Graham County Community College District (Eastern Arizona College) single audit reporting package for the year ...

              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