HENNEPIN TECHNICAL COLLEGE
A MEMBER OF THE
MINNESOTA STATE COLLEGES AND UNIVERSITIES SYSTEM
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2010 and 2009
Prepared by:
Hennepin Technical College
9000 Brooklyn Blvd.
Brooklyn Park, MN 55445-2399
Upon request, this publication is available in alternate formats by calling one of the following:
General number: (651) 297-5579
Toll free: 1-888-667-2848
TTY: (651) 282-2660
HENNEPIN TECHNICAL COLLEGE
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2010 and 2009
TABLE OF CONTENTS
INTRODUCTION
Page
Transmittal Letter .................................................................................................................................. 5
Organization Chart ................................................................................................................................. 7
FINANCIAL SECTION
Independent Auditors’ Report .............................................................................................................. 10
Management’s Discussion and Analysis .............................................................................................. 12
Basic Financial Statements
Statements of Net Assets .............................................................................................................. 18
Statements of Revenues, Expenses, and Changes in Net Assets ................................................... 19
Statements of Cash Flows ............................................................................................................. 20
Notes to the Financial Statements ................................................................................................. 22
SUPPLEMENTAL 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 .................................................................. 40
1
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2
INTRODUCTION
3
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4
5
6
Administration Organizational Chart
June 30, 2010
Board of Trustees
Minnesota State
Colleges and Universities
James H. McCormick
Chancellor
Dr. Cecilia Cervantes
President
Larry Anderson
Executive Assistant to the President
Lisa Larson
Vice President of
Academic Affairs
Colette Campbell Stuart
Director of Diversity
and Affirmative Action
Mark Felsheim
Vice President of
Student Affairs
Sharon Mohr
Director of
Human Resources
Carol Carlson
Director of
Institutional Advancement
7
Diane Paulson
Vice President of
Administrative Services
Randy Bayerl
Director of Technology
and CIO
The financial activity of Hennepin Technical College is included in this report. The College is one of 32
colleges and universities included in the Minnesota State Colleges and Universities Annual Financial
Report which is issued separately.
All financial activity of Minnesota State Colleges and Universities is included in the state of Minnesota
Comprehensive Annual Financial Report.
8
FINANCIAL SECTION
9
10
11
MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)
INTRODUCTION
The following discussion and analysis provide an overview of the financial position and activities of
Hennepin Technical College, a member of the Minnesota State Colleges and Universities system, at June
30, 2010, 2009 and 2008, and for the years ended. This discussion has been prepared by management and
should be read in conjunction with the financial statements and accompanying footnotes.
Hennepin Technical College is one of 32 colleges and universities comprising the Minnesota State Colleges
and Universities system, which 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,
admission requirements, and tuition and fees.
The College is a public two-year institution with a mission of education for employment and advancement.
In the fiscal year ended June 30, 2010, the College served approximately 9,218 students in credit courses
with 4,493 full-year equivalents and 11,586 students in hour-based courses through customized training.
Part-time students account for 44 percent of total headcount and the average age of students is 32. Staffing
at the College has remained relatively stable with approximately 385 faculty and 220 staff and
administrators.
The academic offerings of Hennepin Technical College are grouped into eight curriculum and career
clusters and general education. The College has experienced an increase in enrollment and the distribution
of enrollment across the cluster areas has seen continued growth in manufacturing programs, business
programs, and general education, while the other clusters remained fairly stable.
5 Year FYE Growth
5000
4000
3000
2000
1000
0
FY 06
FY 07
FY 08
FY 09
FY 10
Awards range from certificates (59) to diplomas (49) to Associate of Applied Science (46) and Associate
of Science degrees (2).
12
FINANCIAL HIGHLIGHTS
The College maintained a strong financial position during fiscal year 2010. Total assets increased from
$35.2 million in fiscal year 2009 to $42.1 in fiscal year 2010. Liabilities increased by $1.9 million from
$10.7 million in 2009 to $12.6 million in 2010. Net assets, which represent the residual interest in the
College’s assets after liabilities are deducted, increased from $24.5 million in 2009 to $29.5 million in
2010.
The College’s income before other revenues, expenses, gains and losses increased by $0.7 million, from a
gain of $1.1 million in fiscal year 2009 to a gain of $1.8 million in fiscal year 2010.
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. These
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 an indicator of the current financial
condition of the College, while the change in net assets is an indicator of whether the overall 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 in net assets. A summary of assets, liabilities, and net assets as of June 30, 2010
2009 and 2008 follows.
Statements of Net Assets
(In Thousands)
Assets
Current assets
Capital assets, net
Total assets
2010
2009
2008
$ 22,356
19,704
42,060
$ 17,375
17,802
35,177
$ 15,712
15,919
31,631
Liabilities
Current liabilities
Noncurrent liabilities
Total liabilities
Total net assets
7,725
4,863
12,588
$ 29,472
5,774
4,914
10,688
$ 24,489
5,904
4,186
10,090
$ 21,541
Current unrestricted assets consist primarily of cash and cash equivalents totaling $19.9 million at June 30,
2010. This reflects an increase of $5.0 million over the prior year.
Current liabilities consist primarily of salaries and benefits payable, accounts payable, and unearned
revenue. Salaries and benefits payable totaled $3.2 million at June 30, 2010, which was fairly constant
with the prior year. Included within the salaries and benefits payable accrual are approximately two
months of earned salary for faculty who have elected to receive salaries over twelve months on a
September through August year. Accounts payable increased by $0.3 million from fiscal year 2009 to
fiscal year 2010. Unearned revenue increased to $1.7 million, with $1.6 received to support program and
building operations costs associated with the Law Enforcement program for fiscal years 2011 and 2012.
