Kellogg Community College
Financial Report
with Supplemental Information
June 30, 2014
Kellogg Community College
Contents
Report Letter
1-3
Management’s Discussion and Analysis
4-14
Basic Financial Statements
Statement of Net Position
15
Statement of Revenue, Expenses, and Changes in Net Position
16
Statement of Cash Flows
Discretely Presented Component Unit Kellogg Community College Foundation
Notes to Financial Statements
Supplemental Information
17-18
19
20-34
35
Combining Statement of Net Position
36-37
Combining Statement of Revenue, Expenses, and
Changes in Net Position
38-39
Schedule of General Fund Expenditures
40
Independent Auditor's Report
To the Board of Trustees
Kellogg Community College
Report on the Financial Statements
We have audited the accompanying financial statements of Kellogg Community College (the
"College") and its discretely presented component unit as of and for the years ended June 30,
2014 and 2013 and the related notes to the financial statements, which collectively comprise
Kellogg Community College's basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control relevant
to the preparation and fair presentation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
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 from material misstatement. The financial statements of the
discretely presented component unit were not audited under Government Auditing Standards.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. Accordingly, we express no such opinion. An audit also includes
evaluating the appropriateness of accounting policies used and the reasonableness of significant
accounting estimates made by management, as well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
1
To the Board of Trustees
Kellogg Community College
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects,
the respective financial position of Kellogg Community College and its discretely presented
component unit as of June 30, 2014 and 2013 and the respective changes in its financial position
and, where applicable, cash flow for the years then ended, in accordance with accounting
principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1 to the financial statements, effective July 1, 2013, the College adopted
new accounting guidance under GASB Statement No. 65, Items Previously Reported as Assets and
Liabilities. This statement establishes accounting and financial reporting standards that reclassify,
as deferred outflows and inflows of resources, certain items that were previously reported as
assets and liabilities. Our opinion is not modified in respect to this matter.
Other Matters
Required Supplemental Information
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis on pages 4-14 be presented to supplement the basic
financial statements. Such information, although not a part of the basic financial statements, is
required by the Governmental Accounting Standards Board, which considers it to be an essential
part of financial reporting for placing the basic financial statements in an appropriate operational,
economic, or historical context. We have applied certain limited procedures to the required
supplemental information in accordance with auditing standards generally accepted in the United
States of America, which consisted of inquiries of management about the methods of preparing
the information and comparing the information for consistency with management's responses to
our inquiries, the basic financial statements, and other knowledge we obtained during our audit
of the basic financial statements. We do not express an opinion or provide any assurance on the
information because the limited procedures do not provide us with sufficient evidence to
express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the financial statements that
collectively comprise Kellogg Community College's basic financial statements. The other
supplemental information, as identified in the table of contents, is presented for the purpose of
additional analysis and is not a required part of the basic financial statements.
2
To the Board of Trustees
Kellogg Community College
The other supplemental information, as identified in the table of contents, is the responsibility of
management and was derived from and relates directly to the underlying accounting and other
records used to prepare the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements and certain
additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the basic financial statements or to the
basic financial statements themselves, and other additional procedures in accordance with
auditing standards generally accepted in the United States of America. In our opinion, the other
supplemental information, as identified in the table of contents, is fairly stated in all material
respects in relation to the basic financial statements as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
November 12, 2014 on our consideration of Kellogg Community College's internal control over
financial reporting and on 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 in considering Kellogg Community College's internal control over
financial reporting and compliance.
November 12, 2014
3
Kellogg Community College
Management’s Discussion and Analysis - Unaudited
The discussion and analysis of Kellogg Community College’s (the “College”) financial statements
provides an overview of the College’s financial activities for the years ended June 30, 2014,
2013, and 2012. Management has prepared the financial statements and the related note
disclosures along with the discussion and analysis. Responsibility for the completeness and
fairness of this information rests with the College’s administration.
Using this Report
The College's annual financial report includes the report of independent auditors, the
management’s discussion and analysis, basic financial statements, notes to the financial
statements, and supplemental information. The basic financial statements are comprised of three
components: the statement of net position, the statement of revenue, expenses, and changes in
net position, and the statement of cash flows. These financial statements are prepared in
accordance with Governmental Accounting Standards Board Statement No. 35, Basic Financial
Statements - and Management's Discussion and Analysis - for Public Colleges and Universities.
The Kellogg Community College Foundation (the “Foundation”), a separate nonprofit
organization, qualifies as a component unit of the College under GASB Statement No. 61, The
Financial Reporting Entity: Omnibus. Accordingly, the Foundation’s financial activity has been
discretely presented within the accompanying financial statements.
Financial Highlights
The College’s financial position increased during the fiscal years ended June 30, 2014, 2013, and
2012. In 2014 and 2013, the College’s net position increased $1.6 million (3 percent) and
$200,000 (0.3 percent), respectively, from the previous year.
After experiencing record levels of enrollment in recent years, the College’s enrollment has
decreased over the past three years, including 8 percent and 3 percent in 2014 and 2013, which
were the sixth and fourth most in the College’s history. The College believes the decline in
enrollment is related to students reaching the limit on their ability to receive federal financial aid,
which decreased from approximately $32 million in 2013 to $28 million in 2014, limiting the
students’ ability to enroll in more classes.
In 2013, the College did experience increases in gross tuition revenue and state appropriations
of $200,000 and $800,000, respectively, which was offset by a $400,000 decrease in property
tax revenues. The College also increased its staffing levels to accommodate the high number of
students it served, resulting in increases to instruction and instructional support expenses.
4
Kellogg Community College
Management’s Discussion and Analysis - Unaudited (Continued)
The following chart provides a graphical breakdown of net position by category for the fiscal
years ended June 30, 2014, 2013, and 2012:
Breakdown of Net Position - By Category
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Net Investment in
Capital Assets
Scholarships
and Fellowships
Capital
Improvements
Unrestricted
2014
47.3
0.3
1.7
9.0
2013
47.5
0.3
0.2
8.7
2012
42.3
0.3
1.3
12.6
The Statement of Net Position and the Statement of Revenue, Expenses, and Changes
in Net Position
These two statements will help the reader answer the question, “Is Kellogg Community College,
as a whole, better or worse off as a result of the year’s activities?” The statement of net position
and the statement of revenue, expenses, and changes in net position report information on the
College as a whole and on its activities in a way that helps answer this question. They report the
College’s net position and their changes. One can think of net position - the difference between
assets and liabilities - as one way to measure the College’s financial health or financial position.
Many other nonfinancial factors, such as the trend in admission applicants, student retention,
condition of the buildings, and strength of the faculty, need to be considered to assess the overall
health of the College. These statements include all assets and liabilities using the accrual basis of
accounting, which is similar to the accounting used by most private sector institutions. All of the
current year’s revenue and expenses are taken into account regardless of when cash is received
or paid.
5
Kellogg Community College
Management’s Discussion and Analysis - Unaudited (Continued)
The following is a comparison of the major components of the statement of net position of the
College for the years ended June 30, 2014, 2013, and 2012:
Statement of Net Position at June 30 (in millions)
2014
Assets
Current assets
Restricted cash
Long-term investments
Capital assets - Net
$
Total assets
Liabilities
Current liabilities
Noncurrent liabilities
Total liabilities
Net Position
Net investment in capital assets
Expendable restricted for:
Scholarships and fellowships
Capital improvements
Unrestricted
Total net position
$
2013
20.9
6.4
0.8
50.9
$
2012
16.7
1.4
47.5
$
20.6
1.9
44.5
79.0
65.6
67.0
9.1
11.6
6.4
2.5
8.2
2.3
20.7
8.9
10.5
47.3
47.5
42.3
0.3
1.7
9.0
0.3
0.2
8.7
0.3
1.3
12.6
58.3
$
56.7
$
56.5
Statement of Net Position
The significant changes in the assets and liabilities of the College are as follows:

Current assets increased $4.2 million in 2014 due to an increase in cash and accounts
receivable. In 2013, current assets and long-term investments decreased $3.9 million due to
utilizing resources to finish a capital project.

