MINNESOTA STATE 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:
Minnesota State Community and Technical College
Pat Nordick, Chief Financial Officer
150 2nd St W, Suite B
PO Box 309
Perham, MN 56573
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.
MINNESOTA STATE COMMUNITY AND TECHNICAL COLLEGE
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2012 and 2011
TABLE OF CONTENTS
INTRODUCTION
Page
Transmittal Letter .................................................................................................................................. 5
Organization Chart ............................................................................................................................... 11
FINANCIAL SECTION
Independent Auditors’ Report .............................................................................................................. 14
Management’s Discussion and Analysis .............................................................................................. 16
Basic Financial Statements
Statements of Net Assets ............................................................................................................... 24
Fergus Area College Foundation – Statements of Financial Position ........................................... 25
Statements of Revenues, Expenses, and Changes in Net Assets ................................................... 26
Fergus Area College Foundation – Statements of Activities ......................................................... 27
Statements of Cash Flows ............................................................................................................. 28
Notes to the Financial Statements ................................................................................................. 30
REQUIRED SUPPLEMENTARY INFORMATION SECTION
Schedule of Funding Progress for Net Other Postemployment Benefits ............................................. 53
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 .................................................................. 56
1
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2
INTRODUCTION
3
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4
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10
11
Dr. Peter Wielinski
Chief Student Services
Officer
Pat Nordick
Chief Financial Officer
David Overby
Chief Information Officer
Dacia Johnson
Chief Human Resources
Officer
Dr. Kathy Brock
Chief Academic Officer
Administration
Vacant
Wadena Foundation
Charles Chadwick
Moorhead Foundation
Carolyn Glesne
Fergus Falls Foundation
Vacant
Detriot Lakes Foundation
Foundation
Dr. Peggy Kennedy
Interim President
Steven J. Rosenstone
Chancellor
Board of Trustees
GL Tucker
Dean, CTS and BES
Mary Devine
Director of Communications
And Marketing
Carol Totland
Executive Assistant
MINNESOTA STATE COLLEGES AND UNIVERSITIES
MINNESOTA STATE COMMUNITY AND TECHNICAL COLLEGE
The financial activity of the Minnesota State 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.
12
FINANCIAL SECTION
13
The College offers programs in the areas of health, technology, trades, business, environmental studies, and general
education. These programs are offered through traditional on campus delivery as well as internet, corporate
university, and post-secondary options in the high school.
FINANCIAL HIGHLIGHTS
The College’s financial position continued to improve during fiscal year 2012 ending the year on June 30, 2012 with
assets of $63.2 million, an increase of $.4 million over June 30, 2011, and liabilities of $19.9 million, a decrease of
$2.0 million over June 30, 2011. These changes caused net assets to increase by $2.4 million going from $40.9
million on June 30, 2011 to $43.3 million on June 30, 2012.
•
Income (Loss) before other revenues, expenses, gains, or losses which represents the College’s net results
from operations experienced a loss of $70 thousand. This compares to a gain of $760 thousand and a gain
of $1.3 million in fiscal years 2011 and 2010 respectively.
•
Total revenues experienced a significant decrease of 14.5 percent between fiscal years 2011 and 2012.
Although the operating revenue remained somewhat constant, the nonoperating revenue decreased by $9.0
million dollars. General appropriations decreased by $1.9 million and the capital appropriation decreased
by $2.7 million. The reduction in the general appropriation was the result of an overall base funding
reduction from the State of Minnesota by 8.6 percent. The reduction in the capital appropriation was a
result of fewer capital improvement projects funded and the completion of a large $5.5 million dollar
expansion on the Moorhead campus. The large reduction in the grant area is mainly from the expiration of
the federal funding received in fiscal year 2011 from the American Recovery and Reinvestment Act
(ARRA). The other main contributor to the significant reduction in nonoperating revenue is from gain on
disposal of assets. The College received a large sum of funds from the tornado recovery in Wadena during
fiscal year 2011 which were one time revenues.
•
Total expenses also experienced a decrease between fiscal years. Operating expenses decreased by 6.5
percent from fiscal year 2011 to fiscal year 2012. The largest decrease is supplies and services which saw a
decrease of $3.1 million. The decrease was caused by the elimination of funding from the American
Recovery and Reinvestment Act which resulted in less spending through that program. Salaries and
benefits, the largest cost category of the college increase slightly in fiscal year 2012. This cost constitutes
68.1 percent of total operating expenses.
•
Total net assets continue to grow, increasing from $40.9 million in fiscal year 2011 to $43.3 in fiscal year
2012. The unrestricted portion of the College’s net assets increased from fiscal year 2011 to fiscal year
2012 by $680 thousand.
USING THE FINANCIAL STATEMENTS
The financial report includes three financial statements: the statement of net assets, the statement of revenues,
expenses and changes in net assets, and the statement of cash flows. These financial statements are prepared in
accordance with the Generally Accepted Accounting Principles (GAAP) as established by the Government
Accounting Standards Board (GASB) through authoritative pronouncements.
