Centralia College
Celebrating Our 90th Year of Continuous Service
2015 Financial Report
Centralia College 2015 Financial Report
The Washington State Auditor’s Office (SAO) recognized Centralia College with their
Stewardship Award for the College’s work associated with its 2014 financial statement audit.
centralia.edu
Centralia College
2015 Financial Statements
and
Required Supplementary Information
Letter of Transmittal……………………………………………………………………………………………………………….2
Board of Trustees and Administrative Officers………………………………………………………………………..3
Independent Auditor’s Report………………………………………………………………………………………………..4
Management’s Discussion and Analysis……………………………………………………………………………….…7
Statement of Net Position (College)…….………………………………………………………..…………………..…14
Statement of Revenues, Expenses and Changes in Net Position (College)….………………………….15
Statement of Cash Flows (College)...….………………………………………………………………………….……..16
Statement of Financial Position (Foundation)……..………………………………………………………….…….18
Statement of Activities and Changes in Net Assets (Foundation)….………………………………………19
Notes to the Financial Statements…………………………………………………………………………………………20
Required Supplementary Information…..………………………………………………………………………………36
Page | 1
Letter of Transmittal
Centralia College 2015 Financial Report
Stephen L. Ward, CPA MPA
Joanne Schwartz, Board Chair
Board of Trustees
Centralia College
Centralia, WA 98531
Dear Chair Schwartz:
I am pleased to submit the 2015 Annual Financial Report of Centralia College.
Centralia College had a busy 2014-2015. We went down to the wire, but on June 30, 2015, the state legislature
passed a capital budget which included funding for the College’s TransAlta Commons Project. We broke ground
on this project the following month. This will be the largest capital project in College history with a total budget
of $40 million. We also completed our 2nd financial statement audit for 2015 for which the State Auditors’ Office
(SAO) has issued another clean (unqualified) opinion on the College’s financial statements. The College continues
to be a leader in the area of financial reporting in the community and technical college system, being recognized
by the State Auditors’ Office, earning their Stewardship Award for the College’s efforts with our initial 2014
financial statement audit. We were the first public institution of higher education in the state of Washington, and
the first agency of the state of Washington, to earn this award.
The College does have challenges. For 2015, we were required by law to implement a new pension accounting
standard, which had a significant impact on the College’s unrestricted net position, in the amount of $4.6 million.
We also continue to be challenged by lower enrollment levels and lean state operating budget appropriations. In
the future, the College will also be being looking to fill the College President position. We know that with direction
and guidance from the Board of Trustees, we will meet these challenges head on.
Sincerely,
Stephen L. Ward, Vice President Finance and Administration
Page | 2
Board of Trustees and Administrative Officers
Centralia College 2015 Financial Report
Board of Trustees
Joanne Schwartz, Chair
Doris Wood-Brumsickle, M.A., Vice Chair
Dr. Joe Dolezal
Stuart Halsan, J.D.
Jim Lowery
Administrative Officers
Dr. James M. Walton, Interim President
Stephen Ward, M.P.A., C.P.A., Vice President Finance and Administration
John Martens, M.S., Vice President Instruction
Julie Ledford, J.D., Vice President Human Resources
Robert Cox, M.Ed., Vice President Student Services
Marla Miller, Director of Fiscal Services
Page | 3
Washington State Auditor’s Office
INDEPENDENT AUDITOR’S REPORT
March 22, 2016
Centralia College
Centralia, Washington
REPORT ON THE FINANCIAL STATEMENTS
We have audited the accompanying financial statements of the business-type activities and the
aggregate discretely presented component units of the Centralia College, Lewis County,
Washington, as of and for the year ended June 30, 2015, and the related notes to the financial
statements, which collectively comprise the College’s basic financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with accounting principles generally accepted in the United States of America; this
includes the design, implementation, and maintenance of internal control relevant to the
preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We did
not audit the financial statements of the Centralia College Foundation, which represents 100 percent
of the assets, net position and revenues of the aggregate discretely presented component units. Those
statements were audited by other auditors, whose report has been furnished to us, and our opinion,
insofar as it relates to the amounts included for the Centralia College Foundation, is based solely on
the report of the other auditors. We conducted our audit in accordance with auditing standards
generally accepted in the United States of America and the standards applicable to financial
audits contained in Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free from material misstatement. The financial
statements of the Centralia College Foundation were not audited in accordance with Government
Auditing Standards.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
Page | 4
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the College’s preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the College’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of significant accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinions.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of the business-type activities and the aggregate discretely
presented component units of the Centralia College, as of June 30, 2015, and the respective
changes in financial position and, where applicable, cash flows thereof for the year then ended in
accordance with accounting principles generally accepted in the United States of America.
Matters of Emphasis
As discussed in Note 1, the financial statements of the Centralia College, an agency of the state
of Washington, are intended to present the financial position, and the changes in financial position,
and where applicable, cash flows of only the respective portion of the activities of the state of
Washington that is attributable to the transactions of the College and its aggregate discretely
presented component units. They do not purport to, and do not, present fairly the financial
position of the state of Washington as of June 30, 2015, the changes in its financial position, or
where applicable, its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America. Our opinion is not modified with respect to
this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis and pension plan information be presented to supplement
the basic financial statements. Such information, although not a part of the basic financial
statements, is required by the Governmental Accounting Standards Board who considers it to be
an essential part of financial reporting for placing the basic financial statements in an appropriate
operational, economic or historical context. We have applied certain limited procedures to the
required supplementary information in accordance with auditing standards generally accepted in
the United States of America, which consisted of inquiries of management about the methods of
Page | 5
preparing the information and comparing the information for consistency with management’s
responses to our inquiries, the basic financial statements, and other knowledge we obtained during
our audit of the basic financial statements. We do not express an opinion or provide any assurance
on the information because the limited procedures do not provide us with sufficient evidence
to express an opinion or provide any assurance.
Supplementary and Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the College’s basic financial statements as a whole. The President’s Letter of
Transmittal, Board of Trustees and Administrative Officers and Photographs are presented for
purposes of additional analysis and are not a required part of the basic financial statements. Such
information has not been subjected to the auditing procedures applied in the audit of the basic financial
statements and, accordingly, we do not express an opinion or provide any assurance on it.
OTHER REPORTING REQUIRED BY GOVERNMENT AUDITING
STANDARDS
In accordance with Government Auditing Standards, we have also issued our report dated March
22, 2016 on our consideration of the College’s internal control over financial reporting and on
our tests of its compliance with certain provisions of laws, regulations, contracts and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing
of internal control over financial reporting and compliance and the results of that testing, and not
to provide an opinion on internal control over financial reporting or on compliance. That report
is an integral part of an audit performed in accordance with Government Auditing Standards in
considering the College’s internal control over financial reporting and compliance.
JAN M. JUTTE, CPA, CGFM
DEPUTY STATE AUDITOR
OLYMPIA, WA
Page | 6
Management’s Discussion and Analysis
Centralia College
The following management discussion and analysis (MD&A) provides an overview of the financial position and activities
of Centralia College (“College”) for the year ended June 30, 2015, with comparative 2014 financial information. The MD&A
provides the reader with an objective and easily readable analysis of the College’s financial performance for the year,
based on facts, decisions and conditions. This discussion has been prepared by management and should be read in
conjunction with the financial statements and accompanying notes which follow this section. Unless otherwise stated, all
years refer to the fiscal year ended June 30.
Reporting Entity
Centralia College is one of 34 public institutions of higher education in the state of Washington overseen by the State
Board for Community and Technical Colleges (SBCTC). The College is governed by a Board of five Trustees, which has
broad responsibilities to supervise, coordinate, manage and regulate the College as provided by state law. Trustees are
appointed by the Governor for a term of five years, with consent of the Senate.
In 2015 the College was accredited as a baccalaureate institution by the Northwest Commission on Colleges and
Universities. The College offers associate degrees in six academic programs, and two baccalaureate degrees in Applied
Science.
The College is the oldest continuously operating two-year public college in the state of Washington, was established in
1925 and currently averages approximately 3,800 full-time and part-time students per academic quarter. The College’s
main campus is located in Centralia, and serves Lewis and south Thurston counties with a population of over 75,000, and
has a satellite campus in Morton.
