Centralia College
2014 Financial Report
S
Success starts here
Centralia College 2014 Financial Report
Acknowledgements go out to College Accounting Professor Otto Rabe IV and the Business Office staff for their work in producing this financial report.
centralia.edu
Centralia College
2014 Financial Statements
And
Required Supplementary Information
President’s 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)…………………………………………………………………………………..…15
Statement of Revenues, Expenses and Changes in Net Position (College)…………………………….16
Statement of Cash Flows (College)..……………………………………………………………………………………..17
Statement of Financial Position (Foundation)……………………………………………………………………….19
Statement of Activities and Changes in Net Assets (Foundation)……………………………………………20
Notes to the Financial Statements…………………………………………………………………………………………21
[1]
President’s Letter of Transmittal
Centralia College 2014 Financial Report
Dr. Robert A. Frost
Dr. Joe Dolezal, Board Chair 2014-15
Joanne Schwartz, Board Chair 2015-16
Board of Trustees
Centralia College
Centralia, WA 98531
Dear Chairs Dolezal and Schwartz:
We are pleased to submit the 2014 Annual Financial Report of Centralia College. The accounts of Centralia
College are maintained in accordance with policies and regulations established by Washington State and its
Office of Financial Management. This report has been prepared in accordance with generally accepted
accounting principles, following the guidance of the Governmental Accounting Standards Board.
Management assumes full responsibility for the completeness and reliability of the information contained in this
report, based upon a comprehensive framework of internal controls that were established for this purpose.
Because the cost of internal controls should not exceed the anticipated benefits, the objective is to provide
reasonable, rather than absolute, assurance that the financial statements are free of material misstatement.
The Washington State Auditors’ Office has issued an unqualified (clean) opinion on Centralia College’s financial
statements for the year ended June 30, 2014. This opinion is included in the independent auditor’s report.
Management’s discussion and analysis, located at the front of the financial section of this report, provides a
narrative introduction, overview, and analysis of the basic financial statements. Recognized as one of the best
community colleges in the State, Centralia College is celebrating 90 years of service in the Fall of 2015. The
College is now approved by the NWCCU to offer baccalaureate degrees ensuring its diverse programs will serve
the State of Washington for the next century.
Sincerely,
Robert A. Frost, President
Stephen L. Ward, Vice President Finance and Administration
[2]
Board of Trustees and Administrative Officers
Centralia College 2014 Financial Report
As of June 30, 2014:
Board of Trustees
Stuart Halsan, J.D. Chair
Dr. Joe Dolezal, Vice Chair
Jim Lowery
Joanne Schwartz
Doris Wood-Brumsickle, M.A.
Administrative Officers
Dr. Robert A. Frost, 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
*Replaced Dr. James M. Walton who retired as President on June 30, 2014
[3]
Washington State Auditor’s Office
INDEPENDENT AUDITOR’S REPORT
August 17, 2015
Centralia College
Centralia, Washington
REPORT ON THE FINANCIAL STATEMENTS
We have audited the financial statements of the business-type activities and the aggregate
discretely presented component units of Centralia College, Lewis County, Washington, as of and
for the year ended June 30, 2014, 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
Insurance Building, P.O. Box 40021  Olympia, Washington 98504-0021  (360) 902-0370  TDD Relay (800) 833-6388
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, based on our audit and the report of other auditors, the financial statements
referred to above present fairly, in all material respects, the financial position of the businesstype activities and the aggregate discretely presented component units of the Centralia College,
as of June 30, 2014, and the changes in financial position and cash flows thereof for the year then
ended in accordance with accounting principles generally accepted in the United States of
America.
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 the 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, 2014, 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 be presented to supplement the basic financial statements.
Such information, although not a part of the basic financial statements, is required by the
Governmental Accounting Standards Board who considers it to be an essential part of financial
reporting for placing the basic financial statements in an appropriate operational, economic or
historical context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States of
America, which consisted of inquiries of management about the methods of preparing the
information and comparing the information for consistency with management’s responses to our
inquiries, the basic financial statements, and other knowledge we obtained during our audit of the
basic financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to express
an opinion or provide any assurance.
