ROCHESTER 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:
Rochester Community and Technical College
851 30th Avenue SE
Rochester, MN 55904
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
ROCHESTER 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 ................................................................................................................................. 7
FINANCIAL SECTION
Independent Auditors’ Report .............................................................................................................. 10
Management’s Discussion and Analysis .............................................................................................. 12
Basic Financial Statements
Statements of Net Assets .............................................................................................................. 18
Statements of Revenues, Expenses, and Changes in Net Assets ................................................... 19
Statements of Cash Flows ............................................................................................................. 20
Notes to the Financial Statements ................................................................................................. 22
SUPPLEMENTAL SECTION
Report on Internal Control Over Financial Reporting and on Compliance and
Other Matters Based on an Audit of Financial Statements Performed
in Accordance with Government Auditing Standards .................................................................. 40
1
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2
INTRODUCTION
3
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4
5
6
7
Dr. Michael Bequette
Vice President of
Teaching and
Learning (CAO)
Dr. Stan Cram
Vice President of
Student Development
and Services (CSAO)
Marilyn Hansmann
Vice President of
Finance and Facilities
(CFO)
Renee Engelmeyer
Chief Human
Resources Officer
(CHRO)
Don Supalla
President
James H. McCormick
Chancellor
Scott Sahs
Chief Information
Officer (CIO)
Minnesota State Colleges and Universities
BOARD OF TRUSTEES
June 30, 2010
Dave Weber
Chief Strategic
Operations Officer
Lisa Baldus
Foundation
Executive Director
ROCHESTER COMMUNITY AND TECHNICAL COLLEGE
Organizational Chart
The financial activity of the Rochester 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.
8
FINANCIAL SECTION
9
INDEPENDENT AUDITORS’ REPORT
Board of Trustees
Minnesota State Colleges and Universities
St. Paul, Minnesota
We have audited the accompanying financial statements of Rochester 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 Rochester 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, 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
10
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
11
MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited)
INTRODUCTION
The following discussion and analysis provide an overview of the financial position and activities of Rochester
Community and Technical College, a member of the Minnesota State Colleges and Universities system, for the
fiscal years ended June 30, 2010, 2009, and 2008. This discussion has been prepared by management and
should be read in conjunction with the financial statements and accompanying footnotes, which follow this
section.
Rochester Community and Technical College is one of 32 colleges and universities comprising Minnesota State
Colleges and Universities. A 15 member Board of Trustees appointed by the Governor governs the Minnesota
State Colleges and Universities system. 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.
Rochester Community and Technical College is a two-year institution providing technical, liberal arts, and
lifelong learning, with approximately 4,714 full time equivalents and over 8,213 unduplicated headcount.
Rochester Community and Technical College employs approximately 784 full and part-time faculty and staff
members (unduplicated annual head count). The College is mandated by the Legislature of the State of
Minnesota to be an open enrollment institution.
Rochester Community and Technical College offers more than 70 programs of study with approximately 130
credential options in nursing and allied health, accounting and business, sciences and technical, public and
human services and liberal arts programming. A variety of delivery approaches are utilized to support student
learning. These include face-to-face, labs, online, internships, on-the-job training, clinical experiences,
simulations, cohort, and interactive television delivery. The College is located at University Center Rochester
and partners with a sister institution, Winona State University.
FINANCIAL HIGHLIGHTS
The College’s financial position in fiscal year 2010 continues to be challenged by the economic downturn.
Assets totaled $83.3 million in 2010 compared to $80.7 million in 2009. Liabilities increased to $16.4 million
in 2010 compared to $16.2 million in 2009. Net assets, which represent the residual interest in the Rochester
Community and Technical College’s assets after liabilities are deducted, is comprised of capital assets, net of
related debt, of $59.8 million; restricted assets of $0.8 million; unrestricted assets of $6.3 million in 2010;
compared to capital assets, net of related debt, of $56.6 million; restricted assets of $0.8 million, and
unrestricted assets of $7.1 million in 2009.
USING THE FINANCIAL STATEMENTS
The Rochester Community and Technical College’s financial report includes three financial statements: the
statements of net assets; the statements of revenues, expenses and changes in net assets, and the statements of
cash flows. These financial statements are prepared in accordance with applicable generally accepted
accounting principles (GAAP) as established by the Governmental Accounting Standards Board (GASB)
through authoritative pronouncements.
12
STATEMENTS OF NET ASSETS
The statements of net assets present the financial position of the Rochester Community and Technical 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.
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 in net assets.
Summary Statements of Net Assets as of June 30
(in Thousands)
2010
2009
Current Assets
$ 17,041 $ 17,808
Noncurrent Assets
Student Loans Receivable
221
328
Capital Assets, Net
65,973
62,535
Total Assets
83,235
80,671
Current Liabilities
Noncurrent Liabilities
Total Liabilities
Net Assets
$
6,921
9,444
16,365
66,870
$
6,860
9,353
16,213
64,458
$
2008
17,576
312
63,725
81,613
$
5,918
9,689
15,607
66,006
Current assets consist primarily of cash, cash equivalents, and investments totaling $13.8 and $14.4 million at
June 30, 2010 and 2009, respectively. Total current assets decreased $0.6 million over the prior year and
represents approximately 4 months of operating expenses (excluding depreciation).
