doane college financial statements june 30, … · doane college financial statements june 30, ......

DOANE COLLEGE

FINANCIAL STATEMENTS

JUNE 30, 2011 AND 2010

DANA F. COLE & COMPANY, LLP CERTIFIED PUBLIC ACCOUNTANTS

DOANE COLLEGE TABLE OF CONTENTS

INDEPENDENT AUDITORS' REPORT

FINANCIAL STATEMENTS Statement of Financial Position Statement of Activities Statement of Cash Flows

NOTES TO FINANCIAL STATEMENTS

ACCOMPANYING INFORMATION Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards SF A Programs - Audit Information

REPORTS REQUIRED BY GOVERNMENT AUDITING STANDARDS AND OMB CIRCULAR A-133 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

Independent Auditors' 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

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

PRIOR AUDIT FINDINGS AND RECOMMENDATIONS

Page

1 - 2

3 4

5-6

7 - 18

19 20 21

22 - 23

24 - 25

26 - 27

28

The Board of Trustees Doane College Crete, Nebraska

DANA F. COLE & COMFJ\NY, LLP CERTIFIED PUBLIC ACCOUNTANTS

1248 0 STREET, SUITE 500

LINCOLN, NEBRASKA 68508

INDEPENDENT AUDITORS' REPORT

We have audited the accompanying statement of financial position of Doane College as of June 30, 2011, and the related statements of activities and cash flows for the year then ended. These financial statements are the responsibility of the College's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the College's 2010 financial statements and, in our report dated September 28,2010, we expressed an unqualified opinion on those financial statements.

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.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Doane College as of June 30,2011, and the changes in net assets and cash flows for the year 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 a report date September 27,2011, on our consideration of Doane College's internal control over financial reporting and 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 assessing the results of our audit.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Doane College. 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 basic financial statements. Such information is the responsibility of management and was derived from and relates directly to

1

the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements as a whole.

Lincoln,~ebraska

September 27, 2011

2

DOANE COLLEGE STATEMENT OF FINANCIAL POSITION

JUNE 30, 2011 AND 2010

ASSETS

ASSETS Cash and cash equivalents Accounts receivable, net of allowance for doubtful

accounts of$951,365 for 2011 and $634,258 for 2010 Prepaid expenses, inventories and other assets Investments Notes receivable Pledges receivable Funds held in trust by others Construction in progress Land, buildings and equipment,

net of accumulated depreciation

TOTAL ASSETS

LIABILITIES AND NET ASSETS

LIABILITIES Accounts payable and accrued expenses Advance income Deposits and deferred revenue Amounts held on behalf of others Annuities payable Long-term debt Refundable federal advances for student loans

Total liabilities

NET ASSETS Unrestricted

Undesignated Designated Student loan funds Plant assets

Total unrestricted

Temporarily restricted Contributed for restricted purposes Endowment assets

Total temporarily restricted

Permanently restricted Endowment assets Annuity and life income assets

Total pelmanently restricted

Total net assets

TOTAL LIABILITIES AND NET ASSETS

See accompanying notes to financial statements. 3

2011

1,028,506

2,055,434 1,028,788

100,308,542 1,302,578 1,614,318

698,857 1,204,977

57,545,133

166,787,133

1,688,069 986,696 197,550

97,837 1,221,356

11,768,982 1,163,488

17,123,978

3,072,293 5,810,942

217,092 54,956,929

64,057,256

2,818,611 41,666,349

44,484,960

40,592,349 528,590

41,120,939

149,663,155

166,787,133

2010

682,511

1,712,118 676,036

85,559,096 1,304,018 3,804,497

631,294 11,377,448

40,021,432

145,768,450

3,291,543 1,033,868

211,000 93,792

1,314,445 3,468,046 1,202,185

10,614,879

2,111,839 4,994,698

222,144 50,380,552

57,709,233

4,886,297 32,324,607

37,210,904

39,707,400 526,034

40,233,434

135,153,571

145,768,450

DOANE COLLEGE STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30,2011

(WITH SUMMARIZED FINANCIAL INFORMATION FOR 2010)

Temporarily Permanently Unrestricted Restricted Restricted 2011 2010 Net Assets Net Assets Net Assets Total Total

