Wichita Area Technical College

Transcription

1 Independent Auditor s Reports and Financial Statements June 30, 2015 and 2014

2 June 30, 2015 and 2014 Contents Independent Auditor s Report... 1 Management s Discussion and Analysis... 4 Financial Statements Balance Sheets Statements of Revenues, Expenses and Changes in Net Position Statements of Cash Flows Notes to Financial Statements Required Supplementary Information Schedule of the College s Proportionate Share of the Net Pension Liability Schedule of College Contributions Notes to Required Supplementary Information Supplementary Information Schedule of Expenditures of Federal Awards Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings... 56

3 Independent Auditor s Report Board of Trustees Wichita Area Technical College Wichita, Kansas Report on the Financial Statements We have audited the accompanying basic financial statements of Wichita Area Technical College (the College), which are comprised of balance sheets as of June 30, 2015 and 2014, and the related statements of revenues, expenses and changes in net position and cash flows for the years then ended and the related notes to the 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. 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.

4 Board of Trustees Wichita Area Technical College Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wichita Area Technical College as of June 30, 2015 and 2014, and the changes in its net position and its cash flows 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, in 2015, the College adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27, as amended by GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis and pension information listed in the table of contents be presented to supplement the basic financial statements. Such information, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board, who 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 supplementary 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 audits 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. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the College s basic financial statements. The accompanying schedule of expenditures of federal awards required by OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, as listed in the table of contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information 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. The information has been subjected to the auditing procedures applied in the audits 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

5 Board of Trustees Wichita Area Technical College Page 3 auditing standards generally accepted in the United States of America. In our opinion, the information 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 December 14, 2015, on our consideration of the College s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards considering the College s internal control over financial reporting and compliance. Wichita, Kansas December 14, 2015

6 Management s Discussion and Analysis Years Ended June 30, 2015 and 2014 Introduction This discussion and analysis of the Wichita Area Technical College (the College) financial statements provides an overview of the College s financial performance during the years ended June 30, 2015, 2014 and Since the Management s Discussion and Analysis (MD&A) is designed to focus on current activities, resulting change and current known facts, please read it in conjunction with the College s basic financial statements and the footnotes. The MD&A is unaudited. Economic and Environmental Factors For the second year, the College experienced a reduction in credit hours for traditional programming. This comes as the economy began to show improvement in the south central Kansas area. This reduction was offset by hours from high school students as the College continues to utilize state funds to bring technical training to that population. This initiative is part of the State s commitment to technical training which was funded by Senate Bill 155 (SB155), paying college institutions to teach certain technical classes to high school students. The College moved quickly in 2013 to develop these classes and work with the local high school districts. As a result, the College increased the amount of net funding from the State from $780,000 in 2013 to $2,240,000 in No significant increases are anticipated in the future as the State re-tiered certain classes and the market in this region is maturing. Funding for this program in the 2016 statewide pool was decreased from 2015 levels as the total amount set aside was not fully utilized in the first years of the program. The College is optimistic that there will be enough funds to cover most, if not all, of the College s anticipated request for reimbursement in The College has been moving forward with strengthening its relationship with Wichita State University (WSU). Toward the end of 2015, the College and WSU announced an initiative called Shocker Pathway that will allow the College s students to have college credits transferred seamlessly to WSU. Although pressure continues on state funded educational institutions, 2015 initial appropriation levels remained constant with However, during the second half of 2015, cuts were made at the state level which required the College to return $130,000. State funding for 2016 was restored to the initial 2015 level, but it is possible that cuts will again be made at some point in There are currently two initiatives being discussed and/or implemented at the state level. The first has to do with re-centering where the current funding would be reallocated between colleges based on current credit hours taught by that institution compared to all others in the system. Re-centering would have a positive impact on the College due to the growth in credit hours relative to the other technical and community colleges in the system since the last baseline was established. The second has to do with re-tiering existing courses. Based on a cost study currently being reviewed by the Kansas Board of Regents (KBOR), certain courses would have their funding level either reduced or increased based on the cost to produce that course. Phase 1 of the re-tiering project has been completed and is effective for the SB155 courses for the 2016 academic year. We anticipate that these proposals will continue to evolve as they make their way through KBOR and the state assembly. 4