Current liabilities consist primarily of accounts and salaries payable. Accounts payable totaled $0.9 million at
June 30, 2010 and $1.1 million at June 30, 2009, a decrease $0.2 million due primarily to certain construction
projects being started at the end the fiscal year.
Included within the current liabilities is $3.5 and $3.5 million of salaries payable as of June 30, 2010 and 2009
respectively representing approximately 2 months of earned salary for faculty who have elected to receive
salaries over twelve months on a September 1 - August 31 year.
Net assets represent the residual interest in the College’s assets after liabilities are deducted.
13
The College’s net assets as of June 30, 2010, 2009, and 2008, respectively, are summarized as follows:
Summarized Net Assets as of June 30,
(in Thousands)
2010
Invested in capital assets, net of related debt
$ 59,782 $
Restricted
808
Unrestricted
6,280
Total Net Assets
$ 66,870 $
2009
56,560
815
7,083
64,458
$
$
2008
57,336
797
7,873
66,006
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 debt service and contributed capital for Perkins loans.
CAPITAL AND DEBT ACTIVITIES
One of the critical factors in continuing the quality of the Rochester Community and Technical 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 and 2009, totaled $66.0 million, net of accumulated depreciation of $48.4 million and $62.5
million, net of accumulated depreciation, of $45.2 million respectively. The College is periodically cycling new
technology into the classrooms and disposing of outdated equipment.
Capital outlay totaled $7.0 million in 2010 and $2.3 million in 2009. Capital outlays are primarily comprised of
recently completed new buildings, replacement and renovation of existing facilities, as well as significant
investments in equipment. In fiscal year 2010 major capital projects included a roof replacement at The Heintz
Center, an elevator code modification project, and structural repairs to Memorial Hall. The increase in 2009
was due to the completion of Phase 1 of the Rochester Regional Stadium.
Bonds payable totaled $5.5 million at June 30, 2010. This amount includes bonds issued in prior years and
bonds issued in fiscal 2010 to finance construction of buildings and improvements.
Additional information on capital and debt activities can be found in Notes 6 and 8.
STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS
The statements of revenues, expenses, and changes in net assets present Rochester Community and Technical
College’s results of operations for the year. When reviewing the full statement, users should note that GASB
requires classification of state appropriations as nonoperating revenue.
14
Summary Statements of Revenues, Expenses, and Changes in Net Assets
(in Thousands)
2010
Operating revenues:
Student tuition, fees, and sales net
Other revenue
Total operating revenues
2009
2008
$ 18,877 $ 19,101 $ 17,800
535
1,833
1,237
19,412
20,934
19,037
Nonoperating revenues:
State and capital appropriations
Federal and state grants
Other
Total nonoperating revenues
Total revenues
20,697
12,895
578
34,170
53,582
18,427
8,147
528
27,102
48,036
19,358
7,578
3,336
30,272
49,309
Operating expenses:
Salaries and benefits
Supplies and services
Depreciation
Financial aid, net
Total operating expenses
34,770
10,598
3,578
1,966
50,912
33,431
11,535
3,340
986
49,292
32,507
10,473
2,892
715
46,587
Nonoperating expenses:
Interest expense and other
Total expenses
258
51,170
292
49,584
314
46,901
2,412
(1,548)
2,408
Increase (decrease) in net assets
Net assets, beginning of year
Net assets, end of year
64,458
66,006
63,598
$ 66,870 $ 64,458 $ 66,006
Tuition and state appropriations are the primary sources of funding for the Rochester Community and Technical
College’s academic programs. In fiscal 2010, enrollment for the year increased 7 percent over the previous
year. Gross tuition increased as a result of this enrollment growth along with a tuition rate increase of 2
percent, but it was netted against a substantial increase in the scholarship allowance. Scholarship allowance
increased by 47 percent in fiscal year 2010 compared to fiscal year 2009 due to an increase in financial aid to
students. This resulted in a slight decrease of net tuition revenue in fiscal year 2010. The resources expended
for salaries and benefits increased $1.3 million to $34.8 million in fiscal year 2010.
During fiscal year 2010, a system wide reporting change took place that reclassified federal and state grants to
nonoperating revenue. The overall effect to the statements is zero as operating loss increased but was offset by
nonoperating revenue of the same amount. The College also recognized nonoperating revenue related to the
American Recovery and Reinvestment Act of 2009. Tuition increases were mitigated by a portion of these
funds, $379,885. The remaining funds were used to offset operating expenses.
The state appropriation decreased by $1.5 million in fiscal year 2010 and increased by $0.6 million in fiscal
year 2009. The College consistently relies more on student tuition revenue, as state appropriations have
generally not kept pace with increases over the same period.
Capital appropriations increased by $3.8 million and capital grants decreased by $0.3 million in fiscal year
2010. In fiscal year 2009, capital appropriations decreased by $1.5 million and capital grants decreased by $2.8
15
million. The increase in fiscal year 2010 is due to capital bonding or Higher Education Asset Preservation and
Replacement (HEAPR) funds that were received during the year. The College has elected to combine state and
capital appropriations in the table above, showing a combined increase in appropriations.
