Annual Financial Report

Transcription

1 Annual Financial Report

2 ATTACHMENT 3 MANAGEMENT S DISCUSSION AND ANALYSIS The management s discussion and analysis of Miami Dade College s financial statements provides an overview of the College s financial activities for the fiscal year ended June 30, Management has prepared the financial statements and the related note disclosures along with the management s discussion and analysis. Responsibility for the completeness and fairness of this information rests with the College. The management s discussion and analysis contains financial activities of the College for the and fiscal years, and its component unit, the Miami Dade College Foundation, Inc., for the nine-month period ended March 31, 2006, and the fiscal year, and should be read in conjunction with the accompanying financial statements. As discussed in note 1 to the financial statements, the Foundation changed its fiscal year from July through June, to April through March. This change affects the comparability of the amounts reported between current and previous reporting periods. FINANCIAL HIGHLIGHTS The College s financial position improved during the fiscal year ended June 30, 2006, reflected by a $46.6 million, or 7.4 percent, increase in net assets from the fiscal year. The College s comparative total net assets by category for the fiscal years ended June 30, 2006 and June 30, 2005 are shown on the following graph: Net Assets: College (In Thousands) 400, , , , , ,000 37,225 32,610 0 Invested in Capital Assets, Net of Related Debt Restricted Unrestricted The following chart provides a graphical presentation of College revenues by category for the fiscal year: -1-

3 MANAGEMENT S DISCUSSION AND ANALYSIS Total Revenues: College Other Revenues 12% Operating Revenues 24% Nonoperating Revenues 64% For the fiscal year ended June 30, 2006, College revenue and other support exceeded expenses, creating an increase in net assets of $46.6 million, compared to a $67.1 million increase in the fiscal year. Nonoperating revenues represent 64 percent of total revenues and are comprised of state appropriations, other gifts and grants, and investment income with a purpose of supporting operating expenses. USING THIS ANNUAL REPORT This report consists of three basic financial statements. The statement of net assets; the statement of revenues, expenses, and changes in net assets; and the statement of cash flows provide information on the College as a whole and present a long-term view of the College s finances. The following activities are included in the College s basic financial statements. Miami Dade College (Primary Institution) Most of the programs and services generally associated with a college fall into this category, including instruction, public service, and support services. Miami Dade College Foundation, Inc. (Component Unit) Although legally separate, this component unit is important because the College is financially accountable for it, as the College reports their financial activities to the State of Florida. The Statement of Net Assets and the Statement of Revenues, Expenses, and Changes in Net Assets One of the most important questions asked about the College s finances is, Is Miami Dade College, as a whole, better off or worse off as a result of the year s activities? The statement of net assets and the statement of revenues, expenses, and changes in net assets report information on the College as a whole and on its activities in a way that helps answer this question. When revenues and other -2-

4 MANAGEMENT S DISCUSSION AND ANALYSIS support exceed expenses, the result is an increase in net assets. When the reverse occurs, the result is a decrease in net assets. The relationship between revenues and expenses may be thought of as Miami Dade College s operating results. These two statements report Miami Dade College s net assets and changes in them. You can think of the College s net assets, the difference between assets and liabilities, as one way to measure the College s financial health, or financial position. Over time, increases or decreases in the College s net assets are one indicator of whether its financial health is improving or deteriorating. You will need to consider many other nonfinancial factors, such as certain trends, student retention, condition of the buildings, and the safety of the campus, to assess the overall health of the College. These statements present 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 years revenues and expenses are taken into account regardless of when cash is received and paid. Comparative assets, liabilities, and net assets for the College and its component unit for the fiscal years ended June 30, 2006, and June 30, 2005 are presented in the following table: -3-

5 MANAGEMENT S DISCUSSION AND ANALYSIS Assets, Liabilities, and Net Assets at June 30 (In Thousands) College Component Unit Assets Current Assets $ 158,532 $ 133,813 $ 18,986 $ 82,252 Capital Assets, Net 330, ,365 74,258 9 Other NonCurrent Assets 261, , Total Assets 751, ,324 93,320 82,314 Liabilities Current Liabilities 50,421 54,537 3,869 2,806 Noncurrent Liabilities 23,485 23,186 Total Liabilities 73,906 77,723 3,869 2,806 Net Assets Invested in Capital Assets Net of Related Debt 324, ,995 Restricted 315, ,996 85,972 76,225 Unrestricted 37,225 32,610 3,480 3,283 Total Net Assets 677, ,601 89,452 79,508 Increase (Decrease) in Net Assets $ 46, % $ 9, % Comparative revenues and expenses of the College and its component unit for the and fiscal years are presented in the following table: -4-