7 The College continues to maintain existing and develop new relationships with local industry and government by offering customized training solutions in addition to the traditional for credit college courses. The 2015 revenues remained at levels consistent with the past two years. Finally, the awarding of the four-year National Aviation Consortium s (NAC s) $15,000,000 grant from the Department of Labor in 2013 has continued to increase the awareness of the College at the national level. Implementation of New Accounting Principle In 2015, the College implemented the provisions of GASB Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27, as amended by GASB Statement No. 71, Pensions Transitions for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68, which improve reporting by state and local governments for pensions that are provided to the employees of the government entity through pension plans. This statement establishes standards for measuring and recognizing liabilities, deferred outflows and inflows of resources and expenses. See more detailed information in Note 1. Financial Highlights The 2015 fiscal year was successful for the College as it continued to experience positive growth. Classes and students taught as part of SB155 continued to increase in 2015 as that program has matured into its third year. However, revenues from traditional programming decreased due to a 7.5% reduction of credit hours generated offsetting the increase in SB155 revenues. Both grant revenues and expenses have decreased due to the NAC grant maturing. While overall costs have decreased, costs as a relative percentage to revenues increased slightly. The College continued to decrease its debt burden by making $550,000 in debt payments in As of June 30, 2015, the Cowley County Community College (Cowley) debt has been paid off. New debt of $190,000 was entered into during 2015 with De Lage Landen Public Finance LLC for the purchase of information technology equipment. Cash increased by $990,000 in 2015 to a June 30, 2015, balance of $7,500,000. From this available cash, the Board of Trustees has directed the College to restrict the use of $3,710,000. This cash is set aside in three funds for use in deferred maintenance, operating emergencies and capital projects. Such uses, depending on the amount, are subject to the approval of the Board. The table below identifies the changes over the past three years to the College s net position. Increase (Decrease) 2015 vs vs Amount Percent Amount Percent Operating revenues $ 11,310,736 $ 12,036,663 $ 11,654,153 $ (725,927) (6.03) $ 382, Operating expenses 24,056,141 25,215,459 24,983,004 (1,159,318) (4.60) 232, Operating loss (12,745,405) (13,178,796) (13,328,851) 433, (150,055) (1.13) Net nonoperating revenues 12,963,335 14,448,170 14,793,522 (1,484,835) (10.28) (345,352) (2.33) Capital revenues 262, , , , (62,489) (30.02) Change in net position $ 480,809 $ 1,415,070 $ 1,672,856 $ (934,261) (66.02) $ (257,786) (15.41) 5

8 Financial Position The balance sheets present the financial position of the College at the end of each fiscal year and include all assets and liabilities of the College. Assets and liabilities are generally measured using current values, with certain exceptions such as capital assets, which are stated at cost less accumulated depreciation. The balance sheet shows strengthening as current assets (including cash) increased, liabilities decreased and long-term debt decreased, offset by a decrease in capital and intangible assets due to depreciation and amortization. A summary of the College s assets, liabilities and net position at June 30, 2015, 2014 and 2013, are as follows: Balance Sheets as of June 30, 2015, 2014 and 2013 Increase (Decrease) 2015 vs vs Amount Percent Amount Percent Assets Current assets $ 11,518,452 $ 10,524,433 $ 9,356,493 $ 994, $ 1,167, Pledges receivable, net of discount , (47,749) (100.00) Capital assets, net of depreciation 2,971,270 3,527,064 4,480,725 (555,794) (15.76) (953,661) (21.28) Intangible assets, net of amortization 44,873 93, ,245 (48,984) (52.19) (67,388) (41.79) Total assets $ 14,534,595 $ 14,145,354 $ 14,046,212 $ 389, $ 99, Current Liabilities $ 2,937,242 $ 3,016,753 $ 3,698,540 $ (79,511) (2.64) $ (681,787) (18.43) Long-term Liabilities 312, , ,753 (12,057) (3.71) (634,141) (66.14) Total liabilities 3,249,797 3,341,365 4,657,293 (91,568) (2.74) (1,315,928) (28.26) Net Position Net investment in capital assets 2,874,833 3,120,921 3,129,177 (246,088) (7.89) (8,256) (0.26) Restricted, unexpendable 900, , , Restricted, expendable 339, , ,958 (36,302) (9.66) 81, Unrestricted 7,170,574 6,407,375 5,065, , ,341, Total net position 11,284,798 10,803,989 9,388, , ,415, Total liabilities and net position $ 14,534,595 $ 14,145,354 $ 14,046,212 $ 389, $ 99, Current Assets and Current Liabilities Current Assets 2015 vs Cash increased by $990,000. See discussion on cash flow statement for further explanation. Accounts receivable decreased by $50,000. o o Students and third-party receivables decreased by $400,000 primarily due to a decrease in credit hours. Government receivables increased by $350,000 led by an increase in federal student grants receivables of $450,000 offset by a decrease in NAC receivables of $90,000. Investments are held by the Wichita Area Technical College Foundation (Foundation) and increased by $20,000 primarily due to new gifts. 6