Revenue by Source (In Thousands)
$25,000
$20,000
$15,000
2010
2009
$10,000
2008
$5,000
$Student tuition,
State
fees & sales net appropriations
Federal and
state grants
Capital
Other revenue
appropriations
The relationship between the categories of expenses has remained constant over the last three years with salaries
and benefits remaining the largest.
Fiscal 2009
Expenditures
Fiscal 2010 Expenditures
Salaries and
benefits
Supplies and
services
Depreciation
Financial aid,
net
7% 2%
7% 4%
6%
68
%
68%
16
2%
22
%
23
%
21%
Fiscal 2008
Expenditures
70
%
ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE
Looking toward the future, management believes that Rochester Community and Technical College is
positioned to continue its strong financial condition and level of excellence. New service initiatives were
initiated in 2009 to address the changing needs and expectations of our students and other stakeholders. Special
allocations from the State Legislature, addressing underrepresented and underserved students, align directly
with the College’s strategic plan to reach this student population. The Workforce Center, Inc. of Rochester
funded approximately 200 students with American Resource and Recovery Act funds. Fiscal year 2011 and
beyond will bring new challenges as the economy of the region is strong and unemployment in the region is one
of the lowest rates in the state. Preliminary enrollment numbers the headcount numbers of students remains
constant or slightly up, but students are taking fewer credits.
REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of Rochester Community and Technical College
finances for all those with an interest in the College’s finances. Questions concerning any of the information
provided in this report or requests for additional financial information should be addressed to:
Vice President of Finance & Facilities
Rochester Community & Technical College
851 30th Avenue Southeast
Rochester, MN 55904-4999
17
ROCHESTER COMMUNITY AND TECHNICAL COLLEGE
STATEMENTS OF NET ASSETS
AS OF JUNE 30, 2010 AND 2009
(IN THOUSANDS)
Assets
Current Assets
Cash and cash equivalents
Investments
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
12,796
750
271
1,746
631
356
198
16,748
$
13,707
390
227
1,978
608
368
206
17,484
293
293
324
324
221
65,973
66,194
328
62,535
62,863
83,235
80,671
Liabilities
Current Liabilities
Salaries and benefits payable
Accounts payable
Unearned revenue
Payable from restricted assets
Funds held for others
Current portion of long-term debt
Other compensation benefits
Total current liabilities
Noncurrent Liabilities
Noncurrent portion of long-term debt
Other compensation benefits
Capital contributions payable
Total noncurrent liabilities
3,485
849
971
293
132
601
590
6,921
3,520
1,080
988
324
115
443
390
6,860
5,590
3,371
483
9,444
5,532
3,267
554
9,353
Total Liabilities
16,365
16,213
59,782
808
6,280
56,560
815
7,083
Net Assets
Invested in capital assets, net of related debt
Restricted expendable, other
Unrestricted
Total Net Assets
$
The notes are an integral part of the financial statements.
18
66,870
$
64,458
ROCHESTER 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
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
14,142
2,786
1,949
535
19,412
2009
$
14,339
2,778
1,984
1,833
20,934
34,770
3,587
3,484
744
3,578
1,966
2,783
50,912
(31,500)
33,431
3,865
3,512
1,255
3,340
986
2,903
49,292
(28,358)
Nonoperating Revenues (Expenses)
Appropriations
Federal grants
State grants
Private grants
Interest income
Interest expense
Total nonoperating revenues (expenses)
16,275
10,600
2,295
63
56
(258)
29,031
17,777
6,101
2,046
131
76
(259)
25,872
Loss Before Other Revenues, Expenses, Gains, or Losses
(2,469)
(2,486)
4,422
442
17
2,412
650
321
(33)
(1,548)
64,458
66,006
Capital appropriations
Donated assets and supplies
Capital grants
Loss on disposal of capital assets
Change in net assets
Total Net Assets, Beginning of Year
Total Net Assets, End of Year
$
The notes are an integral part of the financial statements.
19
66,870
$
64,458
ROCHESTER 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 repayment of program loans
Cash paid to suppliers for goods or services
Cash payments to employees
Financial aid disbursements
Net cash flows used in operating activities
$
22,823
90
(13,669)
(34,501)
(2,037)
(27,294)
2009
$
24,026
104
(13,467)
(33,446)
(984)
(23,767)
Cash Flows from Noncapital Financing Activities
Appropriations
Agency activity
Federal grants
State grants
Private grants
Net cash flows from noncapital financing activities
16,275
17
10,518
2,295
63
29,168
17,777
115
6,073
2,046
131
26,142
Cash Flows from Capital and Related Financing Activities
Investment in capital assets
Capital appropriation
Capital grants
Proceeds from the sale of capital assets
Proceeds from borrowing
Proceeds from bond premium
Interest paid
Repayment of lease principal
Repayment of bond principal
Net cash flows used in capital and related financing activities
(6,173)
4,422
17
6
15
19
(241)
(105)
(442)
(2,482)
(1,968)
650
321
51
9
(254)
(448)
(1,639)
Cash Flows from Investing Activities
Proceeds from sales and maturities of investments
Purchase of investments
Investment earnings
Net cash flows from investing activities
(363)
29
(334)
96
43
139
Net Increase (Decrease) in Cash and Cash Equivalents
(942)
875
Cash and Cash Equivalents, Beginning of Year
14,031
Cash and Cash Equivalents, End of Year
$
The notes are an integral part of the financial statements.
