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DESERT COMMUNITY COLLEGE DISTRICT

PALM DESERT, CALIFORNIA

COUNTY OF RIVERSIDE

INDEPENDENT AUDITORS’ REPORT,

FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

JUNE 30, 2010 AND 2009


AUDIT REPORT

TABLE OF CONTENTS

JUNE 30, 2010

Page

Independent Auditors’ Report 1-2 Management’s Discussion and Analysis 3-19 Basic Financial Statements Statements of Net Assets, June 30, 2010 and 2009 20 Statements of Revenues, Expenses and Changes in Net Assets, For the Years Ended June 30, 2010 and 2009 21 Statements of Cash Flows, For the Years Ended June 30, 2010 and 2009 22-23 Statements of Fiduciary Net Assets, June 30, 2010 and 2009 24 Statements of Changes in Fiduciary Net Assets, For the Years Ended June 30, 2010 and 2009 25 Notes to the Financial Statements 26-49 Required Supplementary Information Schedule of Other Postemployment Benefits (OPEB) Funding 50 Supplementary Information Independent Auditors’ Report on Supplementary Information 51 Combining Statement of Net Assets – District, June 30, 2010 52-53 Combining Statement of Net Assets – District, June 30, 2009 54-55 Combining Statement of Revenues, Expenses and Changes in Net Assets –

District, For the Year Ended June 30, 2010 56-57 Combining Statement of Revenues, Expenses and Changes in Net Assets –

District, For the Year Ended June 30, 2009 58-59


AUDIT REPORT

TABLE OF CONTENTS

JUNE 30, 2010 Page Combining Statement of Fiduciary Net Assets, June 30, 2010 60

Combining Statement of Fiduciary Net Assets, June 30, 2009 61 Combining Statement of Changes in Fiduciary Net Assets, For the Year

Ended June 30, 2010 62 Combining Statement of Changes in Fiduciary Net Assets, For the Year

Ended June 30, 2009 63

Board of Trustees and Organization 64 Notes to Supplementary Information 65 Schedule of Workload Measures for State General Apportionment 66 Reconciliation of Annual Financial and Budget Report (CCFS-311) With Audited Financial Statements 67 Independent Auditors’ Report on Compliance with Requirements Applicable to each Major Program and Internal Control over Compliance in Accordance with OMB Circular A-133 68-69 Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance and Other Matters based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 70-71 Independent Auditors’ Report on State Compliance Requirements 72-73 Independent Auditors’ Report on Schedule of Expenditures of Federal Awards and State Financial Assistance 74 Schedule of Expenditures of Federal Awards 75-76 Schedule of State Financial Assistance 77 Schedule of Findings and Questioned Costs 78-80 Status of Prior Year Findings and Questioned Costs 81

LUND & GUTTRY LLP / CERTIFIED PUBLIC ACCOUNTANTS

39700 BOB HOPE DRIVE • SUITE 309 • P.O. Box 250 • RANCHO MIRAGE, CA 92270-0250 Telephone (760) 568-2242 • Fax (760) 346-8891

www.lundandguttry.com

INDEPENDENT AUDITORS’ REPORT

Board of Trustees Desert Community College District Palm Desert, California We have audited the accompanying basic financial statements of Desert Community College District (the District) as of and for the years ended June 30, 2010 and 2009, listed in the foregoing Table of Contents. These basic financial statements are the responsibility of the District’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of the District as of June 30, 2010 and 2009, and the changes in financial position and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated December 9, 2010, on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in conjunction with this report in considering the result of our audit. The management’s discussion and analysis on pages 3 through 19 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it.

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Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s basic financial statements. The combining and individual nonmajor fund financial statements and statistical tables are presented for purposes of additional analysis and are not a required part of the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the basic financial statements of the District. The combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The statistical tables have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. December 9, 2010

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MANAGEMENT’S DISCUSSION AND ANALYSIS



FOR THE YEARS ENDED JUNE 30, 2010 AND 2009

INTRODUCTION The following discussion and analysis provides an overview of the financial position and activities of the Desert Community College District (the “District”) for the years ended June 30, 2010 and 2009. This discussion has been prepared by management and should be read in conjunction with the financial statements and notes thereto which follow this section. Desert Community College District is the preeminent educational, cultural, and economic development institution in the Coachella Valley. We offer programs of the highest quality for students who continue on with their higher education studies; programs of remediation and reentry; programs of exceptional depth in professional job training and workforce development; and community education programs of personal interest. Students in our District may complete the freshman and sophomore years of a baccalaureate degree and transfer to upper division study at a university or complete a certificated vocational program and move directly to the work force. Many of our students have already earned a college degree and attend classes to concentrate on job-related courses to update or enhance their expertise in specific fields. The District also serves students ranging from completion of a high school diploma and learning English to training for a specific vocation or maintaining their professional skills. The District also provides contract education services to many Coachella Valley business enterprises, tailoring these courses to the industry and its employees. FINANCIAL HIGHLIGHTS In June 1999, the Governmental Accounting Standard’s Board (GASB) released Statement No. 34: “Basic Financial Statements and Management Discussion and Analysis for State and Local Governments,” which established a new reporting format for annual financial statements. In November 1999, GASB released Statement No. 35, “Basic Financial Statements and Management’s Discussion and Analysis for Public Colleges and Universities,” which applied to public colleges and universities. Desert Community College District adopted the standards for the year ending June 30, 2003 as required by the standards. The California Community College Chancellor’s Office through its fiscal and accountability standards committee recommended that all state community college districts follow the standards under the Business Type Activity (BTA) model. To comply with the recommendations of the Chancellor’s Office and to report in a manner consistent with other community college districts, Desert Community College District (DCCD) adopted the BTA reporting model for these financial statements. The following discussion and analysis provides an overview of the District’s financial activities. Two years of information are presented in the audited financial statements and Management Discussion and Analysis section.

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FINANCIAL HIGHLIGHTS-continued The annual report consists of three basic financial statements that provide information on the District as a whole:

• The Statements of Net Assets • The Statements of Revenues, Expenses and Changes in Net Assets • The Statements of Cash Flows

STATEMENTS OF NET ASSETS The Statements of Net Assets present the assets, liabilities and net assets of the District as of the end of the fiscal year and are prepared using the accrual basis of accounting, which is similar to the accounting basis used by most private-sector organizations. The Statements of Net Assets are a point of time financial statement whose purpose is to present to the readers a way to measure the financial health of the District. The Statements of Net Assets present end-of-year data concerning assets (current and non-current), liabilities (current and non-current) and net assets (assets minus liabilities). From the data presented, readers of the Statements of Net Assets are able to determine the assets available to continue the operations of the District. Readers are also able to determine how much the District owes vendors and employees. Finally, the Statements of Net Assets provide a picture of the net assets and their availability for expenditure by the District. The difference between total assets and total liabilities (net assets) is one indicator of the current financial condition of the District; the change in net assets is an indicator of whether the overall financial condition has improved or declined during the year. Assets and liabilities are generally measured using current values. One notable exception is capital assets, which are stated at historical cost less an allocation for depreciation expense. The Net Assets are divided into three major categories. The first category, invested in capital assets, net of related debt, provides the net equity amount in property, plant and equipment owned by the District. The second category is expendable restricted net assets; these net assets are available for expenditure by the District, but must be spent for purposes as determined by external entities and/or donors that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets that are available to the District for any lawful purpose of the District. Although unrestricted, the District’s Governing Board may place internal restrictions on these net assets, but it retains the power to change, remove, or modify those restrictions.

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STATEMENTS OF NET ASSETS – continued

• Cash, cash equivalents and investments in Current Assets consist of cash in the County Treasury and in local banks of $59,446,073 as of June 30, 2010, compared to $54,260,675 as of June 30, 2009.

• Receivables consist mainly of state and federal grants, interest, lottery, taxes, deferred state

apportionment and redevelopment funds in which the District has earned funds that were not yet received as of June 30, 2010 amounting to $13,256,170 compared to $11,816,022 as of June 30, 2009.

• Noncurrent restricted cash, cash equivalents and investments consist of unspent general obligation bond proceeds for capital improvements and expansion of the District. Restricted cash, cash equivalents, and cash in the County Treasury as of June 30, 2010 amounted to $168,631,458 compared to $205,169,097 as of June 30, 2009. The fair market value of unspent general obligation bond proceeds in noncurrent restricted investments as of June 30, 2010 amounted to $61,014,758 compared to $53,826,752 as of June 30, 2009.

• Capital assets, net, are the net value of land, buildings, construction, machinery, equipment,

vehicles, and works of art, less accumulated depreciation. The breakdown of this total net value can be found in the notes to the financial statements. Net capital assets as of the end of the fiscal year 2009-10 amounted to $171,344,441 compared to $139,794,921 for the fiscal year ending 2008-09.

• Accounts payable and accrued liabilities consist of payables to vendors, accrued payroll and

benefits of $10,137,706 in 2009-10. The accounts payable and accrued liabilities for 2008-09 were $8,464,772.

• Deferred revenue relates to federal, state and local program funds received but not yet earned as of

the end of the fiscal year 2009-10 of $2,087,492 compared to $2,161,667 for the fiscal year ending 2008-09. Most grant funds are earned when spent, up to the award amount.

• Current and noncurrent liabilities also consist of compensated absences amounting to $795,960 for

2009-10 and $752,163 for 2008-09; capital leases of $17,910 for 2008-09, there were no capital leases for the fiscal year ending 2009-10; net other post-employment benefit obligation of $498,171 for 2009-10 compared to $317,606 in 2008-09 for the implementation of GASB 45.

• Bonds payable of $323,954,507 for the 2009-10 fiscal year and $325,869,507 for the 2008-09 fiscal year represent general obligation bonds issued under Proposition 39/Measure B for capital improvements and expansion of the District. These bonds are discussed in greater detail in the notes to the financial statements.

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STATEMENTS OF NET ASSETS – continued The District’s financial position during 2009-10 continued an increase in net assets. The assets improved due to a revised State Community College equalization bill, SB 361, and enrollment growth. The equalization funds addressed the imbalance in funding for each district in the State and were added to each college’s base revenue resulting in an enhanced funding per credit and non-credit FTES beginning in 2006-07. The State was unable to fund the 2% growth funds or a Cost-of-Living Adjustment for 2009-10. Despite the slumping housing market and decrease in assessed valuations in the Coachella Valley, decreases in property taxes due to foreclosures and reassessments, and only a slight population growth, net assets increased through proper management. The liabilities slightly decreased in the General Fund. Employee salaries did not increase due to furloughs, no COLA and limited step increases. There were budget savings of $1.3 million in all major categories due to prudent management oversight and proper accounting maintenance. Several positive aspects for the District during 2009-10 were: (1) revised base revenue due to the State Community College equalization bill; (2) Federal, State and local grants from hospitals, donors and workforce initiatives have greatly expanded funds for the District; (3) State funds for Basic Skills, Nursing, Economic Development and Student Services; and (4) Federal offset under the American Recovery and Reinvestment Act of 2009 (ARRA).

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STATEMENTS OF NET ASSETS - continued

Increase 2010 2009 (Decrease)

ASSETSCurrent Assets:

Cash and cash equivalents 59,446,073$ 54,260,675$ 5,185,398$ 9.56 %Accounts receivable, net 12,798,512 11,030,088 1,768,424 16.03 %Prepaid expenses 16,116 1,500 14,616 974.40 %

Total Current Assets 72,260,701 65,292,263 6,968,438 10.67 % Non-Current Assets:

Restricted cash and cash equivalents 168,631,458 205,169,097 (36,537,639) (17.81) %Restricted investments 61,014,758 53,826,752 7,188,006 13.35 %Restricted interest receivable 457,658 785,934 (328,276) (41.77) %Capital assets, net of accumulated depreciation 171,344,441 139,794,921 31,549,520 22.57 %

Total Non-Current Assets 401,448,315 399,576,704 1,871,611 0.47 %

TOTAL ASSETS 473,709,016$ 464,868,967$ 8,840,049$ 1.90 %

LIABILITIES AND NET ASSETSCurrent Liabilities:

Accounts payable 10,137,706$ 8,464,772$ 1,672,934$ 19.76 %Due to other funds 23,002 24,505 (1,503) (6.13) %Deferred revenue 2,087,492 2,161,667 (74,175) (3.43) %Compensated absences 795,960 752,163 43,797 5.82 %Capital leases - current portion - 17,910 (17,910) (100.00) %Bonds payable 1,564,848 1,915,000 (350,152) (18.28) %

Total Current Liabilities 14,609,008 13,336,017 1,272,991 9.55 %

Non-Current Liabilities:Net other postemployment benefit obligation 498,171 317,606 180,565 56.85 %Bonds payable 322,389,659 323,954,507 (1,564,848) (0.48) %

Total Non-Current Liabilities 322,887,830 324,272,113 (1,384,283) (0.43) %

TOTAL LIABILITIES 337,496,838 337,608,130 (111,292) (0.03) %

NET ASSETSInvested in capital assets, net of related debt 77,953,792 74,112,753 3,841,039 5.18 %Restricted for:

Capital projects 20,778,169 17,857,935 2,920,234 16.35 %Debt service 21,749,280 20,804,180 945,100 4.54 %Grants and contracts 13,635,110 12,162,860 1,472,250 12.10 %

Unrestricted 2,095,827 2,323,109 (227,282) (9.78) %

TOTAL NET ASSETS 136,212,178 127,260,837 8,951,341 7.03 %

TOTAL LIABILITIES AND NET ASSETS 473,709,016$ 464,868,967$ 8,840,049$ 1.90 %


MANAGEMENT'S DISCUSSION AND ANALYSIS

FOR THE YEARS ENDED JUNE 30, 2010 and 2009

PercentChange




STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS The Statements of Revenues, Expenses and Changes in Net Assets present the results of operation of the District. The purpose of the statements is to present the revenues received by the District, both operating and non-operating, and the expenses paid by the District, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the District. State general apportionment funds, while budgeted for operations, are considered non-operating revenues according to generally accepted accounting principles. Changes in total net assets on the Statements of Net Assets are based on the activity presented in the Statements of Revenues, and Changes in Net Assets. Generally speaking, operating revenues are received for providing goods and services to the various customers and constituencies of the District. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the District. Tuition and fees are generated by the resident, non-resident and foreign fees paid by students attending the District, including fees such as health fees, parking fees, and other student fees. Regular enrollment fees ($26 per unit) are established by the State for all community colleges. Regular enrollment fees are included in the calculation of general apportionment. Non-capital grants and contracts are primarily those received from federal and state sources and used in the instructional program. State apportionments, non-capital, consists of state apportionment and other apportionments which includes Basic Skills and General Purpose funding. State apportionment represents total general apportionment earned less regular enrollment fees, less property taxes. Local property taxes decreased due to the declining property values. As noted above, decreases or increases in property tax revenue affect the District’s State apportionment revenue. The housing market has continued to be slow in the Coachella Valley as well as in California with a larger inventory of homes than a year ago. Interest rates are still relatively low, thus encouraging some home sales, but the banking industry is not readily funding, thus cash sales are predominant. State taxes and other revenue consist primarily of State lottery revenue. Investment income is up due to an increased cash balance in both the General Fund and the Capital Outlay Fund with a slightly higher interest rate at the County Treasury and local banks. This is consistent with typical investments during this fiscal year. Capital apportionment and property taxes consist mainly of Series bond expenditures for architectural and engineering fees, construction of buildings and infrastructure.

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The following graphs reflect the sources and uses of the Unrestricted General Fund 11. UnrestrictedGeneral Fund 11 expenditures totaled $38,321,693.

STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - continued




Federal Revenues0.57%

Local Revenues65.37%

State Revenues34.06%

Sources of Funds of Unrestricted General Fund 11

Academic Salaries46.90%

Classified Salaries21.17%

Employee Benefits19.16%

Supplies0.94%

Operating Expenses11.44% Capital Outlay

0.39%

Uses of Funds of Unrestricted General Fund 11

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IncreaseOPERATING REVENUES 2010 2009 (Decrease)

Enrollment, tuition and other fees (gross) 7,031,216$ 6,126,842$ 904,374$ 14.76 %Less: Scholarship discounts and allowances (2,568,767) (1,664,230) (904,537) 54.35 %

Net enrollment, tuition and other fees 4,462,449 4,462,612 (163) (0.00) %Grants and contracts, non-capital 27,381,253 24,736,020 2,645,233 10.69 %

TOTAL OPERATING REVENUES 31,843,702 29,198,632 2,645,070 9.06 %

TOTAL OPERATING EXPENSES 69,240,599 61,962,889 7,277,710 11.75 %

OPERATING LOSS (37,396,897) (32,764,257) (4,632,640) 14.14 %

NON-OPERATING REVENUE (EXPENSES)State apportionments, non-capital 12,436,981 11,657,875 779,106 6.68 %Local property taxes 36,530,574 39,401,291 (2,870,717) (7.29) %State taxes and other revenues 1,691,676 1,557,219 134,457 8.63 %Other non-operating revenues 371,903 150,055 221,848 147.84 %Investment income, net 6,910,312 5,431,949 1,478,363 27.22 %Interest expense (11,385,208) (12,708,086) 1,322,878 (10.41) %

TOTAL NON-OPERATING REVENUES (EXPENSES) 46,556,238 45,490,303 1,065,935 2.34 %

OTHER REVENUES (EXPENSES), GAINS OR (LOSSES)State apportionments, capital 192,000 2,912,000 (2,720,000) (93.41) %Transfer to COD Foundation (400,000) (400,000) - - %

TOTAL OTHER REVENUES (EXPENSES), GAINS OR (LOSSES) (208,000) 2,512,000 (2,720,000) (108.28) %

INCREASE IN NET ASSETS 8,951,341 15,238,046 (6,286,705) (41.26) %

NET ASSETS, BEGINNING OF YEAR 127,260,837 112,022,791 15,238,046 13.60 %

NET ASSETS, END OF YEAR 136,212,178$ 127,260,837$ 8,951,341$ 7.03 %




Percent Change

STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - continued

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OPERATING EXPENSES (BY NATURAL CLASSIFICATION) - objectIncrease

2010 2009 (Decrease)Salaries 31,658,786$ 31,696,780$ (37,994)$ (0.12) %Employee benefits 9,468,759 7,880,472 1,588,287 20.15 %Supplies, materials, and other operating expenses 10,311,161 10,428,471 (117,310) (1.12) %Financial aid 11,397,102 7,583,472 3,813,630 50.29 %Utilities 1,737,364 1,750,769 (13,405) (0.77) %Depreciation 4,667,427 2,622,925 2,044,502 77.95 %

Total operating expenses 69,240,599$ 61,962,889$ 7,277,710$ 11.75 %

Salaries slightly decreased .12% due to furloughs, no COLA and limited step increases.

Employee benefits increased 20.15% due to escalating health insurance premiums and the Net OPEB obligation.

Supplies, materials, and other operating expenses and services decreased by 1.12% due to decreases in personnel contracts, printing, rents, and maintenance agreements.

Financial aid expenses increased 50.29% due to additional grant revenue used for expenses.

Utility costs decreased by .77% due to demand reduction efforts campus wide and energy management systems on all new construction.

Depreciation expense increased 77.95% due to new depreciation from finished bond constructionprojects.

PercentChange




Salaries46%

Employee Benefits14%

Supplies15%

Financial Aid16%

Utilities2%

Depreciation7%

Operating Expenses




STATEMENTS OF CASH FLOWS The Statements of Cash Flows provide information about cash receipts and cash payments during the fiscal year. These statements also help users assess the District’s ability to generate net cash flows, its ability to meet its obligations as they come due, and its need for external financing. The Statements of Cash Flows are divided into five parts. The first part reflects operating cash flows and shows the net cash provided by the operating activities of the District. The second part details cash received for non-capital financing purposes. The third part shows cash flows from capital and related financing activities. This part deals with the cash used for the acquisition and construction of capital and related items. The fourth part provides information from investing activities and the amount of interest received. The last section reconciles the net cash provided by operating activities to the operating loss reflected on the Statements of Revenues, Expenses and Changes in Net Assets.

IncreaseCash provided by (used in): 2010 2009 (Decrease) Operating activities (35,457,707)$ (32,051,930)$ (3,405,777)$ Non-capital financing activities 50,659,231 52,616,385 (1,957,154) Capital and related financing activities (46,651,162) (81,736,596) 35,085,434 Investing activities 97,397 (46,850,308) 46,947,705 Net increase (decrease) in cash and cash equivalents (31,352,241) (108,022,449) 76,670,208 Cash and cash equivalents – beginning of year 259,429,772 367,452,221 (108,022,449) Cash and cash equivalents – end of year 228,077,531$ 259,429,772$ (31,352,241)$ The primary cash receipts from operating activities consist of grants and contracts. The primary cash outlays include payment of wages, supplies and contracts. General apportionment is the primary source of non-capital financing. The two main components of general apportionment are state apportionment and property taxes. The main financing activities are purchases of capital assets (land, buildings and equipment). Cash from investing activities is interest on investments.

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ECONOMIC FACTORS THAT MAY AFFECT THE FUTURE Local Bond Measure and State Propositions

The Desert Community College District received overwhelming support from the community for the passage of Measure B, a $346.5 million general obligation bond issue on March 2, 2004. The term of the bonds will be from August 2004 to and including 2046. Also approved by the California voters were Proposition 55, a statewide school bond providing for construction matching funds and Propositions 57 and 58, giving the State funding flexibility as it searches for a long term solution to budget deficits that have plagued the State and its community colleges in recent years.

Prior to the bond election, a two-year planning process developed an educational and facilities master plan for the College from the collaboration of students, staff and community members. It was determined that there is a need for a complete overhaul of buildings and mechanical infrastructure on the 44 year old Palm Desert campus. The survey also showed a need for the construction of several new buildings to house a public safety academy and increased demand for instruction in various disciplines, including nursing, business, environmental science and technology, and advanced transportation divisions, together with a student learning commons that would consolidate various student programs and services. As a result of expanded job training and academic programs, College of the Desert will help to provide a better-educated workforce, which will benefit local business and stimulate our economy. The study also revealed an emerging need for a permanent off-campus satellite learning center in the rapidly-growing east valley. College of the Desert currently leases space in Indio for its Eastern Valley Center with more than 2,000 full and part-time students enrolled at this site. College of the Desert has a total enrollment of approximately 20,000 full and part-time students.

The site for the Eastern Valley Campus was announced by the Board of Trustees in Fall 2005 to accept a generous gift of approximately 100 acres near the city of Thermal. The property is located north of Avenue 62, south of Avenue 60, east of State Route 86 and west of Lincoln Street. The parcel was officially deeded to the District on October 16, 2007. The District opened temporary facilities for classes in Spring 2009 on the new site. Completion of the infrastructure is the critical component for building construction. The District and the City of Indio Redevelopment Agency have agreed to move forward on negotiating the building of a permanent site to house the Eastern Valley Center, now located in leased space in a county building in Indio. The new location is northeast of Oasis Street and Requa Avenue. A memorandum of understanding approved by the COD Board of Trustees sets the stage for construction of a 4,000 square foot, four-story building which would house the EVC operations on the top three floors. Retail and office space is envisioned on the ground floor to provide revenue generation for the District. It is proposed to transfer land title to the District for $1 and obligates Indio to upgrade existing infrastructure, demolish an existing old bus station and clear land. In exchange, COD will contribute $200,000 to the cost of demolition, which will be funded out of Measure B Bond proceeds. It is anticipated that the new facility will open for students in 2013-14.

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FOR THE YEARS ENDED JUNE 30, 2010 AND 2009 ECONOMIC FACTORS THAT MAY AFFECT THE FUTURE - continued Local Bond Measure and State Propositions – continued $40 million of bond proceeds will also provide for a new campus in the Western Valley in Palm Springs. In December 2010, the City of Palm Springs donated 119 acres in North Palm Springs to the District which it purchased for $2.1 million from the Bureau of Land Management. The new Green campus is expected to break ground on the northwest corner of Tramview Road and Indian Canyon in 2012. The campus will feature a 60-80 acre Green Park focusing on sustainable energy systems and facilities for green and clean technology research, development, training and education. The solar farm is expected to produce power sufficient enough for 2,800 homes and will be a self-sustaining facility. In addition, it is hoped that the campus will become the home of the future Coachella Valley iHub, a new State-funded program meant to be an incubator for creating green companies and jobs in the region. The District has identified other educational pillars that include hospitality and culinary arts, film, media and allied health. Classes are expected to begin in the Fall of 2014 contingent upon results of the environmental and due diligence studies currently being conducted. The first issuance for bond sales was for $65 million in August 2004 and refunded in June 2005 bringing the total to $73 million. In November 2007, the District issued General Obligation Bonds, Series 2007B, in the amount of $57,850,000. In December 2007, the District issued the final approved principle amount of General Obligation Bonds, Series 2007C, in the amount of $223,648,444. The District’s bond insured rating from Moody and S&P continued as AAA. These bonds will be used to fund the District’s Capital Improvement Plan, which includes acquisition, construction, modernization, renovation and equipping of certain District property and facilities, and to pay certain costs of issuance of said bonds. During 2010-11, the funds will accommodate planning, construction projects and continue the establishment of two satellite campuses as mentioned below:

• Continue construction of the new Classroom Building • Construction drawings to State approval for Communication Classroom Building • Planning phase for renovation of Administration and former Admissions Building • Continue planning phase for Eastern and Western Valley Campuses

An independent Citizens’ Oversight Committee will guarantee that all bond funds are spent exactly as promised to ensure taxpayer safeguards and confidence.

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FOR THE YEARS ENDED JUNE 30, 2010 AND 2009 ECONOMIC FACTORS THAT MAY AFFECT THE FUTURE - continued Accreditation and Educational Master Planning The District was visited by the Accrediting Commission in Spring 2008 to review student learning outcomes information for program improvement. A follow-up status report was due and accepted by the Commission in Spring 2009. Our next comprehensive evaluation will occur in March 2011.

The Strategic Education Master Planning Process Committee has been working for over a year to devise a long-term strategic process that will produce a usable Educational Master Plan. The process will begin with a comprehensive analysis of the internal and external factors affecting College of the Desert, a review of program evaluations, examination of the college mission, values, vision, and the production of a planning document. Within this process resides an annual prioritization and budgeting process. A 26-member committee, representative of all college constituencies, will produce the plan next year. In following years, the college community will execute the plan by implementing college goals and objectives and assessing progress in achieving them. It is expected that the new process will be approved by the Board of Trustees at the end of the 2010 academic year.

Enrollment Student enrollment for our District continued to increase this year, nearly 9% above District enrollment cap in the Fall 2010 semester, reflecting a trend seen at community colleges both state and nationwide as the economic slowdown drives people back to school to retool job skills or train for new careers. Restricted admissions at four-year colleges coupled with a 12% State unemployment rate have led to record numbers of students seeking degrees, certificates or job training. The 2% enrollment growth factor for 2010-11 is in the Governor’s budget for partial funding of our increased enrollment. New Scholarship/Grant for Students College Access Foundation and the Coachella Valley Economic Partnership, along with the College of the Desert Alumni Association and other local businesses, announced a new regional initiative to dramatically expand college access by providing scholarships to low and moderate income students. The National Science Foundation will provide $3,000-$4,000 annual scholarships to 30 District students each year for five years. The $584,000 grant will increase access to higher education for science, technology, engineering and math. The USDA has granted the District $290,000 in collaboration with the University of California, Riverside to encourage students to pursue education leading to careers in agricultural science.

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ECONOMIC FACTORS THAT MAY AFFECT THE FUTURE - continued State of California Budget The State budget shortfall is estimated between $19 and $23 billion dollars. The budget included spending cuts, creative accounting and deferring spring apportionment payments to July 2011. The budget repeals SB 400 CalPERS pension enhancement adopted in 1999, but only for State employees first hired after November 10, 2010. The budget plan for community colleges provides for additional funding, as follows:

• 2.21% enrollment growth • Backfill categorical cuts (replacing ARRA backfill) • Economic and Workforce Development program to “meet emerging workforce needs” • Career Technology programs

The Governor has proposed that the State take a percentage of redevelopment funds from cities across the state. Coachella Valley cities stand to lose at least $13 million in redevelopment funds. The impact on the District is affected by AB1290 which splits revenue from five cities by 47.5% to the General Fund for additional taxes and the remaining 52.5% to the Capital Outlay Fund. Additional cost savings for the State would be accomplished through the deferral of community college general apportionments from January 2011 to June 2011. DISTRICT 2010-11 BUDGET In planning the Desert Community College District budget for 2010-11, we must closely monitor the actions taken by the State Governor and Legislature while providing legislation advocacy for the support of community colleges. The District Budget Task Force will be discussing these issues throughout the year and will keep the college community apprised of major funding changes that may affect our District. Due to the prudent action in 2009-10 by District management, faculty and staff, limited expenditures in supplies, materials and travel, the beginning balance for 2010-11 $8,046,615 will allow for a 5% unrestricted general fund reserve together with an additional $704,294 toward future health insurance liabilities in 2010-11. The semi-restricted retiree health insurance fund was established in 2005-06 with funds from the General Fund toward the unfunded liabilities. Management intends to allocate annually toward continuing the funding of the reserve for retiree health insurance liabilities.

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DISTRICT 2010-11 BUDGET - continued Budget Approval Timeline

September -

March Budget Development by District Budget Task Force

March Budget Task Force review budget with College Planning Council May Study Session with Board of Trustees on Preliminary Budget June Board of Trustees adopts Tentative Budget July/August Revisions of Budget to reflect State funding changes (based on earlier developed priorities) September Study Session with Board of Trustees (if needed) September Board of Trustees adopts Final Budget DISTRICT’S FIDUCIARY RESPONSIBILITY The District is the trustee, or fiduciary, for certain amounts held on behalf of students, clubs and donors for student loans and scholarships. The District’s fiduciary activities are reported in separate Statements of Fiduciary Net Assets and Changes in Fiduciary Net Assets. These activities are excluded from the District’s financial statements because the District cannot use these assets to finance operations. The District is responsible for ensuring that the assets reported in these funds are used for their intended purposes.

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FOR THE YEARS ENDED JUNE 30, 2010 AND 2009 CAPITAL ASSETS As of June 30, 2010, the District had over $171.3 million invested in net capital assets. Total capital assets of approximately $200.8 million consist of land, buildings, construction in progress, site improvements, equipment and vehicles, and works of art. These assets have accumulated depreciation of approximately $29.4 million. Capital asset additions of approximately $36 million occurred during 2009-10 and depreciation expense of approximately $4.4 million was recorded for the year. Capital additions were primarily funded by bond proceeds and redevelopment for improvement of facility infrastructure. Note 5 to the financial statements provides additional information on capital assets. A summary of capital assets net of accumulated depreciation is presented below:

Increase Percent2010 2009 (Decrease) Change

Land 8,683,000$ 8,683,000$ -$ 0.00%

Buildings 68,260,482 56,285,639 11,974,843 21.28%

Construction in progress 50,820,329 35,099,392 15,720,937 44.79%

Site improvements 39,906,834 36,337,283 3,569,551 9.82%

Equipment & vehicles 3,149,796 3,045,607 104,189 3.42%

Works of art 524,000 344,000 180,000 52.33%

Net Capital Assets 171,344,441$ 139,794,921$ 31,549,520$ 22.57%

DEBT ADMINISTRATION At June 30, 2010, the District had $324 million in debt from general obligation bonds. The general obligation bonds were issued to fund renovation of the Palm Desert campus buildings and infrastructure, along with construction of twelve new buildings and a new permanent site for the Eastern and Western Valley satellite campuses. Debt payments on the bonds will be funded through property tax receipts collected over the term of the bonds.

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OTHER POSTEMPLOYMENT BENEFITS OBLIGATION (OPEB) In 2008-09, the District was required to implement GASB 45, which will accrue its liability for unfunded retiree health benefits (over the next 30 years). The District’s total liability is $4.5 million calculated in the last actuarial study dated April 4, 2008, for which the District has set aside $4.5 million in the Proprietary Fund. This amount is called the “actuarial accrued liability” (AAL). Currently, the District pays the retiree benefits from the Proprietary Fund (Internal Service Fund). In 2009-10, the General fund transferred funds of $537,606. In 2010-11, the General Fund budget will transfer $704,294. Combining the normal cost, the unfunded “actuarial accrued liability” amortization costs, and the yearly adjustments produced a total annual required contribution (ARC) of $555,546. The ARC is used in lieu of (rather than in addition to) the “pay-as-you-go” cost. At June 30, 2010, the net OPEB obligation was $498,171. Note 10 to the financial statements provides additional information on the other postemployment benefits obligation. A summary of the long-term debt is as follows:

2010 2009Long-term debt

Other postemployment benefit obligations 498,171$ 317,606$ Capital leases - 17,910 Bonds payable 323,954,507 325,869,507

Total long-term debt 324,452,678 326,205,023 Less current portion (1,564,848) (1,932,910) Long-term portion 322,887,830$ 324,272,113$

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BASIC FINANCIAL STATEMENTS

(The accompanying notes are an integral part of these financial statements)(20)

2010 2009ASSETSCurrent Assets:

Cash and cash equivalents 59,446,073$ 54,260,675$ Accounts receivable, net 12,798,512 11,030,088 Prepaid expenses 16,116 1,500

Total Current Assets 72,260,701 65,292,263

Non-Current Assets:Restricted cash and cash equivalents 168,631,458 205,169,097 Restricted investments 61,014,758 53,826,752 Restricted interest receivable 457,658 785,934 Capital assets, net of accumulated depreciation 171,344,441 139,794,921

Total Non-Current Assets 401,448,315 399,576,704

TOTAL ASSETS 473,709,016$ 464,868,967$

LIABILITIES AND NET ASSETSCurrent Liabilities:

Accounts payable 10,137,706$ 8,464,772$ Due to other funds 23,002 24,505 Deferred revenue 2,087,492 2,161,667 Compensated absences 795,960 752,163 Capital leases - current portion - 17,910 Bonds payable - current portion 1,564,848 1,915,000

Total Current Liabilities 14,609,008 13,336,017

Non-Current Liabilities:Net other postemployment benefit obligation 498,171 317,606 Bonds payable 322,389,659 323,954,507

Total Non-Current Liabilities 322,887,830 324,272,113

TOTAL LIABILITIES 337,496,838 337,608,130

NET ASSETSInvested in capital assets, net of related debt 77,953,792 74,112,753 Restricted for:

Capital projects 20,778,169 17,857,935 Debt service 21,749,280 20,804,180 Grants and contracts 13,635,110 12,162,860

Unrestricted 2,095,827 2,323,109

TOTAL NET ASSETS 136,212,178 127,260,837

TOTAL LIABILITIES AND NET ASSETS 473,709,016$ 464,868,967$


STATEMENTS OF NET ASSETS

JUNE 30, 2010 AND 2009


2010 2009OPERATING REVENUES

Enrollment, tuition and other fees (gross) 7,031,216$ 6,126,842$ Less: Scholarship discounts and allowances (2,568,767) (1,664,230)

Net enrollment, tuition and other fees 4,462,449 4,462,612 Grants and contracts, non-capital

Federal 13,484,202 7,923,611 State 4,989,669 6,709,520 Local 8,907,382 10,102,889

TOTAL OPERATING REVENUES 31,843,702 29,198,632

OPERATING EXPENSESSalaries 31,658,786 31,696,780 Employee benefits 9,468,759 7,880,472 Supplies, materials and other operating expenses and services 10,311,161 10,428,471 Financial aid 11,397,102 7,583,472 Utilities 1,737,364 1,750,769 Depreciation 4,667,427 2,622,925

TOTAL OPERATING EXPENSES 69,240,599 61,962,889

OPERATING LOSS (37,396,897) (32,764,257)

NON-OPERATING REVENUE (EXPENSES)State apportionments, non-capital 12,436,981 11,657,875 Local property taxes 36,530,574 39,401,291 State taxes and other revenues 1,691,676 1,557,219 Other non-operating revenues 371,903 150,055 Investment income, net 6,910,312 5,431,949 Interest expense (11,385,208) (12,708,086)

TOTAL NON-OPERATING REVENUES (EXPENSES) 46,556,238 45,490,303

OTHER REVENUES (EXPENSES), GAINS OR (LOSSES)State apportionments, capital 192,000 2,912,000 Transfer to COD Foundation (400,000) (400,000)

TOTAL OTHER REVENUES (EXPENSES), GAINS OR (LOSSES) (208,000) 2,512,000

INCREASE IN NET ASSETS 8,951,341 15,238,046 NET ASSETS, BEGINNING OF YEAR 127,260,837 112,022,791

NET ASSETS, END OF YEAR 136,212,178$ 127,260,837$



STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS


2010 2009CASH FLOWS FROM OPERATING ACTIVITIES

Tuition and fees 4,953,381$ 4,434,887$ Federal grants and contracts 12,725,402 7,535,210 State grants and contracts 1,585,537 7,856,807 Local grants and contracts 7,969,968 7,632,655 Payments to suppliers (10,391,710) (11,518,432) Payments to/on behalf of employees (40,903,183) (40,409,585) Payments to/on behalf of students (11,397,102) (7,583,472) Net cash used by operating activities (35,457,707) (32,051,930)

CASH FLOWS FROM NON-CAPITAL FINANCING ACTIVITIESState apportionments and receipts 14,128,657 13,215,094 Property taxes 36,530,574 39,401,291 Net cash provided by non-capital financing activities 50,659,231 52,616,385

CASH FLOWS FROM CAPITAL AND RELATEDFINANCING ACTIVITIESState apportionment for capital purposes 2,912,000 - Purchase of capital assets (36,216,947) (56,499,463) Transfer to COD Foundation (400,000) - Donations of capital assets 371,903 150,055 Principal paid on capital debt (1,932,910) (12,679,102) Interest paid on capital debt (11,385,208) (12,708,086) Net cash used by capital and related financing activities (46,651,162) (81,736,596)

CASH FLOWS FROM INVESTING ACTIVITIESInvestment income 3,383,607 6,976,444 Purchase of investments (3,286,210) (53,826,752) Net cash provided (used) by investing activities 97,397 (46,850,308)

NET DECREASE IN CASH AND CASH EQUIVALENTS (31,352,241) (108,022,449) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 259,429,772 367,452,221

CASH AND CASH EQUIVALENTS, END OF YEAR 228,077,531$ 259,429,772$


STATEMENTS OF CASH FLOWS



Reconciliation of Operating Loss to Net Cash Used by Operating Activities

2010 2009CASH USED BY OPERATING ACTIVITIES

Operating loss (37,396,897)$ (32,764,257)$ Adjustments to reconcile net loss to net cash

used by operating activities:Depreciation expense 4,667,427 2,622,925 Changes in assets and liabilities:

Receivables, net (4,535,239) (1,948,525) Prepaid expenses (14,616) 9,150 Accounts payable and other liabilities 1,895,793 (180,675) Deferred revenue (74,175) (90,548)

Net cash used by operating activities (35,457,707)$ (32,351,930)$

OTHERCash and cash equivalents on the Statements of Net Assets consists of the following:

2010 2009

Cash and cash equivalents 59,446,073$ 54,260,675$ Restricted cash and cash equivalents 168,631,458 205,169,097

228,077,531$ 259,429,772$


STATEMENTS OF CASH FLOWS



ASSETS 2010 2009

Cash and cash equivalents 250,754$ 198,207$ Accounts receivable, net 115 3,858 Due from other funds 23,002 24,505 Prepaid expenses - 1,760

TOTAL ASSETS 273,871$ 228,330$

LIABILITIES

Accounts payable 24,610$ 2,121$ Deferred income 15,331 16,701

TOTAL LIABILITIES 39,941 18,822

NET ASSETS

Undesignated 233,930 209,508

TOTAL NET ASSETS 233,930 209,508

TOTAL LIABILITIES AND NET ASSETS 273,871$ 228,330$

JUNE 30, 2010 AND 2009

STATEMENTS OF FIDUCIARY NET ASSETS



2010 2009

ADDITIONSOther local revenues 216,231$ 232,926$

DEDUCTIONSSalaries 17,367 17,734 Employee benefits 1,932 3,005 Supplies and materials and other

operating expenses and services 172,510 172,632

TOTAL DEDUCTIONS 191,809 193,371

INCREASE IN NET ASSETS 24,422 39,555

NET ASSETS, BEGINNING OF YEAR 209,508 169,953

NET ASSETS, END OF YEAR 233,930$ 209,508$


STATEMENTS OF CHANGES IN FIDUCIARY NET ASSETS



NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2010 AND 2009

1) ORGANIZATION AND NATURE OF ACTIVITIES Reporting Entity

The Desert Community College District was formed in 1958 to provide access to higher education in the Coachella Valley. The District includes all funds, account groups, and other entities that are controlled by or dependent on the District’s governing board for financial reporting purposes. The District has considered all potential component units in determining how to define the reporting entity using criteria set forth in generally accepted accounting principles. The decision to not include potential component units in the reporting entity was made by applying the criteria set forth in generally accepted accounting principles (GAAP) and GASB No. 14. The basic, but not the only, criterion for including a potential component unit within the reporting entity is the Board of Trustee’s ability to exercise absolute responsibility. A second criterion used in evaluating potential component units is the scope of public service. A third criterion is the existence of special financing relationships, regardless of whether the District is able to exercise oversight responsibilities. Based upon the application of the criteria listed above, the following potential component units have been excluded from the District’s reporting entity: College of the Desert Foundation – The Foundation is a separate not-for-profit corporation.

The Board of Directors is elected by their own Board and independent of any District Board of Trustees appointments. The Board is responsible for approving its own audit and accounting and finance related activities.

College of the Desert Alumni Association – The Association is a separate not-for-profit

corporation. The Board of Directors is elected by their own Board and independent of any District Board of Trustees appointments. The Board is responsible for approving its own audit and accounting and finance related activities.

Desert Community College District Auxiliary Services – The Auxiliary is a separate not-

for-profit corporation. The Board of Directors is elected by their own Board and independent of any District Board of Trustees appointments. The Board is responsible for approving its own audit and accounting and finance related activities.

Separate financial statements for the above organizations can be obtained through the District.

2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements have been prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB), and other authoritative sources identified in the Statements of Auditing Standards No. 69 of the American Institute of Certified Public Accountants and the requirements of contracts and grants of agencies from which it receives funds.

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JUNE 30, 2010 AND 2009

2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Basis of Accounting The accounting policies and procedures used by the District are those recommended in the “Budget and Accounting Manual for California Colleges”. To ensure compliance with the California Education Code, the financial resources of the District are divided into separate funds for which separate accounts are maintained for recording cash, other resources and all related liabilities, obligations and equities. For financial reporting purposes, the District is considered a special-purpose government engaged in business-type activities. Accordingly, the District’s basic financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-agency transactions have been eliminated. Exceptions to the accrual basis of accounting are as follows:

Summer and Fall session tuition and fees received before year-end are recorded as deferred revenue as of June 30 with the revenue being reported in the fiscal year in which the program is predominantly conducted. Summer session expenditures through June 30 are recorded as prepaid expenditures.

The Board of Trustees adopts an operating budget no later than July 1 in accordance with State law. This budget is revised by the Board of Trustees during the year to give consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the time of budget adoption. The District employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major object account. In accordance with GASB Statement No. 20, the District follows all GASB statements issued prior to November 30, 1989 until subsequently amended, superseded or rescinded. The District has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989 unless FASB conflicts with GASB. The District has elected to not apply FASB pronouncements issued after the applicable date. Cash and Cash Equivalents The District’s cash and cash equivalents are considered to be cash in hand, demand deposits, certificates of deposit, and short-term investments with original maturities of one year or less. The District reports amounts invested in the County Treasury as cash equivalents.

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JUNE 30, 2010 AND 2009

2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued Investments In accordance with GASB Statement No. 31, Accounting and Reporting for Certain Investments and for External Investment Pools, investments are stated at fair value. Fair value is estimated based on published market prices at year-end.

Accounts Receivable Accounts receivable consist primarily of accounts due from the Federal government, State and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the District’s grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. Prepaid Expenses Prepaid expenses represent payments made to vendors and others for services that will benefit periods beyond June 30. Restricted Cash and Cash Equivalents, Interest Receivable and Investments Cash and cash equivalents, interest receivable and investments that are restricted by contractual obligation or to purchase/construct capital or other noncurrent assets are classified as restricted assets in the Statement of Net Assets. Capital Assets Capital assets are recorded at cost at the date of acquisition. Donated capital assets are recorded at their estimated fair value at the date of donation. For equipment, the District’s capitalization policy includes all items with a unit cost of $5,000 or more and an estimated useful life of greater than one year. Buildings as well as renovations to buildings, infrastructure, and land improvements that significantly increase the value or extend the useful life of the structure are capitalized. The cost of normal maintenance and repairs that does not add to the value of the asset or materially extend the asset’s life is recorded in operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 50 years for buildings and land improvements, 10 years for equipment and vehicles, and 3 years for technology. Works of art are considered inexhaustible and are not depreciated.

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JUNE 30, 2010 AND 2009

2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued Compensated Absences Compensated absence costs are accrued when earned by employees. In accordance with GASB No. 16, accumulated unpaid employee vacation benefits are recognized as liabilities of the District. Accumulated employee sick leave benefits are not recognized as liabilities of the District. The District’s policy is to record sick leave as an operating expense in the period taken since such benefits do not vest nor is payment probable; however, unused sick leave is added to the creditable service period for calculation of retirement benefits for eligible employees when they retire.

Net Assets

Invested in capital assets, net of related debt: This represents the District’s total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt.

Restricted net assets – expendable: Restricted expendable net assets include resources in which the District is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

Unrestricted net assets: Unrestricted net assets represent resources available to be used for

transactions relating to the general operations of the District, and may be used at the discretion of the governing board, as designated, to meet current expenses for specific purposes.

State Apportionments Certain current year apportionments from the State are based upon various financial and statistical

information of the previous year.

Any prior year corrections due to the recalculation of the apportionment are made in February of the subsequent year and will be recorded in the year computed by the State. Property Taxes

The property tax levy and due date is November 1. The tax lien date is March 1 and the tax collection dates are April 10 and December 10 of each year.

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JUNE 30, 2010 AND 2009

2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued On-Behalf Payments

GASB Statement No. 24 requires that direct on-behalf payments for fringe benefits and salaries made by one entity to a third party recipient for the employees of another, legally separate entity be recognized as revenue and expenditures by the employer government. The State of California makes direct on-behalf payments for retirement benefits to the State Teachers Retirement System on behalf of all Community College and school districts in California. However, a fiscal advisory was issued by the California Department of Education instructing districts not to record revenue and expenditures for these on-behalf payments. Unapportioned Taxes and Deferred Revenue Unapportioned taxes not distributed to the District within 60 days after year end are recognized as income in the fiscal year in which they are received. However, a corresponding reduction in State revenue and the related deferred revenue is also recorded in order to properly reflect the District’s annual base revenue. Classification of Revenues The District has classified its revenues as either operating or nonoperating revenues according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as student fees, net of scholarship discounts and allowances, and Federal and most State and local grants and contracts. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as State apportionments, taxes, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities that use Proprietary Fund Accounting, and GASB No. 33, such as investment income.

Scholarship Discounts and Allowances Student tuition and fee revenues, and certain other revenues from students, are reported net of scholarship discounts and allowances in the statement of revenues, expenses, and changes in net assets. Scholarship discounts and allowances are the difference between the stated charge for goods and services provided by the District and the amount that is paid by students and/or third parties making payments on the students’ behalf. Certain governmental grants, such as Pell grants, and other Federal, State or nongovernmental programs, are recorded as operating revenues in the District’s financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the District has recorded a scholarship discount and allowance.

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JUNE 30, 2010 AND 2009

2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – continued Use of Estimates Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the 2009 amounts in order to conform to the 2010 presentation.

3) CASH AND INVESTMENTS Cash, cash equivalents, and investments as of June 30, 2010 and 2009 are classified in the

accompanying financial statements as follows:

District Fiduciary District Fiduciary

Statement of net assetsCash and investments 59,446,073$ 250,754$ 54,260,675$ 198,207$ Restricted cash and investments 229,646,216 - 258,995,849 -

Total cash, cash equivalents and investments 289,092,289$ 250,754$ 313,256,524$ 198,207$

2010 2009

Cash, cash equivalents, and investments as of June 30, 2010 and 2009 consist of the following:

District Fiduciary District FiduciaryCash equivalents in the County Treasury 227,970,865$ 45,350$ 255,944,491$ 30,688$ Cash in bank 106,666 145,166 3,485,281 107,830 Certificates of deposit - 60,238 - 59,689 Investments 61,014,758 - 53,826,752 -

Total cash, cash equivalents and investments 289,092,289$ 250,754$ 313,256,524$ 198,207$

2010 2009

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JUNE 30, 2010 AND 2009 3) CASH AND INVESTMENTS - continued Policies and Practices

Under provision of the District’s investment policy, and in accordance with Section 53601 and 53602 of the California Government Code, the District may invest in the following types of investments: The District is authorized under California Government Code to make direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements; medium-term corporate notes; shares of beneficial interest issued by diversified management companies, certificates of participation, obligations with first priority security; and collateralized mortgage obligations.

General Authorizations

The table below identifies the investment types authorized for the District by the California Government Code. The table also identifies certain provisions of the California Government Code that address interest rate risk, credit risk, and concentration of credit risk.

Maximum Maximum MaximumAuthorized Remaining Percentage Investment

Investment Type Maturity of Portfolio in One Issuer

Local Agency Bonds, Notes, Warrants 5 years None NoneRegistered State Bonds, Notes, Warrants 5 years None NoneU.S. Treasury Obligations 5 years None NoneU.S. Agency Securities 5 years None NoneBankers Acceptances 180 days 40% 30%Commercial Paper 270 days 25% 10%Negotiable Certificates of Deposit 5 years 30% NoneRepurchase Agreements 1 year None NoneReverse Repurchase Agreements 92 days 20% of base NoneMedium-Term Corporate Notes 5 years 30% NoneMutual Funds N/A 20% 10%Money Market Mutual Funds N/A 20% 10%Mortgage Pass-Through Securities 5 years 20% NoneCounty Pooled Investment Funds N/A None NoneLocal Agency Investment Fund (LAIF) N/A None NoneJoint Powers Authority Pools N/A None None

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JUNE 30, 2010 AND 2009

3) CASH AND INVESTMENTS – continued Cash in the County Treasury

A significant portion of the District’s cash balances of most funds is deposited with the Riverside County Treasurer for the purpose of increasing interest earnings through County investment activities. The District is considered to be an involuntary participant in an external investment pool as the District is required to deposit all receipts and collections of monies with their County Treasurer (Education Code Section 41001). The District reports amounts involuntarily invested in the County Treasury as cash equivalents as they function as a demand deposit account for the District and can be withdrawn from the pool without notice or penalty. The County is restricted by Government Code §53635 pursuant to §53601 to invest in direct investments in local agency bonds, notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes; securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements; medium term corporate notes; shares of beneficial interest issued by diversified management companies, certificates of participation, obligations with first priority security; and collateralized mortgage obligations. The fair value of the District's investment in the pool is reported in the accompanying financial statements at amounts based upon the District's pro-rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis.

Investments Authorized by Debt Agreements Investment of debt proceeds are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the District’s investment policy. Provisions of the General Obligation Bond, Series 2007 B, provide that moneys will be invested at the written direction of the District, after consultation with the County, in: (i) Non-AMT Bonds (as defined in the Resolutions), (ii) Qualified Non-AMT Mutual Funds (as defined in the Resolutions); or (iii) State and Local Government Securities; provided, however, that each of (i), (ii), and (iii) shall have been issued by a local agency of the State or issued by the State or an agency thereof. If the District fails to direct the County, the County may invest the moneys in: (1) Non-AMT Bonds of a local agency of the State or issued by the State or an agency thereof, (2) Permitted Investments (as defined below) of proceeds of the Bonds, and interest earned on such proceeds, held not more than thirty days pending reinvestment or redemption of the Bonds, and (3) other investments authorized by the Insurer and subject to an opinion of Bond Counsel to the effect that such investment would not adversely affect the tax-exempt status of the Bonds.

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JUNE 30, 2010 AND 2009

3) CASH AND INVESTMENTS - continued Investments Authorized by Debt Agreements - continued Other “Permitted Investments” include: (a) investments in the Riverside County Pooled Investment Fund (Cash in the County Treasury), (b) lawful investments permitted by Sections 16429.1 and 53601 of the Government Code; (c) shares in a California common law trust established pursuant to Title 1, Division 7, Chapter 5 of the Government Code, (d) a guaranteed investment contract with a provider rated in at least the second highest category by each rating agency rating the Bonds and approved by the Insurer; (e) the Local Agency Investment Fund of the California State Treasurer.

Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to change in conjunction with market interest rates. The District manages its exposure to interest rate risk primarily by investing in the County Treasury Pool. A portion of debt proceeds is invested in a portfolio that is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity as needed for capital asset operations. Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuation is provided by the following schedule that shows the distribution of the District's investments by maturity at June 30, 2010 and 2009:

Fair Market Maturity Fair Market MaturityType Value Date* Value Date*

County Treasury pool 227,970,865$ 1.02 45,350$ 1.02Municipal bonds 61,014,758 3.81 - Total 288,985,623$ 45,350$

Fair Market Maturity Fair Market MaturityType Value Date* Value Date*

County Treasury pool 255,944,491$ 1.06 30,688$ 1.06Municipal bonds 53,826,752 4.86 - Total 309,771,243$ 30,688$

* Weighted average maturity in years

FiduciaryDistrict2010

2009District Fiduciary

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JUNE 30, 2010 AND 2009 3) CASH AND INVESTMENTS - continued

Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The following provides the District’s investment credit risk at June 30, 2010 and 2009:

MinimumFair Market Legal Moody's Moody's Moody's S & P

Type Value Rating Aaa Aa2 As3 AAA

County Treasury pool 227,970,865$ Not required 227,970,865$ -$ -$ -$ Municipal bonds 61,014,758 Moody's A- 13,091,362 22,823,425 23,259,232 1,840,739

Total 288,985,623$ 241,062,227$ 22,823,425$ 23,259,232$ 1,840,739$

County Treasury pool 45,350$ Not required 45,350$ -$ -$ -$

Total 45,350$ 45,350$ -$ -$ -$

MinimumFair Market Legal Moody's Moody's Moody's S & P

Type Value Rating Aaa Aa2 As3 AAA

County Treasury pool 255,944,491$ Not required 255,944,492$ -$ -$ -$ Municipal bonds 53,826,752 Moody's A- 12,258,336 21,083,318 18,734,400 1,750,698 Total 309,771,243$ 268,202,828$ 21,083,318$ 18,734,400$ 1,750,698$

County Treasury pool 30,688$ Not required 30,688$ -$ -$ -$ Total 30,688$ 30,688$ -$ -$ -$

Fiduciary

District

Fiduciary

2010

2009

District

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JUNE 30, 2010 AND 2009

3) CASH AND INVESTMENTS - continued Custodial Credit Risk - Deposits This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. California Government Code requires California banks and savings and loan associations to secure the District’s deposits by pledging government securities as collateral. The market value of pledged securities must equal 110 percent of an agency’s deposits. California law also allows financial institutions to secure an agency’s deposits by pledging first trust deed mortgage notes having a value of 150 percent of an agency’s total deposits and collateral is considered to be held in the name of the District. As of June 30, 2010, all of the District’s cash held by financial institutions was entirely insured or collateralized. Custodial Credit Risk - Investments This is the risk that, in the event of the failure of the counterparty, the District will not be able to recover the value of its investments or collateral securities that are in possession of an outside party. As of June 30, 2010, all of the District’s municipal bonds held by a financial institution’s trust department were insured and held in the name of the District. The cash held in the County Treasury is uncategorized and the fair value approximates the carrying value shown in the credit risk schedule. Deposits with the County Treasury are not categories because they do not represent securities which exist in physical or book entry form. The deposits with the County Treasury are valued using the amortized cost method (which approximates fair value). The fair values are provided by the County Treasurer. As of June 30, 2010 and 2009, $227,970,865 and $255,944,491, respectively, of District funds and $45,350 and $30,688, respectively, of Fiduciary funds were invested in the Riverside County Treasurer’s Pooled Investment Fund. The Pooled Investment fund is currently rated Aaa by Moody’s Investor Services.

4) ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30:

District FiduciaryFederal 1,365,095$ -$ State 4,074,761 - Other 7,358,656 115 Total accounts receivable 12,798,512$ 115$

District FiduciaryFederal 596,650$ -$ State 3,948,977 - Other 6,484,461 3,858 Total accounts receivable 11,030,088$ 3,858$

2010

2009

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JUNE 30, 2010 AND 2009

5) CAPITAL ASSETS The following provides a summary of changes in capital assets, for the District only, for the years ended June 30, 2010 and 2009:

Balance Net Change in Balance Net Change in BalanceJune 30, 2008 Capital Assets June 30, 2009 Capital Assets June 30, 2010

Capital AssetsLand 8,683,000$ -$ 8,683,000$ -$ 8,683,000$ Buildings 45,507,341 29,020,985 74,528,326 13,993,174 88,521,500 Construction in progress 38,489,501 (3,390,109) 35,099,392 15,720,937 50,820,329 Site and site improvements 10,567,661 29,619,966 40,187,627 5,717,965 45,905,592 Equipment & vehicles 4,801,539 1,146,063 5,947,602 376,449 6,324,051 Works of art 344,000 - 344,000 180,000 524,000 Total cost 108,393,042$ 56,396,905$ 164,789,947$ 35,988,525$ 200,778,472$

Net change in Net Change in Balance Accumulated Balance Accumulated Balance

June 30, 2008 Depreciation June 30, 2009 Depreciation June 30, 2010

Accumulated DepreciationBuildings 16,865,127 1,377,560 18,242,687 2,018,331 20,261,018 Site and site improvements 3,119,833 730,511 3,850,344 2,148,414 5,998,758 Equipment & vehicles 2,489,699 412,296 2,901,995 272,260 3,174,255 Total accumulated depreciation 22,474,659 2,520,367 24,995,026 4,439,005 29,434,031 Net capital assets 85,918,383$ 53,876,538$ 139,794,921$ 31,549,520$ 171,344,441$

6) OPERATING LEASES

The District has entered into various capital and non-cancelable operating leases for land, buildings, and equipment with lease terms in excess of one year. Future minimum lease payments under these agreements are as follows:

Year Minimum LeaseEnding June 30, Payments

2011 395,843$ 2012 350,702 2013 310,321 2014 109,518 2015 3,884

1,170,268$ Total Minimum Lease Payments

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JUNE 30, 2010 AND 2009

7) BONDED DEBT

On March 2, 2004, $346.5 million in general obligation bonds were authorized by an election held within the District under Proposition 39/Measure B. These bonds are issued in multiple series as general obligations of the District. The following information is provided for purposes of additional analysis only.

In August 2004, Series 2004 A (the Series 2004 A Bonds) general obligation bonds in the amount of $65,000,000 were sold at a premium. The proceeds from the sale of the bonds will generally be used to finance the construction, acquisition, furnishing and equipping of District facilities. Bond issuance costs of $1,013,971.48 were incurred in connection with the issuance of the Series 2004 A general obligation bonds.

In June 2005, a portion of the above bonds were refinanced through the issue of 2005 General Obligation Refunding Bonds (the “Refunding Bonds”). These bonds in the amount of $55,771,886.25 were also sold at a premium (total proceeds of $63,734,231.05). A portion of the bond proceeds ($7,848,411.73) was deposited into the District’s Bond Fund to be used for the District’s project list. The rest of the proceeds ($55,885,819.32) were deposited into an escrow account to (1) advance refund and defease the bonds maturing on and after August 1, 2015 of the District’s outstanding Election of 2004 General Obligation Bonds, Series 2004 A (the “Refunded Bonds”), (2) pay the debt service on the Refunded Bonds, including principal, due on and prior to August 1, 2014 and (3) pay all legal, financial and contingent costs in connection with the issuance of the Bonds. Bond issuance costs of $770,375.09 were incurred in connection with the issuance of the Refunding Bonds. In November 2007, Series 2007 B (the Series 2007 B Bonds) general obligation bonds in the amount of $57,850,000 were sold at a premium. The proceeds from the sale of the bonds will generally be used to finance the construction, acquisition, furnishing and equipping of District facilities. Bond issuance costs of $722,019.73 were incurred in connection with the issuance of the Series 2007 B general obligation bonds. In December 2007, Series 2007 C (the Series 2007 C Bonds) general obligation bonds in the amount of $223,648,443.95 were sold at a premium. The proceeds from the sale of the bonds will generally be used to finance the construction, acquisition, furnishing and equipping of District facilities. Bond issuance costs of $3,731,929.63 were incurred in connection with the issuance of the Series 2007 C general obligation bonds.

The bond proceeds may not be used for District employees’ salaries or other administration costs. In November 2004 the Attorney General of California issued an opinion stating that districts may use Proposition 39 bond proceeds to pay the salaries of district employees to the extent they perform administrative oversight work on construction projects authorized by a voter approved bond measure. The District did not spend any bond proceeds on salaries of District employees for the year ended June 30, 2010 and 2009.

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JUNE 30, 2010 AND 2009

7) BONDED DEBT – continued The following is a summary of the sources and uses of each bond series:

Proposition 39 2005 GeneralMeasure B Obligation

Principal Amount Refunding Original issue Total sources Series of bonds Bonds premium of funds 2004 A 65,000,000.00$ -$ 1,288,727.55$ 66,288,727.55$

2005 Refunding - 55,771,886.25 7,962,344.80 63,734,231.05 2007 B 57,850,000.00 - 2,577,655.40 60,427,655.40 2007 C 223,648,443.95 - 4,966,797.90 228,615,241.85

Total 346,498,443.95$ 55,771,886.25$ 16,795,525.65$ 419,065,855.85$

Series Building fund Escrow fund Debt service fund Costs of issuance Total use of funds2004 65,000,000.00$ -$ 274,756.07$ 1,013,971.48$ 66,288,727.55$

2005 Refunding 7,848,411.73 55,115,444.23 - 770,375.09 63,734,231.05 2007 B 57,850,000.00 - 1,855,635.67 722,019.73 60,427,655.40 2007 C 223,648,443.95 - 1,234,868.27 3,731,929.63 228,615,241.85 Total 354,346,855.68$ 55,115,444.23$ 3,365,260.01$ 6,238,295.93$ 419,065,855.85$

Sources of funds:

Uses of funds:

The following is the outstanding related bonded debt for the District at June 30, 2010 and 2009:

Date of Interest Maturity of Original Outstanding Redeemed OutstandingIssue Series Rate % Date Issue July 1, 2009 Current Year June 30, 2010

Aug-04 2004 A 2.0-5.0% 8/1/2014 $ 65,000,000 $ 4,015,000 $ 310,000 $ 3,705,000

Jun-05 2005 Refunding 3.0-5.0% 8/1/2024 $ 55,771,886 50,716,886 1,605,000 49,111,886

Nov-07 2007 B 4.5-5.0% 8/1/2032 $ 57,850,000 52,620,000 - 52,620,000

Dec-07 2007 C 3.3-5.5% 8/1/2046 $ 223,648,444 218,517,621 - 218,517,621

Total 325,869,507$ 1,915,000$ 323,954,507 Less: current portion (1,564,848)Long term portion 322,389,659$

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JUNE 30, 2010 AND 2009

7) BONDED DEBT – continued

The annual requirements to amortize the bonds payable, outstanding as of June 30, 2010, are as follows:

Year Principal Interest Total Year Principal Interest Total2011 440,000$ 133,750$ 573,750$ 2011 973,960$ 2,992,790$ 3,966,750$ 2012 580,000 116,088 696,088 2012 922,982 3,158,768 4,081,750 2013 730,000 91,887 821,887 2013 875,779 3,330,971 4,206,750 2014 890,000 60,400 950,400 2014 827,795 3,503,955 4,331,750 2015 1,065,000 21,300 1,086,300 2015 783,214 3,683,536 4,466,750

2016-2020 - - - 2016-2020 15,698,156 11,599,219 27,297,375 2021-2025 - - - 2021-2025 29,030,000 3,899,000 32,929,000 2026-2030 - - - 2026-2030 - - - 2031-2035 - - - 2031-2035 - - - 2036-2040 - - - 2036-2040 - - - 2041-2045 - - - 2041-2045 - - - 2046-2047 - - - 2046-2047 - - -

3,705,000$ 423,425$ 4,128,425$ 49,111,886$ 32,168,239$ 81,280,125$

Year Principal Interest Total Year Principal Interest Total2011 -$ 2,631,000$ 2,631,000$ 2011 150,888$ 6,405,612$ 6,556,500$ 2012 - 2,631,000 2,631,000 2012 295,413 6,431,087 6,726,500 2013 - 2,631,000 2,631,000 2013 427,569 6,468,932 6,896,501 2014 - 2,631,000 2,631,000 2014 556,960 6,519,540 7,076,500 2015 - 2,631,000 2,631,000 2015 670,456 6,581,044 7,251,500

2016-2020 - 13,155,000 13,155,000 2016-2020 7,690,478 36,012,022 43,702,500 2021-2025 - 13,155,000 13,155,000 2021-2025 9,210,834 41,961,666 51,172,500 2026-2030 33,685,000 9,234,875 42,919,875 2026-2030 13,512,263 56,320,236 69,832,499 2031-2035 18,935,000 1,039,625 19,974,625 2031-2035 56,646,658 53,407,592 110,054,250 2036-2040 - - - 2036-2040 92,390,036 58,255,896 150,645,932 2041-2045 - - - 2041-2045 27,048,236 149,927,851 176,976,087 2046-2047 - - - 2046-2047 9,917,830 68,527,114 78,444,944

52,620,000$ 49,739,500$ 102,359,500$ 218,517,621$ 496,818,592$ 715,336,213$

Series 2004 A 2005 Refunding

Series 2007 CSeries 2007 B

The repayment of the debt related to the general obligation bonds is accounted for in the District’s Bond Debt Service Fund.

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JUNE 30, 2010 AND 2009 8) LONG-TERM LIABILITIES

Long-term liabilities for the years ended June 30, 2010 and 2009 are summarized as follows:

Balance Balance CurrentJune 30, 2009 Additions Reductions June 30, 2010 Portion

Capital leases 17,910$ -$ (17,910)$ -$ -$ Other postemployment

benefit obligation 317,606 555,546 (374,981) 498,171 - Post-employment benefits - - - - - Bonds payable 325,869,507 - (1,915,000) 323,954,507 1,564,848

326,205,023$ 555,546$ (2,307,891)$ 324,452,678$ 1,564,848$

Balance Balance CurrentJune 30, 2008 Additions Reductions June 30, 2009 Portion

Capital leases 696,189$ -$ (678,279)$ 17,910$ 17,910$ Other postemployment

benefit obligation - 317,606 - 317,606 - Post-employment benefits 1,122,427 - (1,122,427) - - Bonds payable 337,870,330 - (12,000,823) 325,869,507 1,915,000

339,688,946$ 317,606$ (13,801,529)$ 326,205,023$ 1,932,910$ 9) EMPLOYEE RETIREMENT SYSTEMS Qualified employees are covered under multiple-employer defined benefit pension plans maintained by

agencies of the State of California. Certificated employees are members of the State Teachers' Retirement System, and classified employees are members of the Public Employees' Retirement System.

Plan Description

State Teachers' Retirement System (STRS) All full-time certificated employees participate in STRS, a cost-sharing multiple-employer

contributory public employee retirement system. At June 30, 2010 and 2009, the District employed 385 and 386 certificated employees with a total payroll of $17,281,173 and $16,963,619, respectively.

The plan provides retirement, disability, and survivor benefits to beneficiaries. Benefit provisions

are established by state statutes, as legislatively amended, within the State Teachers’ Retirement Law. STRS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the STRS annual financial report may be obtained from the STRS, 7667 Folsom Boulevard, Sacramento, California 95826.

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JUNE 30, 2010 AND 2009

9) EMPLOYEE RETIREMENT SYSTEMS - continued Plan Description-continued

California Public Employees’ Retirement System (PERS) All full-time classified employees participate in PERS, an agent multiple-employer public

employee retirement system that acts as a common investment and administrative agent for participating public entities within the State of California. At June 30, 2010 and 2009, the District employed 194 and 199 classified employees with a total payroll of approximately $10,395,768 and $10,489,334, respectively. The plan provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan member and beneficiaries. Benefit provisions are established by state statute, as legislatively amended, within the Public Employees’ Retirement Law. PERS issues a separate comprehensive annual financial report that includes financial statements and required supplementary information. Copies of the PERS annual financial report may be obtained from the PERS Executive Office, 400 P Street, Sacramento, California 95814.

Funding Policy

State Teachers’ Retirement System (STRS) Active plan members are required to contribute 8.0% of their salary and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used for determining the rate are those adopted by the STRS Teachers’ Retirement Board.

The required employer contribution rate for fiscal 2009-10 was 8% of annual payroll. The

contribution requirements of the plan members are established by state statute. The District’s contributions to STRS for the fiscal year ending June 30, 2010, 2009, and 2008 were $1,425,699, $1,399,500 and $1,361,282, respectively, and equal to 100% of the required contributions for each year.

California Public Employees’ Retirement System (PERS) Active plan members are required to contribute 7.0% of their salary (7% of monthly salary over

$133.33 if the member participates in Social Security), and the District is required to contribute an actuarially determined rate. The actuarial methods and assumptions used are those adopted by the PERS Board of Administration. The required employer contribution rate for fiscal year 2009-10 was 9.709% of annual payroll. The contribution requirements of the plan members are established by state statute. The District’s contribution to CalPERS for fiscal year ending June 30, 2010, 2009, and 2008 were $1,009,325, $988,935 and $924,941, respectively, and equal to 100% of the required contribution for each year.

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JUNE 30, 2010 AND 2009

10) ANNUAL OTHER POSTEMPLOYMENT BENEFIT OBLIGATION (OPEB) The District provides postemployment health care benefits to eligible retirees in accordance with negotiated contracts with various bargaining units of the District. The District implemented the new reporting requirements of GASB Statement No. 45, Accounting and Financial Report by Employers for Postemployment Benefits Other Than Pensions (OPEB) prospectively for the fiscal year ended June 30, 2009. Plan Description

The plan is a single-employer OPEB defined benefit healthcare plan administered by the Desert Community College District. The plan provides post employment medical benefits to eligible retirees and their dependents. Membership of the Plan consisted of 292 and 300, active participants and 46 and 28, retirees at June 30, 2010 and 2009, respectively.

Funding Policy

The contribution requirements are established and may be amended by the District and the District’s bargaining units. The plan is currently funded on a projected pay-as-you-go basis. For fiscal years 2009-10 and 2008-09, the District contributed $374,981 and $220,000, respectively, all of which was used for current premiums.

Annual OPEB Cost and Net OPEB Obligation

The District’s annual OPEB cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the payments of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal costs each year and amortize any unfunded actuarial accrued liabilities (UAAL) (or funding costs) over a period not to exceed 30 years. The following table shows the components of the District's annual OPEB cost, the amount actually contributed to the Plan, and changes in the District's net OPEB obligation to the Plan for the years ended June 30, 2010 and 2009, respectively:

2010 2009Annual required contribution 555,546$ 537,606$

Contributions made (374,981) (220,000)

Increase in net OPEB obligation 180,565 317,606

Net OPEB obligation, beginning of year 317,606 -

Net OPEB obligation, end of year 498,171$ 317,606$

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JUNE 30, 2010 AND 2009

10) OTHER POSTEMPLOYMENT BENEFITS (OPEB) - continued

The annual OPEB cost, the percentage of annual OPEB cost contributed to the Plan, and the net OPEB obligation for 2009 and 2010 were as follows:

Year Ended Annual Required Percentage Net OPEBJune 30, Contribution Contributed Obligation

2009 537,606$ 41% 317,606$ 2010 555,546$ 67% 498,171$

Funding Status and Funding Progress

Actuarial valuation of an ongoing plan involves estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the Plan and the annual required contribution of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information, follows the notes to the financial statements and presents multi-year trend information about whether the actuarial value of Plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions

Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of the District paying the contribution cost to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial values of assets, consistent with the long-term perspective of the calculations.

In the actuarial valuation dated April 4, 2008, the Entry Age Normal cost method was used. The

actuarial assumptions included a 5% investment rate of return, based on the assumed long-term return on plan assets. The inflation rate was assumed to be 3% per year. The cost trend rate used for the medical plan was 4%. The UAAL is being amortized at a level dollar method. The remaining amortization period is 30 years. There is no actuarial value of assets because those funds have not been placed in an irrevocable trust. The District has earmarked funds held in the County Treasury for funding of the OPEB obligation but has not elected to place those assets in an irrevocable trust; therefore, there is no actuarial value of plan assets.

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JUNE 30, 2010 AND 2009

11) COMMITMENTS AND CONTINGENCIES

Contingencies The District is involved from time to time in claims arising in the ordinary course of its operations. While the ultimate liability, if any, arising from these claims cannot be predicted with certainty, the District believes that the resolution of these matters will not likely have a material effect on the District’s financial statements.

Sick Leave Sick leave is accumulated without limit for each employee at the rate of one day for each month worked.

Leave with pay is provided when employees are absent for health reasons; however, the employees do not gain a vested right to accumulated sick leave. Employees, therefore, are never paid for any sick leave balance at termination of employment or any other time. It is, therefore, not appropriate to accrue the value of accumulated sick leave.

State and Federal Allowances, Awards and Grants The District has received State and Federal funds for specific purposes that are subject to review and audit

by the grantor agencies. Although such audits could generate expenditure disallowances under terms of the grants, it is believed that any required reimbursements will not be material.

12) RELATED PARTY TRANSACTIONS As of June 30, 2010 and 2009, the District recorded a payable in the General Fund of approximately $13,761

and $64,221, respectively, and a receivable in the General Fund of approximately $270,322 and $22,314, respectively, to Desert Community College District Auxiliary Services (the “Auxiliary"). The loans provided to the District are to resolve issues requiring liquid cash, which will be reimbursed once the proper request has been made through the District.

As of June 30, 2010 and 2009, the District recorded a payable in the Capital Projects Fund of $400,000 and

$400,000, respectively, to College of the Desert Foundation (the “Foundation”) for the Foundation to fund an endowment for future maintenance costs at the District’s Public Safety Academy.

The District receives contributions directly and indirectly throughout the year from College of the Desert

Alumni Association, Inc. (the “Association”) and the Foundation. The Association and Foundation enter into various pledge commitments to the District for various purposes. Contributions from the Foundation amounted to $1,461,307 and $1,227,907 for the years ended June 30, 2010 and 2009, respectively. Contributions from the Association amounted to $605,990 and $452,558 for the years ended June 30, 2010 and 2009, respectively.

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JUNE 30, 2010 AND 2009

13) PARTICIPATION IN PUBLIC ENTITY RISK POOLS AND JOINT POWERS AUTHORITIES The District is a member of the Statewide Association of Community Colleges (SWACC), Schools Excess

Liability Fund (SELF) public entity risk pools, and the Riverside County Superintendent of Schools’ Self-Insurance Program for Employees (SIPE). The District pays an annual premium to each entity for its health, workers’ compensation, and property liability coverage. The relationships between the District, the pools, and JPAs are such that they are not component units of the District for financial reporting purposes.

These entities have budgeting and financial reporting requirements independent of member units, and their

financial statements are not presented in these financial statements; however, fund transactions between the entities and the District are included in these statements. Audited financial statements are available from the respective entities. The most recent available condensed audited financial information for public entity risk pools and joint powers authorities are as follows:

SWACC SELF SIPE(Draft)

June 30, 2010 June 30, 2010 June 30, 2010Assets 46,019,292$ 196,974,000$ 2,509,665$ Liabilities 21,417,925 160,464,000 327,405 Fund Equity 24,601,367$ 36,510,000$ 2,182,260$

Revenue 9,338,400$ 2,821,000$ 265,339$ Expenses 12,547,315 18,506,000 221,712 Net non-operating income 1,779,679 4,533,000 2,804

Net Increase (Decrease) In Fund Equity (1,429,236)$ (11,152,000)$ 46,431$

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JUNE 30, 2010 AND 2009 14) CONSTRUCTION COMMITMENTS The District included the following projects in the Measure B bonds:

Actual Costs for Fiscal

Year Ended FinalJune 30, 2010 Budget

Alumni Center 1,104,455$ 2,890,946$ Athletic facilities 32,128 1,800,000 Burn Tower 10,426 2,800,000 Business Building renovation 1,670,747 4,465,621 Central Plant 34,483 13,156,448 Classroom building 1,349,121 28,810,672 Communications Building 525,409 25,133,142 Cravens Student Center 13,908,303 22,402,817 Demo Central Annex/Cooling Towers 26,014 1,500,000 Dining Hall renovation 4,349,766 5,687,469 East Valley Phase I 134,292 10,000,000 EVC-Indio Educational Center 428,231 20,000,000 Infrastructure Ph I - upgrade pipes 84,398 14,534,639 Infrastructure Ph II - point of contact 2,856,947 11,935,597 Infrastructure Ph III 4,600,924 10,000,000 Nursing Building renovation 2,433,693 6,065,017 PSA and Magnesia Falls entrance 925,157 1,000,000 Public Safety Academy Phase I 146,306 15,978,064 South Annex Ph III 875 648,982 Temporary dining facilities 22,568 969,985 Weight Room and Training Facility 322,998 1,330,381 West Valley Phase I 554,177 40,000,000 Planning & Program Management 2,613,424.00 20,848,778 Prior year projects - 28,761,449 Future projects - 79,482,531 Contingency - 9,024,716

Totals 38,134,842$ 379,227,254$

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JUNE 30, 2010 AND 2009

15) RECENT ACCOUNTING PRONOUNCEMENTS

In March 2009, the (GASB) issued GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. Statement 54 is intended to improve the usefulness of information provided to financial report users about fund balance by providing clearer, more structured fund balance classifications, and by clarifying the definitions of existing governmental fund types. The District will be required to implement the provisions of this Statement for fiscal year ending June 30, 2011.

16) SUBSEQUENT EVENTS The District evaluated all potential subsequent events as of December 9, 2010 when the financial statements were authorized and available to be issued. On October 5, 2010, the District received a new Actuarial Study of Retiree Health Benefits for the period beginning September 1, 2010 with a new calculated Annual Required Contribution (ARC) for the year beginning September 1, 2010 of $704,294. On December 3, 2010, the City of Palm Springs donated 119 acres in North Palm Springs to the District which it purchased for $2.1 million from the Bureau of Land Management and will house the future West Campus location. No additional subsequent events or transactions were identified after June 30, 2010 or as of December 9, 2010 that require disclosure to the financial statements.

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JUNE 30, 2010 and 200917) FUNCTIONAL EXPENSE

Functional expenses for the District only, for the years ended June 30, 2010 and 2009 consisted of the following:

2010 Supplies, MaterialEmployee & Other Expenses Financial

Salaries Benefits & Services Aid Depreciation TotalInstructional Activities 15,944,117$ 3,836,447$ 36,356,044$ -$ -$ 56,136,608$ Academic Support 3,977,569 1,212,368 1,040,435 - - 6,230,372 Student Services 4,298,337 1,254,555 5,008,162 - - 10,561,054 Operation & Maintenance of Plant 1,747,626 747,769 3,338,808 - - 5,834,203 Institutional Support Services 3,418,637 1,475,627 1,936,650 - - 6,830,914 Community Services & Economic Development 265,522 128,923 166,534 - - 560,979 Ancillary Services & Auxiliary Operations 2,006,978 588,708 2,113,370 - - 4,709,056 Physical Property & Related Acquisitions - - 215,822 - 215,822 Transfers, Student Aid & Other Outgo - - 21,109 11,397,102 - 11,418,211 GASB 35 adjustment - 224,362 (38,148,409) - 4,667,427 (33,256,620) Total 31,658,786$ 9,468,759$ 12,048,525$ 11,397,102$ 4,667,427$ 69,240,599$

2009 Supplies, MaterialEmployee & Other Expenses Financial

Salaries Benefits & Services Aid Depreciation TotalInstructional Activities 16,065,747$ $ 3,712,185 69,132,239$ -$ -$ 88,910,171$ Academic Support 4,136,192 1,133,996 1,683,532 - - 6,953,720 Student Services 4,154,153 1,117,774 1,970,269 - - 7,242,196 Operation & Maintenance of Plant 1,761,799 694,847 4,573,517 - - 7,030,163 Institutional Support Services 3,357,225 1,361,494 2,150,054 - - 6,868,773 Community Services & Economic Development 373,690 121,554 196,906 - - 692,150 Ancillary Services & Auxiliary Operations 1,847,974 570,955 1,541,548 - - 3,960,477 Physical Property & Related Acquisitions - - 91,605 - 91,605 Transfers, Student Aid & Other Outgo - - 5,428 7,583,472 - 7,588,900 GASB 35 adjustment - (832,333) (69,165,858) - 2,622,925 (67,375,266) Total 31,696,780$ 7,880,472$ 12,179,240$ 7,583,472$ 2,622,925$ 61,962,889$

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REQUIRED SUPPLEMENTARY INFORMATION


SCHEDULE OF OTHER POSTEMPLOYMENT BENEFITS (OPEB) FUNDING PROGRESS AND EMPLOYER CONTRIBUTION

FOR THE YEAR ENDED JUNE 30, 2010

ActuarialAccruedLiability Unfunded UAAL as a

Actuarial Actuarial (AAL) AAL Funded Percentage ofValuation Value of Entity (UAAL) Ratio Covered Covered Payroll

Date Assets (a) Age (b) (b - a) (a / b) Payroll ([b - a] / c)4/5/2008 -$ 4,516,331$ 4,516,331$ -$ 23,459,007$ 19%

Schedule of Funding Progress

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SUPPLEMENTARY INFORMATION




INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION

Board of Trustees Desert Community College District Palm Desert, California We have audited the basic financial statements of Desert Community College District for the years ended June 30, 2010 and 2009, and have issued our report thereon dated December 9, 2010. These basic financial statements are the responsibility of the District's management. Our responsibility is to express an opinion on these basic financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and the standards identified by the California Community Colleges Contracted District Audit Manual, issued by the California State Chancellor’s office. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the basic financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Our audits were made for the purpose of forming an opinion on the financial statements of the business-type activities and discretely presented component unit of Desert Community College District, which collectively comprise the District’s basic financial statements. The accompanying supplementary information, listed in the Table of Contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements of the District. The information in the supplementary information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly presented, in all material respects in relation to the basic financial statements taken as a whole. December 9, 2010

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COMBINING STATEMENT OF NET ASSETS - DISTRICT

JUNE 30, 2010

Debt Capital Financial Child Self - Retiree -General Service Projects Aid Development Insurance Benefit GASB 35

Fund Fund Fund Fund Fund Fund Fund Adjustments TotalASSETSCurrent Assets:

Cash and cash equivalents 8,905,932$ 21,749,280$ 23,258,961$ (3,462)$ 105,106$ 709,395$ 4,720,861$ -$ 59,446,073$ Accounts receivable, net 7,318,842 - 5,324,931 - 138,413 1,843 14,483 - 12,798,512 Due from other funds 201,789 - - - 23,094 - 108 (224,991) - Prepaid expenses 16,116 - - - - - - - 16,116

Total Current Assets 16,442,679 21,749,280 28,583,892 (3,462) 266,613 711,238 4,735,452 (224,991) 72,260,701 Non-Current Assets:

Restricted cash and cashequivalents - - 168,631,458 - - - - - 168,631,458

Restricted investments - - 61,014,758 - - - - - 61,014,758 Restricted interest receivable - - 457,658 - - - - - 457,658 Capital assets, net of

accumulated depreciation - - - - - - - 171,344,441 171,344,441 Total Non-Current Assets - - 230,103,874 - - - - 171,344,441 401,448,315 TOTAL ASSETS 16,442,679$ 21,749,280$ 258,687,766$ (3,462)$ 266,613$ 711,238$ 4,735,452$ 171,119,450$ 473,709,016$

LIABILITIESCurrent Liabilities:

Accounts payable 2,898,356$ -$ 7,210,366$ -$ 13,965$ 15,019$ -$ -$ 10,137,706$ Due to other funds 46,204 - 125,373 - 76,416 - - (224,991) 23,002 Deferred revenue 2,061,546 - 10,000 - 15,946 - - - 2,087,492 Compensated absences - - - - - - - 795,960 795,960 Capital leases - current portion - - - - - - - - - Bonds payable-current portion - - - - - - - 1,564,848 1,564,848

Total Current liabilities 5,006,106 - 7,345,739 - 106,327 15,019 - 2,135,817 14,609,008

Non-current liabilities:Net other postemployment

benefit obligation - - - - - - - 498,171 498,171 Bonds payable - - - - - - - 322,389,659 322,389,659

Total Non-Current Liabilities - - - - - - - 322,887,830 322,887,830 TOTAL LIABILITIES 5,006,106$ -$ 7,345,739$ -$ 106,327$ 15,019$ -$ 325,023,647$ 337,496,838$

(continued)(52)


COMBINING STATEMENT OF NET ASSETS - DISTRICT - (continued)

JUNE 30, 2010


Fund Fund Fund Fund Fund Fund Fund Adjustments TotalNET ASSETSInvested in capital assets,

net of related debt -$ -$ -$ -$ -$ -$ -$ 77,953,792$ 77,953,792$ Restricted for:

Capital projects - - 251,342,027 - - - - (230,563,858) 20,778,169 Debt service - 21,749,280 - - - - - 21,749,280 Grants and contracts 8,046,615 - - (3,462) 160,286 696,219 4,735,452 - 13,635,110

Unrestricted 3,389,958 - - - - - - (1,294,131) 2,095,827

TOTAL NET ASSETS 11,436,573 21,749,280 251,342,027 (3,462) 160,286 696,219 4,735,452 (153,904,197) 136,212,178

TOTAL LIABILITIESAND NET ASSETS 16,442,679$ 21,749,280$ 258,687,766$ (3,462)$ 266,613$ 711,238$ 4,735,452$ 171,119,450$ 473,709,016$

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COMBINING STATEMENT OF NET ASSETS - DISTRICT

JUNE 30, 2009


Fund Fund Fund Fund Fund Fund Fund Adjustments TotalASSETSCurrent Assets:

Cash and cash equivalents 10,960,060$ 20,804,180$ 17,118,406$ (8,905)$ 40,270$ 793,467$ 4,553,197$ -$ 54,260,675$ Accounts receivable, net 4,253,463 - 6,649,500 - 113,093 1,056 12,976 - 11,030,088 Due from other funds 35,723 - - - 7,470 17,809 - (61,002) - Prepaid expenses 1,500 - - - - - - - 1,500

Total Current Assets 15,250,746 20,804,180 23,767,906 (8,905) 160,833 812,332 4,566,173 (61,002) 65,292,263 Non-Current Assets:

Restricted cash and cashequivalents - - 205,169,097 - - - - - 205,169,097

Restricted investments - - 53,826,752 - - - - - 53,826,752 Restricted interest receivable - - 785,934 - - - - - 785,934 Capital assets, net of

accumulated depreciation - - - - - - - 139,794,921 139,794,921 Total Non-Current Assets - - 259,781,783 - - - - 139,794,921 399,576,704 TOTAL ASSETS 15,250,746$ 20,804,180$ 283,549,689$ (8,905)$ 160,833$ 812,332$ 4,566,173$ 139,733,919$ 464,868,967$

LIABILITIESCurrent Liabilities:

Accounts payable 2,921,206$ -$ 5,478,418$ -$ 55,119$ 10,029$ -$ -$ 8,464,772$ Due to other funds 31,975 - 8,087 - - - 45,445 (61,002) 24,505 Deferred revenue 2,160,158 - - - - - 1,509 - 2,161,667 Compensated absences - - - - - - - 752,163 752,163 Capital leases - current portion - - - - - - - 17,910 17,910 Bonds payable-current portion - - - - - - - 1,915,000 1,915,000

Total Current liabilities 5,113,339 - 5,486,505 - 55,119 10,029 46,954 2,624,071 13,336,017 Non-current liabilities:

Net other postemploymentbenefit obligation - - - - - - - 317,606 317,606

Bonds payable - - - - - - - 323,954,507 323,954,507 Total Non-Current Liabilities - - - - - - - 324,272,113 324,272,113 TOTAL LIABILITIES 5,113,339$ -$ 5,486,505$ -$ 55,119$ 10,029$ 46,954$ 326,896,184$ 337,608,130$

(continued)(54)


COMBINING STATEMENT OF NET ASSETS - DISTRICT - (continued)

JUNE 30, 2009

Debt Capital Financial Child Self - Retiree -General Service Projects Aid Developmen Insurance Benefit GASB 35

Fund Fund Fund Fund Fund Fund Fund Adjustments TotalNET ASSETSInvested in capital assets,

net of related debt -$ -$ -$ -$ -$ -$ -$ 74,112,753$ 74,112,753$ Restricted for:

Capital projects - - 278,063,184 - - - - (260,205,249) 17,857,935 Debt service - 20,804,180 - - - - - 20,804,180 Grants and contracts 6,744,529 - - (8,905) 105,714 802,303 4,519,219 - 12,162,860

Unrestricted 3,392,878 - - - - - - (1,069,769) 2,323,109

TOTAL NET ASSETS 10,137,407 20,804,180 278,063,184 (8,905) 105,714 802,303 4,519,219 (187,162,265) 127,260,837

TOTAL LIABILITIESAND NET ASSETS 15,250,746$ 20,804,180$ 283,549,689$ (8,905)$ 160,833$ 812,332$ 4,566,173$ 139,733,919$ 464,868,967$

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COMBINING STATEMENT OF REVENUES, EXPENSES ANDCHANGES IN NET ASSETS - DISTRICTFOR THE YEAR ENDED JUNE 30, 2010


Fund Fund Fund Fund Fund Fund Fund Adjustments TotalOPERATING REVENUES

Enrollment, tuition and other fees (gross) 6,976,295$ -$ -$ -$ 54,921$ -$ -$ -$ 7,031,216$ Less: Scholarship discounts

and allowances (2,568,767) - - - - - - - (2,568,767) Net enrollment, tuition and other fees 4,407,528 - - - 54,921 - - - 4,462,449

Grants and contracts, non-capitalFederal 3,179,413 - - 10,253,095 51,694 - - - 13,484,202 State 3,508,687 - - 748,078 732,904 - - - 4,989,669 Local 1,448,518 - 7,373,699 11,341 72,315 - 1,509 - 8,907,382

TOTAL OPERATING REVENUES 12,544,146 - 7,373,699 11,012,514 911,834 - 1,509 - 31,843,702

Salaries 30,794,066 - 273,433 - 591,287 - - - 31,658,786 Employee benefits 8,585,220 - 91,817 - 185,445 6,934 374,981 224,362 9,468,759 Supplies, materials and other operating expenses and services 5,942,111 1,915,000 40,409,907 21,109 59,858 108,585 3,000 (38,148,409) 10,311,161 Financial aid 411,140 - - 10,985,962 - - - - 11,397,102 Utilities 1,715,813 - - - 21,551 - - - 1,737,364 Depreciation - - - - - - - 4,667,427 4,667,427

TOTAL OPERATING EXPENSES 47,448,350 1,915,000 40,775,157 11,007,071 858,141 115,519 377,981 (33,256,620) 69,240,599

TOTAL OPERATING INCOME (LOSS) (34,904,204) (1,915,000) (33,401,458) 5,443 53,693 (115,519) (376,472) 33,256,620 (37,396,897)

(continued)

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COMBINING STATEMENT OF REVENUES, EXPENSES ANDCHANGES IN NET ASSETS - DISTRICT -(continued)



Fund Fund Fund Fund Fund Fund Fund Adjustments TotalNON-OPERATING

REVENUE (EXPENSE)State apportionments, non-capital 12,436,981$ -$ -$ -$ -$ -$ -$ -$ 12,436,981$ Local property taxes 22,608,891 13,921,683 - - - - - - 36,530,574 State taxes and other revenues 1,597,324 94,352 - - - - - - 1,691,676 Other non-operating revenues - - 371,903 - - - - - 371,903 Investment income, net 97,780 230,721 6,516,398 - 879 9,435 55,099 - 6,910,312 Interest expense - (11,386,656) - - - - - 1,448 (11,385,208)

TOTAL NON-OPERATINGREVENUES (EXPENSES) 36,740,976 2,860,100 6,888,301 - 879 9,435 55,099 1,448 46,556,238

OTHER REVENUES (EXPENSES), GAINS OR (LOSSES)Interfund transfers, net (537,606) - - - - - 537,606 - - State apportionments, capital - - 192,000 - - - - - 192,000 Transfer to COD Foundation - - (400,000) - - - - - (400,000)

TOTAL OTHER REVENUES(EXPENSES), GAINS OR (LOSSES) (537,606) - (208,000) - - - 537,606 - (208,000)

INCREASE (DECREASE)IN NET ASSETS 1,299,166 945,100 (26,721,157) 5,443 54,572 (106,084) 216,233 33,258,068 8,951,341

NET ASSETS, BEGINNING OF YEAR 10,137,407 20,804,180 278,063,184 (8,905) 105,714 802,303 4,519,219 (187,162,265) 127,260,837

NET ASSETS, END OF YEAR 11,436,573$ 21,749,280$ 251,342,027$ (3,462)$ 160,286$ 696,219$ 4,735,452$ (153,904,197)$ 136,212,178$

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COMBINING STATEMENT OF REVENUES, EXPENSES ANDCHANGES IN NET ASSETS - DISTRICTFOR THE YEAR ENDED JUNE 30, 2009


Fund Fund Fund Fund Fund Fund Fund Adjustments TotalOPERATING REVENUES

Enrollment, tuition and other fees (gross) 6,083,733$ -$ 1,618$ -$ 41,491$ -$ -$ -$ 6,126,842$ Less: Scholarship discounts

and allowances (1,664,230) - - - - - - - (1,664,230) Net enrollment, tuition and other fees 4,419,503 - 1,618 - 41,491 - - - 4,462,612

Grants and contracts, non-capitalFederal 1,414,319 - - 6,463,695 45,597 - - - 7,923,611 State 5,349,314 - - 699,923 660,283 - - - 6,709,520 Local 1,442,254 - 8,624,065 4,366 33,712 - (1,508) - 10,102,889

TOTAL OPERATING REVENUES 12,625,390 - 8,625,683 7,167,984 781,083 - (1,508) - 29,198,632

Salaries 30,863,402 - 251,136 - 582,242 - - - 31,696,780 Employee benefits 7,992,436 - 85,415 - 182,684 22,129 430,141 (832,333) 7,880,472 Supplies, materials and other operating expenses and services 7,315,207 12,000,823 60,176,836 5,428 63,372 29,663 3,000 (69,165,858) 10,428,471 Financial aid 383,333 - - 7,200,139 - - - - 7,583,472 Utilities 1,728,273 - - - 22,496 - - - 1,750,769 Depreciation - - - - - - - 2,622,925 2,622,925

TOTAL OPERATING EXPENSES 48,282,651 12,000,823 60,513,387 7,205,567 850,794 51,792 433,141 (67,375,266) 61,962,889

TOTAL OPERATING INCOME (LOSS) (35,657,261) (12,000,823) (51,887,704) (37,583) (69,711) (51,792) (434,649) 67,375,266 (32,764,257)

(continued)

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COMBINING STATEMENT OF REVENUES, EXPENSES ANDCHANGES IN NET ASSETS - DISTRICT -(continued)


Debt Capital Financial Child Self - Retiree -General Service Projects Aid Developmen Insurance Benefit GASB 35

Fund Fund Fund Fund Fund Fund Fund Adjustments TotalNON-OPERATING

REVENUE (EXPENSE)State apportionments, non-capital 11,657,875$ -$ -$ -$ -$ -$ -$ -$ 11,657,875$ Local property taxes 24,491,957 14,910,440 (1,106) - - - - - 39,401,291 State taxes and other revenues 1,463,659 93,560 - - - - - - 1,557,219 Other non-operating revenues - - 150,055 - - - - - 150,055 Investment income, net 261,130 546,419 4,555,746 - 1,913 4,813 61,928 - 5,431,949 Interest expense - (12,720,793) - - - - - 12,707 (12,708,086)

- TOTAL NON-OPERATING

REVENUES (EXPENSES) 37,874,621 2,829,626 4,704,695 - 1,913 4,813 61,928 12,707 45,490,303

OTHER REVENUES (EXPENSES), GAINS OR (LOSSES)Interfund transfers, net (468,694) - - - - 248,694 220,000 - - State apportionments, capital - - 2,912,000 - - - - - 2,912,000 Transfer to COD Foundation - - (400,000) - - - - - (400,000)

TOTAL OTHER REVENUES(EXPENSES), GAINS OR (LOSSES) (468,694) - 2,512,000 - - 248,694 220,000 - 2,512,000

INCREASE (DECREASE)IN NET ASSETS 1,748,666 (9,171,197) (44,671,009) (37,583) (67,798) 201,715 (152,721) 67,387,973 15,238,046

NET ASSETS, BEGINNING OF YEAR 8,388,741 29,975,377 322,734,193 28,678 173,512 600,588 4,671,940 (254,550,238) 112,022,791

NET ASSETS, END OF YEAR 10,137,407$ 20,804,180$ 278,063,184$ (8,905)$ 105,714$ 802,303$ 4,519,219$ (187,162,265)$ 127,260,837$

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TotalAssociated Student Student TrustStudents Representation Body Center Total Other and

Trust Fee Trust Trust Trust Agency AgencyFund Fund Fund Funds Fund Funds

ASSETSCash and cash equivalents 185,281$ 38,272$ 7,078$ 230,631$ 20,123$ 250,754$ Accounts receivable, net - 93 22 115 - 115 Due from other funds - 8,114 14,888 23,002 - 23,002

TOTAL ASSETS 185,281$ 46,479$ 21,988$ 253,748$ 20,123$ 273,871$

LIABILITIESAccounts payable 4,161$ 326$ -$ 4,487$ 20,123$ 24,610$ Deferred income - 5,234 10,097 15,331 - 15,331

TOTAL LIABILITIES 4,161 5,560 10,097 19,818 20,123 39,941

NET ASSETSUndesignated 181,120 40,919 11,891 233,930 - 233,930

TOTAL NET ASSETS 181,120 40,919 11,891 233,930 - 233,930

TOTAL LIABILITIES AND NET ASSETS 185,281$ 46,479$ 21,988$ 253,748$ 20,123$ 273,871$


COMBINING STATEMENT OF FIDUCIARY NET ASSETSJUNE 30, 2010

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Associated Student StudentStudents Representation Body Center Total

Trust Fee Trust Trust TrustFund Fund Fund Funds

ASSETSCash and cash equivalents 167,519$ 26,805$ 3,883$ 198,207$ Accounts receivable, net 3,770 82 6 3,858 Due from other funds - 9,660 14,845 24,505 Prepaid expenses 1,760 - - 1,760

TOTAL ASSETS 173,049$ 36,547$ 18,734$ 228,330$

LIABILITIESAccounts payable 66$ 2,055$ -$ 2,121$ Deferred income - 6,758 9,943 16,701

TOTAL LIABILITIES 66 8,813 9,943 18,822

NET ASSETSUndesignated 172,983 27,734 8,791 209,508

TOTAL NET ASSETS 172,983 27,734 8,791 209,508

TOTAL LIABILITIES AND NET ASSETS 173,049$ 36,547$ 18,734$ 228,330$


COMBINING STATEMENT OF FIDUCIARY NET ASSETSJUNE 30, 2009

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Associated Student StudentStudents Representation Body Center Trust

Trust Fee Trust Trust FundsFund Fund Fund Total

ADDITIONSOther local revenues 174,776$ 18,439$ 23,016$ 216,231$

DEDUCTIONSSalaries - - 17,367 17,367 Employee benefits - - 1,932 1,932 Supplies and materials and other

operating expenses and services 166,639 5,254 617 172,510

TOTAL DEDUCTIONS 166,639 5,254 19,916 191,809

CHANGE IN NET ASSETS 8,137 13,185 3,100 24,422

NET ASSETS, BEGINNING OF YEAR 172,983 27,734 8,791 209,508

NET ASSETS, END OF YEAR 181,120$ 40,919$ 11,891$ 233,930$


COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETSFOR THE YEAR ENDED JUNE 30, 2010

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Associated Student StudentStudents Representation Body Center Trust

Trust Fee Trust Trust FundsFund Fund Fund Total

ADDITIONSOther local revenues 189,037$ 17,897$ 25,992$ 232,926$

DEDUCTIONSSalaries - - 17,734 17,734 Employee benefits - - 3,005 3,005 Supplies and materials and other

operating expenses and services 157,208 15,252 172 172,632

TOTAL DEDUCTIONS 157,208 15,252 20,911 193,371

CHANGE IN NET ASSETS 31,829 2,645 5,081 39,555

NET ASSETS, BEGINNING OF YEAR 141,154 25,089 3,710 169,953

NET ASSETS, END OF YEAR 172,983$ 27,734$ 8,791$ 209,508$


COMBINING STATEMENT OF CHANGES IN FIDUCIARY NET ASSETSFOR THE YEAR ENDED JUNE 30, 2009

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BOARD OF TRUSTEES AND ORGANIZATION

JUNE 30, 2010

The Desert Community College District is located in the Coachella Valley in Riverside County, California, and also includes a small portion of Imperial County in the Salton Sea area. The District is comprised of the territory of Palm Springs Unified School District, Coachella Valley Unified School District, Desert Sands Unified School District, Desert Center Unified School District, and Morongo Valley Unified School District. The District was formed July 1, 1958. The educational facility of the Desert Community College District is a 260-acre campus site in Palm Desert, California, operating under the name College of the Desert.

GOVERNING BOARD Term Name Office Expires Mr. John Marman Chairperson 2010 Mr. Charles H. Hayden, Jr. Vice-Chairman 2012 Dr. Bonnie Stefan Clerk 2012 Mr. Michael O’Neill Member 2010 Ms. Becky Broughton Member 2010

ADMINISTRATION

Jerry R. Patton President

Dr. Edwin Deas

Vice President, Business Affairs

Mr. Farley Herzek Vice President, Academic Affairs

Dr. Diane Ramirez

Vice President, Student Affairs

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NOTES TO SUPPLEMENTARY INFORMATION

JUNE 30, 2010

1) PURPOSE OF SCHEDULES

a. Schedule of Workload Measures for State General Apportionment

This schedule shows the basis of apportionment of the District's annual source of funding. b. Reconciliation of Annual Financial and Budget Report with Audited Financial Statements

This schedule provides the information necessary to reconcile the fund balances of all funds as reported on the Form CCFS-311 to the audited financial statements.

c. Schedule of Expenditures of Federal Awards

This schedule provides financial information relating to Federal financial assistance programs administered by the District.

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State Residents Reported Data*

Audit Adjustments Revised Data

A. Summer Intersession (Summer 2009 only)1. Noncredit 103.97 - 103.97 2. Credit 623.27 - 623.27

B. Summer Intersession (Summer 2010 - Prior to July 1, 2010)1. Noncredit - - - 2. Credit 7.68 - 7.68

C. Primary Terms (Exclusive of Summer Intersession)1. Census Procedure Courses

(a) Weekly Census Contact Hours 6,665.95 - 6,665.95 (b) Daily Census Contact Hours 513.95 - 513.95

2. Actual Hours of Attendance Procedure Courses(a) Noncredit 933.80 - 933.80 (b) Credit 123.99 - 123.99

3. Alternative Attendance Accounting Procedure(a) Weekly Census Procedure Courses (Credit) 28.05 - 28.05 (b) Daily Census Procedure Courses (Credit) 16.12 - 16.12 (c) Noncredit Independent Study/Distance

Education Courses - - -

D. Total FTES 9,016.78 - 9,016.78

In-Service Training Courses (FTES) -

Basic Skills Courses and Immigrant Education(a) Noncredit 1,035.08 (b) Credit 964.23

Gross Square footage 525,526

* And Nonresidents attending Noncredit classes


SCHEDULE OF WORKLOAD MEASURES FOR STATE GENERAL APPORTIONMENTANNUAL (ACTUAL) ATTENDANCE AS OF JUNE 30, 2010

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Categories

Supplemental Information

Other Information

All fund balances as reported on Form CCFS-311 were in agreement to the audited financial statements.

This schedule provides the information necessary to reconcile the fund balances of all funds as reported on the Form CCFS-311 to the audited financial statements.

The Form CCFS-311 reports only Trust Funds in the Fiduciary Funds Group. The Agency Fundwhich was included in the Fiduciary Funds in the audited financial statements is not included on the CCFS-311.