In 2014 and 2013, noncurrent assets increased as a result of the College receiving bond
proceeds late in the year and continuing building and capital projects, net of depreciation
expense charged in each respective year.

In 2014, current liabilities increased $2.7 million due to a first bond payment being due in
2015 of $995,000, a $600,000 increase in accounts payable as a result of increased
construction activity, a $600,000 increase in unearned revenue, and a $350,000 increase in
other current liabilities as a result of the College switching to self-insurance for health
benefits. Current liabilities decreased $1.8 million in 2013 as the College made its last
required bond payment related to its 2002 bond issue during the year.

Long-term liabilities increased approximately $9 million in 2014 due to the issuance of bonds
and increased in 2013 as the estimated cost of future retirements increased.
6
Kellogg Community College
Management’s Discussion and Analysis - Unaudited (Continued)
The following is the detail of the major components of operating results of the College for the
years ended June 30, 2014, 2013, and 2012:
Operating Results for the Years Ended June 30 (in millions)
2014
Operating Revenue
Tuition and fees - Net
Federal grants and contracts
State grants and contracts
Private gifts, grants, and contracts
Sales and services of auxiliary activities
Other sources
$
Total operating revenue
Operating Expenses
Instruction
Public service
Instructional support
Student services
Institutional administration
Physical plant operations
Independent operations
Depreciation
Total operating expenses
Operating Loss
Nonoperating Revenue (Expenses)
State appropriations
Property taxes
Federal Pell grant
Investment income
Loss on disposal of capital assets
Interest on capital asset - Related debt
Debt issuance costs
Net nonoperating revenue
Increase in Net Position - Before transfers
Transfers
Net Position - Beginning of year
$
Net Position - End of year
7
2013
12.2
2.2
0.7
2.3
2.6
1.0
$
2012
12.4
1.2
0.7
1.5
2.9
1.0
$
12.9
1.3
0.4
1.8
3.3
1.0
21.0
19.7
20.7
20.7
0.9
6.3
13.2
4.5
4.6
1.7
2.0
20.1
0.9
6.2
14.2
4.3
4.8
1.9
2.0
19.6
0.8
6.0
14.0
4.0
4.4
2.3
2.0
53.9
54.4
53.1
(32.9)
(34.7)
(32.4)
10.3
12.5
11.8
(0.1)
9.8
12.2
12.8
0.1
-
9.1
12.6
12.8
0.1
(0.8)
(0.1)
-
34.5
34.9
33.7
1.6
0.2
1.3
-
-
(0.1)
56.7
56.5
55.3
58.3
$
56.7
$
56.5
Kellogg Community College
Management’s Discussion and Analysis - Unaudited (Continued)
Internally, the College accounts for its financial statements using fund accounting, which is then
reorganized into operating and nonoperating components for the audited financial statements.
The College accounts for its primary programs and operations in its General Fund. The General
Fund is primarily financed through four sources of revenue - tuition and fees, state
appropriations, property taxes, and other. For this report, these sources of revenue are
classified as both operating and nonoperating. The following chart shows the percentage of
these sources of revenue as they were reported in the General Fund for the year ended June 30,
2014.
General Fund Revenue - By Source
Other
4%
State appropriations
27%
Tuition and fees
43%
Property taxes
26%
Operating Revenue
For the College as a whole, operating revenue includes all transactions that result in the sales
and/or receipts from goods and services, such as tuition and fees, and other auxiliary operations.
In addition, certain federal, state, and private grants are considered operating if they are not for
capital purposes and are considered a contract for services.
The College’s operating revenue increased by $1.3 million in 2014, or 6 percent, after a $1
million decrease, or 5 percent, in 2013. The increase in 2014 was the result of increases in
federal and local grant revenue of $1 million and $800,000, respectively, net of decreases in net
tuition and sales revenues. The 2013 decrease resulted from a higher reliance on financial aid by
students to pay for tuition and books and the corresponding increase in the scholarship
allowance to tuition and fees and book sales. Enrollment declines also contributed to the tuition
and sales revenue declines as enrollment in 2014, 2013, and 2012 was equal to approximately
3,600, 3,950, and 4,200 full-time equivalent students (FTE, calculated on a 31 credit hour per
year schedule), respectively.
8
Kellogg Community College
Management’s Discussion and Analysis - Unaudited (Continued)
The following is a graphic illustration of operating revenue by source, including all funds of the
College:
Operating Revenue - By Source
Private grants and
contracts
11%
Auxiliary
12%
State grants
4%
Other operating
5%
Federal grants
10%
Tuition and fees
58%
Nonoperating Revenue
Nonoperating revenue is all revenue sources that are primarily nonexchange in nature. They
consist primarily of state appropriations, property taxes, federal Pell grant revenue, and
investment income. A $1 million decrease in Pell grant revenue in 2014, offset primarily by a
$500,000 increase in state appropriations and a $300,000 increase in property taxes, led to net
decrease in nonoperating revenues of $400,000 in 2014. In 2013, nonoperating revenues
increased $1.2 million, as the College experienced a $700,000 increase in state appropriations
and recognized an $800,000 loss on disposals of capital assets in 2012. These changes were
offset by a decrease of $400,000 in property tax revenues as real estate and taxable values of
real estate continue to suffer from the recession and legal challenges.
The following is a graphic illustration of nonoperating revenue by source:
Nonoperating Revenue - By Source
Property taxes
36%
Federal Pell grant
34%
State appropriations
30%
9
Kellogg Community College
Management’s Discussion and Analysis - Unaudited (Continued)
Operating Expenses
Operating expenses are all the costs necessary to perform and conduct the programs and
primary purposes of the College. They include salaries and benefits, utilities, supplies, services,
and depreciation and are then categorized by function. Overall, total operating expenses
increased (decreased) ($500,000) and $1.3 million in 2014 and 2013, respectively. In 2014, the
decrease was due to a $1 million reduction in federal Pell grants awarded to students, offset by
increasing costs related to instructional activities. In 2013, the increase can be attributed to
increasing costs of instruction and supporting instructional activities due to maintaining high
levels of enrollment. The College also experienced increasing costs across most functional areas.
Among the reasons for cost increases were increases in staff, compensation and fringe benefits,
and improvements and repairs to the College’s infrastructure.
The majority of total expenses are reported internally in the College’s General Fund. The
College spent approximately 70 percent of its General Fund expenditures on instruction and
instructional support in 2014 and 2013. The following is a graphic illustration of operating
expenses by source as reported by the General Fund for the year ended June 30, 2014:
General Fund Expenses - By Source
Operations/
maintenance
10%
Institutional
administration
12%
Instruction
52%
Student service
9%
Instructional support
17%
10
Kellogg Community College
Management’s Discussion and Analysis - Unaudited (Continued)
For this financial report, the different funds of the College are netted and internal expenditures
are eliminated. The following is a graphic illustration of operating expenses by source for the
College as a whole at June 30, 2014:
Operating Expenses - By Source
Independent operations
3%
Depreciation
4%
Public service
2%
Instruction
38%
Physical plant operations
8%
Instit. Admin.
8%
Student services
25%
Instructional support
12%
Other
Other revenue consists of items that are typically nonrecurring, extraordinary, or unusual to the
College. Examples would be state capital appropriations, additions to permanent endowments,
and transfers from related entities. The College had no such revenue in 2014, 2013, and 2012.