17
STATEMENTS OF NET ASSETS
The statements of net assets present the financial position of the College at the end of each fiscal year and include all
assets and liabilities as measured under 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. Capital assets are stated at
historical cost less an allowance for depreciation with current year depreciation reflected as a period expense on the
statement of revenues, expenses, and changes in net assets. A summary of assets, liabilities and net assets at June
30, 2012, 2011 and 2010, is as follows (in thousands):
Assets, Liabilities, and Net Assets
2012
Current assets
$ 19,420 $
Current restricted assets
1,977
Noncurrent restricted assets
486
Noncurrent assets
135
Capital assets, net
41,183
Total assets
63,201
2011
2010
20,630 $ 17,885
2,620
564
14
—
148
159
39,432
31,476
62,844
50,084
Current liabilities
Noncurrent liabilities
Total liabilities
8,656
13,226
21,882
6,355
13,521
19,876
33,007
Invested in capital assets, net of related debt
912
Restricted
9,406
Unrestricted
$ 43,325 $
Total net assets
7,395
10,319
17,714
31,285
24,657
953
669
8,724
7,044
40,962 $ 32,370
The primary component of current assets is cash and cash equivalents, which totaled $16.9 million at June 30, 2012,
reflecting an $863 thousand decrease over the prior year. This represents approximately 3.9 months of total
expenses (excluding depreciation). This is a measure of liquid asset availability to cover operating expenses in the
event of a temporary interruption to or decrease in the College’s revenues. The other large current asset is accounts
receivable which totaled $2.6 million at June 30, 2012 which is an $882 thousand decrease from June 30, 2011. The
decrease is a result of an insurance receivable in fiscal year 2011 from the tornado recovery. Accounts receivable
related to student accounts remained constant between fiscal year 2011 and 2012.
Noncurrent assets consists mainly of land, buildings, construction in progress, equipment, and library collections
and is reduced by accumulated depreciation. Noncurrent assets increased by $1.74 million over June 30, 2011 as a
result of capitalizing the completion of two building projects and a parking lot project, and construction in progress
as a result of the commencement of four new building renovation projects.
Current liabilities consist primarily of salaries and benefits payable, accounts payable, unearned revenue and the
current portion of long term debt. Salaries and benefits payable totaled $2.6 million at June 30, 2012, a decrease of
$1.4 million from June 30, 2011. Faculty receiving their salaries over twelve months while working a nine month
contract account for the majority of the salaries and benefits payable. The significant decrease from June 30, 2011
to June 30, 2012 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. Accounts
payable, including payables from restricted assets, decreased $1.12 million from June 30, 2011.
18
Unearned revenue, another large current liability, is primarily the portion of summer session tuition received, but not
yet earned as well as grants received but not yet earned. The summer tuition revenue is allocated based upon the
number of session days in each fiscal year. Summer tuition revenues received that are in excess of the calculated
amount earned are considered unearned revenue for the purposes of these statements. Unearned revenue increased
from June 30, 2011 to June 30, 2012 by $51 thousand.
Noncurrent liabilities had a slight increase in fiscal year 2012 compared to fiscal year 2011. The largest components
of noncurrent liabilities are long term debt owed on general obligation bonds, and compensated absences, which
represent vacation and sick leave balances earned by employees.
Net assets represent the residual interest in the assets after liabilities are deducted. Invested in capital assets, net of
related debt, represents the largest portion of net assets. Capital assets are carried at the historical cost. Restricted
net assets have constraints placed on their use by external creditors, grantors, contributors, laws or regulations and
consist primarily of those assets restricted for debt service of $0.8 million. The College’s net assets increased by
$2.4 million during fiscal year 2012 increasing from $40.9 million on June 30, 2011 to $43.3 million on June 30,
2012. The unrestricted portion of net assets increased by $680 thousand.
CAPITAL AND DEBT ACTIVITIES
One of the critical factors in continuing the quality of the College’s academic programs is the development and
renewal of its capital assets. The College continues to implement its long range plan to modernize its complement
of older facilities, balanced with new construction. Capital assets, as of June 30, 2012, totaled $41.7 million, net of
accumulated depreciation of $32.5 million. This compares to $39.4 million as of June 30, 2011, net of accumulated
depreciation of $31.1 million. Capital expenses are primarily comprised of new construction, renovations to
existing facilities and investments in equipment. Capital assets are primarily financed by long term debt through
issuance of general obligation and revenue bonds. The College is responsible for paying one third of the debt
service for the general obligation bonds. The College recognizes as capital appropriation revenue any portion of the
general obligation bonds sold for which the college has no debt service responsibility.
Additional information on capital activities and long term debt can be found in Notes 6 and 8.
19
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
The statements of revenues, expenses and changes in net assets present the College’s results of operations for each
year. When reviewing the full statement, users should note that GASB requires classification of state appropriations
as nonoperating revenue.
A summarized statement for the year ended June 30, 2012, 2011 and 2010 follows (in thousands):
Statement of Revenues, Expenses and Changes in Net Assets
2012
Operating revenue:
Tuition, fees, books, net
Restricted student payments, net
Other revenue
Total operating revenue
2011
$ 20,004 $ 20,783 $
106
130
312
180
20,446
21,069
2010
19,457
—
284
19,741
Nonoperating revenue:
State appropriations
Federal and State grants
Private grants
Capital appropriations
Gain on disposal of assets
Other
Total nonoperating revenue
Total revenues
17,749
15,474
632
2,314
—
355
36,524
56,970
19,618
17,257
738
5,042
2,560
339
45,554
66,623
20,131
15,331
1,261
3,189
—
99
40,011
59,752
Operating expense:
Salaries and benefits
Supplies and services
Depreciation
Financial aid, net
Other
Total operating expense
36,759
11,396
2,113
852
2,828
53,948
36,292
14,456
2,114
1,885
2,921
57,668
36,102
12,284
1,998
2,250
2,279
54,913
Nonoperating expense:
Loss on disposal of assets
Grants to other organizations
Interest expense
Total nonoperating expense
Total expenses
122
80
457
659
54,607
—
26
337
363
58,031
45
—
318
363
55,276
Increase in net assets
Net assets, beginning of year
Net assets, end of year
2,363
8,592
4,476
40,962
32,370
27,894
$ 43,325 $ 40,962 $ 32,370
20
FOUNDATION
Included with the financial statements are the statement of financial position and statement of activities for the
Fergus Area College Foundation. The Foundation saw an improvement in its total net assets of $175 thousand over
June 30, 2011. In addition to the Fergus Area College Foundation, the College has three other small foundations
that are in early development at the campuses in Detroit Lakes, Moorhead, and Wadena. Once their activity reaches
a level of materiality the College will include their financial activity as part of future financial statements.
ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE
Looking toward the future, management believes that the College needs to continue to be vigilant in preparing for
the programs, services, and educational changes that will be needed in the next decade. The College continues to
invest in programs and services for the online learner. The College believes this mode of academic delivery will
continue to increase in the foreseeable future. With the ever increasing competition for enrollment, the College will
continue to explore new growth opportunities by looking at alternative delivery methods and modalities as well as
looking for new market penetration.
State appropriation will continue to be a concern for fiscal years 2013 and beyond and the College remains
concerned that future appropriation funding will not keep pace with inflationary growth. The level of state
appropriation per full year equivalent student in fiscal year 2012 was less than what the College received in fiscal
year 2000 and greater pressure continues to be put on tuition as the main source of revenue. This shift, along with
continued pressures to maintain low tuition increases will put extreme pressure on the College to reallocate current
expenditures in order to be able to invest in new programs and services that current and future students and industry
will demand. It will be imperative to continue to be vigilant in financial planning, including continued review of all
programs and services to ensure efficient delivery as well as searching out new program opportunities. In addition,
the College will continue to look at shared programs and services to ensure that all resources are being used as
efficiently as possible.
Across the nation, higher education organizations are moving towards new, creative methods of delivery. These
trends along with the mobility of today’s students make it imperative for the College to stay current on higher
education trends and needs. Delivering education in the same manner as has been done in the past will no longer be
sustainable because the student customer will find a more efficient method other places.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Minnesota State 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:
Chief Financial Officer
Minnesota State Community and Technical College
150 2nd Street Southwest
Perham, MN 56573
23
MINNESOTA STATE COMMUNITY & TECHNICAL COLLEGE
STATEMENTS OF NET ASSETS
AS OF JUNE 30, 2012 AND 2011
(IN THOUSANDS)
Assets
Current Assets
Cash and cash equivalents
Grants receivable
Accounts receivable, net
Prepaid expense
Inventory
Student loans, net
Other assets
Total current assets
Current Restricted Assets
Cash and cash equivalents
Total current restricted assets
Noncurrent Restricted Assets
Construction in progress
Total noncurrent restricted assets
Total restricted assets
Noncurrent Assets
Student loans, net
Capital assets, net
Total noncurrent assets
2012
$
Total Assets
14,880
225
2,631
732
898
30
24
19,420
2011
$
15,100
499
3,513
846
608
30
34
20,630
1,977
1,977
2,620
2,620
486
486
2,463
14
14
2,634
135
41,183
41,318
148
39,432
39,580
63,201
62,844
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
Capital contributions payable
Total noncurrent liabilities
2,551
778
818
790
16
151
723
528
6,355
3,943
1,705
767
983
20
6
713
519
8,656
9,030
4,301
190
13,521
9,012
4,018
196
13,226
Total Liabilities
19,876
21,882
33,007
27
885
9,406
31,285
11
942
8,724
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.
24
43,325
$
40,962
FERGUS AREA COLLEGE FOUNDATION
STATEMENTS OF FINANCIAL POSITION
AS OF JUNE 30, 2012 AND 2011
(IN THOUSANDS)
2012
Assets
Current Assets
Cash and cash equivalents
Investments
Other receivables
Total Assets
$
$
Liabilities and Net Assets
Current Liabilities
Accounts payable
Total Liabilities
$
Net Assets
Unrestricted
Temporarily restricted
Permanently restricted
Total Net Assets
2011
60
3,582
5
3,647
-
$
$
$
105
659
2,883
3,647
Total Liabilities and Net Assets
$
The notes are an integral part of the financial statements.
25
3,647
100
3,432
11
3,543
71
71
103
546
2,823
3,472
$
3,543
MINNESOTA STATE COMMUNITY & 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 and room and board, 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
Nonoperating Revenues (Expenses)
Appropriations
Federal grants
State grants
Private grants
Interest income
Interest expense
Grants to other organizations
Total nonoperating revenues (expenses)
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital appropriations
Donated assets and supplies
Gain (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.
26
2011
13,040
1,961
5,003
130
312
20,446
$
13,516
2,032
5,235
106
180
21,069
36,759
4,110
6,360
926
2,113
852
2,828
53,948
(33,502)
36,292
4,691
8,123
1,642
2,114
1,885
2,921
57,668
(36,599)
17,749
13,595
1,879
632
114
(457)
(80)
33,432
19,618
15,490
1,767
738
109
(337)
(26)
37,359
(70)
760
2,314
241
(122)
2,363
5,042
230
2,560
8,592
40,962
43,325
$
32,370
40,962
FERGUS AREA COLLEGE FOUNDATION
STATEMENTS OF ACTIVITIES
FOR THE YEARS ENDED JUNE 30, 2012 AND 2011
(IN THOUSANDS)
Temporarily
Restricted
Unrestricted
Support and Revenue
Endowment gifts
$
Program income
Investment income
Fundraising income
Unrealized gains
Net assets released from restrictions
Total support and revenue
Expenses
Program services
Scholarships
Total program services
Supporting services
Management and general
Fundraising
Total supporting services
Total expenses
Change in Net Assets
Net Assets, Beginning of Year
Net Assets, End of Year
$
41
64
117
222
$
68
86
86
(127)
113
Permanently
Restricted
$
50
10
60
2012
Total
$
2011
Total
50 $
68
127
64
86
395
354
91
115
59
308
927
141
141
-
-
141
141
145
145
79
79
220
-
-
79
79
220
74
1
75
220
2
113
60
175
707
103
546
2,823
3,472
2,765
3,647 $
3,472
105
$
The notes are an integral part of the financial statements.