Using the Financial Statements
The College reports as a business-type activity as defined by Governmental Accounting Standards Board (GASB) Statement
No. 35, Basic Financial Statements – Management’s Discussion and Analysis – for Public Colleges and Universities, as
amended. Under this model, the financial report includes three financial statements, the Statement of Net Position, the
Statement of Revenues, Expenses and Changes in Net Position and the Statement of Cash Flows. The financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America. The
Governmental Accounting Standards Board (GASB) is the accepted accounting standard setting body for establishing
governmental accounting and financial reporting principles.
GASB Statement No. 39, Determining Whether Certain Organizations are Component Units requires a college to report an
organization that raises and holds economic resources for the direct benefit of a government unit. Under this
requirement, the Centralia College Foundation is a component unit of the College and their financial statements are
discretely presented into this financial report.
In 2015, the College adopted GASB Statement No. 68, as amended by GASB Statement No. 71. The thrust of these two
GASB statements requires the College to record its proportionate share of net pension liabilities, deferred outflows and
inflows of resources. This is done by restating 2014 net position, pension liabilities and deferral of resources as a change
in accounting principle. For the purpose of this analysis, the restatement of 2014’s net position was made to conform to
2015 presentation. The change in accounting principle is noted as follows:
Centralia College 2015 Financial Report
Page | 7
Management’s Discussion and Analysis
(Dollars in thousands)
Net Position as previously reported at June 30, 2014
Prior period adjustment:
Net Pension Liability
Deferred Outflows
Total prior period adjustment
Net Position, as restated, July 1, 2014
$
65,766
$
(5,057)
442
(4,615)
61,151
Statement of Net Position
The Statement of Net Position provides information about the College’s financial position, which includes the College’s
assets, deferred outflows, liabilities, deferred inflows and net positon at year-end. A condensed comparison of the
Statements of Net Position as of June 30, 2015 and 2014, follows:
Condensed Statements of Net Position
As of June 30 (in thousands)
ASSETS
Current assets
Capital, net
Other non-current assets
Total assets
DEFERRED OUTFLOWS
LIABILITIES
Current liabilities
Other non-current liabilities
Total liabilities
DEFERRED INFLOWS
NET POSITION (restated)
2015
$
$
17,841
51,454
2,158
71,453
493
1,895
5,043
6,938
1,431
63,577
2014
$
$
17,339
49,462
2,452
69,253
442
1,959
6,585
8,544
61,151
Current assets consist of cash, accounts receivable and inventories. The modest increase in current assets can be mainly
attributed to a $300,000 increase in amounts due from the Washington State Treasurer for spending on capital
appropriations, as the College was ramping up the construction of the $40 million TransAlta College Commons Project,
which had its official groundbreaking in June 2015. Capital assets increased by a net of $2 million, asset purchases of $3.6
million, less depreciation expense of $1.6 million. The $3.6 million of asset purchases were mainly associated with the
TransAlta project, though other capital work included exterior work on the student center, college signage and parking.
The $300,000 decrease in other non-current assets was the result of the use of restricted cash associated with unspent
fees collected for the student portion of funding for the TransAlta College Commons Project. More information on the
College’s capital assets can be found in footnote 7 to the financial statements.
Deferred outflows, for both 2014 and 2015, are comparable, and were the result of the College’s adoption of GASB
Statement No. 68.
Current liabilities include accounts payable, accrued payroll and associated liabilities and unearned revenues. The modest
decrease in current liabilities was the result of fluctuations from year to year, depending on the receipt of vendor invoices,
and timing of payment of these invoices.
Centralia College 2015 Financial Report
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Management’s Discussion and Analysis
Other non-current liabilities are made up of pension liabilities, vacation and sick leave balances. As previously noted, the
College adopted GASB Statement No. 68, resulting in a restatement of certain balances in 2014, including a $5.1 million
pension liability. The pension liability, while a financial obligation of the College; it is management’s position that if the
College were to see an increase to their employer contractually required contributions to fund the pension liability, most
of the funding would be provided through the State’s legislative appropriation process.
In 2015, the pension liability decreased by $1.6 million, due mainly to the difference between the projected versus actual
earnings on pension plan investments of $1.4 million, which explains both the decrease in non-current liabilities and the
offsetting increase in deferred inflows. The College has no long-term debt for either 2014 or 2015, see footnote 9 to the
financial statements.
The College has a strong balance sheet for both 2014 and 2015, with continued improvement in 2015. The College’s
current ratio, a financial measure used to determine the College’s ability to pay its short-term obligations, and calculated
by dividing current assets over current liabilities, improved from 8.85 in 2014 to 9.42 in 2015. Further, the College’s quick
ratio, a financial measure which measures the short-term liquidity of the College and calculated by dividing cash, shortterm investments and accounts receivables over current liabilities, improved from 8.65 in 2014 to 9.19 in 2015.
Net position represents the difference between the College’s assets plus deferred outflows, less liabilities and deferred
inflows, and measures whether the financial condition has improved or worsened during the year. The College reports its
net position in three categories:
Investment in capital assets – The College’s total investment in property, plant and equipment, net of
accumulated depreciation and any outstanding debt attached to its capital assets. The College had no debt related
to its capital assets in 2014 or 2015. To the extent of restricted cash and cash equivalents for capital projects
collected, but not yet spent, these amounts are not included as a component of capital assets, instead are included
as a component of restricted net position, expendable described below.
Restricted net position, expendable – Includes resources in which the College is legally or contractually obligated
to spend in accordance with restrictions placed by the donor or external parties.
Unrestricted net position – These represent all the other resources available to the College for general and
educational obligations to meet expenses for any lawful purpose. Unrestricted net positon is not subject to
externally imposed stipulations, however the College has designated the majority of the unrestricted net position
for various academic and support functions.
Condensed Net Position
As of June 30 (in thousands)
Investment in capital assets
Restricted expendable
Unrestricted (restated)
2015
$
51,454
2,717
9,406
$
63,577
2014
$
49,462
3,178
8,511
$
61,151
Various factors are involved in the increase in overall net positon, the net increase of $2 million for investment in capital
assets, after depreciation expense of $1.6 million, was the primary reason for the increased net position. The decrease of
restricted expendable are due to the spend-down of fees collected from students who are funding a portion of the
TransAlta project through the assessment of a dedicated fee. The most significant factor involved in the $900,000 increase
in unrestricted net position is the continued prudent financial stewardship by the College.
Centralia College 2015 Financial Report
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Management’s Discussion and Analysis
A conservative measure of unrestricted net position is to have at least 60 to 90 days to cover operating expenses, the
College has unrestricted net position at June 30, 2015 to cover operating expenses for 110 days.
Statement of Revenues, Expenses and Changes in Net Position
The Statement of Revenues, Expenses, and Changes in Net Position provides information about the details of the changes
of the total net position of the College. The statement classifies revenues and expenses as either operating or nonoperating. Generally, operating revenues are revenues that are earned by the College in exchange for providing goods or
services. Operating expenses are defined as expenses incurred in the normal operation of the College, including a
provision for the depreciation of property and equipment assets. The difference between the operating revenues and
operating expenses, will always result in an operating loss since the College’s state operating appropriations, and Federal
Pell grant revenues are shown as non-operating revenues as required by the GASB. A summary of the College’s Statements
of Revenue, Expenses and Changes in Net Position for the years ended June 30, 2014 and 2015, follows:
Condensed Statements of Revenues, Expenses and Changes in Net Position
For the years ended June 30 (in thousands)
Operating revenues
Operating expenses
Net operating loss
Non-operating revenues
Non-operating expenses
Gain (loss) before other revenues and expenses
Other revenues and expenses
Increase in net position
Net position, beginning of year (restated)
Net position, end of year
2015
$ 18,350
33,022
(14,672)
15,269
819
(222)
2,648
2,426
61,151
$ 63,577
2014
$ 17,661
32,030
(14,369)
15,759
872
518
800
1,318
59,833
$ 61,151
Operating and Non-Operating Revenues
State operating appropriations, tuition and fees (net of scholarship discounts and allowances), and grants and contracts,
are the primary sources for funding the College’s academic programs.
The following table shows a comparison of revenues for years ended June 30, 2014 and 2015.
Revenues by Source
For the years ended June 30 (in thousands)
Grants and contracts
State operating appropriations
Student tuition and fees, net
Capital appropriations
Auxiliary enterprise sales, net
Other revenues
Total Revenues
Centralia College 2015 Financial Report
2015
$ 15,992
10,912
5,089
2,648
1,425
201
$ 36,267
Percentage
44.1%
30.1%
14.0%
7.3%
3.9%
0.6%
100.0%
2014
$ 15,458
11,069
5,270
1,021
1,487
136
$ 34,441
Percentage
44.9%
32.1%
15.3%
3.0%
4.3%
0.4%
100.0%
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Management’s Discussion and Analysis
The $1.8 million overall increase in revenues noted above were primarily due to increased capital appropriations spending
for the TransAlta project along with increased federal grant revenue associated with a U.S. Department of Labor grant
started in October 2014. The following illustration showing revenue by source, both operating and non-operating used to
fund the College’s programs for the year ended June 30, 2015.
