MINNESOTA STATE COMMUNITY
AND TECHNICAL COLLEGE
A MEMBER OF THE
MINNESOTA STATE COLLEGES AND UNIVERSITIES SYSTEM
ANNUAL FINANCIAL REPORT
FOR THE YEARS ENDED JUNE 30, 2010 and 2009
Prepared by:
Minnesota State Community and Technical College
Pat Nordick, Chief Financial Officer
150 2nd St W, Suite B
PO Box 309
Perham, MN 56573
Upon request, this publication is available in alternate formats by calling one of the following:
General number: (651) 201-1800
Toll free: 1-888-667-2848
TTY: (651) 282-2660
MINNESOTA STATE 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 ................................................................................................................................. 9
FINANCIAL SECTION
Independent Auditors’ Report .............................................................................................................. 12
Management’s Discussion and Analysis .............................................................................................. 14
Basic Financial Statements
Statements of Net Assets ............................................................................................................... 24
Fergus Area College Foundation – Statements of Financial Position ........................................... 25
Statements of Revenues, Expenses, and Changes in Net Assets ................................................... 26
Fergus Area College Foundation – Statements of Activities ......................................................... 27
Statements of Cash Flows ............................................................................................................. 28
Notes to the Financial Statements ................................................................................................. 30
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 .................................................................. 50
1
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2
INTRODUCTION
3
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4
5
6
7
8
9
Pat Wilber
Vice President for
Advancement and Custom
Training Services
David Overby
Chief Information Officer
Public Affairs
Barry Lane
Chief Academic Officer
Academic Affairs
Pat Nordick
Chief Financial Officer
Finance
Carol Totland
Executive Assistant
Dacia Johnson
Chief Human Resources Officer
Human Resources
Interim Chief Student Services Officer
Shawn Anderson
Jerome Migler
Executive Vice President
Moorhead Campus Provost
Ann Valentine
President
James H. McCormick
Chancellor
Minnesota State
Colleges and Universities
BOARD OF TRUSTEES
June 30, 2010
Organizational Chart
Anna Wasescha
Vice President
Distance Education
Fergus Falls Campus Provostt
Cris Valdex
Vice President, Services
Detroit Lakes and Wadena
Campuses Provost
Minnesota State Community and Technical College
The financial activity of Minnesota State 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.
All financial activity of Minnesota State Colleges and Universities is included in the state of
Minnesota comprehensive annual financial report.
10
FINANCIAL SECTION
11
12
13
MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)
INTRODUCTION
The following discussion and analysis provides an overview of the financial position and activities of Minnesota
State Community and Technical College, a member of Minnesota State Colleges and Universities system, at
June 30, 2010, 2009 and 2008, and the years then ended. This discussion has been prepared by management and
should be read in conjunction with the financial statements and the notes, which follow this section.
The College is located in the northwest and west central portion of the state of Minnesota and has campuses located
in the communities of Detroit Lakes, Fergus Falls, Moorhead, and Wadena. The College continues to receive strong
support from the communities and the businesses and industries that reside in them and it plays an important role in
each of the communities’ economic success.
Minnesota State Community and Technical College is one of 32 colleges and universities comprising Minnesota
State Colleges and Universities system. Minnesota State Colleges and Universities 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 4,884 full year equivalent students and
763 employees that equate to 510 full time equivalent employees. It has seen continued enrollment growth with an
increase of 300 full year equivalent students between fiscal year 2009 and fiscal year 2010. Headcount continues to
increase drastically with a 20 percent increase since 2006. The College offers programs in the areas of health,
technology, trades, business, environmental studies, and general education. These programs are offered through
traditional on campus delivery as well as internet, corporate university, and post secondary options in the high
school.
Throughout the financial highlights and explanations of fiscal changes the College will reference tornado damage.
On June 17, 2010 a F4 tornado went through the community of Wadena and caused extensive damage to the
Wadena campus. The college reacted promptly, and by doing so was able to mediate any further damage from water
and exposure to the elements. Emergency repairs and restoration began in late June with the larger repairs and
renovation beginning in early July. The College does have adequate insurance to cover the majority of the needed
repairs to the building and equipment and has also applied to the Federal Emergency Management Agency (FEMA)
for financial assistance. The College did welcome back students on time in late August and did not have any delay
in starting classes.
FINANCIAL HIGHLIGHTS
The College’s financial position continued to improve during fiscal year 2010 ending the year on June 30, 2010 with
assets of $50.1 million, an increase of $5.7 million over June 30, 2009, and liabilities of $17.7 million, an increase of
$1.2 million over June 30, 2009. These changes caused net assets, which represent the residual interest in assets
after liabilities are deducted, to increase by $4.5 million going from $27.9 million on June 30, 2009 to $32.4 million
on June 30, 2010.
Revenues increased between 2009 and 2010. The operating revenue saw a decrease in net tuition revenue,
as well as a decrease in the net fees, room and board, and sales. Although our gross tuition, fees, and sales
increased because of an enrollment increase and a 2 percent tuition rate increase, the scholarship allowance
increased dramatically because of increased federal financial aid which caused the net amount to be a
decrease. The Federal government increased the annual award maximums and also made a policy change
relative to summer term Pell grants which both contributed to the increase in the federal financial aid
14
program. Room and board saw a small decrease because of slightly lower occupancy in the dormitories.
The nonoperating revenue saw an increase in federal grants, private grants, and capital appropriation but a
significant decrease in state appropriation. The increase in capital appropriation was due to an increase in
the number of construction and renovation projects underway at the College. The large increase in federal
grants comes from the change in federal financial aid awards stated previously as well as funding from the
federal government as a result of the American Recovery and Reinvestment Act. Private grants increased
which shows the increased emphasis and success of the College working to secure funding through private
grant sources. The decrease in general appropriations was due to a 12 percent reduction in the base
appropriation received from the State of Minnesota. The College’s share of the overall appropriation
increased by a small percentage going from 3.24 percent to 3.28 percent of the total Minnesota State
Colleges and Universities allocation, but with the large decrease from the State, the College’s dollar share
was in turn significantly decreased.
Operating expenses increased by 4.0 percent from fiscal year 2009 to fiscal year 2010. The largest increase
is financial aid which saw an increase of $1.2 million. The increase is caused by an overall increase in
federal financial aid award amounts and maximums coupled with an enrollment increase which lead to an
increase in financial aid packages awarded. Employee salaries and benefits increased 1.6 percent from
additional faculty salaries caused by enrollment increases. In addition, purchased services increased by
$469 thousand.
Total net assets continue to grow, increasing from $25.9 million in fiscal year 2008 to $27.9 million in
fiscal year 2009 and $32.4 million in fiscal year 2010. The unrestricted portion of the College’s net assets
increased from fiscal year 2009 to fiscal year 2010 by $2.21 million. This increase is due to receiving a
special project appropriation, along with a concerted effort by the College to improve its cash fund balance.
