Standard Nine - Financial Resources

 

DESCRIPTION

During the past ten years, the College has seen the benefit of many improvements in its financial status. These changes have come about despite fluctuations in state appropriations, flat tuition, minimal fee increases, and level funding from most financial aid programs. The College has developed a substantial financial reserve, implemented an integrated student information system that includes a general ledger, received unqualified audits, and successfully funded a new building, the first in over thirty years.

Sources of Funds
The College receives funding from three sources: net state appropriations, net student tuition and fees, and other miscellaneous income sources.

State appropriations provide support for annual operating expenses. Between 2002 and 2005, the unrestricted appropriation was level or reduced. Although FY2006 shows a 9% increase, the majority (6%) was one-time funding for retroactive collective bargaining salary increases. Despite minimal increases, the College was able to fund significant energy cost increases, major classroom renovations, and substantial technology acquisitions from operations revenue and gifts.

Restricted and capital appropriations were significantly higher in 2005 and 2006 due to the construction of the Lyndon P. Lorusso Applied Technology Building. Through June 30, 2006, the College expended $7.9 million for this project. Current Board of Higher Education and the Executive Branch standards require that the College match at least 25% of the total project cost. Consequently, in FY04, the Educational Foundation donated a $1,965,236 gift to the College to cover the institution's share of the project. The Massachusetts Division of Capital Asset Management (DCAM) provided the remaining 75%.

In addition to state appropriation, the College depends heavily upon revenue from student enrollment. All students at the College pay per credit hour. There is no flat full-time rate. The Commonwealth sets the tuition rate for day classes taught by full-time faculty. Between Spring 1998 and Fall 2000, the credit hour tuition rate fell from $34 to $24 per credit and has since remained unchanged. The College collects these funds on campus, then remits them to the state.

The College retains local tuition from courses taught by adjunct faculty, whether day or evening. Classes also have local fees charged at a per-credit rate. The President and her Cabinet investigate the impact of potential fee increases before submitting proposals to the Board of Trustees for approval. The College has attempted to cover as many costs as possible through the credit-hour fee. As of the Fall 2007 semester, the College has eliminated all incidental fees, including the Admissions Application and Assessment Testing fees.

When the disparity between operating expenses and state appropriations grew, the College increased local fees to ensure adequate revenue to maintain its educational mission. The Vice President of Administration & Finance and the Director of Financial Aid report regularly to the Board of Trustees regarding the availability of financial aid for needy students to ensure their access to the College. The College has been able to maintain its educational focus as a priority without fee increases from Fall 2004 through Summer 2007.

In addition to prudently managing fees for regular programs, the College also has corrected the disparity between special health program costs and standard tuition rates. After receiving Board approval, the Financial Aid Office began awarding grants from an endowed institutional fund. These awards offset the special program fees to match day program rates. Currently, only Evening Nursing and LPN-to-RN students require these grants.

The CCCC Educational Foundation is a significant resource in the College's finances. It provides the College with a means for fundraising and gift solicitation. It is a distinct, non-profit organization separate from the College. It supports its own payroll and has its own Board. The Foundation receives independent audits, following the Statement of Financial Accounting Standards (SFAS). The College provides office space for the Foundation staff on campus. The Foundation provides significant monetary support in the form of scholarships ($350,000-$400,000 annually), minigrants, and donations to support small projects, major renovations, and new buildings. The College operates several programs using grant funds. The Trio Advantage program, Coaches and Mentors, Building Careers, Hyannis adult education, and high school partnership programs all receive funding from federal, state, and private grants. When combined with all other student financial assistance grants, these funds amount to over $4 million.

The College participates in Title IV federal grant and loan programs, several Massachusetts grants and tuition waivers, and receives scholarships through the Educational Foundation. The total financial aid awarded exceeds $4 million annually, of which more than 70% is nonrepayable gift aid.

In the first half of the past decade, financial aid availability climbed. Federal Pell Grants increased annually. In August 1998, the College's allocation for the Massachusetts Cash (Access) Grant increased from less than $60,000 per year to nearly $425,000, which reflected a BHE commitment to make its institutions accessible. By FY2001, the amount was over $720,000. Unfortunately, FY2002 saw a reduction to $670,000 and the grant has since been level-funded at $600,000. At the same time, the Federal Pell Grant limit did not change for five years.