27
659
$
2,883
$
MINNESOTA STATE COMMUNITY & 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 repayment of program loans
Cash paid to suppliers for goods or services
Cash payments to employees salaries
Cash payments to employees benefits
Financial aid disbursements
Cash payments of program loans
Net cash flows used in operating activities
$
2011
20,573
13
(15,467)
(28,541)
(9,372)
(858)
(5)
(33,657)
$
20,775
17
(16,406)
(26,357)
(9,538)
(1,885)
(15)
(33,409)
Cash Flows from Noncapital Financing Activities
Appropriations
Federal grants
State grants
Private grants
Agency activity
Grants to other organizations
Net cash flows provided by noncapital financing activities
17,749
13,899
1,879
632
145
(80)
34,224
19,618
15,218
1,767
738
6
(26)
37,321
Cash Flows from Capital and Related Financing Activities
Investment in capital assets
Capital appropriation
Proceeds from sale of capital assets
Proceeds from insurance
Proceeds from borrowing
Proceeds from bond premium
Interest paid
Repayment of lease principal
Repayment of note principal
Repayment of bond principal
Net cash flows used in capital and related financing activities
(4,341)
2,280
2
833
813
21
(426)
(58)
(148)
(455)
(1,479)
(9,376)
5,042
1,988
2,988
312
(417)
(58)
(136)
(535)
(192)
Cash Flows from Investing Activities
Investment earnings
Net cash flows provided by investing activities
49
49
Net Increase (decrease) in Cash and Cash Equivalents
(863)
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
$
The notes are an integral part of the financial statements.
28
17,720
16,857
47
47
3,767
$
13,953
17,720
MINNESOTA STATE COMMUNITY & 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
Provision for loan defaults
Loan principal repayments
Loans issued
Loans forgiven
Donated supplies
Change in assets and liabilities
Inventory
Accounts receivable
Accounts payable
Salaries and benefits payable
Other compensation benefits
Capital contributions payable
Unearned revenues
Other assets and liabilities
Net reconciling items to adjust operating loss
Net cash flow used in operating activities
$
Non-Cash Investing, Capital, and Financing Activites
Capital projects on account
Donated equipment
Loss on retirement of capital assets
Amortization of bond premium
$
29
(33,502)
2011
$
(36,599)
2,113
3
13
(5)
2
21
2,114
5
17
(15)
3
90
(290)
106
(927)
(1,392)
292
(6)
21
(106)
(155)
(33,657)
304
(280)
538
223
207
1
(14)
(3)
3,190
(33,409)
790
220
(145)
65
$
$
983
140
(64)
62
MINNESOTA STATE 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 Minnesota State Community and Technical College (the
College), a member of 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 Minnesota State 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. Minnesota State 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.
Minnesota State Community and Technical College began on July 1, 2004, and is comprised of four campuses
located in the Minnesota communities of Detroit Lakes, Fergus Falls, Moorhead and Wadena.
Discretely presented component units are legally separate organizations that raise and hold economic resources
for the direct benefit of a college or university in accordance with GASB Statement No. 39, Determining
Whether Certain Organizations are Component Units. The Fergus Area College Foundation is considered
significant to the College and is included as a discretely presented component unit and separately identified in
Note 18. Complete financial statements may be obtained from the Fergus Area College Foundation, 1414
College Way, Fergus Falls, MN 56537.
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 apply 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 appropriation, differs from GAAP. College 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’s biennial budget
request and allocation as part of 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.
30
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 into 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 expenses are incurred. Individual colleges and universities are allocated cash, capital appropriation
revenue, and debt based on capital project expenses.
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 six accounts in local banks. 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,
except for the Revenue Fund, as part of a state investment pool. This asset is reported as a cash equivalent.
Interest income earned on pooled investments is retained by the Office of the Chancellor and allocated to the
colleges and universities as part of the appropriation allocation process.
Cash in the Revenue Fund is invested separately. The Fund contacts with the Minnesota State Board of
Investment and U.S. Bank, N.A. for investment management services. Investments are reported at fair value.
Restricted investments are investment held in Revenue Fund for capital projects and debt service.
Information about the cash in the state treasury and invested by the State Board of Investment, including deposit
and investment risk disclosures, can be obtained from the State of Minnesota Comprehensive Annual Financial
Report, Minnesota Management and Budget, 400 Centennial Building, 658 Cedar Street, St. Paul, MN 55155.
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
35 years
Building improvements 20 years
Equipment
3-20 years
Library collections
7 years
31
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.
Minnesota State College and Universities may finance the construction, renovation and acquisition of facilities
for student residencies, student wellness centers, and student unions through the sale of revenue bonds. These
activities are accounted for 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 College and Universities, 30 7th St. E.,
Suite 350, St. Paul, Minnesota 55101-7804.
The College may also enter into capital lease agreements for certain capital assets. Other long term liabilities
include compensated absences, other postemployment benefits, workers’ compensation claims, and notes
payable.
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
or fall 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 12
for additional information.
Federal Grants — The College participates in several federal grant programs. The largest programs include
Pell, 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.
32
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
Minnesota State Community and Technical College are as follows:
Restricted for bond covenants – revenue bond restrictions
Restricted for other — includes restrictions for the following:
Donations — restricted per donor requests.
Loans — College capital contributed for Perkins loans.
Capital Projects – restricted for completion of capital projects.
Debt service — legally restricted for bond repayments.