USING THE FINANCIAL STATEMENTS
The financial report includes three financial statements: the Statement of Net Assets, the Statement of Revenues,
Expenses and Changes in Net Assets, and the Statement of Cash Flows. These financial statements are prepared in
accordance with the Generally Accepted Accounting Principles (GAAP) as established by the Government
Accounting Standards Board (GASB) through authoritative pronouncements.
STATEMENTS OF NET ASSETS
The Statements of Net Assets present the financial position of the College at the end of each fiscal year and includes
all assets and liabilities as measured under the accrual basis of accounting. The difference between total assets and
total liabilities, (net assets) is one indicator of the current financial condition of the College. Capital assets are stated
at historical cost less an allowance for depreciation with current year depreciation reflected as a period expense on
the Statement of Revenues, Expenses, and Changes in Net Assets. A summary of assets, liabilities and net assets at
June 30, 2010, 2009 and 2008 is as follows (in thousands):
15
Assets, Liabilities, and Net Assets
2010
2009
Current assets
$ 17,885
$ 14,835
Current restricted assets
564
82
Noncurrent assets
Student loans, other
159
172
Capital assets, net
31,476
29,336
Total assets
50,084
44,425
Current liabilities
Noncurrent liabilities
Total liabilities
Net assets
7,395
10,319
17,714
$ 32,370
6,387
10,144
16,531
$ 27,894
2008
$ 12,833
46
180
30,121
43,180
6,864
10,422
17,286
$ 25,894
Current assets consist primarily of cash and cash equivalents which totaled $14.0 million at June 30, 2010, reflecting
a $2.8 million increase over the prior year. This represents approximately 3.5 months of total expenses (excluding
depreciation). The other large current asset is accounts receivable which totaled $2.6 million at June 30, 2010 which
is a $735 thousand increase from June 30, 2009. Accounts receivable increased because of an increase in general
student receivables which is a result of an increase in enrollment, along with an insurance receivable due from the
College’s insurance carrier for tornado damage repairs, and an increase in bookstore credit memos.
Noncurrent assets of $31.5 million consist mainly of land, buildings, construction in progress, equipment, and
library collections and is reduced by accumulated depreciation.
Current liabilities consist primarily of salaries payable, accounts payable and unearned revenue. Salaries payable
totaled $3.7 million at June 30, 2010 and this is a decrease of $32 thousand from June 30, 2009. Faculty receiving
their salaries over twelve months while working a nine month contract account for the majority of the salaries
payable. Accounts payable totaled $1.25 million at June 30, 2010 which is a increase of $522 thousand from
June 30, 2009. There are three major factors that caused this increase. The June tornado at Wadena resulted in
emergency services in the final two weeks of June which were not paid until July and August. In addition, the
threshold for booking subsequent transactions relative to accounts payable was lowered in fiscal year 2010 which
resulted in an increase of $200 thousand, and third, the College had one large payable that was cleared in June in
fiscal year 2009, but did not get processed until July in fiscal year 2010. The College also had a large increase in
capital accounts payable increasing from $82 thousand in fiscal year 2009 to $564 thousand in fiscal year 2010. The
reason for the increase is a larger number of capital projects in progress at the end of fiscal year 2010.
Unearned revenue, another large current liability, is primarily the portion of summer session tuition received, but not
yet earned as well as grants received but not yet earned. The summer tuition revenue is allocated based upon the
number of session days in each fiscal year. Summer tuition revenues received that are in excess of the calculated
amount earned are considered unearned revenue for the purposes of these statements. Unearned revenue increased
from June 30, 2009 to June 30, 2010 by $58 thousand.
Net assets represent the residual interest in the assets after liabilities are deducted.
16
The College’s net assets at June 30, 2010, 2009 and 2008 are summarized as follows (in thousands):
Net Assets
Invested in capital assets, net of related debt
Restricted
Unrestricted
Total net assets
2010
$ 24,657
669
7,044
$ 32,370
2009
$ 22,388
674
4,832
$ 27,894
2008
$ 22,652
639
2,603
$ 25,894
The College’s net assets increased by $4.5 million during fiscal year 2010 going from $27.9 million on
June 30, 2009 to $32.4 million on June 30, 2010. The major factor for this increase was our unrestricted net assets
which increased from $4.8 million to $7.0 million. A portion of the increase is due to a special allocation received
during fiscal years 2009 and 2010 for a college readiness project. The balance of funds remaining for this project
will be liquidated over the next two fiscal years. In addition, the College is purposefully budgeting and managing
operations in order to increase its unrestricted fund balance. The College’s cash reserves have increased for three
consecutive years.
CAPITAL AND DEBT ACTIVITIES
One of the critical factors in continuing the quality of the College’s academic programs is the development and
renewal of its capital assets. The College continues to implement its long range plan to modernize its complement
of older facilities, balanced with new construction. Capital assets, as of June 30, 2010, totaled $31.5 million, net of
accumulated depreciation of $29.2 million. This compares to $29.3 million as of June 30, 2009, net of accumulated
depreciation of $27.9 million. Capital expenses are primarily comprised of new construction, renovations to
existing facilities and investments in equipment. The increase in capital assets was tempered somewhat because of a
decrease in our capital assets to account for the impairment of our Wadena campus caused by a tornado event in
June. Current year capital asset additions were funded through capital appropriations in the amount of $3.42 million
which is funded through general obligation bonds, with the remainder through operating revenues and general
appropriation.
Construction in progress at June 30, 2010 totaled $2.1 million and includes seven different facility projects. Those
projects include $1.63 million as part of a $2.5 million construction project on the Moorhead campus to design and
construct additional space for library and trades program needs, $228 thousand as part of a $911 thousand dollar
HVAC equipment upgrade project on the Moorhead campus, $178 thousand as part of a $250 thousand drainage
project on the Wadena campus, and $127 thousand as part of a $1.1 million roofing project at Fergus Falls. The
remaining three projects have very small construction in progress balances as they are just in the beginning stages.
These projects will help to prepare the College for future growth as well as resolve plumbing and electrical issues.
In addition to the projects listed above the College has several smaller renovation projects in various stages of
completion to the facilities and parking lots.
Additional information on capital activities and long term debt can be found in Notes 5 and 7.
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
The Statements of Revenues, Expenses and Changes in Net Assets present the College’s results of operations for
each year. When reviewing the full statement, users should note that GASB requires classification of state
appropriations as nonoperating revenue.
