Minneapolis Community and Technical College
Annual Financial Report
For the Years Ended June 30, 2012 and 2011
www.minneapolis.edu
MCTC is an equal opportunity educator and employer
A member of the Minnesota State Colleges and Universities system
MINNEAPOLIS COMMUNITY
AND TECHNICAL COLLEGE
A MEMBER OF THE
MINNESOTA STATE COLLEGES AND UNIVERSITIES SYSTEM
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2012 and 2011
Prepared by:
Minneapolis Community & Technical College
1501 Hennepin Avenue South
Minneapolis, MN 55403
Upon request, this publication is available in alternate formats by calling one of the following:
General number (651) 201-1800
Toll free: 1-888-667-2848
For TTY communication, contact Minnesota Relay Service at 7-1-1 or 1-800-627-3529.
MINNEAPOLIS COMMUNITY AND TECHNICAL COLLEGE
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2012 and 2011
TABLE OF CONTENTS
INTRODUCTION
Page
Transmittal Letter .................................................................................................................................. 5
Organizational Chart ............................................................................................................................. 9
FINANCIAL SECTION
Independent Auditors’ Report .............................................................................................................. 12
Management’s Discussion and Analysis .............................................................................................. 14
Basic Financial Statements
Statements of Net Assets .............................................................................................................. 20
Statements of Revenues, Expenses, and Changes in Net Assets ................................................... 21
Statements of Cash Flows ............................................................................................................. 22
Notes to the Financial Statements ................................................................................................. 24
REQUIRED SUPPLEMENTARY INFORMATION SECTION
Schedule of Funding Progress for Net Other Postemployment Benefits ............................................. 45
SUPPLEMENTARY SECTION
Report on Internal Control Over Financial Reporting and on Compliance and
Other Matters Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards .................................................................. 48
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2
INTRODUCTION
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4
December 21, 2012
Chancellor Steven J. Rosenstone
Minnesota State Colleges and Universities
350 Wells Fargo Place
30 East Seventh Street
St. Paul, MN 55101
Dear Chancellor Rosenstone:
I am pleased to submit to you the audited Annual Financial Report for Minneapolis Community and Technical
College (MCTC) for the fiscal year ending June 30, 2012. This report includes the financial statements and
disclosures necessary to accurately present the financial position of the College and results of our operation for
the year. The financial statements are presented in accordance with U.S. Generally Accepted Accounting
Principles as prescribed by the Governmental Accounting Standard Board.
Within the financial statements, audited by the firm Larsen Allen LLP, you will find a Statement of Assets, a
Statement of Revenues, Expenses and Change in Net Assets and a Statement of Cash Flows. You will note that
MCTC ended fiscal year 2012 with total net assets of $98 million. The change in net assets from operation
during fiscal year 2012 was ($0.3) million. For a summary review and explanation of the financial statements,
please review Management’s Discussion and Analysis section of the report.
MCTC experienced a 4.6 percent decline in Full-year Equivalent (FYE) for fiscal year 2012, much of which was
anticipated. While declines were evident at most system schools, the College has adopted a strategic
enrollment management program in order to better identify prospective students and to help retain them once
they enroll.
MCTC showed a sharp decline in its operating margin for fiscal year 2012. The College continued to reinvest in
its facilities and spent $4.6 million on repair and betterment from its general fund alone. This reinvestment,
combined with the decline in enrollment, resulted in a decline in its unrestricted net assets from $21.6 million to
$19.2 million. Maintaining a substantial balance in this account allows for the College to fund one-time projects
and to continue its low yearly increase in tuition. MCTC has posted the smallest overall tuition increase among
metro area schools and currently has the second lowest tuition rate amongst the aforementioned group.
The College continued to pursue ways to hold down the cost of education outside of lower tuition rates. As
nearly 60 percent of the student body can be classified as low income, MCTC has sought ways to impact the cost
of books, transportation and even meals and healthcare in an effort to eliminate some of the obstacles that may
come between its students and academic success. Some highlights include the implementation of an etextbooks
program, the continued funding of the College’s bus pass subsidy (again, more than 7,000 bus passes sold), a 10
percent discount from the College's food services vendor offered to those students who pay with their campus
card, and an increased number of healthcare services provided by the College’s Boynton Health Care Clinic.
5
With flat enrollment projected for the next year, the College will continue to use its budgetary process to
prioritize expenses and increase efficiencies. Critical factors for the College to consider in its long range planning
include state appropriation levels, the cost of employee benefits to the College, and enrollment levels.
About Minneapolis Community and Technical College
Established in 1996 by the merger of Minneapolis Community College and Minneapolis Technical College, and
with educational origins dating back to 1914, MCTC reflects and embraces the changing diversity of our region.
Located on beautiful Loring Park, near the heart of downtown Minneapolis, MCTC offers students a
comprehensive curriculum of 130 liberal arts, career and technical awards.
Enrollment at MCTC increased 18 percent over the past six years, from 11,900 in fiscal year 2007 to 14,100
students in fiscal year 2012.
MCTC is one of Minnesota’s most diverse colleges with 55 percent students of color and an average age of 28.
Some 72 percent of our students receive financial aid and 54 percent are Pell Grant recipients. Our top five
programs (as declared by major) include Liberal Arts, Business Management, Nursing, Education and Child
Development, and Information Technology.
MCTC has led efforts to increase college participation among first-generation students and has one of the largest
English for Speakers of Other Languages (ESOL) and precollege programs in the state.
The College has a budget of $56 million and employs more 839 permanent and temporary faculty and staff. In
addition to the downtown campus, the College operates the Aviation Center in Eden Prairie.
New Initiatives
In fiscal year 2012, the College launched initiatives under the three strategic priority areas of engaging students,
empowering employees and creating capacity.
The College developed an aggressive strategy for ensuring that all students succeed. Several new initiatives
were launched including a Student African-American Brotherhood (SAAB) chapter, Integrated Advising
Academies, Learning Communities, and a College-Ready Academy. In addition to academic and student support
initiatives, the College’s staff departments and leadership team launched several new projects, including a new
website, Atomic Learning Software training, several Lean Process Improvement projects, as well as planning for
a data warehouse.
Academic Programs
MCTC offers more than 130 degree, diploma and certificate options in career and technical program areas like
Aviation, Business, Cinema, Healthcare, Information Technology, Manufacturing and Applied Technology, Media
Arts, Public Safety, Public Service, and Service Industry; as well as liberal arts and transfer programs in Cultural
Studies, Science, Technology, Math and Fine Arts.
6
MCTC Foundation
For more than 30 years, the MCTC Foundation has raised funds for the benefit of our students. In fiscal year
2012, the MCTC Foundation raised more than $800K in total revenue. The Foundation's fiscal year 2012 Return
on Investment is projected to be over five dollars for each public dollar expended -- nearly 70 percent higher
than in fiscal year 2009. The Foundation awarded nearly $350K in scholarships to low-income students and
provided the College over $500K in funding for important college programs including the College Ready
Academy, advisors for the Power of YOU program, the Student African American Brotherhood, the annual MLK
Day of Service and the Jump Start to College program.
Facilities
MCTC is located in downtown Minneapolis on 14 acres of land. There is roughly 1.1 million gross square feet
devoted to academic efforts. MCTC also has a parking ramp with over 447,000 GSF and 1,400 parking stalls. The
campus location is ideal for Metro Transit accessibility and within walking distance of light rail stops.
The College invested more than $7.7 million in its physical plant in 2012. This past year, the College completed
its new student union and procured more than $13 million in G.O. Bond funding for the redesign of its technical
building, to commence in FY2013.
The deferred maintenance as of fiscal year 2012 was at $36.7 million.
Personnel
MCTC’s total staff and faculty headcount has decreased from 1,021 in FY2011 to 942 in fiscal year 2012, a
decrease of 8.38 percent. The person of color headcount has increased from 224 in fiscal year 2011 to 230 in
fiscal year 2012, an increase of 2.67 percent.
Strong Working Relationships with our Students
MCTC’s TRiO program received new grants to serve non-native English speakers and our disabled students,
respectively. MCTC’s TRiO programs are among the largest in the state of Minnesota.
We are extremely proud of what we have accomplished at Minneapolis Community & Technical College this past
year. We understand the importance of being good stewards of our financial resources. The management of
the College is responsible for insuring the accuracy, reliability and completeness of the information in this
report.
Sincerely,
Phillip L. Davis
President
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8
9
Lois Bollman
Vice President
of Academic Affairs
Gail O’Kane
Interim Vice President
Of Strategy, Planning &
Accountability
Joi Lewis
Vice President
Of Student Affairs
Phillip L. Davis
President
Steven J. Rosenstone
Chancellor
Board of Trustees
Scott Erickson
Vice President
of Finance & Operations
Mike Christenson
Associate Vice President
of CTE/Workforce Development
Organizational Chart
Minneapolis Community & Technical College
The financial activity of the Minneapolis Community and Technical College is included in this report. The
College is one of 31 colleges and universities included in the Minnesota State Colleges and Universities
Annual Financial Report which is issued separately.
