MINNEAPOLIS COMMUNITY AND
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:
Minneapolis Community and Technical College
1501 Hennepin Avenue South
Minneapolis, Minnesota 55403
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
MINNEAPOLIS COMMUNITY AND TECHNICAL COLLEGE
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2010 and 2009
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 .............................................................................................................. 22
Statements of Revenues, Expenses, and Changes in Net Assets ................................................... 23
Statements of Cash Flows ............................................................................................................. 24
Notes to the Financial Statements ................................................................................................. 26
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 .................................................................. 46
1
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2
INTRODUCTION
3
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4
5
6
7
8
9
10
11
Irene Kovala
Vice President for
Academic & Student
Affairs
Lois Bollman
Vice President of
Strategy, Planning &
Accountability
Scott Erickson
Vice President of
Finance & Operations
Phillip L. Davis
President
James H. McCormick
Chancellor
Board of Trustees
Minnesota State
Colleges and Universities
June 30, 2010
Reede Webster
Dean of College
Advancement &
Executive Director
The financial activity of the Minneapolis Community and 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.
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
INDEPENDENT AUDITORS’ REPORT
Board of Trustees
Minnesota State Colleges and Universities
St. Paul, Minnesota
We have audited the accompanying financial statements of Minneapolis Community and Technical
College (the College), a campus of Minnesota State Colleges and Universities, as of and for the years
ended June 30, 2010 and 2009, as listed in the table of contents. These financial statements are the
responsibility of the College's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States
of America and the standards applicable to financial audits contained in Government Auditing
Standards issued by the Comptroller General of the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Minneapolis Community and Technical College as of June 30, 2010 and 2009, and
the respective changes in financial position and cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
In accordance with Government Auditing Standards, we have also issued our report dated October 22,
2010, on our consideration of the College’s internal control over financial reporting and our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other
matters. The purpose of that report is to describe the scope of our testing of internal control over
financial reporting and compliance and the results of that testing, and not to provide an opinion on the
internal control over financial reporting or on compliance. That report is an integral part of an audit
performed in accordance with Government Auditing Standards and should be considered in assessing
the results of our audit.
An independent member of Nexia International
14
Board of Trustees
Minnesota State Colleges and Universities
Page 2
The accompanying Management Discussion and Analysis, as listed in the table of contents, is not a
required part of the basic financial statements but is supplementary information required by
U.S. generally accepted accounting principles. We have applied certain limited procedures, which
consisted principally of inquiries of management regarding the methods of measurement and
presentation of the required supplementary information. However, we did not audit the information and
express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements. The
accompanying introductory section, as listed in the table of contents, is presented for purposes of
additional analysis and is not a required part of the basic financial statements. The introductory section
has not been subjected to the auditing procedures applied in the audit of the basic financial statements
and, accordingly, we express no opinion on it.
LarsonAllen LLP
Minneapolis, Minnesota
October 22, 2010
15
MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)
INTRODUCTION
The following discussion and analysis provides an overview of the financial position and activities of Minneapolis
Community and Technical College, a member of Minnesota State Colleges and Universities at June 30, 2010, 2009,
and 2008 and for the years then ended. This discussion has been prepared by management and should be read in
conjunction with the financial statements and accompanying notes, which follow this section.
Minneapolis Community and Technical College (College) is one of 32 colleges and universities comprising
Minnesota State Colleges and Universities. The Minnesota State Colleges and Universities system is governed by a
15-member Board of Trustees appointed by the Governor. Twelve trustees serve six-year terms, eight representing
each of Minnesota’s congressional districts and four serving at large. Three student trustees – one from a state
university, one from a community college and one from a technical college – serve two-year terms. The Board of
Trustees selects the Chancellor and has broad policy responsibility for system planning, academic programs, fiscal
management, personnel, admissions requirements, tuition and fees.
The College is a comprehensive public institution of higher learning with approximately 14,900 students of which
45 percent are students of color. The average age of the student on campus is 28 years old. Approximately 60
percent of our students represent the first generation in their family to attend college. The College employs
approximately 629 full time equivalent staff and faculty members.
The College offers associate degrees, diplomas, certificates, participates in the Minnesota Transfer Curriculum and
is accredited by the Higher Learning Commission. The largest programs based on enrollment are liberal arts,
nursing careers, business management, law enforcement, and human services. Some of our more unique programs
include filmmaking, screenwriting, sound arts, and an urban teacher education program.
The College has over 50 different clubs and activities in areas such as honorary, drama and theater, music
ensembles, cultural and social concerns, and student government.
FINANCIAL HIGHLIGHTS
The College’s financial growth was strong again in fiscal year 2010. Assets totaled $133.0 million compared to
liabilities of $38.9 million. Net assets, which represents the residual interest in the College’s assets after liabilities
are deducted, is comprised of capital assets, net of related debt, of $71.4 million: restricted assets of $2.3 million and
unrestricted assets of $20.4 million.
16
Unrestricted cash and cash equivalents balances increased by $3.9 million in fiscal year 2010. Operating revenues
increased $0.3 million and $1.4 million in fiscal years 2010 and 2009, respectively. Gross tuition revenue increased
due to tuition rate increases of 2 percent in fiscal years 2010 and 2009, respectively, as well as a full year equivalent
increase in student enrollment of approximately 13 percent in 2010, though the increased scholarship allowance
provided to students diminished the net impact in operating revenue. The reclassification of federal and state grant
revenue to non-operating also limited the year-over-year growth in operating revenue. The College’s unprecedented
enrollment growth continued in 2010 and much of the institution’s decision making was predicated on meeting
demand for classes.
Total operating expenses increased by $7.2 million in 2010 after increasing $3.3 million in fiscal year 2009.
Continued enrollment growth and the redistribution of a portion of the proceeds the College’s growth back into the
community were the key drivers to higher expenses in the past year. As in recent years, chief among the related
expenses was the added faculty effort added to support new course offerings. Total net assets increased $4.8 million
for fiscal year 2010, due primarily to increases in cash and cash equivalents.
USING THE FINANCIAL STATEMENTS
The College’s financial report includes three financial statements: the Statements of Net Assets, the Statements of
Revenues, Expenses and Changes in Net Assets, and the Statements of Cash Flows. The financial statements are
prepared in accordance with applicable generally accepted accounting principles (GAAP) as established by the
Governmental Accounting Standards Board (GASB) through authoritative pronouncements.