17
A summarized statement for the year ended June 30, 2010, 2009 and 2008 follows (in thousands):
Statement of Revenues, Expenses and Changes in Net Assets
2010
Operating revenue:
Tuition, fees, books, net
Other revenue
Total operating revenue
2008
2009
$ 15,710
284
15,994
$ 16,546
502
17,048
Nonoperating revenue:
State appropriations
Federal and State grants
Private grants
Capital appropriations
Other
Total nonoperating revenue
Total revenue
19,903
15,331
1,261
3,417
99
40,011
56,005
22,082
10,517
749
473
654
34,475
51,523
21,300
9,520
782
1,199
199
33,000
49,279
Operating expense:
Salaries and benefits
Supplies and services
Depreciation
Financial aid, net
Other
Total operating expense
36,102
8,537
1,998
2,250
2,279
51,166
35,539
7,981
1,893
1,047
2,741
49,201
34,753
7,706
1,856
689
3,050
48,054
Nonoperating expense:
Loss on disposal of assets
Grants to other organizations
Interest expense
Total nonoperating expense
Total expense
45
—
318
363
51,529
14
14
294
322
49,523
23
—
465
488
48,542
4,476
27,894
$ 32,370
2,000
25,894
$ 27,894
737
25,157
25,894
Increase in net assets
Net assets, beginning of year
Net assets, end of year
$
$
15,976
303
16,279
Tuition and state appropriations are the primary sources of funding for academic programs and College operations.
Student tuition, fees, and book revenue net of scholarship allowance totaled $15.7 million as of June 30, 2010. This
compares to $16.5 million as of June 30, 2009 and represents a decrease of $836 thousand. The decrease is a result
of a large increase of scholarship allowance because of a large increase in federal financial aid packages. The other
main source of revenue for annual operations is state appropriations which decreased $2.2 million from fiscal year
2009 to fiscal year 2010. The state of Minnesota continues to see lower revenues and therefore have reduced
appropriation to many of the state departments including higher education.
18
Following is a graphic that depicts the revenue trends by source over the past three fiscal years.
The primary categories for resources expended are compensation and benefits, along with supplies and services.
Compensation and benefits increased from $35.5 million on June 30, 2009 to $36.1 million on June 30, 2010. This
expenditure increased due to the need for more faculty to cover the continued increase in enrollment. Supplies and
services increased slightly from $8.0 million on June 30, 2009 to $8.5 million on June 30, 2010. This increase is
mainly due to additional services needed to complete emergency repairs to our Wadena campus in June following a
tornado that cause severe damage to the building. The largest percentage increase was to financial aid which is
caused by an increase in the federal financial aid student package maximums and amounts.
19
20
FOUNDATIONS
Included with the financial statements are the Statement of Financial Position and Statement of Activities for the
Fergus Area College Foundation. With the improvement in the financial markets during fiscal year 2010, the
Foundation saw an improvement in its total net assets of $308 thousand. In addition to the Fergus Area College
Foundation, the College has three other small foundations that are in early development at the campuses in Detroit
Lakes, Moorhead, and Wadena. Once their activity reaches a level of materiality the College will include their
financial activity as part of future financial statements.
ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE
Looking toward the future, management believes that the College needs to continue to be vigilant in preparing for
the programs, services, and educational changes that will be needed in the next decade. This will allow it to continue
with its level of excellence. In fiscal year 2009 the College invested heavily in alternative means of marketing and
to develop a better understanding of its customer needs into the future. Because of this investment, the College was
well prepared to meet the needs of the changing customer and captured enrollments by meeting those changing
needs. Minnesota State Community and Technical College will continue to offer alternative methods of delivery
such as internet delivery and corporate on site delivered courses, which will assist it in maintaining and expanding
enrollments. With the ever increasing competition for enrollment, the College will continue to explore new growth
opportunities by looking at alternative delivery methods and modalities as well as looking for new market
penetration.
Adequate state appropriation will continue to be a concern for fiscal years 2011 and beyond and the College remains
concerned that future appropriation funding will not keep pace with inflationary growth. The weak economic
outlook for the next biennium for the State of Minnesota is of great concern as it likely will have a direct impact on
the appropriation the College will be receiving in the near future. This, along with continued pressures to maintain
21
low tuition increases will put extreme pressure on the College to reallocate current expenditures in order to be able
to invest in new programs and services that current and future students and industry will demand. It will be
imperative to continue to be vigilant in financial planning, including continued review of all programs and services
to ensure efficient delivery as well as searching out new program opportunities. In addition, the College will
continue to look at shared programs and services to ensure that all resources are being used as efficiently as possible.
The College is also working hard to continue the growth that was realized in recent year in the areas of grant
development and securing supplies and equipment through donations and partnerships with industry.
The College continues to see an increase in enrollments with a wide variety of backgrounds and educational needs.
This diversity continues to put tremendous stress on the College to service all of the various needs without the
needed state funding to bring on additional staff. The College will continue to use technology to be as efficient as
possible to meet the needs of the students but at some point in the near future the current organizational structure
will not be sufficient to serve the increased enrollments and will require additional staffing.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Minnesota State Community and Technical
College’s finances for all those with an interest in the College’s finances. Questions concerning any of the
information provided in this report or requests for additional financial information should be addressed to:
Chief Financial Officer
Minnesota State Community and Technical College
150 2nd Street Southwest
Perham, MN 56573
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MINNESOTA STATE COMMUNITY & 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 Assets
Student loans and other assets, net
Capital assets, net
Total noncurrent assets
2010
$
Total Assets
2009
13,389
279
2,597
648
912
60
17,885
$
11,098
327
1,862
647
831
70
14,835
564
564
82
82
159
31,476
31,635
172
29,336
29,508
50,084
44,425
Liabilities
Current Liabilities
Salaries and benefits payable
Accounts payable
Unearned revenue
Payable from restricted assets
Current portion of long-term debt
Other compensation benefits
Total current liabilities
Noncurrent Liabilities
Noncurrent portion of long-term debt
Other compensation benefits
Capital contributions payable
Total noncurrent liabilities
3,720
1,254
833
564
571
453
7,395
3,752
732
775
82
590
456
6,387
6,247
3,877
195
10,319
6,359
3,588
197
10,144
Total Liabilities
17,714
16,531
24,657
669
7,044
32,370
22,388
674
4,832
27,894
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.
24
$
FERGUS AREA COLLEGE FOUNDATION
STATEMENTS OF FINANCIAL POSITION
AS OF JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Assets
Current Assets
Cash and cash equivalents
Investments
Other receivables
Total Assets
$
Liabilities and Net Assets
Total Liabilities
Net Assets
Unrestricted
Temporarily restricted
Permanently restricted
Total Net Assets
Total Liabilities and Net Assets
The notes are an integral part of the financial statements.