9 The current portion of pledges receivable decreased by $100,000 due to payments of $70,000 on pledge commitments by Snap-On and a $30,000 write-off of the remaining Snap-On commitment. Prepaid expenses and other increased by $110,000 primarily due to an increase of $150,000 in NAC grant prepaid expenses offset by a $60,000 decrease in bookstore inventories. Miscellaneous prepaid expenses and other accounted for the remaining $20,000 increase. Current Liabilities 2015 vs Current maturities of long-term debt decreased by $450,000 with the final Cowley payment of $500,000 due June 30, 2015, offset by the current liability portion of the new De Lage liability. Accounts payable increased by $390,000 primarily due to a $270,000 increase in refunds owed to students for financial aid that was posted to their accounts on June 30, 2015, but had not yet been refunded to them. The other $120,000 variance is due to normal fluctuations in accounts payables. Accrued wages and related liabilities increased by $20,000. o Accrued salaries increased by $30,000 mostly from an extra day of accrual as of June 30, o o o Accrued paid time off (PTO) decreased by $30,000. There was a 2% decrease in accrued PTO hours from 2014 to 2015 along with a 3.4% decrease in the hourly rate used for the accrual. The employees who left the College during 2015 had, on average, larger PTO balances and a higher pay rate than the base. Current accrued early retirement obligations decreased by $30,000 due to payments made during Accrued payroll tax and benefit liabilities increased by $50,000 due to timing of payments. Unearned revenues decreased by $30,000 due to a $70,000 increase in tuition and fees caused by increased summer enrollments, offset by a $100,000 decrease in unearned grant and governmental revenues. Current Assets 2014 vs Cash increased by $1,220,000. See discussion on cash flow statement for further explanation. Accounts receivable decreased by $250,000. o o Students and third-party receivables decreased by $60,000 primarily due to stagnant enrollment growth. Government receivables decreased by $200,000 led by a decrease in NAC receivables of $100,000, a decrease in federal student grants receivables of $70,000 and a decrease in smaller non-nac receivables of $30,000 as those grants expired in

10 Investments increased by $330,000 with the movement of $200,000 of cash into investments, $30,000 of new gifts and net revenues of $110,000 being reinvested being the most significant. Prepaid expenses and other decreased by $150,000 largely due to a decrease in bookstore inventories. Current Liabilities 2014 vs Current maturities of long-term debt decreased by $510,000 with the final Cowley payment of $500,000 due June 30, 2015, replacing the $1,000,000 payment which was made on June 30, Accounts payable decreased by $220,000 primarily due to an $80,000 decrease from the NAC grant and the settlement of the $150,000 that had been accrued for possible exposure in the Department of Education program review audit. Accrued wages and related liabilities increased by $130,000. o Accrued salaries increased by $30,000 mostly from an extra day of accrual as of June 30, o o o Accrued PTO increased by $60,000. There was a 5.6% increase in accrued PTO hours from 2013 to However, due to an influx of employees during the second half of 2013, the average hours accrued per employee increased by 8%. This, plus a 2.25% pay increase accounts for the 11% increase in the liability. Current accrued early retirement obligations increased by $20,000 due to additional former employees moving into payment status. Unearned revenues decreased by $80,000 due to a $100,000 decrease in tuition and fees caused by decreased summer enrollments, offset by a $20,000 increase in unearned grant and governmental revenues. Capital Assets As of June 30, 2015, the College had recorded $12,921,232 in gross capital assets and $9,949,962 in accumulated depreciation that resulted in $2,971,270 in net capital assets. Capital Assets, Net June 30, 2015 Accumulated Net Capital Cost Depreciation Assets Leasehold improvements $ 1,445,111 $ 1,349,848 $ 95,263 Software 3,224,578 2,689, ,812 Furniture, fixtures and equipment 7,110,859 5,258,346 1,852,513 Trucks 203, ,451 81,330 Aviation 936, , ,352 Totals $ 12,921,232 $ 9,949,962 $ 2,971,270 As of June 30, 2014, the College had recorded $12,481,928 in gross capital assets and $8,954,864 in accumulated depreciation that resulted in $3,527,064 in net capital assets. 8

11 Capital Assets, Net June 30, 2014 Accumulated Net Capital Cost Depreciation Assets Leasehold improvements $ 1,396,405 $ 1,286,707 $ 109,698 Software 3,125,689 2,237, ,573 Furniture, fixtures and equipment 6,869,753 4,867,330 2,002,423 Trucks 149, ,474 35,546 Leasehold improvements - CIP 4,158-4,158 Aviation 936, , ,666 Totals $ 12,481,928 $ 8,954,864 $ 3,527,064 As of June 30, 2013, the College had recorded $12,489,118 in gross capital assets and $8,008,393 in accumulated depreciation that resulted in $4,480,725 in net capital assets. Capital Assets, Net June 30, 2013 Accumulated Net Capital Cost Depreciation Assets Leasehold improvements $ 1,351,577 $ 1,124,946 $ 226,631 Software 3,095,686 1,792,569 1,303,117 Furniture, fixtures and equipment 6,950,732 4,611,069 2,339,663 Trucks 134, ,886 25,834 Leasehold improvements - CIP 10,000-10,000 Aviation 946, , ,480 Totals $ 12,489,118 $ 8,008,393 $ 4,480,725 Pledges Receivable The decrease from 2013 to 2014 is due to payments on pledge commitments by Snap-On. Long-term Liabilities The decrease from 2014 to 2015 is due to the $110,000 payment of early retirement obligations offset by the $100,000 addition of the De Lage note. The decrease from 2013 to 2014 is due to the movement of $500,000 in long-term debt maturities and $130,000 in long-term retirement obligations into short-term. The $500,000 debt amount due represents the final payment to Cowley due June 30, The $320,000 balance in long-term early retirement obligations represents payments that peak in 2015 and gradually lessen until fully paid in