The College’s portion of the Revenue Fund is also included in this report. The Revenue Fund activity
is included both in the Minnesota State Colleges and Universities Annual Financial Report and in a
separately issued Revenue Fund Annual Financial Report.
All financial activity of Minnesota State Colleges and Universities is included in the state of Minnesota
Comprehensive Annual Financial Report.
10
FINANCIAL SECTION
11
12
13
MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)
INTRODUCTION
The following discussion and analysis provides an overview of the financial position and activities of Minneapolis
Community and Technical College, a member of Minnesota State Colleges and Universities system at June 30, 2012
and 2011, and for the years then ended. This discussion has been prepared by management and should be read in
conjunction with the financial statements and accompanying notes, which follow this section.
Minneapolis Community and Technical College (College) is one of 31 colleges and universities comprising
Minnesota State Colleges and Universities. The Minnesota State Colleges and Universities system is governed by a
15-member Board of Trustees appointed by the Governor. Twelve trustees serve six-year terms, eight representing
each of Minnesota’s congressional districts and four serving at large. Three student trustees – one from a state
university, one from a community college and one from a technical college – serve two-year terms. The Board of
Trustees selects the Chancellor and has broad policy responsibility for system planning, academic programs, fiscal
management, personnel, admissions requirements, tuition and fees, and policies and procedures.
The College is a comprehensive public institution of higher learning with approximately 14,072 students of which
53 percent are students of color. The average age of the student on campus is 28 years old. Approximately 27
percent of our students represent the first generation in their family to attend college. The College employs
approximately 648 full time equivalent staff and faculty members.
The College offers associate degrees, diplomas, certificates, participates in the Minnesota Transfer Curriculum and
is accredited by the Higher Learning Commission. The largest programs based on enrollment are liberal arts,
nursing careers, business management, and human services. Some of the College’s more unique programs include
filmmaking, screenwriting, sound arts, and an urban teacher education program.
The College has over 50 different clubs and activities in areas such as honorary, drama and theater, music
ensembles, cultural and social concerns, recreational sports and student government.
FINANCIAL HIGHLIGHTS
The College purposely spent more resources in fiscal 2012 than it received in an effort to realign its unrestricted net
assets balance that had grown in recent years due to the careful management of resources. The College will use the
budget process in fiscal year 2013 to reduce costs to their historical norm and limit the one time usages of its fund
balance. Assets totaled $137.6 million compared to liabilities of $39.4 million. Net assets, which represent the
residual interest in the College’s assets after liabilities are deducted, comprised of capital assets, net of related debt
of $74.6 million; restricted assets of $4.4 million, and unrestricted assets of $19.2 million.
Unrestricted cash and cash equivalents balances decreased by $3.5 million in fiscal year 2012. Operating revenues
decreased by $0.6 million in 2012 after decreasing by $2.6 million in 2011, and nonoperating revenues were reduced
by $3.7 million after growing by $1.3 million in 2011 as state aid declined and federal stimulus funds were
discontinued. Gross tuition revenue declined by $0.9 million in 2012 as the tuition rate increase of 3 percent in
fiscal year 2012 was offset by a decrease in full time equivalent enrollment of 4.6 percent. This was the second
straight year of declining enrollment for the College, yet the College still is up more than 11 percent from where it
was five years earlier.
Total operating expenses rose by $0.6 million in 2012 after falling by $0.7 million in fiscal year 2011 due to
increased salary and depreciation expenses. Total net assets decreased by $0.3 million for fiscal year 2012 as the
College continued to spend from its unrestricted net asset balance to complete several one time capital projects
around the campus.
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USING THE FINANCIAL STATEMENTS
The College’s financial report includes three financial statements: the statements of net assets, the statements of
revenues, expenses and changes in net assets, and the statements of cash flows. The financial statements are
prepared in accordance with applicable generally accepted accounting principles (GAAP) as established by the
Governmental Accounting Standards Board (GASB) through authoritative pronouncements.
STATEMENTS OF NET ASSETS
The statements of net assets present the financial position of the College at the end of the fiscal year and include all
assets and liabilities of the College as measured using the accrual basis of accounting. The difference between total
assets and total liabilities (net assets) is one indicator of the current financial condition of the College, while the
change in net assets is an indicator of whether the overall financial condition has improved or worsened during the
year. Capital assets are stated at historical cost less an allowance for depreciation, with current year depreciation
reflected as a period expense on the statements of revenues, expenses, and changes to net assets. A summary of the
College’s assets, liabilities and net assets as of June 30, 2012, 2011 and 2010, respectively, is as follows:
Current assets
Restricted current assets
Restricted noncurrent assets
Capital assets, net
Total assets
Current liabilities
Noncurrent liabilities
Total liabilities
Net assets
(In Thousands)
2012
$ 34,499
3,788
10
99,253
137,550
2011
$ 37,655
8,258
4,933
86,856
137,702
2010
$ 35,607
11,974
347
85,049
132,977
8,080
31,303
39,383
98,167
10,253
28,965
39,218
$ 98,484
9,046
29,857
38,903
$ 94,074
$
Current unrestricted assets consist primarily of cash and cash equivalents totaling $27.1 million at June 30, 2012.
Unrestricted cash and cash equivalents decreased by $3.5 million from June 30, 2011 due to the aforementioned
completion of capital improvements around the College. The decrease in restricted current assets was a result of the
usage of revenue bond proceeds for the continued construction of the College’s Helland Student Center Renovation
that was completed in January, 2012. The $4.9 million reduction in restricted noncurrent assets reflects the
capitalization of the aforementioned project. See Notes 7 and 14 to the financial statements for more information
about revenue bonds.
Current liabilities consist primarily of accounts payable, salaries and benefits payable and unearned revenue.
Unrestricted accounts payable decreased by $0.4 million in fiscal year 2012 while salaries and benefits payable
decreased by $1.3 million. The latter decrease was largely the result of one less pay period. In fiscal year 2012 the
pay period ended prior to June 30, 2012 so those wages and benefits are reflected in cash rather than in salaries and
benefits payable. Salaries and benefits payable includes approximately two months of earned salary for faculty
payroll that have elected to receive salaries over twelve months on a September 1 – August 31 year. Unearned
revenue, consisting primarily of the portion of summer tuition and grants received, but not yet earned, decreased by
$0.2 million in 2012 due to a decline in summer session enrollment.
15
Net assets represent the residual interest in the College’s assets after liabilities are deducted. The College’s net
assets as of June 30, 2012, 2011, 2010, respectively, are summarized below.
(In Thousands)
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total net assets
2012
2011
2010
$ 74,625 $ 73,446 $ 71,427
4,369
3,395
2,272
20,375
19,173
21,643
$ 98,167 $ 98,484 $ 94,074
Invested in capital assets, net of related debt — represents the College’s capital assets, net of accumulated
depreciation and outstanding principal balances of debt attributable to the acquisition, construction or improvement
of those assets.
Restricted— primarily includes donations received for specific purposes, capital projects, and debt service.
CAPITAL AND DEBT ACTIVITIES
One of the critical factors in continuing the quality of the College’s academic programs and student life is the
development and renewal of its capital assets. The College continues to implement its master facilities plan to
modernize its complement of older facilities, balanced with new construction. Capital assets as of June 30, 2012
totaled $99.3 million, net of accumulated depreciation of $91.8 million. Capital assets net of depreciation grew by
$7.5 million in fiscal year 2012 due to the completion and capitalization of the Helland Student Center Renovation
and the return of the College’s parking ramp from Metropolitan State University.
Capital outlays totaled $8.3 million, a $3 million decrease from the prior year. Fiscal year 2012 featured the
completion of the College’s new student union, with a total capitalized value of $9.6 million. The College also
completed its remodel of the Whitney Fine Arts entrance, allowing for a vibrant meeting place extending from
iconic Loring Park. In fiscal 2012 the College received funding approval of $13.4 million for its Workforce
Program Renovation via the state bonding bill. Construction on the project will begin in early fiscal year 2013.
Capital expenditures are primarily comprised of recently completed new buildings, replacement and renovation of
existing facilities, as well as investments in equipment. Current year capital asset additions were funded through
capital appropriations, general obligation and revenue bond funds, and one-time usages of institutional resources.
Construction in progress, at June 30, 2012, decreased by $7.0 million as the College reached substantial completion
in an assortment of capital projects. Additional information on capital and debt activities can be found in Notes 5
and 7 to the financial statements.
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STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
The statements of revenues and expenses and changes in net assets present the College’s results of operations for the
year. When viewing the full statement, users should note that GASB requires classification of state appropriations
as nonoperating revenue.