Faculty contract obligations — faculty development and travel required by contracts.
Net Assets Restricted for Other
(In Thousands)
2012
2011
Donations
$
8 $
6
Loans
31
32
Capital Projects
8
2
Debt service
815
877
Faculty contract obligations
23
25
Total
$ 885 $ 942
•
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 six accounts in 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.
33
The following table summarizes cash and cash equivalents:
Year Ended June 30
(In Thousands)
Carrying Amount
2012
Cash, in bank
$
919
Cash, trustee account (US Bank)
922
Money market
29
Cash, local accounts
1,870
Cash, treasury account
14,987
Total cash and cash equivalents $ 16,857
$
$
2011
1,093
1,438
29
2,560
15,160
17,720
At June 30, 2012 and 2011, the College’s bank balances were $946,954 and $990,280 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.
The cash accounts are invested in short term, liquid, high quality debt securities.
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,
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.
Custodial Credit Risk — Custodial credit risk for investments 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 that recommends investments be diversified by type and issuer.
Interest Rate Risk — Interest rate risk is the 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 investments.
34
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 $3,659,601 and $4,585,026, less an allowance
for uncollectible receivables of $1,028,904 and $1,071,734, respectively.
Summary of Accounts Receivable at June 30
(In Thousands)
2012
2011
Tuition
$ 2,018 $ 2,032
Due from other campus
287
304
Sales and services
463
374
Fees
349
392
Room and board
34
47
Insurance proceeds
—
810
Third party obligations
415
468
Other
94
158
Total accounts receivable
3,660
4,585
Allowance for uncollectible accounts
(1,029)
(1,072)
Net accounts receivable
$ 2,631 $ 3,513
The allowance for uncollectible accounts has been computed based on the following aging schedules:
Allowance
Age
Percentage
Less than 1 year
15
1 to 3 years
45
3 to 5 years
70
Over 5 years
95
4.
PREPAID EXPENSE
Prepaid expense consists primarily of funds which have been deposited in the state’s Debt Service Fund for
future general obligation bond payments in the amounts of $695,418 and $805,498 for fiscal years 2012 and
2011, respectively. 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. Also included in prepaid expense for fiscal years 2012
and 2011 is $36,166 and $40,733, respectively, stemming from prepaid software maintenance agreements and
prepaid contractual support.
5.
LOANS RECEVIABLE
Loans receivable balances consist of loans under the Federal Perkins Loan Program. The federal government
provides the funding for the loans with amounts collected used for new loan advances. The Minnesota State
Colleges and Universities loans collection unit is responsible for loan collections. As of June 30, 2012 and June
30, 2011, the loans receivable for this program totaled $203,471 and $213,267, respectively, less an allowance
for uncollectible loans of $38,357 and $35,071 respectively.
35
6.
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
$
1,321 $
3,958
5,279
— $
3,806
3,806
Decreases
— $
—
—
Completed
Construction
Ending
Balance
— $
(1,059)
(1,059)
1,321
6,705
8,026
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
58,886
5,860
523
65,269
—
589
81
670
—
719
92
811
1,059
—
—
1,059
59,945
5,730
512
66,187
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
27,155
3,649
298
31,102
1,631
409
73
2,113
—
579
92
671
—
—
—
—
28,786
3,479
279
32,544
34,167
39,446 $
(1,443)
2,363 $
140
140 $
1,059
—
33,643
$ 41,669
Total capital assets, depreciated, net
Total capital assets, net
$
Year Ended June 30, 2011
(In Thousands)
Beginning
Balance
Increases
Capital assets, not depreciated:
Land
Construction in progress
Total capital assets, not depreciated
$
1,181 $
2,063
3,244
140 $
9,122
9,262
Decreases
— $
—
—
Completed
Construction
Ending
Balance
— $
(7,227)
(7,227)
1,321
3,958
5,279
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
51,659
5,222
505
57,386
—
799
86
885
—
161
68
229
7,227
—
—
7,227
58,886
5,860
523
65,269
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
25,598
3,264
292
29,154
1,557
483
74
2,114
—
98
68
166
—
—
—
—
27,155
3,649
298
31,102
28,232
31,476 $
(1,229)
8,033 $
7,227
—
34,167
$ 39,446
Total capital assets, depreciated, net
Total capital assets, net
$
36
63
63 $
7.
ACCOUNTS PAYABLE
Accounts payable represent amounts due for goods and services received prior to the end of a fiscal year.
Summary of Accounts Payable at June 30
(In Thousands)
2012
2011
Purchased services
$ 381 $ 695
Supplies
162
604
Employee benefits
2
56
Inventory
29
102
Repairs and maintenance
152
219
Other
52
29
Total
$ 778 $ 1,705
In addition, as of June 30, 2012 and 2011, the College had payable from restricted assets in the amounts of
$790,418 and $982,616, which were related to capital projects financed by general obligation bonds and
revenue bonds.
8.