2015 REVENUES BY SOURCE
State operating
appropriations
30.1%
Other revenues
0.6%
Grants and contracts
44.1%
Capital appropriations
7.3%
Student tuition and fees
14.0%
Auxiliary enterprise sales
3.9%
Operating expenses for 2015 increased by a net of $1 million over 2014. Several factors were involved in this net increase,
1) spending on a new Federal Department of Labor grant, primarily on the category of supplies and materials in excess of
$600,000 in 2015, 2) increased scholarship expenses in 2015, and 3) employee benefits decreased in 2015, primarily the
result of lower employer healthcare premiums. The College has non-operating expenses, comprised solely of tuition
remittances, which has been consistently around $800,000 for the last two years. Operating expenses, for 2014 and 2015
are noted below, by natural classification, followed by a bar chart that shows the comparative percentages for 2014 and
2015:
Operating Expenses
For the years ended June 30 (in thousands)
Salaries and wages
Scholarships and fellowships
Employee benefits
Supplies and materials
Depreciation
Purchased services
Utilities
Other
Total operating expenses
2015
$ 15,651
5,864
4,514
3,171
1,577
919
667
659
$ 33,022
Percentage
47.4%
17.7%
13.7%
9.6%
4.8%
2.8%
2.0%
2.0%
100.0%
2014
$ 15,381
5,451
5,014
2,621
1,474
892
671
526
$ 32,030
Percentage
48.0%
17.0%
15.7%
8.2%
4.6%
2.8%
2.1%
1.6%
100.0%
Salaries, wages and benefits are the major support cost for the College’s programs, followed by scholarships and
fellowships and supplies and materials.
Centralia College 2015 Financial Report
Page | 11
Management’s Discussion and Analysis
1.6%
2.0%
2.1%
2.0%
2.8%
2.8%
4.6%
4.8%
9.6%
15.7%
13.7%
17.7%
17.0%
2014
8.2%
2015
48.0%
47.4%
PERCENTAGES
OPERATING EXPENSE COMPARISION, IN
PERCENTAGES, NATURAL CLASSIFICATION
In 2014, the College amended their program function spending codes to align with the National Association of College &
University Business Officers (NACUBO) program coding guidelines. The following chart shows consistency between 2014
and 2015, for functional reporting, in percentage terms.
OPERATING EXPENSE COMPARISION, IN
PERCENTAGES, BY FUNCTION
2014
INSTRUCTION
SCHOLARSHIPS
AND
FELLOWSHIPS
STUDENT
SERVICES
Centralia College 2015 Financial Report
ACADEMIC
SUPPORT
INSTITUTIONAL
SUPPORT
OPERATION
AND
MAINTENANCE
AUXILIARY
ENTERPRISES
4.6%
4.8%
5.9%
5.8%
6.0%
5.8%
10.3%
9.4%
12.8%
13.7%
14.4%
14.2%
17.0%
17.8%
29.0%
28.5%
2015
DEPRECIATION
Page | 12
Management’s Discussion and Analysis
Capital Improvements
The College spent $3.6 million for capital related purposes in 2015, with significantly more planned for 2016, primarily for
the design and construction of the TransAlta Commons Project. With a total cost of $40 million and construction beginning
in July 2015, the 70,000 square foot building will replace the student services building, provide facilities for Financial Aid,
Enrollment Services, Student Programs, Cashiering, and the College bookstore and cafeteria, and classrooms. The 3rd floor
of the building is dedicated to the teaching and learning mission of the College, with six classrooms, two teaching labs and
faculty offices.
It will also provide a 500 seat dining/meeting space to be used by the campus and community. On the ground floor, a
100-seat, 3D-equipped lecture auditorium will provide a high quality venue for presentations to students, faculty, staff
and the community at large. The majority of the funding for this project was passed in the 2015-17 Washington State
Legislative session. In addition to the State capital appropriations passed in the 2015-17 legislative session, funding was
also raised by the student’s self-assessed fees, College funds, and privately raised capital campaign funds.
Financial Summary and Economic Factors That Will Affect the Future
The College continues to exercise fiscal caution in its overall spending and budgeting, considering the continued slow state
and national economic recovery, reduced enrollments over the last several years, the State’s court-ordered priority to
fully fund K-12 education, the debt crisis and gridlock at the federal level.
In addition, the SBCTC has approved an initiative to modify the funding allocation process amongst the 34 institutions it
oversees. The SBCTC is anticipating implementing the new funding allocation model during the 2016-17 fiscal year.
Of the previous factors mentioned, the College is in a position to address just two - enrollment levels and the impact of a
revised SBCTC model to the allocation process. Marketing and recruitment efforts have been modified and expanded,
however, the related results will take several years to materialize The College is preparing for the modification of the
allocation model by being fully cognizant of the factors and seeking to adjust the program mix to maximize the revenue
stream.
The remaining factors are outside the College’s realm of influence and will also impact all community colleges in the state.
Therefore, the impact will be to higher education overall in the state, not just Centralia College.
2015-16 Student Government
Centralia College 2015 Financial Report
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Statement of Net Position
June 30, 2015
Assets
Current Assets
Cash and cash equivalents
Due from State Treasurer
Accounts receivable, net
Inventories
Other
Total current assets
$ 14,942,297
742,285
1,731,910
399,468
24,706
17,840,666
Non-Current Assets
Restricted cash and cash equivalents
Land and construction in progress
Capital assets, net of depreciation
Total non-current assets
Total Assets
Deferred Outflows
2,158,259
7,764,415
43,689,638
53,612,312
71,452,978
492,608
Liabilities
Current Liabilities
Accounts payable and accrued expenses
Due to State Treasurer
Unearned revenues
Vendor Payment Advance
Total current liabilities
1,434,412
12,754
288,918
159,300
1,895,384
Non-Current Liabilities
Compensated absences
Pension liability
Total non-current liabilities
Total Liabilities
Deferred Inflows
1,537,986
3,504,847
5,042,833
6,938,217
1,430,546
Net Position
Investment in capital assets
Restricted expendable
Unrestricted
Total Net Position
Centralia College
51,454,053
2,716,995
9,405,775
$ 63,576,823
Page | 14
The accompanying notes are an integral part of these financial statements.
Statement of Revenues, Expenses and Changes in Net Position
For The Year Ended June 30, 2015
Operating Revenues
Student tuition and fees
Less scholarship discounts and allowances
State and local grant and contracts
Federal grants and contracts
Auxiliary enterprise sales
Nongovernmental grants and contracts
Other operating revenues
Total operating revenue
$ 10,335,440
(5,246,407)
9,031,571
2,040,592
1,425,016
579,221
184,407
18,349,840
Operating Expenses
Salaries and wages
Scholarships and fellowships
Employee benefits
Supplies and materials
Depreciation
Purchased services
Utilities
Other
Total operating expenses
Operating loss
15,650,657
5,863,538
4,514,521
3,171,019
1,576,597
919,407
667,206
659,256
33,022,201
(14,672,361)
Non Operating Revenues (Expenses)
State operating appropriations
Federal Pell grant revenue
Investment income
Tuition remittance to the State
Net non operating revenues
Loss before capital appropriations
Capital appropriations
Increase in net position
10,911,926
4,340,384
16,927
(819,120)
14,450,117
(222,244)
2,648,312
2,426,068
Net Position
Net position, beginning of year, as previously reported
Cumulative effect of change in accounting principle
Net position, beginning of year, as restated
Net position, end of year
Centralia College
65,765,557
(4,614,802)
61,150,755
$ 63,576,823
Page | 15
The accompanying notes are an integral part of these financial statements.