Statement of Cash Flows
Another way to assess the financial health of the College is to look at the statement of cash
flows. Its primary purpose is to provide relevant information about the cash receipts and cash
payments of an entity during a period. The statement of cash flows also helps users assess:

An entity’s ability to generate future net cash flows

Its ability to meet its obligations as they come due

Its needs for external financing
11
Kellogg Community College
Management’s Discussion and Analysis - Unaudited (Continued)
Cash Flows for the Years Ended June 30 (in millions)
2014
Cash (Used in) Provided by
Operating activities
Noncapital financing activities
Capital and related financing activities
Investing activities
$
2013
(31.0) $
32.6
7.0
0.7
2012
(31.6) $
32.4
(4.7)
1.4
(33.3)
32.6
(4.4)
3.0
Net Increase (Decrease) in Cash
9.3
(2.5)
(2.1)
Cash - Beginning of year
9.0
11.5
13.6
$
Cash - End of year
18.3
$
9.0
$
11.5
Major sources of funds from operations came from student tuition and fees, grants and
contracts, and auxiliary activities, which includes the bookstore. These sources were offset by
expenditures for operations such as payments to employees and suppliers.
Some items of note on the statement of cash flows are as follows:

The net cash used in operating activities decreased $600,000 and $1.7 million in 2014 and
2013, respectively. Increases in cash received from grants and contracts were primarily the
reason for the increase in 2014. The decrease in cash used in 2013 was primarily due to
increases in cash received from tuition and fees and a decrease in the amounts paid to
suppliers.

Cash provided by noncapital financing activities increased (decreased) by $200,000 and
$(200,000) in 2014 and 2013, respectively. The increase in 2014 resulted from increases in
cash received for state appropriations, offset by the decrease in Pell grants described above.
Decreases in property tax collections were the primary reason for the decrease in 2013.

Cash provided by (used in) capital and related financing activities approximated $7.0 million
and $(4.7) million in 2014 and 2013, respectively. In 2014, approximately $10 million was
provided by the bond issue, net of $5.6 million of financing costs and cash used in capital
projects. In 2013, cash was used to invest in its facilities and pay down its debt.

Cash provided by investing activities was $700,000 and $1.4 million in 2014 and 2013,
respectively, as the College liquidated some investments that reached maturity instead of
reinvesting at lower rates.
12
Kellogg Community College
Management’s Discussion and Analysis - Unaudited (Continued)
Capital Assets
At June 30, 2014, the College had $51 million invested in capital assets, net of accumulated
depreciation of $37.5 million. Depreciation charges totaled $2 million for the current fiscal year.
Capital Assets at June 30 (in millions)
2014
Land and land improvements
Buildings and improvements
Furniture, fixtures, and equipment
Construction in progress
Total
2013
$
3.4 $
67.7
14.1
3.3
$
88.5
$
2012
3.3 $
66.6
13.0
0.1
3.2
61.8
12.6
0.4
83.0
78.0
$
The College concluded its first phase of an expansion, facility improvement, and renovation
project called the 21st Century Project in 2013. This initiative was funded with a 15-year millage
levy approved by voters in 1998 and expired with the 2012 tax year. The voters of the College’s
district approved a 15-year extension of this millage in November 2012 that will generate an
estimated $40 million through 2028 to help fund further expansion and improvements to the
College’s facilities.
Debt
During 2014, the College issued the Kellogg Community College Building and Site Bonds, Series
2014 in the amount of $9.7 million.
The table below summarizes this amount by type of debt instrument. The College’s bond ratings
were AA- by the Standard & Poors’ Ratings Services.
Debt Outstanding at June 30 (in millions)
2014
Bonds
$
13
9.7
2013
$
-
2012
$
2.2
Kellogg Community College
Management’s Discussion and Analysis - Unaudited (Continued)
Economic Factors That Will Affect the Future
The economic position of the College is closely tied to that of the State of Michigan. With state
appropriations fluctuating in recent years, the College has been fortunate to have enrollment
remain at high levels in recent years, resulting in tuition revenue growth to keep it financially
stable. The State has increased its operational support to community colleges for the 2014 fiscal
year. However, the College’s enrollment and property tax revenue declines in recent years have
stressed the College’s operations. The College’s board of trustees (the “Board”) will be faced
with the decision of raising revenue or reducing programming and services to students to keep
the College financially stable until enrollment and property taxes stabilize. The Board has
historically been supportive of increasing revenue to support and improve academic offerings
and services to students while keeping the College in sound financial condition.
With the voter support of the capital millage renewal in 2012, the College is fortunate to have a
dedicated resource to support funding its future infrastructure needs.
The College has also implemented various cost-containment measures that were initiated in
prior fiscal years and were maintained through 2014. Such initiatives have included the following:







Offering more cost-effective fringe benefit plans
Limiting salary and wage increases
Competitively bidding certain services
Contracting noncore services of the College
Offering an early retirement incentive
Restructuring certain operational areas of the College
Eliminating programming
There are, however, certain factors that are negatively impacting the College that are out of the
College’s control. The Michigan Public School Employees’ Retirement System has increased the
College’s required contribution rate over the past decade, resulting in soaring retirement costs.
However, the State recently enacted some reform legislation that has capped the College’s
contribution rate to the plan at current levels.
Despite declining enrollment, the College had a favorable year financially, balancing its budget
and investing in its infrastructure. Together, with the College’s Board, management will continue
to monitor enrollment trends, the state and local economies, and react with revenue
enhancements and/or expense containment measures as necessary to ensure that the financial
health and stability of the College are preserved.
14
Kellogg Community College
Statement of Net Position
June 30
2014
Assets
Current assets:
Cash and cash equivalents (Note 3)
Short-term investments (Note 3)
Accounts receivable - Net (Note 4)
Other current assets
$
Total current assets
Noncurrent assets:
Restricted cash (Note 3)
Long-term investments (Note 3)
Capital assets (Note 5)
Total noncurrent assets
Total assets
2013
11,886,837 $
2,343,423
5,409,660
1,239,087
8,967,623
2,425,731
3,911,298
1,374,229
20,879,007
16,678,881
6,367,260
839,234
50,962,474
1,441,282
47,528,223
58,168,968
48,969,505
79,047,975
65,648,386
1,950,939
1,600,119
2,734,829
995,000
18,129
1,362,758
1,506,746
2,183,871
-
930,000
858,673
910,000
495,335
9,087,689
6,458,710
2,675,000
8,730,000
213,232
2,475,000
-
Total noncurrent liabilities
11,618,232
2,475,000
Total liabilities
20,705,921
8,933,710
47,373,373
47,528,223
286,031
1,718,305
8,964,345
290,524
169,593
8,726,336
Liabilities
Current liabilities:
Accounts payable
Accrued payroll and related liabilities
Unearned revenue
Bonds payable - Current (Note 6)
Unamortized bond premium - Current (Note 6)
Accrued retirement and compensated absences - Current
(Note 6)
Other current liabilities
Total current liabilities
Noncurrent liabilities:
Accrued retirement and compensated absences Net of current portion (Note 6)
Bonds payable - Net of current portion (Note 6)
Unamortized bond premium - Net of current portion (Note 6)
Net Position
Net investment in capital assets
Expendable restricted for:
Expendable scholarships and fellowships
Capital improvements
Unrestricted
$
Total net position
The Accompanying Notes are an Integral
Part of these Statements.
15
58,342,054
$
56,714,676
Kellogg Community College
Statement of Revenue, Expenses, and
Changes in Net Position
Year Ended June 30
Operating Revenue
Tuition and fees - Net of scholarship allowance of $4,782,833 and
$4,460,367 for 2014 and 2013, respectively
Federal grants and contracts
State grants and contracts
Private gifts, grants, and contracts
Sales and services of auxiliary activities - Net of scholarship allowance
of $1,041,516 and $1,168,672 for 2014 and 2013, respectively
Other sources
$
Total operating revenue
Operating Expenses
Instruction
Public service
Instructional support
Student services
Institutional administration
Physical plant operations
Independent operations
Depreciation
Total operating expenses
Operating Loss
Nonoperating Revenue (Expenses)
State appropriations
Property taxes
Pell revenue
Investment income
Loss on disposal of capital assets
Interest on capital asset - Related debt
Debt issuance cost
Net nonoperating revenue
Increase in Net Position
Net Position - Beginning of year
$
Net Position - End of year
The Accompanying Notes are an Integral
Part of these Statements.
