CHAFFEY COMMUNITY COLLEGE DISTRICT ANNUAL FINANCIAL REPORT JUNE 30, 2011 AND 2010
TABLE OF CONTENTS JUNE 30, 2011 FINANCIAL SECTION Independent Auditors' Report 2 Management's Discussions and Analysis (Required Supplementary Information) 4 Basic Financial Statements Primary Government Statements of Net Assets 11 Statements of Revenues, Expenses, and Changes in Net Assets 12 Statements of Cash Flows 13 Fiduciary Funds Statements of Net Assets 15 Statements of Changes in Net Assets 16 Discretely Presented Component Unit Chaffey Community College Foundation Statements of Financial Position 17 Statements of Activities 18 Statements of Cash Flows 19 Notes to Financial Statements 20 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Other Postemployment Benefits (OPEB) Funding Progress 52 SUPPLEMENTARY INFORMATION District Organization 54 Schedule of Expenditures of Federal Awards 55 Schedule of Expenditures of State Awards 57 Schedule of Workload Measures for State General Apportionment 58 Reconciliation of Annual Financial and Budget Report (CCFS-311) With Audited Fund Balance 59 Reconciliation of Governmental Funds to the Statement of Net Assets 60 Note to Supplementary Information 61 INDEPENDENT AUDITORS' REPORTS 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 63 Report on Compliance With Requirements That Could Have a Direct and Material Effect on Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A-133 65 Report on State Compliance 67 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Summary of Auditors' Results 70 Financial Statement Findings and Recommendations 71 Federal Awards Findings and Questioned Costs 72 State Awards Findings and Questioned Costs 73 Summary Schedule of Prior Audit Findings 75
FINANCIAL SECTION 1
USING THIS ANNUAL REPORT As required by generally accepted accounting principles, the annual report consists of three basic financial statements that provide information on the Chaffey Community College District's (the District) activities as a whole: the Statements of Net Assets; the Statements of Revenues, Expenses, and Changes in Net Assets; and the Statements of Cash Flows. Responsibility for the completeness and accuracy of this information rests with District management. The California Community Colleges Chancellor's Office has recommended that all State community colleges follow the Business-Type Activity (BTA) model for financial statement reporting purposes. The focus of the Statements of Net Assets is designed to be similar to bottom line results for the District. This statement combines and consolidates current financial resources (net short-term spendable resources) with capital assets and long-term obligations. The Statements of Revenues, Expenses, and Changes in Net Assets focuses on the costs of the District's operational activities, which are supported mainly by property taxes and by State and other revenues. This approach is intended to summarize and simplify the user's analysis of the cost of various District services to students and the public. The Statements of Cash Flows provides an analysis of the sources and uses of cash within the operations of the District. Comparative information is included for the years ended June 30, 2011 and 2010. In addition, per Governmental Accounting Standards Board (GASB) Statement No. 39, a Statement of Financial Position, a Statement of Activities, and a Statement of Cash Flows are included for the District's component unit, the Chaffey Community College Foundation (the Foundation). Even though the Foundation is a separate entity, it is considered a component unit of the District because most of its resources can only be used by, or for, the benefit of the District. GASB Statement No. 39 requires that the Foundation's financials be included in this annual audit report. FINANCIAL HIGHLIGHTS The District's primary funding is based on apportionment received from the State of California. The main basis of the District's apportionment is the number of Full-Time Equivalent Students (FTES). For the 2010-2011 fiscal year, the actual factored FTES per the annual apportionment attendance report was 14,528. This is a decrease of 320 FTES from the prior year. The decrease is a result of the District offering fewer sections to address declining State funding caused by the current economic downturn. In addition, the District receives a basic allocation for each college and center. Chaffey College has one medium college in Rancho Cucamonga and two large State approved centers in Fontana and Chino. At the close of the 2010-2011 fiscal year, the unrestricted General Fund reserve met the California Community Colleges Chancellor's Office recommendation to maintain a minimum of a five percent reserve. The District's Governing Board also has a policy to maintain a seven percent unrestricted General Fund reserve, which the District has also maintained. By maintaining this reserve, the District will have funds available for unanticipated expenditures and budget uncertainties. 4
MANAGEMENT'S DISCUSSIONS AND ANALYSIS (REQUIRED SUPPLEMENTARY INFORMATION) JUNE 30, 2011 FINANCIAL HIGHLIGHTS, Continued In June 2010, the Accrediting Commission for Community and Junior Colleges, Western Association of Schools and Colleges, reaffirmed accreditation for Chaffey College. The District received the following commendation for Financial Stability - "The team commends college for achieving financial stability in a time of diminishing resources". During the 2008-2009 fiscal year, the District opened the new Chaffey College Chino Community Center building at the Chino College Park location. This center is a teaching facility and banquet hall. The center is open to the public for use and meets the need for banquet and meeting space in the community, as well as housing the District's culinary arts, hospitality management, and fashion design programs. The Chaffey College Chino Community Center is managed by an event coordinator that reports to both the college and the City of Chino. Although the center still receives financial support from the college and the city, the number of events held during the 2010-2011 fiscal year nearly doubled which increased the revenue. The event coordinator uses various marketing strategies to promote the center and continues to book events. Chaffey College continues to operate as a fiscally independent district. The District no longer utilizes the San Bernardino County Superintendent of Schools as a pass-through to process commercial and payroll warrants and deals directly with the San Bernardino County Treasurer's and Auditor- Controller's offices. Fiscal independence provides the District with greater internal controls and enables the District to meet their financial obligations by providing timely services to the outside business community, students, and employees. The District participated in the Community College League of California's Tax Revenue and Anticipation Notes (TRANS) borrowing program and in the San Bernardino County's temporary interfund borrowing program. The temporary TRANS of $4,675,000 and the inter-fund borrowing program ensured that the District would have adequate cash available for current obligations. The District has various construction projects funded by the 2002 $230 million general obligation bond and capital projects funds in progress throughout the District. Some of those major projects in progress and completed during the 2010-2011 fiscal year were: o Existing Gym Renovation o Science Complex Aviary Landscaping o Instructional Equipment o Michael Alexander Campus Center West o Business Education Renovation o Physical Science Renovation 5
MANAGEMENT'S DISCUSSIONS AND ANALYSIS (REQUIRED SUPPLEMENTARY INFORMATION) JUNE 30, 2011 Projects not completed in 2010-2011 will be on-going through the 2011-2012 fiscal year and future years until completion. During the 2010-2011 fiscal year, the District completed the new Michael Alexander Campus Center West and completed the Existing Gym Renovation. The 2-story Campus Center is a 16,454 square foot building that includes a commons food service area and office space for student health services, student government, and EOPS. Food services began on the first day of the 2011 Fall Semester with the other services following shortly thereafter. The renovation of the 30,843 square foot Existing Gym included replacement of all HVAC mechanical systems, upgrades to electrical and plumbing, and replacement of gym flooring. ECONOMIC FACTORS AFFECTING CURRENT AND FUTURE FINANCES OF CHAFFEY COMMUNITY COLLEGE DISTRICT The economic position of the District is closely tied to the State of California, as State apportionments and property taxes allocated to the District in 2010-2011 represented approximately 87 percent of the unrestricted General Fund revenues. The current economic recession has affected all California Community Colleges. This fiscal year, the District did not receive a Cost of Living Adjustment (COLA). While growth funds of 2.21 percent were allocated, the actual cash payment for that growth was deferred until the 2011-2012 fiscal year. The 2009-2010 State FTES workload reduction of 3.3 percent continues to affect the current fiscal year and future years' funding since the District's base FTES was reduced. This workload reduction reduced the base FTES funding because the State revenue to fund those FTES was not available. The District's actual 2010-2011 FTES was 14,528, which was 320 FTES below the 2009-2010 fiscal year. In addition, the State deficited general computational revenues for all California Community Colleges by approximately.1 percent. This is the fourth year in a row that the State has deficited community colleges at year-end because of State budget deficits. Total State revenue adjustments at year-end were approximately $383,098. It is anticipated that the State will continue to experience budget revenue shortfalls for several years, and it is projected these shortfalls will adversely affect funding for the District. The District implemented expenditure reductions in 2008-2009, 2009-2010, and 2010-2011 to offset revenue shortfalls from the State. The District continues to review revenues and expenditures to ensure the mission of the college is supported and that instruction and services to students remain a priority. Continuing cost saving measures include the implementation of a voluntary retirement plan in 2010-2011, and developing staffing plans rather than filling vacant positions. There are currently no other known facts, decisions, or conditions that will have a significant effect on the financial position (net assets) or results of operations (revenues, expenses, and changes in net assets) of the District. 6
MANAGEMENT'S DISCUSSIONS AND ANALYSIS (REQUIRED SUPPLEMENTARY INFORMATION) JUNE 30, 2011 Condensed financial information is as follows: (Amounts in thousands) Net Assets As of June 30, 2011 2010* 2009 Current and Other Assets Cash and investments $ 45,212 $ 71,617 $ 103,074 Other current assets 23,003 21,929 20,291 Total Current Assets 68,215 93,546 123,365 Noncurrent Assets Capital assets, net of depreciation 303,655 281,337 265,784 Total Assets 371,870 374,883 389,149 Current Liabilities Accounts payable and accrued liabilities 7,770 10,285 12,209 Deferred revenue 2,369 2,629 3,784 Long-term obligations 6,427 7,789 12,745 Total Current Liabilities 16,566 20,703 28,738 Noncurrent Liabilities Long-term obligations 178,712 183,659 186,331 Total Liabilities 195,278 204,362 215,069 Net Assets Invested in capital assets 133,446 121,258 115,246 Restricted for expendable purposes 21,948 28,763 35,960 Unrestricted 21,198 20,500 22,874 Total Net Assets $ 176,592 $ 170,521 $ 174,080 * Restated This schedule has been prepared from the District's Statements of Net Assets, which is presented on an accrual basis of accounting whereby assets are capitalized and depreciated. Capital assets, net of depreciation, are the historical value (original cost) of land, buildings, construction in progress, and equipment less accumulated depreciation. Capital assets increased approximately $22.3 million due to the projects funded by the general obligation bond. 7
MANAGEMENT'S DISCUSSIONS AND ANALYSIS (REQUIRED SUPPLEMENTARY INFORMATION) JUNE 30, 2011 Long-term obligations consist primarily of the general obligation bond issued in 2002 in the amount of $47.5 million, the second issuance of the general obligation bond issued in 2005 in the amount of $75 million, and the third issuance of the general obligation bond issued in 2007 in the amount of approximately $80 million. Many of the unrestricted net assets have been designated by the Board or by contracts for such purposes as Federal and State grants, outstanding commitments on contracts, bookstore and cafeteria reserves, and general reserves for the ongoing financial health of the District. (Amounts in thousands) Operating Results For the Years Ended June 30, 2011 2010* 2009 Operating Revenues Tuition and fees (net) $ 7,239 $ 8,739 $ 8,285 Bookstore and cafeteria net sales 5,543 5,783 6,351 Total Operating Revenues 12,782 14,522 14,636 Operating Expenses Salaries and benefits 74,666 80,920 78,033 Supplies, materials, and other operating expenses 16,376 19,211 20,861 Student financial aid 29,487 25,783 14,360 Depreciation 7,239 7,553 5,963 Total Operating Expenses 127,768 133,467 119,217 Loss on Operations (114,986) (118,945) (104,581) Nonoperating Revenues (Expenses) State apportionments 52,953 48,430 51,619 Grants and contracts 38,360 36,287 27,442 Property taxes 23,433 29,995 33,609 State revenues 3,639 3,428 3,370 Net interest and investment income (expense) (6,634) (6,557) (5,977) Other nonoperating revenues 1,926 1,767 27 Total Nonoperating Revenue (Expenses) 113,677 113,350 110,090 Other Revenues State and local capital income 7,380 2,036 5,960 Net Change in Net Assets $ 6,071 $ (3,559) $ 11,469 * Restated 8