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
August 17, 2015 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
ACTING STATE AUDITOR
Management’s Discussion and Analysis
Centralia College 2014 Financial Report
Centralia College
The following discussion and analysis provides an overview of the financial position and activities of Centralia College
(“College”) for the year ended June 30, 2014. This MD&A provides the reader with an objective and easily readable
analysis of the College’s financial performance for the year, based on currently known 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 2012, the College applied to the
Northwest Commission on Colleges and Universities for accreditation as a baccalaureate institution. This process has
been completed, and as of February 20, 2015, Centralia College is accredited as a baccalaureate institution.
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
Stated 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 Organization 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.
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, 2014 and 2013, follows:
[7]
Management’s Discussion and Analysis
Centralia College 2014 Financial Report
Condensed Statements of Net Position
As of June 30 (in thousands)
ASSETS
Current assets
Capital, net
Other non-current assets
Total assets
LIABILITIES
Current liabilities
Other non-current liabilities
Total liabilities
NET POSITION
2014
$
$
17,299
49,462
2,492
69,253
1,959
1,528
3,487
65,766
2013
$
$
16,148
49,913
1,959
68,020
1,868
1,704
3,572
64,448
Current assets consist of cash, accounts receivable and inventories. The increase in current assets can be attributed to a
$1.6 million increase in cash, which was primarily the result of overall operating efficiencies for 2014, the maturity of a
$250,000 investment in 2014, and increased collections of accounts receivable. Capital assets decreased by $450,000,
and although $1.2 million of capital assets were purchased in 2014, depreciation expense of $1.5 million and the writeoff of building and improvements totaling over $200,000 caused this reduction. The $200,000 write-off of capital assets
in 2014 was the result of aligning the $100,000 capitalization policy for building and improvement assets to actual
capital assets, resulting in the write-off of assets that did not meet the $100,000 capitalization criteria. Other noncurrents also increase by more than one-half million dollars as unspent fees collected for the student portion of funding
for the TransAlta College Commons Project continued to grow in 2014. More information on the College’s capital assets
can be found in footnote 7 to the financial statements.
Current liabilities include accounts payable, accrued payroll and associated liabilities and unearned revenues. The
modest increase 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. Other non-current liabilities are made up entirely of vacation and sick
leave balances owed to employees, and can also fluctuate depending on the usage of vacation and sick leave time during
the year. The College has no long-term debt for either 2013 or 2014, see footnote 9 to the financial statements.
The college has a strong balance sheet for both 2013 and 2014, with continued improvement in 2014. 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 8.65 in 2013 to 8.83 in 2014. Further, the College’s
quick ratio, a financial measure which measures the short-term liquidity of the College and calculated by dividing cash,
short-term investments and accounts receivables over current liabilities, improved from 8.45 in 2013 to 8.65 in 2014.
Net position represents the difference between the College’s assets plus deferred outflows, less liabilities and deferred
inflows, measures whether the financial condition has improved or worsened during the year. The College reports its
net position in three categories:
Net 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, if any. The College had no
debt related to its capital assets in 2014 or 2013. 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.
[8]
Management’s Discussion and Analysis
Centralia College 2014 Financial Report
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 are 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)
Net investment in capital assets
Restricted expendable
Unrestricted
2014
$
49,462
3,178
13,126
$
65,766
2013
$
49,914
2,617
11,917
$
64,448
While various factors are involved in the increase in overall net positon, it needs to be noted that for investment in
capital assets, depreciation expense exceeded new capital investments by $200,000 in addition to write off of $200,000
of building and improvements other than buildings. The majority of restricted expendable is associated with the
TransAlta College Commons Project (discussed later in this analysis) and the collection of fees from students who are
funding a portion of this project through the assessment of a dedicated fee upon themselves, with over $2 million of
unspent resources at June 30, 2014. The most significant factor involved in the $1.2 million increase in unrestricted net
position is the continued prudent financial stewardship by the College. 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, 2014 to cover operating expenses for over 140 days.
