Graham County Community College District (Eastern Arizona College) single audit reporting package 2002 |
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Annual Financial Report June 30, 2002 Graham County Community College District eastern Graham County Community College District (Eastern Arizona College) Single Audit Reporting Package June 30, 2002 GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Single Audit Reporting Package June 30, 2002 Table of Contents Page Financial Section Independent Auditors’ Report 1 Management’s Discussion and Analysis 3 Statement of Net Assets 9 Statement of Revenues, Expenses, and Changes in Net Assets Statement of Cash Flows 10 11 Notes to Financial Statements 13 Supplementary Information Schedule of Expenditures of Federal Awards 21 Single Audit Section Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards 23 Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 25 Schedule of Findings and Questioned Costs Summary of Auditors’ Results 27 Manage Graham County Community College District (Eastern Arizona College) Financial Section June 30, 2002 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553-0051 DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL WILLIAM THOMSON DEPUTY AUDITOR GENERAL Independent Auditors’ Report Members of the Arizona State Legislature The Governing Board of Graham County Community College District We have audited the accompanying basic financial statements of Graham County Community College District as of and for the year ended June 30, 2002, as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Graham County Community College District as of June 30, 2002, and the changes in financial position and cash flows of the District for the year then ended in conformity with U.S. generally accepted accounting principles. As described in Note 2, the District adopted the provisions of GASB Statement No. 35, Basic Financial Statements- and Management’s Discussion and Analysis- for Public Colleges and Universities, as of June 30, 2002, to implement a new financial reporting model. The Management’s Discussion and Analysis on page 3 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the District’s basic financial statements. The accompanying Schedule of Expenditures of Federal Awards listed in the table of contents is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued our report dated February 28, 2003, on our consideration of the District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Debbie Davenport Auditor General February 28, 2003 3 Management’s Discussion and Analysis This discussion and analysis provides an overview of the District’s financial activities for the year ended June 30, 2002. Please read it in conjunction with the financial statements, which immediately follow. Basic Financial Statements: Beginning with fiscal year 2001-02, the District is required to present annual financial statements in accordance with newly effective pronouncements issued by the Governmental Accounting Standards Board (GASB), the authoritative body for establishing Generally Accepted Accounting Principles (GAAP) for state and local governments, including public institutions of higher education. These new pronouncements permit public colleges and universities to use the guidance for special-purpose governments engaged in business-type activities in their separately issued financial statements. As such, the reader will observe that the presentation format has shifted from a columnar fund group format to a consolidated, single-column, entity-wide format, similar to the type of financial statements one might encounter from a typical business enterprise or a not-for-profit organization. The basic financial statements consist of the following: The Statement of Net Assets reflects the financial position of the District at June 30, 2002. It shows the various assets owned, related liabilities and other obligations, and the various categories of net assets. Net assets is an accounting concept defined as total assets less total liabilities, and as such, represents institutional equity or ownership in the total assets of the District. The Statement of Revenues, Expenses, and Changes in Net Assets reflects the results of operations and other changes for the year ended June 30, 2002. It shows the various revenues and expenses, both operating and nonoperating, reconciling the beginning net assets amount to the ending net assets amount, which is shown on the Statement of Net Assets described above. The Statement of Cash Flows reflects the inflows and outflows of cash and cash equivalents for the year ended June 30, 2002. It shows the various cash activities by type, reconciling the beginning cash and cash equivalents amount to the ending cash and cash equivalents amount, which is shown on the Statement of Net Assets described above. In addition, this statement reconciles cash flows from operating activities to operating income/(loss) on the Statement of Revenues, Expenses, and Changes in Net Assets described above. 4 Financial Highlights and Analysis: Consistent with its mission to provide open access to quality higher education, instruction is the primary function of the Graham County Community College District. Major funding sources supporting all functions include property taxes, state appropriations, and tuition and fees. The District exercises primary tax levy authority for generation of funds used for operating and capital equipment. Although total revenues have been increasing, in recent years the mix of funding sources has gradually been shifting. The District continues to act in a financially conservative manner during the budgetary process, looking to maintain a secure financial future for the institution while bracing for reduced State support. Steady but modest growth is anticipated for the District’s future financial position. While specific comparisons during the transition to a new reporting format will not be presented, a general discussion of current-year results in comparison with the prior year follows, with an emphasis on current-year activity. During the past several years, audited financial reports showed prudent financial planning for District capital improvements with increasing cash balances sufficient to construct needed improvements without long-term or bonded debt. The self-supported construction of the Academic Programs Building project and the Student Services Building project (collectively the Middle Campus project) are the key reasons for a $7 million decline in the District’s cash balance for fiscal year 2001-02. However, the District’s nondepreciable capital assets (construction in progress) significantly increased during the fiscal year due to the previously mentioned capital projects nearing completion. Other significant changes include a decrease in investment income during the fiscal year due to a period of steadily eroding interest rates. The interest rate at the Arizona State Treasurer, where the majority of the District’s investments are held, decreased two and a half points during fiscal year 2001-02. Other key sources of operating and nonoperating revenues remained fairly consistent between fiscal years. Employee compensation and benefits expenses (recorded primarily as institutional support expenses) increased from the prior year as a result of greater employee longevity, a modest salary increase, and expanding educational programs. However, the District had a significant decrease in its compensated absences liability from the prior year that can be attributed to the retirement of several administrators after long tenure with the District. This retirement also contributed to increased institutional support expenses. 5 A decrease in operation and maintenance of plant expenses occurred due to the capitalization of maintenance department personnel expenses related to the construction of two new buildings on campus during the fiscal year (see Capital Assets and Debt Administration later in this discussion for further information on these construction projects). Condensed Financial Information: The District has elected not to restate the June 30, 2001, financial statements for purposes of providing comparative data for this year’s Management’s Discussion and Analysis (MD&A). However, in future years, when prior period information is available, comparative data will be presented. The condensed financial information below highlights the main categories of the Statement of Net Assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The current fiscal year shows an increase in net assets from the restated beginning balance of $49,865,664 on July 1, 2001, to the ending balance of $52,524,702 at June 30, 2002. Statement of Net Assets As of June 30, 2002 Assets: Current assets $19,765,107 Noncurrent assets Capital assets, net 34,518,561 Total assets $54,283,668 Liabilities: Current liabilities $ 1,328,695 Noncurrent liabilities 430,271 Total liabilities 1,758,966 Net Assets: Invested in capital assets $34,518,561 Unrestricted net assets 18,006,141 Total net assets $52,524,702 6 The condensed financial information below highlights the main categories of the Statement of Revenues, Expenses, and Changes in Net Assets. Operating revenues include tuition and fees, food service income, and dormitory rentals and fees, all of which are now presented net of scholarship discounts and allowances. In compliance with the new reporting pronouncements issued by the GASB, these allowances are now recorded as an offset to revenues, instead of as expenses. Depreciation expense is recorded for the first time this fiscal year, in accordance with the adoption of the full accrual basis of accounting. The construction and acquisition of capital assets, although budgeted and tracked in the accounting system, are not reflected as expenses in the financial statements. Rather, such transactions are reported as assets, with the systematic depreciation of the cost of those assets over their useful lives. The District shows an operating loss at June 30, 2002, reflective of the fact that two of the three main revenue sources, property taxes and state appropriations, are considered nonoperating revenues. For a description of the difference between operating and nonoperating revenues, please refer to the Summary of Significant Accounting Policies (Note 1). Statement of Revenues, Expenses, and Changes in Net Assets For the Year Ended June 30, 2002 Operating