STATEMENTS OF NET ASSETS
The statements of net assets present the financial position of the College at the end of the fiscal year and include all
assets and liabilities of the College as measured using the accrual basis of accounting. The difference between total
assets and total liabilities – net assets – is one indicator of the current financial condition of the College, while the
change in net assets is an indicator of whether the overall financial condition has improved or worsened during the
year. Capital assets are stated at historical cost less an allowance for depreciation, with current year depreciation
reflected as a period expense on the statements of revenues, expenses, and changes to net assets. A summary of the
College’s assets, liabilities and net assets as of June 30, 2010, 2009 and 2008, respectively, is as follows:
(In Thousands)
2010
Current assets
$ 35,607
Restricted current assets
11,974
Restricted capital assets
347
Capital assets, net
85,049
Total assets
132,977
2009
$ 29,593
11,610
—
84,879
126,082
2008
$ 25,893
1,897
—
83,048
110,838
Current liabilities
Non-current liabilities
Total liabilities
Net assets
7,218
29,605
36,823
$ 89,259
9,257
17,793
27,050
$ 83,788
$
9,046
29,857
38,903
94,074
17
Current unrestricted assets consist primarily of cash and cash equivalents totaling $27.6 million at June 30, 2010.
Unrestricted cash and cash equivalents increased by $3.9 million from June 30, 2009 due to increased tuition and fee
receipts. The increase in restricted current assets was a result of the intake of fees related to the College’s planned
student center that began construction in 2010. Restricted capital assets, new to the College in fiscal year 2010, are
attributable to the student center renovation that was funded by the sale of revenue bonds at the close of fiscal year
2009. See note 13 to the financial statements for more information about revenue bonds.
Current liabilities consist primarily of accounts payable, salaries payable and unearned revenue. Unrestricted
accounts payable increased by $0.1 million in fiscal year 2010, due to institutional growth. Salaries payable also
increased $0.1 million in fiscal year 2010, totaling $4.0 million at June 30, 2010. Salaries payable includes
approximately two months of earned salary for faculty payroll that have elected to receive salaries over twelve
months on a September 1 – August 31 year. Unearned revenue, consisting primarily of the portion of summer
tuition and grants received, but not yet earned, also increased by $0.1 million in 2010, due primarily to increased
summer session receipts.
Net assets represent the residual interest in the College’s assets after liabilities are deducted. The College’s net
assets (expressed in thousands) as of June 30, 2010, 2009, 2008, respectively, are summarized below.
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total net assets
2010
2009
2008
$ 71,427 $ 70,599 $ 68,900
2,272
1,350
1,028
17,310
20,375
13,860
$ 94,074 $ 89,259 $ 83,788
Invested in capital assets, net of related debt — represents the college’s capital assets net of accumulated
depreciation and outstanding principal balances of debt attributable to the acquisition, construction or improvement
of those assets.
Restricted— primarily includes donations received for specific purposes, capital projects, and debt service.
CAPITAL AND DEBT ACTIVITIES
One of the critical factors in continuing the quality of the College’s academic programs and student life is the
development and renewal of its capital assets. The College continues to implement its master facilities plan to
modernize its complement of older facilities, balanced with new construction. Capital assets as of June 30, 2010
totaled $85.4 million, net of accumulated depreciation of $74.7 million.
Capital outlays totaled $5.0 million, a $0.7 million decrease from the prior year as the College was in the planning
phase for many of its upcoming capital projects. Capital investment should increase significantly in fiscal year 2011
as construction will move forward on various projects, including the new $10.1 million student center renovation.
Capital expenditures are primarily comprised of recently completed new buildings, replacement and renovation of
existing facilities, as well as investments in equipment. Current year capital asset additions were funded through
capital appropriations and one-time usages of institutional resources.
18
Construction in progress, at June 30, 2010, decreased to $5.8 million (from $19.8 million in fiscal year 2009), as
$18.6 million was moved to Buildings due to the capitalization of the Health and Science Building. The College
began to spend its bond proceeds for its student center renovation in fiscal year 2010 with significant spending
anticipated in fiscal year 2011. Additional information on capital and debt activities can be found in Notes 5 and 7
to the financial statements.
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
The statements of revenues and expenses and changes in net assets present the College’s results of operations for the
year. When viewing the full statement, users should note that GASB requires classification of state appropriations,
federal and state grants as non-operating revenue. A summarized statement in table format for the years ending
June 30, 2010, 2009, 2008, respectively, follows:
Summarized Statements of Revenues, Expenses and Changes in Net Assets
(In Thousands)
Operating revenue
Student tuition, fees, and sales
Less scholarship allowances
Net student tuition, fees, and sales
Restricted student payments
Other revenue
Total operating revenue
$
2010
39,380
(18,793)
20,587
1,476
46
22,109
2009
$ 34,098
(12,494)
21,604
—
233
21,837
2008
$ 31,391
(11,039)
20,352
—
99
20,451
Non-operating revenue:
State appropriations
Federal grants
State grants
Other
Total nonoperating revenue
Total revenue
26,194
25,741
3,589
191
55,715
77,824
29,398
16,328
3,018
136
48,880
70,717
37,527
13,518
3,016
344
54,405
74,856
Operating expense:
Salaries and benefits
Supplies and services
Depreciation
Financial aid
Other expense
Total operating expense
46,891
12,356
4,353
4,111
3,767
71,478
44,198
10,062
3,778
2,604
3,593
64,235
42,528
9,113
3,773
1,510
3,981
60,905
Non-operating expense:
Interest expense and other
Total nonoperating expense
Total expense
1,531
1,531
73,009
1,011
1,011
65,246
662
662
61,567
Change in net assets
Net assets, beginning of year
Net assets, end of year
4,815
89,259
94,074
5,471
83,788
$ 89,259
$
19
13,289
70,499
$ 83,788
Tuition, state appropriations and federal grants are the primary sources of funding for the College’s academic
programs. Tuition revenue increased in fiscal year 2010 as a result of a 2 percent increase in tuition rates as well as
a 13 percent increase in full year equivalent students. Total state and capital appropriations decreased in fiscal year
2010 by $3.2 million to $26.2 million as the State of Minnesota cut its funding for higher education.