12 Net Position Net position represents the reserve of the College after accounting for all liabilities. It is categorized by the type of restrictions and defined as follows: Net investment in capital assets This represents the net book value of capital assets less any debt against those assets. These assets are not available to be used for operational purposes unless they are liquidated. Restricted, unexpendable This represents the net position that has been restricted by a donor for a particular purpose and will remain in perpetuity. Any income earned on the underlying assets can be used in accordance with the stated purpose of the donor. These assets consist of the corpus portion of endowment gifts. Restricted, expendable This represents the net position that has been restricted for a particular purpose by a donor or grantor. Unrestricted This represents the net position that has no underlying restrictions attached to the receipt or gift. These assets can be used for any purpose that the College deems appropriate. The makeup of net position as of June 30, 2015, 2014 and 2013, is as follows: Analysis of Net Position June 30, 2015, 2014 and Net investment in capital assets $ 2,874,833 $ 3,120,921 $ 3,129,177 Restricted, unexpendable 900, , ,000 Restricted, expendable 339, , ,958 Unrestricted 7,170,574 6,407,375 5,065,784 Total net position $ 11,284,798 $ 10,803,989 $ 9,388,919 10

13 Operating Results The statements of revenues, expenses and changes in net position present the College s results of operations. The statements distinguish revenues and expenses between operating and nonoperating categories and provide a view of the College s operating margin. Summary statements of revenues, expenses and changes in net position for the years ended June 30, 2015, 2014 and 2013, are as follows: Summary Statements of Revenues, Expenses and Changes in Net Position Years Ended June 30, 2015, 2014 and 2013 Increase (Decrease) 2015 vs vs Amount Percent Amount Percent Operating Revenues Tuition and fees, net $ 6,957,248 $ 5,940,556 $ 5,345,861 $ 1,016, $ 594, Auxiliary 1,503,645 1,992,598 1,904,395 (488,953) (24.54) 88, Grants and contracts 2,316,720 3,440,958 3,791,969 (1,124,238) (32.67) (351,011) (9.26) Other 533, , ,928 (129,428) (19.53) 50, Total operating revenues 11,310,736 12,036,663 11,654,153 (725,927) (6.03) 382, Operating Expenses Compensation and benefits 14,749,810 14,247,134 13,010, , ,236, Other 8,183,531 9,706,416 9,819,172 (1,522,885) (15.69) (112,756) (1.15) Depreciation and amortization 1,122,800 1,261,909 2,152,895 (139,109) (11.02) (890,986) (41.39) Total operating expenses 24,056,141 25,215,459 24,983,004 (1,159,318) (4.60) 232, Operating Loss (12,745,405) (13,178,796) (13,328,851) 433,391 (3.29) 150,055 (1.13) Nonoperating Revenues (Expenses) Appropriations and grants 11,676,599 13,014,752 13,613,935 (1,338,153) (10.28) (599,183) (4.40) Contributions 1,246,339 1,288,135 1,112,524 (41,796) (3.24) 175, Net investment income 42, ,458 64,302 (104,706) (71.01) 83, Gain (loss) on disposal of capital assets (2,355) (2,175) 2,761 (180) 8.28 (4,936) (178.78) Net nonoperating revenues 12,963,335 14,448,170 14,793,522 (1,484,835) (10.28) (345,352) (2.33) Capital Revenues 262, , , , (62,489) (30.02) Increase in Net Position 480,809 1,415,070 1,672,856 $ (934,261) (66.02) $ (257,786) (15.41) Net Position, Beginning of Year 10,803,989 9,388,919 7,716,063 Net Position, End of Year $ 11,284,798 $ 10,803,989 $ 9,388,919 Revenues Tuition and auxiliary fees revenues are reported only to the extent billed to students and earned by the College. Tuition and fees waivers, scholarship awards and financial aid grant awards are reported as a reduction in tuition and fees revenues. Student financial assistance provided by federal sources is reported as federal grant revenues rather than as tuition and fees revenues. Net tuition and fees revenues from 2014 to 2015 increased by $1,020,000. Student related tuition and fees decreased by $530,000, primarily due to a 7.5% decrease in credit hours offset slightly by an average 2.4% increase in tuition rates. Lab books and materials decreased by $40,000 primarily due to the decrease in credit hours. These decreases were 11