revenues : Tuition and fees $ 1,959,240 Government grants and contracts 6,362,961 Other 875,645 Total operating revenues 9,197,846 Operating expenses: Education and general 20,110,812 Auxiliary enterprises 1,874,664 Depreciation 1,364,090 Total operating expenses 23,349,566 Operating loss (14,151,720) Nonoperating revenues: Property taxes 1,783,218 State appropriations 13,160,300 Other 1,228,440 Total nonoperating revenues 16,171,958 7 Income before other revenues, expenses, gains or losses 2,020,238 Capital appropriations 638,800 Increase in net assets 2,659,038 Net assets, July 1, 2001, as restated 49,865,664 Net assets, June 30, 2002 $52,524,702 Summary Operating revenues $ 9,197,846 Nonoperating revenues 16,171,958 Capital appropriations 638,800 Total revenues $26,008,604 Total expenses $23,349,566 Capital Assets and Debt Administration: Fiscal year 2001-02 shows the continuation of a $16,255,580 Capital Development Plan designed to increase available classroom and support space. The Middle Campus construction project, which will be completed next fiscal year, includes two new buildings. Both the Academic Programs facility and the Student Services facility will provide for current need and future growth. Funding for this Capital Development Plan came from District investments with no debt incurred. As mentioned previously, equipment along with all other capital assets (except land and construction in progress) are reported net of accumulated depreciation for the first time this year in accordance with the new reporting standards issued by the GASB. This has the effect of reducing the value of total capital assets. Depreciation expense totaled $1,364,090 for the year, and is now shown as an operating expense on the Statement of Revenues, Expenses, and Changes in Net Assets. Additional information on the District’s capital assets can be found in Note 4 to the basic financial statements. Current Factors Having Probable Future Financial Significance: At June 30, 2002, the District was unsuccessful in negotiating an educational services contract with Gila County. This will result in a loss of equipment and buildings at the Gila Pueblo campus sites in fiscal year 2002-03 and may affect future revenues and related expenses. 8 The financial support from the State continues to be a factor, and a reduction will occur in the District’s fiscal year 2002-03 state funding. Full-time tuition was increased by $12 per semester and residence hall and dining plan costs were increased 3% for fiscal year 2002-03. As stated in the District’s Mission Statement, providing access to quality higher education requires that tuition and related costs remain affordable, and modest increases result in partially offsetting the cumulative loss while keeping higher education affordable to residents of this small rural community. 9 Graham County Community College District (Eastern Arizona College) Statement of Net Assets June 30, 2002 Assets Current assets: Cash and cash equivalents $19,012,457 Receivables (net of allowances for uncollectibles) Property taxes 232,016 Government grants and contracts 331,845 Student loans 13,457 Interest 88,190 Other 9,474 Inventories 77,668 Total current assets 19,765,107 Noncurrent assets: Capital assets, not being depreciated 14,371,443 Capital assets, being depreciated, net 20,147,118 Total noncurrent assets 34,518,561 Total assets 54,283,668 Liabilities Current liabilities: Accounts payable 707,755 Accrued payroll and employee benefits 168,566 Deposits held in custody for others 97,371 Current portion of compensated absences payable 328,309 Deferred revenues 26,694 Total current liabilities 1,328,695 Noncurrent liabilities: Compensated absences payable 430,271 Total noncurrent liabilities 430,271 Total liabilities 1,758,966 Net Assets Invested in capital assets 34,518,561 Unrestricted 18,006,141 Total net assets $52,524,702 See accompanying notes to financial statements. 10 Graham County Community College District (Eastern Arizona College) Statement of Revenues, Expenses, and Changes in Net Assets Year Ended June 30, 2002 Operating revenues: Tuition and fees (net of scholarship allowances of $1,130,075) $ 1,959,240 Government grants and contracts 6,362,961 Private grants and contracts 18,158 Food service income (net of scholarship allowances of $357,237) 249,301 Dormitory rentals and fees (net of scholarship allowances of $245,698) 237,921 Other 370,265 Total operating revenues 9,197,846 Operating expenses: Educational and general: Instruction 8,687,642 Academic support 507,542 Student services 2,678,862 Institutional support 3,816,305 Operation and maintenance of plant 2,144,959 Scholarships 2,275,502 Auxiliary enterprises 1,874,664 Depreciation 1,364,090 Total operating expenses 23,349,566 Operating loss (14,151,720) Nonoperating revenues: Property taxes 1,783,218 State appropriations 13,160,300 Share of state sales taxes 438,357 Investment income 727,522 Gain on disposal of capital assets 62,561 Total nonoperating revenues 16,171,958 Income before other revenues, expenses, gains or losses 2,020,238 Capital appropriations 638,800 Increase in net assets 2,659,038 Total net assets, July 1, 2001, as restated 49,865,664 Total net assets, June 30, 2002 $ 52,524,702 See accompanying notes to financial statements. 11 Graham County Community College District (Eastern Arizona College) Statement of Cash Flows Year Ended June 30, 2002 Cash flows from operating activities: Tuition and fees $ 1,959,240 Government grants and contracts 6,378,421 Private grants and contracts 18,158 Food service receipts 249,301 Dormitory rentals and fees 237,921 Collection of loans issued to students 2,245 Other receipts 416,122 Payments to suppliers and providers of goods and services (5,370,427) Payments to employees (14,450,896) Payments to students (2,275,502) Net cash used for operating activities (12,835,417) Cash flows from noncapital financing activities: Property taxes 1,820,047 State appropriations 13,160,300 Share of state sales taxes 438,357 Agency fund activity (3,323) Net cash provided by noncapital financing activities 15,415,381 Cash flows from capital and related financing activities: Capital appropriations 638,800 Proceeds from sale of capital assets 188,511 Payments made to contractors (11,176,491) Purchases of capital assets (398,051) Net cash used for capital and related financing activities (10,747,231) Cash flows from investing activities: Interest received on investments 853,370 Net cash provided by investing activities 853,370 Net decrease in cash and cash equivalents (7,313,897) Cash and cash equivalents, July 1, 2001 26,326,354 Cash and cash equivalents, June 30, 2002 $ 19,012,457 (Continued) See accompanying notes to financial statements. 12 Graham County Community College District (Eastern Arizona College) Statement of Cash Flows Year Ended June 30, 2002 Reconciliation of operating loss to net cash used for operating activities: Operating loss ($14,151,720) Adjustments to reconcile operating loss to net cash used for operating activities: Depreciation 1,364,090 Changes in assets and liabilities: Increase in: Inventories (5,101) Accounts payable 37,651 Accrued payroll and employee benefits 44,540 Deferred revenues 3,228 Decrease in: Government grants and contracts receivable 12,232 Student loans receivable 2,245 Other receivables 45,857 Compensated absences payable (188,439) Net cash used for operating activities ($12,835,417) Noncash capital activities: During the year ended June 30, 2002, the District sold capital assets with a net book value of $125,950 for $188,511, resulting in a gain on disposal of $62,561. See accompanying notes to financial statements. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 13 Note 1 – Summary of Significant Accounting Policies The accounting policies of the Graham County Community College District conform to generally accepted accounting principles as applicable to public institutions engaged only in business-type activities adopted by the Governmental Accounting Standards Board (GASB). During the year ended June 30, 2002, the District implemented GASB Statement No. 35, which prescribes a new reporting model for public colleges within the reporting guidelines of GASB Statement No. 34, as amended by GASB Statement No. 37. The District also implemented GASB Statement No. 38, which prescribes new and revised note disclosures. A. Reporting Entity The District is a special-purpose government that is governed by a separately elected governing body. It is legally separate and fiscally independent of other state and local governments. Furthermore, there are no component units combined with the District for financial statement presentation purposes, and it is not included in any other governmental reporting entity. The financial activities of the Eastern Arizona College Foundation are not included in the District's financial statements. The Foundation is a nonprofit corporation controlled by a separate board of directors. The Foundation’s goals are to promote educational programs and District objectives. B. Basis of Presentation and Accounting The financial statements include a statement of net assets; a statement of revenues, expenses, and changes in net assets; and a statement of cash flows. A statement of net assets provides information about the assets, liabilities and net assets of the District at the end of the year. Assets and liabilities are classified as either current or noncurrent. Net assets are classified according to external donor restrictions or availability of assets to satisfy District obligations. Invested in capital assets net of related debt represents the net value of capital assets less the debt incurred to acquire or construct the asset. Nonexpendable restricted net assets are gifts that have been received for endowment purposes, the corpus of which cannot be expended. Expendable restricted net assets represent grants, contracts, gifts, and other resources that have been externally restricted for specific purposes. Unrestricted net assets include all other net assets, including those that have been designated by management to be used for other than general operating purposes. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 14 A statement of revenues, expenses, and changes in net assets provides information about the District’s financial activities during the year. Revenues and expenses are classified as either operating or nonoperating, and all changes in net assets are reported, including capital contributions. Generally, revenues generated by the District for instruction and student services are considered to be operating revenues. Other revenues used for instruction and student services, such as property taxes and state appropriations, are not generated from operations and are considered to be nonoperating revenues. A statement of cash flows provides information about the District’s sources and uses of cash and cash equivalents during the year. Increases and decreases in cash and cash equivalents are classified as either operating, noncapital financing, capital financing, or investing. The financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Property taxes are recognized in the year for which they are levied. State appropriations are recognized as revenue in the year in which the appropriation is first made available for use. Grants and donations are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The District eliminates all internal activity. It is the District’s policy to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. The District follows FASB Statements and Interpretations issued on or before November 30, 1989; Accounting Principles Board Opinions; and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements. C. Cash and Investments The District’s cash and cash equivalents are considered to be cash on hand, demand deposits, cash and investments held by the County Treasurer, and investments in the State Treasurer's Local Government Investment Pool. All investments are stated at fair value. D. Inventories All inventories are stated at the lower of cost (first-in, first-out method) or market. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 15 E. Capital Assets Capital assets of the District consist of land, buildings, improvements other than buildings, construction in progress, equipment, and library materials. Capital assets are stated at cost at date of acquisition, or fair market value at date of donation in the case of gifts. Major outlays for assets or improvements to assets are capitalized as projects are constructed. These are categorized as construction in progress until completed, at which time they are reclassified to the appropriate asset type. Capitalization thresholds (the dollar values above which asset acquisitions are added to the capital asset accounts), depreciation methods, and estimated useful lives of capital assets reported in the financial statements are as follows: Capitalization Depreciation Estimated Asset Category Threshold Method Useful Life Land $1 Not applicable Not applicable Buildings, Brick & Mortar $5,000 Straight-line 40 years Buildings, Temporary/Modular $5,000 Straight-line 20 years Improvements other than Buildings $5,000 Straight-line 15 years Construction in Progress $5,000 Not applicable Not applicable Equipment $5,000 Straight-line 5 years Library Materials $1 Straight-line 10 years F. Investment Income Investment income is composed of interest, dividends, and net changes in the fair value of applicable investments. G. Compensated Absences Compensated absences consist of vacation leave and a calculated amount of sick leave earned by employees based on services already rendered. Employees may earn and accumulate vacation days according to their employment position and years of service. Vacation days earned per month range from .83 to 1.83 with a maximum accumulation ranging between 20 and 44 days. Vacation days in excess of the maximums are forfeited at the end of each month during the fiscal year. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 16 Generally, sick leave benefits provide for ordinary sick pay and are cumulative but do not vest with employees. Therefore, a liability for sick leave benefits is not accrued in the financial statements. However, for employees who have met the sick leave vesting requirements under the District option plan, sick leave benefits do vest. The option provides payment to retiring employees up to the maximum of 100 days of accrued sick days multiplied by the employee’s daily rate for employees who have at least 15 years of service and qualify for normal retirement, disability, or death benefit. Those amounts are accrued as a liability in the financial statements. H. Scholarship Allowances A scholarship allowance is the difference between the stated charge for goods and services provided by the District and the amount that is paid by the student or third parties making payments on behalf of the student. Accordingly, some types of student financial aid such as Pell grants and scholarships awarded by the District are considered to be scholarship allowances. These allowances are netted against tuition and fees, food service income, and dormitory rentals and fees in the statement of revenues, expenses, and changes in net assets. I. Property Tax Revenues The Graham County Treasurer is responsible for collecting property taxes for all governmental entities within the County. The County levies the property taxes due to the District in August. Two equal installments, payable in October and March, become delinquent after the first business day in November and May. A lien assessed against real and personal property attaches on the first day of January preceding the assessment and levy. Note 2 – Beginning Balances Restated As a result of implementing GASB Statement No. 35 and a prior period adjustment, the District’s aggregate fund balances reported as of June 30, 2001, totaling $65,030,930, have been restated as beginning net assets of $49,865,664. Of the difference, $15,218,052 is attributable to recording accumulated depreciation on capital assets, and $52,786 is attributable to a prior period adjustment reducing deferred revenue. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 17 Note 3 – Deposits and Investments Arizona Revised Statutes (A.R.S.) requires the District to deposit special tax levies for the District's maintenance or capital outlay with the County Treasurer. Although not statutorily required, the District has also chosen to deposit other public monies in its custody with the County Treasurer. Deposits—The District's deposits totaling $ 5,633 at June 30, 2002, were entirely covered by federal depository insurance or by collateral held by the District's custodial bank in the District's name. Investments—At June 30, 2002, the District’s investments consisted of the following: Fair Value Cash and investments held by the County Treasurer Investments in State Treasurer’s investment pool $ 7,977 18,998,847 Total $19,006,824 The District’s investment in the State or County Treasurer’s investment pools represents a proportionate interest in those pools’ portfolios; however, the District’s portion is not identified with specific investments and is not subject to custodial credit risk. The State Board of Deposit provides oversight for the State Treasurer's pools, and the Local Government Investment Pool Advisory Committee provides consultation and advice to the Treasurer. The fair value of a participant's position in the pool approximates the value of that participant's pool shares. No comparable oversight is provided for the County Treasurer's investment pool, and that pool's structure does not provide for shares. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 18 Note 4 – Capital Assets Capital asset activity for the year ended June 30, 2002, was as follows: Balance July 1, 2001, Balance as restated Increases Decreases June 30, 2002 Capital assets not being depreciated: Land $ 2,284,405 $ 0 $ 0 $ 2,284,405 Construction in progress 1,199,043 10,887,995 0 12,087,038 Total capital assets not being depreciated 3,483,448 10,887,995 0 14,371,443 Capital assets being depreciated: Buildings and improvements 30,514,987 288,496 (477,562) 30,325,921 Equipment 4,849,388 335,823 (473,358) 4,711,853 Library materials 804,288 62,228 (54,815) 811,701 Total capital assets being depreciated 36,168,663 686,547 (1,005,735) 35,849,475 Less accumulated depreciation for: Buildings and improvements 10,594,201 912,761 (406,608) 11,100,354 Equipment 3,974,441 397,640 (473,177) 3,898,904 Library materials 649,410 53,689 0 703,099 Total accumulated depreciation 15,218,052 1,364,090 (879,785) 15,702,357 Total capital assets being depreciated, net 20,950,611 (677,543) (125,950) 20,147,118 Capital assets, net $24,434,059 $10,210,452 $(125,950) $34,518,561 Note 5 – Long-Term Liabilities The following schedule details the District’s long-term liability and obligation activity for the year ended June 30, 2002. Balance July 1, 2001 Additions Reductions Balance June 30, 2002 Due within one year Compensated absences payable $947,019 $323,944 $512,383 $758,580 $328,309 GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 19 Note 6 – Risk Management The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District carries commercial insurance for all such risks of loss, including workers' compensation and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. Note 7 – Construction Commitments The District has entered into contracts for the following construction project: Estimated Required Project Expended Cost to Future Project Authorizations to Date Complete Financing Middle Campus $16,255,580 $12,087,038 $4,168,542 None Note 8 – Retirement Plan Plan Description—The District contributes to a cost-sharing multiple-employer defined benefit pension plan administered by the Arizona State Retirement System. Benefits are established by state statute and generally provide retirement, death, long-term disability, survivor, and health insurance premium benefits. The System is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, Article 2. The System issues a comprehensive annual financial report that includes financial statements and required supplementary information. The most recent report may be obtained by writing the Arizona State Retirement System, 3300 North Central Avenue, PO Box 33910, Phoenix, AZ 85067-3910 or by calling (602) 240-2000 or (800) 621- 3778. Funding Policy—The Arizona State Legislature establishes and may amend active plan members' and the District's contribution rates. For the year ended June 30, 2002, active plan members and the District were each required by statute to contribute at the actuarially determined rate of 2.49 percent (2.00 percent retirement and 0.49 percent long-term disability) of the members' annual covered payroll. The District's contributions to the System for the years ended June 30, 2002, 2001, and 2000 were $258,213, $249,715, and $236,676, respectively, which were equal to the required contributions for the year. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 20 Note 9 – Operating Expenses The District’s operating expenses are presented by functional classification in the Statement of Revenues, Expenses, and Changes in Net Assets. The operating expenses can also be classified into the following: Salaries and benefits $14,086,627 Contract services 1,131,963 Supplies and other services 2,710,201 Communications and utilities 1,040,686 Scholarships 2,275,502 Depreciation 1,364,090 Other 740,497 Total $23,349,566 Note 10 – Subsequent Events Recent Investment Losses in the State Treasurer’s Local Government Investment Pool Pursuant to statutory authority, a portion of the District’s monies are invested in the State Treasurer’s Local Government Investment Pool (LGIP), which was established in 1980 for the collective investment of State and local government monies. Monies in the LGIP may be invested in various types of investments prescribed by law, including bonds, debentures, or other evidences of indebtedness that are issued by entities organized and doing business in the United States that have a minimum rating of “Baa” from Moody’s Investors Service or “BBB” from Standard & Poors Rating Service. In December 2002, the State Treasurer announced that the LGIP currently holds approximately $131 million of asset-backed securities issued by an NPF-12 trust that are serviced by National Century Financial Enterprises (NCFE). Recently, NCFE has come under investigation by the Federal Bureau of Investigation, the Securities and Exchange Commission, and various state authorities for possible fraud and violations of federal and state laws. NCFE has since declared bankruptcy and the trustee for the bonds has informed the State Treasurer that the interest payment due December 1, 2002, was not received. As of December 2002, the District’s share of the potential investment loss was $635,794 of cash equivalents maintained in the State Treasurer’s LGIP. Supplementary Information GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Schedule of Expenditures of Federal Awards Year Ended June 30, 2002 21 Federal Grantor/Pass-Through Grantor/Program Title CFDA Number Pass-Through Grantor’s Number Expenditures U.S. Small Business Administration Passed through the Maricopa County Community College District Small Business Development Center 59.037 None $ 67,586 U.S. Department of Education Student Financial Assistance Cluster Federal Supplemental Educational Opportunity Grants 84.007 103,578 Federal Work-Study Program 84.033 236,079 Federal Pell Grant Program 84.063 2,716,935 Total Student Financial Assistance Cluster 3,056,592 TRIO— Student Support Services 84.042 182,434 Passed through the Arizona Department of Education Adult Education—State Grant Program 84.002 02-FAE-ABE- 270551-02A 12,351 Passed through the State Board of Directors for Community Colleges Vocational Education—Basic Grants to States 84.048 30203 168,639 Passed through the Arizona Board of Regents Leveraging Educational Assistance Partnership 84.069 None 11,134 Total U.S. Department of Education 3,431,150 Total Expenditures of Federal Awards $3,498,736 See accompanying notes to schedule. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Schedule of Expenditures of Federal Awards Year Ended June 30, 2002 22 Note 1 - Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of Graham County Community College District and is presented on the full accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Note 2 - Catalog of Federal Domestic Assistance (CFDA) Numbers The program titles and CFDA numbers were obtained from the federal or pass-through grantor or the 2002 Catalog of Federal Domestic Assistance. Note 3 - Subrecipients The District did not pass-through any federal awards to subrecipients. Graham County Community College District (Eastern Arizona College) Single Audit Section June 30, 2002 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553-0051 DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL WILLIAM THOMSON DEPUTY AUDITOR GENERAL Independent Auditors’ Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards Members of the Arizona State Legislature The Governing Board of Graham County Community College District We have audited the basic financial statements of Graham County Community College District as of and for the year ended June 30, 2002, and have issued our report thereon dated February 28, 2003, which was modified as to consistency because of the implementation of GASB Statement No. 35, Basic Financial Statements—and Management’s Discussion and Analysis—for Public Colleges and Universities. We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the District’s basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control over Financial Reporting In planning and performing our audit, we considered the District’s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the basic financial statements and not to provide assurance on internal control over financial reporting. Our consideration of internal control over financial reporting would not necessarily disclose all such internal control matters that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the basic financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control over financial reporting and its operation that we consider to be material weaknesses. 23 24 This report is intended solely for the information and use of the members of the Arizona State Legislature, the Governing Board, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record, and its distribution is not limited. Debbie Davenport Auditor General February 28, 2003 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553-0051 DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL WILLIAM THOMSON DEPUTY AUDITOR GENERAL Independent Auditors’ Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 Members of the Arizona State Legislature The Governing Board of Graham County Community College District Compliance We have audited the compliance of Graham County Community College District with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to its major federal program cluster for the year ended June 30, 2002. The District’s major federal program cluster is identified in the Summary of Auditors’ Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the District’s management. Our responsibility is to express an opinion on the District’s compliance based on our audit. We conducted our audit of compliance in accordance with U.S. generally accepted auditing standards; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the District’s compliance with those requirements. In our opinion, Graham County Community College District complied, in all material respects, with the requirements referred to above that are applicable to its major federal program cluster for the year ended June 30, 2002. 25 26 Internal Control over Compliance The District’s management is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the District’s internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133. Our consideration of internal control over compliance would not necessarily disclose all such internal control matters that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the members of the Arizona State Legislature, the Governing Board, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record, and its distribution is not limited. Debbie Davenport Auditor General February 28, 2003 Graham County Community College District (Eastern Arizona College) Schedule of Findings and Questioned Costs Year Ended June 30, 2002 27 Summary of Auditors’ Results Financial Statements Type of auditors’ report issued: Unqualified Yes No Material weakness identified in internal control over financial reporting? X Reportable condition identified not considered to be a material weakness? X (None reported) Noncompliance material to the financial statements noted? X Federal Awards Material weakness identified in internal control over major programs? X Reportable condition identified not considered to be a material weakness? X (None reported) Type of auditors’ report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Circular A-133 (section .510[a])? X Identification of major programs: CFDA Number Name of Federal Program or Cluster Student Financial Assistance Cluster of Programs: 84.007 Federal Supplemental Educational Opportunity Grants 84.033 Federal Work-Study Program 84.063 Federal Pell Grant Program Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as low-risk auditee? X Other Matters Auditee's Summary Schedule of Prior Audit Findings required to be reported in accordance with Circular A-133 (section .315[b])? X
Object Description
TITLE | Graham County Community College District (Eastern Arizona College) single audit reporting package for the year... |
CREATOR | Office of the Auditor General, Financial Audit Division |
SUBJECT | Eastern Arizona College--Finance; Community colleges--Arizona--Finance--Statistics |
Browse Topic |
Government and politics |
DESCRIPTION | This title contains one or more publications |
Language | English |
Publisher | Office of the Auditor General |
TYPE |
Text |
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State Documents |
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ORIGINAL FORMAT | Born Digital |
Source Identifier | LG 6.3:A 82 G 61 |
Location | o880578341 |
DIGITAL FORMAT | PDF (Portable Document Format) |
REPOSITORY | Arizona State Library, Archives and Public Records |
Description
TITLE | Graham County Community College District (Eastern Arizona College) single audit reporting package 2002 |
DESCRIPTION | 33 pages (PDF version). File size: 362 KB |
Language | English |
TYPE |
Text |
Acquisition Note | Also contains annual financial report. |
RIGHTS MANAGEMENT | Copyright to this resource is held by the creating agency and is provided here for educational purposes only. It may not be downloaded, reproduced or distributed in any format without written permission of the creating agency. Any attempt to circumvent the access controls placed on this file is a violation of United States and international copyright laws, and is subject to criminal prosecution. |
DATE ORIGINAL | 2002 |
Time Period |
2000s (2000-2009) |
ORIGINAL FORMAT | Born Digital |
