over periods ranging from 3-15 years using the straight-line depreciation method of accounting. The College by law is not authorized to issue debt to support capital expansion, therefore long-term debt related to capital assets remains at $0. Net Position at June 30: Assets 2016 2015 2014 Current Assets $ 9,508,402 $ 9,202,547 $ 7,944,061 Capital Assets 2,023,689 1,561,205 1,344,825 Total Assets 11,532,091 10,763,752 9,288,886 Liabilities Current Liabilities 5,026,434 4,932,253 3,601,808 Non-Current Liabilities 20,347,733 17,711,081 15,171,921 Total Liabilities 25,374,167 22,643,334 18,773,729 Net Position (Deficit) Net Investment in Capital Assets 2,023,689 1,561,205 1,344,825 Unrestricted (15,865,765) (13,440,787) (10,829,668) Total Net Position (Deficit) $ (13,842,076) $ (11,879,582) $ (9,484,843) (5)
MANAGEMENT S DISCUSSION AND ANALYSIS Statement of Revenues, Expenses, and Changes in Net Assets The purpose of the statement is to present the revenues earned and expenses incurred by the College, both operating and non-operating, as well as any other revenues, expenses, gains and losses incurred or spent by the institution. Tuition and Fees, net of scholarships allowances, make up 28.6% of the total revenue for the College, a decrease of 0.3% over the prior year. In the previous fiscal year, tuition and fees made up 28.9% of total revenue for the College, which represents a decrease of.2% when compared to fiscal year 2014. State and Local Appropriations represent 47.9% of the total revenue for the institution, compared to 49.0% for fiscal year 2015 and 48.4% for fiscal year 2014. Other sources make up 10.8% of all revenues, which include certain fringe benefits paid by the State of Maryland, investment revenues, and auxiliaries. In fiscal year 2015, other sources comprised of 10.0% for total college revenue. Federal, State, local and other grants make up approximately 12.7% of total revenues, an increase of 0.6% when compared to fiscal year 2015. The same revenues in fiscal year 2015 represented 12.1% of total revenues, an increase of.1% over 2014. Statements of Revenues, Expenses and Changes in Net Position For the Years Ended June 30: 2016 2015 2014 Operating Revenues Tuition and fees, net $ 10,184,544 $ 10,059,850 $ 9,946,119 Auxiliary enterprises 418,794 317,752 262,695 Grants and contracts 1,429,898 1,209,542 1,215,091 Other 471,230 459,338 635,993 Total 12,504,466 12,046,482 12,059,898 Operating Expenses 37,597,418 37,228,805 36,820,142 Operating Loss (25,092,952) (25,182,323) (24,760,244) Non-Operating Revenues County appropriation 9,309,140 9,327,614 9,059,436 State appropriation 7,745,631 7,705,441 7,467,155 Pell grants 2,613,901 2,992,344 2,880,810 Investment income 11,579 5,892 8,175 Other grants and gifts 493,318 456,585 503,951 Certain fringe benefits paid directly by the State of Maryland 1,434,081 1,452,244 1,334,694 Other sources 1,522,808 847,464 838,719 Total 23,130,458 22,787,584 22,092,940 Decrease in net position (1,962,494) (2,394,739) (2,667,304) Net Position, Beginning of Year (11,879,582) (9,484,843) (6,817,539) Net Position, End of Year $ (13,842,076) $ (11,879,582) $ (9,484,843) (6)
MANAGEMENT S DISCUSSION AND ANALYSIS Breakdown of Operating Revenues Tuition and Fees 2% 10% 3% 4% Federal Grants State Grants 81% Auxiliary Enterprises Other Operating Expenses by Functional Category Expenses for all functional categories represent the following for the years ended June 30: 2016 2015 2014 Instruction $ 15,784,709 $ 15,609,094 $ 15,537,627 Grants 58,823 64,052 56,445 Academic support 4,882,766 4,581,112 4,463,649 Student services 4,087,071 4,152,166 3,963,091 Plant operations and maintenance 3,399,843 3,686,364 3,693,833 Institutional support 6,350,349 6,436,569 6,281,769 Auxiliary enterprises 308,398 276,436 295,192 Other 930,535 618,294 795,522 Depreciation 360,843 352,474 398,320 Certain fringe benefits paid directly by the State of Maryland 1,434,081 1,452,244 1,334,694 Total Operating Expenses $ 37,597,418 $ 37,228,805 $ 36,820,142 (7)
MANAGEMENT S DISCUSSION AND ANALYSIS Expenses By Function FY 2016 9% 17% 1% 0% 2% 1% 4% 42% 11% 13% Instruction Academic Support Student Services Institutional Support Plant Grants Auxiliaries Other Depreciation Fringes State of MD Operating Expenses by Object Classification Expenses by Object Classification represent the following for the years ended June 30: 2016 2015 2014 Salaries and fringe benefits $ 26,934,293 $ 26,739,945 $ 26,351,146 Contracted services 4,488,950 3,997,368 4,152,737 Depreciation 360,843 352,474 398,320 Supplies and materials 1,568,981 1,501,817 1,350,492 Utilities 950,226 1,097,932 1,251,921 Communications 205,622 237,240 183,100 Conferences and meetings 376,481 349,275 304,463 Scholarships (net) 1,076,622 1,251,334 1,218,337 Fixed charges 201,319 249,176 274,932 Certain fringe benefits paid directly by the State of Maryland 1,434,081 1,452,244 1,334,694 Total Expenses $ 37,597,418 $ 37,228,805 $ 36,820,142 (8)