Statement of Cash Flows
For The Year Ended June 30, 2015
Cash Flows From Operating Activities
Student tuition and fees, net
Grants and contracts
Auxiliary enterprise sales
Other revenues
Payments for employees
Payments for scholarships and fellowship
Payments to vendors
Agency fund receipts
Agency fund disbursements
Net cash used by operating activities
$
5,244,236
11,450,643
1,426,617
184,407
(20,327,157)
(5,863,538)
(5,449,453)
13,859
(11,446)
(13,331,832)
Cash Flows From Noncapital Financing Activities
State appropriations
Federal Pell grant receipts
Tuition remittance to the State
Net cash provided by noncapital financing activities
10,987,548
4,340,384
(871,020)
14,456,912
Cash Flows From Capital Related Financing Activities
Capital appropriations
Purchase of capital assets
Net cash used by capital related financing activities
2,276,790
(3,569,025)
(1,292,235)
Cash Flows From Investing Activities
Investment income
Net cash provided by investing activities
Decrease in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
Centralia College
16,927
16,927
(150,228)
17,250,784
$ 17,100,556
Page | 16
The accompanying notes are an integral part of these financial statements.
Statement of Cash Flows
For The Year Ended June 30, 2015
Reconciliation of Operating Loss to Net Cash
used by Operating Activities
Operating Loss
$ (14,672,361)
Adjustments to reconcile operating loss to net cash
used by operating activities
Depreciation expense
Changes in assets, liabilities and deferrals
Accounts receivable
Inventories
Compensated absences
Accounts payable and accrued expenses
Pension obligations
Other assets
Unearned revenues
Net cash used by operating activities
1,576,597
(32,057)
(45,227)
10,038
15,075
(172,017)
15,498
(27,378)
$ (13,331,832)
Noncash Transactions:
Change in Due from State Treasurer
Change in Due to State Treasurer
$
$
295,900
(51,900)
244,000
TransAlta Groundbreaking
Centralia College
Page | 17
The accompanying notes are an integral part of these financial statements.
Statement of Financial Position
(Component Unit – Centralia College Foundation)
June 30, 2015
ASSETS
Current assets
Cash
Short-term investments
Pledges receivable
Current portion of note receivable
Total current assets
$
Land, building, and equipment, net of accumulated depreciation
Other assets
Long-term pledges receivable
Long-term note receivable
Current value of life insurance policies
Long-term investments
Land and building held for the benefit of the College,
at fair market value
Total other assets
Total Assets
1,197,167
249,074
5,095
2,744
1,454,080
338,296
20,710
98,606
82,049
12,650,784
1,366,803
14,218,952
$ 16,011,328
LIABILITIES AND NET ASSETS
Current liabilities
Accounts payable
Promises to give
Total current liabilities
$
4,718
539,796
544,514
Net assets
Unrestricted
Undesignated
Board designated
Endowment
Land, building and equipment
Total unrestricted
Restricted
Temporarily
Permanently
Total net assets
Total Liabilities and Net Assets
Centralia College
650,851
1,329,259
1,366,803
3,346,913
6,780,283
5,339,618
15,466,814
$ 16,011,328
Page | 18
The accompanying notes are an integral part of these financial statements.
Statement of Activities and Changes in Net Assets
(Component Unit – Centralia College Foundation)
Year Ended June 30, 2015
Unrestricted
Revenues, gains,
and other support
Contributions
Dividend income
Other income
Rental revenue
Interest income
Grant revenue
Net assets released from
Restriction
$
204,833
132,456
56,833
24,000
2,790
-
Temporarily
Restricted
$
Permanently
Restricted
327,259
170,655
629
8,807
4,999
$
Total
226,066
-
$
758,158
303,111
57,462
24,000
11,597
4,999
423,697
(423,697)
-
-
844,609
88,652
226,066
1,159,327
493,898
286,422
14,502
794,822
-
-
493,898
286,422
14,502
794,822
Excess of revenues over
expenses before realized and
unrealized gains on investment
49,787
88,652
226,066
364,505
Unrealized and realized gains and
on investments
211,617
27,541
-
239,158
Change in net assets
261,404
116,193
226,066
603,663
Net assets, July 1, 2014
3,348,091
6,484,160
5,030,900
14,863,151
Reclassifications
(262,582)
179,930
82,652
-
5,339,618
$ 15,466,814
Total revenues, gains,
and other support
Expenses
Program
Management and general
Fundraising
Total expenses
Net assets, June 30, 2015
$
3,346,913
$
6,780,283
$
Centralia College
Page | 19
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
Note 1. Summary of Significant Accounting Policies
Financial Reporting Entity
Centralia College (“College”) is a comprehensive community college offering open-door academic transfer,
workforce education and basic skill programs as well as community service and continuing education courses. The
College confers applied baccalaureate degrees, associate degrees, certificates and high school diplomas. The
College is an agency of the State of Washington, and is governed by a five-member Board of Trustees appointed
by the Governor with consent by the state Senate.
The financial activity of the College is included in the State’s Comprehensive Annual Financial Report.
Financial Statement Presentation
The financial statements of the College for the year ending June 30, 2015 have been prepared in conformity with
generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is the
accepted accounting standard setting body for establishing governmental accounting and financial reporting
principles. These financial statements have been prepared in accordance with GASB Statement No. 35, Basic
Financial Statements and Management Discussion and Analysis for Public Colleges and Universities, and GASB
Statements No. 37 and No. 38.
The Governmental Accounting Standards Board (GASB) issued Statement No. 39, Determining Whether Certain
Organizations are Component Units, which amended GASB Statement No. 14, The Financial Reporting Entity. This
provides additional guidance to determine whether certain organizations are component units for which the
primary government is not financially accountable but should be reported based on the nature and significance
of their relationship with the primary government.
Under GASB Statement No. 39 criteria, the Centralia College Foundation (“Foundation”) is considered a legally
separate component unit of the College, and its financial statements are discretely presented in the College’s
financial statements. Inter-entity transactions and balances between the College and Foundation are not
eliminated for financial statement presentation purposes.
The Foundation is a private nonprofit organization that reports under the Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) Topic 958 and as such, certain revenue recognition criteria and
presentation features are different from GASB revenue recognition criteria and presentation features. No
modifications have been made to the Foundation’s financial information in the College’s financial reporting entity
for these differences.
New Accounting Pronouncements, Effective July 1, 2014
The Governmental Accounting Standards Board (GASB) issued Statement No. 68, Accounting and Financial
Reporting for Pensions – an amendment of GASB Statement No. 27, effective for the year ended June 30, 2015.
The primary objective of this statement is to improve accounting and financial reporting by state and local
governments for pensions. It also improves information provided by state and local governmental employers
about financial support for pensions that is provided by other entities. This statement results from a
comprehensive review of the effectiveness of existing standards of accounting and financial reporting for pensions
with regard to providing decision-useful information, supporting assessments of accountability and inter-period
equity, and creating additional transparency. This statement requires recognition of a liability equal to the net
pension liability, which is measured as the total pension liability, less the amount of the pension plan’s fiduciary
net position.
Centralia College 2015 Financial Report
Page | 20
Notes to the Financial Statements
The effect of Statement No. 68 to the College requires that most changes in the net pension liability be included
in pension expense in the period of change, and as permitted under Statement No. 68, the College has elected to
use the prior fiscal year (June 30, 2014) as the measurement date for reporting of net pension liabilities.
The Governmental Accounting Standards Board (GASB) issued Statement No. 69, Government Combinations and
Disposals of Government Operations, effective for the year ended June 30, 2015.
The distinction between a government merger and a government acquisition is based on whether an exchange of
significant consideration is present within the combination transaction. Government mergers include
combinations of legally separate entities without the exchange of significant consideration. This Statement
requires the use of carrying values to measure the assets and liabilities in a government merger. Conversely,
government acquisitions are transactions in which a government acquires another entity, or its operations, in
exchange for significant consideration. This statement requires measurements of assets acquired and liabilities
assumed generally to be based on their acquisition values. This Statement also provides guidance for transfers of
operations that do not constitute entire legally separate entities and in which no significant consideration is
exchanged. This statement defines the term operations for the purposes of determining the applicability of this
Statement and requires the use of carrying values to measure the assets and liabilities in a transfer of operations.
A disposal of a government’s operation results in the removal of specific activities of a government. This
Statement provides accounting and financial reporting guidance for disposals of government operations that have
been transferred or sold.
The College has no disclosure on this pronouncement.
The Governmental Accounting Standards Board (GASB) issued Statement No. 71, Pension Transition for
Contributions Made Subsequent to the Measurement Date – an amendment of GASB Statement No. 68, effective
for the year ended June 30, 2015.
This statement addresses an issue with Statement No. 68 to require that, at transition, a government recognize a
beginning deferred outflow of resources for its pension contributions, if any, made subsequent to the
measurement date at the beginning of the net pension liability.