MANAGEMENT'S DISCUSSIONS AND ANALYSIS (REQUIRED SUPPLEMENTARY INFORMATION) JUNE 30, 2011 Grant and contract revenues relate to student financial aid, as well as specific Federal and State grants received for programs serving the students of the District. These grant and program revenues are restricted as to the allowable expenses related to the programs. In accordance with requirements set forth by the California Community Colleges Chancellor's Office, the District reports operating expenses by object code. Operating expenses by functional classification are as follows: Statements of Functional Expenses For the Year Ended June 30, 2011 Supplies, Materials, Salaries and Other Equipment, and Expenses Maintenance, Student Benefits and Services and Repairs Financial Aid Depreciation Total Instructional activities $ 39,540,425 $ 1,008,923 $ 124,416 $ - $ - $ 40,673,764 Academic support 5,234,699 830,354 - - - 6,065,053 Student services 7,792,214 589,741 40,472 - - 8,422,427 Plant operations and maintenance 2,994,107 2,166,195 5,319 - - 5,165,621 Instructional support services 1,433,063 53,655 59 - - 1,486,777 General institutional support services 10,233,756 4,638,565 - - - 14,872,321 Community services and economic development 206,476 254,266 - - - 460,742 Ancillary services and auxiliary operations 4,702,596 4,712,297 240,831 - - 9,655,724 Student financial aid - - - 29,486,695-29,486,695 Physical property and related acquisitions 163,887 1,256,131 - - - 1,420,018 Planning, policymaking, and coordination 2,364,555 383,514 71,830 - - 2,819,899 Unallocated depreciation - - - - 7,239,517 7,239,517 Total $ 74,665,778 $ 15,893,641 $ 482,927 $ 29,486,695 $ 7,239,517 $ 127,768,558 9
MANAGEMENT'S DISCUSSIONS AND ANALYSIS (REQUIRED SUPPLEMENTARY INFORMATION) JUNE 30, 2011 The Statements of Cash Flows provides information about cash receipts and payments during the year. This statement also assists users in assessing the District's ability to meet its obligations as they come due and its need for external financing. (Amounts in thousands) Statements of Cash Flows For the Years Ended June 30, 2011 2010 2009 Cash From Operating activities $ (105,431) $ (110,712) $ (97,071) Noncapital financing activities 109,330 108,413 93,334 Capital financing activities (31,500) (30,525) (30,735) Investing activities 22,720 23,210 35,404 Net Change in Cash (4,881) (9,614) 932 Cash, Beginning of Year 31,950 41,564 40,632 Cash, End of Year $ 27,069 $ 31,950 $ 41,564 The primary operating receipts are student tuition and fees and auxiliary sales. The primary operating expense of the District is the payment of salaries and benefits to instructional and classified support staff. While State apportionment and property taxes are the primary source of noncapital related revenue, the GASB accounting standards require that this source of revenue is nonoperating as it comes from the general resources of the State and not from the primary users of the District's programs and services (students). The District depends upon this funding as the primary source of funds to continue the current level of operations. CONTACTING THE DISTRICT This financial report is designed to provide our citizens, taxpayers, students, and investors and creditors with a general overview of the District's finances and to show the District's accountability for the money it receives. If you have questions about this report or need any additional financial information, contact the District at: Chaffey Community College District, 5885 Haven Avenue, Rancho Cucamonga, California 91737-3002. 10
STATEMENTS OF NET ASSETS PRIMARY GOVERNMENT JUNE 30, 2011 AND 2010 2011 2010 ASSETS Current Assets Cash and cash equivalents $ 1,456,467 $ 2,441,012 Investments - unrestricted 5,282,903 4,719,114 Investments - restricted 38,472,635 64,456,403 Accounts receivable 18,436,439 16,491,981 Student receivables, net 1,034,230 1,475,236 Due from fiduciary funds 34,817 99,032 Prepaid expenses 2,648 - Inventories 1,189,875 1,371,473 Deferred cost on issuance 2,304,657 2,491,390 Total Current Assets 68,214,671 93,545,641 Noncurrent Assets Nondepreciable capital assets 64,259,555 61,663,389 Depreciable capital assets, net of depreciation 239,395,908 219,674,346 Total Noncurrent Assets 303,655,463 281,337,735 TOTAL ASSETS 371,870,134 374,883,376 LIABILITIES Current Liabilities Accounts payable 7,031,352 9,503,690 Accrued interest payable 737,091 781,280 Due to fiduciary funds 1,382 316 Deferred revenue 2,369,704 2,628,731 Current portion of long-term liabilities 5,885,155 7,247,197 Voluntary retirement incentive program - current portion 541,863 541,863 Total Current Liabilities 16,566,547 20,703,077 Noncurrent Liabilities Compensated absences payable 1,285,040 1,292,575 Bonds and notes payable 173,667,515 178,481,435 Other postemployment benefits obligation 1,230,445 814,859 Voluntary retirement incentive program 2,528,692 3,070,555 Total Noncurrent Liabilities 178,711,692 183,659,424 TOTAL LIABILITIES 195,278,239 204,362,501 NET ASSETS Invested in capital assets, net of related debt 133,445,928 121,258,449 Restricted for: Debt service 10,503,409 15,135,304 Capital projects 9,638,643 12,002,313 Other activities 1,805,915 1,625,026 Unrestricted 21,198,000 20,499,783 TOTAL NET ASSETS $ 176,591,895 $ 170,520,875 The accompanying notes are an integral part of these financial statements. 11
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS PRIMARY GOVERNMENT FOR THE YEARS ENDED JUNE 30, 2011 AND 2010 2011 2010 OPERATING REVENUES Student Tuition and Fees $ 13,100,045 $ 14,094,991 Less: Scholarship discount and allowance (5,860,772) (5,355,595) Net tuition and fees 7,239,273 8,739,396 Sales Bookstore 5,543,205 5,772,011 Cafeteria - 10,929 TOTAL OPERATING REVENUES 12,782,478 14,522,336 OPERATING EXPENSES Salaries 56,581,813 59,527,964 Employee benefits 18,083,965 21,392,679 Supplies, materials, and other operating expenses and services 16,376,568 19,210,981 Student financial aid 29,486,695 25,782,817 Depreciation 7,239,517 7,553,174 TOTAL OPERATING EXPENSES 127,768,558 133,467,615 OPERATING LOSS (114,986,080) (118,945,279) NONOPERATING REVENUES (EXPENSES) State apportionments, noncapital 52,953,282 48,429,607 Federal grants 31,356,775 29,415,222 State grants 7,002,981 6,871,559 Local property taxes, levied for general purposes 15,862,735 18,214,117 Taxes levied for other specific purposes 7,570,565 11,781,108 State taxes and other revenues 3,639,108 3,428,074 Investment income 1,105,813 1,269,288 Interest expense on capital related debt (7,740,142) (8,155,320) Investment income on capital asset - related debt, net 114,690 329,292 Transfer to fiduciary fund - (53,150) Other nonoperating revenue 1,811,555 1,820,338 TOTAL NONOPERATING REVENUES (EXPENSES) 113,677,362 113,350,135 LOSS BEFORE OTHER REVENUES (1,308,718) (5,595,144) OTHER REVENUES State revenues, capital 5,597,360 635,438 Local revenues, capital 1,782,378 1,400,735 TOTAL OTHER REVENUES 7,379,738 2,036,173 CHANGE IN NET ASSETS 6,071,020 (3,558,971) NET ASSETS, BEGINNING OF YEAR (RESTATED) 170,520,875 174,079,846 NET ASSETS, END OF YEAR $ 176,591,895 $ 170,520,875 The accompanying notes are an integral part of these financial statements. 12
STATEMENTS OF CASH FLOWS PRIMARY GOVERNMENT FOR THE YEARS ENDED JUNE 30, 2011 AND 2010 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and fees $ 7,939,511 $ 7,046,267 Auxiliary enterprise sales 5,543,205 5,782,940 Payments to or on behalf of employees (74,828,557) (77,783,774) Payments to vendors for supplies and services (14,598,723) (19,974,634) Payments to students for scholarships and grants (29,486,695) (25,782,817) Net Cash Flows From Operating Activities (105,431,259) (110,712,018) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State apportionments 49,158,165 48,069,587 Noncapital grants and contracts 38,263,834 36,567,041 Property taxes - non-debt related 16,020,240 18,625,738 State taxes and other apportionments 3,535,946 3,428,435 Other nonoperating 2,351,639 1,722,041 Net Cash Flows From Noncapital Financing Activities 109,329,824 108,412,842 CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES State apportionments capital projects 4,903,470 2,399,521 Property taxes - related to capital debt 7,570,565 11,781,108 Local capital grants 1,845,461 316,486 Proceeds from capital debt 1,071,235 1,311,758 Acquisition and construction of capital assets (32,160,309) (25,542,814) Deferred cost on issuance 186,733 186,733 Principal paid on capital debt and leases (7,247,197) (12,801,951) Interest paid on capital debt (7,784,331) (8,535,168) Interest received on capital asset - related debt 114,690 359,725 Net Cash Flows From Capital Financing Activities (31,499,683) (30,524,602) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales and maturities of investments 21,523,366 21,843,774 Investment income 1,196,594 1,366,232 Net Cash Flows From Investing Activities 22,719,960 23,210,006 NET CHANGE IN CASH AND CASH EQUIVALENTS (4,881,158) (9,613,772) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 31,949,940 41,563,712 CASH AND CASH EQUIVALENTS, END OF YEAR $ 27,068,782 $ 31,949,940 The accompanying notes are an integral part of these financial statements. 13
STATEMENTS OF CASH FLOWS PRIMARY GOVERNMENT, (CONTINUED) FOR THE YEARS ENDED JUNE 30, 2011 AND 2010 2011 2010 RECONCILIATION OF OPERATING LOSS TO NET CASH FLOWS FROM OPERATING ACTIVITIES Operating Loss $ (114,986,080) $ (118,945,279) Adjustments to Reconcile Operating Loss to Net Cash Flows From Operating Activities: Depreciation expense 7,239,517 7,553,174 Changes in Operating Assets and Liabilities: Receivables 926,426 (1,342,109) Inventories 181,598 (443,414) Prepaid expenses (2,648) - Accounts payable and accrued liabilities 1,569,928 (1,045,359) Deferred revenue (226,188) (351,020) Voluntary retirement incentive (541,863) 3,612,418 Other postemployment benefits 415,586 428,524 Compensated absences (7,535) (178,953) Total Adjustments 9,554,821 8,233,261 Net Cash Flows From Operating Activities $ (105,431,259) $ (110,712,018) CASH AND CASH EQUIVALENTS CONSIST OF THE FOLLOWING: Cash in banks $ 1,456,467 $ 2,441,012 Cash with County Treasury 25,612,315 29,508,928 Total Cash and Cash Equivalents $ 27,068,782 $ 31,949,940 NON CASH TRANSACTIONS On behalf payments for benefits $ 1,344,169 $ 1,428,499 The accompanying notes are an integral part of these financial statements. 14
STATEMENTS OF FIDUCIARY NET ASSETS JUNE 30, 2011 AND 2010 Trust Funds 2011 2010 ASSETS Cash and cash equivalents $ 564,651 $ 504,788 Accounts receivable 24,302 90,756 Due from other funds 1,382 316 Total Assets 590,335 595,860 LIABILITIES Accounts payable 32,139 11,218 Due to other funds 34,817 99,032 Deferred revenue 7,220 - Total Liabilities 74,176 110,250 NET ASSETS Unreserved 516,159 485,610 Total Net Assets $ 516,159 $ 485,610 The accompanying notes are an integral part of these financial statements. 15
STATEMENTS OF CHANGES IN FIDUCIARY NET ASSETS JUNE 30, 2011 AND 2010 Trust Funds 2011 2010 ADDITIONS Local revenues $ 762,561 $ 836,041 DEDUCTIONS Classified salaries 18,011 10,923 Employee benefits 3,596 446 Services and operating expenditures 703,569 884,114 Capital outlay 6,836 - Total Deductions 732,012 895,483 OTHER FINANCING SOURCES Operating transfers in - 53,150 Total Other Financing Sources - 53,150 Change in Net Assets 30,549 (6,292) Net Assets - Beginning 485,610 491,902 Net Assets - Ending $ 516,159 $ 485,610 The accompanying notes are an integral part of these financial statements. 16
DISCRETELY PRESENTED COMPONENT UNIT CHAFFEY COMMUNITY COLLEGE FOUNDATION STATEMENTS OF FINANCIAL POSITION JUNE 30, 2011 AND 2010 2011 2010 ASSETS Cash and cash equivalents - unrestricted $ 173,075 $ - Cash and cash equivalents - restricted 2,185,185 2,223,632 Accounts receivable 42,784 21,635 Investments 392,116 366,358 Total Assets $ 2,793,160 $ 2,611,625 LIABILITIES AND NET ASSETS LIABILITIES Current Liabilities Accounts payable $ 54,928 $ 63,155 Amounts held for others 463,914 467,300 Total Liabilities 518,842 530,455 NET ASSETS (DEFICITS) Unrestricted: Operating 150,931 (119,994) Board designated 10,000 10,000 Total Unrestricted 160,931 (109,994) Temporarily restricted 1,678,877 1,321,786 Permanently restricted 434,510 869,378 Total Net Assets 2,274,318 2,081,170 Total Liabilities and Net Assets $ 2,793,160 $ 2,611,625 The accompanying notes are an integral part of these financial statements. 17