6 MANAGEMENT S DISCUSSION AND ANALYSIS Operating Results for the Fiscal Years (In Thousands) College Component Unit Operating Revenues Student Tuition and Fees, Net of Scholarship Allowances $ 62,299 $ 58,529 $ - $ - Federal Grants and Contracts 15,631 16,322 State and Local Grants and Contracts 6,750 7,068 3,089 6,251 Nongovernmental Grants and Contracts 4,718 3,327 Sales and Services of Educational Departments Auxiliary Enterprises 3,061 2,985 Other Operating Revenues 5,249 3,692 4,102 6,704 Total Operating Revenues 98,074 92,216 7,191 12,955 Less Operating Expenses 361, ,979 7,839 7,315 Net Operating Income (Loss) (263,141) (256,763) (648) 5,640 Nonoperating Revenues State Appropriations 159, ,055 Other Nonoperating Revenues 98, ,087 7,592 6,707 Net Nonoperating Revenues 258, ,142 7,592 6,707 Income (Loss) Before Other Revenues, Expenses, Gains, or Losses (4,314) 4,379 6,944 12,347 Capital Appropriations 45,465 56,586 Capital Grants and Contracts 3,962 4,187 Additions to Permanent Endowments 1,500 1,911 Increase in Net Assets 46,613 67,063 6,944 12,347 Net Assets, Beginning of Year 630, ,538 79,508 67,161 Net Assets, End of Year $ 677,214 $ 630,601 $ 86,452 $ 79,508 Revenues Operating revenues of the College increased by $5.9 million from the prior fiscal year as a result of the following factors: Student tuition and fee revenue increased by $3.8 million net of the scholarship allowance. The increase resulted from an increase in the student fee rate approved by the District Board of Trustees and was slightly offset by a decrease in full-time equivalent student enrollment. Operating revenue from Federal, State, and local government decreased by $1 million, or 4.3 percent, as a result of a decrease in support from Federal and State sources versus the

7 MANAGEMENT S DISCUSSION AND ANALYSIS 05 fiscal year. Variances from year to year for these revenue sources tend to coincide with fluctuations in student enrollment. Revenues from nongovernmental and private grants and contracts increased by $1.4 million, or 41.8 percent, due to an increase in private support. Other Operating Revenues increased by $1.6 million, or 42.2 percent, primarily due to the recognition of insurance claims submitted to the College s insurance provider related to damages caused by recent hurricanes. Nonoperating revenues of the College decreased by $2.3 million, as a result of the following factors: State appropriations increased by $8.8 million, or 5.8 percent, as projected. Other nonoperating revenues decreased by $11.1 million, due primarily to a $10 million decrease in Federal Pell Grant revenue reported by the College, coupled with a $0.9 million decrease in investment income versus the fiscal year. Capital appropriations decreased by $11.1 million as a result of a reduction of State funding provided to the College in support of capital projects when compared to the fiscal year. Additions to permanent endowments decreased by $0.4 million as a result of mild market fluctuations and the reporting of these investments at their fair value. The reporting of investments at fair value result in unrealized gains and losses as described in the notes to the financial statements. Operating Expenses Operating expenses for the College and its component unit for the and fiscal years are presented in the following table: -6-

8 MANAGEMENT S DISCUSSION AND ANALYSIS Operating Expenses (In Thousands) College Component Unit Operating Expenses Salaries and Benefits $ 221,737 $ 214,122 $ 1,408 $ 966 Scholarships and Waivers 48,358 56,262 4,120 3,634 Utilities and Communications 10,342 8,982 Contractual Services 12,316 13,024 Other Services and Expenses 33,406 18,246 2,302 2,705 Materials and Supplies 16,773 19,144 Depreciation 18,283 19, Total Operating Expenses $ 361,215 $ 348,979 $ 7,839 $ 7,315 College operating expenses increased by $12.2 million, or 3.5 percent, as a result of the following factors: Salary and benefits expenditures increased by $7.6 million, or 3.6 percent, due to a 4.0 percent annual increase in base salary, partially offset by open positions. Scholarships and waivers decreased by $7.9 million, or 14 percent, principally due to a decrease in Federal Pell Grant awards reported by the College, a result of declining enrollment. Utilities and Communications expenses increased by $1.4 million, or 15.1 percent. This increase is mainly attributable to higher usage rates for these services, as expected. Other services and expenses increased by $15.2 million, or 83.1 percent, primarily due to a decrease in capitalized expenses versus the fiscal year. Materials and supplies expenses decreased by $2.4 million, or 12.4 percent. This decrease is reflective of cost-containment measures employed college-wide, and a declining enrollment experience. Depreciation expense for the period decreased by $0.9 million, or 4.8 percent. -7-

9 MANAGEMENT S DISCUSSION AND ANALYSIS The 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 the College during a period. The statement of cash flows also helps users assess: The College s ability to generate future net cash flows. Its ability to meet its obligations as they come due. Its need for external financing. A summary of the College s cash flows for the and fiscal years is presented in the following table: Cash Flows for the Fiscal Year (In Thousands) Cash Provided (Used) by: Operating Activities $ (251,515) $ (242,025) Noncapital Financing Activities 251, ,945 Capital and Related Financing Activities 27,133 (5,011) Investing Activities 38,219 (9,009) Net Increase (Decrease) in Cash and Cash Equivalents 65,285 (7,100) Cash and Cash Equivalents, Beginning of Year 79,643 86,743 Cash and Cash Equivalents, End of Year $ 144,928 $ 79,643 The College s liquidity increased during the reporting period. For the purpose of cash flows, cash and cash equivalents consist of cash on hand and cash in demand accounts, and cash invested with the State Board of Administration and the Florida State Treasury. During the fiscal year, cash and cash equivalents increased by $65.3 million, compared to a $7.1 million decrease during the fiscal year. The increase is primarily due to the increased investment of funds with the State Board of Administration and the Florida State Treasury. The College also experienced an overall increase in revenues during the fiscal year. The net cash used for operating activities was $251.5 million, compared to $242 million in the fiscal year. Included in the calculation of this total are payments for employee salaries and -8-