Statement of Revenues, Expenses and Changes in Net Position
The Statement of Revenues, Expenses, and Changes in Net Position provides information about the detail 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 Governmental Accounting
Standards Board (GASB). A summary of the College’s Statements of Revenue, Expenses and changes in Net Position for
the years ended June 30, 2014 and 2013, follows:
Condensed Statements of Revenues, Expenses and Changes in Net Position
2014
$ 17,661
32,030
(14,369)
For the years ended June 30 (in thousands)
Operating revenues
Operating expenses
Net operating loss
[9]
2013
$ 19,249
32,613
(13,364)
Management’s Discussion and Analysis
Centralia College 2014 Financial Report
Non-operating revenues
Non-operating expenses
Gain (loss) before other revenues and expenses
Other revenues and expenses, net
Increase in net position
Net position, beginning of year
Net position, end of year
$
15,759
872
518
800
1,318
64,448
65,766
$
14,732
855
513
920
1,433
63,015
64,448
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 fiscal years ended June 30, 2014 and 2013.
Revenues by Source
For the years ended June 30 (in thousands)
Grants & contracts
State operating appropriations
Student tuition and fees, net
Auxiliary enterprise sales
Capital appropriations
Other revenues
Total
2014
$ 15,458
11,069
5,270
1,487
1,021
136
$ 34,441
Percentage
44.9%
32.1%
15.3%
4.3%
3.0%
0.4%
100.0%
2013
$ 16,952
10,022
5,156
1,578
920
273
$ 34,901
Percentage
48.6%
28.7%
14.8%
4.5%
2.6%
0.8%
100.0%
With 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, 2014.
Centralia College 2014 Revenues by Source
State operating
appropriations
32.1%
Grants & contracts
44.9%
Student tuition and fees,
net
15.3%
Auxiliary enterprise sales
4.3%
Capital
appropriations
3.0%
Other revenues
0.4%
[10]
Management’s Discussion and Analysis
Centralia College 2014 Financial Report
The primary sources of the College’s non-operating revenues are state operating appropriations and Federal Pell grant
revenue. For the last three years, Federal Pell grant revenue has ranged between $4.3 to $4.7 million annually, on the
other hand, state operating appropriations appear to have “turned the corner”, though for 2014, are still about 18%
below the 2011 level as illustrated in the chart below:
State Operating Appropriations (in millions)
Per Fiscal Year
$13.489
2011
$11.069
$10.351
$10.022
2012
2013
2014
Operating expenses for 2014 are down by $600,000. This was mainly the result of reduced spending on a Federal
Department of Energy grant, in the amount of $1.5 million from 2013 to 2014 as this grant activity wound down. The
reduction of spending on this Federal grant can be identified in the significant drop in spending for “Supplies and
materials” from 2013 to 2014. The College has non-operating expenses, comprised solely of Tuition remittances, which
has been around $800,000 for each of the last two years. Operating expenses are noted below followed by a chart that
shows the percentages for 2014 by natural classification:
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
2014
$ 15,381
5,451
5,014
2,621
1,474
892
671
526
$ 32,030
[11]
Percentage
48.0%
17.0%
15.7%
8.2%
4.6%
2.8%
2.1%
1.6%
100.0%
2013
$ 14,782
5,375
4,811
4,219
1,505
889
660
372
$ 32,613
Percentage
45.3%
16.5%
14.8%
13.0%
4.6%
2.7%
2.0%
1.1%
100.0%
Management’s Discussion and Analysis
Centralia College 2014 Financial Report
Salaries, wages and benefits are the major support cost for the College’s programs, followed by scholarships &
fellowships and supplies and materials.
And as percentages of total operating expenses, these have remained consistent over the last two years.
2014 Operating Expenses by Natural Classification
Depreciation
4.6%
Purchased services
2.8%
Supplies and materials
8.2%
Utilities
2.1%
Scholarships and
fellowships
17.0%
Salaries and wages
48.0%
Employee benefits
15.7%
Other
1.6%
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. This change caused significant fluctuations in the
functional reporting of expenses between 2014 and 2013, resulting is a lack of comparability between these two years.