14 offset by a decrease of $1,100,000 in deductions, primarily due to a decrease in federal Pell grant awards due to the lower enrollment and a decrease in the limits allowed. Revenues from SB155 high school classes increased by $500,000 due to additional classes in Customized training revenues remained flat from 2014 to Auxiliary revenues from 2014 to 2015 decreased by $490,000. This was due to the decrease in credit hours along with a move from the use of traditional books to e-books. Net tuition and fees revenues from 2013 to 2014 increased by $590,000. This increase was driven by a $960,000 net increase in high school tuition revenues due to the expansion of SB155 classes. This increase was offset by student related tuition and fee decreases of $720,000 primarily due to a 13% decrease in credit hours offset by a small tuition increase. Books and materials decreased by $140,000 due to a decrease in program materials charges related to the decrease in credit hours. Deductions from tuition and fees decreased by $540,000 primarily due to lower financial aid grants of $620,000 offset by a $70,000 increase in bad debt expense. Customized training revenues were constant from Grants and contracts revenues are from governmental agencies or charitable organizations. These are typically restricted funds. Grants and contracts revenues from 2014 to 2015 decreased by $1,120,000 driven by lower revenues of $1,130,000 from the NAC grant. Other federal grant revenues decreased by $20,000. Private grants decreased by $40,000, primarily due to a decrease in grant revenues from the Mid America Manufacturing Training Center (MAMTC). These decreases were offset by a $60,000 increase in state grants, primarily from workforce grants. Grants and contracts revenues from 2013 to 2014 decreased by $350,000 led by decreased revenues of $250,000 from the NAC grant, $40,000 from the MAMTC grant, $40,000 from the Perkins grant and $70,000 from miscellaneous smaller grants, offset by increased revenues of $50,000 from Adult Literacy grants. Other revenues represent rental and other miscellaneous income transactions. Other revenues from 2014 to 2015 decreased by $130,000 primarily due to $140,000 of miscellaneous revenues recognized in 2014 when a $150,000 liability accrued for the Department of Education audit was only $13,000. Other revenues from 2013 to 2014 increased by $50,000 primarily due to the $140,000 of miscellaneous revenues recognized in 2014 for the Department of Education audit, offset by a $90,000 payment received in 2013 for reimbursement of excess health insurance loss reserves. Appropriations and grants represent state and local appropriations and nonoperating grants. Appropriations and grants revenues from 2014 to 2015 decreased by $1,340,000. State appropriations decreased by $130,000 due to cutbacks the last half of Student financial aid grants decreased by $1,110,000 due to lower enrollment and a decrease in the limits allowed. Funding from the County decreased by $100,000. Appropriations and grants revenues from 2013 to 2014 decreased by $600,000. State appropriations remained constant from Student financial aid grants decreased by $600,000 due to decreased enrollment numbers. 12

15 Contributions consist of gifts of cash and contributed materials, equipment, compensation and rent. Pledges received are recorded as contributions in the year that the agreement is made. Contributions from 2014 to 2015 decreased by $40,000 due to a decrease in contributed Kansas Public Employees Retirement System (KPERS) pension fund payments from the State on the College s behalf. Contributions from 2013 to 2014 increased by $180,000 primarily due to a $210,000 increase in contributed KPERS pension fund payments from the State on the College s behalf, offset by a $30,000 decrease in gift income. Net investment income (expense) represents the net amount of investment income received on investment balances and interest paid on debt. Net investment income (expense) from 2014 to 2015 decreased by $100,000 due to a decrease in the amount of gains earned on Foundation investments. Net investment income (expense) from 2013 to 2014 increased by $80,000 largely due to an increase in investment income earned on Foundation investments. Capital revenues is funding specifically identified by the State of Kansas for capital projects. The increase from 2014 to 2015 and the decrease from 2013 to 2014 are due to fluctuations in the timing of expenditures. Operating Expenses The College elected to use the natural classification for operating expenses. The amounts incurred for the various expense classifications are as follows: Analysis of Operating Expenses by Natural Classification Years Ended June 30, 2015, 2014 and 2013 Increase (Decrease) 2015 vs vs Amount Percent Amount Percent Compensation and benefits $ 14,749,810 $ 14,247,134 $ 13,010,937 $ 502, $ 1,236, Contractual services 383, , ,672 15, , Supplies and materials 3,046,502 3,597,727 3,168,376 (551,225) (15.32) 429, Professional services 1,510,001 2,552,566 3,379,348 (1,042,565) (40.84) (826,782) (24.47) Depreciation and amortization 1,122,800 1,261,909 2,152,895 (139,109) (11.02) (890,986) (41.39) Repairs and maintenance 349, , ,181 70, , Facilities and equipment rental 952, , ,472 7, , Utilities 841, , ,459 40, , Other 1,100,240 1,163,265 1,108,664 (63,025) (5.42) 54, Total operating expenses $ 24,056,141 $ 25,215,459 $ 24,983,004 $ (1,159,318) (4.60) $ 232,