The effect of Statement No. 71 to the College is to require the deferral (Deferred Outflows) of pension
contributions made subsequent to the measurement date and is addressed in Note 16 to the financial statements.
Change in Accounting Principle
Net position, as of July 1, 2014, has been restated for the implementation of GASB Statement No. 68, as
amended by GASB Statement No. 71:
Net Position as previously reported at June 30, 2014
Prior period adjustment:
Net Pension Liability
Deferred Outflows
Total prior period adjustment
Net Position as restated, July 1, 2014
$
65,765,557
$
(5,056,870)
442,068
(4,614,802)
61,150,755
Basis of Accounting
For financial reporting purposes, the College is considered a special purpose government entity engaged in
business type activities. Accordingly, the College’s financial statements have been presented using the economic
Centralia College 2015 Financial Report
Page | 21
Notes to the Financial Statements
resources measurement focus and the accrual basis of accounting. Under the accrual basis of accounting,
revenues are recognized when earned and expenses are recorded when an obligation has been incurred. Grants
and similar items are recognized as revenue as soon as all the eligibility requirements imposed by the provider
have been met.
The College reports capital assets, net of accumulated depreciation in the Statement of Net Position, and reports
depreciation expense in the Statement of Revenues, Expenses and Changes in Net Position.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the College considers all highly liquid investments with an original
maturity date of 90 days or less to be cash equivalents. Funds invested through the State Treasurer’s Local
Government Investment Pool are also considered cash equivalents.
Cash and cash equivalents that are held with the intent to fund capital projects are classified as non-current assets.
Accounts Receivable
Accounts receivable consists of student tuition and fees and other charges for services provided to students,
faculty and staff. Accounts receivable also includes amounts due from federal, state and local governments or
private sources in connection with reimbursements of allowable expenses made in accordance with sponsored
agreements, and includes a provision of an amount estimated by management deemed as uncollectible.
Inventories
Inventories consist of merchandise held by auxiliary departments. Inventories are valued at cost, using the Firstin First-out (FIFO) valuation method.
Capital Assets
Land, buildings, equipment, and library resources are stated at cost or, if acquired by gift, at fair market value at
the date of the gift. Additions, replacements, major repairs and renovations are also capitalized.
The capitalization threshold is $5,000 or greater for equipment, $100,000 or greater for buildings and
infrastructure, and $1 million for intangibles. Land is capitalized regardless of cost.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 3
to 7 years for equipment; 15 to 50 years for buildings and 20 to 50 years for infrastructure and land improvements.
Unearned Revenue
Unearned revenue occurs when funds have been collected in advance of an event, such as summer quarter tuition
revenue, and unspent cash advances on certain grants.
Compensated Absences
College employees accrue annual leave at rates based on employment status and length of service and sick leave
at the rate of one day (8 hours) per month for full-time employees with both recorded as liabilities. Employees
are entitled to either 25% of the present value of his/her unused sick leave balance on retirement or 25% of his/her
net accumulation for the year in which it exceeds 480 hours.
Scholarship Discounts and Allowances
Student tuition and fee revenue, and certain other revenues from students, are reported net of scholarship
discounts and allowances in the Statement of Revenues, Expenses and Changes in Net Position. Scholarship
Centralia College 2015 Financial Report
Page | 22
Notes to the Financial Statements
discounts and allowances are the difference between the stated charges and services charged by the College, and
the amount that is paid by the students and/or third parties on the students’ behalf. Certain government grants,
e.g. Federal Pell grant, State Need grant and other revenues are recorded as either operating or non-operating
revenues from these programs in the College’s financial statement. To the extent that revenues from these
programs are used to pay tuition, fees and other student charges, the College has recorded a scholarship discount
and allowance.
State Appropriations
The state of Washington appropriates funds to the College on both an annual and biennial basis. These revenues
are reported as non-operating revenues on the Statement of Revenues, Expenses and Changes in Net Position,
and recognized as such when the related expenses are incurred.
Use of Estimates
Allowances for uncollectible accounts are estimated based on aging and historical data on collection of various
receivables. Actual results could differ from these estimates, though the College believes these allowances are
adequate.
Operating Revenues and Expenses
Operating revenues consist of tuition and fees, grants and contracts, sales and services of educational activities
and auxiliary enterprise revenues. Operating expenses include salaries, wages, fringe benefits, scholarships and
fellowships, utilities, supplies, materials, purchased services and depreciation. All other revenues and expenses
of the College are reported as non-operating revenues and expenses including state appropriations, Federal Pell
grant revenues, investment income and tuition remittance.
Tuition Remittance
A portion of every tuition dollar collected by the College is remitted to the Washington State Treasurer to be held
and appropriated in two different funds. The tuition remittance is used to fund 1) the Community and Technical
College’s Capital Projects Fund “060” and 2) the Community and Technical College’s Innovation Fund “561”. Fund
060 is used to fund capital projects for the community and technical college system, while fund 561 is used to
fund technological upgrades and enhancements to the community and technical college system. In 2015, the
College collected $642,876 and $176,244 for funds 060 and 561, respectively, for a total of $819,120. These
remittances are reported in the non-operating revenues and expenses section of the statement of revenues,
expenses and changes in net positon.
Due to/from State Treasurer
Amounts due from state treasurer are for reimbursements owed the College for spending on state operating and
capital appropriations. Amounts due to state treasurer represent amounts owed for tuition remittance collected
by the College, but not yet paid to the state treasurer.
Pension Liability
The College records an aggregate pension liability equal to the net pension liabilities for its pension plans. The net
pension liability is measured as the College’s proportionate share of the total pension liabilities, less the amount
of the pension plans’ fiduciary net positions.
Centralia College 2015 Financial Report
Page | 23
Notes to the Financial Statements
Deferred Outflows/Deferred Inflows
Deferred outflows represent a consumption of net position by the College that is applicable to future reporting
periods. Deferred inflows represent an acquisition of net position by the College that is applicable to future
reporting periods.
Net Position
The College reports net position in the following three categories:
Investment in capital assets – The College’s total investment in property, plant and equipment, net of
accumulated depreciation and any outstanding debt related to those capital assets. The College had no
debt related to its capital assets in 2014 or 2015. To the extent of restricted cash and cash equivalents
for capital projects collected, but not yet spent, these amounts are not included as a component of capital
assets, instead are included as a component of restricted net position, expendable described below.
Restricted net position, expendable – Includes resources in which the College is legally or contractually
obligated to spend in accordance with restrictions placed by the donor or external parties.
Unrestricted net position – These represent all the other resources available to the College for general
and educational obligations to meet expenses for any lawful purpose. Unrestricted net positon is not
subject to externally imposed stipulations, however the College has designated the majority of the
unrestricted net position for various academic and support functions.
Tax Exemption
The College is a tax-exempt organization under Section 115(a) of the Internal Revenue Code and is exempt from
federal income taxes on related income. The Foundation is exempt from income taxes under Section 501(c) (3)
of the Internal Revenue Code.
Violations
The College does not have any material violations of finance-related legal or contractual provisions.
Note 2. Component Unit
The Centralia College Foundation (“Foundation”) is considered a legally separate component unit of the College
and is discretely presented in the College’s financial statements. The Foundation reports information on its
financial position and activities according to the following three classes of net assets:
Permanently restricted net assets – Net assets subject to donor-imposed stipulations they be maintained
in perpetuity by the Foundation.
Temporarily restricted net assets – Net assets subject to donor-imposed stipulations that will be met
either by actions of the Foundation or by passage of time.
Unrestricted net assets – Net assets not subject to donor-imposed stipulations, including certain amounts
designated by the Board of Directors.
The Foundation’s financial statements can be obtained by contacting the Foundation at (360) 736-9391, extension
290.
Centralia College 2015 Financial Report
Page | 24
Notes to the Financial Statements
Note 3. Cash and Cash Equivalents
Cash and cash equivalents include bank demand deposits, money market accounts, petty cash held at the College
and unit shares in the Local Government Investment Pool (LGIP), administered by the Washington State Treasurer.
Bank balances are insured through the Federal Deposit Insurance Corporation (FDIC), or by a collateral pool
administered by the Washington Public Deposit Protection Commission (PDPC).
The LGIP is comparable to a Rule 2a-7 money market fund recognized by the United States Securities and Exchange
Commission (17CFR.270.2a.7). Rule 2a-7 funds are limited to high quality obligations with limited and average
maturities, which minimizes both credit and market risks.