For 2014, functional expenses, as a percentage of total operating expenses, are illustrated below:
Depreciation
4.6%
2014 Operating Expenses by Function
Auxiliary
enterprises
5.9%
Operation and
maintenance
6.0%
Institutional support
8.3%
Instruction
31.0%
Academic support
12.8%
Student services
14.4%
[12]
Scholarships and
fellowships
17.0%
Management’s Discussion and Analysis
Centralia College 2014 Financial Report
Capital Improvements
The College spent $1.24 million for capital related purposes in 2014, with significantly more planned for 2015 and
beyond, primarily for the design and construction of the TransAlta College Commons Project. With an estimated total
cost of $40 million, and scheduled to begin in July 2015, the 70,000 plus square foot building will replace the student
services building, provide facilities for Financial Aid, Enrollment Services, Student Programs, Cashiering, the College
bookstore and cafeteria, and classrooms. The 3rd floor of the building is dedicated to the teaching of the learning
mission of the College, with six classrooms, two teaching labs and faculty offices.
TransAlta College Commons Project
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 that 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 is pending in the current Washington State
Legislative session, in addition to students funding a portion of this project through the assessment of fees upon
themselves, and privately raised capital campaign funds.
[13]
Management’s Discussion and Analysis
Centralia College 2014 Financial Report
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
national economic recovery, reduced enrollments over the last several years, the SBCTC’s initiative to modify the
allocation process amongst the 34 institutions it oversees, the State’s court-ordered priority to fully fund K-12 education,
the debt crisis and gridlock at the federal level.
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.
[14]
Centralia College
Statement of Net Position
June 30, 2014
Assets
Current Assets
Cash and cash equivalents
Due from State Treasurer
Accounts receivable, net
Inventories
Total current assets
$ 14,798,894
446,385
1,699,853
354,241
17,299,373
Non-Current Assets
Restricted cash and cash equivalents
Capital assets, net of depreciation
Other
Total non-current assets
Total Assets
Deferred Outflows
2,451,890
49,461,625
40,204
51,953,719
69,253,092
-
Liabilities
Current Liabilities
Accounts payable and accrued expenses
Due to State Treasurer
Unearned revenues
Vendor payment advance
Total current liabilities
1,419,337
64,654
316,296
159,300
1,959,587
Non-Current Liabilities
Compensated absences
Total non-current liabilities
Total Liabilities
Deferred Inflows
1,527,948
1,527,948
3,487,535
-
Net Position
Net investment in capital assets
Restricted expendable
Unrestricted
Total Net Position
[15]
The accompanying notes are an integral part of these financial statements.
49,461,625
3,177,612
13,126,320
$ 65,765,557
Centralia College
Statement of Revenues, Expenses and Changes in Net Position
For The Year Ended June 30, 2014
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
$
8,711,820
(3,442,200)
8,707,743
1,523,598
1,487,362
557,371
115,211
17,660,905
Operating Expenses
Salaries and wages
Scholarships and fellowships
Employee benefits
Supplies and materials
Depreciation
Purchased services
Utilities
Other
Total operating expenses
Operating loss
15,380,722
5,450,614
5,013,415
2,621,348
1,474,134
892,088
670,990
526,366
32,029,677
(14,368,772)
Non Operating Revenues (Expenses)
State operating appropriations
Federal Pell grant revenue
Investment income
Tuition remittance
Net non operating revenues
Gain before other revenues, expenses, gains or losses
Capital appropriations
Special item - Loss on write-off of buildings and improvements
Total other revenues and expenses
Increase in net position
11,069,132
4,669,032
20,460
(871,994)
14,886,630
517,858
1,021,254
(221,867)
799,387
1,317,245
Net Position
Net position, beginning of year
Net position, end of year
64,448,312
$ 65,765,557
[16]
The accompanying notes are an integral part of these financial statements.
Centralia College
Statement of Cash Flows
For The Year Ended June 30, 2014
Cash Flows From Operating Activities
Student tuition and fees, net
Grants and contracts
Auxiliary enterprise sales
Other revenues
Payments to employees
Payments to vendors
Payments for scholarships and fellowships
Agency fund receipts
Agency fund disbursements
Net cash used by operating activities
$
5,669,718
10,788,712
1,487,362
115,211
(20,569,867)
(4,638,216)
(5,450,614)
31,719
(32,409)
(12,598,384)
Cash Flows From Noncapital Financing Activities
State appropriations
Federal Pell grant receipts
Tuition remittance
Net cash provided by noncapital financing activities
10,933,865
4,669,032
(832,642)
14,770,255
Cash Flows From Capital Related Financing Activities
Capital appropriations
Purchase of capital assets
Net cash used by capital related financing activities
936,364
(1,244,117)
(307,753)
Cash Flows From Investing Activities
Proceeds from sales and maturities of investments
Investment income
Net cash provided by investing activities
Increase in Cash and Cash Equivalents
250,000
20,460
270,460
2,134,578
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
15,116,206
$ 17,250,784
[17]
The accompanying notes are an integral part of these financial statements.