Resources expended for compensation increased $2.7 million to $46.9 million in fiscal year 2010, due to contractual
raises to faculty and increases in staffing for expanded course offerings. Resources expended for compensation were
$44.2 million in fiscal year 2009. Supplies and service expenses increased $2.3 million in fiscal year 2010, as the
College ramped up spending in strategic areas where enrollment growth was most pressing. Chief among the supply
expenses was an upgrade of computer hardware in student labs.
ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE
Looking to the future, management believes that the College is positioned to continue its strong financial condition
and level of excellence while being highly adaptive to the times, as shown over the past year. In fiscal year 2010,
enrollment growth was even stronger than in recent years as displaced workers continued to look to the College for
retraining. Despite the continued lowering of its state appropriation, the College’s receipts grew sharply in fiscal
year 2010 and the College promptly redistributed a portion of the proceeds from its growth to where they were most
needed to meet demand. Disciplined financial management will continue to be a cornerstone upon which the
College relies on in order to uphold its customary level of service while facing a limited pool of capital.
The College has tasked itself with the challenge of keeping tuition increases well below inflation so as to allow it to
continue to provide a broad array of affordable educational opportunities to its student body, a significant proportion
of who are underserved. One-time federal stimulus funds have allowed the college to continue this effort for the
upcoming fiscal year and the College is committed to finding inventive ways to keep costs low in a sustainable
manner.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Minneapolis Community and Technical College’s
finances for all those with an interest in the college’s finances. Questions concerning any of the information
provided in this report or requests for additional financial information should be addressed to:
Scott Erickson, V.P. Finance and Operations
Minneapolis Community and Technical College
1501 Hennepin Ave
Minneapolis, MN 55403
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MINNEAPOLIS COMMUNITY AND TECHNICAL COLLEGE
STATEMENTS OF NET ASSETS
AS OF JUNE 30, 2010 AND 2009
(IN THOUSANDS)
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 restricted assets
Noncurrent Restricted Assets
Construction in progress
Total noncurrent restricted assets
Total restricted assets
Noncurrent Assets
Capital assets, net
Total noncurrent assets
2010
$
Total Assets
27,600
666
3,932
2,884
509
16
35,607
2009
$
23,654
590
3,543
1,375
431
29,593
11,974
11,974
11,610
11,610
347
347
12,321
11,610
85,049
85,049
84,879
84,879
132,977
126,082
Liabilities
Current Liabilities
Salaries and benefits payable
Accounts payable
Unearned revenue
Payable from restricted assets
Interest payable
Funds held for others
Current portion of long-term debt
Other compensation benefits
Total current liabilities
Noncurrent Liabilities
Noncurrent portion of long-term debt
Other compensation benefits
Total noncurrent liabilities
4,050
955
1,122
886
112
127
863
931
9,046
3,919
824
979
62
64
13
841
516
7,218
24,303
5,554
29,857
24,985
4,620
29,605
Total Liabilities
38,903
36,823
71,427
1,005
1,267
20,375
70,599
1,350
17,310
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.
22
94,074
$
89,259
MINNEAPOLIS COMMUNITY AND 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
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
Total nonoperating revenues (expenses)
Income Before Other Revenues, Expenses, Gains, or Losses
Capital appropriations
Capital grants
Loss on disposal of capital assets
Change in net assets
Total Net Assets, Beginning of Year
18,517
2,070
1,476
46
22,109
2009
$
46,891
5,712
4,506
2,138
4,328
4,111
3,792
71,478
(49,369)
44,198
6,168
2,646
1,248
3,778
2,604
3,593
64,235
(42,398)
22,851
25,741
3,589
106
85
(1,122)
51,250
26,449
16,328
3,018
52
84
(644)
45,287
1,881
2,889
3,343
(322)
(87)
4,815
2,949
(342)
(25)
5,471
89,259
Total Net Assets, End of Year
$
The notes are an integral part of the financial statements.
23
18,630
2,334
640
233
21,837
94,074
83,788
$
89,259
MINNEAPOLIS COMMUNITY AND 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 used in operating activities
$
2009
25,727
(19,918)
(45,363)
(4,106)
(43,660)
$
24,461
(16,770)
(43,600)
(3,104)
(39,013)
Cash Flows from Noncapital Financing Activities
Appropriations
Agency activity
Federal grants
State grants
Private grants
Net cash flows from noncapital financing activities
22,851
114
25,573
3,589
106
52,233
26,449
(59)
16,198
3,018
52
45,658
Cash Flows from Capital and Related Financing Activities
Investment in capital assets
Capital appropriation and grants
Proceeds from sale of capital assets
Proceeds from borrowing
Proceeds from bond premium
Interest paid
Repayment of bond principal
Net cash flows from (used in) capital and related financing activities
(4,150)
1,435
13
181
69
(946)
(880)
(4,278)
(7,514)
2,607
1
12,350
209
(743)
(969)
5,941
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.
24
15
15
23
23
4,310
12,609
35,264
22,655
39,574
$
35,264
MINNEAPOLIS COMMUNITY AND 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 revenue
Other
Net reconciling items to be added to operating income
Net cash flow used in operating activities
Non-Cash Investing, Capital, and Financing Activities:
Capital projects on account
Loss on retirement of capital assets
Investment earnings on account
Amortization of bond premium
$
$
25
(49,369)
2009
$
(42,398)
4,328
3,778
(78)
(389)
158
131
1,348
236
(25)
5,709
(43,660)
128
(662)
(492)
344
253
45
(9)
3,385
(39,013)
886
(87)
4
66
$
$
89
(25)
63
MINNEAPOLIS COMMUNITY AND 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 Minneapolis Community and Technical College (College), a
member of the Minnesota State Colleges and Universities system, conform to generally accepted accounting
principles (GAAP) in the United States, as prescribed by the Governmental Accounting Standards Board
(GASB). The statements of net assets; statements of revenues, expenses and changes in net assets; and
statements of cash flows include financial activities of Minneapolis Community and Technical College.
Financial Reporting Entity — Minnesota State Colleges and Universities is an agency of the state of Minnesota
and receives appropriations from the state legislature, substantially all of which are used to fund general
operations. Minneapolis Community and Technical College receives a portion of Minnesota State Colleges and
Universities’ appropriation. The operations of most student organizations are included in the reporting entity
because the Board of Trustees has certain fiduciary responsibilities for these resources.
Basis of Accounting — The basis of accounting refers to when revenues and expenses are recognized and
reported in the financial statements. The accompanying financial statements have been prepared as a special
purpose government entity engaged in business type activities. Business type activities are those that are
financed in whole or in part by fees charged to external parties for goods or services. Accordingly, these
financial statements have been presented using the economic resources measurement focus and the accrual basis
of accounting. Revenues are recognized when earned and expenses are recognized as they are incurred.
Eliminations have been made to minimize the double-counting of internal activities. Interfund receivables and
payables have been eliminated in the statements of net assets.
Minnesota State Colleges and Universities applies all applicable Financial Accounting Standards Board
statements issued prior to November 30, 1989, and GASB statements issued since that date.
Budgetary Accounting — College budgetary accounting, which is the basis for annual budgets and the
allocation of state appropriations, differs from GAAP. Budgetary accounting includes all receipts and expenses
up to the close of the books in August for the budget fiscal year. Revenues not yet received by the close of the
books are not included. The criterion for recognizing expenses is the actual disbursement, not when the goods
or services are received.
The state of Minnesota operates on a two year (biennial) budget cycle ending on June 30 of odd numbered
years. Minnesota State Colleges and Universities is governed by a 15-member board of trustees appointed by
the Governor with the advice and consent of the state senate. The Board approves the College biennial budget
request and allocation as part of the Minnesota State Colleges and Universities’ total budget.
Budgetary control is maintained at the College. The College President has the authority and responsibility to
administer the budget and can transfer money between programs within the College without Board approval.
The budget of the College can be legally amended by the authority of the Vice Chancellor/Chief Financial
Officer.
The state appropriations do not lapse at year end. Any unexpended appropriation from the first year of a
biennium is available for the second year. Any unexpended balance may also carry over to future bienniums.
Capital Appropriation Revenue — Minnesota State Colleges and Universities is responsible for paying one
third of the debt service for certain general obligation bonds sold for capital projects, as specified in the
authorizing legislation. The portion of general obligation bond debt service that is payable by the state of
Minnesota is recognized by Minnesota State Colleges and Universities as capital appropriation revenue when
the related bond sale proceeds are received. Individual colleges and universities are allocated cash, capital
appropriation revenue, and debt based on capital project expenses.
26
The fiscal year 2010 and 2009 capital appropriation and allocations include $309,312 and $1,278,204 of
revenue for higher education asset preservation, replacement projects and other allocations, respectively.
Cash and Cash Equivalents — The cash balance represents cash in the state treasury and demand deposits in
local bank accounts as well as cash equivalents. Cash equivalents are short term, highly liquid investments
having original maturities (remaining time to maturity at acquisition) of three months or less. Cash and cash
equivalents include amounts in demand deposits, savings accounts, cash management pools, repurchase
agreements, and money market funds.
Restricted cash is cash held for capital projects and cash in the Revenue Fund for capital projects and debt
service. The Revenue Fund is used to account for the revenues, expenses and net assets of revenue producing
facilities which are supported through usage. It has the authority to sell revenue bonds for the construction and
maintenance of revenue producing facilities.
All balances related to the state appropriation, tuition revenues, and most fees are in the state treasury. The
College also has two accounts in a local bank. The activities handled through the local bank include financial
aid, student payroll, auxiliary, and student activities.
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 schools as part of the appropriation allocation
process. 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
Building improvements
Equipment
Library collections
35 years
20 years
3-20 years
7 years
Equipment includes all items with an original cost of $10,000 and over for items purchased since July 1, 2008;
$5,000 and over for items purchased between July 1, 2003 and June 30, 2008; and $2,000 and over for items
purchased prior to July 1, 2003. Buildings, building improvements, and internally developed software include
all projects with a cost of $250,000 and over for projects started since July 1, 2008, and $100,000 and over for
projects started prior to July 1, 2008. All land and library collection purchases are capitalized regardless of
amount spent.
Funds Held for Others — Funds held for others are assets held for student organizations.
Long-Term Liabilities — The state of Minnesota appropriates for and sells general obligation bonds to support
construction and renovation of Minnesota State Colleges and Universities’ facilities as approved through the
state’s capital budget process. The College is responsible for a portion of the debt service on the bonds sold for
some College projects. The College may also enter into capital lease agreements for certain capital assets.
27
Other long term liabilities include compensated absences, net other postemployment benefits, early termination
benefits, and workers’ compensation claims.
Minnesota State Colleges and Universities may finance the construction, renovation and acquisition of facilities
for student residences and student unions through the sale of revenue bonds. These activities are accounted for
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 Director, Minnesota State Colleges and Universities, Wells Fargo Place, 30 7th St. E., Suite 350, St.
Paul, Minnesota 55101-7804.
Operating Activities — Operating activities, as reported in the statements of revenues, expenses and changes in
net assets, are those that generally result from exchange transactions such as payments received for providing
services and payments made for services or goods received. Nearly all of the College’s expenses are from
exchange transactions. Certain significant revenue streams relied upon for operations are recorded as
nonoperating revenues including state appropriations, federal, state and private grants, and investment income.
Unearned Revenue — Unearned revenue consists primarily of tuition received, but not yet earned, for summer
session. It also includes amounts received from grants which have not yet been earned under the terms of the
agreement.
Tuition, Fees, and Sales, Net — Tuition, fees, and sales are reported net of scholarship allowances of
$18,793,666 and $12,494,219. Sales are also net of cost of goods sold of $3,770,995 and $3,240,108 for fiscal
years 2010 and 2009, respectively.
Restricted Student Payments — Restricted student payments consist of fee revenue restricted for payment of
revenue bonds.
Federal Grants — Minneapolis Community and Technical College participates in several federal grant
programs. The largest programs include Pell, TRIO, Supplemental Educational Opportunity Grant and Federal
Work Study. Federal Grant revenue is recognized as nonoperating revenue in accordance with GASB
Statement No. 33, Accounting and Financial Reporting for Nonexchange Transactions.
