Standard_7


 * Finance**

Introduction

South Puget Sound Community College (SPSCC) is state-supported and operates on a biennium budget. It is part of the state’s 34 community and technical college system, which is coordinated by the State Board for Community and Technical Colleges (SBCTC). The SBCTC sets policy and oversees the budget allocation for the system. It also collaborates with the colleges in determining and promoting budget priorities to the State Legislature during the budget development process. 7.A Financial Planning

Analysis and Appraisal 7. A.1 The SBCTC allocates the budget it receives from the Legislature to the colleges within the system. SPSCC’s President is empowered by the Board of Trustees, through its Policy Manual, to autonomously develop and execute 90% of the College’s operating budget in alignment with the strategic plan, mission and goals. Expenditure of the remaining funds is mandated by the Legislature. The College is developing a new governance model in which the proposed budget will be reviewed by the College Council before going to the President. This will provide more inclusive participation in the budget process, as the College Council is made up of staff, faculty and administrators. Once approved the budget is monitored by the Board of Trustees via quarterly reports provided by Administrative Services. [Budget Graph] Place Holder for Budget Graph 7.A.2 To better align the budgetary and planning processes, the College has implemented a carry-forward budget model, where institutional priorities are driven by its strategic plan, mission and goals. The Equipment Allocation Process, implemented in 2007, requires a direct correlation to the strategic plan for one-time equipment purchases. Replacement of major equipment and physical facilities are captured in IT Service’s 5-year Technology Plan and Capital Facilities’ 10-year Plan. As a result, optimum learning and working environments are developed, maintained, and replaced/upgraded in accordance with strategically guided processes and plans. “A 3-year projection of major categories of income”? Is this answered? 7.A.3 The Administrative Services Office prepares an annual budget proposal for the Board of Trustees’ approval. Policies, guidelines, and processes for budget development. Once approved it is distributed throughout the college community; in the past by paper copy, in the future via the College’s intranet. Due to the dynamic nature of the budget process revisions/adjustments are continuously made and communicated to the Board of Trustees. 7.A.4 The College currently has two long term debt items acquired through the State’s Certificate of Participation (COP program - two land purchases that were developed into parking lots and the construction of the Student Union Building (SUB). No operating funds are used to pay these debts. The COPs are paid through the use of special service fees; parking fees for the parking lots, which will be paid off in 2009, and a per credit surcharge, which funds the SUB COP.  [How are they periodically reviewed, controlled, & justified? Who authorized it? What’s the governing board policy guiding the use and limit of debt? Is there one?]

Strengths

Challenges

Future Direction/Recommendations: 7.B Adequacy of Financial Resources Analysis and Appraisal 7.B.1 SPSCC relies upon a variety of funding sources including, a share of state allocated funds based on student FTE, tuition, College Foundation fundraising, grants and contracts, and various fees. Chart [insert #] illustrates the relative percentages of fund sources supporting the 2008-2009 budget. From 2007-2009 enrollment increased, resulting in commensurate increases in tuition revenue, yet there was a reduction in worker retraining funds due to a strong economy, up to the start of the current recession. Increased high demand FTEs are likely as the federal stimulus funds begin to flow to Washington State. A new contract with Capital and Providence St. Peter Hospital for the nursing program increased revenue, as did a literacy grant from SBCTC. For the opening of the new Science building, the College Foundation mounted a special fundraising effort, which supported the supply of essential program materials in time for Winter Quarter, 2009.

The college systematically ties resource allocation to the mission and goals of its strategic plan. Examples include:

 1. Equipment Budget Allocation process  2. Faculty Position Prioritization process  3. College Council’s Budget Reduction Recommendation process  4. Sustainability Initiatives

The first three processes use a rubric that ranks proposals according to how closely they match the objectives and goals in the strategic plan. Details of these processes are included in the appendix [document #, # and #]. To support the strategic plan’s sustainability initiative, the college has undertaken several projects. These include installation of solar panels on the science building funded by the State OFM (Office of Financial Management), an energy conservation grant from PSE (Puget Sound Energy), and in-kind donations for the recycling and composting program. Strengths:  ·   The College relies upon a variety of fund sources that allow it to maintain flexibility.  ·   Sustained strong enrollments have the potential to increase local reserves.  ·   The College has found ways to promote sustainability while conserving funds.

Challenges:  ·   Meeting the needs of programs and services in an economic environment that has caused devaluing of reserve investments will require continuous process improvement.  ·   Increased reliance on local tuition funds to replace reduced state funding will make it difficult to serve lower income students.

Future Direction/Recommendation:  ·   The college has expanded the role of College Council to include a recommendation process for budget reductions. The future use of this process will enhance transparency and promote increased understanding of programs and services across the community.