13
Net assets represent the residual interest in the College’s assets after liabilities are deducted.
Net Assets
(In Thousands)
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total net assets
2010
$ 18,290
197
10,985
$ 29,472
2009
$ 16,385
144
7,960
$ 24,489
2008
$ 15,329
74
6,138
$ 21,541
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. The current portion of the capital debt is $79,000 and the non-current portion
is $1,334,000.
Restricted net assets represent donations received for specific purposes and amounts restricted for faculty
professional development funded through their labor contract as well as funds reserved for debt service.
Comparison of amounts as of June 30, 2010, 2009, and 2008 follow.
Restricted Net Assets
(In Thousands)
2010
32
16
149
$ 197
Donations
Faculty contracts
Debt Service
Total restricted net assets
$
2009
$ 26
22
96
$ 144
2008
$ 4
22
48
$ 74
CAPITAL AND DEBT ACTIVITIES
The College remains committed to maintaining an investment in equipment for instructional programs.
This is a cornerstone for achieving the mission of the College. During 2010, the College also continued to
renovate and upgrade existing facilities. Capital assets as of June 30, 2010, totaled $19.7 million, net of
accumulated depreciation of $45.7 million. This compares to $17.8 million as of June 30, 2009, net of
accumulated depreciation of $45.9 million.
Capital outlay totaled $3.4 million in the 2010 fiscal year. Major equipment purchases were made for the
manufacturing and transportation programs as well as technology infrastructure and facilities. Construction
in progress accounted for $2.7 million. This reflects several renovation projects including science labs and
Learning Resource centers at both campuses, hallway lighting upgrades at both campuses, roof replacement
and boiler replacement at the Brooklyn Park campus. Current year capital asset additions were funded
through capital appropriations of $3.2 million and general obligation debt of $80 thousand with the
remainder from College operating funds.
Additional information on capital activities and long-term debt can be found in Notes 5 and 7 to the
financial statements.
14
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
The statements of revenues, expenses, and changes in net assets represent the College’s results of
operations for the year. When reviewing the full statements, users should note that GASB requires
classification of state appropriations as nonoperating revenue. Summarized statements for the years ended
June 30, 2010, 2009 and 2008 follow.
Summarized Statements of Revenues, Expenses, and Changes in Net Assets
(In Thousands)
2010
2009
2008
$ 24,127
(8,126)
16,001
121
16,122
$ 21,023
(5,363)
15,660
1
15,661
$ 19,781
(4,600)
15,181
15
15,196
Nonoperating revenues:
State appropriations
Capital appropriations
Federal grants
State grants
Other nonoperating revenues
Total nonoperating revenues
Total revenues
19,766
3,200
10,604
1,937
108
35,615
51,737
22,414
1,849
5,676
1,871
216
32,026
47,687
22,374
13
4,911
1,592
191
29,081
44,277
Operating expenses:
Salaries and benefits
Supplies and services
Depreciation
Financial aid, net of scholarship allowance
Total operating expenses
31,813
11,279
1,493
2,066
46,651
31,316
11,040
1,437
895
44,688
31,004
11,353
1,545
702
44,604
Nonoperating expenses:
Total nonoperating expenses
Total expenses
103
46,754
51
44,739
102
44,706
4,983
24,489
$ 29,472
2,948
21,541
$ 24,489
Operating revenues:
Tuition, auxiliary, and net sales
Less: scholarship allowance
Net tuition, auxiliary, and net sales
Other operating revenues
Total operating revenues
Change in net assets
Net assets, beginning of year
Net assets, end of year
(429)
21,970
$ 21,541
Tuition and state appropriations are the primary sources of funding for the College. Tuition rates increased
5.0 percent effective at the beginning of the 2009-2010 fall semester. Federal ARRA funds, of $318,485,
provided a two-percent mitigation of tuition rates for our students. Total tuition and fee revenue increased
due to this rate change and an increase of six hundred and four (604) full-year equivalent student credits
from fiscal year 2009 to fiscal year 2010. This compares to an increase in tuition and fees from 2008 to
2009 when the tuition rate increased by 3.98 percent and enrollment increased by one hundred and eight
(108) full year equivalents. The largest growth in enrollment occurred in business programs, science,
English and public safety.
Total state appropriations decreased $1.3 million between fiscal year 2009 and fiscal year 2010, compared
to an increase of $1.9 million from 2008 to 2009. This includes capital appropriations of $13 thousand in
2008, $1.8 million in 2009, and $3.2 million in 2010. The state appropriation includes funds targeted to
support the Board of Trustee initiatives for Access and Opportunity and Enterprise Technology. This has
15
provided resources for initiatives focused on increasing services to support student success and for
improvements to technology infrastructure.