During fiscal year 2010, $1,607,841 of federal aid was recognized as revenue related to the American Recovery
and Reinvestment Act of 2009. Of this amount, $528,514 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 with current year
presentation. Fiscal year 2009 federal and state grant revenue, in the amount of $16,328,220 and $3,018,122
respectively, have been reclassified from operating to nonoperating revenue. This reclassification increases the
total operating loss by $19,346,342 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 more closely align 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 three net asset categories:
28
Invested in capital assets, net of related debt: Capital assets, net of accumulated depreciation, and
outstanding principal balances of debt attributable to the acquisition, construction or improvement
of those assets.
Restricted expendable: Net assets subject to externally imposed stipulations. Net asset
restrictions for Minneapolis Community and Technical College are as follows:
Restricted for other — includes restrictions for the following:
Donations — restricted per donor requests.
Debt service — legally restricted for bond repayments.
Faculty contract obligations – faculty development and travel required by contracts.
Restricted for Other
(In Thousands)
Donations
Debt service
Faculty contract obligations
Total
2010
1
1,236
30
$ 1,267
$
2009
2
1,329
19
$ 1,350
$
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, CASH EQUIVALENTS AND INVESTMENTS
Cash and Cash Equivalents — All balances related to the appropriation, tuition and most fees are in the state
treasury. In addition, the College has two accounts at local banks. The activities handled through local banks
include financial aid, student payroll, and 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 bank
$
333
Cash - trustee account (US Bank)
12,974
Total local cash and cash equivalents
13,307
Total treasury cash accounts
26,267
Grand Total
$ 39,574
2009
$ 1,282
11,548
12,830
22,434
$ 35,264
At June 30, 2010 and 2009, the College’s local bank balances were $1,751,637 and $1,803,159, respectively.
These balances were adjusted by items in transit to arrive at the College’s cash in bank balance. The College’s
balance in the treasury, except for the Revenue Fund, is invested by the Minnesota State Board of Investment as
part of the state investment pool. This asset is reported as a cash equivalent.
Investments — The Minnesota State Board of Investment manages the majority of the state’s investments. All
investments managed by the State Board of Investment are governed by Minnesota Statutes, Chapters 11A and
356A. Minnesota Statutes, Section 11A.24 broadly restricts investments to obligations and stocks of United
29
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. The cash accounts are invested in short
term, liquid, high quality debt securities.
The Minneapolis Community and Technical College had no investments at June 30, 2010 and 2009.
Custodial Credit Risk — Custodial credit risk for investment is the risk that in the event of a failure of the
counterparty, the College will not be able to recover the value of the investments that are in the possession of an
outside party. Board procedure 7.5.1 requires compliance with Minnesota Statutes, Section 118A.03 and
further excludes the use of FDIC insurance when meeting collateral requirements.
Credit Risk — Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. The College’s policy for reducing its exposure to credit risk is to comply with Minnesota Statutes,
Section 118A.04. This statute limits investments to the top quality rating categories of a nationally recognized
rating agency.
Concentration of Credit Risk — Concentration of credit risk is the risk of loss attributed to the magnitude of a
government’s investment in a single issuer. The College’s policy for reducing this risk of loss is to comply with
Board procedure 7.5.1 which recommends investments be diversified by type and issuer.
Interest Rate Risk — Interest rate risk is a risk that changes in interest rates will adversely affect the fair value
of an investment. The College complies with Board procedure 7.5.1 that recommends considering fluctuating
interest rates and cash flow needs when purchasing short term and long-term debt investments.
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.
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
30
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
3,845,016
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 $5,341,060 and $4,954,718, less an allowance
for uncollectible receivables of $1,409,047 and $1,411,432, respectively.
Summary of Accounts Receivable at June 30
(In Thousands)
2010
2009
Tuition
$ 3,039 $ 2,559
Fees
870
747
Sales and services
633
642
Third party obligations
294
195
Other
505
811
Total accounts receivable
5,341
4,954
Less allowance for uncollectible accounts
(1,409)
(1,411)
Net accounts receivable
$ 3,932 $ 3,543
The allowance for uncollectible accounts has been computed based on the following aging schedules:
Fiscal Year 2010
Allowance
Age
Percentage
Less than 1 year
15%
1 to 3 years
45%
3 to 5 years
70%
Over 5 years
95%
4.
Fiscal Year 2009
Allowance
Age
Percentage
Less than 1 year
2%
1 to 2 years
50%
Over 2 years
100%
PREPAID EXPENSE
Prepaid expense consists of $1,236,355 and $1,327,885, for fiscal years 2010 and 2009, respectively, which has
been deposited in the state’s Debt Service Fund for future general obligation bond payments. Minnesota
Statutes, Section 16A.641, requires all state agencies to have on hand on December 1 of each year, an amount
sufficient to pay all general obligation bond principal and interest due, and to become due, through July 1 of the
second year. The expense also consists of a one-time payment of $1,586,652 made to Hennepin Technical
College for the start-up costs related to the transfer of the Criminal Justice and Law Enforcement program. This
expense will be amortized over fiscal years 2011 and 2012. Additionally, a portion of the prepaid expense,
31
$60,620 and $47,443, for fiscal years 2010 and 2009, respectively, consists of prepaid funds for software
maintenance.
5.
CAPITAL ASSETS
Summaries of changes in capital assets for fiscal years 2010 and 2009 follow.
Capital assets, not depreciated:
Land
Construction in progress
Total capital assets, not depreciated
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases
$
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
$
101,513
14,528
1,202
117,243
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total depreciation
Total capital assets, depreciated, net
Total capital assets, net of depreciation
$
Capital assets, not depreciated:
Land
Construction in progress
Total capital assets, not depreciated
18,727
19,841
38,568
57,600
12,597
735
70,932
46,311
84,879
—
4,561
4,561
$
—
283
126
409
3,672
515
166
4,353
(3,944)
$
617 $
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases
$
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total depreciation
Total capital assets, depreciated, net
Total capital assets, net of depreciation
$
18,727
18,600
37,327
97,575
14,325
1,249
113,149
54,540
12,138
750
67,428
45,721
83,048
32
$
—
5,179
5,179
Completed
Construction
Decreases
—
—
—
$
—
316
139
455
3,060
546
171
3,777
(3,322)
$ 1,857 $
$ 18,727
5,827
24,554
—
535
168
703
18,575
—
—
18,575
120,088
14,276
1,160
135,524
—
435
168
603
100
100
—
—
—
—
18,575
—
61,272
12,677
733
74,682
60,842
$ 85,396
$
Completed
Construction
Decreases
$
—
(18,575)
(18,575)
Ending
Balance
—
—
—
$
—
(3,938)
(3,938)
Ending
Balance
$ 18,727
19,841
38,568
—
113
186
299
3,938
—
—
3,938
101,513
14,528
1,202
117,243
—
87
186
273
26
26
—
—
—
—
3,938
—
57,600
12,597
735
70,932
46,311
$ 84,879
$
6.