10 MANAGEMENT S DISCUSSION AND ANALYSIS benefits of $188.6 million and $35.6 million, respectively, compared to $181.9 million and $33.9 million, respectively, in the fiscal year; payments for scholarships of $48.4 million, compared to $56.3 million in the fiscal year; and payments to suppliers of $62.1 million, compared to $52.7 million in the fiscal year. These are the three major outflows of operating activities. Primary inflows of operating activities consist of Tuition and Fees and Grants and Contracts, totaling $58.6 million and $26.9 million, respectively, compared to $58.2 million and $27.7 million, respectively, in the fiscal year. The net cash provided by noncapital financing activities was $251.4 million, compared to $248.9 million in the fiscal year. This amount includes the State appropriations in the amount of $159.9 million, compared to $151.1 million in the fiscal year, and gifts and grants received for other than capital purposes, which includes Federal Pell Grants, in the amount of $86.2 million, compared to $95.8 million in the fiscal year. The net cash provided by capital and related financing activities was $27.1 million, compared to net cash used of $5 million in the fiscal year. Included in the calculation of this total are purchases of capital assets in the amount of $18.7 million, compared to $45.8 million in the fiscal year, and the receipt of capital appropriations totaling $43 million versus $37.9 million in the fiscal year. The change in cash receipts from capital appropriations was mainly due to an increase in capital related financing activities for various capital construction and renovation projects. These are the primary outflows and inflows of capital and related financing activities, respectively. The net cash provided by investing activities was $38.2 million, compared to net cash used of $9 million in the fiscal year. During the fiscal year, the College received $15.6 million of investment income, sold investments at a cost of $27.2 million, and purchased investments at a cost of $4.6 million. The College invested its excess cash in the State Treasury Special Purpose Investment Account and State Board of Administration Local Surplus Funds Trust Fund investment pools. More detail information about the College s investments is presented in the notes to financial statements. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets At June 30, 2006, the College had $592.4 million invested in capital assets, compared to $574.6 million at June 30, Capital assets, net of accumulated depreciation, totaled $330.8 million, -9-

11 MANAGEMENT S DISCUSSION AND ANALYSIS compared to $332.4 million at June 30, Details of capital asset balances of the College and its component unit are shown below: Capital Assets, at Year-End (In Thousands) College Component Unit Land $ 58,327 $ 58,327 $ - $ - Other Structures and Improvement 23,465 22,609 Buildings 442, ,356 Furniture, Machinery, and Equipment 57,586 56, Construction in Progress 10,706 7,559 Total Capital Assets $ 592,383 $ 574,617 $ 164 $ 88 More detail information about the College s capital assets is presented in the notes to the financial statements. Debt At June 30, 2006, the College had $8.3 million in long-term debt outstanding, compared to $9.3 million at June 30, 2005, a decrease of 10.8 percent. The following table summarizes these amounts by debt instrument type. Outstanding Debt, at Year-End (In Thousands) Capital Outlay Bonds $ 8,315 $ 9,285 The State Board of Education issued the State Board of Education s Bonds on behalf of the College. The College made debt repayments of $1 million during the fiscal year, compared to $0.9 million during the fiscal year. More detailed information about the College s long-term liabilities is presented in the notes to the financial statements. -10-

12 MANAGEMENT S DISCUSSION AND ANALYSIS ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE The economic position of Miami Dade College is closely tied to that of the State of Florida. The current projection for the fiscal year is a $21 million, or 12.9 percent, increase in State funding. In addition, the College expects a decrease in student tuition and fee revenue due primarily to a declining enrollment experience that will be partially offset by a three percent fee rate increase. The combination of mildly declining enrollment and expectations of lesser increases of State funding in future years are expected to challenge the College in the fiscal year and beyond. The development of new revenue sources and aggressive cost containment initiatives have served the College well in its commitment to the growth of educational programs, improved student access, and continued overall excellence in service to its students and the community. The conservative economic stance taken by the College will enable it to maintain financial stability given the uncertain economic factors that may affect the public sector of higher education in the future. -11-

