REPORT NO. 2011-089 FEBRUARY 2011 PALM BEACH STATE COLLEGE Financial Audit_part2 docx

The following summarizes the College’s other revenues, expenses, gains, or losses for the 2009-10 and 2008-09 fiscal years: Other Revenues, Expenses, Gains, or Losses: College In Thousa

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Operating expenses for the College and its component unit for the respective fiscal years ended are presented in the

following table:

Operating Expenses (In Thousands)

6-30-10 6-30-09 12-31-09 12-31-08

Operating Expenses

Scholarships and Waivers 25,976 14,829 1,916 1,905 Utilities and Communications 3,852 3,730

Contractual Services 7,551 7,813 Other Services and Expenses 6,180 5,394 5,087 5,909 Materials and Supplies 7,806 8,017

Depreciation 8,515 8,140

Total Operating Expenses $ 129,923 146,940 $ 7,003 $ $ 7,814

The following chart presents the College’s operating expenses for the 2009-10 and 2008-09 fiscal years:

Operating Expenses: College (In Thousands)

College operating expenses increased by $17 million, or 13.1 percent, as a result of the following factors:

 Personnel services expenses increased by $5.1 million, or 6.2 percent, primarily due to increased enrollment

resulting in increased instructional staff and corresponding employee benefits costs

 Scholarship expenses increased by $11.1 million, or 75.2 percent, primarily due to increased financial aid

enrollment activities

 Other services and expenses increased by $0.8 million, or 14.6 percent, which included instructional and

custodial outsourcing operations

Nonoperating Revenues and Expenses

Certain revenue sources that the College relies on to provide funding for operations, including State appropriations,

certain gifts and grants, and investment income, are defined by GASB as nonoperating Nonoperating expenses

$8,515

$7,806

$6,180

$7,551

$3,852

$25,976

$87,060

$8,140

$8,017

$5,394

$7,813

$3,730

$14,829

$82,000

Depreciation Materials and Supplies Other Services and Expenses

Contractual Services Utilities and Communications

Scholarships and Waivers Personnel Services

2008-09 2009-10

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include capital financing costs and other costs related to capital assets The following summarizes the College’s nonoperating revenues and expenses for the 2009-10 and 2008-09 fiscal years:

Nonoperating Revenues (Expenses): College

(In Thousands)

2009-10 2008-09

Investment Income (Loss) 1,662 (229) Loss on Disposal of Capital Assets (57) (461) Interest on Capital Asset-Related Debt (564) (526)

Net Nonoperating Revenues $ 95,572 $ 75,353

Net nonoperating revenues increased by $20.2 million, or 26.8 percent, primarily due to an increase in gifts and grants The increase in gifts and grants was due to the College receiving American Recovery and Reinvestment Act funds and

an increase in other Federal grants

Other Revenues, Expenses, Gains, or Losses

This category is composed of capital appropriations and capital grants, contracts, gifts, and fees The following summarizes the College’s other revenues, expenses, gains, or losses for the 2009-10 and 2008-09 fiscal years:

Other Revenues, Expenses, Gains, or Losses: College

(In Thousands)

2009-10 2008-09

Capital Appropriations $ 5,522 $ 14,554 Capital Grants, Contracts, Gifts, and Fees 4,209 3,464

Capital appropriations decreased by $9 million due to decreased State funding appropriated to support future capital projects Capital grants, contracts, gifts, and fee increased slightly by $0.7 million primarily due to increased capital

improvement fee rates

T HE S TATEMENT OF C ASH F LOWS

Another way to assess the financial health of an institution is to look at the statement of cash flows Its primary purpose is to provide relevant information about the cash receipts and cash payments of an entity during a period The statement of cash flows also helps users assess:

 An entity’s ability to generate future net cash flows

 Its ability to meet its obligations as they come due

 Its need for external financing

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A summary of the College’s cash flows for the 2009-10 and 2008-09 fiscal years is presented in the following table:

Condensed Statement of Cash Flows: College

(In Thousands)

2009-10 2008-09

Cash Provided (Used) by:

Noncapital Financing Activities 93,779 76,361 Capital and Related Financing Activities (3,065) 5,943

Net Increase in Cash and Cash Equivalents 558 6,925 Cash and Cash Equivalents, Beginning of Year 33,295 26,370

Cash and Cash Equivalents, End of Year $ 33,853 $ 33,295

Major sources of funds came from State appropriations ($47.6 million), net student tuition and fees ($33.2 million), and nonoperating gifts and grants ($46.1 million) Major uses of funds were for payments to employees, including salaries and benefits ($86.9 million), payments for scholarships ($26 million) and to providers of goods and services, including capital uses ($46.9 million)

