Mott Community College Budget Update

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Mott Community CollegeBudget Update

• Board of Trustees
• Committee of the Whole
• October 24, 2005
• 630 p.m.

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• The mission of the budget process is to help
  decision makers come to informed choices about
  the provision of services and assets and to
  promote stakeholders participation in the
  process.
• --McPhail, I.P. (2005). Establishing
  Sustaining Learning-Centered Community Colleges.
  (C.J. McPhail, Ed.). Washington, D.C. Community
  College Press, 167.

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AGENDA

• FY04-05 Review
• FY05-06 Status
• Future Outlook
• Questions Comments

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Fiscal Year 2004-05

• Review of Key Results

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FY04-05 Audit

• Independent Audit Plante Moran
• Financial Single Audits on schedule
• Audited Statements issued 9/23/2005
• Unqualified (Clean) Opinion
• No negative findings No material weaknesses in
  internal controls
• Management letter 2 suggestions
• Fixed Assets Inventory Reconciliation
• Pell Loan Pro-Rata Refund Deadlines

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FY04-05 Financial Results

• College as a Whole
• Financial Position (Balance Sheet)
• 90 Million Total Net Assets
• 35 Million (39) are net Capital Assets
• 36 Million (40) are restricted non-spendable
  permanent Endowments
• 9 Million (10) are restricted for spending
  mainly on grants, debt and capital projects
• 10 Million (11) are Unrestricted for spending
  on operations, auxiliary, capital maintenance and
  board designations

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FY04-05 Financial Results
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FY04-05 Financial Results

• College as a Whole
• Results of Operations (Income Statement)
• 5.2 Million Increase in Net Assets
• -- MCC is 6 stronger at 6/30/05 than 6/30/04
• Due to Three factors
• Endowment growth
• Operating surplus
• Reduction of Debt

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FY04-05 Key Initiatives

• Budget/Finance Related
• Addressed Sarbanes-Oxley Act (8.1).
• Renovation of College facilities (6.1)
• Expanded internal controls reviews (7.3)

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FY04-05 Key Initiatives

• Budget/Finance Related
• Foundation for MCC fiscal growth (2.1)
• Total Assets grew by 10 for 2nd year in a row
• Investment Earnings were 9
• Unrestricted Funds increased by 14
• Support to MCC was 330,000
• Total Net Assets reached the 3 million mark!

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FY04-05 Key Initiatives

• Budget/Finance Related
• Ended fiscal year at 6/30/05
• Increasing operating fund balance, and
• Contributing to operating rainy day,
  maintenance/replacement, and capital fund
  reserves, per Board Policy 3930 (6.1).

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FY04-05 Other Highlights

• Bond Rating Upgrade from A to A by SP
• Property Tax Millage Rates Decreased Taxpayers
  paid lower rates in 2005 than in 2004 for both
  operating and debt levy portions
• Tuition and fee increase of 2.3 was leveraged by
  a 6.5 increase in related financial aid

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FY04-05 Other Highlights

• Bond Refunding Jan. 2005
• Utilities Reduction Analysts facilitated 27,000
  in net cost savings
• 360,000 of Operating Budget allocated for new
  strategic initiatives

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FY04-05 General Fund

• Financial Results
• Revenues were 61.2 million, favorable to budget
  by 3
• Expenses were 60.8 million, unfavorable to
  budget by 2
• Overall surplus of 408,000, favorable to budget
  by 536,000
• FY04-05 Results did not substantially impact the
  long-term forecast

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FY04-05 General Fund

• Financial Results
• Fund Balance ending 6/30/05 4.6M
• 8 of Annual Operating Expenses
• (Target is 5 - 10)

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MCCs General Fund Balance has been from 6 to 8
over the past few years, within the Boards 5 -
10 target range
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FY04-05 General Fund

• This years Fair Share Rebate Proposal
• Rationale
• 6/30/05 General Fund Surplus, mainly due to
  one-time revenues in excess of budget (similar to
  last year)
• Employee groups prior efforts to reduce
  compensation costs
• Obligation to collective bargaining agreements

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FY04-05 General Fund

• This years Fair Share Rebate Proposal
• Managements Offer
• 250,000 to distribute
• One-time lump sum payments in Dec.05
• In lieu of formal contract reopeners