The resources expended for compensation and benefits increased by $0.5 million in fiscal year 2010. This
represents approximately a 1.5 percent increase from fiscal year 2009 to fiscal year 2010. The amount of
increase was driven by the state’s financial position as reflected through settlements of employee contracts,
and was tempered by a concerted effort to review all vacancies and increase efficiencies. Our enrollment
growth required additional positions to accommodate an increased need for student services.
Compensation and benefits continue to be the largest percentage of operating expenses for the College; in
fiscal year 2010, these expenditures accounted for approximately 76 percent of total General Fund expense.
ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE
The State’s continued financial outlook will create budget challenges for higher education in general and
for Hennepin Technical College. The College’s increase in unrestricted net assets was a deliberate strategy
to help weather the upcoming biennium with minimal reductions in staffing and service. Enrollment has
remained strong for summer and fall registrations and the College is projecting another enrollment increase
for fiscal year 2011 of 10 percent. Part of this increase, about 40 percent, is from the transfer of the Law
Enforcement Skills program from Minneapolis Community and Technical College, effective fall semester
of fiscal year 2011. The College continues to see the full range of students from recent high-school
graduates to dislocated workers, and to those seeking advanced technical skills. The College remains
focused on both access and success for all students with an emphasis on populations traditionally underrepresented in higher education. Expanded partnerships with local school districts are designed to help
secondary students see college as a viable option and to be more prepared to be academically successful.
There is a continued desire to keep tuition affordable for all students wanting to access higher education.
The federal stimulus funds helped to keep tuition increases moderate for fiscal year 2010 and fiscal year
2011. It is not expected that the stimulus funds will continue into the next biennium. This, along with the
anticipated reduction in state appropriations, may cause the College to look more closely at options for
tuition and fees. Programmatic tuition is a still an option that is available to the College for some
instruction that is higher cost. The College is projecting a modest enrollment increase for the 2012-2013
biennium.
16
Hennepin Technical College has comprehensive process of review for existing instructional programs to
identify areas for growth, increased efficiencies and alignment with industry needs. The College will
continue its strong investment in instructional program equipment, and to maintain and enhance the
technology infrastructure that will support effective delivery of instruction and services. Development of
new and restructured programs that are focused on providing students with both living-wage employment
and educational pathways continue to be a major activity for the College. With the current enrollment
levels, all departments of the College are facing an increased demand for services, and most dramatically,
for student support services. Reallocations will continue to be a key strategy to match resources where
there are greatest needs for services. The College continues to apply for grants that can assist with serving
students. A federal TRIO grant was awarded to the College this summer as well as a $2.6 million
Department of Labor grant for Bio-Medical manufacturing.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Hennepin Technical College 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 information should be addressed to:
Chief Financial Officer
Hennepin Technical College
9000 Brooklyn Boulevard
Brooklyn Park, MN 55445
17
HENNEPIN TECHNICAL COLLEGE
STATEMENTS OF NET ASSETS
AS OF JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Assets
Current Assets
Cash and cash equivalents
Grants receivable
Accounts receivable, net
Prepaid expense
Inventory
Student loans and other assets, net
Total current assets
Current Restricted Assets
Cash and cash equivalents
Total current restricted assets
Noncurrent Restricted Assets
Capital assets, net
Total noncurrent assets
Total Assets
Liabilities
Current Liabilities
Salaries and benefits payable
Accounts payable
Unearned revenue
Payable from restricted assets
Current portion of long-term debt
Other compensation benefits
Other liabilities
Total current liabilities
Noncurrent Liabilities
Noncurrent portion of long-term debt
Other compensation benefits
Total noncurrent liabilities
Total Liabilities
Net Assets
Invested in capital assets, net of related debt
Restricted expendable, other
Unrestricted
Total Net Assets
$
$
The notes are an integral part of the financial statements.
18
2009
19,872
324
1,237
149
461
29
22,072
$
14,914
139
1,425
96
406
5
16,985
284
284
390
390
19,704
19,704
42,060
17,802
17,802
35,177
3,242
1,072
2,538
284
79
488
22
7,725
3,236
719
834
390
76
499
20
5,774
1,334
3,529
4,863
12,588
1,341
3,573
4,914
10,688
18,290
197
10,985
29,472
16,385
144
7,960
24,489
$
HENNEPIN TECHNICAL COLLEGE
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Operating Revenues
Tuition, net
Fees, net
Sales, 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 Before Other Revenues, Expenses, Gains, or Losses
Capital appropriations
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.