25
2009
$
$
59
2,700
6
2,765
$
7
2,443
7
2,457
$
-
$
-
$
95
201
2,469
2,765
2,765
$
46
2,411
2,457
2,457
MINNESOTA STATE COMMUNITY & 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
Room and board and 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
Donated assets and supplies
Loss on disposal of capital assets
Change in net assets
Total Net Assets, Beginning of Year
Total Net Assets, End of Year
$
The notes are an integral part of the financial statements.
26
12,743
1,878
1,089
284
15,994
2009
$
13,237
2,057
1,252
502
17,048
36,102
4,626
2,959
952
1,998
2,250
2,279
51,166
(35,172)
35,539
4,157
3,038
786
1,893
1,047
2,741
49,201
(32,153)
19,903
13,046
2,285
1,261
42
(318)
36,219
22,082
8,189
2,328
749
49
(294)
(14)
33,089
1,047
936
3,417
57
(45)
4,476
473
605
(14)
2,000
27,894
32,370
$
25,894
27,894
FERGUS AREA COLLEGE FOUNDATION
STATEMENTS OF ACTIVITIES
FOR THE YEARS ENDED JUNE 30, 2010 AND 2009
(IN THOUSANDS)
2010
Support and Revenue
Endowment gifts
Program income
Investment income
Fundraising income
Unrealized gains and (losses)
Total support and revenue
$
Expenses
Program services
Scholarships
Total program services
Supporting services
Management and general
Fundraising expenses
Total supporting services
Total expenses
Change in Net Assets
Net Assets, Beginning of Year
Net Assets, End of Year
$
The notes are an integral part of the financial statements.
27
56
87
114
48
215
520
2009
$
15
104
70
48
(333)
(96)
147
147
267
267
64
1
65
212
43
1
44
311
308
(407)
2,457
2,765
$
2,864
2,457
MINNESOTA STATE COMMUNITY & 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 repayment of program loans
Cash paid to suppliers for goods or services
Cash payments to employees
Financial aid disbursements
Cash payments of program loans
Net cash flows used in operating activities
$
2009
19,248
9
(14,250)
(35,784)
(2,252)
(4)
(33,033)
$
20,604
18
(14,123)
(35,397)
(1,076)
(18)
(29,992)
Cash Flows from Noncapital Financing Activities
Appropriations
Federal grants
State grants
Private grants
Grants to other organizations
Net cash flows from noncapital financing activities
19,903
13,084
2,285
1,261
36,533
22,082
8,243
2,328
749
(14)
33,388
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 premium
Interest paid
Repayment of lease principal
Repayment of note principal
Repayment of bond principal
Net cash flows used in capital and related financing activities
(3,748)
3,417
13
479
21
(324)
(137)
(450)
(729)
(638)
473
6
110
12
(307)
(34)
(132)
(492)
(1,002)
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.
28
2
2
11
11
2,773
2,405
11,180
13,953
$
8,775
11,180
MINNESOTA STATE COMMUNITY & 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
Provision for loan defaults
Loan principal repayments
Loans issued
Loans forgiven
Donated supplies
Change in assets and liabilities
Inventory
Accounts receivable
Accounts payable
Salaries and benefits payable
Other compensation benefits
Capital contributions payable
Unearned revenues
Other assets and liabilities
Net reconciling items to be added to operating income
Net cash flow used in operating activities
Non-Cash Investing, Capital, and Financing Activites
Capital projects on account
Donated equipment
Loss on retirement of capital assets
Amortization of bond premium
$
$
29
(35,172)
2009
$
(32,153)
1,998
5
9
(4)
4
57
1,893
3
18
(18)
5
149
(81)
(561)
435
(32)
286
(2)
68
(43)
2,139
(33,033)
79
344
(73)
(68)
208
(16)
(243)
(120)
2,161
(29,992)
651
(45)
40
$
$
82
456
(14)
38
MINNESOTA STATE 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 Minnesota State Community and Technical College, a
member of Minnesota State Colleges and Universities system, conform to generally accepted accounting
principles (GAAP) in the United States, as prescribed by the Governmental Accounting Standards Board
(GASB). The statements of net assets; statements of revenues, expenses and changes in net assets; and
statements of cash flows include financial activities of Minnesota State Community and Technical College.
Financial Reporting Entity — Minnesota State Colleges and Universities is an agency of the state of Minnesota
and receives appropriations from the state legislature, substantially all of which are used to fund general
operations. Minnesota State Community and Technical College receives a portion of Minnesota State Colleges
and Universities’ appropriation. The operations of most student organizations are included in the reporting
entity because the Board of Trustees has certain fiduciary responsibilities for these resources.
Minnesota State Community and Technical College began on July 1, 2004, and is comprised of four campuses
located in the Minnesota communities of Detroit Lakes, Fergus Falls, Moorhead and Wadena.
Discretely presented component units are legally separate organizations that raise and hold economic resources
for the direct benefit of a college or university in accordance with GASB Statement No. 39, Determining
Whether Certain Organizations are Component Units. The Fergus Area College Foundation is considered
significant to the College and is included as a discretely presented component unit and separately identified in
Note 16. Complete financial statements may be obtained from the Fergus Area College Foundation, 1414
College Way, Fergus Falls, MN 56537.
Basis of Accounting — The basis of accounting refers to when revenues and expenses are recognized and
reported in the financial statements. The accompanying financial statements have been prepared as a special
purpose government entity engaged in business type activities. Business type activities are those that are
financed in whole or in part by fees charged to external parties for goods or services. Accordingly, these
financial statements have been presented using the economic resources measurement focus and the accrual basis
of accounting. Revenues are recognized when earned and expenses are recognized as they are incurred.
Eliminations have been made to minimize the double counting of internal activities. Interfund receivables and
payables have been eliminated in the statements of net assets.
Minnesota State Colleges and Universities apply all applicable Financial Accounting Standards Board
statements issued prior to November 30, 1989, and GASB statements issued since that date.
Budgetary Accounting — College budgetary accounting, which is the basis for annual budgets and the
allocation of state appropriation, differs from GAAP. College budgetary accounting includes all receipts and
expenses up to the close of the books in August for the budget fiscal year. Revenues not yet received by the
close of the books are not included. The criterion for recognizing expenses is the actual disbursement, not when
the goods or services are received.
The state of Minnesota operates on a two year (biennial) budget cycle ending on June 30 of odd-numbered
years. Minnesota State Colleges and Universities is governed by a 15 member board of trustees appointed by
the Governor with the advice and consent of the state senate. The Board approves the College’s biennial budget
request and allocation as part of Minnesota State Colleges and Universities’ total budget.
Budgetary control is maintained at the College. The College President has the authority and responsibility to
administer the budget and can transfer money between programs within the College without Board approval.