A summarized statement in table format for the years ending June 30, 2012, 2011, and 2010, respectively, follows:
Summarized Statements of Revenues, Expenses and Changes in Net Assets
(In Thousands)
Operating revenue:
2012
2011
2010
Student tuition, fees, and sales
$ 44,240 $ 44,289 $ 44,627
Less scholarship allowances
(21,768) (21,090) (18,793)
Net student tuition, fees, and sales 22,472
23,199
25,834
Other
186
52
46
Total operating revenue
22,658
23,251
25,880
Nonoperating revenue:
State and capital appropriations
Federal grants
State grants
Other
Total nonoperating revenue
Total revenue
20,768
26,612
2,879
2,938
53,197
75,855
24,571
29,069
2,908
362
56,910
80,161
26,194
25,741
3,589
104
55,628
81,508
Operating expense:
Salaries and benefits
Supplies and services
Depreciation
Financial aid
Other
Total operating expense
47,052
14,964
5,392
3,120
4,563
75,091
45,223
15,036
4,899
4,547
4,812
74,517
46,891
16,127
4,353
4,111
3,767
75,249
Nonoperating expense:
Interest expense and other
Total nonoperating expense
Total expense
1,081
1,081
76,172
1,234
1,234
75,751
1,444
1,444
76,693
Change in net assets
Net assets, beginning of year
Net assets, end of year
(317)
4,410
4,815
98,484
94,074
89,259
$ 98,167 $ 98,484 $ 94,074
Tuition and state appropriations are the primary sources of funding for the College’s academic programs. Tuition
revenue decreased by $0.9 million but overall operating revenue remained largely consistent due to the addition of
parking receipts from the College’s parking ramp. Total state and capital appropriations decreased in fiscal year
2012 by $3.8 million to $20.8 million as the state of Minnesota continued its trend of reduced funding to higher
education and the College had limited participation in the state’s Higher Education Asset Preservation and
Replacement (HEAPR) program.
17
Resources expended for compensation increased $1.8 million to $47.1 million in fiscal year 2012, as the College
paid step increases to eligible employees and reduced its unused personnel allocation due to a more effective
budgeting process. Supplies and service increased by less than $0.1 million.
ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE
Looking to the future, management believes it critical that the College continue to reinvest in its infrastructure in
order to achieve its mission of providing an affordable, extraordinary education. In the past two years, the College
has spent $6.2 million out of its general operating funds alone in capital improvements. The College’s robust
unrestricted net assets, a product of many years of strong controls placed on operational expenses, were used to fund
these improvements and the careful spend down of these funds reached its culmination in fiscal year 2012.
Management will look to recalibrate the College’s budget in fiscal year 2013 as the decline in enrollment bore itself
out in a decreased saturation rate, falling from 85 percent to 80 percent, year-over-year. The College will continue
to invest in its facilities in 2013 as construction on $13.4 million general obligation bond funded Workforce
Program Renovation commences and the combination of state-of-the-art facilities and affordable tuition rates
(second lowest among area two-year colleges) will position the College favorably in future enrollment cycles.
Continued declines in state appropriation will shape much of the dialogue ahead as College administration is faced
with the challenging task of increasingly funding operations from its own revenues while simultaneously holding
down the price of tuition. Given these conditions, the College has looked to innovative ways to fund operations,
examples from fiscal year 2012 which included the opening of a pooled investment account with other Minnesota
State College and Universities system institutions, the application for federal Title III funds, and the outsourcing of
its financial aid disbursement function.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Minneapolis Community and Technical College’s
finances for all those with an interest in the college’s finances. Questions concerning any of the information
provided in this report or requests for additional financial information should be addressed to:
Scott Erickson, V.P. Finance and Operations
Minneapolis Community and Technical College
1501 Hennepin Ave
Minneapolis, MN 55403
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MINNEAPOLIS COMMUNITY AND TECHNICAL COLLEGE
STATEMENTS OF NET ASSETS
AS OF JUNE 30, 2012 AND 2011
(IN THOUSANDS)
Assets
Current Assets
Cash and cash equivalents
Investments
Grants receivable
Accounts receivable, net
Prepaid expense
Inventory
Other assets
Total current assets
Current Restricted Assets
Cash and cash equivalents
Total current restricted assets
Noncurrent Restricted Assets
Other assets
Construction in progress
Total noncurrent restricted assets
Total restricted assets
Noncurrent Assets
Capital assets, net
Total noncurrent assets
2012
$
Total Assets
27,083
638
420
4,592
1,309
358
99
34,499
2011
$
30,627
529
4,053
2,132
230
84
37,655
3,788
3,788
8,258
8,258
10
10
3,798
4,933
4,933
13,191
99,253
99,253
86,856
86,856
137,550
137,702
Liabilities
Current Liabilities
Salaries and benefits payable
Accounts payable
Unearned revenue
Payable from restricted assets
Interest payable
Funds held for others
Current portion of long-term debt
Other compensation benefits
Total current liabilities
Noncurrent Liabilities
Noncurrent portion of long-term debt
Other compensation benefits
Total noncurrent liabilities
2,969
1,141
990
465
161
85
1,572
697
8,080
4,267
1,521
1,204
1,256
112
1
1,306
586
10,253
25,694
5,609
31,303
23,647
5,318
28,965
Total Liabilities
39,383
39,218
74,625
2,352
2,017
19,173
73,446
1,697
1,698
21,643
Net Assets
Invested in capital assets, net of related debt
Restricted expendable, bond covenants
Restricted expendable, other
Unrestricted
Total Net Assets
$
The notes are an integral part of the financial statements.
20
98,167
$
98,484
MINNEAPOLIS COMMUNITY AND TECHNICAL COLLEGE
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
(IN THOUSANDS)
2012
Operating Revenues
Tuition, net
Fees, net
Sales, net
Restricted student payments, net
Other income
Total operating revenues
$
Operating Expenses
Salaries and benefits
Purchased services
Supplies
Repairs and maintenance
Depreciation
Financial aid, net
Other expense
Total operating expenses
Operating loss
15,007
1,738
3,310
2,417
186
22,658
2011
$
16,558
1,694
3,460
1,487
52
23,251
47,052
6,199
7,314
1,451
5,392
3,120
4,563
75,091
(52,433)
45,223
6,679
6,638
1,719
4,899
4,547
4,812
74,517
(51,266)
Nonoperating Revenues (Expenses)
Appropriations
Federal grants
State grants
Private grants
Interest income
Interest expense
Grants to other organizations
Total nonoperating revenues (expenses)
19,815
26,612
2,879
515
239
(1,081)
48,979
22,418
29,069
2,908
125
260
(924)
(125)
53,731
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
(3,454)
2,465
953
2,184
(317)
2,153
(185)
(23)
4,410
Capital appropriations
Capital grants
Transfer in of assets
Loss on disposal of capital assets
Change in net assets
Total Net Assets, Beginning of Year
Total Net Assets, End of Year
$
The notes are an integral part of the financial statements.
21
98,484
98,167
$
94,074
98,484
MINNEAPOLIS COMMUNITY AND TECHNICAL COLLEGE
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
(IN THOUSANDS)
2012
Cash Flows from Operating Activities
Cash received from customers
Cash paid to suppliers for goods or services
Cash payments for employees
Financial aid disbursements
Net cash used in operating activities
$
Cash Flows from Noncapital Financing Activities
Appropriations
Agency activity
Federal grants
State grants
Nonoperating cash transfer
Private grants
Grants to other organizations
Net cash flows provided by noncapital financing activities
Cash Flows from Capital and Related Financing Activities
Investment in capital assets
Capital appropriation and grants
Proceeds from sale of capital assets
Proceeds from borrowing
Proceeds from bond premium
Interest paid
Repayment of bond principal
Net cash flows used in capital and related financing activities
Cash Flows from Investing Activities
Purchase of investments
Investment earnings
Net cash flows provided by (used in) investing activities
21,782
(19,352)
(47,946)
(3,120)
(48,636)
2011
$
19,815
84
26,987
2,879
1,534
515
51,814
22,418
(126)
29,275
2,908
125
(125)
54,475
(9,051)
911
34
2
(1,013)
(1,549)
(10,666)
(10,951)
1,968
13
56
719
(966)
(868)
(10,029)
(639)
113
(526)
Net Decrease in Cash and Cash Equivalents
137
137
(8,014)
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
$
The notes are an integral part of the financial statements.
22
23,143
(18,180)
(45,683)
(4,552)
(45,272)
38,885
30,871
(689)
$
39,574
38,885
MINNEAPOLIS COMMUNITY AND TECHNICAL COLLEGE
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
(IN THOUSANDS)
2012
Operating Loss
$
Adjustment to Reconcile Operating Loss to
Net Cash Flows used in Operating Activities
Depreciation
Change in assets and liabilities
Inventory
Accounts receivable
Accounts payable
Salaries and benefits payable
Other compensation benefits
Unearned revenue
Other
Net reconciling items to be added to operating income
Net cash flow used in operating activities
Non-Cash Investing, Capital, and Financing Activities:
Capital assets net of related debt transfer
Capital projects on account
Donated equipment
$
$
23
(52,433)
2011
$
(51,266)
5,392
4,899
(128)
(488)
(471)
(1,298)
404
(397)
783
3,797
(48,636)
279
(158)
566
217
(581)
49
723
5,994
(45,272)
648
465
4,632
$
$
1256
-
MINNEAPOLIS COMMUNITY AND TECHNICAL COLLEGE
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
1.