Centralia College
Statement of Cash Flows
For The Year Ended June 30, 2014
Reconciliation of Operating Loss to Net Cash
used by Operating Activities
Operating Loss
$ (14,368,772)
Adjustments to reconcile operating loss to net cash
used by operating activities
Depreciation expense
Changes in assets and liabilities
Accounts receivable
Inventories
Compensated absences
Accounts payable and accrued expenses
Unearned revenues
Net cash used by operating activities
1,474,134
438,611
4,277
(175,730)
67,609
(38,513)
$ (12,598,384)
Noncash Transaction:
Loss on disposal of capital assets
$
[18]
The accompanying notes are an integral part of these financial statements.
221,867
Centralia College Foundation (Component Unit)
Statement of Financial Position
June 30, 2014
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
901,591
246,420
37,421
2,650
1,188,082
300,795
19,519
101,350
77,014
12,418,624
1,188,901
13,805,408
$ 15,294,285
LIABILITIES AND NET ASSETS
Current liabilities
Accounts payable
Promises to give
Total current liabilities
$
3,175
427,959
431,134
Net assets
Unrestricted
Undesignated
Board designated
Endowment
Land, building and equipment
Total unrestricted
Restricted
Temporarily
Permanently
Total net assets
Total Liabilities and Net Assets
555,806
1,603,384
1,188,901
3,348,091
6,484,160
5,030,900
14,863,151
$ 15,294,285
[19]
The accompanying notes are an integral part of these financial statements.
Centralia College Foundation (Component Unit)
Statement of Activities and Changes in Net Assets
For The Year Ended June 30, 2014
Revenues, gains,
and other support
Contributions
Interest income
Dividend income
Rental revenue
Bequests
Other income
Net assets released from
restriction
Unrestricted
Temporarily
Restricted
Permanently
Restricted
$
$
$
273,640
6,798
102,331
24,000
100,000
45,749
461,210
8,082
159,356
2,000
-
Total
159,295
-
$
894,145
14,880
261,687
24,000
102,000
45,749
418,190
(418,190)
-
-
Total revenues, gains,
and other support
970,708
212,458
159,295
1,342,461
Expenses
Program
Management and general
Fundraising
503,534
297,465
21,604
-
-
503,534
297,465
21,604
Total expenses
822,603
-
-
822,603
Excess of revenues over
expenses before realized and
unrealized gains on investment
148,105
212,458
159,295
519,858
Unrealized and realized gains
on investments
497,259
807,223
(9,990)
1,294,492
Change in net assets
645,364
1,019,681
149,305
1,814,350
2,514,119
6,620,005
3,914,677
13,048,801
188,608
(1,155,526)
966,918
-
5,030,900
$ 14,863,151
Net assets, July 1, 2013
Reclassifications
Net assets, June 30, 2014
$
3,348,091
$
6,484,160
$
[20]
The accompanying notes are an integral part of these financial statements.
Notes to the Financial Statements
Centralia College 2014 Financial Report
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. It 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 ended June 30, 2014 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, 2013
The Governmental Accounting Standards Board (GASB) issued Statement No. 65, Items Previously Reported as
Assets and Liabilities, effective for the year ended June 30, 2014.
In conjunction with GASB Statement No. 63, this Statement establishes accounting and financial reporting
standards that reclassify as deferred outflows of resources or deferred inflows of resources, items that were
previously reported as assets or liabilities, respectively, limiting the use of the term “Deferred” to specific items
required to be reported for this statement.
The College reports revenues collected in advance as “Unearned” revenues, previously these were reported as
“Deferred” revenues. The College has no other disclosure on this pronouncement.