The Workforce Education Resource Center (WERC), established in 1999, delivers noncredit courses to the public as well as administering credit courses under contract with organizations throughout Southeastern Massachusetts. It also provides custom training to businesses, organizations, municipalities, military and government agencies, as well as individuals within the communities of Cape Cod, Martha's Vineyard, Nantucket, and Southeastern Massachusetts. The College retains the revenue from fees, which vary by class and contract, after direct and administrative expenses.

The College receives minimal amounts of revenue through contracted services from the cafeteria, bookstore, the Academy for Lifelong Learning, Project Forward, and other facilities usage. In Fiscal Years 2005 and 2006, income from auxiliary services was below $200,000 annually.

The College has also created partnerships with other institutions of higher education to provide instruction on campus for degree programs beyond AA and AS. These partnerships under the Office of Advanced Studies also create income. For example, a 2+2 initiative includes a direct revenue payment to the College along with contributions to library materials.

Allocation of Funds
The Vice President of Administration and Finance controls fund allocation through the budget process. Generally, the process begins during the Spring semester. The deans receive worksheets for each of their departments that list current year budget data and provide an opportunity to project upcoming year needs. The deans determine the level of involvement from department heads when completing the budget worksheets. Requests for additional funds must include a justification. The Vice President compiles the information, has discussion at Cabinet about new expenditures, and then issues a tentative spending plan. The proposed budget must receive approval from the Board of Trustees. Ideally, this process is complete before the start of each the new fiscal year. In reality, the budget timeline fluctuates, based on state budget delays and adjustments in appropriation.

Throughout the year, deans and directors receive budget reports for their departments. These reports track expenditures for line items within each cost center. Many individual departments have modest budget reserve lines. Department heads may move funds between cost center categories when unexpected expenses arise.

Many elements of the College's annual budget are not negotiable. Collective bargaining contracts determine salaries for faculty, professional staff, and most support positions. Accounting standards require the College to include deferred compensation for potential sick time and retirements into its financial statements. The BHE mandates that institutions dedicate at least 5% annually toward deferred maintenance.

The institution clearly focuses its revenue on the College's core mission. The distribution of available funds verifies that the College's main priority is supporting its students' learning. Over 80% of available funding is allocated to instruction and student support services.

The Vice President of Administration and Finance manages a Special Initiatives fund. New project ideas move from department chairs to deans for discussion at Cabinet, where the project's relationship to the mission and its estimated costs are assessed. If Cabinet approves a project and it is relatively inexpensive, it may receive funding through the Special Initiatives account. Otherwise, Cabinet may decide to solicit a fundraising proposal working with the Foundation.

Accountability
The College ensures its financial integrity by using both external reviews and internal control procedures. The College had its first audited financial statements at the end of FY1998. The KPMG, LLP independent auditors have issued an unqualified report with no material findings every year since. The auditors present their conclusions at an open Board of Trustees meeting each fall as well as in the Board's executive session.

Additional audits and external reviews occur on a regular and ad hoc basis to ensure financial compliance. For example, the state audited the College's information technology systems and in a separate audit, reviewed faculty load data. Financial aid records receive routine audits from KPMG, state auditors, the US Department of Education, federal loan guarantors, and the Veterans Administration. There have been no significant findings from these reviews.

Within the College, additional policies assure financial integrity. The Board of Trustees has an audit committee. The Board's Policy Manual documents what financial records the College must present for their approval. Examples include quarterly Trust Fund Reports, the Internal Controls Manual, the operating budget, and audited financial statements. The College has autonomy with respect to spending within the budget guidelines, but the President must receive Board approval for single expenditures over $25,000.

Within the Business Office, there is a segregation of duties. Checks and balances exist throughout all processes to ensure accuracy and compliance with cash management regulations. Satisfactory audits confirm that appropriate safeguards are in place.

The College meets or exceeds the BHE Performance Standard Indicators for affordability as well as for effectiveness and efficiency. These indicators include audits, capital adaptation, institutional support, and fundraising. The College meets the auditor's community college best practice recommendation of having at least 10% of operating expenses in unrestricted funds.

 

APPRAISAL

Source of Funds
One of the College's major accomplishments during the past decade is its cash reserves balance. In FY1997, there were no reserves. The balance sheet accrual showed a deficit of $753,295. By FY1998, the deficit increased to nearly $2 million because of new accounting rules incorporating deferred compensation. Following the establishment of a balanced, conservative budget with a built-in reserve goal, the FY2006 unrestricted net assets have grown to over $2 million.