Cash and cash equivalents at year-end consists of the following:
Petty cash and change funds
Bank demand and time deposits
Local government investment pool
Total
$
5,072
7,998,828
9,096,656
17,100,556
$
Cash and cash equivalents includes restricted cash and cash equivalents of $2,158,259 at June 30, 2015. The
majority of the restricted balance comes from the collection of student self-assessed fees for their contribution
towards the construction of the TransAlta College Commons Project.
Note 4. Accounts Receivables
Accounts receivable at fiscal year-end consists of the following:
Federal, state, local and private grants
Student tuition and fees
Other operating activities
Subtotal
Allowance for uncollectibles
Total
$
$
1,615,689
134,565
2,973
1,753,227
(21,317)
1,731,910
Note 5. Investments
At June 30, 2015, the College had no investments on their books.
GASB Statement No. 40 requires certain disclosures of investments that have a fair value that are highly sensitive
to changes in interest rates. The College’s investment policy mitigates this exposure by investing any available
funds in cash and cash equivalents as discussed in the following paragraph.
The College, though its investment policy, where applicable, manages its exposure to custodial credit risk, credit
risk and interest rate risk. The College manages its exposure to interest rate risk by limiting the duration of
investment and structuring the maturity of investments to mature at various points in the year. The College
manages its credit risk by placing deposits that are either fully insured by the Federal Deposit Corporation (FDIC),
or in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection
Commission (PDPC).
Centralia College 2015 Financial Report
Page | 25
Notes to the Financial Statements
Note 6. Inventories
Inventories at year-end, stated at cost using the first-in, first-out (FIFO) method consists of the following:
Bookstore
Food Services
Total
$
$
392,315
7,153
399,468
Note 7. Capital Assets
Capital asset activity for the year ended June 30, 2015 is summarized as follows:
June 30, 2014
Additions
Retirements
June 30, 2015
Non-depreciable Capital Assets
Land
$
Construction in progress
Total non-depreciable assets
4,595,234
$
377,624
$
-
$
4,972,858
842,588
2,442,681
493,712
2,791,557
5,437,822
2,820,305
493,712
7,764,415
61,891,913
969,796
353,347
62,508,362
Depreciable Capital Assets
Buildings
Improvements other than buildings
900,327
-
-
900,327
Furniture, fixtures and equipment
3,420,987
264,409
1,006
3,684,390
Library resources
2,250,572
9,233
-
2,259,805
68,463,799
1,243,438
354,353
69,352,884
18,737,330
1,335,571
353,347
19,719,554
687,357
5,472
-
692,829
Furniture, fixtures and equipment
2,838,964
208,081
-
3,047,045
Library resources
2,176,345
27,473
-
2,203,818
24,439,996
1,576,597
353,347
25,663,246
494,718
$ 51,454,053
Total depreciable assets
Accumulated Depreciation
Buildings
Improvements other than buildings
Total accumulated depreciation
Capital Assets, Net of Depreciation
$ 49,461,625
$
2,487,146
$
The College recorded depreciation expense of $1,576,597 for the fiscal year ending June 30, 2015.
Note 8. Accrued Leave Liabilities
At termination of employment, employees may receive cash payment for all accumulated vacation and
compensatory time. Employees who retire get 25% of the value of their accumulated sick leave credited to a
Voluntary Employees’ Beneficiary Association (VEBA) account, which may be used for future medical expenses
and insurance purposes. The sick leave liability is recorded as an actuarial estimate of one-fourth the total balance
on the payroll records.
Centralia College 2015 Financial Report
Page | 26
Notes to the Financial Statements
The College has the following activity for vacation and sick leave balances for the year-ended June 30, 2015:
Leave Type
Sick
Vacation
Balance
June 30, 2014
$
897,186
630,762
$ 1,527,948
Additions
$
207,376
649,660
$
857,036
Reductions
$
211,481
635,517
$
846,998
Balance
June 30, 2015
$
893,081
644,905
$ 1,537,986
Note 9. Long-Term Liabilities
The College has no long-term liabilities, other than those liabilities associated with accrued leave and pensions,
which are described in Notes 8 and 17 to the financial statements.
Note 10. Lease Obligations
The College leases copiers, printers and facilities under a variety of agreements and non-cancelable operating
leases. At June 30, 2015, the future minimum payments under these lease agreements are as follows:
Fiscal Year
2016
2017
Subtotal
Less present value
Total
Lease Payment
$
45,993
24,000
69,993
(3,580)
$
66,413
The College lease expense totaled $170,613 in 2015.
Note 11. Risk Management
The College participates in the state of Washington risk management self-insurance program. In addition, the
College purchases insurance from the Washington State’s Department of Enterprise Services. These policies cover
such areas as commercial property, athletics and medical malpractice liabilities. The College self-insures
unemployment compensation for all employees, and is on a pay-as-you-go basis for paying unemployment
compensation claims. Unemployment compensation claims paid totaled $30,376 for 2015.
Note 12. Commitments
During the normal course of business, the College may become involved in various legal actions for which the
outcome cannot be predicted. The College participates in the state’s insurance program and is indemnified and
will be reimbursed by the state for any claims. It is the opinion of management that it will not materially affect
the financial statements.
Goods and services for operating and capital projects, contracted for, but not yet received, are considered
commitments at year-end. The College encumbers only operating items to be received through June 30, 2015,
liquidating unused balances, whereas capital projects have commitments that continue into the next fiscal year.
The amount of capital project commitments at June 30, 2015 is $29,086,291, of which $28,890,499 is for the
TransAlta Common Project.
Centralia College 2015 Financial Report
Page | 27
Notes to the Financial Statements
Note 13. Operating Expenses by Function
Operating expenses, by functional classification, for the year ended June 30, 2015 is summarized as follows:
Instruction
Scholarships and fellowships
Student services
Academic support
Institutional support
Operation and maintenance
Auxiliary enterprises
Depreciation
Total operating expenses
$
9,418,687
5,863,538
4,690,286
4,517,345
3,141,394
1,913,133
1,901,221
1,576,597
$ 33,022,201
Note 14. Other Post-Employment Benefits (OPEB)
The GASB issued Statement No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits
Other Than Pensions, effective for the year ending June 30, 2008. Other post-employment benefits (OPEB) are
those that are provided to retired employees beyond their pensions.
This pronouncement requires the recording of the accumulated liability for retiree healthcare and life insurance
costs. Statement No. 45 requires the systematical, accrual measurement and recognition of the OPEB expense in
the year in which benefits are earned.
Healthcare and life insurance programs for employees of the state of Washington are administered by the
Washington Healthcare Authority (HCA). The HCA calculates the premium amounts each year that are sufficient
to fund the statewide health and life insurance programs on a pay-as-you-go basis. These costs are passed through
to individual state agencies based on active employee headcounts; the agencies pay the premium for active
employees to the HCA. Agencies may charge employees for certain higher costs options selected by the employee.
State of Washington retirees may elect coverage through the HCA, for which they pay less than the full cost of the
benefits, based on their age and other demographics factors. The healthcare premiums for active employees,
which are paid by the agency during the employees’ working career, subsidize the “underpayments” of retirees.
An additional factor in the OPEB obligation is a payment that is required by the State Legislature to reduce the
premiums to retirees covered by Medicare (an “explicit” subsidy). This explicit subsidy is also passed through to
state agencies via active employee rates charged to the agency. There is no formal state or College plan that
underlies the subsidy of retiree health and life insurance.
The Office of State Actuary (Actuary) allocated the statewide disclosure information for OPEB to the State Board
for Community and Technical College (SBCTC) system level. The SBCTC further allocated these amounts among
the individual colleges. The College’s share of the GASB Statement No. 45 actuarially accrued liability (AAL) is
$9,996,981, with an annual required contribution (ARC) of $976,837. The ARC represents the amortization of the
liability of fiscal year 2015 plus the current expense for active employees, which is reduced by the current
contributions of $122,811. The College’s net OPEB obligation (NOO) is $1,447,410 This NOO amount is not
included in the College’s financial statement, rather the total statewide net OPEB obligation is recorded in the
State’s Comprehensive Annual Financial Report (CAFR), which is available online by going
to www.ofm.wa.gov/cafr/. The College was billed and paid approximately $2.1 million in 2015 for healthcare
expenses.