The Governmental Accounting Standards Board (GASB) issued Statement No. 66, Technical Corrections – 2012 –
An Amendment to GASB Statements No. 10 and No. 62, effective for the year ended June 30, 2014.
[21]
Notes to the Financial Statements
Centralia College 2014 Financial Report
This Statement amends Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related
Insurance Issues, by removing the provision which limit fund-based reporting of an entity’s risk financing
activities to the general fund and internal service funds.
This Statement also amends Statement No. 62 by modifying the specific guidance on accounting for 1) operating
lease payments that vary from the straight-line basis, 2) the difference between the initial investment (purchase
price) and the principal amount of a purchased loan or group of loans, and 3) service fees related to mortgage
loans that are sold when the stated service fee rate differs significantly from a current (normal) serving fee rate.
The College has no disclosure on this pronouncement.
The Governmental Accounting Standards Board (GASB) issued Statement No. 67, Financial Reporting for Pension
Plans – An Amendment of GASB Statement No. 25, effective for the year ended June 30, 2014.
This Statement establishes accounting and financial reporting requirements related to pension plans for
governments whose employees are provided with pensions through pension plans that are covered by the scope
of this statement, as well as nonemployer governments that have a legal obligation to contribute to those plans.
Statement No. 67 sets financial reporting standards for the retirement plans to follow which are held at the
state level, thus the College has no disclosure on this pronouncement.
The Governmental Accounting Standards Board (GASB) issued Statement No. 70, Accounting and Financial
Reporting for Nonexchange Financial Guarantees, effective for the year ended June 30, 2014.
This Statement requires a government that extends a nonexchange financial guarantee to recognize a liability
when qualitative factors and historical data, if any, indicates that it is more likely than not that a government will
be required to make a payment on the guarantee. The amount of the liability to be recognized should be the
discounted present value of the best estimate of the future outflows related to the guarantee expected to be
incurred.
The College has no disclosure on this pronouncement.
Basis of Accounting
For financial reporting purposes, the College is considered as a special purpose government entity engaged in
business type activities. Accordingly, the College’s financial statements have been presented using the
economic 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.
[22]
Notes to the Financial Statements
Centralia College 2014 Financial Report
Accounts Receivable
Accounts receivable consists of student tuition and fees, loans 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
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 nonoperating 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.
[23]
Notes to the Financial Statements
Centralia College 2014 Financial Report
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 and 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
2014, the College collected $686,788 and $185,206 for funds 060 and 561, respectively, for a total of $871,994.
These remittances are non-exchange transactions reported as an expense 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.
Deferred Outflows/Deferred Inflows
Deferred outflows represent a consumption of net position by the College that is applicable to a future reporting
period. Deferred inflows represent an acquisition of net position by the College that is applicable to a future
reporting period. The College has no amounts to report on either of these two deferred items for the year-end
June 30, 2014.
Net Position
The College reports net position in the following three categories:
Net 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, if any. The
College had no debt related to its capital assets in 2014 or 2013. 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.
[24]
Notes to the Financial Statements
Centralia College 2014 Financial Report
Unrestricted net position – These are 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 that 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.
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 consisted of the following at June 30, 2014:
Cash on hand
Bank demand and time deposits
$
20,184
14,140,858
[25]
Notes to the Financial Statements
Centralia College 2014 Financial Report
Local government investment pool
$
3,089,742
17,250,784
Cash and cash equivalents of $17,250,784 includes $2,451,890 of restricted cash and cash equivalents for capital
project purposes, the majority of this balance coming from the collection of student self-assessed fees for their
contribution towards the construction of the TransAlta College Commons Project, described in greater detail in
the Management’s Discussion and Analysis section of this financial report.
Note 4. Accounts Receivables
Accounts receivable at June 30, 2014 consists of the following:
Federal, state, local and private grants
Student tuition and fees
Loans
Other operating activities
Subtotal
Allowance for uncollectibles
$
$
1,460,601
260,656
15,348
1,754
1,738,359
(38,506)
1,699,853
Note 5. Investments
At June 30, 2014, the College had no investments on their books. In July 2013, a 19 month, $250,000 certificate
of deposit matured with the proceeds deposited in local financial institution holding a portion of the College’s
cash and cash equivalents.