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FY04-05 Plant Funds

• Financial Results
• 6 improvement
• Bond refinancing in January 2005 provided 200
  thousand in savings of future interest costs to
  taxpayers
• Depreciated value at 6/30/05 97M
• Total Debt Outstanding at 6/30/05 62M
• Net Equity in Physical Plant 35M

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FY04-05 Plant Funds

• Financial Results
• Maintenance/Replacement Funds
• Ending Fund Balance 6/30/05 5M
• Emergency Reserve 500,000
• Capital Projects Funds
• Ending Fund Balance 6/30/05 5.8M, mainly
  remainder of Series 2005 bonds
• Emergency Reserve 250,000

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Fiscal Year 2005-06

• Status Update after 1st Quarter

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FY05-06 General Fund

• Initial projection was a -2.8 million deficit
• ASSUMPTIONS
• -4.6 state aid (2 cut 04-05 tuition restraint
  not included for 05-06)
• -2 enrollment on credit side
• 0 change in bottom line on non-credit side
• Retirement cost increase from 14.87 of salaries
  to 16.34
• Double-digit health insurance rate increases
• Utilities costs rising and volatile

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FY05-06 General Fund

• Budget Balancing Steps
• No operating millage rollback property tax
  revenue estimate boosted
• Tuition fee rate increases of 7.4
• Noncredit operations submitted break-even budgets
• Employee group compensation changes continue to
  help tremendously

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FY05-06 General Fund

• Budget Balancing Steps
• 1/2 of Board Authorized positions not budgeted
  for assume salary lag, holds
• Cuts in discretionary line items
• Strategic Initiative funding reduced
• Used 04-05 savings to front-fund planned 05-06
  transfer to maint/repl. fund

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FY05-06 General Fund

• Budget Status after 1st Quarter
• June 2005 Board Approved Budget
• 100,000 Surplus
• 3.6 Increase in Expense level from 04-05
• No program cuts included
• No plan to increase tuition mid-year

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FY05-06 General Fund

• Budget Status after 1st Qtr
• September 30, 2005
• Credit side enrollment down 2 for Summer 0
  for Fall (not final)
• Revenues have positive variance to budget
• Expenses have negative variance to budget
• Bottom line Positive variance of 200,000 to
  budget at this point.

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FY05-06 General Fund

• Budget Status after 1st Qtr
• September 30, 2005
• Forecast for end of year is still small surplus
• Ending fund balance expected to be 4.5 million,
  or at least 7 of annual budget
• Budget amendment planned for November 2005

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State Aid Update

• From FY00-01 to FY05-06 expected, impact of
  difference between budget and actual
• (9,000,000)
• MCC is still annually 50 underfunded compared
  to state aid funding formula

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State Aid Update

• States current 05-06 budget for their GF/GP fund
  estimates they will break even (assuming 3
  revenue growth), but does include cuts for higher
  education.
• Current 14 million in State Appropriations is
  still below 1998 level

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Future Outlook

• Key Issues

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Key Issues for Future

• Long-term Forecast (13 million) cumulative
  deficit 7 years out
• State Aid declines must be offset
• Cost Control remains key focus
• Retirement Costs
• Health Insurance Costs
• Utilities, esp. natural gas prices
• Need to Achieve 100 of requested pro rata
  compensation reduction

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Key Issues for Future

• Increasing all Fund Balance Reserves to
  Board-specified levels
• Securing voter renewal of 0.65 Voted Operating
  Millage by end of FY07-08
• Impact of Delphi bankruptcy, overall economy
• Performance Indicators, Accountability
• AQIP continuing to link budgeting to
  planningoperational, program, and strategic

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• In the midst of increasing enrollments and
  declining state funding, colleges must maintain
  momentum and continue to focus on learning as
  their central institutional commitment.
• --McPhail, I.P. (2005). Establishing
  Sustaining Learning-Centered Community Colleges.
  (C.J. McPhail, Ed.). Washington, D.C. Community
  College Press, 168.

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QUESTIONS OR COMMENTS?
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Thank You!

• For More Information
• Kelli Sproule, CFO
• 810.762.0525 phone
• CM 1032 office
• ksproule_at_mcc.edu
• www.mcc.edu Accounting page