13 DFS's GENERAL LEDGER CODES MIAMI DADE COLLEGE STATEMENT OF NET ASSETS As of June 30, 2006 College Component Total Reporting Unit(s) Entity ASSETS Current Assets: 111 Cash on Hand $ 38, $ 38, Cash in Bank 1,980, ,885, ,865, Restricted Cash in Bank 178, , , Cash with State Board of Administration - Restricted Cash with State Board of Administration Cash with State Treasury - Restricted Cash with State Treasury Investments with the State Board of Administration 63,103, ,103, Restricted Investments with the State Board of Administration 1,029, ,029, Investments with the State Treasury 48, , Restricted Investments with the State Treasury 50, , Other Short-Term Investments - Restricted Other Short-Term Investments - Total Cash and Cash Equivalent 66,429, ,977, ,407, Accounts Receivable 4,103, Less, Allowance for Uncollectible Accounts 949, Accounts Receivable, Net 3,154, ,211, ,366, Due from Other Governmental Agencies 10,697, ,697, Due from State 72,948, ,948, Due from Component Units 2,443, ,443, Due from College 787, , Notes Receivable 2,925, Less, Allowance for Uncollectible Accounts 414, Notes Receivable, Net 2,510, ,510, Inventories 18, , Prepaid Expenses 283, , Deposits - Other 44, , Other Assets 9, , Total Current Assets 158,531, ,986, ,518, Noncurrent Assets: 222 Restricted Cash in Bank Restricted Cash with State Board of Administration Restricted Cash with State Treasury Restricted Investments with the State Board of Administration 78,497, ,497, Restricted Investments with the State Treasury Restricted Other Investments - Total Restricted Cash and Cash Equivalents 78,497, ,497, Other Investments 63,921, ,258, ,179, Endowment Investments 110,040, ,040, Loans and Notes Receivable 11,339, Less, Allowance for Uncollectible Accounts 2,042, Loans and Notes Receivable, Net 9,297, ,297, /267/272/ 274/276/282/ 284/288 Depreciable Capital Assets 523,349, /268/273/ 275/277/283/ 285/289 Less, Accumulated Depreciation 261,552, Depreciable Capital Assets, Net 261,797, , ,873, /266/271/ 278 Nondepreciable Capital Assets 69,033, ,033, Other Assets - Total Noncurrent Assets 592,588, $ 74,333, ,922, TOTAL ASSETS $ 751,119, $ 93,320, $ 844,440, GASB SNA

14 STATEMENT OF NET ASSETS (Continued) As of June 30, 2006 College Component Total Reporting Unit(s) Entity LIABILITIES Current Liabilities: 311 Accounts Payable $ 2,925, $ 656, ,581, Salary and Payroll Taxes Payable 22,336, ,336, Retainage Payable 916, , Payable to Other Governmental Agencies 607, , Payable to State 564, , ,048, Payable to Component Unit 751, , Payable to College 2,635, ,635, Deferred Revenue 4,997, ,997, Estimated Claims Payable Deposits Held in Custody 92, , Long-Term Liabilities - Current Portion: 371 Bonds Payable 970, , Loans Payable Notes Payable Installment Purchases Payable Capital Leases Payable Compensatory Absences Payable 12,902, ,902, Special Termination Benefits Deposits Held in Custody 3,447, ,447, Total Current Liabilities 50,420, ,868, ,289, Noncurrent Liabilities: 461 Bonds Payable 7,344, ,344, Loans Payable Notes Payable Installment Purchases Payable Capital Leases Payable Compensatory Absences Payable 16,135, ,135, Special Termination Benefits Deposits Held in Custody 5, , Other Long Term Liabilities - Total Noncurrent Liabilities 23,485, ,485, TOTAL LIABILITIES 73,905, ,868, ,774, NET ASSETS 536 Invested in Capital Assets, Net of Related Debt 324,430, ,430, Restricted: 557 Restricted: Debt Services Restricted: Other - Nonexpendable: 555 Restricted, Nonexpendable: Endowment 110,169, ,494, ,664, Restricted, Nonexpendable:Research - Expendable: 558 Restricted, Expendable: Research Restricted, Expendable: Grants and Other Loans 26,112, ,112, Restricted, Expendable: Scholarships 2,624, ,477, ,102, Restricted, Expendable: Capital Projects 176,467, ,467, Restricted, Expendable: Debt Service 184, , Unrestricted 37,225, ,479, ,704,730 Total Net Assets 677,214, ,451, ,665, TOTAL LIABILITIES AND NET ASSETS $ 751,119, ,320, ,440, The accompanying notes to financial statements are an integral part of this statement GASB SNA