Centralia College 2015 Financial Report
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Notes to the Financial Statements
Note 15. Deferred Compensation
The College, through the state of Washington, offers its employees a deferred compensation plan created under
Internal Revenue Code Section 457. The plan, available to all state employees, permits individuals to defer a
portion of their salary until future years. The state of Washington administers the plan on behalf of College
employees. The deferred compensation is not available to employees until termination, retirement or unforeseen
financial emergencies, and the College does not have access to these funds.
Note 16. Deferred Outflows and Deferred Inflows of Resources
The following represent the components of the College’s deferred outflows and inflows of resources:
Deferred Inflows (Outflows)
Difference between
projected versus actual
earnings on pension plan
investments
Changes in proportionate
share of pension liability
PERS 1
PERS 2/3
$ 268,206
$ 982,732
-
31,119
-
(189,844)
$
78,362
Difference between
expected and actual
experience
Changes in assumptions
Contributions to pension
plans after measurement
date
Total
TRS 1
$
TRS 2/3
69,900
$
Total
78,589
$ 1,399,427
-
(45,122)
(14,003)
-
-
-
-
(201,813)
$ 812,038
(28,796)
$ 41,104
(27,033)
$
6,434
(447,486)
$ 937,938
The $447,486 reported as deferred outflows of resources represent contributions the College made subsequent
to the measurement date and will be recognized as a reduction of the net pension liability for the year ended June
30, 2016, and is detailed in the following table:
Deferred outflows
PERS 1
$ 189,844
PERS 2/3
$ 201,813
TRS 1
$ 28,796
TRS 2/3
$ 27,033
Total
$ 447,486
Other amounts reported as deferred outflows and inflows of resources will be recognized in pension expense as
follows for each plan:
Year Ended June 30:
2016
2017
2018
2019
2020
Total
PERS 1
$
67,052
67,051
67,052
67,051
$ 268,206
Centralia College 2015 Financial Report
PERS 2/3
$ 254,574
254,574
254,574
250,129
$ 1,013,851
TRS 1
$ 17,475
17,475
17,475
17,475
$ 69,900
TRS 2/3
$
9,838
9,839
9,838
9,838
(5,886)
$ 33,467
Total
$ 348,939
348,939
348,939
344,493
(5,886)
$ 1,385,424
Page | 29
Notes to the Financial Statements
Note 17. Pension and Retirement Plans
The College offers three contributory pension and retirement plans which cover eligible faculty, staff and
administrative employees: The Washington State Public Employees’ Retirement System (PERS) plan, the
Washington State Teachers’ Retirement System (TRS) plan and the State Board Retirement Plan (SBRP).
PERS and TRS Plans
Plan Descriptions
PERS and TRS are multiple-employer, defined benefit pension plans administered by the state of Washington,
Department of Retirement System (DRS).
PERS and TRS Plan 1
These plans provides retirement and disability benefits, and minimum benefit increases beginning at any age, with
30 years of service, or at age 55, with 25 years of service, or at age 60, with five years of service to eligible members
hired prior to October 1, 1977.
PERS and TRS Plan 2
These plans provides retirement and disability benefits, and a cost-of-living allowance, beginning at age 65 with
at least five years of service, or at age 55, with 20 years of service to eligible members hired on or after October
1, 1977.
PERS and TRS Plan 3
These plans are a hybrid defined benefit and defined contribution plans. The College contributions fund the
defined benefit component, provides retirement and disability benefits. In addition, the plans have a defined
contribution component, which is funded by employee contributions. Vesting in these plans occur if the employee
has a) ten years of service credits, or b) five years of service credits and at least 12 of those months were earned
after age 44, or c) five years of service credit earned in PERS Plan 2 prior to June 1, 2003 or five years of service
credit earned in TRS Plan 2 prior to July 1, 1996. Once vested, the employee is eligible for full retirement benefits
at age 65. If the employee has at least 10 years of service credit and are age 55 or older, they can retire early, but
their benefit may be reduced.
Information on these retirement plans and benefits is available in a Comprehensive Annual Financial Report
publicly available from the Department of Retirement Systems’ Fiscal Office, PO Box 48380, Olympia, WA 985048380.
Funding Policy
Each biennium, the Office of State Actuary, using funding methods prescribed by statute to determine the
actuarially required contribution rates for PERS and TRS plans, except where employee contribution rates are set
by statute. Employers are required to contribute at the level established by state law.
Centralia College 2015 Financial Report
Page | 30
Notes to the Financial Statements
The required contribution rates, expressed as percentages for the years 2014 and 2015, are as follows:
2015
2014
Plan
Member
College
Member
College
PERS 1
6.00%
9.21%
6.00%
9.19% - 9.21%
PERS 2
4.92%
9.21%
4.92%
9.19% - 9.21%
PERS 3
5% -15%
9.21%
5% -15%
9.19% - 9.21%
TERS 1
6.00%
10.39%
6.00%
8.05% - 10.39%
TERS 2
4.96%
10.39%
4.69% - 4.96%
8.05% - 10.39%
TERS 3
5% -15%
10.39%
5% -15%
8.05% - 10.39%
Investment Policy
The Washington State Investment Board (WSIB) has been authorized by statute as having the investment
management responsibility for the PERS and TRS pension funds. The WSIB manages retirement fund assets to
maximize the return at a prudent level of risk.
Retirement funds are invested in the Commingled Trust Fund (CTF). The CTF is a diversified pool of investments
that invest in fixed income, private equity, real estate and tangible assets. Investment decisions are made within
the framework of a Strategic Asset Allocation Policy and a series of WSIB-adopted investment policies for the
various asset classes.
For the year ended June 30, 2014, the annual money weighted rate of return on the pension investments, net of
pension plan expenses are as follows:
Pension Plan
Rate of Return
PERS Plan 1
PERS Plan 2/3
TRS Plan 1
TRS Plan 2/3
16.98%
17.06%
16.97%
17.07%
These money-weighted rates of return expresses investment performance, net of pension plan investment
expenses, and reflect both the size and timing of cash flows.
The PERS and TRS target asset allocation and long-term expected real rate of return are summarized in the
following table as of June 30, 2014:
Asset Class
Fixed Income
Tangible Assets
Real Estate
Global Equity
Private Equity
Total
Target Allocation
20%
5%
15%
37%
23%
100%
Centralia College 2015 Financial Report
Long-term Expected Real
Rate of Return
0.80%
4.10%
5.30%
6.05%
9.05%
Page | 31
Notes to the Financial Statements
The inflation component used to create the above table is 2.70% and represents WSIB’s most recent long-term
estimate of broad economic inflation.
Pension Expense
Pension expense, included in “Employee benefits” expense in the statement of revenues, expenses and changes
in net position, totaled $275,469. The following table shows the components of each pension plan’s expense:
Pension Expense
PERS 1
PERS 2/3
TRS 1
TRS 2/3
Total
Actuarial determined
pension expense
$ 116,283
$ 148,764
$ 18,258
$ 22,996
$ 306,301
Amortization of change in
proportionate liability
Total pension expense
(167,176)
$ (50,893)
(8,891)
$ 139,873
135,426
$ 153,684
9,809
$ 32,805
(30,832)
$ 275,469
Changes in Proportionate Shares of Pension Liabilities
The changes, increases or (decreases), to the College's proportionate share of pension liabilities from 2013 to 2014
were (0.002861%), (0.000937%), 0.003834% and 0.005009% for PERS 1, PERS 2/3, TRS 1 and TRS 2/3, respectively
as noted in the following table:
PERS 1
PERS 2/3
TRS 1
TRS 2/3
2013
0.045439%
0.046802%
0.009681%
0.005594%
2014
0.042578%
0.045865%
0.013515%
0.010603%
The College’s proportions of the net pension liability are based on the College’s share of contributions relative to
the pension plan contributions of all participating employers.
The following table shows the changes in each pension plan liability:
Pension Liability
Balance, July 1, 2014
Changes in proportionate
share of liability
Differences in projected
versus actual earnings on
pension plan investments
Contributions to pension
plans after measurement
date
Pension expense
Balance, June 30, 2015
PERS 1
PERS 2/3
TRS 1
TRS 2/3
Total
$(2,655,116)
$(1,998,452)
$(341,956)
$ (61,346)
$(5,056,870)
167,176
40,010
(135,426)
(54,931)
16,829
268,206
982,732
69,900
78,589
1,399,427
191,133
(116,283)
197,377
(148,764)
27,121
(18,258)
26,437
(22,996)
442,068
(306,301)
$(2,144,884)
$ (927,097)
$(398,619)
$ (34,247)
$(3,504,847)
Centralia College 2015 Financial Report
Page | 32
Notes to the Financial Statements
Sensitivity of the Net Pension Liability to Changes in the Discount Rate
The discount rate used to measure the total pension liability was 7.50 percent. To determine the discount rate,
an asset sufficiency test was completed to test whether the pension plan’s fiduciary net position was sufficient to
make all projected future benefit payments of current plan members. Consistent with current law, the completed
asset sufficiency test included an assumed 7.70 percent long-term discount rate to determine funding liabilities
for calculating future contributions rate requirements. Consistent with the long-term expected rate of return, a
7.50 percent future investment rate of return on invested assets was assumed for the test.