7.B.2 Short and long-term debt service requirements are met with non-operating funds to ensure that instructional programs are not adversely impacted. Debt on the Student Union Building is paid with student fees, while parking fees are used to reduce the debt on parking lot creation. The college does not have the legal authority to borrow for capital projects. Capital projects are funded through a clearly defined process where the submissions of all 34 colleges in the system are ranked by the SBCTC and are funded by the Legislature as the State budget permits. The 5-year debt repayment schedule is included in the appendix [insert document #here. Strength:  ·   The College is consistently able to cover debt service with existing fees that will be available into the future.

Challenge: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   Meeting the college need to expand into the northeast part of the county at Hawks Prairie is limited by the competitive capital project process and the current budget shortfall.

Future Direction/Recommendations: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The College may pursue other avenues of raising funds for a first building on the Hawks Prairie land.

7.B.3 Evidence of the college’s financial stability is reflected in the SBCTC’s annual reports to the OFM. Financial data is reported by the Director of Budgeting to OFM as part of a system-wide report and to the Board of Trustees annually. A copy is included with the supporting documentation. As a public institution, the college must balance its budget each fiscal year and is not permitted to incur deficits. Strengths: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The College maintains a consistently strong balance sheet. <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The College adheres to a frequent reporting schedule.

7.B.4 Funds transfers among major funds categories adhere to the policies outlined in Chapter 2 of the Board Policy Manual. Transfers are typically made to cover negative balances. INSERT TRANSFER REPORT OR CHART 7.B.5 The college follows a funds distribution formula that allocates equitable funding to support the college’s program offerings. INSERT CHART HERE?

Budgets, arranged by program, are maintained by the Director of Budgeting (in Financial Services) and the Instructional Budget and Database Manager (in the Instruction Division). INSERT CHART HERE Evidence of the adequacy of funding is demonstrated by the fulfillment of nearly all equipment requests made by Instructional programs during the annual Equipment Budget Allocation process. Unfunded expenditures are pushed to subsequent years.

7.B.6 Sources of financial aid include federal, state, institutional and private funding, which support approximately 40 different aid programs. With the exception of Pell Grants, federal funds are allocated by the US Department of Education based on applicant data from prior years. Although the college has historically applied for increases to meet the needs of projected enrollment, the amount received is typically less due to the federal government’s “fair share” formula for the distribution of funds. Federal Family Education Loan programs are funded in partnership with participating lenders, insured by the federal government and processed by the college.

State allocation-based financial aid programs are also based on anticipated applicant pools from historical data with some latitude for adjustments during the year when large shifts in student populations occur. The Dean of Financial Aid reports applicant data quarterly ] to ensure that the college will benefit from additional funds. Other state programs are student-specific and follow the individual student regardless of the institution.

As tuition increases 3.5% of the revenue collected is subsequently set aside to fund the SPSCC Grant program; an institutional financial aid fund for underprivileged students. This program is tied directly to current and future enrollment. Awards, in the form of grants, work assignments, and loans, are based on expected enrollment and adjusted as needed. All SPSCC Grant aid is awarded on a first come, first served basis.

As aid becomes depleted, the Dean of Financial Aid provides cumulative information to the College Foundation regarding students who have unmet financial need. This information is used to strategize and to increase funding opportunities for scholarships, which has increased dramatically over the past 7 years. [insert info from 7.D]    After all sources of financial aid have been exhausted, the college monitors and controls the relationship between unfunded student financial aid and tuition revenues by dropping students for non-payment of tuition. As a public institution, the college is prohibited from giving away state resources. INSERT CHART TO REPLACE MUCH OF NARRATIVE Strength: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The relationship between the Financial Aid Department and the Foundation serves students well. Challenge: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   Grants are limited by the federal process. 7.B.7 The college has a long history of conservative fiscal management. As such, a relatively large amount of financial reserves has been maintained. The college’s Board Policy Manual strictly controls the circumstances in which reserves may be accessed.

INSERT CHART HERE Strengths: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The College’s fiscal conservatism in years past minimizes the negative impact of the current economic crisis. <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The College maintains relatively strong financial reserves.

Challenge: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   Depending upon the length of the recession, the College may be forced to use increasing amounts of its reserves in order to meet its mission.

7.B.8 The college’s general operations and auxiliary enterprises complement each other and operate to the mutual benefit of the institution. Auxiliary services include the Bookstore, parking services, and the Center for Continuous Learning (CCL) at the Hawks Prairie campus. All are self-supporting except a portion of Continuing Education, specifically the personal enrichment program, which is partially funded from the state-allocated operational fund. CCL contributes revenue to cover the lease and utilities at Hawks Prairie, which offsets the cost of the degree-generating programs offered at that campus. Strengths: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   Through the use of Interagency Agreements, CCL is well-positioned to assist public agencies who are facing the legislated loss of their personal service contracts. <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   CCL has recently adopted an online registration system which will facilitate marketing of its programs and expand its accessibility to new customers. <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The College has provided flexible processes that directly contribute to CCL’s ability to meet its self support mission. Challenges: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   CCL faces competition from many other private training providers, as well as from other public agencies. <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   CCL must increase efforts to integrate and align activities with College academic programs.