20
13,089
13,156
$
14,031
ROCHESTER 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
Provision for loan defaults
Loan principal repayments
Loans forgiven
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
Change in fair market value of investment
Amortization of bond premium
$
$
21
(31,500)
2009
$
(28,358)
3,578
3
90
24
3,340
5
104
26
12
232
89
(35)
304
(71)
21
(41)
4,206
(27,294)
(75)
432
646
58
(74)
2
128
(1)
4,591
(23,767)
367
442
(3)
30
$
$
718
(33)
17
28
ROCHESTER 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 Rochester Community and Technical College, a member of
the Minnesota State Colleges and Universities system, conform to generally accepted accounting principles
(GAAP) in the United States, as prescribed by the Governmental Accounting Standards Board (GASB). The
statements of net assets, statements of revenues, expenses and changes in net assets, and statements of cash
flows include financial activities of the College.
Financial Reporting Entity — Minnesota State Colleges and Universities is an agency of the state of Minnesota
and receives appropriations from the state legislature, substantially all of which are used to fund general
operations. The College receives a portion of 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.
Jointly Governed Organizations — Rochester Community and Technical College participates in a jointly
constructed facility with the City of Rochester, Minnesota for the University Center Rochester Regional Sports
Complex. The complex includes an 114,000 square foot sports facility, soccer and football fields, and baseball
and softball diamonds. The College retains full ownership of the complex and shares the use of the complex
with the city based on a joint use agreement. Under the joint use agreement, the City maintains the playfields
and schedules their use. One softball diamond, one baseball diamond, three football practice fields, and a
football game field are maintained by the college. The College maintains and schedules the UCR Regional
Sports Center building. The City shares in the revenues generated by the sports facility and shares in the
operating costs of the facility. Rochester Community and Technical College incurred total operating expenses
of $400,629 and $426,707 for fiscal years 2010 and 2009, respectively. In fiscal years 2010 and 2009, the total
revenue offsetting these expenses was $138,169 and $225,179, respectively. In fiscal years 2010 and 2009, the
revenue generated during the City portion of the time in the facility was $121,712 and $126,640, respectively.
The University Center Rochester was a partnership of three institutions of higher education: the University of
Minnesota Rochester, Winona State University, and Rochester Community and Technical College. All three
were co-located on one campus, known as the University Center Rochester, with Rochester Community and
Technical College being the landlord. In August 2007, the University of Minnesota Rochester moved its
operations to a new location in downtown Rochester. As a consequence, the joint powers agreement between
the two systems became null and void; however the University of Minnesota Regional Extension Office
remains on campus as a tenant. Rochester Community and Technical College still has agreements with both
institutions to pay for academic and facilities issues that were in effect at the time of the move. Winona State
University paid $857,459 and $1,595,152 in fiscal years 2010 and 2009, respectively, while the University of
Minnesota paid $1,130 and $6,765 respectively.
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. Inter-fund receivables and
payables have been eliminated in the statements of net assets. Minnesota State Colleges and Universities apply
all applicable Financial Accounting Standards Board (FASB) statements issued prior to November 30, 1989,
and GASB statements issued since that date.
22
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 are 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 into future biennium.
Capital Appropriation Revenue — Minnesota State Colleges and Universities is responsible for paying onethird 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.
All balances related to the state appropriation, tuition revenues, and most fees are in the state treasury. The
College also has four accounts in a local bank. The activities handled through the local bank include financial
aid, student payroll, auxiliary, and student activities.
Investments — The Minnesota State Board of Investment invests the College’s balances in the state treasury as
part of a state investment pool. This asset is reported as a cash equivalent. Interest income earned on pooled
investments is retained by the Office of the Chancellor and allocated to the colleges and universities 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, Saint Paul, MN 55155. Investments are reported at fair value.
Receivables — Receivables are shown net of an allowance for uncollectibles.
Inventories — Inventories are valued at cost using the first-in, first-out method.
Prepaid Expense — Prepaid expense consists of deposits in the state of Minnesota Debt Service Fund for future
general obligation bond payments.
23
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
15-20 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 primarily 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, early termination benefits, net other postemployment
benefits, and workers’ compensation.
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
$7,971,511 and $5,439,767 for fiscal years 2010 and 2009, respectively. Sales are also net of cost of goods sold
of $3,157,494 and $2,532,943 for fiscal years 2010 and 2009, respectively.
Federal Grants — Rochester Community and Technical College participates in several federal grant programs.
The largest is the Federal Pell Grant program. 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, $1,139,576 of federal aid was recognized as revenue related to the American Recovery
and Reinvestment Act of 2009. Of this amount, $379,885 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.
Capital Grants — The College receives federal, state, and private grants which are restricted for the acquisition
or construction of capital assets.
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 $6,100,962 and $2,046,239 respectively, have been reclassified from operating to
nonoperating revenue. This reclassification increases the total operating loss by $8,147,201 while increasing
total nonoperating revenue by the same amount.
24
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, 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 categories of net assets:
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 expendables other: Net assets subject to externally imposed stipulations. Net asset
restrictions for Rochester Community and Technical College are as follows:
Debt service — legally restricted for bond repayments.