16 Total operating expenses from 2014 to 2015 decreased by $1,160,000. Compensation and benefits increased by $500,000. Salary expense increased by $190,000, comprised primarily of an increase in administrative/staff pay of $140,000 due to a slight increase in the number of employees, offset by a decrease in faculty pay of $90,000 due to less classes being taught. Salary and benefit reimbursements decreased by $140,000 as there was a reduction in approved funding from National Center for Aviation Training (NCAT) funds. Benefit costs increased by $320,000, primarily due to increased health insurance costs. Supplies and materials from 2014 to 2015 decreased by $550,000. Bookstore purchases decreased by $440,000 due to the reduction in sales. Instructional supplies decreased by $210,000 due to fewer credit hours taught. Facility site expenditures decreased by $50,000 due to the completion of certain improvement projects. Equipment and software purchases increased by $150,000, net of capitalization, due to increased software costs. Professional services from 2014 to 2015 decreased by $1,040,000. NAC grant costs decreased by $950,000, due to a continued decline in these services needed by the grant as it matured into a production mode. Informational technology costs decreased by $180,000 as some services were brought in-house. These decreases were offset by an increase in Adult Literacy professional services of $50,000 due to the payment of management services from grant funds. Depreciation and amortization decreased by $140,000 as previously capitalized items became fully depreciated. Repairs and maintenance increased by $70,000 primarily due to the College using deferred maintenance funds for several projects during Total operating expenses from 2013 to 2014 increased by $230,000. Compensation and benefits increased by $1,240,000. Salary expense increased by $780,000, comprised primarily of increases in administrative/staff pay of $540,000 and faculty pay of $230,000. This is due to a 2.25% raise in 2014 for non-adjunct positions, new positions created for projected enrollment growth and full-year payment for new positions established in 2013 for the NAC grant. Benefit costs increased by $440,000 primarily due to increased health insurance costs, KPERS funding and increased staffing levels. Supplies and materials increased by $430,000. Bookstore purchases increased by $160,000 due to increased sales offset by lower margins. Instructional supplies increased by $250,000 due to increased combined program and high school revenues. Professional services decreased by $830,000 primarily due to an $860,000 decrease in expenses related to the NAC grant as expenses moved more into a program and evaluative nature in 2014 as compared to developmental purposes in Depreciation and amortization decreased by $890,000 led by a $700,000 reduction of intangible and leasehold costs incurred as part of the Cowley purchase that became fully depreciated in In addition, the earlier equipment purchases made from state NCAT funds began to be fully depreciated in Changes for other categories of operating expenses were insignificant in both the nature and amount of change. 14

17 A second method of reporting operating expenses is by functional classification. The following shows the amount of expenses by functional use. Analysis of Operating Expenses by Functional Classification Years Ended June 30, 2015, 2014 and 2013 Increase (Decrease) 2015 vs vs Amount Percent Amount Percent Instructional $ 8,007,092 $ 8,106,883 $ 9,238,836 $ (99,791) (1.23) $ (1,131,953) (12.25) Academic support 4,334,167 4,723,244 3,348,808 (389,077) (8.24) 1,374, Student services 2,922,749 2,797,942 2,399, , , Institutional support 3,892,974 4,125,188 3,873,683 (232,214) (5.63) 251, Auxiliary 1,300,839 1,762,317 1,634,944 (461,478) (26.19) 127, Operation and maintenance of plant 3,598,320 3,699,885 4,487,397 (101,565) (2.75) (787,512) (17.55) Total operating expenses $ 24,056,141 $ 25,215,459 $ 24,983,004 $ (1,159,318) (4.60) $ 232, Total operating expenses from 2014 to 2015 decreased by $1,160,000. Instructional expenses decreased by $100,000. Total salary and benefit expenses increased by $140,000. Salary expenses decreased by $160,000, but pooled benefits actually increased by $140,000 due to higher benefit costs and a change in the payroll mix between faculty and adjunct/overload agreements. Salary and benefit reimbursements decreased by $160,000 as there was a reduction in approved funding from NCAT funds. Supplies and materials decreased by $200,000 due to lower enrollments. Equipment costs increased by $60,000, due primarily to an increase of $70,000 for the automotive program at Goddard. Professional services decreased by $80,000, largely due to a decrease in instructional professional services costs for the Adult Literacy program as more of the instructors are employed by NexStep. Academic support expenses decreased by $390,000. Salary and benefit expenses increased by $250,000 due to higher administrative salaries and an increase in pooled benefit rates. Equipment costs increased by 80,000 due to tablets and software purchased for instructional design and assessment purposes. Professional services decreased by $730,000, primarily due to a decrease of $890,000 in NAC related costs due to the maturing of the program, offset by an increase of $120,000 in Adult Literacy costs due to NexStep taking over more of the administrative responsibilities. Student services expenses increased by $120,000. Salary and benefit expenses increased by $110,000 primarily due to a pay increase in 2015 as well as higher benefit costs. Other expense categories had only minor variations from Institutional support expenses decreased by $230,000. Salary and benefit expenses increased by $30,000, due to the increase in pooled benefit rates. Professional services decreased by $240,000, largely due to a decrease in Information Technology costs of $180,000 as some services were brought in-house and NAC related costs of $60,000. Auxiliary expenses decreased by $460,000 primarily due to decreased inventory purchases. 15