The budget of the College can be legally amended by the authority of the Vice Chancellor/Chief Financial
Officer.
30
The state appropriations do not lapse at year end. Any unexpended appropriation from the first year of a
biennium is available for the second year. Any unexpended balance may also carry over into future bienniums.
Capital Appropriation Revenue — Minnesota State Colleges and Universities is responsible for paying one
third of the debt service for certain general obligation bonds sold for capital projects, as specified in the
authorizing legislation. The portion of general obligation bond debt service that is payable by the state of
Minnesota is recognized by Minnesota State Colleges and Universities as capital appropriation revenue when
the related expenses are incurred. Individual colleges and universities are allocated cash, capital appropriation
revenue, and debt based on capital project expenses.
Cash and Cash Equivalents — The cash balance represents cash in the state treasury and demand deposits in
local bank accounts as well as cash equivalents. Cash equivalents are short term, highly liquid investments
having original maturities (remaining time to maturity at acquisition) of three months or less. Cash and cash
equivalents include amounts in demand deposits, savings accounts, cash management pools, repurchase
agreements, and money market funds.
Restricted cash is cash held for capital projects and cash in the Revenue Fund for capital projects and debt
service.
All balances related to the state appropriation, tuition revenues, and most fees are in the state treasury. The
College also has seven accounts in local banks. The activities handled through the local bank include financial
aid, student payroll, auxiliary, and student activities.
Investments — The Minnesota State Board of Investment invests the College’s balances in the state treasury 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
35 years
Building improvements 20 years
Equipment
3-20 years
Library collections
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.
31
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. Other long term liabilities
include compensated absences, other postemployment benefits, workers’ compensation claims, and notes
payable.
Operating Activities — Operating activities as reported in the statements of revenues, expenses and changes in
net assets are those that generally result from exchange transactions such as payments received for providing
services and payments made for services or goods received. Nearly all of the College’s expenses are from
exchange transactions. Certain significant revenue streams relied upon for operations are recorded as
nonoperating revenues, including state appropriations, federal, state and private grants, and investment income.
Unearned Revenue — Unearned revenue consists primarily of tuition received, but not yet earned, for summer
or fall session. It also includes amounts received from grants which have not yet been earned under the terms of
the agreement.
Tuition, Fees, and Sales, Net— Tuition, fees, and sales are reported net of scholarship allowances of
$11,408,889 and $8,418,966 for fiscal years 2010 and 2009, respectively. Sales are also net of cost of goods
sold of $3,746,928 and $3,547,966 for fiscal years 2010 and 2009, respectively.
Federal Grants — The College participates in several federal grant programs. The largest programs include
Pell, Supplemental Educational Opportunity Grant and Federal Work Study. Federal Grant revenue is
recognized as nonoperating revenue in accordance with GASB Statement No. 33, Accounting and Financial
Reporting for Nonexchange Transactions. During fiscal year 2010, $910,924 of federal aid was recognized as
revenue related to the American Recovery and Reinvestment Act of 2009. Of this amount, $325,373 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 $8,188,912 and $2,327,982 respectively, have been reclassified from operating to
nonoperating revenue. This reclassification increases the total operating loss by $10,516,894 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:
32
Invested in capital assets, net of related debt: Capital assets, net of accumulated depreciation, and
outstanding principal balances of debt attributable to the acquisition, construction or improvement of
those assets.
Restricted expendable: Net assets subject to externally imposed stipulations. Net asset restrictions for
Minnesota State Community and Technical College are as follows:
Restricted for other — includes restrictions for the following:
Donations — restricted per donor requests.
Loans — College capital contributed for Perkins loans.
Debt service — legally restricted for bond repayments.
Faculty contract obligations — faculty development and travel required by contracts.
Net Assets Restricted for Other
(In Thousands)
2010
2009
Donations
$
7 $
5
Loans
32
32
Debt service
608
614
Faculty contract obligations
22
23
Total
$ 669 $ 674
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 seven accounts in local banks. The activities handled through local banks
include financial aid, student payroll, auxiliary, and student activities.
Minnesota Statutes, Section 118A.03, requires that deposits be secured by depository insurance or a
combination of depository insurance and collateral securities held in the state’s name by an agent of the state.
This statute further requires that such insurance and collateral shall be at least 10 percent greater than the
amount on deposit.
Cash and Cash Equivalents at June 30
(In Thousands)
Carrying Amount
2010
Cash, in bank
$ 1,219 $
Money market
29
Cash, local accounts
1,248
Cash, treasury account
12,705
Total cash and cash equivalents $ 13,953 $
2009
856
29
885
10,295
11,180
At June 30, 2010 and 2009, the College’s bank balances were $997,890 and $992,876 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 is invested by the Minnesota State Board of Investment as part of the state investment
pool. This asset is reported as a cash equivalent.
The cash accounts are invested in short term, liquid, high quality debt securities.
Investments — The Minnesota State Board of Investment manages the majority of the state’s investments. All
investments managed by the State Board of Investment are governed by Minnesota Statutes, Chapters 11A and
356A. Minnesota Statutes, Section 11A.24 broadly restricts investments to obligations and stocks of United
33
States and Canadian governments, their agencies and registered corporations, other international securities,
short term obligations of specified high quality, restricted participation as a limited partner in venture capital,
real estate, or resource equity investments, and the restricted participation in registered mutual funds.
Generally, when applicable, the statutes limit investments to those rated within the top four quality rating
categories of a nationally recognized rating agency. The statutes further prescribe the maximum percentage of
fund assets that may be invested in various asset classes and contain specific restrictions to ensure the quality of
the investments.
Within statutory parameters, the Minnesota State Board of Investment has established investment guidelines
and benchmarks for all funds under its management. These investment guidelines and benchmarks are tailored
to the particular needs of each fund and specify investment objectives, risk tolerance, asset allocation,
investment management structure, and specific performance standards.
Custodial Credit Risk — Custodial credit risk for investments is the risk that in the event of a failure of the
counterparty, the College will not be able to recover the value of the investments that are in the possession of an
outside party. Board procedure 7.5.1 requires compliance with Minnesota Statutes, Section 118A.03 and
further excludes the use of FDIC insurance when meeting collateral requirements.
Credit Risk — Credit risk is the risk that an issuer or other counterparty to an investment will not fulfill its
obligations. The College’s policy for reducing its exposure to credit risk is to comply with Minnesota Statutes,
Section 118A.04. This statute limits investments to the top quality rating categories of a nationally recognized
rating agency.
Concentration of Credit Risk — Concentration of credit risk is the risk of loss attributed to the magnitude of a
government’s investment in a single issuer. The College’s policy for reducing this risk of loss is to comply with
Board procedure 7.5.1 that recommends investments be diversified by type and issuer.
Interest Rate Risk — Interest rate risk is the risk that changes in interest rates will adversely affect the fair value
of an investment. The College complies with Board procedure 7.5.1 that recommends considering fluctuating
interest rates and cash flow needs when purchasing short term and long term investments.
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 the state of 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
will, their duration did not generally match the duration of the investments made with cash collateral. On
34
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 State Street for fiscal year 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 $3,504,955 and $2,647,406, less an allowance
for uncollectible receivables of $907,925 and $785,349, respectively.
Summary of Accounts Receivable at June 30
(In Thousands)
2010
2009
Tuition
$ 1,775
$ 1,274
Due from other campus
332
301
Sales and services
424
216
Fees
375
322
Room and board
40
25
Third party obligations
377
118
Other
182
391
Total accounts receivable
3,505
2,647
Less allowance for uncollectible accounts
(908)
(785)
Net accounts receivable
$ 2,597
$ 1,862
The allowance for uncollectible accounts is 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 of $647,767 and $646,768 for fiscal years 2010 and 2009, respectively, which have
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.
35
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
$
1,181 $
362
1,543
— $
3,934
3,934
Decreases
— $
—
—
Completed
Construction
Ending
Balance
— $
(2,233)
(2,233)
1,181
2,063
3,244
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
50,099
5,062
503
55,664
—
333
85
418
673
173
83
929
2,233
—
—
2,233
51,659
5,222
505
57,386
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
24,638
2,930
303
27,871
1,459
466
73
1,998
499
132
84
715
—
—
—
—
25,598
3,264
292
29,154
27,793
29,336 $
(1,580)
2,354 $
214
214 $
2,233
—
28,232
$ 31,476
Completed
Construction
Ending
Balance
Total capital assets, depreciated, net
Total capital assets, net
Capital assets, not depreciated:
Land
Construction in progress
Total capital assets, not depreciated
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases
$
1,181 $
752
1,933
— $
448
448
Decreases
— $
—
—
— $
(838)
(838)
1,181
362
1,543
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
49,261
4,745
529
54,535
—
616
65
681
—
299
91
390
838
—
—
838
50,099
5,062
503
55,664
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
23,210
2,815
322
26,347
1,428
393
72
1,893
—
278
91
369
—
—
—
—
24,638
2,930
303
27,871
28,188
30,121 $
(1,212)
(764) $
838
—
27,793
$ 29,336
Total capital assets, depreciated, net
Total capital assets, net
$
36
21
21 $
6.
ACCOUNTS PAYABLE
Accounts payable represent amounts due for goods and services received prior to the end of a fiscal year.
Summary of Accounts Payable at June 30
(In Thousands)
2010
2009
Purchased services
$ 700 $ 385
Due to other campuses
—
84
Supplies
233
119
Employee benefits
89
25
Inventory
122
38
Repairs and maintenance
23
9
Capital Projects
87
—
Other
—
72
Total
$ 1,254 $ 732
In addition, as of June 30, 2010 and 2009, the College had payable from restricted assets in the amounts of
$563,816 and $81,799, which was 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:
Liabilities for:
Bond premium
General obligation bonds
Notes payable
Total long term debt
Liabilities for:
Bond premium
Capital leases
General obligation bonds
Notes payable
Total long term debt
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases Decreases
$
$
355
5,658
936
6,949
$
$
21
479
—
500
$
$
40
454
137
631
Ending
Balance
$
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases Decreases
$
$
381
34
5,986
1,068
7,469
$
$
37
12
—
110
—
122
$
$
38
34
438
132
642
336
5,683
799
6,818
Current
Portion
$
$
Ending
Balance
$
$
355
—
5,658
936
6,949
—
435
136
571
Current
Portion
$
$
—
—
452
138
590
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
$
$
3,405
108
464
67
4,044
$
$
252
61
304
83
700
Decreases
$
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases
$
$
3,398
121
261
56
3,836
$
$
261
38
293
40
632
167
59
121
67
414
Decreases
$
$
254
51
90
29
424
Ending
Balance
$ 3,490
110
647
83
$ 4,330
Ending
Balance
$ 3,405
108
464
67
$ 4,044
Current
Portion
$ 374
44
—
35
$ 453
Current
Portion
$ 372
57
—
27
$ 456
Bond Premium Payable — In fiscal years 2010 and 2009 bonds were issued, resulting in premiums of $21,158
and $12,317, respectively. Amortization is calculated using the straight-line method and amortized over the
average remaining life of the bonds.
General Obligation Bonds Liability — 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.
Notes Payable — Notes payable consists of state energy efficiency program loans. Some loans received under
this program are interest free while others charge interest. The loans are granted by energy companies in order
to improve energy efficiency in college and university buildings. The College has only interest charging loans
at the present time.
Projects completed under Minnesota Statutes, Section 16C.14 have an interest component. The interest rate is
tied to the prime interest rate at the time of the project.
Compensated Absences — College employees accrue vacation leave, sick leave and compensatory leave at
various rates within limits specified in the collective bargaining agreements. The liability for compensated
absences is payable as severance pay under specific conditions. This leave is liquidated only at the time of
termination from state employment.
Early Termination Benefits — Early termination benefits are benefits received by faculty for discontinuing
services earlier than planned. See Note 8 for additional information.
38
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 Management and Budget manages the self insured workers’
compensation claims activities. The reported liability for workers’ compensation of $82,899 and $66,726 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.
Capital Contributions — The liability of $195,022 and $197,386 at June 30, 2010 and 2009, respectively,
represents the amount the College would owe the federal government if it were to discontinue the Perkins loan
program. The net change was a decrease of $2,364 in fiscal year 2010, and a decrease of $15,187 in fiscal year
2009.
Principal and interest payment schedules are provided in the following table for general obligation bonds,
capital leases, and energy loans. There are no payment schedules for compensated absences, early termination
benefits, other postemployment benefits, workers’ compensation, or capital contributions.
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
Notes Payable
Principal
Interest
Principal
Interest
$ 435
$ 271
$ 136
$
40
435
251
148
31
358
231
138
23
358
214
117
16
336
196
45
12
1,665
733
215
23
1,599
324
—
—
497
31
—
—
$ 5,683
$ 2,251
$ 799
$ 145
EARLY TERMINATION BENEFITS
Minnesota State College Faculty (MSCF) contract
Early termination benefits are defined as benefits received for discontinuing services earlier than planned. The
MSCF contract allows former United Technical College Educators (UTCE) faculty members who meet certain
eligibility and combination of age and years of service requirements to receive an early termination incentive
cash payment based on base salary at time of separation, as well as an amount equal to the employer’s
contribution for one year’s health insurance premiums deposited in his/her health care savings plan at time of
separation. The cash incentive can be paid either in one or two payments.
The number of retired faculty who received this benefit and the amount of future liability for those faculty
members as of the end of fiscal years 2010 and 2009 follow:
Fiscal Year
2010
2009
Number
of Faculty
5
6
39
Future Liability
(In Thousands)
$ 110
108
9.
NET OTHER POSTEMPLOYMENT BENEFITS
The College provides health insurance benefits for certain retired employees under a single employer fully
insured plan, as required by Minnesota Statute, 471.61, Subdivision 2B. Active employees who retire when
eligible to receive a retirement benefit from a Minnesota public pension plan and do not participate in any other
health benefits program providing coverage similar to that herein described, will be eligible to continue
coverage with respect to both themselves and their eligible dependent(s) under the health benefits program.
Retirees are required to pay 100 percent of the total premium cost. Since the premium is a blended rate
determined on the entire active and retiree population, the retirees are receiving an implicit rate subsidy. As of
July 1, 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 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)
Interest on net OPEB obligation
Adjustment to ARC
Annual OPEB Cost
Contributions during the year
Increase in net OPEB obligation
OPEB obligation, beginning of year
OPEB obligation, end of year
2009
$ 300 $
22
(18)
304
(121)
183
464
$ 647 $
291
12
(10)
293
(90)
203
261
464
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 were as follows:
For Year Ended June 30
(In Thousands)
Beginning of year net OPEB Obligation
Annual OPEB Cost
Employer contribution
End of Year net OPEB obligation
Percentage contributed
2010
464
304
(121)
$ 647
$
39.80 %
40
2009
261
293
(90)
$ 464
$
30.72 %
Funding Status — There are currently no assets that have been irrevocably deposited in a trust for future health
benefits. Therefore, the actuarial value of assets is zero.
Actuarial
Valuation
Date
Actuarial
Value of
Assets
July 1, 2008
(a)
$ —
Schedule of Funding Progress
(In Thousands)
Actuarial
Unfunded
Accrued
Actuarial Accrued
Funded
Liability
Liability
Ratio
Covered
Payroll
UAAL as a
Percentage of
Covered Payroll
(b)
$ 2,788
(c)
$ 26,394
((b - a)/c)
10.56 %
(b - a)
$ 2,788
(a/b)
0.00%
Actuarial Methods and Assumptions — Actuarial valuations involve estimates of the value of reported amounts
and assumptions about the probability of occurrence of events far into the future. Examples include
assumptions about future employment, mortality, and healthcare cost trends. Amounts determined regarding
the funded status of the plan and the annual required contributions of the employer are subject to continual
revision as actual results are compared with past expectations and new estimates are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive plan (as understood by the
employer and the plan members) and include the types of benefits provided at the time of each valuation. The
actuarial methods and assumptions used include techniques that are designed to reduce the effects of short term
volatility in actuarial accrued liabilities, consistent with the long term perspective of the calculations.
In the July 1, 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 and office
equipment. These leases are considered for accounting purposes to be operating leases. Lease expenditures for
the years ended June 30, 2010 and 2009, totaled approximately $417,643 and $344,478, respectively.
Future minimum lease payments for existing lease agreements are listed in the following table.
Year Ended June 30
(In Thousands)
Fiscal Year
Amount
2011
$ 422
2012
267
2013
13
2014
12
2015
11
Total $ 725
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 $22,351 and $16,500, respectively, and is
included in other income in the statements of revenues, expenses, and changes in net assets.
41
Future expected income receipts for existing lease agreements are listed in the following table.
Year Ended June 30
(In Thousands)
Fiscal Year
Amount
2011
$
24
2012
25
2013
15
2014
15
2015
15
Total
$
94
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
Total
Academic support
$ 4,270 $ 1,745 $ 6,015
Institutional support
3,568
2,537
6,105
Instruction
20,312
2,026 22,338
Operation & maintenance of plant
1,522
2,482
4,004
Public service
117
77
194
Student services
5,591
999
6,590
Auxiliary enterprises
722
950
1,672
Depreciation
—
1,998
1,998
Scholarships & fellowships
—
2,250
2,250
Total operating expenses $ 36,102 $ 15,064 $ 51,166
For the Year Ended June 30, 2009
(In Thousands)
Salaries/
Description
Benefits
Other
Total
Academic support
$ 4,370 $ 1,375 $ 5,745
Institutional support
3,465
2,872
6,337
Instruction
20,232
1,794 22,026
Operation & maintenance of plant
1,638
2,822
4,460
Public service
31
36
67
Student services
5,148
1,088
6,236
Auxiliary enterprises
655
735
1,390
Depreciation
—
1,893
1,893
Scholarships & fellowships
—
1,047
1,047
Total operating expenses $ 35,539 $ 13,662 $ 49,201
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12. EMPLOYEE PENSION PLANS
The College participates in four retirement plans: the State Employees Retirement Fund, administered by the
Minnesota State Retirement System; the Public Employees Retirement Fund, administered by the Public
Employees Retirement Association; the Teachers Retirement Fund, administered by the Minnesota Teachers
Retirement Association; and Minnesota State Colleges and Universities Defined Contribution Retirement Plan.
State Employees Retirement Fund (SERF)
Pension fund information is provided by Minnesota State Retirement System, which prepares and publishes its
own stand alone comprehensive annual financial report, including financial statements and required
supplementary information. Copies of the report may be obtained directly from Minnesota State Retirement
System at 60 Empire Drive, Suite 300, St. Paul, MN 55103.
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 the College were::
(In Thousands)
Fiscal Year
Amount
2010
$ 270
2009
286
2008
252
Teachers Retirement Fund (TRF)
Pension fund information is provided by Minnesota Teachers Retirement Association (TRA), which prepares
and publishes its own stand alone comprehensive annual financial report, including financial statements and
required supplementary information. Copies of the report may be obtained directly from Minnesota Teachers
Retirement Association at 60 Empire Drive, Suite 400, St. Paul, MN 55103.
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
43
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 the College were:
(In Thousands)
Fiscal Year
Amount
2010
$ 168
2009
176
2008
170
Minnesota State Colleges and Universities Defined Contribution Retirement Fund
General Information — 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 for the two plans is Teachers Insurance and Annuity Association College Retirement
Equities Fund (TIAA-CREF). Separately issued financial statements can be obtained from TIAA-CREF,
Normandale Lake Office Park, 8000 Norman Center Drive, Ste 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 faculty and administrators, the employer and employee statutory contribution rates are 6 percent and
4.5 percent, respectively. The contributions are made under the authority of Minnesota Statutes, Chapter 354B.
Required contributions for the College were:
(In Thousands)
Fiscal year
Employer Employee
2010
$ 1,020 $
765
2009
1,000
751
2008
938
709
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.