Faculty contract obligations — faculty development and travel required by contracts.
Loans — the College’s contributed capital for Perkins loans.
Net Assets Restricted for Other
(In Thousands)
2010
2009
Debt service
$ 593 $ 608
Faculty contract obligations
44
36
Loans
171
171
Total
$ 808 $ 815
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 four accounts in a local bank. 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
Cash, in bank
Money markets
Cash, treasury account
Total cash and cash equivalents
25
2010
4,192
476
8,421
$ 13,089
$
2009
5,946
810
7,275
$ 14,031
$
At June 30, 2010 and 2009, the College’s bank balance was $4,026,853 and $6,100,797, 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 cash is reported as a cash equivalent.
The cash accounts are invested in short-term, liquid, high quality debt securities.
Investments — The Minnesota State Board of Investment manages the majority of the state’s investments. All
investments managed by the State Board of Investment are governed by Minnesota Statutes, Chapters 11A and
356A. Minnesota Statutes, Section 11A.24, broadly restricts investments to obligations and stocks of United
States and Canadian governments, their agencies and registered corporations, other international securities,
short term obligations of specified high quality, restricted participation as a limited partner in venture capital,
real estate, or resource equity investments, and the restricted participation in registered mutual funds.
Generally, when applicable, the statutes limit investments to those rated within the top four quality rating
categories of a nationally recognized rating agency. The statutes further prescribe the maximum percentage of
fund assets that may be invested in various asset classes and contain specific restrictions to ensure the quality of
the investments.
Within statutory parameters, the Minnesota State Board of Investment has established investment policies for
all funds under its management. These investment policies 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 State Board of Investment has conducted detailed analyses of each of the funds
under its control. These studies guide the ongoing management of the funds and are updated periodically.
The College had certificates of deposit of $749,669 and $389,812 at June 30, 2010 and 2009, respectively.
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 which 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 a debt 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. Minnesota SBI 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
26
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 SBI. Because the loans were terminable at will, their duration did
not generally match the duration of the investments made with cash collateral. On June 30, 2010 and 2009, the
State of Minnesota had no credit risk exposure to borrowers because the amounts the state owed the borrowers
exceeded the amounts the borrowers owed the state.
The College had no security lending allocation for either fiscal year 2010 or 2009. The following tables provide
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 and businesses.
At June 30, 2010 and 2009, the total accounts receivable balances for the College were $2,269,841 and
$2,460,290 respectively, less an allowance for uncollectible receivables of $524,321 and $482,371,
respectively.
Summary of Accounts Receivable at June 30
(In Thousands)
2010
2009
Tuition
$ 974 $ 874
Fees
247
207
Sales and services
106
185
Third party obligations
447
41
Other
496
1,153
Total accounts receivable
2,270
2,460
Allowance for uncollectible accounts
(524)
(482)
Net accounts receivable
$ 1,746 $ 1,978
27
The allowance for uncollectible accounts has been computed based on the following aging schedules:
Fiscal Year 2010
Allowance
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
Percentage
Less than 1 year
2%
1 to 2 years
50%
Over 2 years
100%
PREPAID EXPENSE
Prepaid expense consists of $592,479 and $607,891 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. Additionally, a portion of prepaid expense, $38,532 for fiscal year 2010, consists of prepaid funds
for software maintenance.
5.
LOANS RECEIVABLE
Loans receivable balances consist of loans under the Federal Perkins Loan Program. The federal government
provides the funding for the loans with amounts collected used for new loan advances. The Minnesota State
Colleges and Universities loans collection unit is responsible for loan collections. As of June 30, 2010 and
2009, the loans receivable for this program totaled $508,649 and $622,755, respectively, less an allowance for
uncollectible loans of $172,715 and $169,447 respectively.
6.
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
$
2,991
2,026
5,017
$
—
5,433
5,433
Completed
Construction
Decreases
$
—
—
—
$
Ending
Balance
— $
(5,561)
(5,561)
2,991
1,898
4,889
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
95,969
5,164
1,558
102,691
1,201
113
275
1,589
—
223
150
373
5,561
—
—
5,561
102,731
5,054
1,683
109,468
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
41,173
3,175
825
45,173
2,926
412
240
3,578
—
217
150
367
—
—
—
—
44,099
3,370
915
48,384
5,561
—
61,084
$ 65,973
Total capital assets depreciated, net
Total capital assets, net
$
57,518
62,535
28
$
(1,989)
3,444 $
6
6
$
Capital assets, not depreciated:
Land
$
Construction in progress
Total capital assets, not depreciated
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases Decreases
2,991
4,341
7,332
$
—
1,345
1,345
$
—
103
103
Completed
Construction
$
Ending
Balance
— $
(3,557)
(3,557)
2,991
2,026
5,017
Capital assets, depreciated:
Buildings and improvements
Equipment
Library collections
Total capital assets, depreciated
92,412
4,922
1,431
98,765
—
675
265
940
—
433
138
571
3,557
—
—
3,557
95,969
5,164
1,558
102,691
Less accumulated depreciation:
Buildings and improvements
Equipment
Library collections
Total accumulated depreciation
38,464
3,168
740
42,372
2,709
408
223
3,340
—
401
138
539
—
—
—
—
41,173
3,175
825
45,173
(2,400)
(1,055) $
32
135
Total capital assets depreciated, net
Total capital assets, net
7.
