FINANCIAL MANAGEMENT
This chapter reviews the financial operations of Austin Community College (ACC) in the following sections:
- A. Organization and Management
- B. Budgeting and Planning
- C. Tax Rate and Collections
- D. Internal and External Auditing
- E. Tuition and Fees
- F. Accounting Operations
As other public institutions, community colleges are being challenged to do more with less, manage change effectively and, at the same time, demonstrate accountability to a number of constituencies. In addition, community colleges are expected to meet the needs of diverse student populations while preparing them to successfully participate in an evolving, technologically sophisticated workforce. Whether working on a two-year degree in preparation for transfer to a four-year intuition, obtaining a certification in a particular area of study or sharpening skills for career advancement, students expect community colleges to serve these purposes and more.
BACKGROUND
Financial management is critical for community colleges. It involves budgeting and planning; accounting operations; such as accounts payable, payroll, grant accounting and student receivables; tax rate and collections; and internal and external auditing. Effective financial management enables a community college to plan for the future, meet its goals with limited resources and manage its commitments. Sound financial management also ensures a community college's monetary resources are properly recorded, controlled and safeguarded so that its mission can be efficiently achieved.
Many entities influence and set standards for how financial management is done in community colleges today. ACC must follow the financial accounting policies required by the Texas Higher Education Coordinating Board (THECB). These requirements substantially conform to the requirements of the Government Accounting Standards Board (GASB); the American Institute of Certified Public Accountants' (AICPA) Industry Guides for Colleges and Universities; AICPA's generally accepted accounting principles; and the National Association of College and University Business Officer's Financial Accounting and Reporting Manual for Higher Education.
A major change in financial reporting for colleges and universities took place in 1999 when GASB issued two important rulings. In June 1999, the GASB issued Statement No. 34, Basic Financial Statements-and Management's Discussion and Analysis-for State and Local Governments (GASB 34), which makes dramatic changes to the way state and local governments report their finances to the public. Originally, public colleges and universities were excluded from the scope of the statement. However, in November 1999, GASB issued Statement No. 35, Basic Financial Statements-and Management's Discussion and Analysis-for Public Colleges and Universities, which removed the exclusion and required public colleges and universities to follow the special-purpose government provisions of GASB 34. As special-purpose entities, most colleges and universities that charge tuition may elect to follow the requirements of GASB 34 related to special-purpose governments engaged in only business-type activities.
THECB requires colleges and universities to classify expenditures in the functional categories described in Exhibit 5-1. These categories make it possible to compare expenditures of all colleges and institutions of higher education in Texas.
Exhibit 5-1 Source: Texas Higher Education Coordinating Board (THECB) Annual Financial Reporting Requirements for Texas Public Community Colleges.
THECB Functional Category Descriptions
Category Description Instruction Includes expenditures for all activities related to an institution's instruction program. Includes expenditures for credit and non-credit courses, academic, vocational and technical instruction, for developmental and tutorial instruction, and for regular, special and extension sessions. Research Includes expenditures for research-related activities sponsored either internally or externally. Public services Includes the cost of activities designed primarily to serve the general public such as correspondence courses, adult study courses, public lectures, radio and television stations, workshops, demonstrations and similar activities. Academic support services Includes the cost to operate libraries, instructional administrative expense and faculty development leaves. Student services Includes cost to administer the activities such as admission and registration, student financial services and other activities for the benefit of students. Institutional support services Includes expenditures for central executive level management and long-range planning; fiscal operations; administrative data processing; space management; employee personnel and records; procurement; safety; printing and other services that support the institution. Operational and maintenance of plant Includes the cost for plant support services, building maintenance, custodial services, ground maintenance and utilities. Scholarships and fellowships Includes financial aid to students. Auxiliary enterprise expenditures Includes the operational cost of self-supporting activities for the benefit of students, faculty and staff such as on-campus bookstores and food services. ACC groups these accounts into funds. A fund is a self-balancing group of accounts established to provide separate accountability for assets, liabilities, fund balances, revenues and expenditures. Like most not-for-profit organizations, community colleges use fund accounting to enable them to comply with the legal and policy restrictions placed on their resources. Exhibit 5-2 provides fund descriptions.