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Basis of Presentation — The reporting policies of Minneapolis Community and Technical College (College), a
member of the Minnesota State Colleges and Universities system, conform to generally accepted accounting
principles (GAAP) in the United States, as prescribed by the Governmental Accounting Standards Board
(GASB). The statements of net assets; statements of revenues, expenses and changes in net assets; and
statements of cash flows include financial activities of Minneapolis Community and Technical College.
Financial Reporting Entity — Minnesota State Colleges and Universities is an agency of the state of Minnesota
and receives appropriations from the state legislature, substantially all of which are used to fund general
operations. Minneapolis Community and Technical College receives a portion of Minnesota State Colleges and
Universities’ appropriation. The operations of most student organizations are included in the reporting entity
because the Board of Trustees has certain fiduciary responsibilities for these resources.
Basis of Accounting — The basis of accounting refers to when revenues and expenses are recognized and
reported in the financial statements. The accompanying financial statements have been prepared as a special
purpose government entity engaged in business type activities. Business type activities are those that are
financed in whole or in part by fees charged to external parties for goods or services. Accordingly, these
financial statements have been presented using the economic resources measurement focus and the accrual basis
of accounting. Revenues are recognized when earned and expenses are recognized as they are incurred.
Eliminations have been made to minimize the double-counting of internal activities. Interfund receivables and
payables have been eliminated in the statements of net assets.
Minnesota State Colleges and Universities applies all applicable Financial Accounting Standards Board
statements issued prior to November 30, 1989, and GASB statements issued since that date.
Budgetary Accounting — College budgetary accounting, which is the basis for annual budgets and the
allocation of state appropriations, differs from GAAP. Budgetary accounting includes all receipts and expenses
up to the close of the books in August for the budget fiscal year. Revenues not yet received by the close of the
books are not included. The criterion for recognizing expenses is the actual disbursement, not when the goods
or services are received.
The state of Minnesota operates on a two year (biennial) budget cycle ending on June 30 of odd numbered
years. Minnesota State Colleges and Universities is governed by a 15-member Board of Trustees appointed by
the Governor with the advice and consent of the state senate. The Board approves the College biennial budget
request and allocation as part of the Minnesota State Colleges and Universities’ total budget.
Budgetary control is maintained at the College. The College President has the authority and responsibility to
administer the budget and can transfer money between programs within the College without Board approval.
The budget of the College can be legally amended by the authority of the Vice Chancellor/Chief Financial
Officer.
The state appropriations do not lapse at year end. Any unexpended appropriation from the first year of a
biennium is available for the second year. Any unexpended balance may also carry over to future bienniums.
Capital Appropriation Revenue — Minnesota State Colleges and Universities is responsible for paying one
third of the debt service for certain general obligation bonds sold for capital projects, as specified in the
authorizing legislation. The portion of general obligation bond debt service that is payable by the state of
Minnesota is recognized by Minnesota State Colleges and Universities as capital appropriation revenue when
the related bond sale proceeds are received. Individual colleges and universities are allocated cash, capital
appropriation revenue, and debt based on capital project expenses.
24
The fiscal year 2012 and 2011 capital appropriation and allocations include $952,527 and $2,499,898 of
revenue for higher education asset preservation, replacement projects and other allocations, respectively.
Cash and Cash Equivalents — The cash balance represents cash in the state treasury and demand deposits in
local bank accounts as well as cash equivalents. Cash equivalents are short term, highly liquid investments
having original maturities (remaining time to maturity at acquisition) of three months or less. Cash and cash
equivalents include amounts in demand deposits, savings accounts, cash management pools, repurchase
agreements, and money market funds.
Restricted cash is cash held for capital projects and cash in the Revenue Fund for capital projects and debt
service. The Revenue Fund is used to account for the revenues, expenses and net assets of revenue producing
facilities which are supported through usage. It has the authority to sell revenue bonds for the construction and
maintenance of revenue producing facilities.
All balances related to the state appropriation, tuition revenues, and most fees are in the state treasury. The
College also has two accounts in a local bank. The activities handled through the local bank include financial
aid, student payroll, auxiliary, and student activities.
Investments —The Minnesota State Board of Investment invests the College’s balances in the state treasury as
part of a state investment pool. This asset is reported as a cash equivalent. Interest income earned on pooled
investments is allocated to the colleges and universities.
Receivables — Receivables are shown net of an allowance for uncollectibles.
Inventories — Inventories are valued at cost using the retail cost method.
Prepaid Expense — Prepaid expense consists primarily of deposits in the state of Minnesota Debt Service Fund
for future general obligation bond payments.
Capital Assets — Capital assets are recorded at cost or, for donated assets, at fair value at the date of
acquisition. Estimated historical cost has been used when actual cost is not available. Such assets are
depreciated or amortized on a straight-line basis over the useful life of the assets. Estimated useful lives are as
follows:
Buildings
Building improvements
Equipment
Library collections
35 years
20 years
3-20 years
7 years
Equipment includes all items with an original cost of $10,000 and over for items purchased since July 1, 2008;
$5,000 and over for items purchased between July 1, 2003 and June 30, 2008; and $2,000 and over for items
purchased prior to July 1, 2003. Buildings, building improvements, and internally developed software include
all projects with a cost of $250,000 and over for projects started since July 1, 2008, and $100,000 and over for
projects started prior to July 1, 2008. All land and library collection purchases are capitalized regardless of
amount spent.
Funds Held for Others — Funds held for others are assets held for student organizations.
Long-Term Liabilities — The state of Minnesota appropriates for and sells general obligation bonds to support
construction and renovation of Minnesota State Colleges and Universities’ facilities as approved through the
state’s capital budget process. The College is responsible for a portion of the debt service on the bonds sold for
some College projects. Other long term liabilities include compensated absences, net other postemployment
benefits, early termination benefits, and workers’ compensation claims.
Minnesota State Colleges and Universities may finance the construction, renovation and acquisition of facilities
for student residences and student unions through the sale of revenue bonds. These activities are accounted for
25
and reported in the Revenue Fund included herein. Details on the Revenue Fund bonds are available in the
separately audited and issued Revenue Fund annual financial report. Copies are available from the Financial
Reporting System Director, Minnesota State Colleges and Universities, 30 7th St. E., Suite 350, Saint Paul,
Minnesota 55101-7804.
Operating Activities — Operating activities, as reported in the statements of revenues, expenses and changes in
net assets, are those that generally result from exchange transactions such as payments received for providing
services and payments made for services or goods received. Nearly all of the College’s expenses are from
exchange transactions. Certain significant revenue streams relied upon for operations are recorded as
nonoperating revenues including state appropriations, federal, state and private grants, and investment income.
Unearned Revenue — Unearned revenue consists primarily of tuition received, but not yet earned, for summer
session. It also includes amounts received from grants which have not yet been earned under the terms of the
agreement.
Tuition, Fees, and Sales, Net — Tuition, fees, and sales are reported net of scholarship allowances. See Note 11
for additional information.
Restricted Student Payments — Restricted student payments consist of fee revenue restricted for payment of
revenue bonds. See Note 11 for additional information.
Federal Grants — Minneapolis Community and Technical College participates in several federal grant
programs. The largest programs include Pell, TRIO, Supplemental Educational Opportunity Grant and Federal
Work Study. Federal Grant revenue is recognized as nonoperating revenue in accordance with GASB
Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions. Expenditures under
government contracts are subject to review by the granting authority. To the extent, if any, that such a review
reduces expenditures allowable under these contracts, the College will record such disallowance at the time the
determination is made.
Use of Estimates — To prepare the basic financial statements in conformity with generally accepted accounting
principles, management must make estimates and assumptions. These estimates and assumptions may affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the
financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. The most significant areas that require the use of management’s
estimates relate to allowances for uncollectible accounts, scholarship allowances, workers’ compensation
claims, and compensated absences.
Net Assets — The difference between assets and liabilities is net assets. Net assets are further classified for
accounting and reporting purposes into the following three net asset categories:
•
Invested in capital assets, net of related debt: Capital assets, net of accumulated depreciation, and
outstanding principal balances of debt attributable to the acquisition, construction or improvement
of those assets.
•
Restricted expendable: Net assets subject to externally imposed stipulations. Net asset
restrictions for Minneapolis Community and Technical College are as follows:
Restricted for bond covenants — revenue bond restrictions
Restricted for other — includes restrictions for the following:
Capital projects — restricted for the completion of capital projects.
Debt service — legally restricted for bond repayments.
Faculty contract obligations – faculty development and travel required by contracts.
26
Net Assets Restricted for Other
(In Thousands)
2012
2011
Capital projects
—
85
Debt service
2,016
1,588
Faculty contract obligations
1
25
Total
$ 2,017 $ 1,698
•
Unrestricted: Net assets that are not subject to externally imposed stipulations. Unrestricted net
assets may be designated for specific purposes by action of management, the System Office, or the
Board of Trustees.
