Core
Requirement 2.11.1
The institution has a sound financial
base and demonstrated financial stability to support the mission of the
institution and the scope of its programs and services.
The member institution provides the
following financial statements: (1) an institutional audit (or Standard Review Report issued in
accordance with Statements on Standards
for Accounting and Review Services issued by the AICPA for those
institutions audited as part of a systemwide or statewide audit) and written
institutional management letter for the most recent fiscal year prepared by an
independent certified public accountant and/or an appropriate governmental
auditing agency employing the appropriate audit (or Standard Review Report) guide; (2) a statement of financial
position of unrestricted net assets, exclusive of plant assets and
plant-related debt, which represents the change in unrestricted net assets
attributable to operations for the most recent year; and (3) an annual budget
that is preceded by sound planning, is subject to sound fiscal procedures, and
is approved by the governing board. (Financial
Resources)
aCompliance ___Partial Compliance ___Non-Compliance
Narrative:
Lawson State Community
College has a sound financial base and has demonstrated that it has financial
stability to support its institutional mission and the scope of its programs
and services.
SOURCES
OF REVENUES
The College’s revenues
consist of restricted and unrestricted funds.
Restricted funds are those which must be utilized only in activities
with the purpose established by their source and include federal and state
contracts and grants, private gifts and contracts, and other restricted
sources. Unrestricted funds are those
over which the institution retains complete control. Sources of unrestricted funds include tuition
and fees paid by students, state appropriations, local appropriations and
revenue generated by sales and services of educational activities.
Appropriations from the
State of Alabama comprise the major source of funding for Lawson State
Community College. Based on a funding
allocation, provided
by the Alabama Community College System and approved by the State Board of
Education, state funds are appropriated to the system’s junior, community and
technical colleges in the State of Alabama.
However, state appropriations to the college have been level funded for
over 10 years. Increases in state appropriations
have been awarded from legislative mandates or increases in available funds
from the State for specified purposes.
AUDITED FINANCIAL STATEMENTS
Annual financial statements are prepared in conformity with
accounting principles generally as prescribed by the Governmental Accounting
Standards Board (GASB). The financial
presentation provides a comprehensive, entity-wide perspective of the college’s
assets, liabilities, net assets, revenues, expenses, changes in net assets, and
cash flows. The State Board of Education
requires that the college provides audited financial statements annually (Policy 318.01).
Lawson State Community College’s audit responsibility is assigned to the
State of Alabama Examiners of Public Accounts, who performs an institutional
audit of the college's accounts, records and procedures on an annual basis. The
results of these audits demonstrate that the accounting and record-keeping practices of
the college are sound.
DEMONSTRATION OF FINANCIAL STABILITY
Lawson State has
maintained its financial stability while achieving the mission and vision of
the college and while maintaining programs and services. Demonstrating financial stability has been
accomplished by using the four core ratios to calculate the Composite Financial
Index (CFI): Primary Reserve Ratio,
Viability Ratio, Return on Net Assets Ratio, and Net Operating Revenues
Ratios. Each of these ratios is measured
and the CFI calculated immediately following the core ratio analysis (CFI
Index calculation). A Statement
of Financial Position of Unrestricted Net Assets exclusive of
plant assets and plant related debt has been prepared to provide documentation
of operating outcomes.
The Primary Reserve Ratio is
a reasonable measure of financial viability and a broad measure of the
liquidity of the institution. This ratio
provides a snapshot of financial strength and flexibility by indicating how
long the institution could function using its expendable reserves without
relying on additional net assets generated by operations. The Primary Ratio for Lawson State has
averaged .17 over the past five fiscal years (2004, 2005, 2006, 2007,
2008). A ratio of this level shows that
Lawson State has the ability to cover approximately 2 months of expense from
reserves.
The Viability Ratio
measures the availability of expendable net assets to cover long-term debt
should the institution need to settle its obligations as of the balance sheet
date. This is a comparison of expendable
net assets to long-term debt. Lawson
State had no experience with long term financing until 2004. The College financed an instructional
facility to meet the increase in enrollment.
The College’s viability ratio is less than 1 in each year, where 1
indicates that an entity has sufficient expendable net assets to satisfy debt
obligations at the balance sheet date.
As a member of the Alabama Community College System, Lawson State has
additional funds set aside in the System’s Reserve Fee Fund. This fund was established by the Alabama
State Board of Education in March 2004 to guarantee Board-issued revenue bond
debt service on behalf of the various Alabama Community College System
Institutions. Audit
Report of the ACS Reserve Fee. The College has the ability to satisfy this
ratio in accordance with the Alabama Community
College System Reserve Fee Guidelines.
