Section II: Core Requirements

2.11. The institution has a sound financial base and demonstrated financial stability, and adequate physical resources to support the mission of the institution and the scope of its programs and services. 

           The member institution provides the following financial statements: (a) an institutional audit (or Standard Review Report issued in accordance with Statements on Standards for Accounting and Review Services issued by the AICPA for those institutions audited as part of a systemwide or statewide audit) and written institutional management letter for the most recent fiscal year prepared by an independent certified public accountant and/or an appropriate governmental auditing agency employing the appropriate audit (or Standard Review Report) guide; (b) a statement of financial position of unrestricted net assets, exclusive of plant assets and plant-related debt, which represents the change in unrestricted net assets attributable to operations for the most recent year; and, (c) an annual budget that is preceded by sound planning, is subject to sound fiscal procedures, and is approved by the governing board.

            Audit requirements for applicant institutions may be found in the Commission policy entitled “Accreditation Procedures for Applicant Institutions. (Resources)

JUDGMENT OF COMPLIANCE

Compliance.

NARRATIVE/JUSTIFICATION FOR JUDGMENT OF COMPLIANCE

Northeast Alabama Community College demonstrates compliance. 

The institution presents a sound financial base, demonstrated financial stability, and adequate physical resources to support the mission of the institution and the scope of its programs and services. Two goals of the institutional Mission and Goals Statement pertain directly to financial and physical resources:

·         Goal Ten: Procurement and administration of financial resources in an effective manner.

·      Goal Eleven: Provision for and maintenance of a physical plant with instructional facilities and technology suitable for all the institution’s programs and services.

The Education Audit Division of the State of Alabama Department of Examiners of Public Accounts has assured the college that the auditor’s report for FY 2003 will be available by mid-March 2004. This audit will be submitted to the Commission as soon as it is available. A letter advising the college of this schedule is included in the accompanying documentation. The college provides institutional auditor’s reports for the three preceding years, prepared by the Alabama Department of Examiners of Public Accounts.  These audits employ the appropriate audit guide. 

The college provides an audited statement of financial position of unrestricted net assets, exclusive of plant assets and plant-related debt, which represents the change in unrestricted net assets attributable to operations.  Statements for the three preceding years are provided within

the respective auditor’s reports.

The institution presents annual budgets for the past three years and demonstrates that budgets are preceded by sound planning, are subject to sound fiscal procedures, and are approved by the governing board. 

The institution has a sound financial base and demonstrated financial stability.  The sound financial base and financial stability are indicated by adequate operating reserves, absence of long-term debt, stable or increasing unrestricted assets, stable revenues, appropriate expenditures per full-time-equivalent enrollments (FTE), and consistent funding of all programs and services of the college.

Adequate Operating Reserves.  The Alabama Department of Postsecondary Education recommends that colleges within the system maintain a two-month operating surplus.  NACC ended the 2002-2003 fiscal year with an unrestricted fund balance operating surplus of 1.6 million, which represents a greater than two-month operating surplus.

Absence of Long-Term Debt.   NACC has no long-term debt; all annual revenues can be used for operations.

Unrestricted Assets, Investments, and Cash Balances.  As shown in Table 1, investments have increased from $162,000 in 1996 to $1.7 million in 2003.  Total unrestricted assets have increased from $951,472 in 1996 to $2.8 million in 2003, and cash balances remain stable.

Table 1

Stable Revenues. Annual revenues have shown a steady increase from FY 1999 through FY 2003 (Table 2). The increase is attributed to increased enrollment and to a statewide increase in the rate of tuition and fees. 

Table 2

The college has two primary sources of revenue.  As a state institution, the college receives an annual appropriation from the Alabama Educational Trust Fund (ETF).  Money from this fund is earmarked for education in the state. ETF monthly appropriations compose approximately one half of the annual revenue for the college.  The other primary source of revenue for the college is student tuition and fees. Sound educational planning involving the expansion of the NACC curriculum and course offerings has resulted in a twenty-five percent increase in enrollment over the past two years. This increase, along with an increase in the rate for tuition and fees, has greatly enhanced this source of funding. The fact that approximately one half of tuition and fees are paid through Pell Grants, external private and agency scholarships, and student loans contributes to the stability of tuition and fees as a funding source.

The ETF funding, by contrast, has a degree of inherent instability. Since the ETF is funded primarily by sales tax receipts and income taxes, the fund reflects fluctuations in the state and national economy. Occasionally, in years of a weak economy when revenue fails to meet state budget projections, the funds must be prorated to recipients.  This situation has occurred twice in the past decade. When this reduction occurs and appropriations to NACC are prorated, the amount of revenue lost is relatively small compared to the total revenue of the college. The most recent reduction in late spring of 2001 represented three percent of the college’s revenue for the year. The shortfall was compensated by restrictions on travel and instructional supplies, as well as reduced course offerings for the Summer 2001 term. The current NACC Administration has set as a fiscal priority the accumulation of surplus funds to protect against any shortfalls in the ETF. As mentioned earlier, the college now has this surplus. 

Through the years, the college has benefited from other sources of funding. For a number of years prior to 2003, the college received “critical needs” funds from the Alabama Legislature for funding of the college infrastructure and facility enhancements. These funds were approximately $150,000 to $200,000 per year. In 2002 another $300,000 was obtained from the Alabama Legislature through the Alabama Department of Transportation to construct a parking lot on campus. State bond funds also have provided funding for a Technology Center, renovations to the student center, and additional lighting on campus. Federal grants, such as the Perkins Vocational/Technical Grant and grants from the Appalachian Regional Commission (ARC) have funded various technical and academic programs on campus. Recognizing that sound budget planning prohibits dependence on these less reliable external sources of funding, college personnel do not rely on these funds in budgeting for the regular, ongoing college functions.

Northeast has taken action toward pursuing other supplemental sources of funding that can contribute to enhanced instructional and physical resources. The college recently contracted with Regional Development Inc. to pursue federal and state grants.  College administrators also are negotiating with two companies to pursue direct federal appropriations for NACC. An administrative assistant recently hired has as part of her responsibilities assistance with grant writing and other fund-raising activities. A college foundation is being planned and should be activated within the 2004 calendar year. These potential sources of funding will contribute to an enhanced financial base and stronger fulfillment of the college mission.

E & G Expenditures per FTE. Table 3 shows Educational and General (E & G) expenditures per full-time equivalent student (FTE). Several factors have contributed to the lower expenditures per FTE after 1999-2000: (1) proration was declared late spring, 2001; (2) cost-containing measures were put into place effective during the 2001-2002 year, including temporarily not replacing a number of retiring personnel and reorganizing assignments to allow maximization of existing personnel; (3) addition of classes and increase in overall enrollment increased the efficiency of the instructional systems in place. The resulting stronger financial position of the college is reflected in the somewhat higher expenditure per FTE shown in 2002-2003.

Table 3

Consistent Funding of All Programs and Services of the College. Tables 4, 5, and 6 show overall funding to all aspects and services of the college over the past three fiscal years. The planning and budgeting process described later in this section allows each administrative and curricular  unit to present the needs of the respective area for consideration. Funding to all instructional programs is demonstrated in the Institutional Management Plan (IMP), which includes an annual listing of the projected equipment purchases for the various instructional areas as projected by the division chairs. Table 7 shows the IMP projections for the first year of the planning cycle covered by the 2003-2004/2005-2006 plan (dated September 2003). These projections are utilized in the budgeting process.  

Table 4

Table 5

Table 6

Table 7