19
13,898
1,230
873
121
16,122
2009
$
13,458
1,101
1,101
1
15,661
31,813
4,086
3,802
1,645
1,493
2,066
1,746
46,651
(30,529)
31,316
4,586
3,804
645
1,437
895
2,005
44,688
(29,027)
19,766
10,604
1,937
98
10
(78)
(9)
32,328
22,414
5,676
1,871
178
38
(35)
(14)
30,128
1,799
1,101
3,200
(16)
4,983
1,849
(2)
2,948
24,489
29,472
$
21,541
24,489
HENNEPIN TECHNICAL COLLEGE
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Cash Flows from Operating Activities
Cash received from customers
Cash paid to suppliers for goods or services
Cash payments to employees
Financial aid disbursements
Net cash flows used in operating activities
$
2009
18,467
(13,050)
(31,861)
(2,066)
(28,510)
$
17,209
(13,274)
(31,443)
(895)
(28,403)
Cash Flows from Noncapital Financing Activities
Appropriations
Federal grants
State grants
Private grants
Grants to other organizations
Net cash flows from noncapital financing activities
19,766
10,367
1,937
98
1,578
33,746
22,414
5,727
1,871
178
(14)
30,176
Cash Flows from Capital and Related Financing Activities
Investment in capital assets
Capital appropriation
Proceeds from sale of capital assets
Proceeds from borrowing
Proceeds from bond premiums and discounts
Interest paid
Repayment of bond principal
Net cash flows used in capital and related financing activities
(3,463)
3,200
4
63
17
(98)
(110)
(387)
(2,939)
1,849
11
862
25
(62)
(74)
(328)
Cash Flows from Investing Activities
Investment earnings
Net cash flows from investing activities
Net Increase in Cash and Cash Equivalents
Cash and Cash Equivalents, Beginning of Year
Cash and Cash Equivalents, End of Year
$
The notes are an integral part of the financial statements.
20
3
3
32
32
4,852
1,477
15,304
20,156
$
13,827
15,304
HENNEPIN TECHNICAL COLLEGE
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
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 revenues
Other assets and liabilities
Net reconciling items to be added to operating loss
Net cash flow used in operating activities
Non-Cash Investing, Capital and Financing Activities
Capital projects on account
Loss on retirement of capital assets
Amortization of bond premium
$
$
21
2009
(30,529)
$
(29,027)
1,493
1,437
(55)
188
353
6
(55)
169
(80)
2,019
(28,510)
(62)
(242)
(197)
(35)
(93)
(167)
(17)
624
(28,403)
284
(16)
7
$
$
390
(2)
6
HENNEPIN TECHNICAL COLLEGE
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
1.
SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Basis of Presentation — The reporting policies of Hennepin Technical 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; the statements of revenues, expenses, and changes in net assets; and the statements of cash flows include
the financial activities of the 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. The College receives a portion of the 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 (FASB)
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. 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 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 of Minnesota State Colleges and Universities.
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.
22
Cash and Cash Equivalents — The cash balance represents cash in the state treasury and demand deposits in a
local bank account 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 debt service.
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 retained by the Office of the Chancellor and allocated to the colleges and universities as part of
the appropriation allocation process.
Excess cash in the local bank account is swept into a repurchase agreement nightly. The balance in the
repurchase agreement is included in cash and cash equivalents on the balance sheet.
Receivables — Receivables are shown net of an allowance for uncollectible accounts.
Inventories — Inventories are valued at cost using the first in, first out method.
Prepaid Expense — Prepaid expense consists of deposits in the state of Minnesota Debt Service Fund for future
general obligation bond payments. More information about prepaid expense can be found in Note 4.
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:
Asset Type
Buildings
Building improvements
Equipment
Library collections
Life
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 the
amount spent.
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 the noncurrent portion of compensated absences, net
other postemployment benefits and workers’ compensation claims as well as early retirement benefits accrued
by some faculty members.
Unearned Revenue — Historically, unearned revenue consists primarily of tuition received, but not yet earned,
for summer and fall sessions. It also includes amounts received from grants which have not yet been earned
under the terms of the agreement. At June 30, 2010, unearned revenue also included an amount received from
the Minneapolis Community and Technical College related to the transfer of the 21 credit Advanced Law
Enforcement Certificate (Skills) program to Hennepin Technical College effective July 1, 2010. The amount of
the payment was $1,586,652 which will be allocated over the next two fiscal years.
23
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.
Tuition, Fees, and Sales, Net—Tuition, fees, and sales are reported net of scholarship allowances of $8,125,695
and $5,363,073 for fiscal years 2010 and 2009, respectively. Sales are also reported net of cost of goods sold of
$1,989,385 and $1,956,303 for fiscal years 2010 and 2009, respectively.
Funds Held for Others — Funds held for others are primarily assets held for student organizations.
Federal Grants — Hennepin Technical College participates in several federal grant programs. The largest
programs include Pell, Supplemental Educational Opportunity Grant, Carl Perkins, 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. During fiscal year 2010, $910,770 of
federal aid was received through the American Recovery and Reinvestment Act of 2009. Of this amount,
$318,485 was used to mitigate tuition increases that would have otherwise been necessary. 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.
Reclassifications — Certain prior year amounts have been reclassified to conform to current year presentation.
These classifications had no effect on net assets previously reported. Fiscal year 2009 federal and state grant
revenue, in the amount of $5,676,109 and $1,870,922 respectively, have been reclassified from operating to
nonoperating revenue. This reclassification increases the total operating loss by $7,547,031 while increasing
total nonoperating revenue by the same amount.