DISCRETELY PRESENTED COMPONENT UNIT CHAFFEY COMMUNITY COLLEGE FOUNDATION STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED JUNE 30, 2011 AND 2010 2011 Temporarily Permanently Unrestricted Restricted Restricted Total REVENUES Contributions $ 241,976 $ 308,971 $ 15,000 $ 565,947 Special events 93,409 - - 93,409 Net assets released from restrictions 303,585 (303,585) - - Total Revenues 638,970 5,386 15,000 659,356 EXPENSES Program 328,439 - - 328,439 Operating 81,389 - - 81,389 Fundraising 93,409 - - 93,409 Total Expenses 503,237 - - 503,237 OTHER REVENUES AND EXPENSES Net unrealized gain (loss) 2,830 21,681-24,511 Interest and dividends 2,870 9,648-12,518 Foundation management fees - - - - Interfund transfers 129,492 320,376 (449,868) - Total Other Revenues and Expenses 135,192 351,705 (449,868) 37,029 CHANGE IN NET ASSETS 270,925 357,091 (434,868) 193,148 NET ASSETS (DEFICITS), BEGINNING OF YEAR (109,994) 1,321,786 869,378 2,081,170 NET ASSETS, END OF YEAR $ 160,931 $ 1,678,877 $ 434,510 $ 2,274,318 The accompanying notes are an integral part of these financial statements. 18
2010 Temporarily Permanently Unrestricted Restricted Restricted Total $ 77,061 $ 655,068 $ - $ 732,129 69,702 - - 69,702 305,751 (305,751) - - 452,514 349,317-801,831 326,475 - - 326,475 142,725 - - 142,725 69,702 - - 69,702 538,902 - - 538,902 (1,069) 39,339-38,270 4,187 14,071-18,258 31,575 (31,575) - - - - - - 34,693 21,835-56,528 (51,695) 371,152-319,457 (58,299) 950,634 869,378 1,761,713 $ (109,994) $ 1,321,786 $ 869,378 $ 2,081,170 18
DISCRETELY PRESENTED COMPONENT UNIT CHAFFEY COMMUNITY COLLEGE FOUNDATION STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2011 AND 2010 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES Change in Net Assets $ 193,148 $ 319,457 Adjustments to Reconcile Change in Net Assets to Net Cash From Operating Activities: Net unrealized gain on investments (24,511) (38,270) Contributions restricted for long-term purposes (323,971) (655,068) Changes in Assets and Liabilities: Change in accounts receivable 21,149 54,318 Change in accounts payable (8,227) 28,402 Change in amounts held on behalf of others (3,386) 59,101 Net Cash Flows From Operating Activities (145,798) (232,060) CASH FLOWS FROM INVESTING ACTIVITIES Sale of investments - (1,963) Purchase of investments (5,091) (421,045) Net Cash Flows From Investing Activities (5,091) (423,008) CASH FLOWS FROM FINANCING ACTIVITIES Collections of long-term contributions 323,964 655,068 NET CHANGE IN CASH AND CASH EQUIVALENTS 173,075 - CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR - - CASH AND CASH EQUIVALENTS, END OF YEAR $ 173,075 $ - The accompanying notes are an integral part of these financial statements. 19
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 1 - ORGANIZATION The Chaffey Community College District (the District) was established in 1916, as a political subdivision of the State of California and provides post secondary educational services to residents of San Bernardino County. The District operates under a locally elected five-member Governing Board form of government, which establishes the policies and procedures by which the District operates. The Board must approve the annual budgets for the General Fund, Special Revenue funds, Capital Project funds, and Proprietary funds but these budgets are managed at the department level. Currently, the District operates one community college located in Rancho Cucamonga, California; two State approved centers in Fontana and Chino, California, as well as several satellite facilities. While the District is a political subdivision of the State of California, it is not a component unit of the State in accordance with the provisions of Governmental Accounting Standards Board (GASB) Statement No. 39. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Reporting Entity The District has adopted GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. This Statement amends GASB Statement No. 14, The Financial Reporting Entity, to provide additional guidance to determine whether certain organizations, for which the District is not financially accountable, should be reported as component units based on the nature and significance of their relationship with the District. As defined by generally accepted accounting principles established by the GASB, the financial reporting entity consists of the primary government (the District), as well as the following component units: Chaffey Community College Foundation The Chaffey Community College Foundation (the Foundation) is a legally separate, tax-exempt component unit of the District. The Foundation acts primarily as a fundraising organization to provide grants and scholarships to students and support to employees, programs, and departments of the District. The twenty-one member Board of the Foundation consists of community members, alumni, and other supporters of the Foundation. Although the District does not control the timing or amount of receipts from the Foundation, the majority of resources or income, thereon that the Foundation holds and invests, are restricted to the activities of the District by the donors. Because these restricted resources held by the Foundation can only be used by, or for the benefit of the District, the Foundation is considered a component unit of the District with the inclusion of the statements as a discretely presented component unit. The Foundation is reported in separate financial statements because of the difference in its reporting model, as further described below. The Foundation is a not-for-profit organization under Internal Revenue Code (IRC) Section 501(c)(3) that reports its financial results in accordance with Financial Accounting Standards Codifications. 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 District's financial reporting entity for these differences. Financial statements for the Foundation can be obtained by calling the Foundation at (909) 652-6545. 20
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Chaffey College Financing Authority Corporation The Chaffey College Financing Authority Corporation (the Corporation) is a legally separate organization and a component unit of the District. The Corporation was formed to issue debt specifically for the acquisition and construction of capital assets for the District. The Governing Board of the Corporation is the same as the Governing Board of the District. The financial activity has been "blended" or consolidated within the financial statements as the District as if the activity was the District's. Within the other supplementary information section of the report, the activity is included as the Other Debt Service Fund. Certificates of participation issued by the Corporation have been defeased and have closed out. Individually-prepared financial statements are not prepared for Chaffey College Financing Authority Corporation. Measurement Focus, Basis of Accounting, and Financial Statement Presentation For financial reporting purposes, the District is considered a special-purpose government engaged only in business-type activities as defined by GASB Statements No. 34 and No. 35, as amended by GASB Statements No. 37, No. 38 and No. 39. Accordingly, the District's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All intra-agency and intra-fund transactions have been eliminated. Revenues resulting from exchange transactions, in which each party gives and receives essentially equal value, are classified as operating revenues. These transactions are recorded on the accrual basis when the exchange takes place. Available means that the resources will be collected within the current fiscal year or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal year. For the District, operating revenues consist primarily of student fees and auxiliary activities through the bookstore and cafeteria. Nonexchange transactions, in which the District receives value without directly giving equal value in return, include State apportionments, property taxes, certain Federal and State grants, entitlements, and donations. Property tax revenue is recognized in the fiscal year received. State apportionment revenue is earned based upon criteria set forth from the Community Colleges Chancellor's Office and includes reporting of full-time equivalent student (FTES) attendance. The corresponding apportionment revenue is recognized in the period the FTES are generated. Revenue from Federal and State grants and entitlements are recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements may include time and/or purpose requirements. Operating expenses are costs incurred to provide instructional services including support costs, auxiliary services, and depreciation of capital assets. All other expenses not meeting this definition are reported as nonoperating. Expenses are recorded on the accrual basis as they are incurred, when goods are received, or services are rendered. 21
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 The accounting policies of the District conform to accounting principles generally accepted in the United States of America (US GAAP) as applicable to colleges and universities, as well as those prescribed by the California Community Colleges Chancellor's Office. The District reports are based on all applicable GASB pronouncements, as well as applicable Financial Accounting Standards Board (FASB) pronouncements issued on or before November 30, 1989, unless those pronouncements conflict or contradict GASB pronouncements. When applicable, certain prior year amounts have been reclassified to conform to current year presentation. The budgetary and financial accounts of the District are maintained in accordance with the State Chancellor's Office's Budget and Accounting Manual. The financial statements are presented in accordance with the reporting model as prescribed in GASB Statement No. 34, Basic Financial Statements and Management's Discussions and Analysis for State and Local Governments, and GASB Statement No. 35, Basic Financial Statements and Management's Discussions and Analysis for Public Colleges and Universities, as amended by GASB Statements No. 37 and No. 38. The business-type activities model followed by the District requires the following components of the District's financial statements: Management's Discussion and Analysis Basic Financial Statements for the District as a whole including: o Statement of Net Assets - Primary Government o Statement of Revenues, Expenses, and Changes in Net Assets - Primary Government o Statement of Cash Flows - Primary Government o Financial Statements for the Fiduciary Funds including: o Statements of Fiduciary Net Assets o Statements of Changes in Fiduciary Net Assets Notes to the Financial Statements Cash and Cash Equivalents The District's cash and cash equivalents are considered to be unrestricted cash on hand, demand deposits, and short-term unrestricted investments with original maturities of three months or less from the date of acquisition. Cash equivalents also include unrestricted cash with county treasury balances for purposes of the Statement of Cash Flows. Restricted cash and cash equivalents represent balances restricted by external sources such as grants and contracts specifically restricted for the repayment of capital debt. Investments Investments held at June 30, 2011 and 2010, with original maturities greater than one year are stated at fair value. Fair value is estimated based on quoted market prices at year-end. All investments not required to be reported at fair value are stated at cost or amortized cost. Fair values of investments in county and State investment pools are determined by the program sponsor. Restricted Assets Restricted assets arise when restrictions on their use change the normal understanding of the availability of the asset. Such constraints are either imposed by creditors, contributors, grantors, or laws of other governments or imposed by enabling legislation. Restricted assets represent investments required to be set aside by the District for the purpose of satisfying certain requirements. 22