18 Operation and maintenance of plant expenses decreased by $100,000. Salary and benefit expenses decreased slightly due to less spent on part-time workers. Utility expenses increased by $40,000 due to higher electricity costs. Repairs and maintenance expenses increased by $70,000 primarily due to the College using deferred maintenance funds for several projects during Depreciation decreased by $140,000 as previously capitalized items became fully depreciated. The College capitalized $80,000 more in 2015 than in 2014, resulting in fewer purchases being expensed. Total operating expenses from 2013 to 2014 increased by $230,000. Instructional expenses decreased by $1,130,000. Salary and benefit expenses increased by $460,000 due to increased enrollment, offset by an increase of salary and benefit reimbursements from NCAT funding and Pratt of $180,000. Supplies and materials increased by $240,000 primarily due to increased enrollment. Professional services decreased by $1,670,000 in part from $1,500,000 in NAC related professional services in 2013 for development costs. Academic support expenses increased by $1,370,000. Salary and benefit expenses increased by $410,000 due to increased enrollment and support services personnel and a $180,000 reduction in the amount of salary reimbursements from NCAT funding. Professional services increased by $670,000 primarily due to an increase in NAC related professional services as those costs moved into a program and evaluative nature. Professional development and travel Student services increased $90,000 led by increased travel costs associated with the NAC grant as the other colleges increased their activities and there was a full year of activity for the grant. Student services expenses increased by $400,000. Salary and benefit expenses increased by $200,000 due to a slight increase in the number of employees. Advertising costs increased by $90,000 due to increased emphasis on marketing efforts. Copier rental and related costs increased by $60,000 as these costs were reallocated in 2014 from other areas due to the usage by marketing and student services. Institutional support expenses increased by $250,000. Salaries and benefits increased by $50,000, primarily due to raises and increases in the pooled benefits. Advertising and promotional costs increased by about $40,000, primarily due to accreditation and NAC related costs. Professional services increased by $150,000 primarily due to several largescale IT projects. Auxiliary expenses increased by $130,000 primarily due to increased inventory purchases. Operation and maintenance of plant expenses decreased by $790,000. Salary and benefit expense increased slightly. Utilities increased by $80,000 primarily due to increased heating costs as 2014 was a much colder winter across the northern part of the country. Repairs and maintenance increased by $70,000 primarily due to a new quarterly maintenance agreement for the NCAT facility and several larger repairs at the Southside facility. Rental and leasing expenses decreased by $80,000 primarily due to reallocating the copier lease payments from Operations to other departments. There were slight increases in other rental costs for the various facilities. These increases were offset by an $890,000 decrease in depreciation, primarily due to several large assets associated with the Cowley purchase becoming fully depreciated at the end of 2013 along some of the earlier NCAT funded purchases becoming fully depreciated. 16

19 Cash Flows The statements of cash flows provide a view of the sources and uses of the College s cash resources. A summary statement is as follows: Cash Flows Years Ended June 30, 2015, 2014 and 2013 Increase (Decrease) 2015 vs vs Amount Percent Amount Percent Cash Provided by (Used in) Operating activities Cash inflows $ 11,447,291 $ 12,112,349 $ 11,296,152 $ (665,058) (5.49) $ 816, Cash outflows (21,522,111) (22,729,564) (21,544,901) 1,207, (1,184,663) (5.50) Net operating activities (10,074,820) (10,617,215) (10,248,749) 542, (368,466) (3.60) Noncapital financing activities 11,729,454 13,077,413 13,928,943 (1,347,959) (10.31) (851,530) (6.11) Capital and related financing activities (667,651) (1,058,776) (1,743,885) 391, , Investing activities (578) (181,163) 17, , (198,450) (1,147.97) Increase (Decrease) in Cash and Cash Equivalents 986,405 1,220,259 1,953,596 $ (233,854) (19.16) $ (733,337) (37.54) Cash and Cash Equivalents, Beginning of Year 6,510,285 5,290,026 3,336,430 Cash and Cash Equivalents, End of Year $ 7,496,690 $ 6,510,285 $ 5,290,026 Cash and cash equivalents increased by $990,000 in 2015 as compared to a $1,220,000 increase in Net cash used in operating activities from 2014 to 2015 decreased by $540,000. Total operating revenues decreased by $730,000 and total operating expenses decreased by $1,160,000, resulting in a decrease in operating loss of $430,000. Noncash expenses included in the operating loss such as depreciation, contributed services and materials and bad debts decreased by $90,000. Net working capital accounts decreased by $170,000 in 2015 as compared to a decrease of $370,000 in 2014, resulting in a $200,000 decrease in cash outflows from 2014 to Net cash provided by noncapital financing activities from 2014 to 2015 decreased by $1,350,000. Cash provided by federal grants and contracts decreased by $1,110,000 due to a decrease in cash received for student financial aid grants. Cash provided by state and local appropriations decreased by $230,000 due to a $130,000 decrease in funding from the State and a $100,000 decrease in funding from Sedgwick County. Cash provided by contributions decreased by $10,