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. For fiscal year 2010, the estimate used to calculate the allowance for
uncollectible accounts was changed to align more closely with historical receivable collections.
Net Assets — The difference between assets and liabilities is net assets. Net assets are further classified for
accounting and reporting purposes into the following 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
Hennepin Technical College are as follows:
Restricted for other — Includes restrictions for the following:
Debt service — legally restricted for bond repayments.
Donations — restricted per donor requests.
Faculty contract obligations — faculty development and travel required by contracts.
24
Restricted for Other
(In Thousands)
2010
Debt service
$ 149
Donations
32
Faculty contracts
16
Total
$ 197
2009
96
26
22
$ 144
$
Unrestricted: Net assets that are not subject to externally imposed stipulations. Unrestricted net assets
may be designated for specific purposes by action of management, Office of the Chancellor, or the
Board of Trustees.
2.
CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents — All balances related to the appropriation, tuition, and most fees are in the state
treasury. In addition, the College has an account in a local bank. The activities handled through the local bank
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.
Cash and Cash Equivalents at June 30
(In Thousands)
Carrying Amount
2010
Cash, in local bank
$
1,549
Cash, in state treasury
18,607
Total cash and cash equivalents
$ 20,156
2009
1,129
14,175
$ 15,304
$
At June 30, 2010 and 2009, the College’s local bank balances were $1,660,367 and $1,326,779, respectively.
These balances were adjusted by items in transit to arrive at the College’s cash in bank balance. The difference
in the bank balance and the carrying amount is due to outstanding checks and deposits in transit. The College’s
balance in the treasury is invested by the Minnesota State Board of Investment as part of the state investment
pool. This cash is reported as a cash equivalent.
Securities Lending Transactions — State statutes do not prohibit the state of Minnesota from participating in
securities lending transactions. The Minnesota State Board of Investment has, by way of custodial trust
agreements, authorized State Street Bank and Trust Company (State Street) and Wells Fargo Bank, Minnesota,
N.A. (Wells Fargo) to act as agents in lending Minnesota’s securities to broker/dealers and banks pursuant to a
form of loan agreement.
During fiscal years 2010 and 2009, State Street and Wells Fargo lent, on behalf of the state of Minnesota,
certain securities held by State Street or Wells Fargo as custodian and received cash (both United States and
foreign currency) and securities issued or guaranteed by the United States government, sovereign debt of
foreign countries and irrevocable bank letters of credit as collateral. The securities lending activity for Wells
Fargo ceased in May 2009. Neither State Street nor Wells Fargo has the ability to pledge or sell collateral
securities absent a borrower default. Borrowers were required to deliver collateral for each loan in amounts
equal to not less than 100 percent of the fair value of the loaned securities.
The state of Minnesota did not impose any restrictions during the fiscal years on the amount of the loans that
either State Street or Wells Fargo made on its behalf. State Street and Wells Fargo indemnified the state of
Minnesota by agreeing to purchase replacement securities or return the cash collateral in the event a borrower
failed to return a loaned security or pay distributions thereon. No borrower failed to return loaned securities or
pay distributions thereon during fiscal years 2010 or 2009. In addition, there were no losses during the fiscal
years resulting from default of the borrowers, State Street, or Wells Fargo.
25
During fiscal years 2010 and 2009, the state of Minnesota and the borrowers maintained the right to terminate
all securities lending transactions on demand. The cash collateral received on each loan was invested in the
separately managed funds of the Minnesota State Board of Investment. Because the loans were terminable at
will, their duration did not generally match the duration of the investments made with cash collateral. On
June 30, 2010 and 2009, the state of Minnesota had no credit risk exposure to borrowers because the amounts
the state owed the borrowers exceeded the amounts the borrowers owed the state.
The College had no security lending allocation for fiscal years 2010 and 2009. The following table provides
information related to the securities invested by State Street:
Security Lending Analysis, State Street, at June 30
(In Thousands)
2010
2009
Fair value of securities on loan
$ 3,720,274
$ 6,587,602
Collateral held
3,845,017
6,829,949
Average duration
8 days
37 days
Average weighted maturity
43 days
201 days
3.
ACCOUNTS RECEIVABLE
The accounts receivable balances are made up primarily of receivables from individuals. At June 30, 2010 and
2009, the total accounts receivable balances for the College were $1,493,764 and $1,660,706, respectively, less
an allowance for uncollectible receivables of $256,247and $235,540, respectively.
Summary of Accounts Receivable at June 30
(In Thousands)
2010
2009
Tuition
$
568 $
514
Sales and services
431
731
Third party obligations
238
145
Fees
143
91
Other
114
180
Total accounts receivable
1,494
1,661
Allowance for uncollectible accounts
(257)
(236)
Net accounts receivable
$ 1,237 $ 1,425
The allowance for uncollectible accounts has been computed based on the following aging schedules:
Fiscal Year 2010
Less than 1 year
1 to 3 years
3 to 5 years
Over 5 years
4.