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Accounts Receivable Accounts receivable include amounts due from the Federal, State, and/or local governments or private sources, in connection with reimbursement of allowable expenditures made pursuant to the District's grants and contracts. Accounts receivable also consist of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty, and staff, the majority of each residing in the State of California. Inventories Inventories consist primarily of bookstore merchandise and supplies held for resale to the students and faculty of the college. Inventories are stated at cost or market, utilizing the average cost method. The cost is recorded as an expense as the inventory is consumed. Capital Assets and Depreciation Capital assets are long-lived assets of the District as a whole and include land, construction-in-progress, buildings, leasehold improvements, and equipment. The District maintains an initial unit cost capitalization threshold of $5,000 for machinery and equipment. For buildings and improvements the District uses $150,000 as an initial unit capitalization threshold. Assets are recorded at historical cost, or estimated historical cost, when purchased or constructed. The District does not possess any infrastructure. Donated capital assets are recorded at estimated fair market value at the date of donation. Improvements are capitalized; the costs of routine maintenance and repairs that do not add to the value of the asset or materially extend an asset's life are charged as an operating expense in the year in which the expense was incurred. Major outlays for capital improvements are capitalized as construction-in-progress as the projects are constructed. Depreciation of capital assets is computed and recorded by utilizing the straight-line method. Estimated useful lives of the various classes of depreciable capital assets are as follows: buildings, 20 to 50 years; improvements, 5 to 20 years; equipment, 2 to 15 years; and vehicles, 5 to 10 years. Accrued Liabilities and Long-Term Obligations All payables, accrued liabilities, and long-term obligations are reported in the entity-wide financial statements. Deferred Issuance Costs, Premiums, and Discounts Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the straight line method. Compensated Absences Accumulated unpaid vacation benefits are accrued as a liability as the benefits are earned. The entire compensated absence liability is reported on the government-wide financial statements. The amounts have been reported in the fund from which the employees, who have accumulated leave, are paid. 23
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Sick leave is accumulated without limit for each employee based upon negotiated contracts. Leave with pay is provided when employees are absent for health reasons; however, the employees do not gain a vested right to accumulated sick leave. Employees are never paid for any sick leave balance at termination of employment or any other time. Therefore, the value of accumulated sick leave is not recognized as a liability in the District's financial statements. However, retirement credit for unused sick leave is applicable to all classified school members who retire after January 1, 1999. At retirement, each member will receive.004 year of service credit for each day of unused sick leave. Retirement credit for unused sick leave is applicable to all academic employees and is determined by dividing the number of unused sick days by the number of base service days required to complete the last school year, if employed full time. Deferred Revenue Deferred revenue arises when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the current period, or when resources are received by the District prior to the incurrence of qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the District has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. Deferred revenues include (1) amounts received for tuition and fees prior to the end of the fiscal year that are related to the subsequent fiscal year and (2) amounts received from Federal and State grants received before the eligibility requirements are met are recorded as deferred revenue. Noncurrent Liabilities Noncurrent liabilities include bonds and notes payable, compensated absences, claims payable, capital lease obligations, OPEB obligations, and Voluntary Retirement Incentive with maturities greater than one year. Net Assets GASB Statements No. 34 and No. 35 report equity as "Net Assets" and represent the difference between assets and liabilities. Net assets are classified according to imposed restrictions or availability of assets for satisfaction of District obligations according to the following net asset categories: Invested in Capital Assets, Net of Related Debt - Capital assets, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets. Restricted - Expendable - Net assets whose use by the District is subject to externally imposed constraints that can be fulfilled by actions of the District pursuant to those constraints or by the passage of time. Unrestricted - Net assets that are not subject to externally imposed constraints. Unrestricted net assets may be designated for specific purposes by action of the Governing Board or may otherwise be limited by contractual agreements with outside parties. Substantially all unrestricted net assets are designated for economic uncertainties. When both restricted and unrestricted resources are available for use, it is the District's practice to use restricted resources first and the unrestricted resources when they are needed. The entity-wide financial statements report $21,947,967 of restricted net assets. 24
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 State Apportionments Certain current year apportionments from the State are based on financial and statistical information of the previous year. Any corrections due to the recalculation of the apportionment are made in February of the subsequent year. When known and measurable, these recalculations and corrections are accrued in the year in which the FTES are generated. Property Taxes Secured property taxes attach as an enforceable lien on property as of January 1. The County Assessor is responsible for assessment of all taxable real property. Taxes are payable in two installments on November 1 and February 1 and become delinquent on December 10 and April 10, respectively. Unsecured property taxes are payable in one installment on or before August 31. The County of San Bernardino bills and collects the taxes on behalf of the District. Local property tax revenues are recorded when received. The voters of the District passed a General Obligation Bond in March 2002 for the acquisition, construction, and remodeling of certain District property. As a result of the passage of the Bond, property taxes are assessed on the property within the District specifically for the repayment of the debt incurred. The taxes are billed and collected as noted above and remitted to the District when collected. The property tax revenue received for the repayment of the bonds for the years ended June 30, 2011 and 2010, was $7,570,565 and $11,781,108, respectively. Scholarship Discounts and Allowances Student tuition and fee revenue is reported net of scholarship discounts and allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. Scholarship discounts and allowances represent the difference between stated charges for enrollment fees and the amount that is paid by students or third parties making payments on the students' behalf. To the extent that fee waivers and discounts have been used to satisfy tuition and fee charges, the District has recorded a scholarship discount and allowance. Federal Financial Assistance Programs The District participates in Federally funded Pell Grants, SEOG Grants, Federal Work-Study, and Stafford Loan programs, as well as other programs funded by the Federal government. Financial aid to students is either reported as operating expenses or scholarship allowances, which reduce revenues. The amount reported as operating expense represents the portion of aid that was provided to the student in the form of cash. Scholarship allowances represent the portion of aid provided to students in the form of reduced tuition. These programs are audited in accordance with the Single Audit Act Amendments of 1996, and the U.S. Office of Management and Budget's revised Circular A-133, Audits of States, Local Governments and Non-Profit Organizations, and the related Compliance Supplement. The District discontinued its direct lending program prior to the start of the fiscal year. 25
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 On Behalf Payments GASB Statement No. 24 requires direct on behalf payments for fringe benefits and salaries made by one entity to a third party recipient for the employees for another legally separate entity be recognized as revenues and expenditures by the employer entity. The State of California makes direct on behalf payments to the California State Teachers' Retirement System and the California Public Employees' Retirement System (CalSTRS and CalPERS) on behalf of all community colleges in California. 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 amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Interfund Activity Interfund transfers and interfund receivables and payables for governmental activities are eliminated during the consolidated process in the entity-wide financial statements. Fund Presentation - Chaffey Community College Foundation The Foundation presents its financial statements in accordance with Statement of Financial Accounting Codifications. Under these reporting requirements, the Foundation is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. As permitted by the codification, the Foundation does not use fund accounting. 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 related investments for general or specific purposes. Temporarily Restricted Net Assets - Net assets subject to donor-imposed stipulations that will be met by actions of the Foundation and/or the passage of time. Unrestricted Net Assets - Net assets not subject to donor-imposed restrictions. Revenues and expenses are recorded when incurred in accordance with the accrual basis of accounting. Revenues are reported as increases in the unrestricted net assets classification unless use of the related assets is limited by donor-imposed restrictions. Contributions, including unconditional promises to give, are recognized as revenue in the period received. Conditional promises to give are not recognized as revenue until the conditions on which they depend are substantially met. Contributions for in-kind gifts from outside sources are recorded at their fair market value on the date of the donation. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. 26
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Investments are reported at fair value in accordance with FASB Topic ASC 820, Fair Value Measurements and Disclosures. The Foundation is a not-for-profit organization that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and related California Franchise Tax Codes. New Accounting Pronouncements In November 2010, the GASB issued Statement No. 61, The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 14 and No. 34. The objective of this Statement is to improve financial reporting for a governmental financial reporting entity. The requirements of GASB Statement No. 14, The Financial Reporting Entity, and the related financial reporting requirements of GASB Statement No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, were amended to better meet user needs and to address reporting entity issues that have arisen since the issuance of those Statements. This Statement modifies certain requirements for inclusion of component units in the financial reporting entity. For organizations that previously were required to be included as component units by meeting the fiscal dependency criterion, a financial benefit or burden relationship also would need to be present between the primary government and that organization for it to be included in the reporting entity as a component unit. Further, for organizations that do not meet the financial accountability criteria for inclusion as component units but that, nevertheless, should be included because the primary government's management determines that it would be misleading to exclude them, this Statement clarifies the manner in which that determination should be made and the types of relationships that generally should be considered in making the determination. This Statement also amends the criteria for reporting component units as if they were part of the primary government (that is, blending) in certain circumstances. For component units that currently are blended based on the "substantively the same governing body" criterion, it additionally requires that (1) the primary government and the component unit have a financial benefit or burden relationship or (2) management (below the level of the elected officials) of the primary government have operational responsibility (as defined in paragraph 8a) for the activities of the component unit. New criteria also are added to require blending of component units whose total debt outstanding is expected to be repaid entirely or almost entirely with resources of the primary government. The blending provisions are amended to clarify that funds of a blended component unit have the same financial reporting requirements as a fund of the primary government. Lastly, additional reporting guidance is provided for blending a component unit if the primary government is a business-type activity that uses a single column presentation for financial reporting. This Statement also clarifies the reporting of equity interests in legally separate organizations. It requires a primary government to report its equity interest in a component unit as an asset. The provisions of this Statement are effective for financial statements for periods beginning after June 15, 2012. Early implementation is encouraged. 27