The College's capital assets grew with the addition of the Lorusso Applied Technology Building. This new building was in a "pending" status with the state for over ten years before the College received approval to proceed. In 2006, the College opened its first new building on campus in over thirty years. The Educational Foundation ran a highly successful capital campaign raising $4.2 million. Along with funding from the Commonwealth, the building is a debt-free asset for the College.

As at any institution, financial resources are critical for sustaining the College's mission. Like many public institutions, the College receives a portion of its funding from the Commonwealth, but this limited amount does not fully cover operating expenses. The administration must continually address the necessity of keeping costs for students affordable, while still generating sufficient revenue for operating costs. Student fee increases have slowed in the past several years, but the administration must still consider adjustments annually. The Board of Trustees is sensitive to the issue of affordability and access. All fee increase decisions have been well researched and debated.

The College has been fortunate to have stable enrollment revenue. There are no formal contingency plans for an unanticipated decline in these funds. However, many efforts are in place within Admissions and Advising to bring in new enrollments and retain current students. With the data available in the Jenzabar student information system, and the new Director of Institutional Research and Effectiveness position, the College has an opportunity to execute more sophisticated enrollment planning.

Allocation of Funds
The College must dedicate the majority of its financial resources to employee salaries and deferred compensation. Since the last accreditation, there have been two early retirement incentive programs that had a major impact on the College's resources. Careful financial management provided the College with the necessary funds to pay out the retirements. The Commonwealth limited new hires to 20% of the positions vacated, which created a staffing deficit critical to the College's mission. Further payroll-related pressures occur when contracts mandate salary adjustments and the legislature fails to fund them. In 2006, the state appropriated $500,000 to fund retroactive contract increases. The restrictions and funding delays for contracted employees generally are not applicable to non-unit employees, creating apparent inequities.

Maintaining the campus is a continuous financial challenge. Due to the facility's age and years of scarce funding, there are always more maintenance projects than resources. It is difficult to retrofit disability accommodations, provide ventilation or air conditioning in all buildings, assuage environmental health concerns, and otherwise modernize all areas. Funds from the Educational Foundation have allowed for many physical upgrades. Thanks to significant support from external donations, instruction is now carried out in SMART classrooms, Nursing and Dental Hygiene labs have been improved and expanded, Massage Therapy has dedicated space, Disability Services received additional equipment, the theater and hospitality programs were updated, and the space provided for the Academy for Lifelong Learning was renovated.

Slim resources and existing expenses can limit academic initiatives. However, the College has succeeded in implementing many offerings. The Academic Departments received resources to initiate a Massage Therapy Certificate Program, an expanded Dental Hygiene Clinic with additional chairs and equipment, degrees and certificates in Environmental Studies, an additional cohort of Nursing students, technology upgrades throughout the College, the Zammer Hospitality Institute, and online distance learning.

While the budget process involves much discussion at the Cabinet level and must receive approval from the Board of Trustees, there is a general sense that the process is not sufficiently inclusive. There are limited resources for new initiatives, budgets are generally level-funded, and department heads must submit requests to deans for proposed adjustments. Once the deans receive these requests, significant delays too often occur before departments receive tentative budgets due to fluctuations in state appropriations.

The President's Cabinet has access to daily enrollment reports. These data are critical for projecting revenue and planning adjustments to the budgets. Forecasting beyond the current semester continues to be a challenge, but is essential to multi-year planning. The current process, though effective, is more informal than systematic. A well defined connection between financial projections and strategic planning does not yet exist.

Like many public institutions, the College has relied on annual planning based on the state budget process. Appropriation predictions vary significantly and official budget information often becomes available only after the start of the fiscal year. This is another critical challenge to multi-year planning. To link budgeting to the strategic plan, the administration will need to explore options for overcoming this hurdle.

Although formalized multi-year financial planning is not yet in place, the College has been looking forward while considering both its mission and funding. For example, a feasibility study explored the possibility of building oncampus student housing. Based on the results, the College may continue moving forward to receive approval from the BHE, explore the financing options, and secure resources for implementation. Such housing would open new vistas for the future of Cape Cod Community College.

Accountability
Strides have been made in documenting financial procedures. Perhaps most important has been the implementing software with an integrated general ledger. QuoData, which subsequently became Jenzabar, has allowed for more accurate accounting and reporting.