Fiscal Year 2009
Allowance
Percentage
15%
45%
70%
95%
Less than 1 year
1 to 2 years
Over 2 years
Allowance
Percentage
2%
50%
100%
PREPAID EXPENSE
Prepaid expense consists primarily of deposits 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 fiscal year. For fiscal years 2010 and 2009, the College’s deposits
were $149,120 and $95,952, respectively.
26
5.
CAPITAL ASSETS
Summaries of changes in capital assets for fiscal years 2010 and 2009 follow:
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases Decreases
Capital assets, not depreciated:
Land
$
Construction in progress
Total capital assets, not depreciated
2,631
2,673
5,304
$
—
2,745
2,745
$
—
—
—
Completed
Construction
$
—
(5,418)
(5,418)
Ending
Balance
$
2,631
—
2,631
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
39,253
18,681
454
58,388
—
581
31
612
—
1,606
70
1,676
5,418
—
—
5,418
44,671
17,656
415
62,742
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
31,721
13,903
266
45,890
500
934
59
1,493
—
1,644
70
1,714
—
—
—
—
32,221
13,193
255
45,669
Total capital assets, depreciated, net
Total capital assets, net
12,498
$ 17,802
5,418
—
17,073
$ 19,704
$
(881)
1,864 $
(38)
(38) $
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases Decreases
Capital assets, not depreciated:
Land
$
Construction in progress
Total capital assets, not depreciated
2,631
14
2,645
$
—
2,940
2,940
$
—
—
—
Completed
Construction
$
— $
(281)
(281)
Ending
Balance
2,631
2,673
5,304
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
38,972
18,898
464
58,334
—
319
62
381
—
536
72
608
281
—
—
281
39,253
18,681
454
58,388
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
31,355
13,432
273
45,060
366
1,006
65
1,437
—
535
72
607
—
—
—
—
31,721
13,903
266
45,890
Total capital assets, depreciated, net
Total capital assets, net
13,274
$ 15,919
(1,056)
$ 1,884
—
27
$
1
1
$
281
12,498
— $ 17,802
6.
ACCOUNTS PAYABLE
Accounts payable represent amounts due for goods and services received prior to the end of the fiscal year.
Summary of Accounts Payable at June 30
(In Thousands)
2010
2009
Purchased services
$ 247 $ 351
Supplies
383
177
Other payables
31
99
Repairs and maintenance
217
40
Financial aid
116
22
Inventories
33
16
Employee benefits
45
14
Total
$ 1,072 $ 719
In addition, as of June 30, 2010 and 2009, the College had accounts payable from restricted assets in the
amounts of $283,853 and $390,142, respectively, which were related to capital projects financed by general
obligation bonds.
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 2010 and 2009 follow:
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases Decreases
Liabilities for:
Bond premium
General obligation bonds
Total long term debt
Liabilities for:
Bond premium
General obligation bonds
Total long term debt
$
55
1,362
1,417
$
$
$
17
63
80
$
$
7
77
84
Ending
Balance
$
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases
Decreases
$
$
36
554
590
$
$
28
25
862
887
$
$
6
54
60
65
1,348
1,413
Current
Portion
$
$
Ending
Balance
$
$
55
1,362
1,417
—
79
79
Current
Portion
$
$
—
76
76
The changes in other compensation benefits for fiscal years 2010 and 2009 follow:
Year Ended June 30, 2010
(In Thousands)
Liabilities for:
Compensated absences
Early termination benefits
Net other postemployment benefits
Workers’ compensation
Total other compensation benefits
Beginning
Balance
$
$
3,353
368
257
94
4,072
Increases
$
$
325
25
222
82
654
Decreases
$
$
360
144
141
64
709
Year Ended June 30, 2009
(In Thousands)
Liabilities for:
Compensated absences
Early termination benefits
Net other postemployment benefits
Workers’ compensation
Total other compensation benefits
Beginning
Balance
$
$
3,534 $
345
146
138
4,163 $
Increases
48
125
217
76
466
Decreases
$
$
229
102
106
120
557
Ending
Balance
$ 3,318
249
338
112
$ 4,017
Current
Portion
$
$
Ending
Balance
$ 3,353
368
257
94
$ 4,072
310
131
—
47
488
Current
Portion
$
$
317
144
—
38
499
Bond Premium — In fiscal years 2010 and 2009, bonds were issued, resulting in premiums of $17,059 and
$24,724, respectively. Amortization is calculated using the straight line method amortized over the average
remaining life of the bonds.
General Obligation Bonds — The state of Minnesota sells general obligation bonds to finance most of
Minnesota State Colleges and Universities’ 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 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.
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. Technical college faculty members that had ten years of service prior to
July 1, 1995, will have a choice at the time of retirement, to choose the state retirement provisions or the early
retirement and severance provisions of their member district 1993-1995 contract, from which they transferred to
the state on July 1, 1995.
Early Termination Benefit — The College provides early retirement benefits for certain faculty members. The
reported liability for early termination benefits of $249,328 and $367,872, as of June 30, 2010 and 2009,
respectively, is based on accepted offers. More information about early termination benefits can be found in
Note 8.