Changes in cash and cash equivalents were the result of the following factors:

 Cash used by operating activities increased by $15.9 million primarily due to an increase in financial aid scholarship funds

 Cash provided by noncapital financing activities increased by $17.4 million primarily due to increases in gifts and grants funding offset by a decrease in State appropriations

CAPITAL ASSETS AND DEBT ADMINISTRATION

C APITAL A SSETS

At June 30, 2010, the College had $301.5 million in capital assets, less accumulated depreciation of $97.2 million, for net capital assets of $204.3 million Depreciation charges for the current fiscal year totaled $8.5 million The following table summarizes the College’s capital assets at June 30:

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Capital Assets: College (In Thousands)

Balance

Additions Reductions Ending

Balance

Other Structures and Improvements 24,930 1,453 233 26,150

Furniture, Machinery, and Equipment 14,177 2,118 588 15,707

Construction in Progress 8,921 18,026 15,942 11,005

Less, Accumulated Depreciation:

Other Structures and Improvements 18,632 1,185 180 19,637

Furniture, Machinery, and Equipment 11,839 1,544 583 12,800

Total Accumulated Depreciation 89,446 8,515 763 97,198

Capital Assets, Net $ 191,231 $ 29,087 $ 16,000 $ 204,318

Major capital additions completed during the 2009-10 fiscal year and the resources that funded their acquisition included:

Major Capital Additions (In Thousands)

Amount Central Campus:

PST C Firing Range (PECO) $ 6,570 R/R Administration Building 111 (PECO, CO&DS) 1,513 R/R Finance Building 110 (PECO, CO&DS) 1,180 Mechanical Building 124 - Chiller (PECO) 343 Parking Lots (PECO) 306 Signage (PECO, Transfer Funds) 190 North Campus:

LLRC/ Lab Building (PECO, Transfer Funds) 5,421 Burt Reynolds Building 106 (PECO, Transfer Funds) 276 Signage (PECO, Transfer Funds) 95 South Campus:

Signage (PECO, Transfer Funds) 32 Glades Campus:

Roadwork (PECO) 277

Total Major Capital Additions Completed $ 16,203 Note: PECO = Public Education Capital Outlay

CO&DS = Capital Outlay and Debt Service

Capital expenditures totaling $26.2 million for significant projects are planned for the 2010-11 fiscal year Projects planned include: Lake Worth “Central” Campus: (1) Criminal Justice/Crime Scene/Fire Classroom Building -

$10.3 million; (2) Central Energy Plant #3 - $3.7 million; (3) Fire Training Tower - $1.7 million; (4) Emergency Vehicle Operator Course Skid Pad - $0.7 million; (5) new BAS Building - $7.9 million; (6) Student Commons Landscape Project - $0.2 million; and District Expenditures – All campuses as needed: (1) District Re-roofing -

$0.4 million; (2) HVAC Air Handler Replacements - $0.9 million; (3) General Renovations - $0.4 million Additional information about the College’s capital assets is presented in the notes to the financial statements

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D EBT A DMINISTRATION

At fiscal year-end, the College had $12.3 million in long-term debt outstanding The following table summarizes outstanding long-term debt by type for the fiscal years ended June 30, 2010, and June 30, 2009:

Long-Term Debt, at June 30: College

(In Thousands)

SBE Capital Outlay Bonds $ 3,835 $ 4,075 Capital Improvement

Revenue Bonds 8,425 8,740

The State Board of Education issues capital outlay bonds on behalf of the College During the 2009-10 fiscal year, there were no bond sales and debt repayments totaled $555,000 Additional information about the College’s long-term debt is presented in the notes to financial statements

ECONOMIC FACTORS THAT WILL AFFECT THE FUTURE

Palm Beach State College’s economic condition is closely tied to that of the State of Florida Because of limited economic growth and increased demand for State resources, only a modest increase in State funding is anticipated in the coming year In response to a decrease in State appropriations, the Board of Trustees increased the tuition rate eight percent to take effect beginning with the Fall 2010 term The College has also monitored budgeted expenditures closely and has maintained a committee to continue to analyze potential further cuts Despite the lack of increases in State funding, the College’s current financial and capital plans indicate that the infusion of additional financial resources from an increase in enrollment and growth in grant activities will enable it to maintain consistent mission-critical services over the coming year

REQUESTS FOR INFORMATION

Questions concerning information provided in the MD&A, or other required supplementary information, and financial statements and notes thereto, or requests for additional financial information should be addressed to the Vice President for Administration and Business Services, Palm Beach State College, 4200 Congress Avenue, Lake Worth, Florida 33461