16
2014
2013
12,168,874 $
2,148,630
739,043
2,295,336
12,353,782
1,172,646
728,289
1,504,266
2,573,269
996,054
2,941,318
1,017,794
20,921,206
19,718,095
20,695,039
910,333
6,236,821
13,220,291
4,508,034
4,568,867
1,688,846
2,034,832
20,112,219
942,876
6,177,269
14,193,720
4,255,630
4,816,256
1,911,325
2,034,437
53,863,063
54,443,732
(32,941,857)
(34,725,637)
10,379,598
12,479,568
11,806,851
45,282
(51,097)
(90,967)
9,861,107
12,196,232
12,845,766
51,656
(2,169)
(22,000)
-
34,569,235
34,930,592
1,627,378
204,955
56,714,676
56,509,721
58,342,054
$
56,714,676
Kellogg Community College
Statement of Cash Flows
Year Ended June 30
2014
2013
Cash Flows from Operating Activities
Tuition and fees
Grants and contracts
Payments to suppliers
Payments to employees
Auxiliary enterprise charges - Net
Other
$
Net cash used in operating activities
Cash Flows from Noncapital Financing Activities
Local property taxes
Federal direct lending receipts
Federal direct lending disbursements
Federal Pell grant
State appropriations
Net cash provided by noncapital financing activities
Cash Flows from Capital and Related Financing Activities
Purchase of capital assets
Capital property taxes
Principal paid on capital debt
Issuance of capital debt
Interest paid on capital debt
Net cash provided by (used in) capital and related financing activities
Cash Flows from Investing Activities
Sales and maturities of investments
Interest on investments
Net cash provided by investing activities
12,269,869 $
4,875,515
(15,100,536)
(32,171,326)
(718,208)
(126,651)
12,568,440
3,323,491
(17,304,444)
(31,107,820)
(491,574)
1,372,558
(30,971,337)
(31,639,349)
10,170,485
16,997,120
(16,997,120)
11,835,927
10,586,422
10,089,496
19,384,407
(19,384,407)
13,057,910
9,286,126
32,592,834
32,433,532
(5,469,083)
2,590,125
9,956,361
(142,064)
(5,087,804)
2,582,576
(2,200,000)
(22,000)
6,935,339
(4,727,228)
684,356
45,282
1,395,786
51,656
729,638
1,447,442
Net Increase (Decrease) in Cash and Cash Equivalents
9,286,474
(2,485,603)
Cash and Cash Equivalents - Beginning of year
8,967,623
11,453,226
$
Cash and Cash Equivalents - End of year
The Accompanying Notes are an Integral
Part of these Statements.
17
18,254,097
$
8,967,623
Kellogg Community College
Statement of Cash Flows (Continued)
Year Ended June 30
2014
2013
Reconciliation of Operating Loss to Net Cash from Operating Activities
Operating loss
Adjustments to reconcile operating loss to net cash from
operating activities:
Depreciation expense
Change in allowance for bad debts
(Increase) decrease in assets:
Accounts receivable
Inventories, prepaids, and other assets
Increase in liabilities:
Accounts payable
Accrued liabilities and other
Deferred revenue
(32,941,857) $
2,034,832
400,000
(2,415,304)
135,142
588,181
676,711
550,958
(34,725,637)
2,034,437
200,000
212,504
47,216
255,475
306,457
30,199
$ (30,971,337) $ (31,639,349)
Net cash used in operating activities
There were no noncash activities during 2014 or 2013.
The Accompanying Notes are an Integral
Part of these Statements.
$
18
Kellogg Community College
Discretely Presented Component Unit
Kellogg Community College Foundation
Balance Sheet
May 31
2014
2013
Assets
Cash and cash equivalents
Contribution receivable
Long-term investments (Note 3)
$
264,252
$
48,032
8,732,125
Total assets
117,210
14,805
7,972,516
$
9,044,409
$
8,104,531
$
573,125
$
151,556
Liabilities and Net Assets
Liabilities
Payable to Kellogg Community College
Deferred revenue
-
20,405
Total liabilities
593,530
151,556
Unrestricted
2,636,725
2,615,607
Temporarily restricted
Permanently restricted
2,128,448
3,685,706
1,790,298
3,547,070
8,450,879
7,952,975
Net Assets
Total net assets
Total liabilities and net assets
$
9,044,409
$
8,104,531
Statement of Activities
Year Ended May 31
2014
2013
Revenue
Contributions
$
Special event revenue
Investment income
Unrealized and realized gain on investments
Total revenue
267,156
$
366,669
88,963
92,944
266,091
493,588
216,679
724,389
1,115,798
1,400,681
547,400
70,494
255,370
94,441
617,894
349,811
497,904
1,050,870
7,952,975
6,902,105
Expenses
Scholarships and grants expense
Institutional administration
Total expenses
Change in Net Assets
Net Assets - Beginning of year
Net Assets - End of year
The Accompanying Notes are an Integral
Part of these Statements.
$
19
8,450,879
$
7,952,975
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 1 - Industry Information and Significant Accounting Policies
Reporting Entity - Kellogg Community College (the “College”) is a Michigan
community college whose financial statements have been prepared in accordance with
generally accepted accounting principles as applicable to public colleges and universities
outlined in Governmental Accounting Standards Board (GASB) Statement No. 35 and
the Manual for Uniform Financial Reporting - Michigan Public Community Colleges, 2001.
The College reports as a business-type activity, as defined by GASB Statement No. 35.
Business-type activities are those that are financed in whole or in part by fees charged to
external parties for goods or services.
The accompanying financial statements have been prepared in accordance with criteria
established by the Governmental Accounting Standards Board for determining the
various governmental organizations to be included in the reporting entity. These criteria
include significant operational or financial relationships with the College. Based on
application of the criteria, the financial statements of Kellogg Community College
Foundation have been discretely presented in Kellogg Community College’s financial
statements.
The Kellogg Community College Foundation (the “Foundation”), a nonprofit
organization, was formed to solicit, collect, and invest donations made for the
promotion of educational activities and capital campaigns at the College. Separate
financial statements of the Foundation may be obtained by contacting Kellogg
Community College, 450 North Avenue, Battle Creek, MI 49017.
Significant accounting policies followed by the College are described below to enhance
the usefulness of the financial statements to the reader:
Basis of Presentation - Effective July 1, 2013, the College implemented the provisions
of Governmental Accounting Standards Board Statement No. 65, Items Previously
Reported as Assets and Liabilities. Statement No. 65 establishes accounting and financial
reporting standards that reclassify, as deferred outflows and inflows of resources,
certain items that were previously reported as assets and liabilities. This statement also
provides other financial reporting guidance related to the impact of the financial
statement elements deferred outflows of resources and deferred inflows of resources.
20
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 1 - Industry Information and Significant Accounting Policies
(Continued)
The Foundation is a private nonprofit organization that reports under Financial
Accounting Standards Board (FASB) standards. As such, certain revenue recognition
criteria and presentation features are different from GASB revenue recognition criteria
and presentation features. No modifications have been made to the Foundation’s
financial information in the College’s financial reporting entity for these differences. The
Internal Revenue Service has determined the Foundation is exempt from federal income
taxes under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provision
for income taxes has been recorded.
Accrual Basis - The financial statements of Kellogg Community College have been
prepared on the accrual basis of accounting, whereby revenue is recognized when
earned and expenditures are recognized when the related liabilities are incurred and
certain measurement and matching criteria are met.
Cash and Cash Equivalents - Cash and cash equivalents consist of all highly liquid
investments with an initial maturity of three months or less.
Restricted Cash - Cash that was received from the issuance of the College Building
and Site Bonds, Series 2014, which is restricted for the use of capital projects.
Investments - Investments are recorded at fair value, based on quoted market price.
Property and Equipment - Property and equipment are recorded at cost. Gifts of
property are recorded at fair market value at the time gifts are received. Library books
are recorded using a historically based estimated value. Expenditures for maintenance
and repairs are expensed as incurred. Depreciation is computed using the straight-line
method. No depreciation is recorded on land. Expenditures for major renewals and
betterments that extend the useful lives of the assets are capitalized. The following
estimated useful lives are used to compute depreciation:
Buildings
Land improvements and infrastructure
Furniture, fixtures, and equipment
40 years
20 years
5-15 years
Unearned Revenue - Revenue received prior to year end that relates to the next fiscal
period is recorded as unearned revenue. Unearned revenue consists of approximately
$664,000 and $761,000 for the 2014 and 2013 summer semesters, respectively, and
approximately $631,000 and $605,000 for the 2014 and 2013 fall semesters,
respectively. The remaining amount included in unearned revenue relates to grant
funding received during the year that will either be spent in future years or returned to
the granting agencies.
21
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 1 - Industry Information and Significant Accounting Policies
(Continued)
Unrestricted Net Position - Unrestricted net position represents net positions that
are not subject to externally imposed constraints. Unrestricted net position may be
designated for specific purposes by action of management or the board of trustees.
Net Investment in Capital Assets - Net investment in capital assets represents
capital assets, net of accumulated depreciation and outstanding principal balances of
debt attributable to the acquisition, construction, or improvement of those assets.
Restricted Net Position - Restricted net position represents amounts over which
third parties have imposed restrictions that cannot be changed by the board, including
amounts that the board has agreed to set aside under contractual agreements with third
parties. The restricted balance consists primarily of funds restricted for student loans,
scholarships, capital improvements, and other purposes. Generally, the College first
applies restricted resources when an expense is incurred for which both restricted and
unrestricted resources are available.
Scholarship Discounts and Allowances - Student tuition and fee revenues, and
certain other revenues from students, are reported net of scholarship discounts and
allowances in the statement of revenues, expenses, and changes in net position.
Scholarship discounts and allowances are the difference between the stated charge for
goods and services provided by the College, and the amount that is paid by students
and/or third parties making payments on the students’ behalf. Certain governmental
grants, such as Pell grants, and other federal, state, or nongovernmental programs, are
recorded as either operating or nonoperating revenues in the College’s financial
statements. To the extent that revenues from such programs are used to satisfy tuition
and fees and other student charges, the College has recorded a scholarship discount and
allowance.
Operating Revenue and Expenses - Revenue and expense transactions are normally
classified as operating revenue and expenses when such transactions are generated by
the College’s principal ongoing operations. However, most revenue that is considered
to be nonexchange, such as tax revenue, federal Pell grant revenue, and state
appropriations, is nonoperating revenue.
Revenue Recognition of Tuition and Fees - The academic programs are offered in
traditional fall and spring semesters. Revenue from tuition and student fees is recognized
during the academic term. Revenue from the summer semester, which commences in
May and ends in August, is split and recognized proportionally to the number of days of
the semester within the fiscal year. Tuition revenue is reported at established rates net
of institutional financial aid and discounts provided directly by the College to students.
22
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 1 - Industry Information and Significant Accounting Policies
(Continued)
Grant Revenue - Revenue from grant and contract agreements is recognized as it is
earned through expenditure in accordance with the agreement.
Federal Financial Assistance Programs - The College participates in federally funded
Pell grants, SEOG grants, Federal Work Study, and Federal Direct Lending programs.
Federal programs are audited in accordance with the Single Audit Act amendments of
1996, the U.S. Office of Management and Budget Revised Circular A-133, Audit of
States, Local Governments and Non-Profit Organizations, and the compliance supplement.
During the years ended June 30, 2014 and 2013, the College distributed $16,997,120
and $19,384,407, respectively, for direct lending through the U.S. Department of
Education, which is not included as revenue and expenditures on the accompanying
financial statements.
Reclassification - Certain 2013 amounts have been reclassified to conform to the 2014
presentation.
Note 2 - Property Taxes
Property tax revenue is recognized in the year for which taxes have been levied.
Property taxes are levied on July 1 and December 1 based on taxable values as of the
preceding December 31. The taxes, which are collected and remitted to the College by
townships within the College district boundaries, are collected through February 28.
Uncollected real property taxes of the College are turned over to the counties in which
the district is located for subsequent collection. The College is subsequently paid
100 percent of delinquent real property taxes through the counties’ tax revolving funds.
These payments are usually received within three to five months after the delinquency
date.
During the years ended June 30, 2014 and 2013, $2.8636 of tax per $1,000 of taxable
property value in the College’s taxing district was levied for general operating purposes
on all property. Total operating property tax revenue was $9,889,443 and $9,613,656
for the years ended June 30, 2014 and 2013, respectively.
For capital improvement and debt retirement purposes, $.7500 and $.8470 per $1,000
of taxable property value in the College’s taxing district was levied for the years ended
June 30, 2014 and 2013. Total property tax revenue for the retirement of debt related
to the 2014 bond issuances and capital improvement projects was $2,590,125 and
$2,582,576 for the years ended June 30, 2014 and 2013, respectively.
23
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 3 - Cash and Investments
The College considers all highly liquid investments with a maturity of three months or
less when purchased to be cash equivalents. The College’s deposits and investments are
included on the statement of net position under the following classifications at June 30,
2014 and 2013:
2014
Cash and cash equivalents
Short-term investments
Restricted cash
Long-term investments
2013
$ 11,886,837 $ 8,967,623
2,343,423
2,425,731
6,367,260
839,234
1,441,282
$ 21,436,754 $ 12,834,636
Total cash and investments
The amounts in the previous chart are classified in the following categories:
2014
2013
Cash and cash equivalents
Investments in securities and similar instruments
Petty cash and cash on hand
$ 18,246,913 $ 8,960,439
3,182,657
3,867,013
7,184
7,184
Total cash and investments
$ 21,436,754 $ 12,834,636
As of June 30, 2014, the College had the following investments and maturities:
Fair Market
Value
Certificates of deposit
Notes and bonds
Money market
Total
Less Than
One Year
1-5 Years
6-10 Years
More Than 10
Years
$
2,435,905 $
55,190
691,562
1,651,861 $
691,562
784,044 $
-
-
$
55,190
-
$
3,182,657 $
2,343,423 $
784,044 $
-
$
55,190
24
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 3 - Cash and Investments (Continued)
As of June 30, 2013, the College had the following investments and maturities:
Fair Market
Value
Certificates of deposit
Notes and bonds
Money market
Total
Less Than
One Year
1-5 Years
6-10 Years
More Than 10
Years
$
2,413,994 $
1,169,130
283,889
1,641,666 $
500,176
283,889
772,328 $
505,780
-
-
$
163,174
-
$
3,867,013 $
2,425,731 $
1,278,108 $
-
$
163,174
Interest Rate Risk - The College does not have a formal investment policy that limits
investment maturities as a means of managing its exposure to fair value losses arising
from increasing interest rates. The College does invest in accordance with state law.
Credit Risk - According to state law, the College must limit investments in commercial
paper to corporations rated prime by at least one of the standard rating services. The
Foundation invests in mutual funds with a long-term growth objective.
At June 30, 2014 and 2013, the College’s investments subject to credit risk (interest rate
fluctuations) and related ratings consisted of the following:
2014
Market
Value
Government National Mortgage Association Bonds
Federal Home Loan Mortgage Corp., 2.25%, 1/23/17
Federal Home Loan Mortgage Corp., 4.50%, 7/15/37
U.S. Treasury Bonds dated 07/15/13
Total
$
55,190
-
$
55,190
2013
NRSRO
Rating
N/A
N/A
N/A
N/A
Market
Value
$
98,015
505,780
65,159
500,176
$
1,169,130
NRSRO
Rating
N/A
Aaa
N/A
AAA
The nationally recognized statistical rating organization (NRSRO) utilized is primarily
Moody’s Investors Service.
25
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 3 - Cash and Investments (Continued)
Custodial Credit Risk of Bank Deposits - Custodial credit risk is the risk that in the
event of a bank failure, the College’s deposits may not be available or returned. The
College does not have a deposit policy for custodial credit risk. At June 30, 2014 and
2013, the carrying amount of the College’s deposits was approximately $21,700,000 and
$11,900,000, respectively. Of that amount, approximately $2,400,000 and $2,500,000,
respectively, was insured by the Federal Deposit Insurance Corporation and National
Credit Union Insurance Fund. The remaining $19,300,000 and $9,400,000 at June 30,
2014 and 2013, respectively, was uninsured and uncollateralized. The College does not
require deposits to be insured or collateralized. It is precluded by state law from
collateralizing its deposits.
Custodial Credit Risk of Investments - Custodial credit risk is the risk that, in the
event of the failure of the counterparty, the College will not be able to recover the
value of its investments or collateral securities that are in the possession of an outside
party. The College’s investment policy does not address custodial credit risk. All of the
investments are, however, in the name of the College, and the investments are held in
trust accounts with each financial institution from which they were purchased.
More than 5 percent of the College’s investments at June 30 were invested as follows:
Issuer
Fifth Third Bank
Goldman Sachs
United Educational Credit Union
Southern Michigan Bank and Trust
Chemical Bank
Post Community Credit Union
Kellogg Community Federal Credit Union
Marshall Community Credit Union
Omni Community Credit Union
26
2014
2013
19%
8%
8%
8%
8%
8%
17%
8%
11%
7%
6%
7%
7%
7%
7%
14%
7%
9%
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 3 - Cash and Investments (Continued)
Foundation Investments - Investments at Kellogg Community College Foundation are
as follows:
2013
2014
Amortized
Cost
Mutual funds
Fair Value
Amortized
Cost
Fair Value
$ 7,308,867 $ 8,732,125 $ 7,114,372 $ 7,972,516
The Foundation invests in mutual funds with a long-term objective to preserve principal
and provide appreciation. Due to the long-term nature of the investments, the
Foundation does not limit investment maturities. The Foundation is also not limited to
the investing restrictions imposed on the College by state law.
Note 4 - Accounts Receivable
Accounts receivable consist of the following:
Student and third party
Grants and contracts
State appropriations - Operating
Other
Total accounts receivable
Less allowance for uncollectibles
Net accounts receivable
2014
2013
$ 2,897,658
1,398,748
2,013,231
1,500,023
$ 2,670,239
497,786
2,220,055
523,218
7,809,660
5,911,298
(2,400,000)
(2,000,000)
$ 5,409,660 $ 3,911,298
The College values accounts receivable at gross realizable value. All amounts deemed to
be uncollectible are charged directly against income in the period that determination is
made.
27
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 5 - Capital Assets
Capital asset activity for the year ended June 30, 2014 was as follows:
Beginning
Additions
Balance
Land improvements
Building and building improvements
Furniture, fixtures, and equipment
$
Subtotal - Depreciable assets
Land
Construction in progress
Subtotal - Nondepreciable assets
Total
Less accumulated depreciation:
Land improvements
Building and building improvements
Furniture, fixtures, and equipment
Total accumulated depreciation
Capital assets - Net
$
28
Transfers/
Ending
Disposals
Balance
3,051,417 $
66,572,585
13,002,788
16,586 $
1,130,613
1,109,279
-
82,626,790
2,256,478
-
290,602
125,904
3,331,584
(118,979)
290,602
3,338,509
416,506
3,331,584
(118,979)
3,629,111
83,043,296
5,588,062
(118,979)
88,512,379
1,811,171
22,813,911
10,889,991
89,334
1,459,098
486,400
35,515,073
$ 2,034,832
47,528,223
$
$
3,068,003
67,703,198
14,112,067
84,883,268
-
1,900,505
24,273,009
11,376,391
-
37,549,905
$
50,962,474
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 5 - Capital Assets (Continued)
Capital asset activity for the year ended June 30, 2013 was as follows:
Beginning
Balance
$
Land improvements
Building and building improvements
Furniture, fixtures, and equipment
Subtotal - Depreciable assets
Land
Construction in progress
Subtotal - Nondepreciable assets
Total
Less accumulated depreciation:
Land improvements
Building and building improvements
Furniture, fixtures, and equipment
Total accumulated depreciation
Capital assets - Net
$
Additions
Transfers/
Ending
Disposals
Balance
2,970,039 $
61,767,774
12,579,270
81,378 $
4,804,811
477,694
$
(54,176)
3,051,417
66,572,585
13,002,788
77,317,083
5,363,883
(54,176)
82,626,790
290,602
401,983
127,314
(403,393)
290,602
125,904
692,585
127,314
(403,393)
416,506
78,009,668
5,491,197
(457,569)
83,043,296
1,717,749
21,416,234
10,398,660
93,422
1,397,677
543,338
(52,007)
1,811,171
22,813,911
10,889,991
33,532,643
$ 2,034,437
(52,007)
35,515,073
$
44,477,025
$
47,528,223
Note 6 - Long-term Obligations
Long-term obligation activity during the year ended June 30, 2014 was as follows:
Beginning
Balance
Additions
Reductions Ending Balance
Bonds Payable College Building and Site Bonds
$ 9,725,000 $
Series 2014
$
Other Long-term Liabilities
Accrued retirement and
3,385,000
220,000
compensated absences
Unamortized bond premium
236,527
Total
$ 3,385,000 $ 10,181,527 $
29
Current
Portion
-
$ 9,725,000 $
995,000
5,166
3,605,000
231,361
930,000
18,129
5,166 $ 13,561,361 $ 1,943,129
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 6 - Long-term Obligations (Continued)
Long-term obligation activity during the year ended June 30, 2013 was as follows:
Beginning
Balance
Bonds Payable 2002 Community College
$
Improvement bonds
Other Long-term Liabilities Accrued retirement and
compensated absences
Total
$
Additions
2,200,000 $
-
Current
Portion
Reductions Ending Balance
$ 2,200,000 $
-
-
$
3,145,000
240,000
3,385,000
5,345,000 $
240,000 $ 2,200,000 $ 3,385,000 $
-
910,000
910,000
College Building and Site Bonds, Series 2014 - Bonds issued in March 2014 for
$9,750,000. Interest on the bond ranges from 2.00 percent to 3.00 percent and is
payable semiannually in April and October. The first principal installment of $995,000 is
due on April 1, 2015 and the final principal installment of $490,000 is due on April 1,
2027. The proceeds from the bonds will be used for capital projects.
Total principal and interest maturities on the bond payable as of June 30, 2014 is as
follows:
Debt Obligations
Interest
Principal
Years Ending
June 30
2015
2016
2017
2018
2019
2020-2024
2025-2027
Total
$
Total
995,000 $ 229,097 $ 1,224,097
995,000
201,213
1,196,213
995,000
181,313
1,176,313
995,000
161,413
1,156,413
995,000
141,513
1,136,513
3,275,000
437,675
3,712,675
94,461
1,569,461
1,475,000
$ 9,725,000 $ 1,446,685 $ 11,171,685
Community College Improvement Bonds, 2002 - Bonds issued in March 2002 in
the amount of $11,500,000. The last principal installment of $2,200,000 was paid in
October 2012. The proceeds from the bonds were used on the 21st Century Project.
Cash Paid for Interest - Cash paid for interest was approximately $44,000 for the
years ended June 30, 2013, respectively. There was no cash paid for interest during the
year ended June 30, 2014.
30
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 6 - Long-term Obligations (Continued)
Accrued Retirement and Compensated Absences - The College provides
termination benefits upon departure from the College resulting from unused sick time
and years of service and defined by each respective labor contract and administrative
policy under the vesting method. Under the vesting method, the liability is accrued for
employees based on the amount eligible and certain assumptions are used to determine
probability of reaching the criteria required for eligibility. Included in the current portion
of the accrual is earned but not used vacation and amounts to be provided to employees
that will be retiring in the upcoming fiscal year. Management believes these calculations
accurately reflect the College’s liability as a result of offering these benefits.
Note 7 - Retirement Plans
Defined Benefit Plan
Plan Description - The College participates in the Michigan Public School Employees’
Retirement System (MPSERS), a statewide, cost-sharing, multiple-employer defined
benefit public employee retirement system governed by the State of Michigan that
covers substantially all employees of the College. The MPSERS provides retirement,
survivor, and disability benefits to plan members and their beneficiaries.
The Michigan Public School Employees’ Retirement System issues a publicly available
financial report that includes financial statements and required supplemental information
for the MPSERS. That report may be obtained by writing to the MPSERS at 7150 Harris
Drive, P.O. Box 30171, Lansing, MI 48909-7671.
Funding Policy - Employer contributions to the MPSERS result from the implementing
effects of the School Finance Reform Act. Under these procedures, each college is
required to contribute the full actuarial funding contribution amount to fund pension
benefits, plus an additional amount to fund retiree healthcare benefit amounts on a cash
disbursement basis.
Retirement Benefits - The employer contribution rates for plan members ranged
from 15.44 percent to 18.34 percent of covered payroll for the period from July 1, 2013
through June 30, 2014 and 12.78 to 16.25 percent of covered payroll for the period
from July 1, 2012 through June 30, 2013 based on the plan option selected. The plan
options include Basic, Member Investment Plan (MIP), MIP Fixed, MIP Graded, MIP
Plus, Pension Plus, and beginning February 1, 2013, employees could transition to a
defined contribution (DC) plan, and could also elect out of the healthcare premium
subsidy and into the Personal Healthcare Fund (PHF), depending on their date of hire
and retirement plan election. Depending on the plan selected, plan member
contributions range from 0.0 percent up to 6.0 percent of gross wages. Plan members
electing into the defined contribution plan are not required to make additional
contributions.
31
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 7 - Retirement Plans (Continued)
The College’s required and actual contributions to the plan for retirement benefits for
the years ended June 30, 2014, 2013, and 2012 were approximately $3,086,000,
$2,221,000, and $1,944,000, respectively.
Postemployment Benefits - Under the MPSERS Act, all retirees participating in the
MPSERS pension plan have the option of continuing health, dental, and vision coverage
through MPSERS. Retirees electing this coverage contribute an amount equivalent to the
monthly cost for Part B Medicare and 10 percent of the monthly premium amount for
the health, dental, and vision coverage at the time of receiving the benefits. The MPSERS
board of trustees annually sets the employer contribution rate to fund the benefits on a
pay-as-you-go basis. Participating employers are required to contribute at that rate. The
employer contribution rate was 8.50 percent of covered payroll for the period July 1,
2012 through September 30, 2012. The employer contribution rate ranged from 8.18
percent to 9.11 percent of covered payroll for the period October 1, 2012 through
September 30, 2013 and 5.52 percent to 6.45 percent of covered payroll for the period
from October 1, 2013 through June 30, 2014, dependent upon the employee’s date of
hire and plan election as noted above. Effective February 1, 2013, members can choose
to contribute 3 percent of their covered payroll to the Retiree Healthcare Fund and
keep this premium subsidy benefit, or they can elect not to pay the 3 percent
contribution and instead choose the Personal Healthcare Fund, which can be used to
pay healthcare expenses in retirement. Members electing the Personal Healthcare Fund
will be automatically enrolled in a 2 percent employee contribution into their 457
account as of their transition date and create a 2 percent employer match into the
employee’s 401(k) account.
The College’s required and actual contributions to the plan for retiree healthcare
benefits for the years ended June 30, 2014, 2013, and 2012 totaled approximately
$1,228,000, $1,227,000, and $1,239,000, respectively.
Defined Contribution Plan
As an alternative pension option, the College offers all full-time faculty and
administrative employees the opportunity to participate in the Teachers’ Insurance and
Annuity Association - College Retirement Equities Fund (TIAA-CREF). Funding for the
plan consists of employer contributions of 10.5 percent and employee contributions of
4.0 percent of covered compensation for the years ended June 30, 2014 and 2013.
Benefits vest immediately. Compensation covered under the plan for the years ended
June 30, 2014 and 2013 was approximately $6,802,000 and $6,768,000, respectively,
resulting in contributions of approximately $714,000 and $711,000, respectively, for the
College and $272,000 and $271,000, respectively, for employees.
32
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 8 - Kellogg Community College Foundation
The Foundation was incorporated in 1998 and was organized to provide support
exclusively for the objectives and purposes of Kellogg Community College and to
augment the facilities of the College in such a manner as may be designated by its board
of trustees. All distributions made out of the Foundation, other than normal operating
expenses, are to be made to the College. Substantially all administrative and general
costs incurred by the Foundation since its inception, other than commissions and trust
administrative fees, have been paid and expensed by the College. Upon dissolution of
the Foundation, its remaining assets will be distributed to the College.
Accounting principles generally accepted in the United States of America require
management to evaluate tax positions taken by the Foundation and recognize a tax
liability if the Foundation has taken an uncertain position that more likely than not would
not be sustained upon examination by the IRS or other applicable taxing authorities.
Management has analyzed the tax positions taken by the Foundation and has concluded
that as of May 31, 2014 and 2013, there are no uncertain positions taken or expected to
be taken that would require recognition of a liability or disclosure in the financial
statements. The Foundation is subject to routine audits by taxing jurisdictions; however,
there are currently no audits for any tax periods in progress. Management believes it is
no longer subject to income tax examinations for years prior to May 31, 2011.
Note 9 - Risk Management
The College is exposed to various risks of loss related to property loss, errors and
omissions, and employee injuries (workers' compensation), as well as medical benefits
provided to employees. The College has purchased commercial insurance for property
loss, errors and omissions, and medical benefits provided to employees and claims
relating to employee injuries. Settled claims relating to the commercial insurance have
not exceeded the amount of insurance coverage in any of the past three fiscal years.
33
Kellogg Community College
Notes to Financial Statements
June 30, 2014 and 2013
Note 9 - Risk Management (Continued)
Self-insurance
The College is self-insured for health benefits. The College estimates the liability for
medical benefit claims that have been incurred through the end of the fiscal year,
including both those claims that have been reported as well as those that have not yet
been reported. The College has purchased insurance to protect the College for claims in
excess of $35,000.
2014
2013
Estimated liability - Beginning of year
Estimated claims incurred, including changes in estimates
Less claim payments
$
$
424,139
(174,139)
-
Estimated liability - End of year
$
250,000 $
-
Note 10 - Upcoming Pronouncements
In June 2012, the GASB issued Statement No. 68, Accounting and Financial Reporting for
Pensions. Statement No. 68 requires governments providing defined benefit pensions to
recognized their unfunded pension benefit obligations as a liability for the first time, and
to more comprehensively and comparably measure the annual costs of pension benefits.
The statement also enhances accountability and transparency through revised note
disclosures and required supplemental information (RSI). The College is currently
evaluating the impact this standard will have on the financial statements when adopted.
The total pension liability will be computed on a different basis than the current actuarial
accrued liability and the method of allocating this liability to each participating employer
has not yet been determined, so the precise impact is not known; however, if we
approximate the liability based on the actuarial accrued liability and allocated based on
covered payroll, this computes to a liability of $38 million. The provisions of this
statement are effective for financial statements for the year ending June 30, 2015.
34
Supplemental Information
35
~This Page Intentionally Left Blank ~
Kellogg Community College
General Fund
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable - Net
Other current assets
Due (to) from other funds
$
Total current assets
Noncurrent assets:
Restricted cash
Long-term investments
Capital assets
Total noncurrent assets
Total assets
Auxiliary Fund
11,886,837 $
2,158,084
3,792,454
730,722
(5,160,578)
238,183
508,365
1,094,494
13,407,519
1,841,042
Restricted Fund
$
185,339
1,004,023
569,613
1,758,975
Plant Fund
$
375,000
3,496,471
3,871,471
839,234
-
-
-
6,367,260
50,962,474
839,234
-
-
57,329,734
14,246,753
1,841,042
1,758,975
61,201,205
1,948,375
1,600,119
1,294,885
2,564
-
1,439,944
880,000
799,613
17,000
59,060
33,000
-
995,000
18,129
-
6,522,992
78,624
1,472,944
1,013,129
Liabilities
Current liabilities:
Accounts payable
Accured payroll and related liabilities
Unearned revenue
Accrued retirement and compensated
absences - Current
Bonds payable - Current
Unamortized bond premium - Current
Other current liabilities
Total current liabilities
-
Noncurrent liabilities:
Accrued retirement and compensated
absences - Noncurrent
Bonds payable - Noncurrent
Unamortized bond premium - Noncurrent
2,675,000
-
-
-
8,730,000
213,232
Total noncurrent liabilities
2,675,000
-
-
8,943,232
Total liabilities
9,197,992
Net Position
Net investment in capital assets
Restricted for:
Expendable scholarships and fellowships
Capital improvements
Unrestricted
Total net position
78,624
-
-
5,048,761
$
5,048,761
36
1,472,944
-
1,762,418
$
1,762,418
$
9,956,361
47,373,373
286,031
-
1,718,305
2,153,166
286,031
$ 51,244,844
Combining Statement of Net Position
June 30, 2014
Total
$
11,886,837
2,343,423
5,409,660
1,239,087
-
Eliminations
$
-
Combined Total
$
11,886,837
2,343,423
5,409,660
1,239,087
-
20,879,007
-
20,879,007
6,367,260
839,234
50,962,474
-
6,367,260
839,234
50,962,474
58,168,968
-
58,168,968
79,047,975
-
79,047,975
1,950,939
1,600,119
2,734,829
-
1,950,939
1,600,119
2,734,829
930,000
995,000
18,129
858,673
-
930,000
995,000
18,129
858,673
9,087,689
-
9,087,689
2,675,000
8,730,000
213,232
-
2,675,000
8,730,000
213,232
11,618,232
-
11,618,232
20,705,921
-
20,705,921
47,373,373
-
47,373,373
286,031
1,718,305
8,964,345
-
286,031
1,718,305
8,964,345
$ 58,342,054
$
-
$
58,342,054
37
Kellogg Community College
General Fund
Operating Revenue
Tuition and fees - Net of scholarship allowance
Federal grants and contracts
State grants and contracts
Private gifts, grants, and contracts
Sales and services of auxiliary activities - Net of
scholarship allowance
Other sources
$
Total operating revenue
Operating Expenses
Instruction
Public service
Instructional support
Student services
Institutional administration
Physical plant operations
Independent operations
Depreciation
Total operating expenses
16,063,578
221,694
66,349
$
Nonoperating Revenue (Expenses)
State appropriations
Property taxes
Pell revenue
Investment income
Interest on capital asset - Related debt
Debt issuance cost
Net nonoperating revenue
648,129
2,148,630
517,349
1,728,987
$
500,000
173,893
17,417,520
3,884,047
5,216,988
500,000
19,390,478
153,413
6,236,821
3,399,041
4,508,034
3,920,956
-
288,115
3,003,362
-
1,304,561
756,920
14,315,968
-
647,911
2,034,832
37,608,743
3,291,477
16,377,449
2,682,743
(11,160,461)
(2,182,743)
592,570
-
10,334,704
9,889,443
33,817
-
8,465
-
36,429
11,806,851
-
2,590,125
11,465
(51,097)
(90,967)
20,257,964
8,465
11,843,280
2,459,526
66,741
601,035
682,819
276,783
(60,249)
(500,000)
(687,312)
1,247,561
6,492
101,035
(4,493)
1,524,344
5,042,269
1,661,383
Transfers
Increase (Decrease) in Net Position
$
$
Plant Fund
3,497,735
146,312
Increase in Net Position - Before transfers
Net Position - Beginning of year
240,000
-
Restricted Fund
117,050
948,849
(20,191,223)
Operating (Loss) Income
Net Position - End of year
Auxiliary Fund
5,048,761
38
$
1,762,418
$
290,524
49,720,500
286,031
$ 51,244,844
Combining Statement of Revenue, Expenses, and
Changes in Net Position
Year Ended June 30, 2014
Total
$
Eliminations
16,951,707
2,148,630
739,043
2,295,336
$
Combined Total
(4,782,833) $
-
12,168,874
2,148,630
739,043
2,295,336
3,614,785
1,269,054
(1,041,516)
(273,000)
2,573,269
996,054
27,018,555
(6,097,349)
20,921,206
20,695,039
910,333
6,236,821
18,003,124
4,508,034
4,568,867
3,003,362
2,034,832
(4,782,833)
(1,314,516)
-
20,695,039
910,333
6,236,821
13,220,291
4,508,034
4,568,867
1,688,846
2,034,832
59,960,412
(6,097,349)
53,863,063
(32,941,857)
-
(32,941,857)
10,379,598
12,479,568
11,806,851
45,282
(51,097)
(90,967)
-
10,379,598
12,479,568
11,806,851
45,282
(51,097)
(90,967)
34,569,235
-
34,569,235
1,627,378
-
1,627,378
-
-
-
1,627,378
-
1,627,378
56,714,676
-
56,714,676
$ 58,342,054
$
-
$
58,342,054
39
Kellogg Community College
Schedule of General Fund Expenditures
Year Ended June 30, 2014
(with comparative totals for the year ended June 30, 2013)
Salaries
Instruction
General education
Business and human services
Technical and industrial trades
Health occupations
Developmental and basic skills
Human development
Personal interest
Equipment
$
Total instruction
Other
Expenses
Expenses
6,006,377
3,240,976
1,503,375
4,657,365
1,562,841
14,923
124,488
-
$
17,110,345
Instructional Support
Instructional support
Equipment
Total instructional support
Student Services
Student services programs
and administration
Financial aid
Intercollegiate athletics
Equipment
Total student services
Institutional Administration
Institutional administration
Equipment
Total institutional administration
Physical Plant Operations
Physical plant operations
Energy services
Campus security
Equipment
Total physical plant operations
$
611,072
480,407
300,938
654,296
108,971
941
7,849
-
Equipment
$
2,164,474
153,413
Public Serivce
Total expenditures
and Related
115,659
115,659
-
-
$
2014
2013
Total
Total
6,617,449
3,721,383
1,804,313
5,311,661
1,671,812
15,864
132,337
115,659
$
6,633,198
3,698,102
1,822,451
5,138,573
1,519,041
10,629
136,029
170,269
19,390,478
19,128,292
153,413
145,277
5,380,343
-
832,626
-
23,852
6,212,969
23,852
6,170,239
7,030
5,380,343
832,626
23,852
6,236,821
6,177,269
2,290,710
493,194
101,976
-
297,890
196,346
6,429
-
12,496
2,588,600
689,540
108,405
12,496
2,275,140
955,021
103,084
4,661
2,885,880
500,665
12,496
3,399,041
3,337,906
2,777,826
-
1,703,047
-
27,161
4,480,873
27,161
4,226,748
28,882
2,777,826
1,703,047
27,161
4,508,034
4,255,630
957,748
107,120
-
1,714,517
850,525
253,323
-
37,723
2,672,265
850,525
360,443
37,723
2,508,544
746,448
340,479
67,146
1,064,868
2,818,365
37,723
3,920,956
3,662,617
29,372,675
$ 8,019,177
216,891
$ 37,608,743
40
$
$
36,706,991