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.
29
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 $112,007
and $93,822 at June 30, 2010 and 2009, 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.
Principal and interest payment schedules are provided in the following table for general obligation bonds.
There are no payment schedules for bond premium, compensated absences, early termination benefits, other
postemployment benefits, or workers’ compensation.
General Obligation Bonds
(In Thousands)
Fiscal Years
Principal
Interest
2011
$
79
$ 64
2012
79
60
2013
79
57
2014
79
53
2015
79
49
2016-2020
396
185
2021-2025
384
86
2026-2030
173
15
Total
$ 1,348
$ 569
8.
EARLY TERMINATION BENEFITS
Early termination benefits are defined as benefits received for discontinuing services earlier than planned.
Minnesota State College Faculty (MSCF) contract
Hennepin Technical College provides early retirement benefits, as per Article 28, Section 3, Retirement
Incentive Grandparent Clause, of the UTCE Contract for 1995-1997, for certain faculty members and their
dependents. Eligible faculty members include those who, as of July 1, 1995, had served at least ten years with
Independent School District 287, the employer for the College prior to the merger into the Minnesota State
Colleges and Universities system. Employees who have reached age 55 and have at least 15 years of
continuous service with the College are eligible to receive early retirement benefits. Early retirement credit is
based on the employee’s years of service and age at retirement.
Retirees may elect to receive benefit payments in a lump sum, in three equal annual payments, or may elect to
bank all or part of the cash value of their vested sick leave and early retirement benefit to continue participation
in a group health and dental plan. In the event of the death of the retiree prior to the final payment, regardless
of the election by the retiree, the balance of the remaining benefit is payable to the named beneficiary or the
estate of the deceased.
The number of retired faculty who received this benefit and the amount of the future liability for those faculty
as of the end of fiscal years 2010 and 2009 follow:
Fiscal Year
2010
2009
Number
of Faculty
10
11
30
Future Liability
(In Thousands)
$ 249
368
9.
NET OTHER POSTEMPLOYMENT BENEFITS
The Minnesota State Colleges and Universities provide 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
who 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, 2008 there were approximately 16 retirees receiving health benefits from the health plan.
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 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 2010 and 2009, the amount
actually contributed to the plan, and changes in the net OPEB obligation:
Components of the Annual OPEB Cost
(In Thousands)
2010
Annual required contribution (ARC)
$ 220
12
Interest on net OPEB obligation
(10)
Adjustment to ARC
222
Annual OPEB cost
(141)
Contributions during the year
81
Increase in net OPEB obligation
257
Net OPEB obligation, beginning of year
Net OPEB obligation, end of year
$ 338
2009
$ 216
7
(6)
217
(106)
111
146
$ 257
The College’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan and the net OPEB
obligation for fiscal years 2010 and 2009 follow:
For Year Ended June 30
(In Thousands)
2010
257
Beginning of year OPEB obligation $
222
Annual OPEB cost
(141)
Employer contribution
338
End of year OPEB obligation
$
Percentage contributed
63.51 %
$
$
2009
146
217
(106)
257
48.85 %
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.
31
Actuarial
Valuation
Date
July 1, 2008
Schedule of Funding Progress
(In Thousands)
Actuarial
Value of
Assets
Actuarial
Accrued
Liability
Unfunded
Actuarial
Accrued Liability
Funded
Ratio
Covered
Payroll
UAAL as a
Percentage of
Covered Payroll
(a)
(b)
(b - a)
(a/b)
(c)
((b - a)/c)
$ —
$ 2,615
$ 2,615
0.00 %
$ 23,817
10.98%
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, 2008 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 8.97 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 is committed under various leases primarily for building space. These leases
are considered, for accounting purposes, to be operating leases. Lease expenses for the years ended
June 30, 2010 and 2009, totaled approximately $133,441 and $111,373, respectively.
Future minimum lease payments for existing lease agreements follow:
Year Ended June 30
(In Thousands)
Fiscal Year
Amount
2011
$ 97
2012
79
2013
65
2014
30
2015
20
Total
$ 291
Income Leases — The College has entered into several income lease agreements, primarily for building space.
Lease income for the years ended June 30, 2010 and 2009, totaled $133,440 and $113,243, respectively, and are
included in sales, net in the statements of revenues, expenses, and changes in net assets.