$
56,393
63,725
$
$
3,557
—
$
57,518
62,535
ACCOUNTS PAYABLE
Accounts payable represent amounts due for goods and services received prior to the end of the fiscal year.
Summary of Accounts Payable at June 30
(In Thousands)
2010
Supplies
$ 290
Purchased services
252
Employee benefits
95
Cost of goods sold
2
Capital projects
74
Repair and maintenance
52
Other
84
Total
$ 849
2009
$ 288
193
64
2
394
139
—
$ 1,080
In addition, as of June 30, 2010 and 2009, the College had payable from restricted assets in the amounts of
$292,776 and $323,946, respectively, which was related to capital projects, financed by general obligation
bonds.
29
8.
LONG TERM OBLIGATIONS
Summaries of amounts due within one year are reported in the current liability section of the statements of net
assets. The changes in long-term debt for fiscal years 2010 and 2009 follow:
Liabilities for:
Bond premium
Capital lease
General obligation bonds
Total long term debt
Liabilities for:
Bond premium
General obligation bonds
Total long term debt
Year Ended June 30, 2010
(In Thousands)
Beginning
Balance
Increases
$
263
—
5,712
5,975
$
$
19
759
15
793
$
$
282 $
6,107
6,389 $
$
28
105
444
577
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases
$
Ending
Balance
Decreases
$
$
Decreases
9 $
51
60 $
254
654
5,283
6,191
Current
Portion
$
$
Ending
Balance
28 $
446
474 $
—
159
442
601
Current
Portion
263 $
5,712
5,975 $
—
443
443
Ending
Balance
Current
Portion
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
$
$
3,303
14
299
41
3,657
$
$
330
219
205
81
835
Decreases
$
$
Year Ended June 30, 2009
(In Thousands)
Beginning
Balance
Increases
$
$
3,310
123
194
104
3,731
$
$
159
—
199
3
361
387
14
89
41
531
$
$
$
166
109
94
66
435
$
$
Ending
Balance
Decreases
$
3,246
219
415
81
3,961
$
$
3,303
14
299
41
3,657
337
219
—
34
590
Current
Portion
$
$
360
14
—
16
390
Bond Premium — In fiscal years 2010 and 2009, bonds were issued resulting in premiums of $19,080 and
$8,832, respectively, which will be amortized over the average remaining life of the bonds refunded.
Amortization is calculated using the straight-line method.
Capital Leases — Liabilities for capital leases include those leases that meet the criteria in FASB Accounting
Standards Codification (ACS) 840, Leases (previously FAS 13). See Note 11 for additional information.
30
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
those capital projects, as specified in the authorizing legislation. This debt obligation is allocated to the colleges
and universities based upon the specific projects funded. The general obligation bonds liability included in
these financial statements represents the College’s share.
Compensated Absences — College employees accrue vacation leave, sick leave, and compensatory leave at
various rates within limits specified in the collective bargaining agreements. The liability for compensated
absences is payable as severance pay under specific conditions. This leave is liquidated only at the time of
termination from state employment. Technical college faculty members that had ten years of service prior to
July 1, 1995 will have a choice, at the time of retirement, to choose the state retirement provisions or the early
retirement and severance provisions of their member district 1993-1995 contract from which they transferred to
the state on July 1, 1995.
Early Termination — Early termination benefits are benefits received for discontinuing service earlier than
planned. See Note 9 for additional information.
Net Other Postemployment Benefit — Other postemployment benefits are health insurance benefits for certain
retired employees under a single-employer fully-insured plan. Under the health benefits program retirees are
required to pay 100 percent of the total premium cost. Since the premium is a blended rate determined on the
entire active and retiree population, the retirees are receiving an implicit rate subsidy. See Note 10 for further
details.
Workers’ Compensation —The state of Minnesota Department of Management and Budget manages the self
insured workers’ compensation claims activities. The reported liability for workers’ compensation of $81,109
and $41,377 at June 30, 2010 and 2009, respectively, is based on claims filed for injuries to state employees
occurring prior to June 30, and is an undiscounted estimate of future payments.
Capital Contributions — The liabilities of $483,237 and $554,252 at June 30, 2010 and 2009, respectively,
represent the amounts the College would owe the federal government if it were to discontinue the Perkins loan
program. The net change was a decrease of $71,015 for fiscal year 2010 and a increase of $2,133 for fiscal year
2009.
Principal and interest payment schedules are provided in the following table for general obligation bonds and
capital leases. There are no payment schedules for bond premium, compensated absences, early termination
benefits, net other postemployment benefits, or workers’ compensation.
Long Term Debt Repayment Schedule
(In Thousands)
Fiscal Years
2011
2012
2013
2014
2015
2016-2020
2021-2025
2026-2030
Total
9.
Capital Leases
Principal
Interest
$ 159
$
24
138
18
142
13
143
7
72
1
—
—
—
—
—
—
$ 654
$
63
General
Obligation Bonds
Principal
Interest
$ 442
$ 252
445
230
413
209
362
189
333
172
1,595
622
1,303
253
390
22
$ 5,283
$ 1,949
EARLY TERMINATION BENEFITS
Early termination benefits are defined as benefits received for discontinuing services earlier than planned.