Future Direction/Recommendations: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The success of the Continuing Education program will permit more of its expenses to be converted to a self support model. <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   Reorganized leadership at Hawks Prairie will facilitate streamlining of processes with commensurate reduction of expenses.

7.C-1 Financial Management

Analysis and Appraisal 7.C.1 The Board of Trustees is presented financial summaries by the President, Vice President for Administrative Services, and the Director of Budgeting Services periodically throughout the year. Normally, in June of each year, the Board of Trustees approves the College operating budget, the capital construction budget, and the student government budget. Subsequently, the Board receives quarterly budget reports outlining the percentage of operating budget expended, local tuition revenue collected, a review of capital budget and briefings on any potential issues. In the fall, the Board receives a year-end financial report for the fiscal year. Applicable reports : <span style="background: yellow; font-family: Symbol; mso-highlight: yellow; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·  <span style="background: yellow; font-family: 'Times New Roman','serif'; mso-highlight: yellow;">in Required Supporting Documentation section - “A list and description of financial and management reports regularly provided to the governing board” <span style="background: yellow; font-family: Symbol; mso-highlight: yellow; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·  <span style="background: yellow; font-family: 'Times New Roman','serif'; mso-highlight: yellow;">in Required Exhibits – “Detailed current operating budget” 7.C.2 The financial management of the College is the responsibility of the Vice President for Administrative Services who reports directly to the President. Day-to-day financial transactions and budget oversight are under the direction of the Dean of Financial Services. The Director of Budgeting Services coordinates budget development, monitoring and reporting. The Bookstore operation is managed by the Director of Auxiliary Services. Each area employs appropriate staff to complete assigned functions. Departmental staff workloads and processes are periodically reviewed and evaluated for the need of additional staff and/or streamlining of processes. The Administrative Services Department has qualified employees who are committed to the students and to the financial integrity of the college. Sustained, favorable audit reports received by the college are a product of effective organization and functioning. 7.C.3 Expenditures and income are coordinated through the College’s financial processes which are governed in their basic structure by the State. The State sets financial standards and policy through OFM. Financial and budget information is input and reported via the Financial Management System (FMS), a computerized process used by all Washington State community and technical colleges. This system interfaces with the State government system and complies with conventional accounting and auditing guidelines. FMS includes control tables, general ledger accounting, accounts payable, customer accounts, cashiering, budget development and budget. Information contained in the financial system is used in the College’s planning, budgeting, accounting, and auditing processes. Departmental codes are used to track and monitor financial activity. Monthly budget and fiscal reports are placed on a cold storage system (halFILES) for departments to access for review and reconciliation.

Financial Aid employs the use of FAS, a computerized Financial Aid System. The FAS is an application system developed by a private vendor for colleges and universities. The system has been approved by federal and state authorities and is in use by Washington community and technical colleges. It encompasses needs analysis, application tracking, award management, student loans, student employment monitoring, external reporting, and disbursement. The Dean of Student Financial Services has responsibility for the College’s financial aid programs.

7.C.4 OFM establishes the standards and guidelines for cash management and investments. The Dean of Financial Services monitors the College’s investment accounts. Investment options are limited by Washington State law, resulting in a conservative and safe investment strategy. Decisions on investments are based on current market conditions, interest rates, and the long and short-term cash needs of the College. Final approval for all investments is the delegated responsibility of the Vice President for Administrative Services. The Dean of Financial Services reviews the activity and keeps the College pooled investment account in balance. 7.C.5 The College’s accounting system follows Generally Accepted Accounting Principles (GAAP), as required by OFM, and meets the requirements of the State Auditor. GAAP is used by all (32) public two-year colleges in Washington and is closely monitored by the Business Affairs Commission, which is comprised of the business officers from those colleges. Any changes to the accounting system are recommended by this group. 7.C.9 As a Washington State institution, the College is required by State law under RCW 43.090.020, to be audited by the Office of the State Auditor. SPSCC is on a two-year audit cycle. Audits are very comprehensive and include all college activities with the exception of the Foundation, which is audited by a private, independent firm. Each audit is a “single audit process” covering both federal and state funds.