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Comparative Financial Information Comparative financial information for the prior year has been presented for additional analysis; certain amounts presented in the prior year data may have been reclassified in order to be consistent with the current year's presentation. NOTE 3 - DEPOSITS AND INVESTMENTS Policies and Practices The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements; medium term corporate notes; shares of beneficial interest issued by diversified management companies, certificates of participation, obligations with first priority security; and collateralized mortgage obligations. Investment in County Treasury - The District is considered to be an involuntary participant in an external investment pool as the District is required to deposit all receipts and collections of monies with their County Treasurer (Education Code Section 41001). The fair value of the District's investment in the pool is reported in the accounting financial statements at amounts based upon the District's pro-rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis. Investment in the State Investment Pool - The District is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The fair value of the District's investment in the pool is reported in the accompanying financial statement at amounts based upon the District's pro-rata share of the fair value provided by LAIF for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF, which is recorded on the amortized cost basis. Other Investments The District maintains investments outside the San Bernardino County Treasurer as allowed by the District's investment policy. The investments are stated at fair value as determined by quoted market prices. 28
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 General Authorizations Limitations as they relate to interest rate risk, credit risk, and concentration of credit risk are indicated in the schedules below: Maximum Maximum Maximum Authorized Remaining Percentage Investment Investment Type Maturity of Portfolio In One Issuer Local Agency Bonds, Notes, Warrants 5 years None None Registered State Bonds, Notes, Warrants 5 years None None U.S. Treasury Obligations 5 years None None U.S. Agency Securities 5 years None None Banker's Acceptance 180 days 40% 30% Commercial Paper 270 days 25% 10% Negotiable Certificates of Deposit 5 years 30% None Repurchase Agreements 1 year None None Reverse Repurchase Agreements 92 days 20% of base None Medium-Term Corporate Notes 5 years 30% None Mutual Funds N/A 20% 10% Money Market Mutual Funds N/A 20% 10% Mortgage Pass-Through Securities 5 years 20% None County Pooled Investment Funds N/A None None Local Agency Investment Fund (LAIF) N/A None None Joint Powers Authority Pools N/A None None Authorized Under Debt Agreements Investments of debt proceeds held by bond trustees are governed by provisions of the debt agreements rather than the general provisions of the California Government Code. These provisions allow for the acquisition of investment agreements with maturities of up to 30 years. 29
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Summary of Deposits and Investments Deposits and investments of the primary government as of June 30, 2011, consist of the following: Cash on hand and in banks $ 1,416,467 Cash in revolving 40,000 Investments 43,755,538 Total Deposits and Investments $ 45,212,005 Deposits and investments of the Fiduciary Funds as of June 30, 2010, consist of the following: Cash on hand and in banks $ 564,651 Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuation is provided by the following schedule that shows the distribution of the District's investment by maturity: Weighted Fair Average Days Investment Type Value to Maturity County Pool - San Bernardino $ 25,689,739 360 Investment Money Market Funds 2,182,502 N/A Corporate Obligations 7,022,969 1,127 Government Obligations 5,874,526 N/A Municipal Bonds 3,073,930 671 Total $ 43,843,666 30
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The District's investments in the County Pool and LAIF are not required to be rated. Presented below is the minimum rating required by the California Government Code, the District's investment policy, or debt agreements, and the actual rating, as rated by Standard and Poor's, as of the year-end for each investment type. The following investments of the District are not legally required to be rated. Fair Rating Investment Type Value June 30, 2011 County Pool - San Bernardino $ 25,689,739 AAA Investment Money Market Funds 2,182,502 N/A Corporate Obligations 7,022,969 A- Government Obligations 5,874,526 N/A Municipal Bonds 3,073,930 A-1 Total $ 43,843,666 Custodial Credit Risk - Deposits This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District does not have a policy for custodial credit risk for deposits. However, the California Government Code requires that a financial institution secure deposits made by State or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under State law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agencies. California law also allows financial institutions to secure public deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secured deposits. As of June 30, 2011, the District's bank balance of $1,047,080 was exposed to custodial credit risk because it was uninsured and collateralized with securities held by the pledging financial institution's trust department or agent, but not in the name of the District. 31
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 4 - ACCOUNTS RECEIVABLE Accounts receivable for the Primary government consisted primarily of intergovernmental grants, entitlements, interest, and other local sources. The accounts receivable are as follows: Primary Government 2011 2010 Federal Government Categorical aid $ 417,757 $ 1,297,444 State Government Categorical aid 383,682 237,695 Lottery 1,024,121 920,959 Apportionment 12,741,352 10,409,267 Construction reimbursement 693,890 - Local Sources Property taxes 1,562,768 1,724,395 Interest 44,521 135,302 Redevelopment fees 508,222 504,100 Other local sources 1,060,126 1,262,819 Total Primary Government $ 18,436,439 $ 16,491,981 Student receivables, net $ 1,034,230 $ 1,475,236 Discretely Presented Component Unit The accounts receivable held by the Foundation consist primarily of short-term donations. In the opinion of management, all amounts have been deemed to be fully collectible. 32
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 5 - CAPITAL ASSETS Capital asset activity for the primary government for the fiscal year ended June 30, 2011, was as follows: Balance Balance Beginning End of Year Additions Deductions of Year Capital Assets Not Being Depreciated Land $ 51,369,683 $ - $ - $ 51,369,683 Construction in progress 10,293,706 27,497,115 24,900,949 12,889,872 Total Capital Assets Not Being Depreciated 61,663,389 27,497,115 24,900,949 64,259,555 Capital Assets Being Depreciated Buildings and improvements 246,187,254 25,639,226-271,826,480 Machinery and equipment 14,391,374 1,346,749 234,762 15,503,361 Total Capital Assets Being Depreciated 260,578,628 26,985,975 234,762 287,329,841 Total Capital Assets 322,242,017 54,483,090 25,135,711 351,589,396 Less Accumulated Depreciation Buildings and improvements 31,058,416 6,060,138-37,118,554 Machinery and equipment 9,845,866 1,179,379 209,866 10,815,379 Total Accumulated Depreciation 40,904,282 7,239,517 209,866 47,933,933 Net Capital Assets $ 281,337,735 $ 47,243,573 $ 24,925,845 $ 303,655,463 Depreciation expense for the year was $7,239,517. 33
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Capital asset activity for the District for the fiscal year ended June 30, 2010, was as follows: *Balance Balance Beginning End of Year Additions Deductions of Year Capital Assets Not Being Depreciated Land $ 51,369,683 $ - $ - $ 51,369,683 Construction in progress 38,101,745 22,433,902 50,241,941 10,293,706 Total Capital Assets Not Being Depreciated 89,471,428 22,433,902 50,241,941 61,663,389 Capital Assets Being Depreciated Buildings and improvements 195,943,687 50,261,410 17,843 246,187,254 Machinery and equipment 13,974,053 684,254 266,933 14,391,374 Total Capital Assets Being Depreciated 209,917,740 50,945,664 284,776 260,578,628 Total Capital Assets 299,389,168 73,379,566 50,526,717 322,242,017 Less Accumulated Depreciation Buildings and improvements 24,936,795 6,121,621-31,058,416 Machinery and equipment 8,668,656 1,431,553 254,343 9,845,866 Total Accumulated Depreciation 33,605,451 7,553,174 254,343 40,904,282 Net Capital Assets $ 265,783,717 $ 65,826,392 $ 50,272,374 $ 281,337,735 Depreciation expense for the year was $7,553,174. * Restated - See Note 16. NOTE 6 - INTERFUND TRANSACTIONS Interfund Receivables/Payables (Due To/Due From) Interfund receivable and payable balances arise from interfund transactions and are recorded by all funds affected in the period in which transactions are executed. Interfund activity within the governmental funds and fiduciary funds has been eliminated respectively in the consolidation process of the basic financial statements. Balances owing between the primary government and the fiduciary funds are not eliminated in the consolidation process. As of June 30, 2011, the District's governmental funds owed the fiduciary funds $1,382. The fiduciary funds owed the governmental funds $34,817. 34
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Interfund Operating Transfers Operating transfers between funds of the District are used to (1) move revenues from the fund that statute or budget requires to collect them to the fund that statute or budget requires to expend them, (2) move receipts restricted to debt service from the funds collecting the receipts to the debt service fund as debt service payments become due, and (3) use restricted revenues collected in the General Fund to finance various programs accounted for in other funds in accordance with budgetary authorizations. Operating transfers within the funds of the District have been eliminated in the consolidation process. Transfers between the primary government and the fiduciary funds are not eliminated in the consolidation process. During the 2011 fiscal year, the District did not transfer any funds to the fiduciary funds. NOTE 7 - ACCOUNTS PAYABLE Accounts payable for the primary government consisted of the following: Primary Government 2011 2010 Accrued payroll and benefits $ 1,751,609 $ 1,780,576 State apportionment 443,650 1,906,682 State categorical 26,549 14,221 Construction 1,517,364 4,095,532 Other 3,292,180 1,706,679 Total $ 7,031,352 $ 9,503,690 Discretely Presented Component Unit The accounts payable of the Foundation consist primarily of amounts owed to vendors for supplies and services. NOTE 8 - SHORT-TERM BORROWING On August 1, 2010, the District issued $4,675,000 Tax and Revenue Anticipation Notes bearing interest at 2.00 percent. The notes were issued to supplement cash flows. Interest and principal were due and paid on June 30, 2011. There is no outstanding balance as of year end. 35
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 9 - DEFERRED REVENUE Deferred revenue consisted of the following: Primary Government 2011 2010 Federal categorical aid $ 74,626 $ 159,375 State categorical aid 1,901,835 1,945,303 Enrollment fees 225,513 451,701 Other local 167,730 72,352 Total $ 2,369,704 $ 2,628,731 36
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 10 - LONG-TERM OBLIGATIONS Summary The changes in the District's long-term obligations during the 2011 fiscal year consisted of the following: Bonds Balance Balance Beginning Additions/ End Due in of Year Accretion Deductions of Year One Year General obligation bonds, Series 2002A $ 6,435,000 $ - $ 1,825,000 $ 4,610,000 $ 1,770,000 General obligation bonds, Series 2005B 68,990,000-805,000 68,185,000 970,000 General obligation bonds, 2005 Refunding Bonds 895,000-895,000 - - General obligation bonds, Series 2007C 80,986,128 760,824 1,945,000 79,801,952 1,995,000 Lease revenue bonds, Series 2006A 2,565,000-55,000 2,510,000 75,000 Lease revenue bonds, Series 2008A 10,572,373 310,411 70,000 10,812,784 90,000 Unamortized bond premium 8,070,330-657,825 7,412,505 - Redevelopment agreement payable 2,760,000-140,000 2,620,000 140,000 Note payable 4,411,401-810,972 3,600,429 845,155 Total Bonds and Notes Payable 185,685,232 1,071,235 7,203,797 179,552,670 5,885,155 Other Liabilities Compensated absences 1,292,575-7,535 1,285,040 - Net OPEB obligation 814,859 1,417,000 1,001,414 1,230,445 - Voluntary Retirement Incentive 3,612,418-541,863 3,070,555 541,863 Capital leases 43,400-43,400 - - Total Other Liabilities 5,763,252 1,417,000 1,594,212 5,586,040 541,863 Total Long-Term Obligations $ 191,448,484 $ 2,488,235 $ 8,798,009 $ 185,138,710 $ 6,427,018 37