Source Identifier | LG 6.3:A 82 G 61/ 2002 /E |
Location | o880578341 |
DIGITAL IDENTIFIER | Graham_County_CCCD_June_30_2002_Single_Audit.pdf |
DIGITAL FORMAT | PDF (Portable Document Format) |
REPOSITORY | Arizona State Library, Archives and Public Records |
File Size | 370343 Bytes |
Full Text | Annual Financial Report June 30, 2002 Graham County Community College District eastern Graham County Community College District (Eastern Arizona College) Single Audit Reporting Package June 30, 2002 GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Single Audit Reporting Package June 30, 2002 Table of Contents Page Financial Section Independent Auditors’ Report 1 Management’s Discussion and Analysis 3 Statement of Net Assets 9 Statement of Revenues, Expenses, and Changes in Net Assets Statement of Cash Flows 10 11 Notes to Financial Statements 13 Supplementary Information Schedule of Expenditures of Federal Awards 21 Single Audit Section Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards 23 Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 25 Schedule of Findings and Questioned Costs Summary of Auditors’ Results 27 Manage Graham County Community College District (Eastern Arizona College) Financial Section June 30, 2002 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553-0051 DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL WILLIAM THOMSON DEPUTY AUDITOR GENERAL Independent Auditors’ Report Members of the Arizona State Legislature The Governing Board of Graham County Community College District We have audited the accompanying basic financial statements of Graham County Community College District as of and for the year ended June 30, 2002, as listed in the table of contents. These financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Graham County Community College District as of June 30, 2002, and the changes in financial position and cash flows of the District for the year then ended in conformity with U.S. generally accepted accounting principles. As described in Note 2, the District adopted the provisions of GASB Statement No. 35, Basic Financial Statements- and Management’s Discussion and Analysis- for Public Colleges and Universities, as of June 30, 2002, to implement a new financial reporting model. The Management’s Discussion and Analysis on page 3 is not a required part of the basic financial statements but is supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the District’s basic financial statements. The accompanying Schedule of Expenditures of Federal Awards listed in the table of contents is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued our report dated February 28, 2003, on our consideration of the District's internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Debbie Davenport Auditor General February 28, 2003 3 Management’s Discussion and Analysis This discussion and analysis provides an overview of the District’s financial activities for the year ended June 30, 2002. Please read it in conjunction with the financial statements, which immediately follow. Basic Financial Statements: Beginning with fiscal year 2001-02, the District is required to present annual financial statements in accordance with newly effective pronouncements issued by the Governmental Accounting Standards Board (GASB), the authoritative body for establishing Generally Accepted Accounting Principles (GAAP) for state and local governments, including public institutions of higher education. These new pronouncements permit public colleges and universities to use the guidance for special-purpose governments engaged in business-type activities in their separately issued financial statements. As such, the reader will observe that the presentation format has shifted from a columnar fund group format to a consolidated, single-column, entity-wide format, similar to the type of financial statements one might encounter from a typical business enterprise or a not-for-profit organization. The basic financial statements consist of the following: The Statement of Net Assets reflects the financial position of the District at June 30, 2002. It shows the various assets owned, related liabilities and other obligations, and the various categories of net assets. Net assets is an accounting concept defined as total assets less total liabilities, and as such, represents institutional equity or ownership in the total assets of the District. The Statement of Revenues, Expenses, and Changes in Net Assets reflects the results of operations and other changes for the year ended June 30, 2002. It shows the various revenues and expenses, both operating and nonoperating, reconciling the beginning net assets amount to the ending net assets amount, which is shown on the Statement of Net Assets described above. The Statement of Cash Flows reflects the inflows and outflows of cash and cash equivalents for the year ended June 30, 2002. It shows the various cash activities by type, reconciling the beginning cash and cash equivalents amount to the ending cash and cash equivalents amount, which is shown on the Statement of Net Assets described above. In addition, this statement reconciles cash flows from operating activities to operating income/(loss) on the Statement of Revenues, Expenses, and Changes in Net Assets described above. 4 Financial Highlights and Analysis: Consistent with its mission to provide open access to quality higher education, instruction is the primary function of the Graham County Community College District. Major funding sources supporting all functions include property taxes, state appropriations, and tuition and fees. The District exercises primary tax levy authority for generation of funds used for operating and capital equipment. Although total revenues have been increasing, in recent years the mix of funding sources has gradually been shifting. The District continues to act in a financially conservative manner during the budgetary process, looking to maintain a secure financial future for the institution while bracing for reduced State support. Steady but modest growth is anticipated for the District’s future financial position. While specific comparisons during the transition to a new reporting format will not be presented, a general discussion of current-year results in comparison with the prior year follows, with an emphasis on current-year activity. During the past several years, audited financial reports showed prudent financial planning for District capital improvements with increasing cash balances sufficient to construct needed improvements without long-term or bonded debt. The self-supported construction of the Academic Programs Building project and the Student Services Building project (collectively the Middle Campus project) are the key reasons for a $7 million decline in the District’s cash balance for fiscal year 2001-02. However, the District’s nondepreciable capital assets (construction in progress) significantly increased during the fiscal year due to the previously mentioned capital projects nearing completion. Other significant changes include a decrease in investment income during the fiscal year due to a period of steadily eroding interest rates. The interest rate at the Arizona State Treasurer, where the majority of the District’s investments are held, decreased two and a half points during fiscal year 2001-02. Other key sources of operating and nonoperating revenues remained fairly consistent between fiscal years. Employee compensation and benefits expenses (recorded primarily as institutional support expenses) increased from the prior year as a result of greater employee longevity, a modest salary increase, and expanding educational programs. However, the District had a significant decrease in its compensated absences liability from the prior year that can be attributed to the retirement of several administrators after long tenure with the District. This retirement also contributed to increased institutional support expenses. 5 A decrease in operation and maintenance of plant expenses occurred due to the capitalization of maintenance department personnel expenses related to the construction of two new buildings on campus during the fiscal year (see Capital Assets and Debt Administration later in this discussion for further information on these construction projects). Condensed Financial Information: The District has elected not to restate the June 30, 2001, financial statements for purposes of providing comparative data for this year’s Management’s Discussion and Analysis (MD&A). However, in future years, when prior period information is available, comparative data will be presented. The condensed financial information below highlights the main categories of the Statement of Net Assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether the financial position of the District is improving or deteriorating. The current fiscal year shows an increase in net assets from the restated beginning balance of $49,865,664 on July 1, 2001, to the ending balance of $52,524,702 at June 30, 2002. Statement of Net Assets As of June 30, 2002 Assets: Current assets $19,765,107 Noncurrent assets Capital assets, net 34,518,561 Total assets $54,283,668 Liabilities: Current liabilities $ 1,328,695 Noncurrent liabilities 430,271 Total liabilities 1,758,966 Net Assets: Invested in capital assets $34,518,561 Unrestricted net assets 18,006,141 Total net assets $52,524,702 6 The condensed financial information below highlights the main categories of the Statement of Revenues, Expenses, and Changes in Net Assets. Operating revenues include tuition and fees, food service income, and dormitory rentals and fees, all of which are now presented net of scholarship discounts and allowances. In compliance with the new reporting pronouncements issued by the GASB, these allowances are now recorded as an offset to revenues, instead of as expenses. Depreciation expense is recorded for the first time this fiscal year, in accordance with the adoption of the full accrual basis of accounting. The construction and acquisition of capital assets, although budgeted and tracked in the accounting system, are not reflected as expenses in the financial statements. Rather, such transactions are reported as assets, with the systematic depreciation of the cost of those assets over their useful lives. The District shows an operating loss at June 30, 2002, reflective of the fact that two of the three main revenue