Exhibit 5-2 Source: THECB-Annual Financial Reporting Requirements for Texas Public Community Colleges.
Fund Descriptions
Fund Group Description Current Funds Expendable for current operating purposes. They may be restricted or unrestricted and includes auxiliary enterprises. Loan Funds Available for loans to students, faculty and staff. Endowment Funds Funds for which a donor, external agency or governing board stipulates a particular use and for which only the income from investments may be spent unless stipulated otherwise by the donor, external agency or governing board. Annuity Funds Funds donated to an institution on condition that the institution pay a stipulated amount to the donor or designated individuals for a specified time or until the death of the annuitant. Plant Funds Funds for the construction, rehabilitation, acquisition, renewal and replacement of long-lived assets. Agency Funds Funds held as custodian or fiscal agent for others, for example student organizations, individual students or faculty members. ACC receives revenue from: state reimbursements, student tuition, local property taxes, grants and contracts. State revenues are allocated through a funding formula developed by THECB. The formula is based on a biennial cost study of all community colleges in the state. Each community college provides THECB the per-contact-hour cost of teaching and administering courses in specified academic and technical disciplines. The median cost for each discipline is then applied to the number of contact hours taught in each discipline during the "base year" immediately before the legislative session. Contact hours represent time spent with an instructor. The Legislature appropriates money directly to the community college - not to THECB - but THECB distributes the funds. Tuition and fees are collected from students at rates the board approves. Local property taxes are based on local property values and the community college district's tax rate. Contracts and grants are received from federal, state, local and private sources and are used for financial aid, student work-study programs, technology and other programs in keeping with the college's mission.
During fiscal 2001, ACC received 37 cents of every current fund dollar from state appropriations, 29 cents from tuition and fees, 17 cents from property taxes, 9 cents from contracts and grants and 8 cents from other sources. Instruction expenditures were 42 percent of total current fund expenditures during fiscal 2001, while expenditures for institutional support and student services were 22 and 9 percent, respectively. Exhibits 5-3 and 5-4 depict graphically where the money comes from and where it goes.
Exhibit 5-3 Source: ACC Audited Financial Statements, Fiscal 2001.
Where the Money Comes From-Fiscal 2001Exhibit 5-4 Source: ACC Audited Financial Statements, Fiscal 2001.
Where the Money Goes-Fiscal 2001Exhibit 5-5 provides an overview of ACC revenues and expenses for fiscal 1999 through 2001. It includes all fund groups as well as restricted and non-restricted funds.
Exhibit 5-5 Source: ACC Audited Financial Statements, Fiscal 1999 through 2001.
ACC Financial Overview-Fiscal 1999 through 2001
Description 1999 2000 2001 Revenue State Appropriations $41,678,680 $41,661,283 $44,375,340 Tuition and Fees $30,891,003 $32,022,102 $34,895,000 Property Taxes $15,255,032 $17,558,001 $20,314,271 Grants and Contracts $8,927,856 $11,415,413 $11,283,881 Other $6,562,832 $5,481,779 $8,325,154 Total Current Fund Revenues $103,315,403 $108,138,578 $119,193,646 Other Fund Revenues $13,076,092 $8,844,002 $12,215,884 Total Revenues $116,391,495 $116,982,580 $131,409,530 Expenditures Instruction $40,128,096 $46,847,188 $51,216,974 Public Service $1,815,523 $2,085,477 $3,689,151 Academic Support $10,821,705 $9,653,793 $8,463,409 Student Services $6,612,442 $7,172,222 $10,284,139 Institutional Support $18,554,827 $22,073,081 $26,731,607 Operation & Plant Maintenance $8,164,236 $7,041,228 $7,290,986 Scholarships & Fellowships $6,784,934 $8,375,897 $8,918,401 Auxiliary Enterprises $1,087,020 $1,237,656 $1,298,329 Other Expenditures $379,843 $426,411 $185,816 Total Current Fund Expenditures $94,348,626 $104,912,953 $118,078,812 Current Fund Transfers $7,932,207 $3,469,202 $3,911,576 Other Fund Expenditures-Net of Transfers $4,180,283 $6,682,231 $9,440,805 Total Expenditures $106,461,116 $115,064,386 $131,431,193 Changes in Fund Balance Net Increase (Decrease)-Current Funds $1,034,570 ($243,577) ($2,796,742) Net Increase (Decrease)-Other Funds $8,895,809 $2,161,771 $2,775,079 Net Increase (Decrease)-All Funds $9,930,379 $1,918,194 ($21,663) State appropriations account for 37 percent of ACC's revenue compared to the peer average of 35 percent. ACC obtains 29 percent of its revenue from tuition, which is higher than the peer average of 19 percent, reflecting ACC's high out-of-district tuition rates. Property taxes comprise 17 percent of ACC's revenues, compared to a 27 percent peer average, which reflects ACC's relatively low tax rate.