15 DFS's GENERAL LEDGER CODES MIAMI DADE COLLEGE STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS For the Fiscal Year Ended June 30, 2006 College Component Total Reporting Unit(s) Entity REVENUES Operating Revenues: Student Tuition and Fees (Net of Scholarship 671 Allowances of $44,564, and Discounts of $0.00 $ 62,299, $ 62,299, Federal Grants and Contracts 15,631, ,631, State and Local Grants and Contracts 6,749, $ 3,089, ,839, Nongovernmental Grants and Contracts 4,717, ,717, Sales and Services of Educational Departments 366, , Auxiliary Enterprises (Net of Scholarship 671 Allowances of $0.00 and Discounts of $0.00 3,060, ,060, Other Operating Revenues 5,248, ,101, ,350, Total Operating Revenues 98,074, ,190, ,264, EXPENSES Operating Expenses: 771 Personnel Services $ 221,736, ,407, ,144, Scholarships and Waivers 48,357, ,120, ,477, Utilities and Communications 10,342, ,342, Contractual Services 12,315, ,301, ,617, Other Services and Expenses 33,406, ,406, Materials and Supplies 16,773, ,773, Operating Expenses: Depreciation 18,282, , ,291, Total Operating Expenses 361,214, ,838, ,053, Operating Income (Loss) (263,140,703.39) 2,352, (260,788,543.39) Nonoperating Revenues (Expenses) 684 State Appropriations $ 159,855, ,855, Investment Income 13,941, ,591, ,532, Interest on Capital Asset-Related Debt (445,585.48) (445,585.48) 621 Gifts and Grants 86,193, ,193, /771 Other Nonoperating Revenues (Expenses) (718,002.01) (718,002.01) 787 Special Item - Net Nonoperating Revenues (Expenses) 258,826, ,591, ,418, Income (Loss) Before Other Revenues, Expenses, Gains, or Losses (4,313,748.49) 9,944, ,630, Capital Appropriations 45,465, ,465, Capital Grants, Gifts, and Fees 3,961, ,961, Additions to Permanent Endowments 1,499, ,499, Total Other Revenues 50,926, ,926, Increase (Decrease) in Net Assets 46,613, ,944, ,557, Net Assets, Beginning of Year 630,600, ,507, ,108, Adjustments to Increase (Decrease) in Net Assets - Net Assets, End of Year $ 677,214, $ 89,451, $ 766,665, The accompanying notes to financial statements are an integral part of this statement GASB SRECNA

16 MIAMI DADE COLLEGE STATEMENT OF CASH FLOWS For the Fiscal Year Ended June 30, 2006 College CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees $ 58,551, Grants and Contracts 26,937, Payments to Suppliers (62,108,485.24) Payments to Utilities (10,342,460.87) Payments to Employees (188,560,562.09) Payments to Benefits (35,634,687.73) Payments for Scholarships (48,357,515.27) Loans Issued to Students and Employees (13,845,729.86) Collection of Loans to Students and employees 12,932, Auxillary Charges 3,060, Sales and Service of Educational 366, Other Receipts (Payments) 5,486, Net Cash Provided (Used) by Operating Activities (251,515,004.09) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations 159,855, Gifts and Grants Received for other Than Capital or Endowment Purposes 86,193, Private Gifts for Endowment Purposes 5,398, PLUS Loans Split-interest Transactions Student Organization Agency Transactions Net Cash Provided (Used) by Noncapital Financing Activities 251,448, CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from Capital Debt - Capital Appropriations 43,013, Capital Grants and Gifts Received 3,961, Proceeds from Sales of Capital Assets 233, Purchases of Capital Assets (18,710,715.04) Principal Paid on Capital Debt and Lease (920,000.00) Interest Paid on Capital Debt and Lease (445,585.48) Deposit with Trustee Net Cash Provided (Used) by Capital and Related Financing Activities 27,132, CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments 27,198, Interest on Investments 15,641, Purchase of Investments (4,620,867.33) Net Cash Provided (Used) by Investing Activities 38,219, Net Increase in Cash and Cash Equivalents 65,284, Cash and Cash Equivalents, Beginning of Year 79,642, Cash and Cash Equivalents, End of Year 144,927, GASB CFS

17 STATEMENT OF CASH FLOWS (Continued) For the Fiscal Year Ended June 30, 2006 College RECONCILIATION OF NET OPERATING REVENUES (EXPENSES) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating Income (Loss) (263,140,703.39) Adjustments to Reconcile Net Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense 18,282, Changes in Assets and Liabilities: Receivables, Net (2,799,483.85) Inventories (7,776.36) Other Assets Accounts Payable (2,825,458.06) Deferred Revenue (1,137,497.99) Deposits Held for Others 266, Compensated Absences 760, Loans to Students and Employees (913,346.38) NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (251,515,004.09) SUPPLEMENTAL DISCLOSURE OF NONCASH CAPITAL FINANCING ACTIVITY 0.00 Enter a description of noncash activity, such as a new lease purchase agreement, capital lease, etc. The accompanying notes to financial statements are an integral part of this statement GASB CFS

18 NOTES TO FINANCIAL STATEMENTS June 30, 2006 ATTACHMENT 1 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity. The governing body of the Miami Dade College, a component unit of the State of Florida, is the District Board of Trustees. The Board constitutes a corporation and is composed of seven members appointed by the Governor and confirmed by the Senate. The District Board of Trustees is under the general direction and control of the Florida Department of Education, Division of Community Colleges, and is governed by law and the State Board of Education rules. However, the District Board of Trustees is directly responsible for the day-to-day operations and control of the College within the framework of applicable State law and State Board of Education rules. Geographic boundaries of the District correspond with those of Miami-Dade County. Component Unit. Criteria for defining the reporting entity are identified and described in the Governmental Accounting Standards Board's Codification of Governmental Accounting and Financial Reporting Standards, Sections 2100 and These criteria were used to evaluate potential component units for which the District Board of Trustees is financially accountable and other organizations for which the nature and significance of their relationship with the District Board of Trustees are such that exclusion would cause the College's financial statements to be misleading or incomplete. Based on the application of these criteria, Miami Dade College Foundation, Inc. (Foundation) is included within the College's reporting entity as a discretely presented component unit. The Foundation is audited by other auditors, pursuant to Section (6), Florida Statutes. The Foundation s audited financial statements are available to the public at the College. The financial data reported on the accompanying financial statements was derived from the Foundation s audited annual financial statements of the organization for the fiscal year ended March 31, The Foundation s financial activities are presented for a nine-month period because the Foundation changed its fiscal year from July through June to April through March. This affects the comparability of amounts reported for the discretely presented component unit column for the fiscal year with amounts reported for the fiscal year. The Foundation is also a direct-support organization, as defined in Section , Florida Statutes, and although legally separate from the College, is financially accountable to the College. The Foundation is managed independently, outside the College s budgeting process, and its powers generally are vested in a Attachment 1 - Notes to Financial - MDC -1-