New Accounting Pronouncements — In December 2010, the GASB issued Statement No. 60, Accounting and
Reporting for Service Concession Arrangements. The objective of this statement is to improve financial
reporting by establishing recognition, measurement, and disclosure requirements for Service Concession
Arrangements (SCA’s) for both transferors and governmental operators, and by requiring governments to
account for and report SCAs in the same manner, which improves the comparability of financial statements. In
addition, it is designed to alleviate the confusion that can arise when determining what guidance should be
applied in complex circumstances not previously specifically addressed in GASB literature. The requirements
of this statement are effective for Minnesota State Colleges and Universities for the year ended June 30, 2013.
The effect GASB Statement No. 60 will have on the fiscal year 2013 basic financial statements has not been
determined.
2.
CASH, CASH EQUIVALENTS AND INVESTMENTS
Cash and Cash Equivalents — All balances related to the appropriation, tuition and most fees are in the state
treasury. In addition, the College has two accounts at local banks. The activities handled through local banks
include financial aid, student payroll, auxiliary, and student activities.
Minnesota Statutes, Section 118A.03, requires that deposits be secured by depository insurance or a
combination of depository insurance and collateral securities held in the state’s name by an agent of the state.
This statute further requires that such insurance and collateral shall be at least 10 percent greater than the
amount on deposit.
The following table summarizes cash and cash equivalents:
Year Ended June 30
(In Thousands)
Carrying Amount
2012
Cash, in bank
$ 1,683
Cash - trustee account (US Bank)
1,934
Total local cash and cash equivalents
3,617
Total treasury cash accounts
27,254
Grand Total
$ 30,871
2011
$ 1,881
8,258
10,139
28,746
$ 38,885
At June 30, 2012 and 2011, the College’s local bank balances were $1,566,016 and $2,892,564, respectively.
These balances were adjusted by items in transit to arrive at the College’s cash in bank balance. The College’s
balance in the treasury, except for the Revenue Fund, is invested by the Minnesota State Board of Investment as
part of the state investment pool. This asset is reported as a cash equivalent.
Investments — The Minnesota State Board of Investment manages the majority of the state’s investments. All
investments managed by the State Board of Investment are governed by Minnesota Statutes, Chapters 11A and
356A. Minnesota Statutes, Section 11A.24 broadly restricts investments to obligations and stocks of United
States and Canadian governments, their agencies and registered corporations, other international securities,
27
short term obligations of specified high quality, restricted participation as a limited partner in venture capital,
real estate, or resource equity investments, and the restricted participation in registered mutual funds.
Generally, when applicable, the statutes limit investments to those rated within the top four quality rating
categories of a nationally recognized rating agency. The statutes further prescribe the maximum percentage of
fund assets that may be invested in various asset classes and contain specific restrictions to ensure the quality of
the investments.
Within statutory parameters, the Minnesota State Board of Investment has established investment guidelines
and benchmarks for all funds under its management. These investment guidelines and benchmarks are tailored
to the particular needs of each fund and specify investment objectives, risk tolerance, asset allocation,
investment management structure, and specific performance standards. The cash accounts are invested in short
term, liquid, high quality debt securities.
Custodial Credit Risk — Custodial credit risk for investment is the risk that in the event of a failure of the
counterparty, the College will not be able to recover the value of the investments that are in the possession of an
outside party. Board procedure 7.5.1 requires compliance with Minnesota Statutes, Section 118A.03 and
further excludes the use of FDIC insurance when meeting collateral requirements.
Credit Risk — Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. The College’s policy for reducing its exposure to credit risk is to comply with Minnesota Statutes,
Section 118A.04. This statute limits investments to the top quality rating categories of a nationally recognized
rating agency.
Concentration of Credit Risk — Concentration of credit risk is the risk of loss attributed to the magnitude of a
government’s investment in a single issuer. The College’s policy for reducing this risk of loss is to comply with
Board procedure 7.5.1 which recommends investments be diversified by type and issuer.
Interest Rate Risk — Interest rate risk is a risk that changes in interest rates will adversely affect the fair value
of an investment. The College complies with Board procedure 7.5.1 that recommends considering fluctuating
interest rates and cash flow needs when purchasing short term and long-term debt investments.
At June 30, 2012, the College had investments in corporate/municipal bonds in the amount $637,915 with a
weighted maturity of 9 years.
3.
ACCOUNTS RECEIVABLE
The accounts receivable balances are made up primarily of receivables from individuals. At June 30, 2012 and
2011, the total accounts receivable balances for the College were $6,281,848 and $5,536,402, less an allowance
for uncollectible receivables of $1,689,400 and $1,483,557, respectively.
Summary of Accounts Receivable at June 30
(In Thousands)
2012
Tuition
$ 3,291 $
Fees
1,115
Sales and services
1,018
Third party obligations
271
Other
586
Total accounts receivable
6,281
Allowance for uncollectible accounts
(1,689)
Net accounts receivable
$ 4,592 $
28
2011
3,166
1,097
520
130
623
5,536
(1,483)
4,053
The allowance for uncollectible accounts has been computed based on the following aging schedule for 2012 and
2011:
Allowance
Percentage
15
45
70
95
Age
Less than 1 year
1 to 3 years
3 to 5 years
Over 5 years
4.
PREPAID EXPENSE
Prepaid expense includes $1,259,252 and $1,280,121, for fiscal years 2012 and 2011, respectively, which has
been deposited in the state’s Debt Service Fund for future general obligation bond payments. Minnesota
Statutes, Section 16A.641, requires all state agencies to have on hand on December 1 of each year, an amount
sufficient to pay all general obligation bond principal and interest due, and to become due, through July 1 of the
second year. In fiscal year 2010, a one-time payment of $1,586,652 was made to Hennepin Technical College
for the start-up costs related to the transfer of the Criminal Justice and Law Enforcement Center program, of
which $793,326 remained unamortized as prepaid expense at June 30, 2011. This expense was fully amortized
in 2012. The remainder of the prepaid expense, $49,805 and $58,139, for fiscal years 2012 and 2011,
respectively, consists of prepaid funds for software maintenance.
5.
CAPITAL ASSETS
Summaries of changes in capital assets for fiscal years 2012 and 2011 follow:
Year Ended June 30, 2012
(In Thousands)
Beginning
Balance
Increases
Capital assets, not depreciated:
Land
Construction in progress
Total capital assets, not depreciated
$
18,727
8,732
27,459
$
—
7,743
7,743
Completed
Construction
Decreases
$
—
—
—
$
—
(14,712)
(14,712)
Ending
Balance
$ 18,727
1,763
20,490
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
128,207
14,362
1,074
143,643
12,063
408
107
12,578
—
155
222
377
14,712
—
—
14,712
154,982
14,615
959
170,556
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
65,587
13,031
695
79,313
12,323
363
137
12,823
—
121
222
343
—
—
—
—
77,910
13,273
610
91,793
Total capital assets, depreciated, net
Total capital assets, net of depreciation
$
64,330
91,789
14,712
—
78,763
$ 99,253
29
$
(245)
7,498 $
34
34
$
Year Ended June 30, 2011
(In Thousands)
Beginning
Balance
Increases
Capital assets, not depreciated:
Land
Construction in progress
Total capital assets, not depreciated
6.
$
18,727
5,827
24,554
$
—
11,024
11,024
Completed
Construction
Decreases
$
—
—
—
$
—
(8,119)
(8,119)
Ending
Balance
$ 18,727
8,732
27,459
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
120,088
14,276
1,160
135,524
—
201
105
306
—
115
191
306
8,119
—
—
8,119
128,207
14,362
1,074
143,643
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
61,272
12,677
733
74,682
4,315
431
153
4,899
—
77
191
268
—
—
—
—
65,587
13,031
695
79,313
Total capital assets, depreciated, net
Total capital assets, net of depreciation
$
60,842
85,396
8,119
—
64,330
$ 91,789
$
(4,593)
6,431 $
38
38
$
ACCOUNTS PAYABLE
Accounts payable represent amounts due at June 30 for goods and services received prior to the end of the fiscal
year.
Summary of Accounts Payable at June 30
(In Thousands)
2012
2011
Repairs and maintenance $
45 $ 143
Purchased services
463
632
Salaries
1
44
Employee benefits
33
23
Supplies
206
153
Other
287
46
Capital projects
106
480
Total
$ 1,141 $ 1,521
In addition, as of June 30, 2012 and 2011, the College had payable from restricted assets in the amounts of $464,509
and $1,255,695, which were related to capital projects financed by general obligation bonds and revenue bonds.
30
7.
LONG TERM OBLIGATIONS
Summaries of amounts due within one year are reported in the current liability section of the statements of net
assets.