The Vice President of Finance and Administration and the Business Office staff have created several documents to ensure compliance with all finance-related regulations. The Comptroller updates the Internal Controls manual annually as part of the yearly audit. It also received an extensive revision after the implementation of the Jenzabar system. The BHE has cited the College's Risk Assessment document from the Internal Controls manual as a model for other Massachusetts community colleges. The Vice President's Office is also responsible for maintaining the College's Administrative Policies and Procedures Manual, which received a thorough update in 2006. The Billing Procedures Calendar, created twice per year with the Jenzabar Operations Committee, includes critical dates for registration, admissions, assessment, and financial aid. After careful research and negotiation, the College hired a new independent auditing firm, O'Connor and Drew, beginning with the FY2007 audit. This represents both a good business practice for compliance and a significant savings in cost.

Other areas still require attention. The budget process, for example, is handled consistently, but is not well documented. Information is shared between the Vice President and the Deans, but the process is not necessarily transparent to others. Resources often require level funding, and as a result departments often cannot implement the initiatives they have requested.

The College Meeting governance system provides the Vice President of Finance and Administration an opportunity to provide monthly updates on financial and budgetary issues. These reports frequently include the status of funding from the BHE and legislature. The Board of Trustees Finance and Personnel Committee meets on a monthly basis in advance of each full Trustees meeting.

The College has made major financial investments in technology over the past ten years, both in academic and administrative areas. The College brought the Jenzabar student information system on line in July 2003, which allowed full integration of student records, billing, financial aid, and all other accounting functions. Although the Business Office had implemented its general ledger in 1999 using QuoData, the system was independent from the College's student system and from the financial aid system. The Jenzabar system that replaced QuoData allows easier and more accurate reporting, has eliminated most manual adjustments to student accounts, and allows for greater accuracy and simplification in the reconciliation process.

There has been stable leadership in the Finance area over the past ten years. The current Vice President of Administration and Finance was hired in Fall 2005. Her predecessor was in the position for ten years. Nearly all staff members in the Business Office and Human Resources have worked for the College more than ten years. This continuity gives the institution strength for maintaining compliance as well as implementing new initiatives. Staffing revisions have been made in the Finance area, such as creating new positions or upgrading existing ones, in order to better address critical functions in payroll and the Business Office.

 

INSTITUTIONAL EFFECTIVENESS

The College continues to meet the Financial Resources standard for effectiveness by means of a mandatory, on-going system of evaluation. Financial activities receive scrutiny within the institution based on policies regarding budgeting, planning, and Board of Trustees oversight. The College's finances also receive evaluation from mandatory annual audits, ad hoc reporting, and BHE performance standards. When external reviews identify potential or real problems, the College responds by taking steps for improvement immediately. Through the use of continuous internal review, workflow processes are updated and regulatory requirements implemented prior to external reviews. Within all areas of the institution's financial resources, it is impossible to avoid routine scrutiny and evaluation of procedures related to finance. As indicated by the past ten years of clean audits, the College has established a successful process of internal assessment to ensure compliance with good operations and the implementation of improvements.

Projections - Standard Nine - Financial Resources
Projections	Responsible Staff	Completion Date
Develop a multi-year planning process that will integrate with the College's mission and strategic plans. It must accommodate the unpredictable amounts and fluctuating timelines associated with state appropriations and contract funding.	President & Cabinet	FY 2009-2010
Update and document the budget process beginning with the FY2008 cycle. The goal is to link the College's mission, strategic plan, and budgeting into a cohesive process.	VP Admin. and Finance	FY 2009
Refine the enrollment data reports as needed. These reports are critical to forecasting anticipated enrollment changes, thereby providing more assurance of incoming revenue. Within the next two to three years, the College should be able to incorporate enrollment forecasting in its multi-year fiscal planning.	IR Director	FY 2009-2010
Develop a financial strategy for responding to an increasing number of retirements. The College will need to cover the costs of these retirements, while also budgeting for sufficient replacements to maintain its high level of academic quality.	President VP Admin. & Finance Cabinet	FY 2009
Evaluate and document the security controls within the College's financial system. Given the College's history of unqualified audits, this project could wait to begin in two to three years. Reviewing and documenting the security procedures within the Jenzabar Business Office will take approximately a year to complete.	Comptroller IT Director or Appropriate IT Staff	FY 2010
The College's grant writing and fund processing will become more systematic within the next five years. The Grant Writer will formalize the process by which faculty and staff participate in the grant-writing process. The College will evaluate improvements in this area by measuring increased funding through grants.	Grant Developer & Grant Accountant	FY 2008-2013
Implement alternative forms of communication to ensure that those unable to attend College Meetings receive this fiscal information consistently. New methods of communication will also allow timely announcements in between the monthly meetings. These changes should foster a sense of inclusive communication.	VP Admin & Finance IT Staff	FY 2009