Certain bargaining unit contracts — Minnesota State College Faculty (MSCF) and Inter Faculty Organization
(IFO) — provide for this benefit. The following is a description of the different benefit arrangements for each
31
contract, including number of retired faculty receiving the benefit, and the amount of future liability as of the
end of fiscal years 2010 and 2009.
Minnesota State College Faculty (MSCF) contract
The MSCF contract allows former Minnesota State College 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 year 2010 and 2009 follow:
Fiscal Year
2010
2009
Number
of Faculty
6
1
Future Liability
(In thousands)
$ 219
14
10. 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, 471.61A, 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 14 retirees receiving health benefits from the health plan.
Annual OPEB Cost and Net OPEB Obligation — The annual other postemployment benefit (OPEB) cost
(expense) is calculated based on the annual required contribution (ARC) of the employer, an amount actuarially
determined in accordance with the parameters of GASB Statement No. 45, Accounting and Financial Reporting
by Employers for Post Employment Benefits Other Than Pensions. The ARC represents a level of funding that,
if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial
liabilities (or funding excess) over a period not to exceed 30 years.
The following table shows the components of the annual OPEB cost for fiscal years 2010 and 2009, the amount
actually contributed to the plan, and changes in the net OPEB obligation:
Components of the Annual OPEB Cost
(In Thousands)
2010
2009
$
Annual required contribution (ARC)
$ 203
198
Interest on net OPEB obligation
14
9
Adjustment to ARC
(12)
(8)
Annual OPEB cost
205
199
Contributions during the year
(89)
(94)
Increase in net OPEB obligation
116
105
Net OPEB obligation, beginning of year
299
194
Net OPEB obligation, end of year
$ 415 $
299
32
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 year net OPEB obligation
Annual OPEB cost
Employer contribution
End of year net OPEB obligation
Percentage contributed
2010
299
205
(89)
$ 415
$
2009
194
199
(94)
$ 299
$
43.41 % 47.24 %
\
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.
Schedule of Funding Progress
(In Thousands)
Actuarial
Valuation
Date
July 1, 2008
Actuarial
Value of
Assets
(a)
—
Actuarial
Accrued
Liability
(b)
$ 2,153
Unfunded
Actuarial
Accrued
Liability
(b - a)
$ 2,153
Funded
Ratio
(a/b)
0.00%
Covered
Payroll
(c)
$ 26,492
UAAL as a
Percentage of
Covered
Payroll
((b - a)/c)
8.13%
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.
11. LEASE AGREEMENTS
Capital Leases — In fiscal year 2010, the College entered into a capital lease with Rochester Community and
Technical College Foundation. The Foundation installed a fabric bubble over the artificial turf field of the
Regional Stadium and will lease the facilities to the College for operation. The lease is for five years with lease
payments totaling $759,202 with a bargain purchase option at the end of the lease.
33
This lease meets the criteria of a capital lease as defined by the FASB ACS 840, Leases (previously FAS 13)
which defines a capital lease generally as one which transfers benefits and risk of ownership to the lessee.
12. 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//
Benefits
Other
$ 4,734
$ 2,039
2,286
2,545
19,357
1,196
2,362
2,863
677
296
4,794
976
560
683
—
3,578
—
1,966
$ 34,770
$ 16,142
Description
Academic support
Institutional support
Instruction
Operation & maintenance of plant
Public service
Student services
Auxiliary enterprises
Depreciation
Scholarships & fellowships
Total operating expenses
Total
$ 6,773
4,831
20,553
5,225
973
5,770
1,243
3,578
1,966
$ 50,912
For the Year Ended June 30, 2009
(In Thousands)
Salaries/
Benefits
$ 4,995
2,194
18,239
2,479
560
4,401
563
—
—
$ 33,431
Description
Academic support
Institutional support
Instruction
Operation & maintenance of plant
Public service
Student services
Auxiliary enterprises
Depreciation
Scholarships & fellowships
Total operating expenses
Other
2,022
2,650
1,184
3,801
234
1,145
499
3,340
986
$ 15,861
$
Total
$ 7,017
4,844
19,423
6,280
794
5,546
1,062
3,340
986
$ 49,292
13. EMPLOYEE PENSION PLANS
The College participates in four retirement plans: the State Employees Retirement Fund, administered by the
Minnesota State Retirement System; the Teachers Retirement Fund, administered by the Minnesota Teachers
Retirement Association; the 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
34
supplementary information. Copies of the report may be obtained directly from Minnesota State Retirement
System at 60 Empire Drive, Suite 300, St. Paul, Minnesota 55103-3000.
The SERF is a cost sharing, multiple employer defined benefit plan. All classified employees are covered by
this plan. A classified employee is one who serves in a civil service position. Normal retirement age is 65. The
annuity formula is the greater of a step rate with a flat rate reduction for each month of early retirement, or a
level rate (the higher step rate) with an actuarial reduction for early retirement. The applicable rates for each
year of allowable service are 1.2 percent and 1.7 percent of the members’ average salary which is defined as the
highest salary paid in five successive years of service. Minnesota State Colleges and Universities, as an
employer for some participants, are 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 Rochester Community and Technical College were:
(In Thousands)
Fiscal Year
Amount
2010
$ 278
2009
264
2008
230
Teachers Retirement Fund (TRF)
Pension fund information is provided by Minnesota Teachers Retirement Association, which prepares and
publishes its own stand alone comprehensive annual financial report, including financial statements and
required supplementary information. Copies of the report may be obtained directly from Minnesota Teachers
Retirement Association at 60 Empire Drive, Suite 400, St. Paul, Minnesota 55103-3000.