Contributions from plan members and employers are assumed to continue to be made at contractually required
rates (including PERS Plan 2/3 and TRS Plan 2/3, whose rates include a component for the PERS Plan 1 and TRS
Plan 1 liabilities, respectively). Based on those assumptions, the pension plan’s fiduciary net position was
projected to be available to make all projected future benefit payments of current plan members. Therefore, the
long-term expected rate of return of 7.50 percent on pension plan investments was applied to determine the total
pension liability.
The following represents the net pension liability of the College using the discount rate of 7.50 percent, as well as
what the College’s net pension liability (asset) would be if it were calculated using a discount rate that is 1percentage-point lower (6.50 percent) or 1-percentage-point higher (8.50 percent) than the current rate.
1% Decrease
(6.50%)
2,643,783
3,867,121
512,969
297,672
Pension Plan
PERS Plan 1
PERS Plan 2/3
TRS Plan 1
TRS Plan 2/3
Current
Discount
Rate
(7.50%)
2,144,884
927,097
398,619
34,247
1% Increase
(8.50%)
1,716,633
(1,318,534)
300,464
(161,558)
At June 30, 2014, the College reported a total collective liability of $3,504,847 for its proportionate shares of the
net pension liability for the PERS and TRS pension plans.
The total pension liabilities were determined by an actuarial valuation as of June 30, 2013 with the results rolled
forward to June 30, 2014, using the following actuarial assumptions applied for both PERS and TRS plans, to all
prior periods included in this measurement.
•
•
•
Inflation - 3.0% total economic inflation, 3.75% salary inflation
Salary Increases - In addition to the base 3.75% salary inflation assumption, salaries are also
expected to grow by promotion and longevity
Investment Rate of Return – 7.50%
State Board Retirement Plan (SBRP)
The State Board Retirement Plan (SBRP), created for the SBCTC, the 34 community and technical colleges in the
state of Washington, and the Student Achievement Council, is a tax deferred multiple-employer defined
contribution plan which covers most faculty, professional and exempt staff. Contributions to the plan are invested
in annuity contracts or mutual funds offered by the Teachers Insurance and Annuity Association and College
Retirement Equities Fund (TIAA-CREF). Benefits are available upon employee separation or retirement. The SBRP,
operating under section 401(a) of the Internal Revenue Code, has a contract with the TIAA-CREF to administer
records, investments and benefits.
Centralia College 2015 Financial Report
Page | 33
Notes to the Financial Statements
The benefit goal for the SBRP is 2% of the employee’s average annual salary for each year of full-time service up
to a maximum of 25 years of service. However, if the employee does not elect to make the 10% contribution at
age 50, the benefit goal is reduced to 1.5% for each year of full-time service.
The plan has a supplemental payment plan component which guarantees a minimum retirement benefit based
on a one-time calculation at each employee’s retirement date. Effective for employees hired on or after July 1,
2011, state law no longer offers this supplemental component benefit.
Effective January 1, 2012, state law establishes a higher education retirement plan supplemental benefit fund for
the purpose of funding future benefit obligations of higher education retirement plan supplemental benefits
which the State Investment Board has authority to manage this fund. The funding for this is an employer
contribution based on a percentage of salary for active plan participants. From January 1, 2012 through June 30,
2013, the employer required contribution was one-quarter percent (0.25%) of salary. Beginning July 1, 2013, the
employer required contribution increased to one-half percent (0.5%) of salary. For the year-end June 30, 2015,
the College contributed $36,673 to this fund.
The SBCTC, on behalf of the College, will make direct payments to qualifying retirees when the retirement benefits
provided by the fund sponsors do not meet the benefits goal. The unfunded actuarial accrued liability (UAAL)
calculated at June 30, 2015 was $104,696,000 under the plan’s entry age normal method and is amortized over a
10 year period. The actuarial assumptions include an investment rate of return of 4% with projected salary
increases of 3.75%. The annual required contribution (ARC) is $16,200,000 consists of the amortization of the
UAAL ($10,583,000), normal cost ($5,302,000) and interest.
Reported as a liability by the SBCTC, the Net Pension Obligation (NPO) is the cumulative excess of the ARC over
actual benefit payments. The following table reflects the SBCTC activity of the NPO for the year ended June 30,
2015:
Balance, June 30, 2014
Annual Required Contribution
Payments to Beneficiaries
Balance, June 30, 2015
$ 65,469,064
16,200,000
(583,625)
$ 81,085,439
The College does not report any of the NPO balance in their financial statements.
Funding Policy
Employee contribution rates, based on age, varies from 5% for participants under 35 years of age, 7.5% for
participants 35 to 49 years of age and 10% for participants age 50 and over. Employees have, at all times, a 100%
vested interest in their accumulations. Employee and employer contributions to the SBRP for the year-end June
30, 2015 were $758,916 and $758,916, respectively. All required employer and employee contributions have
been made by the College.
Note 18. Vendor Payment Advance
In accordance with RCW 28B.50.143, the Washington State Treasurer advances the College an amount equal to
17% of the College’s general fund (001) budgeted expenditures for the biennium. This advance is returned to the
state Treasurer after the final reimbursement for the biennium is requested. In July 2013, the College repaid the
11/13 biennium advance in the amount of $136,600 and was advanced $159,300 for the current 13/15 biennium.
Centralia College 2015 Financial Report
Page | 34
Notes to the Financial Statements
Note 19. Related-Party Transactions
Based on their inter-relationship, the College and the Foundation have a number of transactions with each other
during the course of the year. Under a formal agreement between the College and Foundation, the College
provides office space, staff, services and supplies, which the value totaled $152,488 for 2015, while the Foundation
provides fundraising and financial services.
The Foundation distributed approximately $421,414 to the College for restricted and unrestricted purposes. Interentity transactions and balances between the College and Foundation are not eliminated for financial statement
presentation purposes.
Note 20. Subsequent Event
On November 3, 2015, the College completed the purchase of an apartment complex in the amount of $1.2 million
for College student housing. The purchase of the apartment complex was accomplished by a bridge-loan from
College internal funds. The College has legislative authorization to participate in a bond issue to fund the
purchase, however, the College is currently evaluating the option of funding this purchase internally, using market
interest rate conditions as a financing factor. If the College pursues the bond issue option in March 2016, an
interest rate of 3% is anticipated.
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Centralia College 2015 Financial Report
Page | 35
Required Supplementary Information
Schedule of the College’s Proportionate Share of Net Pension Liabilities*
At June 30, 2014
PERS Plan 1
College's proportion of net pension
liability (asset)
PERS Plan 2/3
0.042578%
TRS Plan 1
0.045865%
TRS Plan 2/3
0.013515%
0.010603%
College’s proportionate share of the
net pension liability
$ 2,144,884
$
927,097
$
398,619
$
34,247
College covered-employee payroll
$
$
3,929,463
$
71,793
$
452,643
College's proportionate share of the
net pension liability (asset) as a
percentage of its covered-employee
payroll
Plan's fiduciary net position as a
percentage of the total pension
liability
344,042
623.44%
23.59%
555.23%
7.57%
61.19%
93.29%
68.77%
96.81%
Schedule of the College Contributions*
At June 30, 2014
PERS Plan 1
PERS Plan 2/3
Contractually required contributions
$
$
Contributions in relation to the
contractually required contributions
31,698
31,698
TRS Plan 1
362,037
$
362,037
TRS Plan 2/3
7,407
$
7,407
46,700
46,700
Contribution deficiency (excess)
$
-
$
-
$
-
$
-
College covered-employee payroll
$
344,042
$
3,929,463
$
71,793
$
452,643
Contributions as a percentage of
covered-employee payroll
9.21%
9.21%
Centralia College 2015 Financial Report
*These schedules are to be built prospectively until they contain ten years of data.
10.32%
10.32%
Page | 36
Centralia College 2015 Financial Report
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