19 NOTES TO FINANCIAL STATEMENTS June 30, 2006 governing board pursuant to various State statutes. The Foundation receives, holds, invests, and administers property and makes expenditures to or for the benefit of the College. Basis of Presentation. The College s accounting policies conform with accounting principles generally accepted in the United States of America applicable to colleges and universities as prescribed by the Governmental Accounting Standards Board (GASB). The National Association of College and University Business Officers (NACUBO) also provides the College with recommendations prescribed in accordance with generally accepted accounting principles promulgated by GASB and the Financial Accounting Standards Board (FASB). GASB allows public colleges various reporting options. The College has elected to report as an entity engaged in only business-type activities. This election requires the adoption of the accrual basis of accounting and entity-wide reporting including the following components: Management s Discussion and Analysis Basic Financial Statements: - Statement of Net Assets - Statement of Revenues, Expenses, and Changes in Net Assets - Statement of Cash Flows (presented using the direct method in compliance with GASB Statement No. 9) - Notes to Financial Statements Basis of Accounting. Basis of accounting refers to when revenues, expenses, and related assets and liabilities are recognized in the accounts and reported in the financial statements. Specifically, it relates to the timing of the measurements made, regardless of the measurement focus applied. The College s financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Revenues, expenses, gains, losses, assets, and liabilities resulting from exchange and exchangelike transactions are recognized when the exchange takes place. Revenues, expenses, gains, losses, assets, and liabilities resulting from nonexchange activities are generally recognized when all applicable eligibility requirements, including time requirements, are met. The College's discretely presented component unit uses the accrual basis of accounting whereby revenues are recognized when earned and expenses are recognized when incurred, and follows FASB Standards of accounting and financial reporting prescribed for not-for-profit organizations. Attachment 1 - Notes to Financial - MDC -2-

20 NOTES TO FINANCIAL STATEMENTS June 30, 2006 Interdepartmental transactions of auxiliary service departments have been accounted for as reductions of expenditures and not revenues of those departments. The College s principal operating activity is instruction. Operating revenues and expenses include all fiscal transactions related to instruction as well as administration, academic support, student services, physical plant operations, and depreciation of capital assets. Nonoperating revenues include State appropriations, Federal and State student financial aid, investment income, and capital funding. Interest on asset-related debt is considered a nonoperating expense. The College follows FASB statements and interpretations issued after November 30, 1989, unless those pronouncements conflict with GASB pronouncements. The statement of net assets is presented in a classified format to distinguish between current and noncurrent assets and liabilities. When both restricted and unrestricted resources are available to fund specific programs, it is the College s policy to first apply the restricted resources to such programs followed by the use of the unrestricted resources. The statement of revenues, expenses and changes in net assets is presented by major sources and is reported net of tuition scholarship allowances. Tuition scholarship allowances are the differences between the stated charge for goods and services provided by the College and the amount that is actually paid by the student or the third-party making payment on behalf of the student. The College identified, within its accounting system, amounts paid for tuition and fees by financial aid. The total amount of these third-party payments is deducted from student tuition and fees. Cash and Cash Equivalents. The amount reported as cash and cash equivalents consists of cash on hand, cash in demand accounts, institutional cash management money market mutual fund, and cash invested with the State Treasury and State Board of Administration. For the purpose of reporting cash flows, the College considers all highly liquid investments with original maturities of three months or less to be cash equivalents. Under this definition, the College considers amounts invested in the State Treasury Special Purpose Investment Account and State Board of Administration Local Government Surplus Funds Trust Fund investment pools to be cash equivalents. College cash deposits are held in banks qualified as public depositories under Florida law. All such deposits are insured by Federal depository insurance, up to specified limits, or collateralized with securities held in Florida s multiple financial institution collateral pool required by Chapter 280, Florida Statutes. Cash and cash equivalents and investments that are externally Attachment 1 - Notes to Financial - MDC -3-