sources, property taxes and state appropriations, are considered nonoperating revenues. For a description of the difference between operating and nonoperating revenues, please refer to the Summary of Significant Accounting Policies (Note 1). Statement of Revenues, Expenses, and Changes in Net Assets For the Year Ended June 30, 2002 Operating revenues : Tuition and fees $ 1,959,240 Government grants and contracts 6,362,961 Other 875,645 Total operating revenues 9,197,846 Operating expenses: Education and general 20,110,812 Auxiliary enterprises 1,874,664 Depreciation 1,364,090 Total operating expenses 23,349,566 Operating loss (14,151,720) Nonoperating revenues: Property taxes 1,783,218 State appropriations 13,160,300 Other 1,228,440 Total nonoperating revenues 16,171,958 7 Income before other revenues, expenses, gains or losses 2,020,238 Capital appropriations 638,800 Increase in net assets 2,659,038 Net assets, July 1, 2001, as restated 49,865,664 Net assets, June 30, 2002 $52,524,702 Summary Operating revenues $ 9,197,846 Nonoperating revenues 16,171,958 Capital appropriations 638,800 Total revenues $26,008,604 Total expenses $23,349,566 Capital Assets and Debt Administration: Fiscal year 2001-02 shows the continuation of a $16,255,580 Capital Development Plan designed to increase available classroom and support space. The Middle Campus construction project, which will be completed next fiscal year, includes two new buildings. Both the Academic Programs facility and the Student Services facility will provide for current need and future growth. Funding for this Capital Development Plan came from District investments with no debt incurred. As mentioned previously, equipment along with all other capital assets (except land and construction in progress) are reported net of accumulated depreciation for the first time this year in accordance with the new reporting standards issued by the GASB. This has the effect of reducing the value of total capital assets. Depreciation expense totaled $1,364,090 for the year, and is now shown as an operating expense on the Statement of Revenues, Expenses, and Changes in Net Assets. Additional information on the District’s capital assets can be found in Note 4 to the basic financial statements. Current Factors Having Probable Future Financial Significance: At June 30, 2002, the District was unsuccessful in negotiating an educational services contract with Gila County. This will result in a loss of equipment and buildings at the Gila Pueblo campus sites in fiscal year 2002-03 and may affect future revenues and related expenses. 8 The financial support from the State continues to be a factor, and a reduction will occur in the District’s fiscal year 2002-03 state funding. Full-time tuition was increased by $12 per semester and residence hall and dining plan costs were increased 3% for fiscal year 2002-03. As stated in the District’s Mission Statement, providing access to quality higher education requires that tuition and related costs remain affordable, and modest increases result in partially offsetting the cumulative loss while keeping higher education affordable to residents of this small rural community. 9 Graham County Community College District (Eastern Arizona College) Statement of Net Assets June 30, 2002 Assets Current assets: Cash and cash equivalents $19,012,457 Receivables (net of allowances for uncollectibles) Property taxes 232,016 Government grants and contracts 331,845 Student loans 13,457 Interest 88,190 Other 9,474 Inventories 77,668 Total current assets 19,765,107 Noncurrent assets: Capital assets, not being depreciated 14,371,443 Capital assets, being depreciated, net 20,147,118 Total noncurrent assets 34,518,561 Total assets 54,283,668 Liabilities Current liabilities: Accounts payable 707,755 Accrued payroll and employee benefits 168,566 Deposits held in custody for others 97,371 Current portion of compensated absences payable 328,309 Deferred revenues 26,694 Total current liabilities 1,328,695 Noncurrent liabilities: Compensated absences payable 430,271 Total noncurrent liabilities 430,271 Total liabilities 1,758,966 Net Assets Invested in capital assets 34,518,561 Unrestricted 18,006,141 Total net assets $52,524,702 See accompanying notes to financial statements. 10 Graham County Community College District (Eastern Arizona College) Statement of Revenues, Expenses, and Changes in Net Assets Year Ended June 30, 2002 Operating revenues: Tuition and fees (net of scholarship allowances of $1,130,075) $ 1,959,240 Government grants and contracts 6,362,961 Private grants and contracts 18,158 Food service income (net of scholarship allowances of $357,237) 249,301 Dormitory rentals and fees (net of scholarship allowances of $245,698) 237,921 Other 370,265 Total operating revenues 9,197,846 Operating expenses: Educational and general: Instruction 8,687,642 Academic support 507,542 Student services 2,678,862 Institutional support 3,816,305 Operation and maintenance of plant 2,144,959 Scholarships 2,275,502 Auxiliary enterprises 1,874,664 Depreciation 1,364,090 Total operating expenses 23,349,566 Operating loss (14,151,720) Nonoperating revenues: Property taxes 1,783,218 State appropriations 13,160,300 Share of state sales taxes 438,357 Investment income 727,522 Gain on disposal of capital assets 62,561 Total nonoperating revenues 16,171,958 Income before other revenues, expenses, gains or losses 2,020,238 Capital appropriations 638,800 Increase in net assets 2,659,038 Total net assets, July 1, 2001, as restated 49,865,664 Total net assets, June 30, 2002 $ 52,524,702 See accompanying notes to financial statements. 11 Graham County Community College District (Eastern Arizona College) Statement of Cash Flows Year Ended June 30, 2002 Cash flows from operating activities: Tuition and fees $ 1,959,240 Government grants and contracts 6,378,421 Private grants and contracts 18,158 Food service receipts 249,301 Dormitory rentals and fees 237,921 Collection of loans issued to students 2,245 Other receipts 416,122 Payments to suppliers and providers of goods and services (5,370,427) Payments to employees (14,450,896) Payments to students (2,275,502) Net cash used for operating activities (12,835,417) Cash flows from noncapital financing activities: Property taxes 1,820,047 State appropriations 13,160,300 Share of state sales taxes 438,357 Agency fund activity (3,323) Net cash provided by noncapital financing activities 15,415,381 Cash flows from capital and related financing activities: Capital appropriations 638,800 Proceeds from sale of capital assets 188,511 Payments made to contractors (11,176,491) Purchases of capital assets (398,051) Net cash used for capital and related financing activities (10,747,231) Cash flows from investing activities: Interest received on investments 853,370 Net cash provided by investing activities 853,370 Net decrease in cash and cash equivalents (7,313,897) Cash and cash equivalents, July 1, 2001 26,326,354 Cash and cash equivalents, June 30, 2002 $ 19,012,457 (Continued) See accompanying notes to financial statements. 12 Graham County Community College District (Eastern Arizona College) Statement of Cash Flows Year Ended June 30, 2002 Reconciliation of operating loss to net cash used for operating activities: Operating loss ($14,151,720) Adjustments to reconcile operating loss to net cash used for operating activities: Depreciation 1,364,090 Changes in assets and liabilities: Increase in: Inventories (5,101) Accounts payable 37,651 Accrued payroll and employee benefits 44,540 Deferred revenues 3,228 Decrease in: Government grants and contracts receivable 12,232 Student loans receivable 2,245 Other receivables 45,857 Compensated absences payable (188,439) Net cash used for operating activities ($12,835,417) Noncash capital activities: During the year ended June 30, 2002, the District sold capital assets with a net book value of $125,950 for $188,511, resulting in a gain on disposal of $62,561. See accompanying notes to financial statements. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 13 Note 1 – Summary of Significant Accounting Policies The accounting policies of the Graham County Community College District conform to generally accepted accounting principles as applicable to public institutions engaged only in business-type activities adopted by the Governmental Accounting Standards Board (GASB). During the year ended June 30, 2002, the District implemented GASB Statement No. 35, which prescribes a new reporting model for public colleges within the reporting guidelines of GASB Statement No. 34, as amended by GASB Statement No. 37. The District also implemented GASB Statement No. 38, which prescribes new and revised note disclosures. A. Reporting Entity The District is a special-purpose government that is governed by a separately elected governing body. It is legally separate and fiscally independent of other state and local governments. Furthermore, there are no component units combined with the District for financial statement presentation purposes, and it is not included in any other governmental reporting entity. The financial activities of the Eastern Arizona College Foundation are not included in the District's financial statements. The Foundation is a nonprofit corporation controlled by a separate board of directors. The Foundation’s goals are to promote educational programs and District objectives. B. Basis of Presentation and Accounting The financial statements include a statement of net assets; a statement of revenues, expenses, and changes in net assets; and a statement of cash flows. A statement of net assets provides information about the assets, liabilities and net assets of the District at the end of the year. Assets and liabilities are classified as either current or noncurrent. Net assets are classified according to external donor restrictions or availability of assets to satisfy District obligations. Invested in capital assets net of related debt represents the net value of capital assets less the debt incurred to acquire or construct the asset. Nonexpendable restricted net assets are gifts that have been received for endowment purposes, the corpus of which cannot be expended. Expendable restricted net assets represent grants, contracts, gifts, and other resources that have been externally restricted for specific purposes. Unrestricted net assets include all other net assets, including those that have been designated by management to be used for other than general operating purposes. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 14 A statement of revenues, expenses, and changes in net assets provides information about the District’s financial activities during the year. Revenues and expenses are classified as either operating or nonoperating, and all changes in net assets are reported, including capital contributions. Generally, revenues generated by the District for instruction and student services are considered to be operating revenues. Other revenues used for instruction and student services, such as property taxes and state appropriations, are not generated from operations and are considered to be nonoperating revenues. A statement of cash flows provides information about the District’s sources and uses of cash and cash equivalents during the year. Increases and decreases in cash and cash equivalents are classified as either operating, noncapital financing, capital financing, or investing. The financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Property taxes are recognized in the year for which they are levied. State appropriations are recognized as revenue in the year in which the appropriation is first made available for use. Grants and donations are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. The District eliminates all internal activity. It is the District’s policy to first apply restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net assets are available. The District follows FASB Statements and Interpretations issued on or before November 30, 1989; Accounting Principles Board Opinions; and Accounting Research Bulletins, unless those pronouncements conflict with GASB pronouncements. C. Cash and Investments The District’s cash and cash equivalents are considered to be cash on hand, demand deposits, cash and investments held by the County Treasurer, and investments in the State Treasurer's Local Government Investment Pool. All investments are stated at fair value. D. Inventories All inventories are stated at the lower of cost (first-in, first-out method) or market. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 15 E. Capital Assets Capital assets of the District consist of land, buildings, improvements other than buildings, construction in progress, equipment, and library materials. Capital assets are stated at cost at date of acquisition, or fair market value at date of donation in the case of gifts. Major outlays for assets or improvements to assets are capitalized as projects are constructed. These are categorized as construction in progress until completed, at which time they are reclassified to the appropriate asset type. Capitalization thresholds (the dollar values above which asset acquisitions are added to the capital asset accounts), depreciation methods, and estimated useful lives of capital assets reported in the financial statements are as follows: Capitalization Depreciation Estimated Asset Category Threshold Method Useful Life Land $1 Not applicable Not applicable Buildings, Brick & Mortar $5,000 Straight-line 40 years Buildings, Temporary/Modular $5,000 Straight-line 20 years Improvements other than Buildings $5,000 Straight-line 15 years Construction in Progress $5,000 Not applicable Not applicable Equipment $5,000 Straight-line 5 years Library Materials $1 Straight-line 10 years F. Investment Income Investment income is composed of interest, dividends, and net changes in the fair value of applicable investments. G. Compensated Absences Compensated absences consist of vacation leave and a calculated amount of sick leave earned by employees based on services already rendered. Employees may earn and accumulate vacation days according to their employment position and years of service. Vacation days earned per month range from .83 to 1.83 with a maximum accumulation ranging between 20 and 44 days. Vacation days in excess of the maximums are forfeited at the end of each month during the fiscal year. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 16 Generally, sick leave benefits provide for ordinary sick pay and are cumulative but do not vest with employees. Therefore, a liability for sick leave benefits is not accrued in the financial statements. However, for employees who have met the sick leave vesting requirements under the District option plan, sick leave benefits do vest. The option provides payment to retiring employees up to the maximum of 100 days of accrued sick days multiplied by the employee’s daily rate for employees who have at least 15 years of service and qualify for normal retirement, disability, or death benefit. Those amounts are accrued as a liability in the financial statements. H. Scholarship Allowances A scholarship allowance is the difference between the stated charge for goods and services provided by the District and the amount that is paid by the student or third parties making payments on behalf of the student. Accordingly, some types of student financial aid such as Pell grants and scholarships awarded by the District are considered to be scholarship allowances. These allowances are netted against tuition and fees, food service income, and dormitory rentals and fees in the statement of revenues, expenses, and changes in net assets. I. Property Tax Revenues The Graham County Treasurer is responsible for collecting property taxes for all governmental entities within the County. The County levies the property taxes due to the District in August. Two equal installments, payable in October and March, become delinquent after the first business day in November and May. A lien assessed against real and personal property attaches on the first day of January preceding the assessment and levy. Note 2 – Beginning Balances Restated As a result of implementing GASB Statement No. 35 and a prior period adjustment, the District’s aggregate fund balances reported as of June 30, 2001, totaling $65,030,930, have been restated as beginning net assets of $49,865,664. Of the difference, $15,218,052 is attributable to recording accumulated depreciation on capital assets, and $52,786 is attributable to a prior period adjustment reducing deferred revenue. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 17 Note 3 – Deposits and Investments Arizona Revised Statutes (A.R.S.) requires the District to deposit special tax levies for the District's maintenance or capital outlay with the County Treasurer. Although not statutorily required, the District has also chosen to deposit other public monies in its custody with the County Treasurer. Deposits—The District's deposits totaling $ 5,633 at June 30, 2002, were entirely covered by federal depository insurance or by collateral held by the District's custodial bank in the District's name. Investments—At June 30, 2002, the District’s investments consisted of the following: Fair Value Cash and investments held by the County Treasurer Investments in State Treasurer’s investment pool $ 7,977 18,998,847 Total $19,006,824 The District’s investment in the State or County Treasurer’s investment pools represents a proportionate interest in those pools’ portfolios; however, the District’s portion is not identified with specific investments and is not subject to custodial credit risk. The State Board of Deposit provides oversight for the State Treasurer's pools, and the Local Government Investment Pool Advisory Committee provides consultation and advice to the Treasurer. The fair value of a participant's position in the pool approximates the value of that participant's pool shares. No comparable oversight is provided for the County Treasurer's investment pool, and that pool's structure does not provide for shares. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 18 Note 4 – Capital Assets Capital asset activity for the year ended June 30, 2002, was as follows: Balance July 1, 2001, Balance as restated Increases Decreases June 30, 2002 Capital assets not being depreciated: Land $ 2,284,405 $ 0 $ 0 $ 2,284,405 Construction in progress 1,199,043 10,887,995 0 12,087,038 Total capital assets not being depreciated 3,483,448 10,887,995 0 14,371,443 Capital assets being depreciated: Buildings and improvements 30,514,987 288,496 (477,562) 30,325,921 Equipment 4,849,388 335,823 (473,358) 4,711,853 Library materials 804,288 62,228 (54,815) 811,701 Total capital assets being depreciated 36,168,663 686,547 (1,005,735) 35,849,475 Less accumulated depreciation for: Buildings and improvements 10,594,201 912,761 (406,608) 11,100,354 Equipment 3,974,441 397,640 (473,177) 3,898,904 Library materials 649,410 53,689 0 703,099 Total accumulated depreciation 15,218,052 1,364,090 (879,785) 15,702,357 Total capital assets being depreciated, net 20,950,611 (677,543) (125,950) 20,147,118 Capital assets, net $24,434,059 $10,210,452 $(125,950) $34,518,561 Note 5 – Long-Term Liabilities The following schedule details the District’s long-term liability and obligation activity for the year ended June 30, 2002. Balance July 1, 2001 Additions Reductions Balance June 30, 2002 Due within one year Compensated absences payable $947,019 $323,944 $512,383 $758,580 $328,309 GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 19 Note 6 – Risk Management The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The District carries commercial insurance for all such risks of loss, including workers' compensation and accident insurance. Settled claims resulting from these risks have not exceeded commercial insurance coverage in any of the past three fiscal years. Note 7 – Construction Commitments The District has entered into contracts for the following construction project: Estimated Required Project Expended Cost to Future Project Authorizations to Date Complete Financing Middle Campus $16,255,580 $12,087,038 $4,168,542 None Note 8 – Retirement Plan Plan Description—The District contributes to a cost-sharing multiple-employer defined benefit pension plan administered by the Arizona State Retirement System. Benefits are established by state statute and generally provide retirement, death, long-term disability, survivor, and health insurance premium benefits. The System is governed by the Arizona State Retirement System Board according to the provisions of A.R.S. Title 38, Chapter 5, Article 2. The System issues a comprehensive annual financial report that includes financial statements and required supplementary information. The most recent report may be obtained by writing the Arizona State Retirement System, 3300 North Central Avenue, PO Box 33910, Phoenix, AZ 85067-3910 or by calling (602) 240-2000 or (800) 621- 3778. Funding Policy—The Arizona State Legislature establishes and may amend active plan members' and the District's contribution rates. For the year ended June 30, 2002, active plan members and the District were each required by statute to contribute at the actuarially determined rate of 2.49 percent (2.00 percent retirement and 0.49 percent long-term disability) of the members' annual covered payroll. The District's contributions to the System for the years ended June 30, 2002, 2001, and 2000 were $258,213, $249,715, and $236,676, respectively, which were equal to the required contributions for the year. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Financial Statements June 30, 2002 20 Note 9 – Operating Expenses The District’s operating expenses are presented by functional classification in the Statement of Revenues, Expenses, and Changes in Net Assets. The operating expenses can also be classified into the following: Salaries and benefits $14,086,627 Contract services 1,131,963 Supplies and other services 2,710,201 Communications and utilities 1,040,686 Scholarships 2,275,502 Depreciation 1,364,090 Other 740,497 Total $23,349,566 Note 10 – Subsequent Events Recent Investment Losses in the State Treasurer’s Local Government Investment Pool Pursuant to statutory authority, a portion of the District’s monies are invested in the State Treasurer’s Local Government Investment Pool (LGIP), which was established in 1980 for the collective investment of State and local government monies. Monies in the LGIP may be invested in various types of investments prescribed by law, including bonds, debentures, or other evidences of indebtedness that are issued by entities organized and doing business in the United States that have a minimum rating of “Baa” from Moody’s Investors Service or “BBB” from Standard & Poors Rating Service. In December 2002, the State Treasurer announced that the LGIP currently holds approximately $131 million of asset-backed securities issued by an NPF-12 trust that are serviced by National Century Financial Enterprises (NCFE). Recently, NCFE has come under investigation by the Federal Bureau of Investigation, the Securities and Exchange Commission, and various state authorities for possible fraud and violations of federal and state laws. NCFE has since declared bankruptcy and the trustee for the bonds has informed the State Treasurer that the interest payment due December 1, 2002, was not received. As of December 2002, the District’s share of the potential investment loss was $635,794 of cash equivalents maintained in the State Treasurer’s LGIP. Supplementary Information GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Schedule of Expenditures of Federal Awards Year Ended June 30, 2002 21 Federal Grantor/Pass-Through Grantor/Program Title CFDA Number Pass-Through Grantor’s Number Expenditures U.S. Small Business Administration Passed through the Maricopa County Community College District Small Business Development Center 59.037 None $ 67,586 U.S. Department of Education Student Financial Assistance Cluster Federal Supplemental Educational Opportunity Grants 84.007 103,578 Federal Work-Study Program 84.033 236,079 Federal Pell Grant Program 84.063 2,716,935 Total Student Financial Assistance Cluster 3,056,592 TRIO— Student Support Services 84.042 182,434 Passed through the Arizona Department of Education Adult Education—State Grant Program 84.002 02-FAE-ABE- 270551-02A 12,351 Passed through the State Board of Directors for Community Colleges Vocational Education—Basic Grants to States 84.048 30203 168,639 Passed through the Arizona Board of Regents Leveraging Educational Assistance Partnership 84.069 None 11,134 Total U.S. Department of Education 3,431,150 Total Expenditures of Federal Awards $3,498,736 See accompanying notes to schedule. GRAHAM COUNTY COMMUNITY COLLEGE DISTRICT (EASTERN ARIZONA COLLEGE) Notes to Schedule of Expenditures of Federal Awards Year Ended June 30, 2002 22 Note 1 - Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of Graham County Community College District and is presented on the full accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. Note 2 - Catalog of Federal Domestic Assistance (CFDA) Numbers The program titles and CFDA numbers were obtained from the federal or pass-through grantor or the 2002 Catalog of Federal Domestic Assistance. Note 3 - Subrecipients The District did not pass-through any federal awards to subrecipients. Graham County Community College District (Eastern Arizona College) Single Audit Section June 30, 2002 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553-0051 DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL WILLIAM THOMSON DEPUTY AUDITOR GENERAL Independent Auditors’ Report on Compliance and on Internal Control over Financial Reporting Based on an Audit of Basic Financial Statements Performed in Accordance with Government Auditing Standards Members of the Arizona State Legislature The Governing Board of Graham County Community College District We have audited the basic financial statements of Graham County Community College District as of and for the year ended June 30, 2002, and have issued our report thereon dated February 28, 2003, which was modified as to consistency because of the implementation of GASB Statement No. 35, Basic Financial Statements—and Management’s Discussion and Analysis—for Public Colleges and Universities. We conducted our audit in accordance with U.S. generally accepted auditing standards and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the District’s basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards. Internal Control over Financial Reporting In planning and performing our audit, we considered the District’s internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the basic financial statements and not to provide assurance on internal control over financial reporting. Our consideration of internal control over financial reporting would not necessarily disclose all such internal control matters that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the basic financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control over financial reporting and its operation that we consider to be material weaknesses. 23 24 This report is intended solely for the information and use of the members of the Arizona State Legislature, the Governing Board, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record, and its distribution is not limited. Debbie Davenport Auditor General February 28, 2003 2910 NORTH 44th STREET • SUITE 410 • PHOENIX, ARIZONA 85018 • (602) 553 -0333 • FAX (602) 553-0051 DEBRA K. DAVENPORT, CPA AUDITOR GENERAL STATE OF ARIZONA OFFICE OF THE AUDITOR GENERAL WILLIAM THOMSON DEPUTY AUDITOR GENERAL Independent Auditors’ Report on Compliance with Requirements Applicable to Each Major Program and on Internal Control over Compliance in Accordance with OMB Circular A-133 Members of the Arizona State Legislature The Governing Board of Graham County Community College District Compliance We have audited the compliance of Graham County Community College District with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that are applicable to its major federal program cluster for the year ended June 30, 2002. The District’s major federal program cluster is identified in the Summary of Auditors’ Results section of the accompanying Schedule of Findings and Questioned Costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs is the responsibility of the District’s management. Our responsibility is to express an opinion on the District’s compliance based on our audit. We conducted our audit of compliance in accordance with U.S. generally accepted auditing standards; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the District’s compliance with those requirements. In our opinion, Graham County Community College District complied, in all material respects, with the requirements referred to above that are applicable to its major federal program cluster for the year ended June 30, 2002. 25 26 Internal Control over Compliance The District’s management is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the District’s internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133. Our consideration of internal control over compliance would not necessarily disclose all such internal control matters that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements of laws, regulations, contracts, and grants that would be material in relation to a major federal program being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control over compliance and its operation that we consider to be material weaknesses. This report is intended solely for the information and use of the members of the Arizona State Legislature, the Governing Board, federal awarding agencies, and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties. However, this report is a matter of public record, and its distribution is not limited. Debbie Davenport Auditor General February 28, 2003 Graham County Community College District (Eastern Arizona College) Schedule of Findings and Questioned Costs Year Ended June 30, 2002 27 Summary of Auditors’ Results Financial Statements Type of auditors’ report issued: Unqualified Yes No Material weakness identified in internal control over financial reporting? X Reportable condition identified not considered to be a material weakness? X (None reported) Noncompliance material to the financial statements noted? X Federal Awards Material weakness identified in internal control over major programs? X Reportable condition identified not considered to be a material weakness? X (None reported) Type of auditors’ report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with Circular A-133 (section .510[a])? X Identification of major programs: CFDA Number Name of Federal Program or Cluster Student Financial Assistance Cluster of Programs: 84.007 Federal Supplemental Educational Opportunity Grants 84.033 Federal Work-Study Program 84.063 Federal Pell Grant Program Dollar threshold used to distinguish between Type A and Type B programs: $300,000 Auditee qualified as low-risk auditee? X Other Matters Auditee's Summary Schedule of Prior Audit Findings required to be reported in accordance with Circular A-133 (section .315[b])? X |