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BASIC FINANCIAL STATEMENTS

Unit ASSETS

Current Assets:

Restricted Cash and Cash Equivalents 583,150

Accounts Receivable, Net 1,975,998 343,950

Due from Other Governmental Agencies 9,523,893

Noncurrent Assets:

Restricted Cash and Cash Equivalents 19,000,286

Depreciable Capital Assets, Net 188,291,660

Nondepreciable Capital Assets 16,026,269 11,000

LIABILITIES

Current Liabilities:

Salary and Payroll Taxes Payable 1,382,824

Long-Term Liabilities - Current Portion:

Compensated Absences Payable 463,643

Total Current Liabilities 4,567,011 356,481

Noncurrent Liabilities:

Compensated Absences Payable 8,969,680

Other Postemployment Benefits Payable 142,453

Other Noncurrent Liabilities 417,004

PALM BEACH STATE COLLEGE

A COMPONENT UNIT OF THE STATE OF FLORIDA

STATEMENT OF NET ASSETS

June 30, 2010

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College Component

Unit NET ASSETS

Invested in Capital Assets, Net of Related Debt $ 192,057,930 $ 11,000

Restricted:

Nonexpendable:

Expendable:

Grants and Loans 1,583,669

Scholarships 865,934 10,984,870

Capital Projects 26,492,952

Debt Service 99,187

Unrestricted 4,904,337 (1,137,172)

Total Net Assets 226,004,009 23,282,120

TOTAL LIABILITIES AND NET ASSETS $ 251,775,157 $ 23,638,601

A COMPONENT UNIT OF THE STATE OF FLORIDA STATEMENT OF NET ASSETS (Continued)

June 30, 2010

The accompanying notes to financial statements are an integral part of this statement.

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Unit REVENUES

Operating Revenues:

Student Tuition and Fees, Net of Scholarship

State and Local Grants and Contracts 711,563 113,702 Nongovernmental Grants and Contracts 5,339,941 4,737,729 Sales and Services of Educational Departments 628,770

EXPENSES

Operating Expenses:

NONOPERATING REVENUES (EXPENSES)

Interest on Capital Asset-Related Debt (563,777)

Income (Loss) Before Other Revenues,

Capital Grants, Contracts, Gifts, and Fees 4,208,658

A COMPONENT UNIT OF THE STATE OF FLORIDA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET ASSETS

For the Fiscal Year Ended June 30, 2010

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College CASH FLOWS FROM OPERATING ACTIVITIES

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES

Gifts and Grants Received for Other Than Capital or Endowment Purposes 46,136,215

Net Cash Provided by Noncapital Financing Activities 93,778,966

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES

Net Cash Used by Capital and Related Financing Activities (3,064,916)

CASH FLOWS FROM INVESTING ACTIVITIES

STATEMENT OF CASH FLOWS For the Fiscal Year Ended June 30, 2010

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College RECONCILIATION OF OPERATING LOSS

TO NET CASH USED BY OPERATING ACTIVITIES

Adjustments to Reconcile Operating Loss

to Net Cash Used by Operating Activities:

Changes in Assets and Liabilities:

SUPPLEMENTAL DISCLOSURE OF NONCASH CAPITAL RELATED

FINANCING ACTIVITIES

(57,300)

$

A COMPONENT UNIT OF THE STATE OF FLORIDA STATEMENT OF CASH FLOWS (Continued) For the Fiscal Year Ended June 30, 2010

Losses from the disposal of capital assets were recognized on the statement of

revenues, expenses, and changes in net assets, but are not cash transactions for

the statement of cash flows.

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NOTES TO FINANCIAL STATEMENTS

J UNE 30, 2010

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1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reporting Entity The governing body of Palm Beach State College 1, a component unit of the State of Florida, is the District Board of Trustees The Board constitutes a corporation and is composed of five 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 Florida Colleges, and

is governed by law and 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 laws and State Board of Education rules Geographic boundaries of the District correspond with those

of Palm Beach County

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

2600 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 upon the application of these criteria, the College is a component unit of the State of Florida, and its financial balances and activity are reported in the State’s

Comprehensive Annual Financial Report by discrete presentation

Discretely Presented Component Unit Based on the application of the criteria for determining

component units, the Palm Beach State 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 1004.70(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 financial

statements for the fiscal year ended December 31, 2009

The Foundation is also a direct-support organization, as defined in Section 1004.70, 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 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

1 The College’s Board of Trustees approved the name change from Palm Beach Community College to Palm Beach State College effective January 12, 2010, pursuant to Section 1001.60(2)(b), Florida Statutes

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