21 NOTES TO FINANCIAL STATEMENTS June 30, 2006 restricted to make debt service payments, maintain sinking or reserve funds, and to purchase or construct capital or other restricted assets are classified as restricted. Under an agreement with a local bank, the amounts for outstanding checks awaiting clearance are invested in an institutional cash management money market mutual fund. This money market mutual fund invests in corporate money market securities, commercial papers, repurchase agreements, variable-rate instruments, and bank instruments. The College had investments totaling $99,619 at June 30, 2006, in the State Treasury Special Purpose Investment Account (SPIA) investment pool. The investments represented ownership of a share of the pool, not the underlying securities. The College s investments in the pool are reported at fair value. The State Treasury has taken the position that participants in the pool should disclose information related to interest rate risk and credit risk. The SPIA carried a credit rating of AA-f by Standard and Poor s and had an effective duration of 2.72 years at June 30, The College had investments totaling $142,429,639 at June 30, 2006, in the Local Government Surplus Funds Trust Fund administered by the State Board of Administration (SBA) pursuant to Section , Florida Statutes. The College s investment in the pool are reported at fair value. The College s investment in the Local Government Surplus Funds Trust Fund, a Securities and Exchange Commission Rule 2a7-like external investment pool, are similar to money market funds in which shares are owned in the fund rather than the underlying investments. The SBA has taken the position that participants in the pool are not required to disclose information related to interest rate risk, custodial credit risk, concentration of credit risk, and foreign credit risk. The investment pool was not rated by a nationally recognized statistical rating agency as of June 30, Capital Assets. College capital assets consist of land; buildings; other structures and improvements; furniture, machinery, and equipment; and construction in progress. These assets are capitalized and recorded at cost at the date of acquisition or at estimated fair value at date of acquisition in the case of gifts and surplus property acquired at nominal cost. Interest costs incurred during construction of capital assets are not considered material, and are not capitalized as part of the cost of construction. The College has a capitalization threshold of $5,000 for tangible personal property and $25,000 for improvements other than buildings. Depreciation is computed on the straight-line basis over the following estimated useful lives: Buildings 40 Years Attachment 1 - Notes to Financial - MDC -4-

22 NOTES TO FINANCIAL STATEMENTS June 30, 2006 Other Structures and Improvements, Portables 10 Years Furniture and Equipment: - Computer Equipment 3 Years - Vehicles, Office Machines, Educational Equipment 5 Years - Furniture 7 Years Property and equipment of the College s component unit is stated at cost, and is net of accumulated depreciation of $88,462. The College s component unit depreciates property and equipment using the straight-line method over estimated lives of the assets (five years). 2. INVESTMENTS Section (16), Florida Statutes, authorizes the College to invest in the Local Government Surplus Trust Fund investment pool administered by the State Board of Administration; interest-bearing time deposits and savings accounts in qualified public depositories, as defined by Section , Florida Statutes; direct obligations of the United States Treasury; obligations of Federal agencies and instrumentalities; securities of, or interests in, certain open-end or closed-end management type investment companies; Securities and Exchange Commission registered money market funds with the highest credit quality rating from a nationally recognized rating agency; and other investments approved by the College s Board of Trustees as authorized by law. State Board of Education Rule 6A , Florida Administration Code, provides that College loan, endowment, and annuity, and life income funds may also be invested pursuant to Section , Florida Statutes. Investments authorized by Section , Florida Statutes, include bonds, notes, and commercial paper, and various other types of investments. The Board adopted an investment policy for the management of endowment assets and other investments, which include investment objectives, permitted types of securities in which the Board may invest, and evaluation criteria necessary to measure the investment performance of the plan. Additionally, the College s investment policy provides that the goal of the investment program is to provide a real total return from assets invested that will preserve the purchasing power of endowment assets and other investments, while generating an income stream sufficient to support the established spending requirements. Investments are to be related to the short, mid, and long-term needs of the College, considering the probable safety of their capital as well as the probable income to be derived from the investment. For endowment investments, four assets classes are targeted to ensure the proper level of diversification within the fund. These assets classes Attachment 1 - Notes to Financial - MDC -5-

23 NOTES TO FINANCIAL STATEMENTS June 30, 2006 are domestic equity, international equity, domestic fixed income, and cash and cash equivalents. For other investments, the highest priority is placed on the safety of the principal. The College s investment policy also provides that investment managers with different investment styles (strategies) will be used. During the fiscal year, moneys of the Endowment Fund were invested by twelve investments managers, and other investments were invested by two investment managers. Endowment investments and other investments are reported at a fair value of $110,040,351 and $63,921,394 respectively. The reporting of endowment investments at fair value resulted in an unrealized loss of $3,895,652 reported as a decrease to permanent endowments. The reporting of other investments at fair value resulted in an unrealized loss of $1,712,150 reported as a decrease to investment income. The College s Investments at June 30, 2006, are reported at fair value, as follows: Investment Tpyes Amount U.S. Government Obligations $ 28,804,329 Federal Agency Obligations 28,103,483 Corporate Bonds and Notes 20,951,551 Stocks and Other Equity Securities 45,382,194 International Equities 22,002,412 Mutual Funds 16,594,494 Money Market Funds 12,123,282 Total College Investments $ 173,961,745 The following risks apply to the College s investments in debt securities; Interest Rate Risk: the College s written investment policy, as a means of managing its exposure to fair value losses arising from increasing interest rates, requires that portfolios be actively managed so that changes in duration are made in anticipation of interest changes or business cycle movements. For endowment investments at June 30, 2006 the College s debt securities totaling $8,390,585 with one investment manager, and $8,255,546 with another investment manager, had average durations of 4.4 and 5.4 years, respectively. Credit Risk: The College s investment policy for endowment investments states that the fixed income manager s overall portfolio should exhibit at least an investment grade rating by either Moody or Standard and Poors. The College s corporate bonds and notes for the endowment investments at June 30, 2006, held an average quality rating of AA by Standard and Poor s. The College s investment policy for other investments states that investments shall be made with the same judgment and care, under circumstance then prevailing, which persons of prudence, discretion, and intelligence exercise in the management of their own Attachment 1 - Notes to Financial - MDC -6-