The TRF is a cost sharing, multiple employer defined benefit plan. Teachers and other related professionals
may participate in TRF. Normal retirement age is 65. Coordinated membership includes participants who are
covered by the Social Security Act. The annuity formula is the greater of a step rate with a flat reduction for
each month of early retirement, or a level rate (the higher step rate) with an actuarially based reduction for early
retirement. The applicable rates for coordinated members are 1.2 percent and 1.7 percent for service rendered
before July 1, 2006, and 1.4 percent and 1.9 percent for service rendered on or after July 1, 2007. Minnesota
State Colleges and Universities, an employer for some participants, is liable for a portion of any unfunded
accrued liability of this fund.
The statutory authority for TRF is Minnesota Statutes, Chapter 354. Effective July 1, 2007, the funding
requirement is 5.5 percent for both employer and employee coordinated members. Beginning July 1, 2011, both
employee and employer contribution rate increases will be phased-in with a 0.5 percent increase occurring
every July 1 over four years until it reaches a contribution rate of 7.5 percent on July 1, 2014. Actual
contributions were 100 percent of required contributions.
Required contributions for Rochester Community and Technical College were:
(In Thousands)
Fiscal Year
Amount
2010
$ 299
2009
318
2008
317
35
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 55103-3000.
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, are 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 Rochester Community and Technical College were:
(In Thousands)
Fiscal Year Employer
Employee
2010
$
30
$
25
2009
29
25
2008
26
23
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 TRF or IRAP upon
achieving eligibility. An unclassified employee is one who serves in a position deemed unclassified according
to Minnesota Statutes. This includes presidents, vice presidents, deans, administrative or service faculty,
teachers, and other managers and professionals in academic and academic support programs. Eligibility begins
with the employment contract for the first year of unclassified service in which the employee is hired for more
than 25 percent of a full academic year, excluding summer session. An employee remains a participant of the
plan, even if he/she is employed for less than 25 percent of a full academic year in subsequent years.
36
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 Rochester Community and Technical College were:
(In Thousands)
Fiscal Year Employer
Employee
2010
$ 730
$ 550
2009
700
527
2008
614
462
Supplemental Retirement Plan (SRP)
Participation — Each employee who has completed two full time years of unclassified service with Minnesota
State Colleges and Universities must participate upon achieving eligibility. The eligible employee is enrolled
on the first day of the fiscal year following completion of two full time years. Vesting occurs immediately and
normal retirement age is 55.
Contributions — Participants contribute 5 percent of the eligible compensation up to a defined maximum
annual contribution as specified in the following table:
Member Group
MN Association of Professional Employees Unclassified
MN Community College Faculty Association
Middle Management Association Unclassified
Administrators
Other Unclassified Members
Eligible
Compensation
$6,000 to $40,000
6,000 to 52,000
6,000 to 40,000
6,000 to 60,000
6,000 to 40,000
Maximum
Annual
Contributions
$ 1,700
2,300
1,700
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 Rochester Community and Technical College were:
In Thousands)
Fiscal Year Amount
2010
$ 434
2009
435
2008
342
14. COMMITMENTS
In fiscal year 2010, the College completed the three Higher Education Asset Preservation and Replacement
(HEAPR) projects from fiscal year 2009, the Heintz Center roof project, tuck pointing on Memorial Hall, and
elevator code modification project. The College also completed the parking lot expansion project from fiscal
year 2009. In fiscal year 2010, the College received HEAPR and/or bonding funds to begin some additional
projects; replace main campus HVAC, campus wide lighting replacement, and remodel of nursing lab / health
science lab. These projects were started in fiscal year 2010 to be finished in fiscal year 2011. In fiscal year
2010, $1.9 million was included in construction in progress for these projects leaving $1.9 million to be
finished.
37
At the end of 2008, the college received design money, $201,600, for the Workforce Center Co-location at the
Heintz Center. The design process was started in fiscal year 2009, and the college requested construction funds
in fiscal year 2010. The constructions funds were not received in the most recent bonding bill. Construction
funds will be requested again in the next bonding bill.
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.
While property and casualty coverage is required by Minnesota State Colleges and Universities policy, the
College also selected optional coverage for international accident, international liability, and student health
services professional liability.
Property coverages offered by the Minnesota Risk Management Fund are 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
$2,500 to $250,000
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
Rochester 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 also purchased travel insurance for travel within the United States on
the open market for the College.
Minnesota State Colleges and Universities participate 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.
Description
Fiscal Year Ended 6/30/10
Fiscal Year Ended 6/30/09
$
(In Thousands)
Beginning
Net Additions
Liability
and Changes
41
$
81
104
3
38
$
Payments
41
66
Ending
Liability
$
81
41
SUPPLEMENTAL SECTION
39
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 Rochester 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 opinion 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
40
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 test 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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