REVENUES AND GAINS Student tuition and fees 31,860,761 31,860,761 28,235,325 Less: Unfunded scholarships

and grants (8,936,050) (8,936,050) (7,751,038) Funded scholarships

and grants (2,510,855) (2,510,855) (2,668,522)

Net tuition and fees 20,413,856 20,413,856 17,815,765 Government grants and

contracts 662,317 1,076,372 1,738,689 1,293,377 Gifts and pledges 630,589 1,885,347 231,828 2,747,764 4,681,110 Investment income 170,810 2,141,677 89,816 2,402,303 1,973,613 Other income 384,338 194,278 578,616 479,709 Realized and unrealized gains

(losses) 2,706,8]3 10,723,645 531,420 13,961,878 6,480,915 Auxiliary enterprises 6,568,155 6,568,155 6,]44,698

Total revenues and gains 31,536,878 ] 6,021,319 853,064 48,411,261 38,869,187 Actuarial adjustment to

annuities 83,909 83,909 132,796 Loan cancellations and loss

provision (28,237) (28,237) (31,283) Net assets released from

restriction 8,796,730 (8,747,263) (49,467)

Total revenues and gains and other support 40,305,371 7,274,056 887,506 48,466,933 38,970,700

EXPENSES Instruction 15,726,145 15,726,145 14,992,108 Academic support 1,946,661 1,946,661 1,656,772 Student services 5,513,5]4 5,513,514 4,938,513 Institutional support 5,167,253 5,167,253 4,705,393

Total educational and general expenses 28,353,573 28,353,573 26,292,786

Auxiliary enterprises 5,603,776 5,603,776 4,774,072

Total expenses 33,957,349 33,957,349 31,066,858

CHANGE IN NET ASSETS 6,348,022 7,274,056 887,506 14,509,584 7,903,842

NET ASSETS, beginning of year 57,709,233 37,210,904 40,233,434 135,153,571 127,249,729

NET ASSETS, end of year 64,057,255 44,484,960 41,120,940 149,663,155 135,153,571

See accompanying notes to financial statements. 4

DOANE COLLEGE STATEMENT OF CASH FLOWS

YEARS ENDED JUNE 30, 2011 AND 2010

CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets

Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation Amortization Net realized (gain) loss on sale of investments (Increase) decrease in accounts receivable (Increase) decrease in inventories, prepaid

expenses and other assets Increase (decrease) in accounts payable and

accrued expenses Increase (decrease) in advance tuition Increase (decrease) in deferred revenue Net unrealized (appreciation) depreciation in

investments Gifts received for long-term investment

Total adjustments

Net cash provided by (used in) in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES (Increase) decrease in notes receivable Increase (decrease) in annuities payable Net sales (purchases) of investments Purchase of property, plant and equipment

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES Increase (decrease) in deposits held on behalf of others Gifts received for long-term investment (Increase) decrease in pledges receivable Refundable federal advances for student loans Increase (decrease) in accrued interest payable Issuance of long-term debt Payments on long-term debt

Net cash provided by financing activities

5

2011 2010

14,509,584 7,903,842

2,685,079 2,272,466 12,461 11,252

(1,625,763) (622,617) (343,316) 401,670

(365,213) (144,555)

(1,601,132) 2,474,318 (47,172) 8,737 (13,450) (126,700)

(12,336,115) (6,179,231) (1,448,980) {3,805,388)

(15,083,601) {5,710,048)

(574,017) 2,193,794

1,440 8,196 (93,089) (466,856)

(855,131) 5,808,558 (10,036,309) (14,812,852)

(10,983,089) (9,462,954)

4,045 5 1,448,980 3,805,388 2,190,179 1,758,547

(38,697) (52,707) (2,342) (2,101)

8,606,954 1,393,046 (306,018) (215,000)

11,903,101 6,687,178

DOANE COLLEGE STATEMENT OF CASH FLOWS

YEARS ENDED JUNE 30, 2011 AND 2010

NET INCREASE (DECREASE) IN CASH AND CASH EQUN ALENTS

CASH AND CASH EQUN ALENTS, beginning of year

CASH AND CASH EQUIVALENTS, end of year

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMA TlON Cash paid for interest on long-term debt

See accompanying notes to financial statements.

6

2011 2010

345,995 (581,982)

682,511 1,264,493

1,028,506 682,511

473,378 97,939

DOANE COLLEGE NOTES TO FINANCIAL STATEMENTS

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Activities and Organization

Doane College, established in 1872, operates as a not-for-profit, private college. The College was incorporated under the laws of the State of Nebraska and is an Organization exempt from income taxes under Code Section 501(c)(3) of the Internal Revenue Code.

Basis of Accounting

The financial statements of Doane College have been prepared on the accrual basis of accounting.

Basis of Presentation

Financial statement presentation follows the recommendations of the FASB ASC 958-205 "Financial Statements of Not-for-Profit Organizations". Under this standard, the College is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. A description of the net asset categories used by the College follows:

Unrestricted Net Assets include the following:

Education and general: Educational and general activities include the revenues and expenses associated with the principal educational mission of the College.

Unexpended plant and debt service: Unexpended plant and debt service net assets include gifts and income earned on unexpended balances for capital projects which are currently under construction and transfers from the operating budget to fund the debt service requirements for outstanding bonds, notes and mortgages payable. The College follows the policy of lifting the restrictions on contributions of cash or other assets received for the acquisition of long-lived assets when the long-lived assets are acquired or, for construction projects, when construction commences.

Investment in plant: Investment in plant assets are stated at cost or fair value at the date of gift for donated items, less accumulated depreciation, computed on a straight-line basis over the estimated useful lives of the assets ranging from five to fifty years. Collections and works of art are stated at cost or fair value at the date of gift for donated items.

Student loan: Student loan net assets record lending activity to students utilizing College resources designated for that purpose.

Temporarily restricted net assets include amounts for which donor or other externally imposed restrictions have not yet been met.

Permanently restricted net assets include amounts which require, by donor restriction, that the corpus be invested in perpetuity and only the income be made available for program operations in accordance with donor restrictions.

7


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of Presentation (Continued)

The financial statements present expenses in accordance with the principal educational mission ofthe College displayed in their functional classifications.

Contributions

The College utilizes FASB ASC 958-605, "Not-for-Profit Entities Revenue Recognition". This standard requires that unconditional promises to give (pledges) be recorded as receivables and revenues and requires the organization to distinguish between contributions received for each net asset category in accordance with donor imposed restrictions. Conditional promises to give are recognized only when the conditions on which they depend are substantially met and the promises become unconditional.

Investments

The College has adopted FASB ASC 958-320 "Accounting for Certain Investments Held by Not-for-Profit Organizations." FASB ASC 958-320 establishes standards of reporting at fair value certain investments, debt and equity securities, held by not-for-profit organizations.

Therefore, investments in equity securities that have a readily determinable fair value and all investments in debt securities are stated at fair value, with gains and losses included in the statements of activities. Fair value is determined by quoted market values.

For investments not traded on organized exchanges, the fair value reported is the estimated fair value provided by the investment managers. Such valuations generally reflect discounts for illiquidity and consider variables such as financial performance of investments, recent sales prices of investments, and other pertinent information.

Accounts Receivable

The College uses the allowance method to account for uncollectible accounts receivable.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.

Real Estate

Real estate consists of property which was donated to the College. The properties are stated at the estimated fair value.

Advertising

Advertising costs of the College are expensed as incurred.

8



Cash Equivalents

Cash equivalents include highly liquid temporary investments with original maturities of three months or less, readily convertible to known amounts of cash.

Property and Equipment

Property and equipment are stated at cost, if purchased or fair value, if donated. Major expenditures for property and those which substantially increase useful lives are capitalized. Maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are included in income.

Depreciation

The College provides for depreciation of property and equipment using annual rates which are sufficient to amortize the cost of depreciable assets using the straight-line method over their estimated useful lives which range from 3 to 50 years.

Refundable Federal Advances for Student Loans

Funds provided by the U.S. Government under the Federal Perkins Loan program are loaned to qualified students and may be re-loaned after collections. These funds are ultimately refundable to the U.S. Government and are included as a liability in the statements of financial position.

The College reports gifts of cash and other assets as restricted support if the gifts are received with donor stipulations that limit the use of the donated assets. Gifts received with donorimposed restrictions that stipulate resources be maintained permanently but permit the use of all or a part of the income derived from the donated assets are reported as permanently restricted assets. Gifts received with donor-imposed restrictions that permit the use of the donated assets as specified are reported as temporarily restricted assets. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.