MANAGEMENT S DISCUSSION AND ANALYSIS Operating Expenses by Object Category Salaries and fringe benefits clearly represent the largest operating expense at 72%, 72% and 72% for fiscal years 2016, 2015 and 2014, respectively. This line includes Other Post-Employment Benefits and does not include certain fringe benefits paid by the State of Maryland. Utility costs are paid by the county government and are recorded by the College as in-kind costs for both budgetary and accounting purposes. Utility costs decreased 13.4% in fiscal year 2016 compared to a decrease of 12.3% in fiscal year 2015. Scholarships represent financial aid expense less institutional scholarships, which has been deducted from tuition revenue. Scholarship allowances for the fiscal years 2016, 2015 and 2014 are $2,319,127, $2,482,453, and $2,429,480, respectively. Depreciation reflects no changes in the useful life of the College s fixed assets definitions from the previous fiscal year. Expenses By Object 2016 3% 1% 4% 2% 1% 1% 12% 0% 4% 72% Salaries & Fringe Benefits Contracted Services Depreciation Supplies Utilities Communications Conferences and Meetings Scholarships Fixed Charges Fringe Benefits - State (9)
MANAGEMENT S DISCUSSION AND ANALYSIS Statement of Cash Flows The Statement of Cash Flows provides information about cash receipts and cash payments during the year. This statement also helps users assess the College s ability to generate net cash flow and its ability to meet obligations as they come due. The primary cash receipts from operating activities consist of tuition and fees, auxiliary enterprises, and grants and contracts. Major cash outlays in operating activities consist of salaries and benefits and outsourced services. State and local appropriations and Pell grants are the primary source of non-capital financing activities. Accounting standards require that we reflect this source of revenue as non-operating even though the College s budget depends on this to continue the current level of operations. Cash flows from investment activities represent income earned on cash invested in the Maryland Local Government Pool (MLGIP), which is held by PNC Bank and a checking, public fund savings account held by Branch Bank and Trust. 2016 2015 2014 Cash provided by (used in): Operating activities $ (21,019,615) $ (20,054,386) $ (20,749,787) Noncapital financing activities 20,201,208 19,609,899 18,931,625 Capital financing activities 660,264 1,150,250 1,543,607 Investing activities 11,579 5,892 8,175 Net increase (decrease) in cash (146,564) 711,655 (266,380) Cash, Beginning of Year 7,133,225 6,421,570 6,687,950 Cash, End of Year $ 6,986,661 $ 7,133,225 $ 6,421,570 Economic Factors That Will Affect the Future The economic position of the College is closely tied to that of the County and State governments. The County and State governments provide vital resources to the College s operating budget as noted in the Statements of Revenues, Expenses and Changes in Net Position. In addition, enrollment is a major factor in determining revenue. As the College completed this fiscal year, the outlook for fiscal years 2017 and 2018 are closely tied to the revenue stream produced by local income and sales taxes at the state level and property tax and local income tax revenues at the county level. These tax receipts continue to recover slowly from the recent poor economy. The County Government has built into its budgeted operating plan a 3% increases in funding to the college in fiscal years 2018 and through fiscal year 2022. This plan is evaluated annually. The College has received an increase of 8.7% of funds from the County government in fiscal year 2017 over what was provided in fiscal year 2016. The State of Maryland s economic climate is improving. The State s revenue stream is heavily influenced by Federal government programs. The combination of what actions the State of Maryland will take as it sets it financial priorities and uncertainty related to the Federal budget situation leads the College to be cautious when predicting future state aid. The amount of State Aid to be received each year is subject to annual evaluation by the State and is expected to have a modest increase over the next few years. In fact, in fiscal year 2017, the State made a modest increase in funding to the (10)
