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3.10.1     The institution’s recent financial history demonstrates financial stability. (Financial stability)

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Summary

Fayetteville Technical Community College (FTCC) is in compliance with this comprehensive standard.  The College demonstrates financial stability to support the mission of the College and the scope of its operations.  The College’s financial support continues to grow annually, and the College’s liquidity meets the financial obligations.  The College’s financial statement audit history demonstrates financial stability.  

Narrative

FTCC’s annual financial statements consist of a Statement of Net Assets, Statement of Revenues, Expenses, and Changes in Net Assets, Statement of Cash Flows, accompanying notes, and Management’s Discussion and Analysis.     

The majority of the College’s funding is appropriated by the state of North Carolina and is distributed by the North Carolina Community College System (NCCCS) as directed by the State Board of Community Colleges.  State funding is based on the greater of the College's prior-year student full-time equivalency (FTE) or the College's average FTE over the last three years. Over the most recent six-year period, from fiscal year 2003-04 to fiscal year 2008-09, the College’s budgeted FTE increased 11 percent and state funding increased 53 percent. While it appears the State Aid decreased approximately 2 percent between fiscal year 2008-09 and 2007-08, this is not the case.  For financial statement presentation, a portion of state funding is reclassified to Student Tuition and Fees (tuition receipts) and Noncapital Grants (federal pass through funds).  The amount reclassified out of State Aid and into one of the other revenue accounts was greater in fiscal year 2008-09 compared to 2007-08, but the College’s spending of state funds was actually slightly greater in fiscal year 2008-09 compared to 2007-08. 

County appropriations are another major source of funding for the College.  County funding increased 41 percent over the same six-year period, 2003-04 to 2008-09.  State and county funds are indicated on the 2008-09 fiscal year financial statements and the 2003-04 fiscal year review report.  As physical facility expansions have occurred, the College has received state bond funding and county capital funding in addition to state and county funding for operations.  Since fiscal year 2003-04, the College’s capital assets have increased 80 percent.  FTCC has also experienced growth in institutional funds revenues, which are available to supplement state and county funding.

The College’s net assets are one indicator of its financial stability.  The Statement of Net Assets presents the assets, liabilities, and net assets of the College at fiscal year end.  An increase in net assets indicates improvement of the College’s financial condition.  In comparing fiscal year 2008-09 to 2007-08, total assets increased $11,146,829.77 or 13  percent, total liabilities increased $426,298.81 or 10 percent, and net assets increased $10,720,530.96 or 14 percent. In comparing fiscal year 2007-08 to 2006-07, total assets increased $4,639,522.01 or 6 percent, total liabilities decreased $255,085.22 or 6 percent, and net assets increased $4,894,607.23 or 7 percent.  In comparing fiscal year 2006-07 to 2005-06, total assets increased $7,671,139.00 or 11 percent, total liabilities increased $46,859.96 or 1 percent, and net assets increased $7,624,279.04 or 11 percent.

The current ratio is a measurement of financial liquidity calculated by comparing current assets to current liabilities.  A current ratio of 2.00 or greater indicates that the College’s liquidity is adequate to meet its financial obligations in the event of an economic downturn.  Over the last three years, in 2006-07, 2007-08, and 2008-09 the current ratio was 7.41, 8.72, and 7.17, respectively.  The high current ratios indicate that the College’s financial liquidity is outstanding.

The Statement of Revenues, Expenses, and Changes in Net Assets presents the College’s results of fiscal operations for the fiscal year.  The Statement presents the revenues received and expenses paid by the College, both operating and non-operating, and other revenues, expenses, gains, and losses received or spent by the College. In comparing fiscal year 2008-09 to 2007-08, operating revenues increased $972,336.92 or 8 percent, non-operating revenues increased $3,090,394.65 or 5 percent, other revenues increased $7,904,573.27 or 137 percent, and operating expenses increased $5,524,443.51 or 7 percent. In comparing fiscal year 2007-08 to 2006-07, operating revenues increased $1,583,416.30 or 6 percent, non-operating revenues increased $4,224,723.00 or 9 percent, other revenues decreased $3,221,055.96 or 36 percent, and operating expenses increased $5,261,618.75 or 7 percent.  The decrease in other revenues of $3,221,055.96 was due to a decrease in county capital aid.  The College recorded $3,237,087.62 of county capital aid in fiscal year 2006-07 for the purchase of a building.  This level of county capital funding is non-recurring.  In comparing fiscal year 2006-07 to 2005-06, operating revenues decreased $391,170.95 or 1 percent, non-operating revenues increased $3,017,865.11 or 7 percent, other revenues increased $4,934,702.83 or 122 percent, and operating expenses increased $1,645,658.48 or 2 percent.  The slight decrease in operating revenue resulted from a decrease in federal Pell grants.  The number of Pell students decreased by 4 percent in 2006-07.

The College’s Office of Business and Finance prepares the College’s financial statements and submits them to the Office of the State Controller and the Office of the State Auditor (OSA) annually.  FTCC’s financial statements are included in the statewide Comprehensive Annual Financial Report (CAFR).  OSA audits FTCC’s financial statements every other year.  Previous to fiscal year 2001-02, OSA performed an annual audit of the College’s financial statements.  Community colleges are currently audited every other year, unless the auditors identify issues they believe warrant annual audits.  The most recent audit performed by OSA is for the fiscal year 2008-09.  OSA audits the statewide CAFR on an annual basis. 

The audit standards followed by OSA require auditors to obtain reasonable assurance that the financial statements are free of material misstatement.  OSA’s audits include tests of evidence supporting the amounts and disclosures in the College’s financial statements.  OSA assesses the accounting principles used and significant estimates made by management in the preparation of the College’s financial statements.  OSA evaluates the overall financial statement presentation and considers the College’s internal control over financial reporting.  FTCC has received only one financial statement audit finding over the past 20 years. Based on the College’s response to the fiscal year 2006-07 audit finding, OSA did not perform an audit of the College’s financial statements in 2007-08.  FTCC received a response from the NCCCS on December 12, 2008, which stated that the College’s response to the audit finding was acceptable and the matter closed.

Supporting Documentation

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