32
Future expected income receipts for existing lease agreements follow:
Year Ended June 30
(In Thousands)
Fiscal Year
Amount
2011
$ 17
2012
17
2013
17
2014
16
Total
$ 67
11. OPERATING EXPENSES BY FUNCTIONAL CLASSIFICATION
The following table provides information related to operating expenses by functional classification:
For the Year Ended June 30, 2010
(In Thousands)
Salaries/
Description
Benefits
Other
Academic support
$ 4,452 $ 2,103
Institutional support
3,001
1,761
Instruction
17,542
2,922
Operation & maintenance of plant
1,964
3,125
Public service
69
75
Student services
4,289
985
Auxiliary enterprises
496
308
Depreciation
—
1,493
Scholarships & fellowships
—
2,066
Total operating expenses
$ 31,813
$ 14,838
For the Year Ended June 30, 2009
(In Thousands)
Salaries/
Description
Benefits
Other
Academic support
$ 5,038 $ 1,221
Institutional support
3,033
2,081
Instruction
16,747
3,601
Operation & maintenance of plant
1,937
2,671
Public service
56
63
Student services
4,119
1,044
Auxiliary enterprises
386
359
Depreciation
—
1,437
Scholarships & fellowships
—
895
Total operating expenses
$ 31,316
$ 13,372
Total
6,555
4,762
20,464
5,089
144
5,274
804
1,493
2,066
$ 46,651
$
Total
6,259
5,114
20,348
4,608
119
5,163
745
1,437
895
$ 44,688
$
12. 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; the Public Employees Retirement Fund, administered by the Public Employees
Retirement Association; and the Minnesota State Colleges and Universities Defined Contribution Retirement
Plan.
33
State Employees Retirement Fund (SERF)
Pension fund information is provided by the 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 the 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. Beginning July 1, 2007 the funding
requirement for both employer and employee was 4.25 percent. The funding contribution rate increases 0.25
percent in each of the subsequent years until reaching 5 percent from July 1, 2010, and thereafter. For the
period July 1, 2009 to June 30, 2010, the funding requirement is 4.75 percent for both employer and employee.
Actual contributions were 100 percent of required contributions.
Required contributions for Hennepin Technical College were:
(In Thousands)
Fiscal Year
Amount
2010
$ 172
2009
174
2008
159
Teachers Retirement Fund (TRF)
Pension fund information is provided by the 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 the Minnesota
Teachers Retirement Association at 60 Empire Drive, Suite 400, St. Paul, Minnesota 55103-4000.
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. Effective July 1, 2007, the funding
requirement is 5.5 percent for both employer and employee coordinated members. Beginning July 1, 2011, both
employee and employer contribution rate increases will 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.
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Required contributions for Hennepin Technical College were:
(In Thousands)
Fiscal Year
Amount
2010
$ 444
2009
455
2008
423
Public Employees Retirement Fund (PERF)
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 the
Public Employee Retirement Association at 60 Empire Drive, Suite 200, St. Paul, Minnesota 55103-2088.
The PERF 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 PERF is Minnesota Statutes, Chapter 353. Effective January 1, 2008, the funding
requirement for employees was 6 percent and 6.5 percent for employers. Effective January 1, 2009 and again
January 1, 2010, employer contributions increased 0.25 percent respectively. Beginning January 1, 2011
contribution rates for both employees and employers will increase 0.25 percent. Actual contributions were 100
percent of required contributions.
Required contributions for Hennepin Technical College were:
Fiscal Year
2010
2009
2008
(In Thousands)
Employer
Employee
$ 160
$ 137
163
143
153
136
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. Vesting occurs
immediately.
The administrative agent of the two plans is the Teachers Insurance and Annuity Association College
Retirement Equities Fund (TIAA-CREF). Separately issued financial statements can be obtained from TIAACREF, Normandale Lake Office Park, 8000 Norman Center Drive, Suite 1100, Bloomington, MN 55437.
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Individual Retirement Account Plan (IRAP)
Participation — Each employee who is in unclassified service is required to participate in TRF 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 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 Hennepin Technical College were:
Fiscal Year
2010
2009
2008
(In Thousands)
Employer
Employee
$ 487
$ 366
453
340
415
315
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
MN 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
Maximum
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 Hennepin Technical College were:
(In Thousands)
Fiscal Year Amount
2010
$ 373
2009
393
2008
348
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13. 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 manages these risks through Minnesota insurance plans including the state of Minnesota Risk
Management Fund, a self insurance 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 coverage offered by the Minnesota Risk Management Fund is as follows:
Institution deductible
Fund responsibility
Primary reinsurance coverage
Catastrophic reinsurance 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
$1,000 to $50,000
$1,000,000
$1,000,001 to $25,000,000
$25,000,001 to $1,000,000,000
$500,000
$1,500,000
$4,000,000
$25,000
Hennepin Technical College retains the risk of loss. The College did not have any settlements in excess of
coverage in the last three years.
The Minnesota Risk Management Fund purchased student intern professional liability insurance on the open
market for the College.
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, 2010 and 2009.
(In Thousands)
Beginning
Net Additions
Liability
and Changes
Fiscal Year Ended 6/30/10
Fiscal Year Ended 6/30/09
$ 94
138
$ 82
76
Payments
Ending
Liability
$ 64
120
$ 112
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14. RELATED PARTY TRANSACTONS
Pursuant to an agreement regarding the transfer of the 21 credit Law Enforcement Skills program from
Minneapolis Community and Technical College to Hennepin Technical College, in June 2010, Minneapolis
Community and Technical College paid Hennepin Technical College $1,586,652 to help offset future expenses.
This amount is the estimated gap between expenses for instructional and building operation costs, and tuition
and other income revenues for fiscal years 2011 and 2012. This reflects the two-year lag of enrollment under
the allocation framework and the agreement between the two colleges.
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SUPPLEMENTAL SECTION
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