MANAGEMENT S DISCUSSION AND ANALYSIS community college system overall of approximately 5%. Distribution of State funds is based on a formula with funds not evenly distributed to each college. Carroll Community College received an increase of approximately 4% in Fiscal Year 2017 and is anticipated a similar increase in Fiscal Year 2018. The College expects enrollments to decline in FY2017 as it did in FY2016. Fewer high school graduates are the main reason for this expected decline. Fewer enrollments equate to less tuition and fee revenue. The College s annual operating budget and Five-Year Strategic Plan anticipates a small annual decline in enrollment for at least the next five years thus fewer tuition dollars before the impact of a tuition increase is factored into the equation. New programs are being evaluated to determine if enrollment growth can be generated through new offerings while at a minimum covering the cost of implementing these new programs. The College is seeking to limit future tuition increases to no more that 5% per year. The College maintains a contingency plan in the event that there is a reduction to the State or County appropriation in excess of what the annual operating budget is based on. The College does not anticipate the need to take any drastic actions to maintain a balanced budget. The College maintains a financial reserve that when coupled with an active budget review and contingency planning process allows the College to be better prepared for changing fiscal conditions. During the recent budget cycle for fiscal year 2017, the Board of Trustees increased tuition by $8 per credit or 6.5%. The tuition rates for out-of-county and out-of-state residents were increased proportionally. The College will continue to be evaluating future tuition increases against the availability of State and County funding levels. The College is actively working with the Carroll Community College Foundation to identify needs and raise funds to offset some of the College s future financial requirements. In FY2017 the Carroll Community College Foundation plans to provide $166,000 in direct support to the college to offset the equivalent of a tuition increase equaling $2 per credit hour. Future partnership efforts are under evaluation as part of the ongoing effort of the Foundation. Contacting the College s Financial Management The financial report is designed to provide interested parties with a general overview of Carroll Community College s finances. If you have questions about this report or require additional financial information, contact Carroll Community College, Administration Office, 1601 Washington Road, Westminster, Maryland 21157. (11)
STATEMENTS OF NET POSITION (DEFICIT) 2016 2015 ASSETS Current assets: Cash and cash equivalents $ 6,986,661 $ 7,133,225 Accounts receivable: Carroll County 242,856 390,562 State of Maryland 200,121 258,830 Federal government 13,131 1,830 Student and other (net of allowance of $412,036 and $397,886, respectively) 216,695 244,003 Other receivables 209,482 174,348 Due from Carroll Community College Foundation 68,733 70,450 Prepaid expenses 1,570,723 929,299 Total current assets 9,508,402 9,202,547 Non-current assets: Capital assets 2,023,689 1,561,205 Total assets 11,532,091 10,763,752 LIABILITIES Current liabilities: Accounts payable: Carroll County 87 166 Other payables 622,754 377,482 Accrued salaries and taxes 1,071,758 926,038 Claims payable 903,072 1,351,337 Compensated absences - current 692,758 691,801 Unearned revenue 1,736,005 1,585,429 Total current liabilities 5,026,434 4,932,253 Non-current liabilities: Compensated absences, net of current portion 197,190 185,977 Other post employment benefits 20,150,543 17,525,104 Total non-current liabilities 20,347,733 17,711,081 Total liabilities 25,374,167 22,643,334 NET POSITION (DEFICIT) Net investment in capital assets 2,023,689 1,561,205 Unrestricted (deficit) (15,865,765) (13,440,787) Total Net Position (Deficit) $ (13,842,076) $ (11,879,582) See accompanying Notes to Financial Statements. (12)
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION (DEFICIT) YEARS ENDED 2016 2015 OPERATING REVENUES Tuition and fees $ 12,503,671 $ 12,542,303 Scholarship allowances (2,319,127) (2,482,453) 10,184,544 10,059,850 Federal grants and contracts 247,058 246,597 State, local and other grants and contracts 1,182,840 962,945 Auxiliary enterprises 418,794 317,752 Other sources 471,230 459,338 Total operating revenues 12,504,466 12,046,482 OPERATING EXPENSES Instruction 15,784,709 15,609,094 Grants 58,823 64,052 Academic support 4,882,766 4,581,112 Student services 4,087,071 4,152,166 Plant operations and maintenance 3,399,843 3,686,364 Institutional support 6,350,349 6,436,569 Auxiliary enterprises 308,398 276,436 Other 930,535 618,294 Depreciation 360,843 352,474 Certain fringe benefits