The changes in long term debt for fiscal years 2012 and 2011 follow:
Year Ended June 30, 2012
(In Thousands)
Beginning
Balance
Increases
Liabilities for:
Bond premium/discount
General obligation bonds
Revenue bonds
Total long term debt
$
$
1,212
12,226
11,515
24,953
$
$
—
—
3,984
3,984
$
$
Year Ended June 30, 2011
(In Thousands)
Beginning
Balance
Increases
Liabilities for:
Bond premium/discount
General obligation bonds
Revenue bonds
Total long term debt
$
$
616
13,035
11,515
25,166
$
$
719
56
—
775
Ending
Balance
Decreases
122
866
683
1,671
$ 1,090
11,360
14,816
$ 27,266
$
123
865
—
988
$
—
866
706
$ 1,572
Ending
Balance
Decreases
$
Current
Portion
$ 1,212
12,226
11,515
$ 24,953
Current
Portion
$
—
866
440
$ 1,306
The changes in other compensation benefits for fiscal years 2012 and 2011 follow:
Year Ended June 30, 2012
(In Thousands)
Beginning
Balance
Increases
Liabilities for:
Compensated absences
Early termination benefits
Net other postemployment benefits
Workers’ compensation
Total other compensation benefits
$
$
4,807
75
982
40
5,904
$
$
537
92
438
169
1,236
$
$
Year Ended June 30, 2011
(In Thousands)
Beginning
Balance
Increases
Liabilities for:
Compensated absences
Early termination benefits
Net other postemployment benefits
Workers’ compensation
Total other compensation benefits
$
$
4,754
118
687
926
6,485
$
$
31
517
75
410
40
1,042
Ending
Balance
Decreases
529
75
198
32
834
$
$
$
464
118
115
926
1,623
$
$
Ending
Balance
Decreases
$
4,815
92
1,222
177
6,306
Current
Portion
$
$
4,807
75
982
40
5,904
526
92
—
79
697
Current
Portion
$
$
529
39
—
18
586
Bond Premium/Discount — In fiscal years 2012 and 2011, bonds were issued resulting in premiums of $0 and
$719,043, respectively. Amortization is calculated using the straight-line method and amortized over the
average remaining life of the bonds.
General Obligation Bonds — The state of Minnesota sells general obligation bonds to finance most capital
projects. The interest rate on these bonds ranges from 2.0 to 5.5 percent. Minnesota State Colleges and
Universities is responsible for paying one-third of the debt service for certain general obligation bonds sold for
their capital projects, as specified in the authorizing legislation. This debt obligation is allocated to the colleges
and universities based upon the specific projects funded. The general obligation bonds liability included in
these financial statements represents the College’s share.
Revenue Bonds–The Revenue Fund is authorized by Minnesota Statues, Section 136F.98 to issue revenue bonds
whose aggregate principal shall not exceed $300,000,000 at any time. The proceeds of these bonds are used to
finance the acquisition, construction, and remodeling of buildings for residence hall, food service, student
union, and other revenue-producing and related facilities at the state universities. Revenue bonds currently
outstanding have interest rates between 2.5 percent and 6.5 percent.
The revenue bonds are payable solely from, and collateralized by, an irrevocable pledge of revenues to be
derived from the operation of the financed buildings and from student fees. These revenue are payable through
fiscal year 2030. Annual principal and interest payments on the bonds are expected to require less than 55.44
percent of net revenues. The total principal and interest remaining to be paid on the bonds is $20,815,006.
Principal and interest paid for the current year and total customer net revenues were $1,338,150 and $2,428,644
respectively.
Compensated Absences — College employees accrue vacation, sick, and compensatory leave at various rates
within limits specified in the collective bargaining agreements. The liability for compensated absences is
payable as severance pay under specific conditions. This leave is liquidated only at the time of termination
from state employment.
Early Termination Benefits — Early termination benefits are benefits received for discontinuing services earlier
than planned. See Note 8 for details.
Net Other Postemployment Benefits — Other postemployment benefits are health insurance benefits for certain
retired employees under a single employer, fully insured plan. Under the health benefits program retirees are
required to pay 100 percent of the total premium cost. Since the premium is a blended rate determined on the
entire active and retiree population, the retirees are receiving an implicit rate subsidy. See Note 9 for further
details.
Workers’ Compensation — The state of Minnesota Department of Management and Budget manages the self
insured workers’ compensation claims activities. The reported liability for workers’ compensation of $176,571
and $39,581 at June 30, 2012 and 2011, respectively, is based on claims filed for injuries to state employees
occurring prior to the fiscal year end, and is an undiscounted estimate of future payments.
32
Principal and interest payment schedules are provided in the following table for general obligation and revenue
bonds. There are no payment schedules for bond premium, compensated absences, early termination benefits,
other postemployment benefits, or workers’ compensation.
Fiscal Years
2013
2014
2015
2016
2017
2018-2022
2023-2027
2028-2032
Total
8.
Long Term Debt Repayment Schedule
(In Thousands)
General
Obligation Bonds
Revenue Bonds
Principal Interest
Principal
Interest
$
866 $
541
$
706 $
633
866
499
730
608
866
457
755
581
864
414
795
551
863
372
816
519
4,276
1,225
4,778
1,983
2,438
343
3,836
954
321
13
2,400
170
$ 11,360 $ 3,864
$ 14,816 $ 5,999
EARLY TERMINATION BENEFITS
Early termination benefits are defined as benefits received for discontinuing services earlier than planned.
The Minnesota State College Faculty (MSCF) contract allows former United Technical College Educators
(UTCE) faculty members who meet certain eligibility and combination of age and years of service requirements
to receive an early retirement incentive cash payment based on base salary at time of separation, as well as an
amount equal to the employer’s contribution for one year’s health insurance premiums deposited in his/her
health care savings plan at time of separation. The cash incentive can be paid either in one or two payments.
The number of retired faculty who received this benefit, and the amount of future liability for those faculty, as
of the end of fiscal years 2012 and 2011, follow:
Fiscal Year
2012
2011
9.
Number
of Faculty
6
10
Future Liability
(In Thousands)
$ 92
75
NET OTHER POSTEMPLOYMENT BENEFITS
The College provides health insurance benefits for certain retired employees under a single-employer fullyinsured plan, as required by Minnesota Statute, 471.61 subdivision 2B. Active employees who retire when
eligible to receive a retirement benefit from a Minnesota public pension plan and do not participate in any other
health benefits program providing coverage similar to that herein described, will be eligible to continue
coverage with respect to both themselves and their eligible dependent(s) under the health benefits program.
Retirees are required to pay 100 percent of the total premium cost. Since the premium is a blended rate
determined on the entire active and retiree population, the retirees are receiving an implicit rate subsidy. As of
July 1, 2010, there were approximately 10 retirees receiving health benefits from the health plan.
33
Annual OPEB Cost and Net OPEB Obligation — The annual other postemployment benefit (OPEB) cost
(expense) is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially
determined in accordance with the parameters of GASB Statement No. 45, Accounting and Financial Reporting
by Employers for Postemployment Benefits Other than Pensions. The ARC represents a level of funding that, if
paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial
liabilities (or funding excess) over a period not to exceed 30 years.
The following table shows the components of the annual OPEB cost for fiscal years 2012 and 2011, the amount
actually contributed to the plan, and changes in the net OPEB obligation:
Components of the Annual OPEB Cost
(In Thousands)
2012
2011
Annual required contribution (ARC)
$ 429 $ 404
Interest on net OPEB obligation
47
33
Adjustment to ARC
(38)
(27)
Annual OPEB cost
438
410
Contributions during the year
(198)
(115)
Increase in net OPEB obligation
240
295
Net OPEB obligation, beginning of year
982
687
Net OPEB obligation, end of year
$ 1,222 $ 982
The College’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB
obligation for fiscal years 2012 and 2011 follow:
For Year Ended June 30
(In Thousands)
Beginning of the year net OPEB obligation
Annual OPEB cost
Employer contribution
End of year net OPEB obligation
Percentage contributed
$
$
2012
982 $
438
(198)
1,222 $
45.21%
2011
687
410
(115)
982
28.05 %
Funding Status — There are currently no assets that have been irrevocably deposited in a trust for future health
benefits. Therefore, the actuarial value of assets is zero.
Actuarial
Valuation
Date
Actuarial
Value of
Assets
(a)
July 1, 2010
—
Schedule of Funding Progress
(In Thousands)
Actuarial
Unfunded
Accrued
Actuarial Accrued
Funded
Liability
Liability
Ratio
(b)
(b - a)
(a/b)
Covered
Payroll
(c)
UAAL as a
Percentage of
Covered Payroll
((b - a)/c)
$ 3,782
$ 36,752
10.29%
$ 3,782
0.00%
Actuarial Methods and Assumptions — Actuarial valuations involve estimates of the value of reported amounts
and assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding
the funded status of the plan and the annual required contributions of the employer are subject to continual
revision as actual results are compared with past expectations and new estimates are made about the future.
34
Projections of benefits for financial reporting purposes are based on the substantive plan (as understood by the
employer and the plan members) and include the types of benefits provided at the time of each valuation. The
actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term
volatility in actuarial accrued liabilities, consistent with the long-term perspective of the calculations.
In the July 1, 2010 actuarial valuation, the entry age normal actuarial cost method was used. The actuarial
assumptions included a 4.75 percent discount rate, which is based on the estimated long-term investment yield
on the general assets, using an underlying long-term inflation assumption of 3 percent. The annual healthcare
cost trend rate is 6.25 percent initially, reduced incrementally to an ultimate rate of 5 percent after twenty years.