Academic support includes expenditures such as libraries, academic administration, computer and audio-visual resources and course and curriculum development that support the college in its primary mission - instruction, research and public service. Institutional support services include costs for central executive level management and long-range planning, fiscal operations, administrative data processing, space management, employee personnel and records, procurement, printing, transportation, community and alumni relations and other support costs.
ACC spent a lower percentage of its current expenditures on academic support and a higher percentage on institutional support during fiscal 2001 than its peers. On average, during fiscal 2001, ACC's peers spent 10 percent of current expenditures for academic support compared to 7 percent for ACC. Over the same period, the peers spent 15 percent of current expenditures for institutional support compared to 22 percent for ACC.
Business Services personnel said that over the past few years, the institutional support figure in the annual financial report has been overstated because employee benefits had not been allocated to other functions. If the allocations had been properly made, institutional support would represent 16 percent of total current fund expenditures instead of 22 percent, which is more comparable to the peer average of 15 percent.
Overall, ACC's total current expenditures of $4,282 per student are slightly higher than the peer average of $4,249 per student. Exhibit 5-6 compares ACC's financial statistics to those of its peers.
Exhibit 5-6 Source: ACC and Peer Audited Financial Statements, Fiscal 2001.
Revenue and Expenditure Components- Current Funds By Function
ACC and Peer Colleges-Fiscal 2001
Description North Harris
MontgomeryCollin
CountySan
JacintoPeer
AverageACC Revenue State Appropriations 35% 31% 37% 35% 37% Tuition and Fees 20% 16% 19% 19% 29% Property Taxes 22% 40% 22% 27% 17% Grants and Contracts 19% 4% 9% 12% 9% Other 4% 9% 13% 7% 8% Total Current Fund Revenues 100% 100% 100% 100% 100% Expenditures Instruction 44% 42% 35% 40% 43% Public Service 2% 1% 6% 3% 3% Academic Support 13% 11% 6% 10% 7% Student Services 9% 9% 8% 9% 9% Institutional Support 13% 15% 17% 15% 22% Operation & Plant Maintenance 7% 10% 9% 9% 6% Scholarships & Fellowships 9% 4% 8% 8% 8% Auxiliary Enterprises 3% 8% 11% 7% 2% Total Current Fund Expenditures 100% 100% 100% 100% 100% Enrollment-Fall 2001 29,503 14,239 22,747 22,163 27,577 Expenditures per Student $3,998 $4,107 $4,662 $4,249 $4,282 During fiscal 2001, ACC spent 62 percent of its current fund dollars for salaries and wages. By comparison, ACC's peer colleges spent 55 percent of their current fund dollars for salaries and wages. Other expenses comprised 26 percent of ACC's current fund expenditures, compared to an average of 34 percent for ACC's peers. Exhibit 5-7 presents a comparison of fiscal 2001 current fund expenditure for ACC and its peers.
Exhibit 5-7 Source: ACC and Peer Audited Financial Statements, Fiscal 2001.
Current Expenditure Components-By Object
ACC and Peer Colleges-Fiscal 2001
Description North Harris
MontgomeryCollin
CountySan
JacintoPeer
AverageACC Salaries & wages 55% 55% 50% 55% 62% Staff benefits 10% 8% 4% 8% 9% Other expenses 32% 35% 43% 34% 26% Capital outlay 3% 2% 3% 3% 3% Total 100% 100% 100% 100% 100%