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 The changes in the District's long-term obligations during the 2010 fiscal year consisted of the following: Bonds *Balance Balance Beginning Additions/ End Due in of Year Accretion Deductions of Year One Year General obligation bonds, Series 2002A $ 8,325,000 $ - $ 1,890,000 $ 6,435,000 $ 1,825,000 General obligation bonds, Series 2005B 69,640,000-650,000 68,990,000 805,000 General obligation bonds, 2005 Refunding Bonds 8,520,000-7,625,000 895,000 895,000 General obligation bonds, Series 2007C 81,186,077 740,051 940,000 80,986,128 1,945,000 Lease revenue bonds, Series 2006A 2,600,000-35,000 2,565,000 55,000 Lease revenue bonds, Series 2008A 10,030,666 571,707 30,000 10,572,373 70,000 Unamortized bond premium 8,728,155-657,825 8,070,330 657,825 Redevelopment agreement payable 2,900,000-140,000 2,760,000 140,000 Note payable 5,189,573-778,172 4,411,401 810,972 Total Bonds and Notes Payable 197,119,471 1,311,758 12,745,997 185,685,232 7,203,797 Other Liabilities Compensated absences 1,471,528-178,953 1,292,575 - Net OPEB obligation 386,335 1,038,878 610,354 814,859 - Voluntary Retirement Incentive - 3,612,418-3,612,418 541,863 Capital leases 99,354-55,954 43,400 43,400 Total Other Liabilities 1,957,217 4,651,296 845,261 5,763,252 585,263 Total Long-Term Obligations $ 199,076,688 $ 5,963,054 $ 13,591,258 $ 191,448,484 $ 7,789,060 * Restated - See Note 16. Description of Debt Payments on the general obligation bonds are made by the Bond Interest and Redemption Fund with local property tax revenues. 38
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 The lease revenue bonds issued in 2006, were to fund various capital improvement projects at the Fontana Center. At June 30, 2011, $2,510,000 was outstanding. The bonds mature through January 2023, with interest rates ranging from 3.5 percent to 5.81 percent. Payments will be made from the unrestricted Capital Projects Fund or the unrestricted General Fund. The lease revenue bonds issued in 2008, were to fund various capital improvement projects at the Fontana Center. At June 30, 2011, $10,812,784 was outstanding. The bonds mature through January 2038, with interest rates ranging from 3.5 percent to 4.25 percent. Payments will be made from the Capital Projects Fund or the unrestricted General Fund. The notes payable issued in 2005 in the amount of $8,000,000 were to design and construct the Central Plant project for the purpose of promoting feasible means of energy conservation and a feasible use of alternative energy sources. At June 30, 2011, $3,600,429 was outstanding. The notes mature through May 2015 with an interest rate of 4.15 percent. Payments will be made from the Capital Projects Fund or the unrestricted General Fund. The compensated absences will be paid by the fund for which the employee worked. At June 30, 2011, the balance outstanding was $1,285,040. During the 2010 fiscal year, the District adopted a Voluntary Retirement Plan (VRP) to achieve certain projected expenditure reductions in order to meet future fiscal obligations. To be eligible, the employee had to be at least 55 years of age as of June 30, 2010, full-time contract employee and represented by the CCFA and CSEA agreements. Under the VRP, the District makes a contribution to the participants plan account over a five year period (15 percent in years one and two, 20 percent in year three, and 25 percent in years four and five). The contribution is based on 90 percent of the final year base compensation. At June 30, 2011, the obligation for the VRP was $3,070,555. The District will make annual contributions from the unrestricted General Fund and/or the self-insurance fund over the next five years, as noted in the schedule below: Fiscal Year Principal 2012 $ 541,863 2013 722,484 2014 903,104 2015 903,104 Total $ 3,070,555 During fiscal year 2005, the District entered into an agreement with the Fontana Redevelopment Agency to assist in the expansion of the Chaffey College Ralph M. Lewis Fontana Center. The agency purchased the land on behalf of the District, and the District agreed to pay $3,600,000 for the land in annual payments of $140,000. Payments will be made from the Capital Projects Fund. At June 30, 2011, the outstanding balance was $2,620,000. The net OPEB obligation will be paid out of the Self-Insurance Fund. See Note 11 for additional information on the District's OPEB obligation. Capital lease payments are made from the unrestricted General Fund and were paid off during the fiscal year. 39
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Bonded Debt 2002 General Obligation Bonds, Series A General obligation bonds were approved by a local election in March 2002. The total amount approved by the voters was $230,000,000. During June 2002, the District issued 2002 General Obligation Bonds, Series A, in the amount of $47,565,000. At June 30, 2011, $4,610,000 was outstanding. Interest rates range from 3.00 percent to 5.25 percent. 2005 General Obligation Bonds, Series B During May 2005, the District issued the 2005 General Obligation Bonds, Series B in the amount of $75,000,000. The bonds mature beginning on June 1, 2006 through June 1, 2030, with interest yields ranging from 2.65 percent to 4.47 percent. At June 30, 2011, the principal balance outstanding was $68,185,000. 2005 General Obligation Refunding Bonds During May 2005, the District issued the 2005 General Obligation Refunding Bonds in the amount of $26,280,000. The bonds mature beginning on June 1, 2006 through June 1, 2011, with interest yields ranging from 2.65 percent to 3.21 percent. As of June 30, 2011, the principal balance outstanding was paid in full. 2007 General Obligation Bonds, Series C During June 2007, the District issued the 2007 General Obligation Bonds, Series C in the amount of $79,999,966. The bonds issued included $9,769,966 of Capital Appreciation bonds and $70,230,000 of Current Interest bonds. The Capital Appreciation bonds have a maturing principal balance of $15,920,000. The bonds mature beginning on June 1, 2009 through June 1, 2032, with interest yields ranging from 3.99 percent to 4.60 percent. At June 30, 2011, the principal balance outstanding (including accreted interest to date) was $79,801,952. The outstanding general obligation bonded debt is as follows: Bonds Accreted Bonds Issue Maturity Interest Original Outstanding Interest Outstanding Date Date Rate Issue July 1, 2010 Issued Additions Redeemed June 30, 2011 2002 2028 3.00-5.25% $ 47,565,000 $ 6,435,000 $ - $ - $ 1,825,000 $ 4,610,000 2005 2030 2.65-4.47% 75,000,000 68,990,000 - - 805,000 68,185,000 2005 2011 2.65-3.21% 26,280,000 895,000 - - 895,000-2007 2032 3.99-4.60% 79,999,966 80,986,128-760,824 1,945,000 79,801,952 $ 157,306,128 $ - $ 760,824 $ 5,470,000 $ 152,596,952 40
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Debt Service Requirements to Maturity The General Obligation Bonds, Series 2002 A, mature through 2028 as follows: Interest to Fiscal Year Principal Maturity Total 2012 $ 1,770,000 $ 168,363 $ 1,938,363 2013 1,725,000 94,094 1,819,094 2014 80,000 55,437 135,437 2015 75,000 51,469 126,469 2016 75,000 47,531 122,531 2017-2021 375,000 178,594 553,594 2022-2026 370,000 81,125 451,125 2027-2028 140,000 7,000 147,000 Total $ 4,610,000 $ 683,613 $ 5,293,613 The General Obligation Bonds, Series 2005 B, mature through 2030 as follows: Interest to Fiscal Year Principal Maturity Total 2012 $ 970,000 $ 3,275,113 $ 4,245,113 2013 1,160,000 3,239,950 4,399,950 2014 1,360,000 3,196,450 4,556,450 2015 1,570,000 3,145,450 4,715,450 2016 1,800,000 3,082,650 4,882,650 2017-2021 13,125,000 13,860,750 26,985,750 2022-2026 21,955,000 9,835,760 31,790,760 2027-2030 26,245,000 3,422,250 29,667,250 Total $ 68,185,000 $ 43,058,373 $ 111,243,373 41
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 The General Obligation Bonds, Series 2007 C, mature through 2032 as follows: Principal Current (Including Accreted Accreted Interest to Fiscal Year Interest to Date) Interest Maturity Total 2012 $ 1,913,963 $ 81,037 $ 3,511,500 $ 5,506,500 2013 1,880,394 164,606 3,511,500 5,556,500 2014 1,548,771 516,229 3,511,500 5,576,500 2015 1,478,712 691,288 3,511,500 5,681,500 2016 1,408,512 866,488 3,511,500 5,786,500 2017-2021 12,821,600 1,043,400 16,760,250 30,625,250 2022-2026 20,870,000-12,763,750 33,633,750 2027-2031 30,415,000-6,642,750 37,057,750 2032 7,465,000-373,250 7,838,250 Total $ 79,801,952 $ 3,363,048 $ 54,097,500 $ 137,262,500 Lease Revenue Bonds The Lease Revenue Bonds, Series 2006 A, mature through 2023 as follows: Interest to Fiscal Year Principal Maturity Total 2012 $ 75,000 $ 101,863 $ 176,863 2013 95,000 99,050 194,050 2014 115,000 95,487 210,487 2015 140,000 90,887 230,887 2016 165,000 85,287 250,287 2017-2021 1,290,000 302,873 1,592,873 2022-2023 630,000 37,582 667,582 Total $ 2,510,000 $ 813,029 $ 3,323,029 42
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 The Lease Revenue Bonds, Series 2008 A, mature through 2038 as follows: Accreted Interest to Fiscal Year Principal Interest Maturity Total 2012 $ 90,000 $ - $ 218,562 $ 308,562 2013 115,000-214,112 329,112 2014 135,000-208,412 343,412 2015 160,000-203,012 363,012 2016 195,000-195,012 390,012 2017-2021 1,635,000-799,510 2,434,510 2022-2026 3,864,787 1,340,213 251,022 5,456,022 2027-2031 2,830,339 4,799,661-7,630,000 2032-2036 1,679,162 4,135,838-5,815,000 2037-2038 108,496 381,499-489,995 Total $ 10,812,784 $ 10,657,211 $ 2,089,642 $ 23,559,637 Notes Payable The notes mature through 2015 as follows: Interest to Fiscal Year Principal Maturity Total 2012 $ 845,155 $ 136,378 $ 981,533 2013 880,778 100,755 981,533 2014 917,903 63,630 981,533 2015 956,593 24,940 981,533 Total $ 3,600,429 $ 325,703 $ 3,926,132 Redevelopment Agreement Payable Fiscal Year Principal 2012 $ 140,000 2013 140,000 2014 140,000 2015 140,000 2016 140,000 2017-2021 700,000 2022-2026 700,000 2027-2030 520,000 Total $ 2,620,000 43
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Other Postemployment Benefits Obligation The District's annual required contribution for the year ended June 30, 2011, was $1,387,311, and contributions made by the District during the year were $1,001,414. Interest on the net OPEB obligation and adjustments to the annual required contribution were $40,743 and $(11,054), respectively, which resulted in an increase to the net OPEB obligation of $415,586. As of June 30, 2011, the net OPEB obligation was $1,230,455. See Note 11 for additional information regarding the OPEB obligation and the postemployment benefits plan. NOTE 11 - POSTEMPLOYMENT HEALTH CARE PLAN AND OTHER POSTEMPLOYMENT BENEFITS (OPEB) OBLIGATION Plan Description The Postemployment Benefits Plan (the Plan) is a single-employer defined benefit healthcare plan administered by Chaffey Community College District. The Plan provides medical and dental insurance benefits to eligible retirees and their spouses. Membership of the Plan consists of retirees and beneficiaries currently receiving benefits, terminated plan members entitled to but not receiving benefits, and active Plan members. The maximum age for receiving retirement benefits is 65 years old. Funding Policy The contribution requirements of Plan members and the District are established and may be amended by the District and the District's bargaining units. The required contribution is based on projected pay-as-you-go financing requirements with an additional amount to prefund benefits as determined annually through agreements between the District and the bargaining units. For fiscal year 2010-2011, the District contributed $1,001,414 to the Plan, all of which was used for current premiums. Annual OPEB Cost and Net OPEB Obligation The District's annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the payments of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial accrued liabilities (UAAL) (or funding costs) over a period not to exceed 30 years. The following table shows the components of the District's annual OPEB cost for the year, the amount actually contributed to the Plan, and changes in the District's net OPEB obligation to the Plan: Annual required contributions (ARC) $ 1,387,311 Interest on net OPEB obligation 40,743 OPEB adjustment (11,054) Annual OPEB costs 1,417,000 Contributions made (1,001,414) Increase in net OPEB obligation 415,586 Net OPEB obligation, beginning of year 814,859 Net OPEB obligation, end of year $ 1,230,445 44
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Trend Information Trend information for the annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation is as follows: Year Ended Annual OPEB Actual Percentage Net OPEB June 30, Cost Contribution Contributed Obligation 2009 $ 998,921 $ 612,586 61% $ 386,335 2010 1,038,878 610,354 59% 814,859 2011 1,417,000 1,001,414 71% 1,230,445 Funding Status and Funding Progress The funded status of the OPEB plan as of the most recent actuarial date is as follows: Actuarial Accrued Liability (AAL) $ 11,030,076 Actuarial Value of Plan Assets - Unfunded Actuarial Accrued Liability (UAAL) $ 11,030,076 Funded Ratio (Actuarial Value of Plan Assets/AAL) - Covered Payroll $ 31,501,500 UAAL as Percentage of Covered Payroll 35.0% The actuarial accrued liability was determined in a April 29, 2011, valuation. Actuarial valuation of an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the Plan and the annual required contribution of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information, follows the notes to the financial statements and presents multi-year trend information about whether the actuarial value of Plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits. Since the District has obtained one actuarial valuation report, only the one year information is presented. Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive Plan (the Plan as understood by the employer and the Plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and the Plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of shortterm volatility in actuarial accrued liabilities and the actuarial values of assets, consistent with the long-term perspective of the calculations. 45
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 In the June 30, 2011, actuarial valuation, the unprojected unit credit method was used. The actuarial assumptions included a five percent investment rate of return (net of administrative expenses). The UAAL is being amortized at a level percentage method. The District has not funded an irrevocable trust and currently funds the benefits on a pay as you go basis. The District has reserved funds in their self-insurance fund to offset future costs related to the OPEB obligation. The remaining amortization period is 27 years. NOTE 12 - RISK MANAGEMENT Property and Liability The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. During fiscal year ending June 30, 2011, the District contracted with the Southern California Schools Risk Management (SCSRM) Joint Powers Authority for property and liability insurance coverage. Settled claims have not exceeded this commercial coverage in any of the past three years. There has not been a significant reduction in coverage from the prior year. Workers' Compensation For fiscal year 2011, the District participated in the Southern California Schools Risk Management (SCSRM) Joint Powers Authority (JPA), an insurance purchasing pool. The intent of the JPA is to achieve the benefit of a reduced premium for the District by virtue of its grouping and representation with other participants in the JPA. The workers' compensation experience of the participating districts is calculated as one experience, and a common premium rate is applied to all districts in the JPA. Each participant pays its workers' compensation premium based on its individual rate. Total savings are then calculated and each participant's individual performance is compared to the overall saving. A participant will then either receive money from or be required to contribute to the "equity-pooling fund". This "equity pooling" arrangement insures that each participant shares equally in the overall performance of the JPA. Participation in the JPA is limited to K-12 and community college districts that can meet the JPA's selection criteria. Insurance Program / Company Name Type of Coverage Limits CSAC Workers' Compensation $ 125,000 Schools' Excess Liability Fund Excess Workers' Compensation $ 125,000 Southern California Schools Risk Management Property and Liability $ 500,000 Claims Liabilities The District records an estimated liability for indemnity torts and other claims against the District. Claims liabilities are based on estimates of the ultimate costs of reported claims (including future claim adjustment expenses) and an estimate for claims incurred, but not reported based on historical experience. 46
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 13 - EMPLOYEE RETIREMENT SYSTEMS Qualified employees are covered under multiple-employer retirement plans maintained by agencies of the State of California. Certificated employees are members of the California State Teachers' Retirement System (CalSTRS) and classified employees are members of the California Public Employees' Retirement System (CalPERS). CalSTRS Plan Description The District contributes to CalSTRS, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalSTRS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and survivor benefits to beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the State Teachers' Retirement Law. CalSTRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalSTRS annual financial report may be obtained from CalSTRS, 7919 Folsom Blvd., Sacramento, California 95826. Funding Policy Active members are required to contribute 8.0 percent of their salary while the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalSTRS Teachers' Retirement Board. The required employer contribution rate for fiscal year 2010-2011 was 8.25 percent of annual payroll. The contribution requirements of the plan members are established by State statute. The District's total contributions to CalSTRS for the fiscal years ended June 30, 2011, 2010, and 2009, were $2,579,948, $2,761,984, and $2,788,867, respectively, and equal 100 percent of the required contributions for each year. CalPERS Plan Description The District contributes to the School Employer Pool under CalPERS, a cost-sharing multiple-employer public employee retirement system defined benefit pension plan administered by CalPERS. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and survivor benefits to plan members and beneficiaries. Benefit provisions are established by State statutes, as legislatively amended, within the Public Employees' Retirement Laws. CalPERS issue a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the CalPERS' annual financial report may be obtained from the CalPERS Executive Office, 400 P Street, Sacramento, California 95811. 47
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 Funding Policy Active plan members are required to contribute 7.0 percent of their salary (seven percent of monthly salary over $133.33 if the member participates in Social Security), and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the CalPERS Board of Administration. The District's contribution rate to CalPERS for fiscal year 2010-2011 was 10.707 percent of annual payroll. The District's contributions to CalPERS for the fiscal years ending June 30 2011, 2010, and 2009, were $2,000,596, $1,919,864, and $1,826,924, respectively, and equal 100 percent of the required contributions for each year. On Behalf Payments The State of California makes contributions to CalSTRS on behalf of the District. These payments consist of State General Fund contributions to CalSTRS which amounted to $1,344,169, $1,428,499, and $1,526,544, (4.267 percent) of salaries subject to CalSTRS, for the years ended June 30, 2011, 2010, and 2009, respectively. Under accounting principles generally accepted in the United States of America, these amounts are reported as revenues and expenditures. These amounts have been reflected in the financial statements as a component of nonoperating revenue and employee benefit expense. Social Security As established by Federal law, all public sector employees who are not members of their employer's existing retirement system (CalSTRS or CalPERS) must be covered by Social Security or an alternative plan. The District has elected to use Social Security as its plan. Contributions are made by the District and an employee vest immediately. The District contributes 6.20 percent of an employee's gross earnings. An employee is required to contribute 6.20 percent of his or her gross earnings to the pension plan. NOTE 14 - COMMITMENTS AND CONTINGENCIES Deferral of State Apportionments Certain apportionments owed to the District for funding of FTES, categorical programs, and construction reimbursements which are attributable to the 2010-2011 fiscal year have been deferred to the 2011-2012 fiscal year. The total amount of funding deferred into the 2011-2012 fiscal year was $12.7 million. As of July 2011, this amount has been received. These deferrals of apportionment are considered permanent with future funding also being subject to deferral into future years. Fiscal Issues Relating to State-Wide Funding Reductions The State of California economy is continuing through a recessionary economy. The California Community College system is reliant on the State of California to appropriate the funding necessary to provide for the educational services and student support programs that are mandated for the colleges. 48
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 In addition to the deferral of cash payments, actual reductions in the funding of FTES has reduced the District's State apportionment funding. Significant reductions in funding for other categorical programs and services have also impacted the ability of the District to provide programs and services to the students attending Chaffey Community College District. Grants The District receives financial assistance from Federal and State agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with terms and conditions specified in the grant agreements and are subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the District. However, in the opinion of management, any such disallowed claims will not have a material adverse effect on the overall financial position of the District at June 30, 2011. Litigation The District is involved in various litigation arising from the normal course of business. In the opinion of management and legal counsel, the disposition of all litigation pending is not expected to have a material adverse effect on the overall financial position of the District at June 30, 2011. Operating Leases The District has entered into various operating leases for classroom/office facilities. All leases contain termination clauses providing for cancellation by the contracted parties. It is expected that in the normal course of business, most of these leases will be replaced by similar leases. Expenditures for rent under leases for the year ended June 30, 2011, amounted to approximately $187,627. Construction Commitments The District is involved with various long-term construction and renovation projects throughout the District. The projects are in various stages of completion and are funded through the vote approved General Obligation Bonds. The outstanding commitments at June 30, 2011, were approximately $14.5 million. The projects are funded through a combination of general obligation bonds and capital project apportionments from the State Chancellor's Office. Construction Agreement with Fontana Redevelopment Agency During fiscal year 2007, the District entered into a Public Improvements Loan agreement with Fontana Redevelopment Agency to assist in the expansion of the District's Fontana Center. The District has drawn down all available funds, $700,000. If funds are available upon completion of the third phase of the project, the District is obligated to pay the Agency up to the amount drawn down with the Redevelopment Agency pass-through funds. Payment is only due when the pass-through funds are available after debt service payments are made from existing bond projects. 49
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 AND 2010 NOTE 15 - PARTICIPATION IN PUBLIC ENTITY RISK POOLS AND JOINT POWERS AUTHORITIES The District is a member of the Southern California Schools Risk Management (SCSRM) joint powers authority (JPA) public entity risk sharing pools for property/liability and the Southern California Schools Employee Benefits Association (SCSEBA) JPA public entity risk sharing pools for workers' compensation. The District pays annual premiums to both entities for its workers' compensation and property liability coverage. The relationship between the District and both pools is such that it is not a component unit of the District for financial reporting purposes. These JPAs have budgeting and financial reporting requirements independent of member units and their financial statements are not presented in these financial statements; however, fund transactions between the JPAs and the District are included in these statements. Audited financial statements are available from the respective entities. The District's share of year-end assets, liabilities, or fund equity has not been calculated. During the year ended June 30, 2011, the District made payments of $1,462,558 and $2,626,115 to SCSRM and SCSEBA, respectively. NOTE 16 - RESTATEMENT The financial statements reflect a correction of accumulated accounting errors which were discovered and reconciled by management. Management has accumulated all required information for capital assets and related long-term debt, and prepared the information necessary for financial statement disclosure. Government-Wide Financial Statements Net Assets - Fiscal year 2010 beginning of year $ 172,505,801 Understatement of capital assets 4,474,045 Understatement of long-term debt (2,900,000) Net Assets - Fiscal year 2010 beginning of year restated $ 174,079,846 NOTE 17 - SUBSEQUENT EVENTS The District issued $5,000,000 of Tax and Revenue Anticipation Notes dated August 1, 2011. The notes mature on June 29, 2012, and yield 2.00 percent interest. The notes were issued to supplement cash flows. 50
REQUIRED SUPPLEMENTARY INFORMATION 51
SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDING PROGRESS FOR THE YEAR ENDED JUNE 30, 2011 Actuarial Accrued Liability Unfunded UAAL as a Actuarial (AAL) - AAL Percentage of Valuation Actuarial Value Entry Age (UAAL) Funded Ratio Covered Covered Payrol Date of Assets (a) Normal (b) (b - a) (a / b) Payroll (c) ([b - a] / c) June 30, 2009 $ - $ 7,573,262 $ 7,573,262 $ - $ 33,795,527 22% April 29, 2011-11,030,076 11,030,076 $ - 31,501,500 35% 52
SUPPLEMENTARY INFORMATION 53