7.C.11 The Dean of Financial Services maintains the College’s internal control and risk assessment process. Annually, an internal control risk assessment is performed on high risk programs, with special controls, checks and balances, or separation of duties implemented to reduce the risk factor. The College’s internal control risk assessment may also be subject to review by the State Auditor’s Office which would make recommendations. Additional internal controls conducted through the Dean of Financial Services’ staff include balancing accounting records monthly and annually with state records and reviewing budget reconciliation reports for accuracy of expenditures and correct coding. 7.C.12 The President, a member of the Board of Trustees, the Vice President for Administrative Services, and the Dean of Financial Services meet with the State Auditor’s Office at the conclusion of the biannual audit to review results. During the review management letter items and SPSCC’s proposed responses to the auditor’s recommendations are addressed. Recommendations are forwarded to the appropriate area(s) for disposition. 7.C.13 Federal, state, and internal audit reports are made available for examination as part of any evaluation conducted by the Northwest Commission on Colleges and Universities//.// Applicable reports for exhibit: Audit results are published in a statewide audit report. <span style="background: yellow; font-family: Symbol; mso-highlight: yellow; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·  <span style="background: yellow; font-family: 'Times New Roman','serif'; mso-highlight: yellow;">State-wide Single Audit report (SWSA) <span style="background: yellow; font-family: Symbol; mso-highlight: yellow; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·  <span style="background: yellow; font-family: 'Times New Roman','serif'; mso-highlight: yellow;">Washington State Comprehensive Annual Financial Report (CAFR) <span style="background: yellow; font-family: Symbol; mso-highlight: yellow; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·  <span style="background: yellow; font-family: 'Times New Roman','serif'; mso-highlight: yellow;">SPSCC – Internal Control / Risk Assessment report? Strengths: ·  <span style="font-family: 'Times New Roman','serif';">The College’s sound fiscal management results in an absence of audit findings. Challenges: ·  <span style="font-family: 'Times New Roman','serif';">Dependency upon two-year budget state legislation makes it hard to project revenues and expenditures beyond a current biennium. 7.D – Fundraising and Development

Analysis and Appraisal 7.D.1 College Foundation fundraising activities are governed by institutional policies as described in the College Handbook (Exhibit X.X), the College-Foundation Agreement (Exhibit X.X) and the Foundation Bylaws (Exhibit X.X). Fundraising activities comply with governmental requirements: The College Foundation maintains IRS 501(c)(3) documentation, files 990 forms with the IRS annually and is registered with the Washington Secretary of State as a charitable organization. The institutional policies governing the College Foundation establish clear professional and ethical policies. 7.D.2 In the 2008-2009 fiscal year, the College Foundation Finance Committee, which operates under approved endowment objectives and an investment policy adopted by the College Foundation Board of Directors, administered a total of 83 endowment funds: 72 Student Scholarships; 9 Exceptional Faculty Awards; 1 Trustees’ Staff Classified Award; and 1 General Endowment Fund. The College-Foundation Agreement provides clear policies for maintenance of complete fund records and compliance with applicable legal requirements. The College Foundation does not administer life income funds. 7.D.3 The mission of the College Foundation is to enhance educational quality and accessibility at the college by soliciting financial and in-kind support for the institution. The College Foundation receives private gifts, bequests, and donations made to benefit the college for the encouragement and support of its students, faculty, and administration, and to promote the college within the community. The College Foundation Board of Directors consists of up to 30 volunteers who are asked to sit for three-year terms. Foundation Board of Directors membership includes the college president, who serves as secretary of the Board of Directors and as a College Board of Trustee liaison. The College Foundation executive director is also a member of the college president’s staff. The College-Foundation Agreement provides a clear definition of the relationship between the College and the Foundation. Strengths: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The Foundation’s biennial third party audits consistently result in no findings. [Th e 2009 audit (or 2007-2008) will be       available in the Resource Room as  Exhibit X.X.] <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The Foundation is forward-thinking, resourceful, and positioned to face adverse situations, to wit: the current economic downturn. [Development Advancement Study Executive Summary, Exhibit X.X]  <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol; mso-bidi-font-weight: bold;"> ·    There is a high degree of integration between the College and the Foundation as reflected in the College’s strong fundraising and development programs. <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol; mso-bidi-font-weight: bold;"> ·   The Foundation successfully emphasizes “friend-raising” efforts to increase public awareness and fundraising opportunities for the College. Challenges: <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The current economic downturn has created challenges to sustaining endowment funds and securing new donations. <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   The Foundation Executive Director’s retirement in June 2009, after nine years, will create a temporary loss of corporate knowledge. <span style="font-size: 11pt; font-family: Symbol; mso-fareast-font-family: Symbol; mso-bidi-font-family: Symbol;"> ·   A change in the Foundation’s leadership may create a temporary decline in fundraising as the public adjusts to new representation.

Future Direction/Recommendations: