Standard 9: Financial Resources
Description
NMTC is financially stable as is demonstrated by the status of its financial resources from the system level, financial audits, its unrestricted fund balance and plant reserve fund. The college maintains a balanced budget, while relying on the philosophy of increasing cost efficiency within each department and maximizing investments made without disrupting the quality of students’ learning experiences. All or substantially all of the operating current fund revenue is devoted to the support of educational purposes and programs. The college has been successful in obtaining outside grants, bond referendum support and special project allocations. This has enabled the college to provide financial resources to meet educational objectives and to provide resources for institutional improvements. The college's strategic plan is used as a guide to allocate revenue and expenditures dedicated to fulfilling the mission and vision of this college. Final funding decisions rest with the president and management team.
The institution's positive fund balance and balanced budgets demonstrate the financial capability to graduate the entering class. Resources are allocated in a way that reflects its mission, vision and strategic plan. NMTC's stability and viability are not unduly dependent upon vulnerable financial resources or a historically narrow base of support. This is evidenced by the increased funding provided to the MTCS by the state legislature.
The budget is established and implemented after appropriate consultation with relevant constituencies in accord with a well established strategic planning process that provides for the appropriate integration of academic, student service, fiscal, development, and physical resource priorities to advance NMTC's educational objectives. The president and director of finance receive input from the area cost center managers who receive input from program departments, staff, maintenance, and/or administrators proposing funding levels for personnel services, general operating and equipment budgets. The president and director of finance regularly review budgets submitted by area supervisors to ensure that projected revenues and expenditures will result in a balanced budget. All fiscal policies, including those related to investments, insurance risk management, contracts and grants, fund-raising, and other institutional advancement and development activities, are published in the MTCS Accounting Principles Manual and the MTCS Policies and Procedures Manual. This is supplemented by the policies and procedures outlined in the NMTC Faculty and Staff Handbook. The annual budget reflects the college's benchmarks for capital expenditures and professional development.
NMTC ensures the integrity of its finances through prudent financial management and organization. The director of finance and NMTC president consistently monitor expenses, flag anomalies, seek explanations and make adjustments to ensure a balanced budget. NMTC has, and implements, a realistic plan for addressing issues raised by the existence of any operating deficit, with the first step being to foresee anything that may cause a deficit and to take corrective action to avoid it completely. There are appropriate control mechanisms established in each cost center in which the area supervisor and the director of finance have to approve any purchases made at the college. A follow-up procedure ensures the proper receipt of goods and that all assets are included in the inventory control system. All purchases to be made are first submitted via an internal purchase requisition to the area supervisor for initial approval. This is then submitted to the director of finance to ensure sufficient funds are available and, on approval, the internal requisition is forwarded to the purchasing area for action. Upon receipt, the orders are reviewed for accuracy and completeness and invoices forwarded to accounts payable. An annual physical inventory of all assets is taken at the end of each fiscal year, and the bookstore maintains a computerized perpetual inventory. The business office provides monthly variance reports to area supervisors.
The policy for fund-raising efforts is clearly stated in the Faculty & Staff Handbook, section 64203:00. The MTCS board of trustees is solely responsible for the receipt and acceptance of aid, money, or property to carry out the educational goals of the system. The focus of NMTC's fundraising efforts is in the form of direct grants for programs and donations of instructional equipment. The Northern Maine Technical Educational Foundation has procedures and guidelines in place and focuses primarily on financial assistance for students in the form of grants and scholarships, with only a small percentage (approximately four percent) used for administrative purposes. The foundation staff and faculty have utilized any gifts for the designated purpose. Its board of directors maintains the foundation’s financial statements.
The institution's budgets will be on display for the on-site visit to illustrate that resources are allocated to support the mission and vision of this institution. The annual budgets are submitted to the system office for integration into a composite MTCS budget, which is forwarded to the board of trustees for approval. All operations related to the institution's federal grant programs are included in the scope of the OMB Circular A-133 Audit.
NMTC has developed an appropriate fund balance by effectively managing its resources while continuing to achieve its purposes and objectives. The college has maintained ratios that are comparable to ratios provided by NACUBO, the auditing firms, and peer institution ratios. As of June 30, 2002, the current fund balance to total assets was 39.5 percent, and the current fund balance to total assets, including plant reserve, was 63.4 percent. These ratios provide a guideline for the allocation of the college's resources.
Should recommendations be included in the auditors’ annual management letter, the president and the director of finance respond to them. Necessary corrective action is immediately taken to eliminate the situation which caused the recommendation. The business office provides area managers with a monthly financial report. This report compares budget to actual expenditures. All material variances are analyzed and reviewed by the president and the director of finance. This enables the college to maintain a balanced budget and to deliver a quality education to its students.
Appraisal
The budgeting process and the control provided by financial policies and procedures of the MTCS and NMTC enable effective management of the college's resources to sustain the achievement of its educational objectives. The internal controls and systems of balances have provided ongoing financial stability. The college's fund balance and reserves have allowed the college to respond to financial emergencies or critical issues/needs that were not budgeted without financial harm to the college's educational programs.
The revenue from tuition and state appropriations has allowed the college to maintain a stable and viable status. With the existing fund balances and ongoing state revenues, the college maintains the financial capability to graduate each entering class.
The college has attained or exceeded the system benchmarks established for capital expenditures and professional development. Capital equipment expenditures have been maintained at a level that has typically provided reasonably up-to-date equipment for classroom and laboratory instruction. The target for capital equipment acquisition is set at five percent of the previous year’s actual equipment fixed asset value, one percent of the previous year’s actual current student revenues, and one percent of the previous year’s actual current personnel services expenditures. The budget process includes consultation with area managers who also obtain input from cost center managers to request financial resources adequate to achieve NMTC's educational objectives. The college's fiscal policies are clearly stated in writing and are consistently implemented in compliance with ethical and sound financial practices, as reflected in the MTCS Policies and Procedures Manual.
All of the equipment and vehicles at the college are coded for inventory control. The business office staff take an annual inventory of all the equipment and vehicles. Since implementation in 1999, the physical inventory has located all the fixed assets of the college, with minor exceptions.
The college has maintained the integrity of its finances by prudent financial management. It maintains a balanced operating budget. This budget process and control has provided management with timely financial information for decision making. Any financial variances have been reviewed and proper action taken to adjust or correct the variances.
Fund raising efforts continue to be a high priority endeavor. The November 1999 bond referendum provided the MTCS with $26.4 million in funds, with $3 million in funds earmarked for NMTC for library and information technology resource expansion. The MTCS was responsible for $7 million in matching funds. All appropriate donations are accepted by the MTCS board of trustees and are used to carry out the educational goals of the system.
NMTC allocates resources to support the mission and vision of the college. The college's audit reports for the past five years by PriceWaterhouseCoopers has given unqualified opinions that the financial statements are in accordance with generally accepted accounting principles and Government Auditing Standards issued by the Comptroller General of the United States. The Statement of Current Fund Revenues, Expenditures and Other Changes as reported by PriceWaterhouseCoopers reflect the relationship of financial revenue to educational activities. The financial aid funds are used in accordance with guidelines and regulations set forth under the scope of the OMB Circular A-133 audit guidelines. There have not been any findings pertaining to this audit in recent years. Fund ratios provided by NACUBO and PriceWaterhouseCoopers are used as a guideline in maintaining the fund balance to total asset ratio. These ratios are also used as a guide in allocating the college's resources. An internal student satisfaction survey given to NMTC students annually also indicates that the internal mechanisms NMTC uses are appropriate based on the positive results for the financial area of the college.
Projection
The college expects to remain financially stable by effectively managing its budget and expenditures and increasing the plant fund reserve, as savings are identified, for major college repairs and minimizing deferred maintenance.
The State of Maine has agreed to reimburse the MTCS for negotiated collective bargaining agreement incremental costs for FY03; NMTC's reimbursement is projected to be $179,000 for FY03.
NMTC’s goal will continue to be attainment of the benchmarks established system-wide for capital equipment acquisition and professional development. The system continues to pursue additional legislation that will enhance the services the system colleges can provide to students.
Through an upgrade of the payroll software a better array of payroll reports can be provided for the management of payroll budgets. Remaining minor problems related to the change are being addressed. Increased use of on-line purchasing of supplies has streamlined the process for ordering and receipt of those supplies. The on-line purchasing procedure is under the control of cost center managers, the director of finance, and purchasing personnel. The annual physical inventory of fixed assets will continue with any variances between book inventory and physical inventory researched and resolved. Approval of the final actual inventory rests with the director of finance. The perpetual inventory in the college bookstore will continue to be monitored and assessed internally, with an outside auditing firm validating accuracy of the inventory as part of the annual financial year-end audit.
The college, via the foundation, will continue to solicit donations from the community in support of fund raising efforts.
The fund balance developed over the last several fiscal years at NMTC remains financially sound with fund balance to total assets reflected at 39.5 percent, and fund balance plus reserve for renewal and replacement to total assets reflected at 63.4 percent. These financial ratios reflect the fiscal soundness of NMTC. Debt service (total bond debt) for the 1980 bond will be paid in full as of April 2005, with an annual interest payment of approximately $20,000. The college's financial reserve has developed a sufficient balance for possible infrastructure expenses, with these reserves maintained in the plant fund.
The college has the flexibility to increase its student fee structure, currently the lowest in the MTCS. If the management team decided to make any increase(s), they would be effective the next academic year (Fall 03 at the earliest).
A number of federally funded programs will continue to assist the college in meeting its services to students and associated costs. Federal funds are received to support the TRIO Student Support Services program, the evening childcare program, and the precision metals manufacturing program. These programs will continue through 2004 and 2005.