RECONCILIATION OF ANNUAL FINANCIAL AND BUDGET REPORT (CCFS-311)WITH AUDITED FINANCIAL STATEMENTS


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INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM

AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

Board of Trustees Desert Community College District Palm Desert, California Compliance We have audited the compliance of Desert Community College District with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2010. The District’s major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the District’s management. Our responsibility is to express an opinion on the District's compliance based on our audit. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the District’s compliance with those requirements. In our opinion, the District complied, in all material respects, with the requirements referred to above that are applicable to each of its major federal programs for the year ended June 30, 2010.

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Internal Control Over Compliance The management of Desert Community College District is responsible for establishing and maintaining effective internal controls over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the District’s internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control over compliance. A deficiency in the District’s internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, Board of Trustees and various county, state and federal regulatory agencies and is not intended to be and should not be used by anyone other than these specified parties; however, this report is a matter of public record. December 9, 2010

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INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS

BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Board of Trustees Desert Community College District Palm Desert, California We have audited the basic financial statements of Desert Community College District as of and for the year ended June 30, 2010 and have issued our report thereon dated December 9, 2010. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District’s basic financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the District’s internal control over financial reporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control over financial reporting.

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A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the District’s financial statements will not be prevented, or detected and corrected on a timely basis. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal in internal control over financial reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. This report is intended solely for the information and use of management, Board of Trustees and various county, state and federal regulating agencies and is not intended to be and should not be used by anyone other than these specified parties; however, this report is a matter of public record. December 9, 2010

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INDEPENDENT AUDITORS' REPORT ON STATE COMPLIANCE REQUIREMENTS

Board of Trustees Desert Community College District Palm Desert, California We have audited the basic financial statements of Desert Community College District for the year ended June 30, 2010, and have issued our report thereon dated December 9, 2010. Our audit was made in accordance with governmental auditing standards generally accepted in the United States of America and issued by the Comptroller General of the United States and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In connection with our audit referred to above, we selected and tested transactions and records to determine the District’s compliance with the following State laws and regulations in accordance with Section 400 of the Chancellor’s Office’s California Community Colleges Contracted District Audit Manual (CDAM): A) A separate and complete tabulation is maintained for each course section in which the student attendance

is reported for state support. Credit student head count data has been collected pursuant to definitions in the California Community Colleges Management Information Systems Data Element Dictionary. Also, gross square footage and FTES is less than 100% leased space.

B) The District's salaries of classroom instructors is equal to or exceeds 50 percent of the District's current

expense of education in accordance with Section 84362 of the Education Code. C) The District only claims State apportionment for credit courses for students that are residents of

California at the time of registration. D) The District only claimed FTES for concurrent enrollment of K-12 pupils who met all of the

requirements of the Education Code and the California Code of Regulations. E) For District apportionment claim purposes, all courses being submitted are open to enrollment by the

general public. F) For purposes of determining the District's share of annual apportionments, enrollment fee reports were

reviewed to verify that the total amount the students should have paid for enrollment fees are being reported.

G) State allocations spent for matriculation-related expenditures do not exceed 25 percent of the total funds

spent for matriculation efforts in accordance with the Seymour-Campbell Matriculation Act of 1986.

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H) The District computes its annual appropriation limit in accordance with Article XIII-B of the California

Constitution and Chapter 1205, Statutes of 1980. The appropriation limit, appropriations subject to limit, State aid apportionments, subventions included within property tax proceeds and amounts excluded from the appropriations subject to limit are reported in accordance with Section 7908(c) of the Government Code.

I) The District only charges mandatory student fees for which it is under express statutory authority and no

fees charged are in conflict or inconsistent with existing law, and are not inconsistent with the purposes for which the District has been established.

J) Instructional service agreements, if any, were reviewed to be certain that requirements were met in order

to claim Full-Time Equivalent Students (FTES). K) The District only claims, for apportionment purposes, the attendance of students actively enrolled in a

course section as of the census date (if census procedures are used to record attendance in the course section).

L) The District expended CalWORKs Program State and TANF funds to provide specialized student

support services, curriculum development, or instruction to eligible CalWORKs students. M) The actual amount expended in fiscal year 1995-96 in the General Fund for Activity Code 6500,

Operation and Maintenance of Plant, excluding any State funds and match dollars expended for "Deferred Maintenance and Special Repairs" as defined in Education Code Section 84660, if reported in Activity Code 6500 were $2,328,729 which will be identified as "base year expenditures".

Management is responsible for the District’s compliance with the requirements listed above. Our responsibility is to express an opinion on the District’s compliance based on our examination. Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants and, accordingly, included examining, on a test basis, evidence about the District’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our opinion. Our examination does not provide a legal determination on the District’s compliance with specified requirements. In our opinion, except for three findings described in the accompanying schedule of findings and questioned costs (#10-1, #10-2 and #10-3), the Desert Community College District complied, in all material respects, with the aforementioned requirements. Our examination of compliance made for the purposes set forth in the preceding paragraph of this report would not necessarily disclose all instances of noncompliance. This report is intended solely for the information and use of management, Board of Trustees and various county, state and federal regulating agencies and is not intended to be, and should not be, used by anyone other than these specified parties; however, this report is a matter of public record. December 9, 2010

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INDEPENDENT AUDITORS' REPORT ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

AND STATE FINANCIAL ASSISTANCE

Board of Trustees Desert Community College District Palm Desert, California We have audited the basic financial statements of the Desert Community College District for the year ended June 30, 2010 and have issued our report thereon dated December 9, 2010. These financial statements are the responsibility of the Desert Community College District's management. Our responsibility is to express an opinion on these basic financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Our audit was conducted for the purpose of forming an opinion on the basic financial statements of the Desert Community College District, taken as a whole. The accompanying Schedule of Expenditures of Federal Awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments and Non-Profit Organizations, and is not a required part of the financial statements, including the State Financial Assistance schedule. The information in those schedules has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly presented in all material respects in relation to the basic financial statements taken as a whole. This report is intended solely for the information and use of management, Board of Trustees and various county, state and federal regulating agencies and is not intended to be, and should not be, used by anyone other than these specified parties; however, this report is a matter of public record. December 9, 2010

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Pass ThroughFederal Entity

Federal Grantor/Pass Through CDFA Identifying FederalGrantor/Program or Cluster Title Number Number ExpendituresU.S. DEPARTMENT OF EDUCATION

Student financial assistance clusterSupplemental Educational Opportunity Grant (SEOG) 84.007 137,519$ Federal College Work Study (FWS) 84.033 326,101 Federal Pell Grant (PELL) 84.063 9,831,756 William D. Ford Direct Student Loan Program 84.268 14,682 Academic Competitiveness Grant (ACG) 84.375 92,817

Total student financial assistance cluster 10,402,875

TRIO clusterStudent Support Services (ACES) 84.042 301,680 Upward Bound 84.047 359,121

Total TRIO cluster 660,801

Child Care Access Means Parents in School (CCHAMPIS) 84.335A 6,750

Title V-Cooperative Grant with California State University, San Bernardino 84.031S 197,331

Career and Technical Education ActPassed through the California Department of Education

Career and Technical Education (Perkins Title I-C) 84.048 09-C0l-013 221,534 Passed through Imperial Valley College

Career and Technical Education 84.048 09-140-031 265,759 Passed through Riverside City College

Tech Prep Education 84.243 09-139-960 60,832 Total Career and Technical Education Act 548,125

Rehabilitation ActPassed through the California Department of Rehabilitation

Workability 84.126A 26761 232,380 ARRA-Rehabilitation Services 84.390A 27725A 18,712

Total Rehabilitation Act 251,092

Passed through the California Department of Education Adult Education State Grant Program 84.002 33-67025 234,790 William F. Gooding Even Start Family Literacy 84.213C 10-14331 116,924

Total California Department of Education 351,714

Passed through the California Community CollegeChancellor's Office - ARRA 84.394 S394A090005 232,907

Total U.S. Department of Education 12,651,595


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


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SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS-continued

Pass ThroughFederal Entity

Federal Grantor/Pass Through CDFA Identifying FederalGrantor/Program or Cluster Title Number Number Expenditures

U.S. DEPARTMENT OF AGRICULTUREHispanic Serving Institutions Education 10.223 37,549$ Passed through the California Department of Education

Child Care Food Program 10.558 33-2407-4A 51,694 Total U.S. Department of Agriculture 89,243

U.S. DEPARTMENT OF LABORPassed through the State of CaliforniaEmployment Development Department

WIA clusterWorkforce Investment Act/ARRA Clean Energy 17.258 K077163 213,247 Workforce Investment Act/ARRA Title 1 Classroom 17.258 038-102/105 449,387

Total U.S. Department of Labor 662,634

NATIONAL SCIENCE FOUNDATIONScholarships in STEM 47.076 64,320

U.S. DEPARTMENT OF VETERANS AFFAIRSVeterans Education 64.116 2,033

U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICESGreater Avenues for Independence 93.561 14,377

Total Expenditures of Federal Awards 13,484,202$

Note 1. Basis of Presentation

Note 2. Subrecipients

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SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


The accompanying schedule of expenditures of federal awards includes the federal grant activity of DesertCommunity College District and is presented on the accrual basis of accounting. The information in thisschedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, LocalGovernments, and Non-Profit Organizations. Therefore, some amounts presented in this schedule may differfrom amounts presented in, or used in the preparation of, the general-purpose financial statements.

Of the federal expenditures presented in the schedule, Desert Community College District did not provide anyfederal awards to subrecipients.

StateState program title Assistance

Advanced Transportation Technology 145,871$ Articulation Award 2,377 Basic Skills 532,446 Board Financial Assistance Program (BFAP) 60,346 Board of Governors Unemployment Insurance Offset 1,537 CalWorks Program 124,284 Career Technical Work Experience 35,211 Cooperative Agencies & Resources for Education 64,745 Department of Education (Child Care) 729,639 Department of Education (Child Care Food Program) 3,265 Disabled Students Programs and Services 508,672 Enrollment Fee Administration 29,237 Extended Opportunities, Programs & Services (EOPS) 335,570 Leadership 111,552 Math, Engineering and Science Achievement (MESA) 72,051 Matriculation Credit 249,648 Matriculation Non-Credit 137,904 Nursing Enrollment Growth 415,509 Nursing Initiative WIA 220,000 Staff Diversity 14,352 State Instructional Equipment Grant 96,973 Student Financial Aid Grant 979,852 Telecommunications & Technology Infrastructure (TTIP) 16,958 Workplace Learning Centers 101,670

Total 4,989,669$


SCHEDULE OF STATE FINANCIAL ASSISTANCE


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SCHEDULE OF FINDINGS AND QUESTIONED COSTS


SUMMARY OF AUDIT RESULTS Financial Statements 1. The auditor's report issued on the financial statements is unqualified. 2. Internal controls over financial reporting identified no control deficiencies. 3. There were no significant deficiencies that are considered to be a material weakness. 4. There are no instances of noncompliance material to the financial statements. Federal Awards 1. The auditor's report issued on compliance for the major programs is unqualified. 2. Internal control over major programs identified no significant deficiencies. 3. There are no significant deficiencies that are considered to be a material weakness. 4. There are no audit findings that should be disclosed in accordance with Section 510(a) of Circular A-133. Major Programs CFDA No. 84.063 Pell Grant Program CFDA No. Various American Recovery and Reinvestment Act of 2009 84.394 – Rehabilitation 84.390A – Clean Energy 17.258 – Title 1 Classroom

1. The dollar threshold that was used to distinguish between type A and type B programs was $300,000.

2. Desert Community College District qualified as a low-risk auditee.

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FEDERAL COMPLIANCE

There were no findings relating to Federal compliance for the year ended June 30, 2010.

STATE COMPLIANCE

Finding #10-1 The District did not maintain census rosters for several courses selected for our testing of State Compliance Requirements. Although there was an aggressive effort by the District to collect the census rosters, several instructors did not submit them on a timely basis and some did not turn them in at all. This is in noncompliance with the Credit Student Headcount data requirements pursuant to the California Community Colleges Management Information Systems Data Element Dictionary. While the District was in noncompliance with the Credit Student Headcount data requirements, they had the information necessary to submit to the Chancellor’s Office and claim State apportionments. Recommendation We recommend that the District implement written procedures encouraging instructors in the adherence of State requirements. Response Management agrees with this finding and is implementing procedures necessary to meet the requirements of the State. Finding #10-2 Instructors did not properly maintain census rosters for several students selected for our testing of State Compliance Requirements. Five students claimed they attended courses during the Fall 2009/Spring 2010 semesters with no accurate attendance records provided by instructors. Census data had to be modified and later re-establish that these students in fact attended a course for which no census data was provided. By not providing accurate census data, the District could potentially miss out on FTES allocations by the State. This is also in noncompliance with the Credit Student Headcount data requirements pursuant to the California Community Colleges Management Information Systems Data Element Dictionary. Recommendation We recommend that the District implement written procedures encouraging instructors in the adherence of State requirements. Response Management agrees with this finding and is implementing procedures necessary to meet the requirements of the State.

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FOR THE YEAR ENDED JUNE 30, 2010 STATE COMPLIANCE – (continued) Finding #10-3 The California Education Code Section 14020 states that a student must demonstrate that they have a verified disability and can benefit from general education classes, activities, and services offered through the Community College system in order to qualify for services provided under the Disabled Student Programs and Services (DSPS). It furthermore states that classes are to be provided only when they facilitate the student’s measurable progress towards their educational goals. During our audit of DSPS students, it was noted that three out of four students tested did not have an educational plan on file showing their measurable progress and ability to benefit from the general classes being offered to them. Recommendation We recommend that the District implement written procedures to ensure that all DSPS students have an educational plan on file as provided by a DSPS coordinator. Response Management agrees with this finding and is implementing procedures necessary to meet the requirements of the State. INTERNAL CONTROL There were no findings relating to internal controls for the year ended June 30, 2010.

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STATUS OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2010

FEDERAL COMPLIANCE

There were no findings relating to Federal compliance for the year ended June 30, 2009.

STATE COMPLIANCE

Finding #09-1 The District did not maintain census rosters for several courses selected for our testing of State Compliance Requirements. Although there was an aggressive effort by the District to collect the census rosters, several instructors did not submit them on a timely basis and some did not turn them in at all. This is in noncompliance with the Credit Student Headcount data requirements pursuant to the California Community Colleges Management Information Systems Data Element Dictionary. While the District was in noncompliance with the Credit Student Headcount data requirements, they had the information necessary to submit to the Chancellor’s Office and claim State apportionments. This compliance finding was not corrected in the current year. (See Finding #10-1) Finding #09-2 Instructors did not properly maintain census rosters for several students selected for our testing of State Compliance Requirements. Ten students claimed they attended courses during the Fall 2008/Spring 2009 semesters with no accurate attendance records provided by instructors. Census data had to be modified and later re-establish that these students in fact attended a course for which no census data was provided. By not providing accurate census data, the District could potentially miss out on FTES allocations by the State. This is also in noncompliance with the Credit Student Headcount data requirements pursuant to the California Community Colleges Management Information Systems Data Element Dictionary. This compliance finding was not corrected in the current year. (See Finding #10-2) INTERNAL CONTROL There were no findings relating to internal controls for the year ended June 30, 2009.

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