44
Contributions — Participants contribute 5 percent of the eligible compensation up to a defined maximum
annual contribution as specified in the following table:
Member Group
Minnesota Association of Professional Employees Unclassified
Middle Management Association Unclassified
Administrators
Other Unclassified Members
Eligible Compensation
Maximum
Annual
Contributions
$ 6,000 to
6,000 to
6,000 to
6,000 to
$ 1,700
1,700
2,700
1,700
$$40,000
40,000
60,000
40,000
The College matches amounts equal to the contributions made by participants. The contributions are made
under the authority of Minnesota Statutes, Chapter 354C.
Required contributions for the College were:
(In Thousands)
Fiscal Year
Amount
2010
$ 510
2009
510
2008
428
13. COMMITMENTS
The College has many facility construction and renovation projects in process and at various stages. The
College is nearing completion of a $765 thousand code correction project in Wadena, a $663 thousand kitchen
repair/renovation project in Moorhead, a $250 thousand electrical switchgear project in Detroit Lakes, a $350
thousand steam piping retrofit in Moorhead, and a $250 thousand drainage project in Wadena. These projects
will be completed by December 2010. Minnesota State Community and Technical College is midway though a
$2.5 million project in Moorhead to redesign the trades and library areas as well as add general education
classrooms. The College is also in the early stages of four other projects - a $911 thousand heating, ventilation,
and air conditioning project on the Moorhead campus began this past summer, Phase 2 of the library addition in
Moorhead in the amount of $5.448 million will begin fall 2010, an auditorium renovation project in Moorhead
in the amount of $525 thousand and a classroom renovation project in the amount of $525 thousand in Wadena
will both begin in fall 2010. Of these final projects, all except for the large library addition will be completed
by spring 2011. The large project is scheduled to be completed by fall 2012.
14. RISK MANAGEMENT
Minnesota State Colleges and Universities is exposed to various risks of loss related to tort; theft of, damage to,
or destruction of assets; error or omissions; and employer obligations. Minnesota State Colleges and
Universities manage these risks through Minnesota insurance plans including the state of Minnesota Risk
Management Fund, and through purchased insurance coverage.
Automobile liability coverage is required by the state and is provided by the Minnesota Risk Management
Fund. The College also purchased optional physical damage coverage for their newest or most expensive
vehicles.
Property and casualty coverage is required by Minnesota State Colleges and Universities policy. The College
has selected optional coverage for student health services professional liability.
45
Property coverage offered by the Minnesota Risk Management Fund is as follows:
Coverage Type
Institution deductible
Fund responsibility
Primary re-insurer coverage
Multiple re-insurers’ coverage
Bodily injury and property damage per person
Bodily injury and property damage per occurrence
Annual maximum paid by fund, excess by reinsurer
Maintenance deductible for additional claims
Amount
$50,000
Deductible to $1,000,000
$1,000,001 to $25,000,000
$25,000,001 to $1,000,000,000
$500,000
$1,500,000
$4,000,000
$25,000
Minnesota State Community and Technical College retains the risk of loss. The College did not have any
settlements in excess of coverage the last three years.
The Minnesota Risk Management Fund purchased student intern professional liability and dental clinics
professional liability on the open market for the College.
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 06/30/10
Fiscal Year Ended 06/30/09
(In Thousands)
Beginning
Net Additions
Ending
Liability
and Changes
Payments
Liability
$
67
$
83
$
67
$
83
56
40
29
67
15. RELATED PARY TRANSACTIONS
During fiscal year 2005, the College entered into a five year joint lease agreement with Minnesota State
University Moorhead for the Minnesota Higher Education Center. The initial lease expired prior to 2010.
16. COMPONENT UNITS
GASB Statement No. 39, Determining Whether Certain Organizations Are Component Units, the following
foundation affiliated with Minnesota State Community and Technical College is a legally separate, tax exempt
entity and reported as a component unit.
The Fergus Area College Foundation is a separate legal entity formed for the purpose of obtaining and
disbursing funds for the sole benefit of the College. The College does not appoint any members of the board
and the resources held by the Foundation can only be used by, or for, the benefit of the College. The
Foundation’s relationship with the institution is such that exclusion of the Foundation’s financial statements
46
would cause the College’s financial statements to be misleading or incomplete. The Foundation is considered a
component unit of the College and their statements are discretely presented in the College’s financial
statements.
The value of scholarships and equipment contributed by or passed through the Foundation was $147,597 and
$267,170 for the fiscal years ended June 30, 2010 and 2009, respectively.
The Foundation’s financial statements have been prepared on the accrual basis of accounting in accordance with
generally accepted accounting principles as prescribed by the Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 958-205, Presentation of Financial Statements (previously FAS
117). Net assets, which are classified on the existence or absence of donor imposed restrictions, are classified
and reported according to the following classes:
Unrestricted: Net assets that are not subject to donor imposed stipulations.
Temporarily Restricted Net Assets: Net assets subject to donor imposed restrictions as to how the
assets be used.
Permanently Restricted Net Assets: Net assets subject to donor imposed stipulations that they be
maintained permanently by each foundation. Generally, the donors of these assets permit the
foundation to use all or part of the income earned on any related investments for general or specific
purposes.
Investments — The foundation’s investments are presented in accordance with FASB ASC 958-320,
Investments-Debt and Equity Securities (previously FAS 124). Under ASC 958-320, investments in marketable
securities with readily determinable fair values and all investments in debt securities are reported at their fair
values in the statement of financial position. At June 30, 2010, all of the foundation's investments were related
to endowments.
Summary of Investments at June 30
(In Thousands)
Investments
2010
2009
Common stock
$
62 $
53
Mutual funds
2,031
1,665
Fixed income securities / Bonds
355
442
Other investments
252
283
Total investments
$ 2,700 $ 2,443
17. IMPAIRMENT OF CAPITAL ASSET
On June 17, 2010 an F4 tornado swept through the southwest portion of the City of Wadena. The tornado
damaged and destroyed a large number of buildings within the city including buildings owned and operated by
the College. Extensive damaged occurred to the main campus building as well as out buildings at the
lineworker location. In addition to building damage, the College received damages to vehicles, equipment, and
landscaping. The financial statements represent the reduction to capital assets due to impairment in the amount
of $174,000, net of accumulated depreciation, as well as corresponding accounts receivable due from the
insurance carrier. At the time of these financial statements, renovations are being implemented to bring the
building back to pre-tornado condition and the College believes all renovations will be covered by the insurance
carrier, less deductible of $50,000. In addition, the College is working with the United States Federal
Emergency Management Agency (FEMA) to recover the deductible. The building was ready for student
occupancy when classes began in late August.
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SUPPLEMENTAL SECTION
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50
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