ACCOUNTS PAYABLE
Accounts payable represent amounts due at June 30 for goods and services received prior to the end of the fiscal
year.
Summary of Accounts Payable at June 30
(In Thousands)
2010
2009
Repairs and maintenance $
23 $
9
Purchased services
575
661
Salaries
67
22
Employee benefits
41
26
Supplies
243
39
Other
6
39
Capital projects
—
28
Total
$ 955 $ 824
In addition, as of June 30, 2010 and 2009, the College had payable from restricted assets in the amounts of
$886,086 and $61,872, which was related to capital projects financed by general obligation bonds and revenue
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:
Liabilities for:
Bond premium
General obligation bonds
Revenue bonds
Total long term debt
Liabilities for:
Bond premium
General obligation bonds
Revenue bonds
Total long term debt
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases
$
$
615
13,696
11,515
25,826
$
$
69
181
—
250
$
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases
$
$
469
13,678
—
14,147
$
209
835
11,515
$ 12,559
33
Ending
Balance
Decreases
68
842
—
910
$
616
13,035
11,515
$ 25,166
$
63
817
—
880
$
$
Ending
Balance
Decreases
$
Current
Portion
$
615
13,696
11,515
$ 25,826
—
863
—
863
Current
Portion
$
$
—
841
—
841
The changes in other compensation benefits for fiscal years 2010 and 2009 follow:
Liabilities for:
Compensated absences
Early termination benefits
Net other postemployment benefits
Workers’ compensation
Total other compensation benefits
Liabilities for:
Compensated absences
Early termination benefits
Net other postemployment benefits
Workers’ compensation
Total other compensation benefits
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases
$
$
4,509
48
506
73
5,136
$
$
592
118
303
923
1,936
$
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases
$
$
4,442
62
307
72
4,883
$
$
453
48
293
24
818
Ending
Balance
Decreases
347
48
122
70
587
$
$
$
386
62
94
23
565
$
$
Ending
Balance
Decreases
$
4,754
118
687
926
6,485
Current
Portion
$
$
4,509
48
506
73
5,136
464
78
—
389
931
Current
Portion
$
439
48
—
$
29
516
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.
Bond Premium — In fiscal years 2010 and 2009, bonds were issued resulting in premiums of $69,349 and
$208,947, respectively. Amortization is calculated using the straight-line method and amortized over the
average remaining life of the bonds.
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 acquisition, construction and remodeling of buildings for dormitory, residence hall, student
union, food service and parking purposes at the state universities. Revenue bonds currently outstanding have
interest rates of 2 percent to 4.63 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 2030. Annual principal and interest payments on the bonds are expected to require less than 59.5
percent of net revenues. The total principal and interest remaining to be paid on the bonds is $17,156,806 .
Principal and interest paid for the current year and total customer net revenues were $353,062 and $1,492,866
respectively.
Compensated Absences — College employees accrue vacation, sick, and compensatory leave at various rates
within limits specified in the collective bargaining agreements. The liability for compensated absences is
payable as severance pay under specific conditions. This leave is liquidated only at the time of termination
from state employment.
34
Early Termination Benefits — Early termination benefits are benefits received for discontinuing services earlier
than planned. See Note 8 for details.
Net Other Postemployment Benefits — Other postemployment benefits are health insurance benefits for certain
retired employees under a single employer, fully insured plan. Under the health benefits program retirees are
required to pay 100 percent of the total premium cost. Since the premium is a blended rate determined on the
entire active and retiree population, the retirees are receiving an implicit rate subsidy. See Note 9 for further
details.
Workers’ Compensation — The state of Minnesota Department of Management and Budget manages the self
insured workers’ compensation claims activities. The reported liability for workers’ compensation of $925,944
and $73,236 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 and revenue
bonds. There are no payment schedules for bond premium, compensated absences, early termination benefits,
other postemployment benefits, or workers’ compensation.
Fiscal Years
2011
2012
2013
2014
2015
2016-2020
2021-2025
2026-2030
Total
8.
Long Term Debt Repayment Schedule
(In Thousands)
General
Obligation Bonds
Revenue Bonds
Principal Interest
Principal
Interest
$
863 $
626
$
— $
449
863
583
440
445
863
540
450
435
863
498
460
423
863
455
470
411
4,293
1,638
2,645
1,802
3,443
632
3,215
1,220
984
81
3,835
457
$ 13,035 $ 5,053
$ 11,515 $ 5,642
EARLY TERMINATION BENEFITS
Early termination benefits are defined as benefits received for discontinuing services earlier than planned.
The Minnesota State College Faculty (MSCF) contract allows former United Technical College Educators
(UTCE) faculty members who meet certain eligibility and combination of age and years of service requirements
to receive an early retirement incentive cash payment based on base salary at time of separation, as well as an
amount equal to the employer’s contribution for one year’s health insurance premiums deposited in his/her
health care savings plan at time of separation. The cash incentive can be paid either in one or two payments.
The number of retired faculty who received this benefit, and the amount of future liability for those faculty, as
of the end of fiscal years 2010 and 2009, follow.
Fiscal Year
2010
2009
Number
of Faculty
7
5
35
Future Liability
(In thousands)
$ 118
48
9.
NET OTHER POSTEMPLOYMENT BENEFITS
The College provides health insurance benefits for certain retired employees under a single-employer fullyinsured plan, as required by Minnesota Statute, 471.61 subdivision 2B. Active employees who retire when
eligible to receive a retirement benefit from a Minnesota public pension plan and do not participate in any other
health benefits program providing coverage similar to that herein described, will be eligible to continue
coverage with respect to both themselves and their eligible dependent(s) under the health benefits program.