The unfunded actuarial accrued liability is being amortized as a level dollar amount over an open 30 year
period.
10. LEASE AGREEMENTS
Operating Leases — The College was committed under various leases primarily for building space. These
leases were considered for accounting purposes to be operating leases. Lease expenditures for the years ended
June 30, 2012 and 2011 totaled approximately $667,109 and $496,873 respectively.
Future minimum lease payments for existing lease agreements are as follows:
Lease Repayment Schedule
(In Thousands)
Fiscal Year
Amount
2013
$
678
2014
681
2015
684
2016
407
Total
$ 2,450
11. TUITION, FEES, AND SALES, NET
The following tables provide information related to tuition, fees, and sales revenue:
Description
Tuition
Fees
Sales
Restricted student payments
Total
Gross
$ 32,843
3,882
5,098
2,417
$ 44,240
Year Ended June 30
(In Thousands)
2012
Scholarship
Allowance
Net
$ (17,836) $ 15,007
(2,144)
1,738
(1,788)
3,310
—
2,417
$ (21,768) $ 22,472
35
$
$
Gross
33,753
3,821
5,228
1,487
44,289
2011
Scholarship
Allowance
$ (17,195) $
(2,127)
(1,768)
—
$ (21,090) $
Net
16,558
1,694
3,460
1,487
23,199
12. OPERATING EXPENSES BY FUNCTIONAL CLASSIFICATION
The following tables provide information related to operating expenses by functional classification:
Year Ended June 30, 2012
(In Thousands)
Description
Academic support
Institutional support
Instruction
Student services
Auxiliary enterprises
Scholarships & fellowships
Less interest expense
Total operating expenses
Salaries
4,472
3,662
20,089
7,006
836
—
—
$ 36,065
$
Benefits
1,442
1,403
5,957
1,915
270
—
—
$
10,987
$
$
$
Other
3,716
5,254
6,442
4,595
4,912
3,120
—
28,039
$
$
Interest
70
59
319
105
528
—
(1,081)
—
$
$
Total
9,700
10,378
32,807
13,621
6,546
3,120
(1,081)
75,091
Year Ended June 30, 2011
(In Thousands)
Description
Academic support
Institutional support
Instruction
Student services
Auxiliary enterprises
Scholarships & fellowships
Less interest expense
Total operating expenses
Salaries
4,370
3,530
19,591
6,259
759
—
—
$ 34,509
$
Benefits
1,434
1,390
5,894
1,754
242
—
—
$ 10,714
$
$
$
Other
3,589
4,844
7,679
4,165
4,470
4,547
—
29,294
$
$
Interest
68
58
310
94
394
—
(924)
—
$
$
Total
9,461
9,822
33,474
12,272
5,865
4,547
(924)
74,517
13. EMPLOYEE PENSION PLANS
The College participates in four retirement plans: the State Employees Retirement Fund, administered by the
Minnesota State Retirement System; the Teachers Retirement Fund, administered by the Minnesota Teachers
Retirement Association; Public Employees Retirement Fund, administered by the Public Employees Retirement
Association; and the Minnesota State Colleges and Universities Defined Contribution Retirement Plan.
State Employees Retirement Fund (SERF)
Pension fund information is provided by Minnesota State Retirement System, which prepares and publishes its
own stand alone comprehensive annual financial report, including financial statements and required
supplementary information. Copies of the report may be obtained directly from Minnesota State Retirement
System at 60 Empire Drive, Suite 300, St. Paul, Minnesota 55103-3000.
The SERF is a cost sharing, multiple employer defined benefit plan. All classified employees are covered by
this plan. A classified employee is one who serves in a civil service position. Normal retirement age is 65. The
annuity formula is the greater of a step rate with a flat rate reduction for each month of early retirement, or a
level rate (the higher step rate) with an actuarial reduction for early retirement. The applicable rates for each
year of allowable service are 1.2 percent and 1.7 percent of the members’ average salary, which is defined as
the highest salary paid in five successive years of service. Minnesota State Colleges and Universities, as an
employer for some participants, is liable for a portion of any unfunded accrued liability of this fund.
The statutory authority for SERF is Minnesota Statutes, Chapter 352. For fiscal year 2010 the funding
requirement for both employer and employee was 4.75 percent. For fiscal years 2011 and 2012 the funding
requirement was 5 percent for both employer and employee. Actual contributions were 100 percent of required
contributions.
36
Required contributions for Minneapolis Community and Technical College were:
(In Thousands)
Fiscal Year
Amount
2012
$ 426
2011
414
2010
352
Teachers Retirement Fund (TRF)
Pension fund information is provided by Minnesota Teachers Retirement Association, which prepares and
publishes its own stand alone comprehensive annual financial report, including financial statements and
required supplementary information. Copies of the report may be obtained directly from Minnesota Teachers
Retirement Association at 60 Empire Drive, Suite 400, St. Paul, Minnesota 55103-3000.
The TRF is a cost sharing, multiple employer defined benefit plan. Teachers and other related professionals
may participate in TRF. Normal retirement age is 65. Coordinated membership includes participants who are
covered by the Social Security Act. The annuity formula is the greater of a step rate with a flat reduction for
each month of early retirement, or a level rate (the higher step rate) with an actuarially based reduction for early
retirement. The applicable rates for coordinated members are 1.2 percent and 1.7 percent for service rendered
before July 1, 2006, and 1.4 percent and 1.9 percent for service rendered on or after July 1, 2006. Minnesota
State Colleges and Universities, an employer for some participants, is liable for a portion of any unfunded
accrued liability of this fund.
Effective July 1, 2006 the Minneapolis Teacher’s Retirement Fund combined with the Minnesota Retirement
Association. The Minneapolis Teachers Retirement Association’s membership consisted of eligible employees
of the Minneapolis Special School District No. 1, employees formerly employed by the district and the
employees of the Association. The funding requirements were 8.14 percent for the employer and 5.5 percent
for the employee for the coordinated plan prior to July 1, 2006.
The statutory authority for TRF is Minnesota Statutes, Chapter 354. For fiscal years 2010 and 2011 the funding
requirement was 5.5 percent for both employer and employee coordinated members. For fiscal year 2012 the
funding requirement was 6 percent for both employer and employer coordinated members. Beginning July 1,
2011, both employee and employer contribution rate increases were and will continue to be phased in with a 0.5
percent increase, occurring every July 1 over four years, until it reaches a contribution rate of 7.5 percent on
July 1, 2014. Actual contributions were 100 percent of required contributions.
Required contributions for Minneapolis Community and Technical College were:
(In Thousands)
Fiscal Year
Amount
2012
$ 366
2011
370
2010
427
37
General Employees Retirement Fund (GERF)
Pension fund information is provided by the Public Employees Retirement Association of Minnesota, which
prepares and publishes its own stand alone comprehensive annual financial report, including financial
statements and required supplementary information. Copies of the report may be obtained directly from Public
Employees Retirement Association of Minnesota at 60 Empire Drive, Suite 200, St. Paul, Minnesota 55103.
The GERF is a cost sharing, multiple employer defined benefit plan. Former employees of various
governmental subdivisions including counties, cities, school districts and related organizations participate in the
plan. Normal retirement age is 65. The annuity formula is the greater of a step rate with a flat reduction for
each month of early retirement, or a level rate (the higher step rate) with an actuarially based reduction for
early retirement. The applicable rates for members are 1.2 percent and 1.7 percent. Minnesota State Colleges
and Universities, as an employer for some participants, is liable for a portion of any unfunded accrued liability
of this fund.
The statutory authority for GERF is Minnesota Statutes, Chapter 353. GERF establishes the employer and
employee contribution rates on a calendar year basis rather than on a fiscal year basis. For the period January 1,
2009 through December 31, 2009, employee and employer contribution rates were 6 percent and 6.75 percent,
respectively. For the period January 1, 2010 through December 31, 2010, employee and employer contribution
rates were 6 percent and 7 percent, respectively. Effective January 1, 2011 and thereafter, employee and
employer contribution rats were 6.25 percent and 7.25 percent, respectively. Actual contributions were 100
percent of required contributions.
Required contributions for Minneapolis Community and Technical College were:
(In Thousands)
Fiscal Year
Employer Employee
2012
$
32
$
27
2011
31
27
2010
31
26
Minnesota State Colleges and Universities Defined Contribution Retirement Fund
General Information — The Minnesota State Colleges and Universities Defined Contribution Retirement Fund
include two plans: an Individual Retirement Account Plan and a Supplemental Retirement Plan. Both plans are
mandatory, tax deferred, single employer defined contribution plans authorized by Minnesota Statutes, Chapters
354B and 354C. The plans are designed to provide retirement benefits to Minnesota State Colleges and
Universities unclassified employees. An unclassified employee is one who belongs to Minnesota State Colleges
and Universities specific bargaining units. The plans cover unclassified teachers, librarians, administrators and
certain other staff. The plans are mandatory for qualified employees and vesting occurs immediately.
The administrative agent of the two plans is Teachers Insurance and Annuity Association College Retirement
Equities Fund (TIAA-CREF). Separately issued financial statements can be obtained from TIAA-CREF,
Normandale Lake Office Park, 8000 Norman Center Drive, Suite 1100, Bloomington, MN 55437.