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 Decreases
Liabilities for:
Bond premium
General obligation bonds
Capital leases
Notes payable
Revenue bonds
Total long term debt
$
$
586
6,674
242
663
1,560
9,725
$
$
21
813
—
—
—
834
$
$
65
535
58
148
—
806
Ending
Balance
$
$
Year Ended June 30, 2011
(In Thousands)
Beginning
Balance
Increases Decreases
Liabilities for:
Bond premium
General obligation bonds
Capital leases
Notes payable
Revenue bonds
Total long term debt
$
$
336
5,683
—
799
—
6,818
$
313
1,428
300
—
1,560
$ 3,601
37
$
$
63
437
58
136
—
694
542
6,952
184
515
1,560
9,753
Current
Portion
$
$
Ending
Balance
$
$
586
6,674
242
663
1,560
9,725
—
470
60
138
55
723
Current
Portion
$
$
—
507
58
148
—
713
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
$
$
3,411
186
889
51
4,537
$
$
476
36
398
70
980
Decreases
$
$
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
$
$
3,490
110
647
83
4,330
$
$
295
108
373
51
827
375
118
155
40
688
Decreases
$
$
374
32
131
83
620
Ending
Balance
$ 3,512
104
1,132
81
$ 4,829
Ending
Balance
$ 3,411
186
889
51
$ 4,537
Current
Portion
$ 420
71
—
37
$ 528
Current
Portion
$ 375
122
—
22
$ 519
Bond Premium— In fiscal years 2012 and 2011 bonds were issued, resulting in premiums of $21,007 and
$294,611, respectively. In fiscal year 2011, revenue bonds were issued resulting in a premium of $18,454.
Amortization is calculated using the straight-line method and amortized over the average remaining life of the
bonds.
Capital Leases – Liabilities for capital leases include those leases that meet the criteria in the FASB Accounting
Standards Codification (ASC) 840, Leases. See Note 11 for details.
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 Statutes, 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 construction of a student wellness center. Revenue bonds currently outstanding
have interest rates between 3 percent and 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 bonds are payable
through fiscal year 2032. Annual principal and interest payments on the bonds are expected to require less than
90.44 percent of net revenues. The total principal and interest remaining to be paid on the bonds is $2,347,878.
Principal and interest paid for the current year and total customer net revenues were $ 71,605 and $ 129,935
respectively.
38
Notes Payable — Notes payable consists of state energy efficiency program loans. Some loans received under
this program are interest free while others charge interest. The loans are granted by energy companies in order
to improve energy efficiency in college and university buildings. The College has only interest charging loans
at the present time with interest rates ranging from 4.81 percent to 8.98 percent.
Projects completed under Minnesota Statutes, Section 16C.14 have an interest component. The interest rate is
tied to the prime interest rate at the time of the project. The range of interest rates charged to the current notes
is 4.81 to 9.90 percent.
Compensated Absences — College employees accrue vacation leave, sick leave 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 by faculty for discontinuing
services earlier than planned. See note 9 for additional information.
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 10 for further
details.
Workers’ Compensation — The state of Minnesota Management and Budget manages the self insured workers’
compensation claims activities. The reported liability for workers’ compensation of $81,346 and $50,767 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.
Capital Contributions — The liability of $190,353 and $195,917 at June 30, 2012 and 2011, respectively,
represents the amount the College would owe the federal government if it were to discontinue the Perkins loan
program. The net change was a decrease of $5,564 in fiscal year 2012, and an increase of $895 in fiscal year
2011.
Principal and interest payment schedules are provided in the following table for general obligation bonds,
revenue bonds, capital leases, and notes payable. There are no payment schedules for compensated absences,
early termination benefits, net other postemployment benefits, workers’ compensation, or capital contributions.
Long Term Debt Repayment Schedule
(In Thousands)
Fiscal Years
2013
2014
2015
2016
2017
2018-2022
2023-2027
2028-2032
Total
$
$
General
Obligation Bonds
Principal
Interest
470
$
332
471
309
449
286
446
264
445
242
2,224
877
1,887
342
560
44
6,952
$ 2,696
Revenue Bonds
Capital Leases
Notes Payable
Principal
Interest
Principal
Interest
Principal Interest
$
55
$
64 $
60
$
5
$ 138
$ 23
60
62
61
3
117
16
60
60
63
1
45
12
60
59
—
—
49
10
65
58
—
—
54
7
345
248
—
—
112
6
410
172
—
—
—
—
505
65
—
—
—
—
$ 1,560
$ 788 $
184
$
9
$
515
$ 74
39
9.
EARLY TERMINATION BENEFITS
Minnesota State College Faculty (MSCF) contract
Early termination benefits are defined as benefits received for discontinuing services earlier than planned. The
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 termination 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
members as of the end of fiscal years 2012 and 2011 follow:
Fiscal Year
2012
2011
Number
of Faculty
5
8
$
Future Liability
(In Thousands)
104
186
10. NET OTHER POSTEMPLOYMENT BENEFITS
The College provides health insurance benefits for certain retired employees under a single employer fully
insured 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 14 retirees receiving health benefits from the health plan.
Annual OPEB Cost and Net OPEB Obligation — The annual other postemployment benefit (OPEB) cost 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 Post Employment 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)
Annual required contribution (ARC)
Interest on net OPEB obligation
Adjustment to ARC
Annual OPEB Cost
Contributions during the year
Increase in net OPEB obligation
Net OPEB obligation, beginning of year
Net OPEB obligation, end of year
40
2012
2011
390 $
42
(34)
398
(155)
243
889
$ 1,132 $
367
31
(25)
373
(131)
242
647
889
$
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 were as follows:
Year Ended June 30
(In Thousands)
Beginning of year net OPEB obligation
Annual OPEB Cost
Employer contribution
End of year net OPEB obligation
Percentage contributed
2012
889
398
(155)
$ 1,132
$
2011
647
373
(131)
$ 889
$
38.94%
35.12%
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
July 1, 2010
(a)
$ —
Schedule of Funding Progress
(In Thousands)
Actuarial
Unfunded
Accrued
Actuarial Accrued
Funded
Liability
Liability
Ratio
Covered
Payroll
UAAL as a
Percentage of
Covered Payroll
(b)
$ 3,103
(c)
$ 27,364
((b - a)/c)
11.34 %
(b - a)
$ 3,103
(a/b)
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.