20 Net cash used in capital and related financing activities from 2014 to 2015 decreased by $390,000. Cash provided from the State for capital outlay increased by $10,000. Cash used to pay long-term debt and associated interest decreased by $460,000. Cash provided from the sale of capital assets decreased by $10,000. Cash used to pay for the purchase of capital assets increased by $70,000. Net cash used in investing activities from 2014 to 2015 decreased by $180,000. In 2014, the Foundation purchased $200,000 in investments. This was partially offset in 2015 with the addition of $25,000 to a certificate of deposit held by the College. Net cash used in operating activities from 2013 to 2014 increased by $370,000. Total operating revenues increased by $380,000 and total operating expenses increased by $230,000, resulting in a decrease in operating loss of $150,000. Noncash expenses included in the operating loss such as depreciation, contributed services and materials and bad debts decreased by $640,000. Net working capital accounts decreased by $370,000 in 2014 as compared to a decrease of $500,000 in 2013, resulting in a $130,000 decrease in cash outflows from 2013 to Net cash provided by noncapital financing activities from 2013 to 2014 decreased by $850,000. Cash provided by federal grants and contracts decreased by $600,000 due to a decrease in cash received for student financial aid grants. Cash provided by state and local appropriations remained constant. Cash provided by contributions decreased by $250,000 due to the final Spirit pledge payment made in Net cash used in capital and related financing activities from 2013 to 2014 decreased by $690,000. Cash used to pay long-term debt and associated interest decreased by $660,000. Cash used to pay for the purchase of capital assets decreased by $20,000. Net cash used in investing activities from 2013 to 2014 increased by $200,000. Cash used for the purchase of investments increased by $200,

21 Supplemental disclosures on noncash financing and investing activities represent financing and investing transactions that are not shown on the cash flow statement as they had no effect on cash but affected other balance sheet or statement of revenues, expenses and changes in net position accounts. There are four such disclosures. The amount of pension plan contributions made by the State of Kansas to KPERS on behalf of the College. The amount of in-kind contributions the College received for the use of the Grove facilities and for supplies and materials for the use of various programs. Contributed supplies in connection with a pledge receivable. Purchase of capital assets through issuance of debt. Wichita Area Technical College Foundation Activity The Foundation began operations in 2008 when it received its nonprofit designation from the IRS. The activity of the Foundation for 2015, 2014 and 2013 is included in the College s financial statements and is as follows: Beginning net position balance $ 1,256,998 $ 1,116,785 $ 1,072,491 Gift income 17,601 28,099 45,985 Investment and miscellaneous income 32, ,407 69,589 Operating expenses (12,413) (18,874) (45,181) Grant awards (10,855) (6,419) (26,099) Ending net position balance $ 1,283,890 $ 1,256,998 $ 1,116,785 Cash balance $ 60,305 $ 52,037 $ 261,235 Accounts receivable $ 3,755 $ 1,825 $ - Accounts payable $ 33 $ 34 $ 127 Payable to Wichita Area Technical College $ 15,988 $ 9,283 $ 28,048 Investments $ 1,235,851 $ 1,212,453 $ 883,725 19

22 Balance Sheets June 30, 2015 and Assets Current Assets Cash Unrestricted $ 3,789,877 $ 3,274,139 Board restricted 3,706,813 3,236,146 7,496,690 6,510,285 Certificate of deposit, restricted 100,000 75,000 Accounts receivable, net of allowance; $570,000, $655,000 1,978,159 2,026,544 Pledges receivable, net of discount - 99,015 Investments 1,235,851 1,212,453 Prepaid expenses and other 707, ,136 Total current assets 11,518,452 10,524,433 Capital Assets, Net 2,971,270 3,527,064 Intangible Assets, Net 44,873 93,857 Total assets $ 14,534,595 $ 14,145,354 Liabilities and Net Position Current Liabilities Current portion of notes payable $ 45,385 $ 500,000 Accounts payable 1,193, ,360 Accrued wages and related liabilities 1,087,556 1,065,689 Unearned revenue 610, ,704 Total current liabilities 2,937,242 3,016,753 Long-term Liabilities Notes payable 95,925 - Accrued benefits payable 216, ,612 Total liabilities 3,249,797 3,341,365 Net Position Net investment in capital assets 2,874,833 3,120,921 Restricted, unexpendable 900, ,000 Restricted, expendable 339, ,693 Unrestricted 7,170,574 6,407,375 Total net position 11,284,798 10,803,989 Total liabilities and net position $ 14,534,595 $ 14,145,354 See Notes to Financial Statements 20