DISTRICT ORGANIZATION JUNE 30, 2011 Chaffey Community College was founded as a private college in 1883, and was one of the first colleges to be established in California. Chaffey College has been publicly supported since 1916. The College District is comprised of approximately 310 square miles in the western portion of San Bernardino County. The curriculum offered includes lower division courses for students planning to transfer to a four-year college or university. Also offered are general education courses designed to provide continuing educational opportunities to students. The District serves the communities of Rancho Cucamonga, Upland, Ontario, Chino, Chino Hills, Fontana, and Montclair. The College is accredited through the Western Association of Schools and Colleges. GOVERNING BOARD MEMBER OFFICE TERM EXPIRES Katie Roberts President December 2013 Paul J. Gomez Vice President December 2011 Lee C. McDougal Clerk December 2011 Gary L. George Immediate Past President December 2011 Kathleen R. Brugger Member December 2013 Richard Berlo Student Trustee May 2012 ADMINISTRATION Henry D. Shannon, Ph.D. Stephen W. Menzel, Jr. Sherrie L. Guerrero, Ed.D. Ciriaco "Cid" Pinedo, Ed.D. Superintendent/President Interim Vice President, Business Operations Vice President of Instruction and Student Services Interim Vice President, Administrative Services and External Relations See accompanying note to supplementary information. 54
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2011 Pass-Through Entity Federal Grantor/Pass-Through CFDA Identifying Federal Grantor/Program Number Number Expenditures U.S. DEPARTMENT OF EDUCATION Student Financial Assistance Cluster Pell Grant 84.063 $ 27,576,140 Pell Grant - Administration 84.063 42,247 Supplemental Education Opportunity Program 84.007 270,000 Supplemental Education Opportunity Program - Administration 84.007 13,817 College Work Study 84.033 435,396 College Work Study - Administration 84.033 21,769 Academic Competitiveness Grant 84.375 167,264 Total Student Financial Assistance Cluster 28,526,633 Career and Technical Education Grants 84.048 834,325 Improvement of Learning Strategies Services to Hispanic and Other Low Income Engineering, Math, and Sciences Students 84.031C 486,664 Developing Hispanic Service Institutions Program (Title V) 84.031S 274,061 Child Care Access Means Parent in School Grant (CAMPIS) 84.335A 47,275 Pass through from California Community Colleges Chancellor's Office Tech Prep Program Allocation 84.243 10-139-920 69,708 State Fiscal Stabilization Funds - ARRA 84.394 [1] 35,941 Pass through from California State Department of Rehabilitation State Rehabilitation Services Program Workability III 84.126A 27332 140,940 State Rehabilitation Services Program Workability III - ARRA 84.390A 27569A 25,639 Total U.S. Department of Education 30,441,186 U.S. DEPARTMENT OF AGRICULTURE Child Care Food Program 10.558 52,494 Forest Reserve 10.665 2,349 Total U.S. Department of Agriculture 54,843 [1] Pass-Through Entity Identifying Number not available. See accompanying note to supplementary information. 55
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS, (CONTINUED) FOR THE YEAR ENDED JUNE 30, 2011 Pass-Through Entity Federal Grantor/Pass-Through CFDA Identifying Federal Grantor/Program Number Number Expenditures U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Temporary Assistance for Needy Families Cluster Pass through from California Community Colleges Chancellor's Office Temporary Assistance for Needy Families (TANF) 93.558 [1] $ 145,111 Temporary Assistance for Needy Families (TANF) - CDC 93.558 1012-05 54,442 Pass through from County of San Bernardino Transitional Assistance Department Vocational Education and Training 93.558 08-548 A-2 93,601 Total Temporary Assistance for Needy Families Cluster 293,154 Child Care and Development Fund Cluster Pass through from California Department of Education Child Care and Development Program - Federal Block Grants 93.596 CCTR-0235 304,318 California State Preschool Program 93.596 CSPP-0431 93,613 Infant Toddler Resource 93.713 CCAP-0079 1,090 Pass through from Yosemite Community College District Child Development Training Consortium 93.575 11-G07-1 7,500 Total Child Care and Development Fund Cluster 406,521 Total U.S. Department of Health and Human Services 699,675 U.S. DEPARTMENT OF LABOR EMPLOYMENT Workforce Investment Board Act Cluster (WIA) Pass through from Mt. San Antonio Community College District Workforce Investment Act Board Act: Health Care Sector and Other High Growth and Emerging Industry - ARRA 17.258 GJ-20034-10-60-A-6 136,545 Pass through from Mt. San Antonio Community College District Workforce Investment Act Board Act: MSSC Logistics ARRA 17.258 [1] 24,526 Total U.S. Department of Labor Employment 161,071 Total Federal Programs $ 31,356,775 [1] Pass-Through Entity Identifying Number not available. See accompanying note to supplementary information. 56
SCHEDULE OF EXPENDITURES OF STATE AWARDS FOR THE YEAR ENDED JUNE 30, 2011 Program Entitlements Prior Current Year Total Program Year Carryover Entitlement Alliance for Education $ 6,038 $ - $ 6,038 Basic Skills - 918,773 918,773 Building Performance Institute Grant - 195,741 195,741 Cal Grants 1,474,719-1,474,719 CalWORKS 272,803-272,803 Campus Child Care Tax Bailout 139,504-139,504 Care Program 76,512 3,508 80,020 Career Tech Engineering Collaborative 400,000 395,434 795,434 DPS 615,714 29,718 645,432 Employment Training Grant 258,993 396,217 655,210 Extended Opportunity Program and Services (EOPS) 643,281 301 643,582 ETP Logistics 113,305-113,305 General - State Portion 323,443-323,443 Hope Grant, Year 3-164,296 164,296 Hope Grant, Year 4 275,862-275,862 Hope Grant - Restricted Holding 85,095-85,095 Instructional Equipment and Library Materials - 156,894 156,894 Instructional Equipment Block Grant 06/07 One Time - 9,480 9,480 One-Time Instructional Equipment - 69,863 69,863 Part-Time Faculty Allocation 301,589-301,589 Physical Plant and Instructional Support - 4,318 4,318 Physical Plant and Instructional Equipment Block Grant - 138,767 138,767 Puente Project 1,500-1,500 RHORC 10,000-10,000 Matriculation 498,234 37,597 535,831 Non-Credit Matriculation 18,572 32 18,604 Nursing Enrollment Grant - 118,187 118,187 Nursing Equipment Grant Year 2-31,207 31,207 Scheduled Maintenance - 64,382 64,382 Staff Diversity 32,791-32,791 State Meal Reimbursement 3,500-3,500 Student Financial Assistance Programs (BFAP) 510,036 67,597 577,633 Technology Grant 2002-2003 - 24,504 24,504 Technology Grant 2004-2005 - 4,089 4,089 Technology Grant 2005-2006 - 15,928 15,928 Technology Grant 2006-2007 - 10,845 10,845 Technology Grant 2007-2008 - 10,181 10,181 Technology Grant 2008-2009 - 27,066 27,066 West End Career Tech Education 130,000-130,000 Workforce Innovative Partnership 150,000-150,000 Total State Programs See accompanying note to supplementary information. 57
Program Revenues Cash Accounts Deferred Total Program Received Receivable (Payable) Revenue Revenue Expenditures $ 6,038 $ - $ - $ 6,038 $ 2,704 918,773-510,438 408,335 408,335 195,741 - - 195,741 195,741 1,474,719-1,428 1,473,291 1,473,291 272,803 - - 272,803 272,803 139,504 - - 139,504 139,504 76,472 - - 76,472 76,472 795,434-542,128 253,306 253,306 645,432 - - 645,432 645,432-194,802-194,802 194,802 643,582 - - 643,582 643,582-25,059-25,059 25,059 252,565 (9,571) - 242,994 242,994-132,487-132,487 132,487 275,862 - - 275,862 174,988 85,095-85,095 - - 156,894-138,387 18,507 18,507 9,480-9,480 - - 69,863-47,045 22,818 22,818 301,589 - - 301,589 301,589 4,318-4,318 - - 138,767-88,824 49,943 49,943 1,500 - - 1,500 1,500 10,000-3,233 6,767 6,767 535,831 - - 535,831 535,831 18,604 - - 18,604 18,604 99,277-2,061 97,216 97,216 - - - - 31,201 64,382-8,092 56,290 56,290 32,791-32,791 - - 3,138 - - 3,138 3,271 577,626-523,169 54,457 54,457 - - - - - 4,089-4,089 - - 15,928-15,635 293 293 10,845-10,692 153 153 10,181-10,181 - - 27,066-26,996 70 70 130,000-130,000 - - 150,000-95,023 54,977 54,977 $ 8,154,189 $ 342,777 $ 2,289,105 $ 6,207,861 $ 6,134,987 57
SCHEDULE OF WORKLOAD MEASURES FOR STATE GENERAL APPORTIONMENT FOR THE YEAR ENDED JUNE 30, 2011 CATEGORIES Reported Audit Audited Data Adjustments Data Credit Full-Time Equivalent Student (FTES) A. Summer Intersession (Summer 2010 only) 1. Credit 727-727 B. Summer Intersession (Summer 2011 - Prior to July 1, 2011) 1. Credit 265-265 C. Primary Terms (Exclusive of Summer Intersession) 1. Census Procedure (a) Weekly Census Contact Hours 10,396-10,396 (b) Daily Census Contact Hours 858-858 2. Actual Hours of Attendance (a) Credit 644-644 3. Independent Study/Work Experience (a) Weekly Census Procedures Courses 877-877 (b) Daily Census Procedures Courses 353-353 Subtotal Credit Courses 14,120-14,120 Noncredit FTES A. Summer Intersession (Summer 2010 only) 1. Noncredit 58-58 B. Summer Intersession (Summer 2011 - Prior to July 1, 2011) 1. Noncredit - - - C. Primary Terms (Exclusive of Summer Intersession) 1. Actual Hours of Attendance (a) Noncredit 350-350 2. Independent Study/Work Experience (a) Noncredit Independent Study - - - Subtotal Non Credit Courses 408-408 Total FTES 14,528-14,528 Basic Skills Courses 1. Noncredit 398 2. Credit 1,234 1,632 See accompanying note to supplementary information. 58
RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT (CCFS-311) WITH AUDITED FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2011 Summarized below are the fund balance reconciliations between the Annual Financial and Budget Report (CCFS-311) and the audited fund balance. Unrestricted General Fund FUND BALANCE Balance, June 30, 2011, (CCFS-311) $ 19,038,131 Decrease in: Accounts Receivable (412,109) Balance, June 30, 2011 Fund Financial Statement $ 18,626,022 See accompanying note to supplementary information. 59
RECONCILIATION OF GOVERNMENTAL FUNDS TO THE STATEMENT OF NET ASSETS JUNE 30, 2011 Amounts Reported for Governmental Activities in the Statement of Net Assets are Different Because: Total Fund Balance and Retained Earnings General Fund $ 18,742,845 Special Revenue Funds 4,232,687 Capital Projects Funds 20,212,223 Debt Service Funds 11,240,500 Proprietary Funds 2,077,654 Fiduciary Funds 517,826 Capital assets used in governmental activities are not financial resources and, therefore, are not reported as assets in governmental funds. The cost of capital assets is 351,589,396 Accumulated depreciation is (47,933,933) $ 57,023,735 303,655,463 Expenditures relating to the issuance of debt were recognized on modified accrual basis, are amortized over the life of the debt on the accrual basis. 2,304,657 In governmental funds, unmatured interest on long-term obligations is recognized in the period when it is due. On the government-wide financial statements, unmatured interest on long-term obligations is recognized when it is incurred. (737,091) Amounts held in trust on behalf of others (Trust and Agency Funds) (516,159) Long-term obligations at year-end consist of: Bonds and notes payable 179,552,670 Early retirement incentive 3,070,555 Compensated absences (vacations) 1,285,040 Net OPEB obligation 1,230,445 (185,138,710) Total Net Assets $ 176,591,895 See accompanying note to supplementary information. 60
NOTE TO SUPPLEMENTARY INFORMATION JUNE 30, 2011 NOTE 1 - PURPOSE OF SCHEDULES District Organization This schedule provides information about the District's governing board members and administration members. Schedule of Expenditures of Federal Awards The accompanying Schedule of Expenditures of Federal Awards includes the Federal grant activity of the District and is presented on the modified accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of the United States Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Schedule of Expenditures of State Awards The accompanying Schedule of Expenditures of State Awards includes the State grant activity of the District and is presented on the modified accrual basis of accounting. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. The information in this schedule is presented to comply with reporting requirements of the California State Chancellor's Office. Schedule of Workload Measures for State General Apportionment Full-Time Equivalent Students (FTES) is a measurement of the number of pupils attending classes of the District. The purpose of attendance accounting from a fiscal standpoint is to provide the basis on which apportionments of State funds, including restricted categorical funding, are made to community college districts. This schedule provides information regarding the annual attendance measurements of students throughout the District. Reconciliation of Annual Financial and Budget Report (CCFS-311) With Audited Fund Balance This schedule provides the information necessary to reconcile the fund balance of all funds reported on the Form CCFS-311 to the District's internal fund financial statements. Reconciliation of Governmental Funds to the Statement of Net Assets This schedule provides a reconciliation of the adjustments necessary to bring the District's internal fund financial statements, prepared on a modified accrual basis, to the entity-wide full accrual basis financial statements required under GASB Statements No. 34 and 35 business-type activities reporting model. 61
INDEPENDENT AUDITORS' REPORTS 62