Retirees are required to pay 100 percent of the total premium cost. Since the premium is a blended rate
determined on the entire active and retiree population, the retirees are receiving an implicit rate subsidy. As of
July 1, 2008, there were approximately 11 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 Postemployment Benefits Other than Pensions. The ARC represents a level of funding that, if
paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial
liabilities (or funding excess) over a period not to exceed 30 years.
The following table shows the components of the annual OPEB cost for fiscal years 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
2009
Annual required contribution (ARC)
$ 299 $ 290
Interest on net OPEB obligation
24
15
Adjustment to ARC
(20)
(12)
Annual OPEB cost
303
293
Contributions during the year
(122)
(94)
Increase in net OPEB obligation
181
199
Net OPEB obligation, beginning of year
506
307
Net OPEB obligation, end of year
$ 687 $ 506
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)
Beginning of the year net OPEB obligation
Annual OPEB cost
Employer contribution
End of year net OPEB obligation
Percentage contributed
$
$
2010
506 $
303
(122)
687 $
40.26 %
36
2009
307
293
(94)
506
32.08 %
Funding Status — There are currently no assets that have been irrevocably deposited in a trust for future health
benefits. Therefore, the actuarial value of assets is zero.
Actuarial
Valuation
Date
Actuarial
Value of
Assets
(a)
July 1, 2008
$ —
Schedule of Funding Progress
(In Thousands)
Actuarial
Unfunded
Accrued
Actuarial Accrued
Funded
Liability
Liability
Ratio
(b)
(b - a)
(a/b)
Covered
Payroll
(c)
UAAL as a
Percentage of
Covered Payroll
((b - a)/c)
$ 2,816
$ 26,451
10.65%
$ 2,816
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, 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 was committed under various leases primarily for building space. These
leases were considered for accounting purposes to be operating leases. Lease expenditures for the years ended
June 30, 2010 and 2009 totaled approximately $774,885 and $692,344 respectively.
Future minimum lease payments for existing lease agreements are as follows.
Lease Repayment Schedule
(In Thousands)
Fiscal Year
Amount
2011
$ 314
2012
227
2013
219
2014
37
Total
$ 797
37
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
$ 5,421
$ 2,728
Institutional support
4,207
3,837
Instruction
25,666
2,743
Operation & maintenance of plant
2,755
4,347
Public service
4
—
Student services
7,703
1,896
Auxiliary enterprises
1,135
597
Depreciation
—
4,328
Scholarships & fellowships
—
4,111
Total operating expenses
$ 46,891
$ 24,587
Total
$ 8,149
8,044
28,409
7,102
4
9,599
1,732
4,328
4,111
$ 71,478
For the Year Ended June 30, 2009
(In Thousands)
Salaries/
Description
Benefits
Other
Academic support
$ 5,239
$ 1,656
Institutional support
4,290
3,210
Instruction
23,726
2,152
Operation & maintenance of plant
2,592
3,759
Public service
37
3
Student services
7,345
1,905
Auxiliary enterprises
969
970
Depreciation
—
3,778
Scholarships & fellowships
—
2,604
Total operating expenses
$ 44,198
$ 20,037
Total
$ 6,895
7,500
25,878
6,351
40
9,250
1,939
3,778
2,604
$ 64,235
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; Public Employees Retirement Fund, administered by the Public Employees Retirement
Association; and the Minnesota State Colleges and Universities Defined Contribution Retirement Plan.
State Employees Retirement Fund (SERF)
Pension fund information is provided by Minnesota State Retirement System, which prepares and publishes its
own stand alone comprehensive annual financial report, including financial statements and required
supplementary information. Copies of the report may be obtained directly from Minnesota State Retirement
System at 60 Empire Drive, Suite 300, St. Paul, Minnesota 55103.
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
38
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 Minneapolis Community and Technical College were:
(In Thousands)
Fiscal Year
Amount
2010
$ 352
2009
343
2008
309
Teachers Retirement Fund (TRF)
Pension fund information is provided by Minnesota Teachers Retirement Association, which prepares and
publishes its own stand alone comprehensive annual financial report, including financial statements and
required supplementary information. Copies of the report may be obtained directly from Minnesota Teachers
Retirement Association at 60 Empire Drive, Suite 400, St. Paul, Minnesota 55103.
TRF is a cost sharing, multiple employer defined benefit plan. Teachers and other related professionals may
participate in TRF. Normal retirement age is 65. Coordinated membership includes participants who are
covered by the Social Security Act. The annuity formula is the greater of a step rate with a flat reduction for
each month of early retirement, or a level rate (the higher step rate) with an actuarially based reduction for early
retirement. The applicable rates for coordinated members are 1.2 percent and 1.7 percent for service rendered
before July 1, 2006, and 1.4 percent and 1.9 percent for service rendered on or after July 1, 2006. Minnesota
State Colleges and Universities, an employer for some participants, is liable for a portion of any unfunded
accrued liability of this fund.
Effective July 1, 2006 the Minneapolis Teacher’s Retirement Fund combined with the Minnesota Retirement
Association. The Minneapolis Teachers Retirement Association’s membership consisted of eligible employees
of the Minneapolis Special School District No. 1, employees formerly employed by the district and the
employees of the Association. The funding requirements were 8.14 percent for the employer and 5.5 percent
for the employee for the coordinated plan prior to July 1, 2006.
The statutory authority for TRF is Minnesota Statutes, Chapter 354. 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.
Required contributions for Minneapolis Community and Technical College were:
(In Thousands)
Fiscal Year
Amount
2010
$ 427
2009
428
2008
406
39
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 Public
Employees Retirement Association at 60 Empire Drive, Suite 200, St. Paul, Minnesota 55103.
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 Minneapolis Community and Technical College were:
(In Thousands)
Fiscal Year
Employer Employee
2010
$ 31
$ 26
2009
30
27
2008
28
26
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
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 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 — Each 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
40
6 percent and 4.5 percent, respectively. The contributions are made under the authority of Minnesota Statutes,
Chapter 354B.