The Return of Net Assets
Ratio measures total economic return.
Lawson State has averaged a 2.4% surplus of Net Assets over the last 5
year period beginning fiscal year 2004.
The Return of Net Assets measures whether the institution has invested
in items that generate resources. While
these levels are acceptable, the fact that the college has been able to
maintain economic growth during a period of merger and reorganization gives
users of the financial statements confidence that Lawson has the ability to
succeed even when major resources are needed to develop programs and
facilities.
The Net Operating Revenues
Ratio is a primary indicator, explaining how the surplus from operating activities
affects the behavior of the other three core ratios. A positive ratio indicates that the
institution experienced an operating surplus for the year. In each of the 5 year period, Lawson has made
important budgetary and management decisions by maintaining Operating surpluses
to ensure that Long term liabilities are satisfied. In addition, Lawson proved it could survive
and prepare for the future without making short-term decisions that could
possibly lead to decay of campus and community services.
The overall Composite Financial Index (CFI) scores for FY 2004, FY
2005, FY2006, FY 2007, and FY2008 are 4.35, 9.86, 4.65, 1.49 and 3.93
respectively. The established threshold
CFI value is 3.00. As shown in the CFI
scores, the college currently exceeds the threshold for viability. While Lawson achieved the threshold in all
but 1 year, the President’s vision to maximize existing resources and increase
net worth without reducing services has also been achieved.
Lawson State Community College performed other analysis to
determine its financial stability. One
is by measuring the College’s solvency, or the ability to pay current
liabilities. Lawson State’s current
ratio is consistently over 2, which means that the College holds more than two
times as much in current assets than it shows in current liabilities. At any given point in time, the College has
two times more than enough in current assets to settle vendor invoices, to pay
the current portion of long-term liabilities and to fund other current liabilities. The current financial ratios demonstrate the solvency
of Lawson State Community College and, thus another indicator of the financial
stability of the college.
ANNUAL BUDGET WITH SOUND FINANCIAL
PLANNING
The Department of Postsecondary Education set forth the guidelines
on the format for completion and submission of the college’s annual budget (Policy
304.01).
The annual budget process
begins in the Spring Semester of each year. Lawson State Community College
receives its annual budget allocation for the new fiscal year from the
Department of Postsecondary Education.
The Business Affairs Office provides budget forms that dictate the
format for accepting budget requests.
Administrative head of departments, deans, directors, budget managers
and support staff review the current year’s assessment results, student
learning outcomes results, unit goals and objectives, and strategic indicators
before submitting budget requests for compilation into the entire operating
budget. The Vice President for
Administrative and Student Services prepares the budget for the President’s
review. After the President’s review
and approval the budget is forward to the Department of Postsecondary Education
for presentation to the State Board of Education. The college's annual budget is approved by
the Department of Postsecondary Education and the state of Alabama Board of
Education (State
Board of Education Minutes). Comparative data provided by the
Alabama Community College System (2007-2008
Budget Recommendations) shows that Lawson State budgetary process and financial operations
are consistent with the mandates of the Department of Postsecondary Education
of the State of Alabama. Lawson State’s
procedures on budget preparation, revisions and amendments are communicated in
the Business
Office Procedures Manual.
Documentation:
|
Document |
Location |
|
Alabama Community College System Annual O & M Allocation |
|
|
The Alabama State Board of Education policy
318.01 on Audits |
|
|
2003/2004 Audited Financial
Statement 2004/2005 Audited Financial
Statement 2005/2006 Audited Financial
Statement 2006/2007 Audited Financial
Statement 2007/2008
Audited Financial Statement |
|
|
Schedules
of Financial Ratios |
|
|
Composite Financial Index Calculation |
|
|
Statement of Financial Position of Unrestricted
Net Assets |
|
|
Alabama Community College System Reserve Fee Financial Statement Audit and Reserve Fee
Guidelines |
|
|
The
Department of Postsecondary Education policy 304 on Budget submission |
|
|
2004/2005
Operating Budget |
|
|
2005/2006
Operating Budget |
|
|
2006/2007
Operating Budget |
|
|
2007/2008
Operating Budget |
|
|
2008/2009
Operating Budget |
|
|
Minutes of the State Board of
Education on approval of college budgets |
|
|
The Alabama Community College System2007-2008
Budget Recommendation |
|
|
Business Office Procedures Manual |