paid directly by the State of Maryland 1,434,081 1,452,244 Total operating expenses 37,597,418 37,228,805 Operating loss (25,092,952) (25,182,323) NONOPERATING REVENUES County appropriation 7,827,680 7,608,220 County capital appropriation 1,481,460 1,719,394 State appropriation 7,745,631 7,705,441 Pell grants 2,613,901 2,992,344 Investment income 11,579 5,892 Other grants and gifts 493,318 456,585 Certain fringe benefits paid directly by the State of Maryland 1,434,081 1,452,244 Other sources 1,522,808 847,464 Total nonoperating revenues 23,130,458 22,787,584 CHANGE IN NET POSITION (DEFICIT) (1,962,494) (2,394,739) NET POSITION (DEFICIT) - BEGINNING OF YEAR (11,879,582) (9,484,843) NET POSITION (DEFICIT) - END OF YEAR $ (13,842,076) $ (11,879,582) See accompanying Notes to Financial Statements. (13)
STATEMENTS OF CASH FLOWS YEARS ENDED 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and fees $ 10,108,749 $ 10,241,707 Operating grants and contracts 1,606,954 1,144,134 Other sources 711,354 147,065 Payments to suppliers (8,623,010) (8,762,823) Payments for salaries and benefits (25,240,652) (23,131,513) Auxiliary enterprises charges 416,990 307,044 Net cash used in operating activities (21,019,615) (20,054,386) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES County appropriations 7,827,680 7,608,220 State appropriations 7,745,631 7,705,441 Pell grants 2,613,901 2,992,344 Direct loan receipts 2,331,408 2,648,872 Direct loan disbursements (2,331,408) (2,648,872) Other grants and gifts 493,318 456,585 Other sources 1,520,678 847,309 Net cash provided by noncapital financing activities 20,201,208 19,609,899 CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES County capital appropriation 1,481,460 1,719,394 Purchases of capital assets (821,196) (569,144) Net cash provided by capital financing activities 660,264 1,150,250 CASH FLOWS FROM INVESTING ACTIVITIES Investment income 11,579 5,892 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (146,564) 711,655 CASH AND CASH EQUIVALENTS - BEGINNING 7,133,225 6,421,570 CASH AND CASH EQUIVALENTS - ENDING $ 6,986,661 $ 7,133,225 RECONCILIATION OF NET OPERATING LOSS TO NET CASH USED IN OPERATING ACTIVITIES Operating loss $ (25,092,952) $ (25,182,323) Adjustments to reconcile operating loss to net cash used in operating activities: Depreciation 360,843 352,474 Certain fringe benefits paid by the State of Maryland 1,434,081 1,452,244 Effects of changes in operating assets and liabilities: Accounts receivable - State of Maryland 58,709 (176,785) Accounts receivable - Federal government (11,301) 10,074 Accounts receivable - Student and other 138,041 (152,028) Due from Carroll Community College Foundation 3,556 (52,784) Prepaid expenses (1,292,199) 475,468 Accounts payable 245,192 (78,681) Accrued salaries and taxes 145,720 169,983 Claims payable 202,510 416,502 Compensated absences 12,170 64,966 Unearned revenue 150,576 164,991 Other post retirement benefits 2,625,439 2,481,513 NET CASH USED IN OPERATING ACTIVITIES $ (21,019,615) $ (20,054,386) See accompanying Notes to Financial Statements. (14)
STATEMENTS OF FINANCIAL POSITION COMPONENT UNIT ASSETS 2016 2015 Cash and cash equivalents $ 254,658 $ 357,937 Investments 8,590,883 7,876,732 Contributions receivable, net 278,315 424,727 Accounts and interest receivable 23,403 24,500 Real estate - 180,000 Art and doll collections 382,525 382,525 Total Assets $ 9,529,784 $ 9,246,421 LIABILITIES AND NET ASSETS ACCOUNTS PAYABLE Carroll Community College $ 68,733 $ 70,450 NET ASSETS Unrestricted 2,296,641 2,219,966 Temporarily restricted 2,058,004 2,028,681 Permanently restricted 5,106,406 4,927,324 Total net assets 9,461,051 9,175,971 Total Liabilities and Net Assets $ 9,529,784 $ 9,246,421 See accompanying Notes to Financial Statements. (15)
STATEMENT OF ACTIVITIES COMPONENT UNIT YEAR ENDED JUNE 30, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total REVENUES, GAINS AND OTHER SUPPORT Contributions $ 56,367 $ 254,467 $ 179,082 $ 489,916 In-kind contributions 396,833 2,610-399,443 Fundraising activities 349,988 - - 349,988 Net investment income 29,421 112,799-142,220 Rental income - - - - Net unrealized and realized gain on investments 9,311 42,235-51,546 Realized loss on real estate (5,000) - - (5,000) Net assets released from restrictions: Satisfaction of restrictions 382,788 (382,788) - - Total revenues, gains and other support 1,219,708 29,323 179,082 1,428,113 EXPENSES Scholarships and grants awarded 515,040 - - 466,040 Management and general- noncash expenses of $399,443 478,471 - - 527,471 Fundraising- noncash expenses of $65,609 149,522 - - 149,522 Total expenses 1,143,033 - - 1,143,033 CHANGE IN NET ASSETS 76,675 29,323 179,082 285,080 NET ASSETS, BEGINNING OF YEAR 2,219,966 2,028,681 4,927,324 9,175,971 NET ASSETS, END OF YEAR $ 2,296,641 $ 2,058,004 $ 5,106,406 $ 9,461,051 See accompanying Notes to Financial Statements. (16)
STATEMENT OF ACTIVITIES COMPONENT UNIT YEAR ENDED JUNE 30, 2015 Temporarily Permanently Unrestricted Restricted Restricted Total REVENUES, GAINS AND OTHER SUPPORT Contributions $ (16,849) $ 242,676 $ 199,381 $ 425,208 In-kind contributions 338,706 9,467-348,173 Fundraising activities 315,324 - - 315,324 Net investment income 30,707 124,735-155,442 Rental income 9,000 - - 9,000 Net unrealized and realized gain on investments (10,746) 14,466-3,720 Net assets released from restrictions: Satisfaction of restrictions 465,048 (465,048) - - Total revenues, gains and other support 1,131,190 (73,704) 199,381 1,256,867 EXPENSES Scholarships and grants awarded 448,427 - - 448,427 Management and general- noncash expenses of $348,174 360,782 - - 360,782 Fundraising- noncash expenses of $51,407 134,910 - - 134,910 Total expenses 944,119 - - 944,119 CHANGE IN NET ASSETS 187,071 (73,704) 199,381 312,748 NET ASSETS, BEGINNING OF YEAR 2,032,895 2,102,385 4,727,943 8,863,223 NET ASSETS, END OF YEAR $ 2,219,966 $ 2,028,681 $ 4,927,324 $ 9,175,971 See accompanying Notes to Financial Statements. (17)
NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Carroll Community College (the College) is considered a body politic under Maryland State law as an instrumentality of the State of Maryland (the State). The College is governed by the Board of Trustees of Carroll Community College, a seven-member board, who are appointed for six-year terms by the governor of the State with the advice and consent of the State Senate. The significant accounting policies followed by the College are described below. Funding is received from the State based on full-time-equivalent students enrolled as reported two years earlier. Although the College is not a Carroll County, Maryland (the County) agency, the County approves the College s operating budget and provides a substantial amount of funding. As a result of this relationship with the County, the College s financial statements are considered component unit financial statements and are properly included in the Comprehensive Annual Financial Report of the County in accordance with generally accepted accounting principles in the United States of America. The Carroll Community College Foundation, Inc. (the Foundation) is a separate legal entity. It has a separate Board of Directors that works closely with the College. The College President, Vice-President of Administration and a College Trustee are ex-officio members of the Foundation Board. Although the College does not control the timing or amount of receipts from the Foundation, all of the resources or income thereon that the Foundation holds and invests are restricted to the activities of the College by the donors. Because these restricted 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 in accordance with the Government Accounting Standards Board Statement No. 39, Determining Whether Certain Organizations are Component Units, as amended. The Foundation is a private nonprofit organization that reports under 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 financial information in the College s financial reporting entity for these differences. Significant accounting policies followed by the College are described below. Basis of Presentation The College presents its financial statements in accordance with Governmental Accounting Standards Board (GASB) Statement No. 34 Basic Financial Statements and Management Discussion and Analysis for State and Local Governments and No. 35 Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities. (18)
NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Basis of Presentation (Continued) GASB Statement 34 identified three types of special-purpose governments (SPG): (1) those engaged only in governmental activities, (2) those engaged only in business-type activities, and (3) those engaged in both governmental and business-type activities. Business-type activities are financed in whole or in part by fees charged to external parties for goods and services. Given the importance of tuition, fees and other exchange-type transactions in financing higher education, the College adopted the financial reporting model required of SPG s engaged in business-type activities (BTA). Colleges reporting as BTA s follow GASB standards applicable to proprietary (enterprise) funds. The BTA model requires the following component unit financial statement components. Management s Discussion and Analysis Statement of Net Position Statement of Revenues, Expenses and Changes in Net Position Statement of Cash Flow Notes to the Financial Statements The College s component unit financial statements are prepared using the format of a special-purpose government engaged only in business-type activities with an economic resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting, revenues are recorded when earned and expenses are recorded when they have been reduced to a legal contractual obligation to pay. The statements are intended to report the public institution as an economic unit that includes all measurable assets and liabilities, intangible, financial and capital, of the institution. The Statements of Revenues, Expenses, and Changes in Net Position for special-purpose governments engaged in business-type activities (BTA) require an operating/non-operating format to be used. The College has elected to report its operating expenses by functional classification. The Statements of Cash Flows is presented as the direct method, which depicts cash flows from operating activities and a reconciliation of operating cash flows to operating income. The College s tuition and fees revenue is reported net of any scholarship allowance. The scholarship allowance represents monies received as tuition from outside resources such as the Title IV Federal Grant Program, restricted grants, Board of Trustee Scholarships, as well as waivers. The total scholarship allowance for the years ended June 30, 2016 and 2015 was $2,319,127 and $2,482,453, respectively. Federal Financial Assistance Programs The College participates in federally funded Pell, SEOG, and Federal Work-Study Grants. A separate audit of federal programs is performed in accordance with Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). (19)
NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Federal Financial Assistance Programs (Continued) The College participates in the federal direct lending program, which makes it easier for students to secure loan funding for their education. For the years ended June 30, 2016 and 2015, the total amount loaned to students through direct lending was $2,331,408 and $2,648,872, respectively. Operating and Non-Operating Components Financial statement operating components include all transactions and other events that are not defined as capital and related financing, noncapital financing or investing activities. The College s principal ongoing operations determine operating flow activities. Ongoing operations of the College include, but are not limited to, providing intellectual, cultural and social services through two-year associate degree programs, continuing education programs and continuous learning programs. Operating revenues of the College consist of tuition and fees, grants and contracts (except Federal Pell grants), and auxiliary enterprise revenues. The College maintains an encumbrance system for tracking outstanding purchase orders and other commitments for materials or services not received during the year. Encumbrances were $242,039 and $91,502 at June 30, 2016 and 2015, respectively, which represent the estimated amount of expenses ultimately to result when unperformed contracts in process are completed. Encumbrances outstanding do not constitute expenses or liabilities and are not reflected in these financial statements. Unencumbered appropriations expire at year-end, but are typically renewed in the next fiscal year. Cash and Cash Equivalents For purposes of the Statements of Cash Flows for the College, cash and cash equivalents include demand deposits, Maryland Local Government Investment Pool (MLGIP), and short-term investments held at financial institutions with a maturity date of three months or less at time of purchase. Revenue Recognition and Unearned Revenue Tuition revenue is recognized when instruction is provided. Grant and appropriation revenue is recognized when all of the conditions are met. Unearned revenue is primarily tuition received prior to year end for semesters beginning after June 30 of the year presented. Grant revenue received during the year that has restrictions on spending are considered unearned until those restrictions are met. Deferred Outflows/Inflows of Resources In addition to assets, the Statements of Net Position (Deficit) will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position that applies to a future period and so will not be recognized as an outflow of resources (expenses/expenditures) until then. The College has no items that qualify for reporting in this category. (20)
NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Deferred Outflows/Inflows of Resources (Continued) In addition to liabilities, the Statements of Net Position (Deficit) will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position that applies to a future period and so will not be recognized as an inflow of resources (revenue) until that time. The College has no items that qualify for reporting in this category. Tuition Receivable Tuition receivables are uncollateralized obligations of students resulting from course registration and for which the earnings process is complete. The receivable is due before the end of the semester in which it was incurred. Amounts that remain uncollected ninety (90) days from the date of invoice are considered delinquent and are referred to the collections department. The allowance method for accounts receivable is used to measure bad debts, which include account charge-offs. The allowance for doubtful accounts is determined based upon aging analysis and management s estimation of collectability of such accounts. Compensated Absences It is the College s policy to allow employees to carry over unused annual leave, payable upon termination. There are limits on the amount of carry over based on employee classification. Leave is earned at the following rates: Full-time 12 month support staff: Less than 5 years of service: 10 days per year 5 10 years of service 15 days per year More than 10 years of service 20 days per year Full-time 12 month professional employees: 20 days per year Capital Assets Capital assets are recorded at cost at the time of purchase or fair value at the date of donation in case of gifts. The College s policy is to include only those capital assets with an individual item purchase price or fair value at donation of at least $2,500. The entire library collection is recorded and valued at cost or estimated cost as a unit without regard to individual item cost. Depreciation is provided over the estimated economic life of the item on a straight-line basis as follows: Fiscal Years 2016 2015 Number of Years Number of Years Library books 3 3 Furniture and equipment 5 5 Building improvements 15 15 Vehicles 7 7 (21)
NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Postemployment Benefits The College s employees participate in retirement plans as more fully discussed in Note 5. Additionally, the College sponsors postemployment benefits other than the retirement plans as described in Note 6. Federal and State Income Tax Status The College is exempt from federal and state income taxes as it is essentially a political subdivision of the State. Use of Estimates in Preparing Financial Statements The preparation of 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 disclosure of contingent assets and liabilities at the date of the component unit financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Net Position Flow Assumptions Sometimes the College will fund outlays for a particular purpose from both restricted and unrestricted resources. In order to calculate the amounts to be reported as restricted and unrestricted net position in the financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the College s policy to consider restricted net position to have been depleted before unrestricted net position is applied. The College had no restricted net position as of June 30, 2016 and 2015. Net Position (Deficit) Net Position (Deficit) comprises the various earnings from operating income, non-operating revenues, expenses and capital contributions. Net Position (Deficit) is classified in the following components: Net Investment in Capital Assets This component of Net Position consists of capital assets, net of accumulated depreciation reduced by outstanding debt used to acquire the assets. The College had no outstanding debt as of June 30, 2016 and 2015. Restricted This component of Net Position consists of amounts that are restricted to specific purposes when constraints are placed on the use of resources by constitution, external resource providers, or through enabling legislation. The College has no restricted Net Position as of June 30, 2016 and 2015. Unrestricted This component of Net Position consists of Net Position (Deficit) that do not meet the definition of restricted or net investment in capital assets. This component includes Net Position (Deficit) that may be allocated for specific purposes by the Board. Reclassifications Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation. These reclassifications did not have any impact on net position or change in net position. (22)
NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Carroll Community College Foundation, Inc. A separate board governs the discretely presented component unit. The Foundation is a separate entity that has been recognized as a tax-exempt organization as defined by Section 501(c)(3) of the Internal Revenue Code. Complete financial statements for the Foundation can be obtained from the respective administrative offices listed below: Carroll Community College Foundation, Inc. 1601 Washington Road Westminster, MD 21157 Nature of Activities The Foundation is a not-for-profit organization operated for the benefit of Carroll Community College. The Foundation provides scholarships to students, administers funds restricted for special college programs, and provides special awards and grants to students attending Carroll Community College, located in Carroll County, Maryland. The Foundation s primary funding sources are donor contributions and fundraising events. Accrual Basis The financial statements of the Foundation, Inc. have been prepared on the accrual basis of accounting. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Foundation and changes therein are classified and reported as follows: Unrestricted net assets Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets Net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Foundation and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statements of Activities as net assets released from restrictions. Permanently restricted net assets Net assets subject to donor-imposed stipulations that they be maintained permanently by the Foundation. Generally, the donors of these assets permit the Foundation to use all or part of the income earned on any related investments for general or specific purposes. Expenditures which meet the specific purposes of the temporarily restricted net assets are expensed from temporary net assets prior to unrestricted net assets. Cash and Cash Equivalents Amounts in demand deposits or short-term investments with a maturity date of three months or less when purchased are considered cash and cash equivalents. (23)
NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Carroll Community College Foundation, Inc. (Continued) Investments Investment securities are carried at fair value. Accordingly, the change in net unrealized appreciation (depreciation) of marketable securities for the year is reflected in the Statements of Activities. Realized gains and losses on sales of investments are computed on a specific identification basis and are recorded on the settlement date of the transactions in the appropriate net asset category. Certain investments are effectively restricted as to use to the extent of permanently restricted net assets. Investment income and losses on investments of temporarily restricted assets is added to or taken from temporarily restricted net assets when restricted as to use by the donor. Unrealized gains (losses) on the invested corpus of the permanently restricted net assets are recorded in the temporarily restricted net assets. However, realized and unrealized losses on permanently restricted net assets in excess of realized and unrealized gains on previously accumulated permanently restricted net assets are recorded as reductions of unrestricted net assets. Contributions Receivable Pledges are recorded at the fair value pledged by the donor. Pledges deemed to be uncollectible are charged directly against gift and contribution revenue and pledges receivable is reduced. Pledges due in more than one year are discounted to their net present value. The current allowance for uncollectible pledges is 2%. Contributions of temporarily restricted net assets that are received and expended in the same fiscal year are treated as temporarily restricted revenue and net assets released from restriction in that year. Permanently Restricted Contributions Contributions subject to donor-imposed stipulations that must be maintained in perpetuity by the Foundation are included in permanently restricted net assets. Generally, the donors of these assets permit the Foundation to use all or part of the income earned and capital gains on related investments, if any, for general or specific purposes. Temporarily Restricted Contributions Contributions subject to donor-imposed stipulations that may or will be met by actions of the Foundation and/or the passage of time are included in temporarily restricted net assets. Unrestricted Contributions Contributions not subject to donor-imposed stipulations, or whose restrictions have been satisfied, are recorded as unrestricted net assets. In-kind Contributions In-kind contributions represent wages and benefits paid by the College on behalf of individuals performing services for the Foundation, as well as other expenses paid by the College for the Foundation. This amount also includes any in-kind gifts made to the Foundation by other parties. A corresponding amount is included in the operating expenses of the Foundation. (24)