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, through 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).
Note 6. Inventories
Inventories at June 30, 2014, stated at cost using the first-in, first-out (FIFO) method consists of the following:
Bookstore
Food Services
$345,536
8,705
$354,241
[26]
Notes to the Financial Statements
Centralia College 2014 Financial Report
Note 7. Capital Assets
Capital asset activity for the year ended June 30, 2014 is summarized as follows:
June 30, 2013
Additions
Retirements
June 30, 2014
Non-depreciable Capital Assets
Land
$
4,356,468
Construction in progress
$
238,766
$
-
$
4,595,234
-
842,588
-
842,588
4,356,468
1,081,354
-
5,437,822
62,588,355
-
696,442
61,891,913
Improvements other than buildings
1,001,591
-
101,264
900,327
Furniture, fixtures and equipment
3,271,646
149,341
-
3,420,987
Total non-depreciable assets
Depreciable Capital Assets
Buildings
Library resources
2,263,119
13,422
25,969
2,250,572
69,124,711
162,763
823,675
68,463,799
17,965,524
1,264,622
492,816
18,737,330
783,147
5,474
101,264
687,357
Furniture, fixtures and equipment
2,659,771
179,193
-
2,838,964
Library resources
2,159,228
24,845
7,728
2,176,345
23,567,670
1,474,134
601,808
24,439,996
221,867
$ 49,461,625
Total depreciable assets
Accumulated Depreciation
Buildings
Improvements other than buildings
Total accumulated depreciation
Capital Assets, Net of Depreciation
$ 49,913,509
$
(230,017)
$
In 2014, the College recorded depreciation expense of $1,474,134. In addition, the College wrote off buildings
and improvements other than buildings whose historical costs were between $5,000 and less than $100,000 in
order for these capital asset types to properly reflect the capitalization policy of costs $100,000 or great. The
write-off these assets resulted in a loss of $221,867 in 2014.
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. The accrued vacation leave and sick leave totaled $630,762 and $897,186,
respectively at June 30, 2014. There was no liability for compensatory time at June 30, 2014.
Note 9. Long-Term Liabilities
The College has no long-term liabilities, other than those liabilities associated with accrued leave, which are
described in Note 8 to the financial statements.
[27]
Notes to the Financial Statements
Centralia College 2014 Financial Report
Note 10. Lease Obligations
The College leases copiers, printers and facilities under a variety of agreements and non-cancelable operating
leases. At June 30, 2014, the future minimum payments under these lease agreements are as follows:
Fiscal Year
2015
2016
2017
2018
Subtotal
Less present value
Total
Lease Payment
$
76,167
47,848
25,856
1,856
151,727
(9,680)
142,047
$
The College lease expense totaled $154,350 in 2014.
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 State of Washington’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. In 2014, unemployment compensation claims paid totaled $32,690.
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 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, 2014,
liquidating unused balances, whereas capital projects have commitments that continue into the next fiscal year.
The amount of capital project commitments at June 30, 2014 is $1,386,005.
Note 13. Operating Expenses by Function
Operating expenses, by functional classification, for the year ended June 30, 2014 are summarized as follows:
Instruction
Scholarship and aid
Student services
$
9,913,817
5,450,614
4,619,249
[28]
Notes to the Financial Statements
Academic support
Institutional support
Operation and maintenance
Auxiliary enterprises
Depreciation
Total operating expenses
Centralia College 2014 Financial Report
4,099,458
2,666,896
1,935,382
1,870,127
1,474,134
$ 32,029,677
Note 14. Other Post-Employment Benefits (OPEB)
The Governmental Accounting Standards Board (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 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
$8,825,229, with an annual required contribution (ARC) of $862,230. The ARC represents the amortization of
the liability of fiscal year 2014 plus the current expense for active employees, which is reduced by the current
contributions of $162,232. The College’s net OPEB obligation (NOO) is $699,998. 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 $2.5 million in 2014 active and retiree healthcare expenses.
[29]
Notes to the Financial Statements
Centralia College 2014 Financial Report
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. Retirement Plans
The College offers three contributory pension 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).
For the year-ended June 30, 2014, the payroll covered by the three retirement plans is as follows:
Covered payroll
PERS
$ 4,273,505
TRS
$ 524,436
SBRP
$ 8,509,488
Total
$ 13,307,429
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 employees have 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, PO Box 48380, Olympia, WA 98504-8380.
[30]
Notes to the Financial Statements
Centralia College 2014 Financial Report
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.
The required contribution rates, expressed as a percentage for the years 2014, 2013 and 2012, are as follows:
2014
2013
2012
Plan
Member
College
Member
College
Member
College
PERS 1
6%
9.19% - 9.21%
6%
7.21%
6%
7.07% - 7.25%
PERS 2
4.92%
9.19% - 9.21%
4.64%
7.21%
4.59% - 4.64%
7.07% - 7.25%
PERS 3
5% -15%
9.19% - 9.21%
5% -15%
7.21%
5% -15%
7.07% - 7.25%
TRS 1
6%
8.05% - 10.39%
6%
8.04% - 8.05%
6%
6.14% - 8.04%
TRS 2
4.69% - 4.96%
8.05% - 10.39%
4.69%
8.04% - 8.05%
3.36% - 4.69%
6.14% - 8.04%
TRS 3
5% -15%
8.05% - 10.39%
5% -15%
8.04% - 8.05%
5% -15%
6.14% - 8.04%
The contributions required, in actual dollars, for the years 2014, 2013 and 2012, are as follows:
2014
2013
2012
Plan
Member
College
Member
College
Member
College
PERS 1
$
$
$
$
$
$
20,657
31,698
22,629
27,193
22,700
27,227
PERS 2
172,620
323,036
160,327
249,129
162,144
251,850
PERS 3
32,512
39,001
31,323
29,388
38,961
38,380
TRS 1
4,293
7,407
4,258
5,713
4,161
5,567
TRS 2
6,092
12,540
5,606
9,621
5,495
9,442
TRS 3
27,264
34,160
9,652
9,239
7,910
7,939
State Board Retirement Plan (SBRP)
The State Board Retirement Plan (SBRP), created for the State Board for Community and Technical Colleges
(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.
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
[31]
Notes to the Financial Statements
Centralia College 2014 Financial Report
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,
2014, the College contributed $41,747 to this fund. The SBCTC accounted for $5,008,355 of fund balance as of
June 30, 2014.
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. In 2014, the SBCTC paid $6,822 of
supplemental benefits on behalf of the College.
The unfunded actuarial accrued liability (UAAL) calculated at July 1, 2013 was $69,213,000 under the plan’s
entry age normal method and is amortized over an 11 year period. The actuarial assumptions include an
investment rate of return of between 4.25% and 7.25% with projected salary increases of 3.0%. The annual
required contribution (ARC) is $11,041,000 consists of the amortization of the UAAL ($6,678,000), normal cost
($4,135,000) and interest. The Net Pension Obligation (NPO) is the cumulative excess of the ARC over actual
benefit payments and reported as a liability by the SBCTC.
The following table reflects the activity of the NPO for the year ended June 30, 2014:
Balance as of June 30, 2013
Annual Required Contribution
Payments to Beneficiaries
Balance as of June 30, 2014
$
$
54,894,190
11,041,000
(466,582)
65,468,608
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 yearend June 30, 2014 were $768,139 and $768,139, respectively.
All required employer and employee contributions have been made by the College.
Note 17. 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.
[32]
Notes to the Financial Statements
Centralia College 2014 Financial Report
Note 18. 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 $169,590 for 2014, while the
Foundation provides fundraising and financial services. For 2014, the Foundation distributed approximately
$210,027 to the College for restricted and unrestricted purposes.
Inter-entity transactions and balances between the College and Foundation are not eliminated for financial
statement presentation purposes.
Note 19. Subsequent Event
On June 30, 2015, the Washington State Legislature passed 2EHB-1115 (State Capital Budget), which provides
$32,089,000 of funding for the TransAlta College Commons Project, discussed in detail in the Management
Discussion and Analysis section of this report. Construction began in early July 2015.
TransAlta Groundbreaking
[33]
Centralia College 2014 Financial Report
Child Care Program
Graduation Day
centralia.edu