Required contributions for Minneapolis Community and Technical College were:
Fiscal Year
2010
2009
2008
(In Thousands)
Employer
$ 962
902
802
Employee
$ 727
678
606
Supplemental Retirement Plan (SRP)
Participation — Each unclassified employee who has completed two full time years of unclassified service with
Minnesota State Colleges and Universities must participate upon achieving eligibility. The eligible employee is
enrolled on the first day of the fiscal year following completion of two full time years. Vesting occurs
immediately and normal retirement age is 55.
Contributions — Participants contribute 5 percent of the eligible compensation up to a defined maximum
annual contribution as specified in the following table:
Member Group
Minnesota Association of Professional Employees Unclassified
Middle Management Association Unclassified
Minnesota State College Faculty Association
Administrators
Other Unclassified Members
Eligible
Compensation
$ 6,000 to $ 40,000
6,000 to 40,000
6,000 to 56,000
6,000 to 60,000
6,000 to 40,000
Max Annual
Contributions
$ 1,700
1,700
2,500
2,700
1,700
The College matches amounts equal to the contributions made by participants. The contributions are made
under the authority of Minnesota Statutes, Chapter 354C.
Required contributions for Minneapolis Community and Technical College were:
(In Thousands)
Fiscal Year
Amount
2010
$ 539
2009
509
2008
402
13. 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.
41
Minnesota State Colleges and Universities issues revenue bonds to finance its student union.
Minneapolis Portion of the Revenue Fund
(In Thousands)
CONDENSED STATEMENTS OF NET ASSETS
Assets:
Current assets
Restricted assets
Total assets
Liabilities:
Current liabilities
Noncurrent liabilities
Total liabilities
Net Assets:
Restricted
Unrestricted
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
Total net assets, beginning of year
Total 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
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
2010
$
$
$
2,251
11,578
13,829
2009
$
1,279
11,545
12,824
66
11,546
11,612
1,005
—
1,005
2
(65)
(63)
$
1,486
(29)
1,457
(389)
1,068
(63)
1,005
$
2,371
2
(552)
1,821
11,549
$ 13,370
$
$
$
1
11,548
11,549
$
$
—
—
—
(63)
(63)
—
(63)
1
(2)
11,550
11,549
—
11,549
14. COMMITMENTS
Minneapolis Community and Technical College expended $347,000 to date for a new Student Union. Total
project cost is estimated at $11,500,000 with completion expected in July 2011.
15. RISK MANAGEMENT
Minnesota State Colleges and Universities is exposed to various risks of loss related to tort; theft of, damage to,
or destruction of assets; error or omissions; and employer obligations. Minnesota State Colleges and
Universities manage these risks through Minnesota insurance plans including the state of Minnesota Risk
Management Fund, and through purchased insurance coverage. Automobile liability coverage is required by
the state and is provided by the Minnesota Risk Management Fund. Property and casualty coverage is required
by Minnesota State Colleges and Universities policy.
42
Property coverage offered by the Minnesota Risk Management Fund are as follows:
Coverage Type
Institution deductible
Fund responsibility
Primary reinsurer coverage
Multiple reinsurers’ coverage
Bodily injury and property damage per person
Bodily injury and property damage per occurrence
Annual maximum paid by fund, excess by reinsurer
Maintenance deductible for additional claims
Amount
$2,500 to $250,000
$1,000,000
$1,000,001 to $25,000,000
$25,000,001 to $1,000,000,000
$500,000
$1,500,000
$4,000,000
$25,000
Minneapolis Community and Technical College retains the risk of loss. The College did not have any
settlements in excess of coverage the last three years.
Minnesota State Colleges and Universities participates in the State Employee Group Insurance Plan which
provides life insurance and hospital, medical, and dental benefits coverage through provider organizations.
Workers’ compensation is covered through state participation in the Workers’ Compensation Reinsurance
Association which pays for catastrophic workers’ compensation claims. Other workers’ compensation risks are
covered through self insurance for which Minnesota State Colleges and Universities pays the cost of claims
through the state Workers’ Compensation Fund. A Minnesota State Colleges and Universities workers’
compensation payment pool helps institutions manage the volatility of such claims. Annual premiums are
assessed by the pool based on salary dollars and claims history. From this pool all workers’ compensation
claims are paid to the state Workers’ Compensation Fund.
The following table presents changes in the balances of workers’ compensation liability during the fiscal years
ended June 30, 2010 and 2009.
Fiscal Year Ended 6/30/10
Fiscal Year Ended 6/30/09
(In Thousands)
Beginning Net Additions
Liability
and Changes
$ 73
$ 923
72
24
Reductions
$ 70
23
Ending
Liability
$ 926
73
16. RELATED PARTY TRANSACTIONS
Metropolitan State University’s Minneapolis Campus (MSU) is located at Minneapolis Community and
Technical College (MCTC) and shares physical plant, institutional and academic support, and student services
costs. In fiscal year 2010 and 2009, MSU recorded $588,286 and $548,811 respectively, in shared costs
payable to MCTC.
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SUPPLEMENTAL SECTION
45
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
Board of Trustees
Minnesota State Colleges and Universities
St. Paul, Minnesota
We have audited the financial statements of Minneapolis Community and Technical College (the
College) as of and for the year ended June 30, 2010, and have issued our report thereon dated
October 22, 2010. We conducted our audit in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered the College’s internal control over financial
reporting as a basis for designing our auditing procedures for the purpose of expressing our opinions
on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the
College’s internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the College’s internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent, or
detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control such that there is a reasonable possibility that a material
misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a
timely basis.
Our consideration of internal control over financial reporting was for the limited purpose described in the
first paragraph of this section and was not designed to identify all deficiencies in internal control over
financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did
not identify any deficiencies in internal control over financial reporting that we consider to be material
weaknesses as defined above.
An independent member of Nexia International
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Board of Trustees
Minnesota State Colleges and Universities
Page 2
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the College’s financial statements are free of
material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on
the determination of financial statement amounts. However, providing an opinion on compliance with
those provisions was not an objective of our audit, and accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are required to
be reported under Government Auditing Standards.
This report is intended solely for the information and use of the Board of Trustees and management of
the College and is not intended to be and should not be used by anyone other than these specified
parties.
LarsonAllen LLP
Minneapolis, Minnesota
October 22, 2010
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