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
11. LEASE AGREEMENTS
Operating Leases — The College is committed under various leases primarily for building space and office
equipment. These leases are considered for accounting purposes to be operating leases. Lease expenditures for
the years ended June 30, 2012 and 2011, totaled approximately $503,930 and $361,204, respectively.
41
Future minimum lease payments for existing lease agreements are listed in the following table.
Year Ended June 30
(In Thousands)
Fiscal Year
Amount
2013
$
531
2014
294
2015
85
2016
81
2017
18
Total $ 1,009
Capital Leases – During fiscal year 2011 the College entered into one capital lease in the amount of $300,000
for the purchase of a telephone system. The lease meets the criteria of a capital lease as defined by FASB ASC
840, Leases. The term of the lease is for five years.
Income Leases —The College has entered into several income lease agreements primarily for building space.
Lease income for the years ended June 30, 2012 and 2011, totaled $33,816 and $89,102, respectively, and is
included in other income in the statements of revenues, expenses, and changes in net assets.
Future expected income receipts for existing lease agreements are listed in the following table.
Year Ended June 30
(In Thousands)
Fiscal Year
Amount
2013
$
18
2014
16
Total
$
34
12. TUITION, FEES, AND SALES, NET
The following table provides information related to tuition, fees, and sales revenue:
Description
Tuition
Fees
Room and board and sales
Restricted student payments
Total
Year Ended June 30
(In Thousands)
2012
Scholarship
Gross
Allowance
Net
$ 24,928 $ (11,888) $ 13,040
2,877
(916)
1,961
6,054
(1,051)
5,003
130
—
130
$ 33,989 $ (13,855) $ 20,134
42
$
$
Gross
24,750
2,977
6,294
106
34,127
2011
Scholarship
Allowance
Net
$ (11,234) $ 13,516
(945)
2,032
(1,059)
5,235
—
106
$ (13,238) $ 20,889
13. OPERATING EXPENSES BY FUNCTIONAL CLASSIFICATION
The following tables provides information related to operating expenses by functional classification:
Year Ended June 30, 2012
(In Thousands)
Description
Academic support
Institutional support
Instruction
Public service
Student services
Auxiliary enterprises
Scholarships & fellowships
Less interest expense
Total operating expenses
Salaries
3,241
2,386
16,759
135
3,853
775
—
—
$ 27,149
$
Benefits
1,130
1,134
5,408
62
1,676
200
—
—
$
9,610
$
$
$
Other
3,218
1,903
3,618
163
2,623
4,812
852
—
17,189
$
$
Interest
54
43
277
2
69
12
—
(457)
—
$
$
Total
7,643
5,466
26,062
362
8,221
5,799
852
(457)
53,948
Year Ended June 30, 2011
(In Thousands)
Description
Academic support
Institutional support
Instruction
Public service
Student services
Auxiliary enterprises
Scholarships & fellowships
Less interest expense
Total operating expenses
Salaries
3,020
2,779
16,075
98
4,056
471
—
—
$ 26,499
$
Benefits
1,241
1,244
5,373
40
1,638
257
—
—
$
9,793
$
$
$
Other
3,194
2,781
5,766
179
2,726
4,845
1,885
—
21,376
$
$
Interest
40
37
199
1
53
7
—
(337)
—
$
$
Total
7,495
6,841
27,413
318
8,473
5,580
1,885
(337)
57,668
14. EMPLOYEE PENSION PLANS
The College participates in four retirement plans: the State Employees Retirement Fund, administered by the
Minnesota State Retirement System; the Public Employees Retirement Fund, administered by the Public
Employees Retirement Association; the Teachers Retirement Fund, administered by the Minnesota Teachers
Retirement Association; and 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, MN 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.
43
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.
Required contributions for the College were:
(In Thousands)
Fiscal Year
Amount
2012
$ 330
2011
325
2010
270
Teachers Retirement Fund (TRF)
Pension fund information is provided by Minnesota Teachers Retirement Association (TRA), 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, MN 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.
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 employee 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 three 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 the College were:
(In Thousands)
Fiscal Year
Amount
2012
$ 189
2011
165
2010
168
Minnesota State Colleges and Universities Defined Contribution Retirement Fund
General Information — The Minnesota State Colleges and Universities Defined Contribution Retirement Fund
includes 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
44
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 for 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.
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 the College were:
(In Thousands)
Fiscal Year Employer Employee
2012
$ 1,022 $
765
2011
1,039
782
2010
1,020
765
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
Administrators
Other Unclassified Members
Eligible Compensation
Maximum
Annual
Contributions
$ 6,000 to
6,000 to
6,000 to
6,000 to
$ 1,700
1,700
2,700
1,700
$$40,000
40,000
60,000
40,000
The College matches amounts equal to the contributions made by participants. The contributions are made
under the authority of Minnesota Statutes, Chapter 354C.
45
Required contributions for the College were:
(In Thousands)
Fiscal Year
Amount
2012
$ 509
2011
546
2010
510
15. 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 Minnesota State Community and
Technical College in the amount of $1,560,000.
Minnesota State 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
Total assets
Liabilities:
Current liabilities
Noncurrent liabilities
Total liabilities
Net Assets:
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 increase (decrease)
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
46
$
45
1,601
486
2,132
2011
$
455
1,522
1,977
$
$
$
$
$
155
155
32
1,640
14
1,686
24
1,578
1,602
$
135
(3)
132
(61)
71
84
155
$
124
2
(161)
(35)
1,672
1,637
$
$
$
84
84
107
(4)
103
(19)
84
—
84
104
(1)
1,569
1,672
—
1,672
16. COMMITMENTS AND CONTINGENCIES
During fiscal year 2012, construction neared completion on the $5.45 million library addition on the Moorhead
campus and a $525 thousand classroom rightsizing project on the Wadena campus. As of June 30, 2012, $5.04
million had been expended on the library addition and $485 thousand had been expended on the classroom
rightsizing project. The library project is expected to be completed by November 2012 and the classroom
project will be completed by October 2012. In addition, the student fee funded $1.25 million wellness center in
Moorhead is in progress with $486 thousand expended as of June 30, 2012. The center is projected to be
completed by October 2012.