24 NOTES TO FINANCIAL STATEMENTS June 30, 2006 affairs. The College s investment policy for other investments also states that the weighted average quality rating of the collective funds invested must maintain a rating of AA or higher. For other investments at June 30, 2006, the College s corporate bonds and notes totaling $9,674,807 with one investment manager, and totaling $7,884,267 with another investment manager, had average quality ratings of AA and AA+, respectively, by Standard and Poor s. Concentration of Credit Risk: The College s investment policy for endowment investments allows for investment allocations of 50 to 70 percent in domestic equity securities, 5 to 20 percent in international equity securities, 20 to 40 percent in domestic fixed securities, and up to 23 percent in cash and cash equivalents. In addition, each domestic fixed income manager can invest up to 10 percent of its respective portfolio in certain international securities as long as the total international equity securities and international fixed income securities do not exceed 20 percent of total endowment investments. The College s investment policy for other investments provides that a maximum of 5 percent may be invested in securities of any single issuer. Component Unit Investments Investments held by the College s component unit are composed of mutual funds and investments in equity, debt and Federal agency debt securities, offshore funds and limited partnerships, and are presented on the financial statements at fair value of $74,258, ACCOUNTS RECEIVABLE Accounts receivable represent amounts for student fee deferments, various student services provided by the College, uncollected commissions for food service and vending machine sales, and grant reimbursements due from third parties. These receivables are reported net of $949,193 allowance for uncollectible accounts. 4. DUE FROM STATE This amount primarily consists of $71,454,638 of Public Education Capital Outlay allocations due from the State to the College for construction of College facilities. 5. DUE FROM/PAYABLE TO COMPONENT UNIT The $751,129 reported as payable to the component unit consists of amounts owed by the College to the Foundation pursuant to an agreement to support the Foundation s operations. The amount due from the Attachment 1 - Notes to Financial - MDC -7-

25 NOTES TO FINANCIAL STATEMENTS June 30, 2006 component unit consists of amounts owed to the College by the Foundation for scholarships and student aid. 6. NOTES RECEIVABLE Notes receivable represent student loans made under the Federal Perkins Loan Program of $13,026,880, Federal Nursing Student Loan Program of $67,777, short-term loan program of $1,163,178, and dean emergency loan program of $7,332. Notes receivable are reported net of $2,456,917 allowance for uncollectible notes. 7. INVENTORIES Inventories consist of items for resale by the Vision Care Clinic, and are valued using the retail method. Consumable laboratory supplies, teaching materials, and office supplies on hand in College departments are expensed when purchased and are not considered material. Accordingly, these items are not included in the reported inventory. 8. CAPITAL ASSETS Capital asset activity for the year ended June 30 is shown below: Attachment 1 - Notes to Financial - MDC -8-

26 NOTES TO FINANCIAL STATEMENTS June 30, 2006 Beginning Additions Reductions Ending Balance Balance Nondepreciable Capital Assets: Land $ 58,327,132 $ - $ 58,327,132 Construction in Progress 7,558,562 10,327,657 7,179,840 10,706,379 Total Nondepreciable Capital Assets 65,885,694 10,327,657 7,179,840 69,033,511 Depreciable Capital Assets: Buildings 429,356,257 16,193,723 3,250, ,299,127 Other Structures and Improvements 22,608, ,624 23,465,336 Furniture, Machinery, and Equipment 56,766,139 2,213,026 1,393,640 57,585,525 Total Depreciable Capital Assets $ 508,731,108 19,263,373 4,644, ,349,988 Less Accumulated Depreciation: Buildings 168,169,716 17,385, , ,713,415 Other Structures and Improvements 20,983, ,742 21,741,471 Furniture, Machinery, and Equipment 53,098,279 3,356,220 1,356,768 55,097,731 Total Accumulated Depreciation 242,251,724 21,499,319 2,198, ,552,617 Total Depreciable Capital Assets, Net $ 266,479,384 $ (2,235,946) $ 2,446, ,797, SALARIES AND PAYROLL TAXES PAYABLE Salaries and payroll taxes payable as of June 30, 2006 totaled $22,336,683. This amount includes $12,091,156 of salaries and payroll taxes to be paid during the fiscal year and banked point liability of $10,245,527. Under the bank point system, faculty members are allowed to bank overload teaching assignments. The instructor may use the banked points to offset future under loads, provide for additional leave time, or receive payment upon termination. 10. LONG-TERM LIABILITIES Long-term liabilities of the College at June 30, 2006, include bonds, compensated absences and deposits held for others. The long-term liabilities activity for the year ended June 30, 2006 is shown below: Attachment 1 - Notes to Financial - MDC -9-