Split Interest Agreements

The College is the beneficiary of various trust and annuities. The College's interest in these split interest agreements is reported as a contribution in the year received at its net present value discounted at prevailing rates, based upon actuarially determined mortality rates. The assets ofthese agreements, for which the College is the trustee, are included in investments on the statements of financial position.

9



Income Taxes

The College is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the College's taxexempt purpose is subject to taxation as unrelated business income. In addition, the College qualifies for the charitable contribution deduction under Section 170(b)(1 )(A) and has been classified as an organization other than a private foundation under Section 509(a)(2).

The College has adopted the provisions ofFASB ASC 740-10, "Accounting for Uncertain Tax Positions". The College continually evaluates expiring statutes oflimitations, audits, proposed settlements, changes in tax law and new authoritative rulings. Years 2008 and after are open to examination by the respective authorities.

Cash Investments

Cash investments include highly liquid temporary investments with original maturities of three months or less, readily convertible to known amounts of cash. These investments are included in the statement of financial position as investments and are further disclosed in Note 2 as mutual funds, money market certificates and certificates of deposit.

Use of Estimates

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Compensated Absences

Employees' vacation benefits are recognized in the period earned.

NOTE 2. INVESTMENTS

The investments of the College are carried at fair value and consisted of the following as of June 30, 2011 and 2010.

Money market certificates and certificates of deposit

Equity securities Fixed income securities Alternative investments Real estate and REITS

10

2011 2010

10,009,106 51,460,971 17,848,000 16,103,887 4,886,578

100,308,542

5,448,732 41,000,390 16,760,355 15,403,890 6,945,729 ~5~096


NOTE 2. INVESTMENTS (Continued)

The College's endowment includes the majority of the investments shown above and consists of individual funds established for a variety of purposes. The endowment includes both donor-restricted funds and funds designated to function as endowments. As required by generally accepted accounting principles, net assets associated with endowment funds, including funds designated to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.

The Board of Trustees ofthe College has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIF A) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result ofthis interpretation, the College classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donorrestricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the College in a manner consistent with the standard of prudence prescribed by UPMIF A. In accordance with UPMIF A, the College considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the various funds, (2) the purposes ofthe donor-restricted endowment funds, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of the College, and (7) the College's investment policies.

Investment Return Objectives, Risk Parameters and Strategies

The College has adopted investment and spending policies, approved by the Board of Trustees, for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment funds while also maintaining the purchasing power of those endowment assets over the long-term. Accordingly, the investment process seeks to achieve an aftercost total real rate of return, including investment income as well as capital appreciation, which exceeds the annual distribution with acceptable levels of risk. Endowment assets are invested in a well diversified asset mix, which includes equity, debt securities and illiquid alternative investments, which is intended to result in a consistent inflation-protected rate of return that has sufficient liquidity to make a maximum annual distribution of 5%, while growing the funds if possible. Investment risk is measured in terms of the total endowment fund; investment assets and allocation between asset classes and strategies are managed to not expose the fund to unacceptable levels of risk.

11


NOTE 2. INVESTMENTS (Continued)

Spending Policy

The College has a policy of appropriating for distribution each year a percentage, currently 4.9%, ofthe average fair market value of the endowment assets for the prior three calendar years. In establishing this policy, the College considered the long-term expected return on its investment assets, the nature and duration of the individual endowment funds, many of which must be maintained in perpetuity because of donor-restrictions, and the possible effects of inflation. This is consistent with the College's objective to maintain the purchasing power of the endowment assets as well as to provide additional real growth through new gifts and investment return.

Endowment Net Asset Composition by Type of Fund as of June 30, 2011 is as follows:

Total Net Temporarily Permanently Endowment

Unrestricted Restricted Restricted Assets Donor -restricted endowment

funds (36,074) 41,666,349 36,682,516 78,312,791 Quasi-endowment funds 12,669,759 12,669,759

Total funds 12,633,685 ~Ma~;;16 20,982,550

Changes in endowment net assets as of June 30, 2011 are as follows:

Total Net Temporarily Permanently Endowment

Unrestricted Restricted Restricted Assets Endowment net assets,

begilming of year 9,726,251 32,324,606 36,312,540 78,363,397 Contributions 369,976 369,976 Investment income (net) (93,791) 3,777,819 3,684,028 Net appreciation (depreciation) 2,541,137 9,006,802 11,547,939 Transfers 990,312 990,312 Amounts appropriated for

expenditure (530,224) (3,442,878) (3,973,102)

Endowment net assets, end of year 12J533.68~ 41.666,349 3~682,516 20,982~50

As ofJune 30, 2011 and 2010, individual named endowment funds had estimated fair values that were $36,074 and $439,897 less than their permanently restricted or historic dollar value. This was the result of net declines in financial markets since these endowment funds were established. Though the College is not required by donor-imposed restriction or law to use its unrestricted resources to restore the endowments to their historic dollar value, accounting guidance for not-for-profit organizations require that such losses and subsequent gains be reflected as changes to unrestricted net assets until the fair values again reach the historical dollar values.

12


NOTE 3. PROPERTY, PLANT AND EQUIPMENT

At June 30, 2011 and 2010, propeliy, plant, and equipment consisted of the following:

Land Buildings and improvements Leasehold improvements Equipment

Less: Accumulated depreciation Total property, plant and equipment

NOTE 4. INVESTMENT IN PLANT - LIABILITIES

Note Payable - NEF A

2011 2010

582,882 69,892,772

1,024,630 15,614,961 87,115,245

(29,570,112) 57,545,133

582,882 51,435,096

952,199 13,936.286 66,906,463

(26,885,031 ) 40,021.432

NEFA issued the Doane College Revenue Bonds, Series 1999, on February 15,1999 in compliance with the provisions of the above issue. This Series was issued to finance the construction of a new residence hall. The total offering was $3,500,000 and is payable in semiannual installments in amounts necessary to pay the principal and interest due at rates of 3.65% to 5.30% per annum over a twenty-year period beginning February 15,2000, and ending February 15, 2020. The bonds are secured by an unperfected security interest in the gross revenues of the College and a Deed of Trust and perfected security interest covering respective portions of Doane College land and improvements in Crete, Nebraska. These 1999 bonds were called and refunded in May 2004. The refunded offering was $3,120,000 and is payable in semiannual installments in amounts necessary to pay the principal and interest due at rates of 1.40% to 4.55% per annum over a 14-year period beginning May 15, 2005 and ending May 15,2018. Interest accrued on these bonds as of June 30, 2011 and 2010 was $22,691 and $25,033, respectively, and the principal balances were $1,805,000 and $2,025,000.

NEFA authorized an Educational Facilities Loan Note to Doane College on May 1, 2009, in an amount up to $10 million, for capital construction or improvement projects. This note bears an interest rate of 4.66% through May 1,2019, to be paid back on the basis of a 30-year monthly amortization of the note principal. The interest rate will be reset on May 1, 2019, and every 5 years thereafter. There is no pre-payment penalty unless the note is moved to another financial institution. The note balance at June 30, 2011 and 2010 was $9,913,982 and $1,443,046, respectively.

NEFA authorized an Educational Facilities Loan Note to Doane College on April 28, 2011, in an amount up to $5 million, to finance the renovation of a residence halL This note bears an interest rate of 4.62% through November 1, 2021, to be paid back on the basis of a 30-year monthly amortization of the note principaL The interest rate will be reset on November 1, 2021, and every 5 years thereafter. The Note outstanding principal balance and interest shall be paid in full on November 1, 2041. There is no pre-payment penalty unless the note is moved to another financial institution. The note balance at June 30, 2011 was $50,000.

13


NOTE 4. INVESTMENT IN PLANT - LIABILITIES (Continued)

Estimated Future Maturities on Plant Fund Liabilities

Future maturities on Plant Fund liabilities are estimated to be:

Years Ending

June 30, 2012 June 30, 2013 June 30, 2014 June 30, 2015 June 30, 2016

NOTE 5. OPERATING LEASES

Amount

1,255,480 1,251,280 1,251,880 1,251,590 1,250,498

The College has signed a two-year lease for building space in Grand Island, Nebraska through June 30, 2013. The gross lease amount for this space is $84,112 per year.

The College has also entered into a four-year lease for building space in Lincoln, Nebraska through February 28, 2015. The gross lease amount for this space is $121,737 per year.

Future minimum payments under the existing lease agreements as of June 30, 2011 are:

Years Ending June 30,

2012 2013 2014

CAPITAL LEASES

205,849 205,849 121,737

The College has signed a three-year non-cancellable lease to purchase technology equipment. The gross lease amount for this equipment is $134,935.

Future minimum payments under the existing lease agreements as of June 30, 2011 are:

Years Ending June 30, Principal Interest Total

2012 37,799 7,180 44,979 2013 41,233 3,746 44,979

Total 79,032 lQ,226 ~958

14


NOTE 6. PENSION COSTS

The College maintains retirement plans for College employees, under which contributions are made to the Teacher's Insurance and Annuity Association and College Retirement Equities Fund (TIAA-CREF) and Fidelity Investments for the purchase of retirement annuities for employees. Total pension expense for this plan for the years ended June 30, 2011 and 2010 amounted to $536,789 and $541,231, respectively. The College's policy is to fund current pension costs accrued.

NOTE 7. PROMISES TO GIVE

Unconditional promises to give are pledges receivable to be received by the College for years subsequent to June 30, 2009 and are deemed, by management, to be fully collectible. Promises have been discounted using a rate of 5%.

Receivable in less than one year Receivable in one to five years

Less discount to present value

Net pledges receivable

NOTE 8. NET ASSETS RELEASED FROM RESTRICTIONS

The sources of net assets released from restrictions are as follows:

Acquisition of land, buildings and equipment Scholarships, instruction and other

departmental support

NOTE 9. FAIR VALUE OF FINANCIAL INSTRUMENTS

Total June 30,

2011

850,789 1,016,120 1,866,909

252,591

1,61;h21~

Total June 30,

2010

1,540,451 2,670,008 4,210,459

405,962

~~D4,422

Temporarily Restricted

3,913,257

4,883,473

8,796,730

The College has adopted F ASB ASC 820-10, "Fair Value Measurements", which provides a framework for measuring fair value under generally accepted accounting principles. F ASB ASC 820-10 applies to all financial instruments that are being measured and reported on a fair value basis.

15


NOTE 9. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

As defined in F ASB ASC 820-10, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the College uses various methods including market, income and cost approaches. Based on these approaches, the College often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The College utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability ofthe inputs used in the valuation techniques, the College is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1 - Valuations for assets and liabilities traded in active exchange markets, such as the New York Stock Exchange. Levell also includes U.S. Treasury and federal agency securities and federal agency mortgage-backed securities, which are traded by dealers or brokers in active markets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third party pricing services for identical or similar assets or liabilities.

Level 3 - Valuations for assets and liabilities that are derived from other valuation methodologies, including option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

For the year ended June 30, 2011, the application of valuation techniques applied to similar assets has been consistent. The College considers the carrying amounts of all financial instruments to be a reasonable estimate of fair value.

The table below presents the balances of assets measured at June 30, 2011 at fair value on a recurring basis.

2011 Total Levell Level 2 Level 3

Cash and money markets 10,009,106 10,009,106 Equity securities 51,460,971 51,460,971 Fixed income securities 17,848,000 4,506,573 13,341,427 Alternative investments 16,103,887 16,103,887 Funds held in trust by others 698,857 698,857 Real estate and REITS 4,886,578 4,886,578

Total assets 10 1,007,399 65,976,650 18,228,005 16,802,744

16


NOTE 9. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Total Levell Level 2 Level 3

Cash and money markets 5,448,732 5,448,732 Equity securities 41,000,390 41,000,390 Fixed income securities 16,760,355 2,722,875 14,037,480 Alternative investments 15,403,890 15,403,890 Funds held in trust by others 631,294 631,294 Real estate and REITS 6,945,729 6,945,729

Total assets 86,190.390 49,171,997 20.983.209 16,035,184

Changes in Level 3 assets and liabilities measured at fair value for the year ended June 30, 2011:

Beginning Investment Purchase, Ending Balance Gain Withdrawal Balance

Alternative investments 15,403,890 699,997 16,103,887 Funds held in trust by others 631,294 67,563 698,857

Total 16,035,184 767,560 16,802,744

Management evaluates securities for other than temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial conditions and near-term prospects of the issuer, and (3) the intent and ability of the College to retain its investments in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. As management has the ability to hold securities for the foreseeable future, no declines are deemed to be other than temporary.

NOTE 10. SUMMARIZED FINANCIAL INFORMATION

The financial statements include certain prior year summarized information in total, but not by net asset category. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles.

NOTE 11. CONCENTRATION OF CREDIT RISK

The College has deposits in various financial institutions insured by the Federal Deposit Insurance Corporation (FDIC). At June 30, 2011 and 2010, the College has in place an additional $500,000 Depositor Surety Bond with Pinnacle Bank Nebraska. Deposits in excess of these insured limits at June 30, 2011 and 2010 were $390,118 and $144,986.

17


NOTE 11. CONCENTRATION OF CREDIT RISK (Continued)

Financial instruments which potentially subject the College to concentrations of credit risk consist primarily of trade receivables with a variety of customers. The College generally does not require collateral from its customers. Such credit risk is considered by management to be limited due to the College's broad customer base and its customers' financial resources.

NOTE 12. CONTINGENCIES

The College has been named in a lawsuit regarding a construction contract. The College believes it has meritorious defenses and intends to vigorously contest any such claims or litigation. The College believes that resolution of this suit will not have a material adverse effect on its financial position.

NOTE 13 RESTRICTED NET ASSETS

Temporarily restricted net assets are available for the following as of June30, 2011 and 2010 respectively:

Contributions for college programs and projects Contributions for endowments

2011

2,818,611 41,666,349 ~<48~!.960

2010

4,886,297 32,324,607 31,2_10 ,904

Permanently restricted net assets are annuity funds and restricted endowments in which the principal is invested in perpetuity. Permanently restricted net assets were $41,120,939 and $40,233,434 at June 30, 2011 and 2010, respectively.

NOTE 14. SUBSEQUENT EVENTS

In preparing the financial statements, the College has evaluated events and transactions for potential recognition or disclosure through September 27,2011, the date the financial statements were available to be issued.

18

ACCOMPANYING INFORMATION

DOANE COLLEGE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

YEAR ENDED JUNE 30, 2011

CFDA Federal Federal Program Title Number Revenues Expenditures

U.S. Department of Education Special Services for Disadvantaged Students 84.042 302,364 302,364

Pell Grant Program 84.063 2,888,505 2,888,505 Federal Work-Study Program 84.033 91,047 91,047 Federal Supplemental Educational

Opportunity Grant Program 84.007 97,756 97,756 Academic Competitiveness Grant 84.375 132,950 132,950 National Smart Grant 84.376 28,000 28,000 TEACH Grant 84.379 187,000 187,000 Perkins Revolving Loan Fund 84.038 1,329,025 1,329,025 Direct Loan Program 84.268 15,182,361 15,182,361

Passed through the Nebraska Department of Education

Leveraging Educational Assistance Partnership 84.069A 12,851 12,851

National Science Foundation Research Instrumentation Grant 47.049 228,840 228,840 Plant Genome Research Grant 47.074 80,301 80,301 F acuIty Early Career Development Grant 47.049 113,717 113,717 Research Infrastructure Improvement Grant 47.081 43,954 43,954

Health and Human Services National Center for Research Resources 93.389 294,209 294,209

Corporation for National and Community Service Learn and Serve America 94.005 2,893 2,893

U.S. Environmental Protection Agency No Stream Left Behind 66.951 9,769 9,769

TOTAL FEDERAL PROGRAMS 21,025,542 21,025,542

19

DOANE COLLEGE NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


NOTE 1. BASIS OF PRESENTATION

The accompanying schedule of expenditures of federal awards includes the federal grant activity of Doane College and is presented on the accrual basis of accounting. The information in this schedule is presented is accordance with the requirements ofOMB Circular A-133, "Audits of States, Local Governments, and Non-Profit Organizations". Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements.

NOTE 2. SUBRECIPIENTS

Doane College provided no federal awards to subrecipients.

20

DOANE COLLEGE 1014 BOSWELL AVENUE

CRETE, NEBRASKA 68333 SFA PROGRAMS - AUDIT INFORMATION

LEAD AUDITOR: Gary R. Pohlmann Permit No. 219120 Dana F. Cole & Company, LLP 1248 0 Street, Suite 500 Lincoln, Nebraska 68508

TELEPHONE NO: (402) 479-9300

The audit was performed between August 15, 2011 and August 18, 2011, and through September 27, 2011, for the final FISAP report at the institution's facilities as follows:

Location

Crete, Nebraska

Lincoln, Nebraska

Lincoln, Nebraska

Description of Facility

Main Campus - Administrative and Student Financial Aid offices

Doane - Lincoln College

Review of Final FISAP Edit Report

Institution's Accrediting Organization:

North Central Association of Colleges and Universities

National Council for Accreditation of Teacher Education

Nebraska Council on Teacher Education

The institution does not utilize a SF A Consultant/Servicer.

Dates Visited

August 15,2011 to

August 18,2011

August 15,2011 to

August 18,2011

September 27, 2011

Records for the accounting and administration of the SF A programs are located at 1014 Boswell Avenue, Crete, Nebraska 68333.

21




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 Doane College Crete, Nebraska

We have audited the financial statements of Doane College as of and for the year ended June 30, 2011, and have issued our report thereon dated September 27, 2011 , 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.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered Doane College'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 Doane College's internal control over financial reporting. Accordingly, we do not express an opinion on the effectiveness of the Organization's internal control over financial reporting.

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 entity'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 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.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Doane College's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, 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.

22

This report is intended solely for the information and use of the Board of Trustees, audit committee, management, others within the College and federal awarding agencies and is not intended to be and should not be used by anyone other than these specified parties.

Lincoln, Nebraska September 27, 2011

23




INDEPENDENT AUDITORS' 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 Doane College Crete, Nebraska

Compliance

We have audited Doane College's compliance with the types of compliance requirements described in the OMB Circular A-133 "Compliance Supplement" that could have a direct and material effect on each of Doane College's major federal programs for the year ended June 30, 2011. Doane College's major federal programs are identified in the summary of auditors' 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 Doane College's management. Our responsibility is to express an opinion on Doane College'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 Govermnent Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, "Audits of States, Local Govermnents, 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 Doane College'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 of Doane College's compliance with those requirements.

In our opinion, Doane College complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2011.

Internal Control Over Compliance

Management of Doane College is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered Doane College's internal control over compliance with the requirements that could have a direct and material effect on a major federal program to determine the 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 Doane College's internal control over compliance.

24

A deficiency in 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 the Board of Trustees, audit committee, management, others within the organization and federal awarding agencies and is not intended to be and should not be used by anyone other than these specified parties.

Lincoln, Nebraska September 27,2011

25

DOANE COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS


SECTION 1. SUMMARY OF AUDITORS' RESULTS

Financial Statements

Type of auditors' report issued:

Internal control over financial reporting:

Material weakness identified:

Significant deficiencies identified that are not considered to be material weaknesses:

Noncompliance matter to the financial statements disclosed:

Federal Awards

Internal control over major programs:

Material weakness identified:

Significant deficiencies identified that are not considered to be material weaknesses:

Type of auditors' report issued on compliance for major programs:

Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133:

Identification of major programs:

Pell Grant Program Federal Supplemental Education

Opportunity Grant Federal Work-Study Academic Competitiveness Grant Federal Direct Student Loan Program Perkins Loan Program

26

Unqualified

_Yes ~No

_Yes ~None reported

_Yes ~No

_Yes ~No

_Yes ~None reported

Unqualified

_Yes ~No

84.063

84.007 84.033 84.375 84.268 84.038

DOANE COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS


SECTION I. SUMMARY OF AUDITORS' RESULTS (Continued)

Identification of major programs: (Continued)

National Science and Mathematics Access to Retain Talent Grant

Teacher Education Assistance for College and Higher Education Grant

Mathematical and Physical Sciences Special Services for Disadvantaged Students

Dollar threshold used to distinguish between type A and type B programs:

Auditee qualified as a low-risk auditee:

SECTION II. FINANCIAL STATEMENT FINDINGS

None reported.

84.376

84.379 47.049 84.042

$300,000

--.2L Yes _No

SECTION III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

None reported.

27

DOANE COLLEGE PRIOR AUDIT FINDINGS AND RECOMMENDATIONS

There were no prior year audit findings and recommendations that required resolution by Doane College for the year ended June 30, 2010.

28

doane college financial statements june 30, … · doane college financial statements june 30, ......

Documents