New commitments made by the College during fiscal year 2012 include a $300 thousand energy retrofit in
Moorhead, a $900 thousand roof replacement project in Detroit Lakes, and a $250 thousand windows and doors
replacement project all of which are funded through GO bonds. In addition, a $326 thousand food service and
dining hall renovation project is under way in Moorhead which is funded by proceeds from the enterprise fund.
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.
17. 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. The College also purchased optional physical damage coverage for their newest or most expensive
vehicles.
Property and casualty coverage is required by Minnesota State Colleges and Universities policy. The College
has selected optional coverage for student health services professional liability.
Property coverage offered by the Minnesota Risk Management Fund is as follows:
Coverage Type
Institution deductible
Fund responsibility
Primary re-insurer coverage
Multiple re-insurers’ 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
$50,000
Deductible to $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
Minnesota State Community and Technical College retains the risk of loss. The College did not have any
settlements in excess of coverage the last three years.
The Minnesota Risk Management Fund purchased student intern professional liability and dental clinics
professional liability on the open market for the College.
47
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.
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 06/30/12
Fiscal Year Ended 06/30/11
Beginning
Liability
$
51
$
83
Additions
70
51
$
Payments
& Other
Reductions
40
83
Ending
Liability
$
81
51
18. COMPONENT UNITS
In accordance with GASB Statement No. 39, Determining Whether Certain Organizations Are Component
Units, the following foundation affiliated with Minnesota State Community and Technical College is a legally
separate, tax exempt entity and reported as a component unit.
The Fergus Area College Foundation is a separate legal entity formed for the purpose of obtaining and
disbursing funds for the sole benefit of the College. The College does not appoint any members of the board
and the resources held by the Foundation can only be used by, or for, the benefit of the College. The
Foundation’s relationship with the institution is such that exclusion of the Foundation’s financial statements
would cause the College’s financial statements to be misleading or incomplete. The Foundation is considered a
component unit of the College and their statements are discretely presented in the College’s financial
statements.
The value of scholarships and equipment contributed by or passed through the Foundation was $141,172 and
$144,788 for the fiscal years ended June 30, 2012 and 2011, respectively.
The Foundation’s financial statements have been prepared on the accrual basis of accounting in accordance with
generally accepted accounting principles as prescribed by the FASB ASC 958-205, Presentation of Financial
Statements. Net assets, which are classified on the existence or absence of donor imposed restrictions, are
classified and reported according to the following classes:
•
Unrestricted: Net assets that are not subject to donor imposed stipulations.
•
Temporarily Restricted Net Assets: Net assets subject to donor imposed restrictions as to how the
assets be used.
•
Permanently Restricted Net Assets: Net assets subject to donor imposed stipulations that they be
maintained permanently by each foundation. Generally, the donors of these assets permit the
foundation to use all or part of the income earned on any related investments for general or specific
purposes.
48
Investments — The foundation’s investments are presented in accordance with FASB ASC 958-320,
Investments-Debt and Equity Securities. Under ASC 958-320, investments in marketable securities with readily
determinable fair values and all investments in debt securities are reported at their fair values in the statement of
financial position.
Schedule of Investments at June 30
(In Thousands)
Investments
2012
2011
Common stock
$
87 $
60
Mutual funds
2,942
2,769
Fixed income securities / Bonds
301
317
Other investments
252
286
Total investments
$ 3,582 $ 3,432
Endowment Funds— The Foundation’s endowment includes donor-restricted funds. As required by generally
accepted accounting principles, net assets associated with endowment funds, including funds designated by the
Board of Trustees to function as endowments, are classified and reported based on the existence or absence of
donor-imposed restrictions.
Changes in endowment net assets as of June 30, 2012 are as follows:
Schedule of Endowment Net Assets
As of June 30, 2012
(In Thousands)
Net assets, beginning of year
Contributions
Investment income
Net appreciation
Reclassifications
Amounts appropriated for expenditures
Net Assets, End of Year
Temporarily
Unrestricted
Restricted
$
— $
395
—
53
41
85
—
92
—
(9)
(41)
(117)
$
— $
499
Total
Permanently
Endowment
Restricted
Net Assets
$
2,823 $
3,218
51
104
—
126
—
92
9
—
—
(158)
$
2,883 $
3,382
Changes in endowment net assets as of June 30, 2011 are as follows:
Schedule of Endowment Net Assets
As of June 30, 2011
(In Thousands)
Net assets, beginning of year
Contributions
Investment income
Net appreciation
Amounts appropriated for expenditures
Net assets, end of year
Total
Temporarily
Permanently
Endowment
Unrestricted
Restricted
Restricted
Net Assets
$
— $
71 $
2,468 $
2,539
—
70
354
424
39
76
1
116
—
308
—
308
(39)
(130)
—
(169)
$
— $
395 $
2,823 $
3,218
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REQUIRED SUPPLEMENTARY
INFORMATION SECTION
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52
MINNESOTA STATE 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)
$ 2,788
$ 2,788
0.00%
2,788
2,788
0.00
3,103
3,103
0.00
53
Covered
Payroll
(c)
$ 26,105
26,216
27,364
UAAL as a
Percentage of
Covered Payroll
((b - a)/c)
10.68%
10.63
11.34
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SUPPLEMENTARY SECTION
55
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