38
Individual Retirement Account Plan (IRAP)
Participation — Every employee who is in unclassified service is required to participate in TRA or IRAP upon
achieving eligibility. An unclassified employee is one who serves in a position deemed unclassified according
to Minnesota Statutes. This includes presidents, vice presidents, deans, administrative or service faculty,
teachers, and other managers and professionals in academic and academic support programs. Eligibility begins
with the employment contract for the first year of unclassified service in which the employee is hired for more
than 25 percent of a full academic year, excluding summer session. An employee remains a participant of the
plan, even if employed for less than 25 percent of a full academic year in subsequent years.
Contributions — There are two member groups participating in the IRAP: a faculty group and an administrators
group. For both faculty and administrators, the employer and employee statutory contribution rates are
6 percent and 4.5 percent, respectively. The contributions are made under the authority of Minnesota Statutes,
Chapter 354B.
Required contributions for Minneapolis Community and Technical College were:
Fiscal Year
2012
2011
2010
(In Thousands)
Employer
Employee
$ 1,031
$
775
1,003
754
962
727
Supplemental Retirement Plan (SRP)
Participation — Every unclassified employee who has completed two full time years of unclassified service
with Minnesota State Colleges and Universities must participate upon achieving eligibility. The eligible
employee is enrolled on the first day of the fiscal year following completion of two full time years. Vesting
occurs immediately and normal retirement age is 55.
Contributions — Participants contribute 5 percent of the eligible compensation up to a defined maximum
annual contribution as specified in the following table:
Member Group
Minnesota Association of Professional Employees Unclassified
Middle Management Association Unclassified
Minnesota State College Faculty Association
Administrators
Other Unclassified Members
Eligible
Compensation
$ 6,000 to $ 40,000
6,000 to 40,000
6,000 to 56,000
6,000 to 60,000
6,000 to 40,000
Max Annual
Contributions
$ 1,700
1,700
2,500
2,700
1,700
The College matches amounts equal to the contributions made by participants. The contributions are made
under the authority of Minnesota Statutes, Chapter 354C.
Required contributions for Minneapolis Community and Technical College were:
(In Thousands)
Fiscal Year
Amount
2012
$ 579
2011
556
2010
539
39
14. SEGMENT INFORMATION
A segment is an identifiable activity reported as a stand alone entity for which one or more revenue bonds are
outstanding. A segment has a specific identifiable revenue stream pledged in support of revenue bonds and has
related expenses, gains and losses, assets, and liabilities that are required by an external party to be accounted
for separately.
Minnesota State Colleges and Universities issued revenue bonds to finance its student union.
Minneapolis Community and Technical College Portion of the Revenue Fund
(In Thousands)
2012
CONDENSED STATEMENTS OF NET ASSETS
Assets:
Current assets
Current restricted assets
Noncurrent restricted assets
Noncurrent assets
Total assets
Liabilities:
Current liabilities
Noncurrent liabilities
Total liabilities
Net Assets:
Invested in capital assets, net
Restricted
Total net assets
CONDENSED STATEMENTS OF REVENUES,
EXPENSES, AND CHANGES IN NET ASSETS
Operating revenues
Operating expenses
Net operating income
Nonoperating revenues (expenses)
Changes in net assets
Net assets, beginning of year
Net assets, end of year
CONDENSED STATEMENTS OF CASH FLOWS
Net cash provided (used) by:
Operating activities
Investing activities
Capital and related financing activities
Net decrease
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
40
$
$
$
$
$
$
2,570
3,788
10
14,080
20,448
2011
$
1,843
8,144
4,933
—
14,920
1,293
14,170
15,463
1,726
11,103
12,829
1,875
3,110
4,985
—
2,091
2,091
$
2,424
(1,204)
1,220
1,674
2,894
2,091
4,985
$
1,444
15
(5,106)
(3,647)
9,836
6,189
$
$
1,487
(29)
1,458
(372)
1,086
1,005
2,091
429
19
(3,982)
(3,534)
13,370
$
9,836
15. COMMITMENTS AND CONTINGENCIES
Minneapolis Community and Technical College expended $9,569,089 in revenue bond funds for work done as
of June 30, 2012, for a new Student Union. The total project cost was $9,791,980 after a contribution of
$222,891 from the College’s general fund, and was capitalized in fiscal year 2012. Also, the College will begin
construction on its general obligation bond funded Workforce Center project in fiscal year 2013, with an
estimated project cost of $13,389,000.
Minnesota State Colleges and Universities are in negotiations with the faculty bargaining units for the 20112013 contract period. Furthermore, the legislative sub-committee on employee relations rejected the
settlements reached by the State with MAPE and AFSCME for the same period. As a result, these contracts
have not been approved nor implemented. It is possible that the full legislature will consider and approve the
settlements during the regular legislative session. Whether there will be retroactive pay owed to state
employees as a result of negotiated settlements, and the impact such settlements may have on the fiscal year
2012 financials, remains unknown. Therefore, no provision for related expense or liability, if any, has been
reflected in these financial statements.
16. RISK MANAGEMENT
Minnesota State Colleges and Universities is exposed to various risks of loss related to tort; theft of, damage to,
or destruction of assets; error or omissions; and employer obligations. Minnesota State Colleges and
Universities manage these risks through Minnesota insurance plans including the state of Minnesota Risk
Management Fund, and through purchased insurance coverage. Automobile liability coverage is required by
the state and is provided by the Minnesota Risk Management Fund. Property and casualty coverage is required
by Minnesota State Colleges and Universities policy.
Property coverages offered by the Minnesota Risk Management Fund are as follows:
Coverage Type
Institution deductible
Fund responsibility
Primary reinsurer coverage
Multiple reinsurers’ coverage
Bodily injury and property damage per person
Bodily injury and property damage per occurrence
Annual maximum paid by fund, excess by reinsurer
Maintenance deductible for additional claims
Amount
$2,500 to $250,000
$1,000,000
$1,000,001 to $25,000,000
$25,000,001 to $1,000,000,000
$500,000
$1,500,000
$2,000,000
$25,000
Minneapolis Community and Technical College retains the risk of loss. The College did not have any
settlements in excess of coverage the last three years.
Minnesota State Colleges and Universities participates in the State Employee Group Insurance Plan which
provides life insurance and hospital, medical, and dental benefits coverage through provider organizations.
Workers’ compensation is covered through state participation in the Workers’ Compensation Reinsurance
Association which pays for catastrophic workers’ compensation claims. Other workers’ compensation risks are
covered through self insurance for which Minnesota State Colleges and Universities pays the cost of claims
through the state Workers’ Compensation Fund. A Minnesota State Colleges and Universities workers’
compensation payment pool helps institutions manage the volatility of such claims. Annual premiums are
assessed by the pool based on salary dollars and claims history. From this pool all workers’ compensation
claims are paid to the state Workers’ Compensation Fund.
41
The following table presents changes in the balances of workers’ compensation liability during the fiscal years
ended June 30, 2012 and 2011.
(In Thousands)
Fiscal Year Ended 6/30/12
Fiscal Year Ended 6/30/11
Beginning
Liability
Additions
$
40 $
169
926
40
Payments
& Other
Ending
Reductions
Liability
$
32 $
177
926
40
17. RELATED PARTY TRANSACTIONS
Metropolitan State University’s Minneapolis Campus (MSU) is located at Minneapolis Community and
Technical College (MCTC) and shares physical plant, institutional and academic support, and student services
costs. In fiscal year 2012 and 2011, MSU recorded $437,312 and $539,997 respectively, in shared costs
payable to MCTC.
On July 1, 2011, the College executed an agreement with MSU to transfer ownership of the Minneapolis
parking ramp, a revenue bond-funded project, to MCTC. The result of this ownership changed transferred
capital assets of $12.1 million less accumulated depreciation of $7.4 million, an increase in nonoperating cash
of $1.5 million, an increase of short and long term debt of $4.0 million. This net change of $2.2 million is
shown as a transfer of assets on the financial statements.
42
REQUIRED SUPPLEMENTARY
INFORMATION SECTION
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MINNEAPOLIS COMMUNITY AND TECHNICAL COLLEGE
SCHEDULE OF FUNDING PROGRESS FOR NET OTHER POSTEMPLOYMENT BENEFITS
Actuarial
Valuation
Date
July 1, 2006
July 1, 2008
July 1, 2010
Actuarial
Value of
Assets
(a)
—
—
—
Schedule of Funding Progress
(In Thousands)
Actuarial
Unfunded
Accrued Actuarial Accrued Funded
Liability
Liability
Ratio
(b)
(b - a)
(a/b)
$ 3,377
$ 3,377
0.00%
2,816
2,816
0.00
3,782
3,782
0.00
45
Covered
Payroll
(c)
$ 31,976
32,959
36,752
UAAL as a
Percentage of
Covered Payroll
((b - a)/c)
10.56%
8.54
10.29
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46
SUPPLEMENTARY SECTION
47
48
49
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