Financial Section

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THOMAS L. WAGNER, JR.. CPASTATE AUDITOR

(803) 253-4160FAX (803) 343-0723

November 22, 2000

The Honorable James H. Hodges, Governorand

Members of the Board of TrusteesCollege of CharlestonCharleston, South Carolina

This report on the audit of the financial statements of the College of Charleston for the fiscalyear ended June 30, 2000, was issued by Rogers & Laban, PA, Certified Public Accountants, undercontract with the South Carolina Office of the State Auditor.

If you have any questions regarding this report, please let us know.

TL Wjr/trb

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1401 MAIN STREEf. sum 1200COLUMBIA, S.C.29201

State Auditor t/

INDEPENDENT AUDITOR'S REPORT

Mr. Thomas L. Wagner, Jr., CPAState Auditor

State of South CarolinaColumbia, South Carolina

We have audited the accompanying basic financial statements of the College of Charleston (theCollege) as of June 30. 2000, and for the year then ended as listed in the table of contents. Thesefinancial statements are the responsibility of the College's management. Our responsibility is toexpress an opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards. Those standardsrequire that we plan and perform the audit to obtain reasonable assurance about whether thefinancial 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 includesassessing the accounting principles used and significant estimates made by management, as well asevaluating the overall financial statement presentation. We believe that our audit provides areasonable basis for our opinion.

As discussed in Note 1 to the financial statements, the accompanying basic financial statements ofthe College are intended to present the financial position, changes in fund balances and currentfunds revenues, expenditures, and other changes of only that portion of the funds of the State ofSouth Carolina financial reporting entity that is attributable to the transactions of the College, aninstitution of the State of South Carolina. These financial statements do not include other agencies,institutions, departments, or component units of the State of South Carolina primary government.

In our opinion, the basic financial statements referred to above present fairly, in all material respects,the financial position of the College at June 30, 2000, and the changes in fund balances and currentfunds revenues. expenditures, and other changes and the results of operations and cash flows of itscomponent unit for the year then ended in conformity with generally accepted accounting principles.

These financial statements exclude the related parties described in Note 18 from the reporting entitybecause the College is not financially accountable for this entity. As part of its affiliatedorganizations project. the Governmental Accounting Standards Board (GASB) is currently studyingother circumstances under which related entities that do not meet the financial accountability criteriawould be included in the financial reporting entity.

As discussed in Note 23, effective July 1, 1999, the College implemented accounting changesregarding functional category classification of certain expenditures and the revenue classification foramounts received from private gifts and non-governmental sources and began capitalizing internal-use computer software costs.

1529 HAMPTON STREET, SUITE 200 .COLUMBIA, SC 29201 .(803) 779-5870 .FAX (803) 765-0072 .E-MAIL: ROGLAB@USIT.NE

SCACPA(A!:c:pA)

16

CERTIFIED PUBLIC ACCOUNTANTS AND FINANCIAL CONSULTANTS

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Sec'uritieJ Offered Thrc)U,lIh 1,,1 Glol",1 IIl,'urallc'e Sen.;c'e" qtfered 71,roughCapital Ct)IP Member NASD. SIPC 1,,1 Glt)bal IIl,\ltralll'e Sen.;t'e. IIll',

The information presented in the Introductory and Statistical Sections is presented for purposes ofadditional analysis and is not a required part of the financial statements. Such information has notbeen subjected to the auditing procedures applied to the audit of the financial statements and,accordingly, we express no opinion on it.

~., Ldr:.- , P./J.

October 12, 2000

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COLLEGE OF CHARLESTON BALANCE SHEET

Current Funds

Loan

Funds

Endowment

FundUnrestricted Restricted

$ 13,787,240 $ $ 341,141 $ 98,763

2,213,669642, 192

67,619

864,241

1,983,766

1,966 245

2,081,303

307,039

ASSETSCash and cash equivalentsAccounts receivable, net of provision fordoubtful accounts $150,000

Grants and contracts receivablePrivate gifts receivableInterest/investment and endowment income receivablePrepaid itemsInventoriesStudent loans receivableCapital improvement bonds proceedsreceivable

Due from Restricted Current FundsLand and improvementsBuildings and improvementsEquipmentLibrary books and materialsComputer software

Less accumulated depreciaitionConstruction in progress

TOTAL ASSETS $ 19,223,574 $ 644, 158 $ 2,422,689 $ 98,763

$ 3,081 ,0113,142,344

$ 139,22047,440

$ 6,078 $

2,142,379959,946

2,371,561

307,039

7,526,333 150,459 2,416,611 98,763

LIABILITIES & FUND BALANCESAccounts payable and accrued expensesAccrued payroll and related liabilities

Retainages payableDeferred and unearned student revenuesStudent depositsCompensated absences payable andrelated liabilities

Due to Unrestricted Current FundsDeposits held for othersAccrued interest payableObligation under capital leaseBonds payableFund balancesNet investment in plant

TOT AL LIABILITIES and FUND BALANCES $ 19,223,574 $ 644, 158 $ 2,422,689 $ 98,763

See accompanying Notes to Financial Statements.

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June 30, 2000with totals as of June 30, 1999

Plant Funds

Agency

Funds

Investment

in Plant

T otals

(Memorandum Only)2000 1999Unexpended

$ 20,690,348 $ 1,079,621 $ $ 136,819 $ 36, 133,932 $ 34,535,839

6,468 2,220, 137642, 192

6,259,565205,576866,341

1,983,7662,081,303

3,019,686366,751559,565120,879689,175

1,594,3882,052,459

6,259,565125,675 10.071

2,100

27,824, 127 27,824,127307,039

21,893,596107 ,965,360

6, 780,20317,245,383

224,246

(22,425)1,667,978

12,878,23680,374

21,893,596100,905,900

6,415,16616,154,621

21,893,596

1071965,360

6, 780,203

17,245,383

224,246

(22,425)1,667,978 2,512,752

$ 54,899,715 $ 1,089,692 $ 155,754,341 $ 145,387 $ 234,278,319 $ 2031779,387

$ 543,514 $ $1,363 $ 45,79315,939

$ 3,816,9793,205, 723

194,9562, 142,379

959,946

$ 3,238,5722,834,075

7,3122,224, 1411,099,692

194,956

2,371,561307,03983,655

333,73056,156

19,385,00065, 108,010

136,313, 185

2,358,245

80,374

97,627354, 739

134,243

20,635,000

43,602,575

127, 112,792

83,655333, 730

56, 15619,385,000

54,161,245 754,599

136,313,185

$ 54,899, 715 $ 1,089,692 $ 155,754,341 $ 145,387 $ 234,278,319 $ 203,779,387

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COLLEGE OF CHARLESTON

STATEMENT OF CURRENT FUNDS REVENUES,

EXPENDITURES, AND OTHER CHANGESFor the year ended June 30, 2000with totals for the year ended June 30, 1999

REVENUES:Tuition and related feesState appropriationsFederal grants and contractsState grants and contractsLocal grants and contractsNon-governmental grants and contracts -restrictedPrivate giftsPrivate gifts for auxiliariesEducational activities revenuesStudent organizations generated revenuesAuxiliary enterprises interest/investment incomeSales and services of auxiliary enterprisesEndowmentincome ,

Other sourcesTOTAL CURRENT REVENUES

EXPENDITURES AND MANDATORY TRANSFERS:Educational and general:InstructionResearchPublic serviceAcademic support-libraryAcademic support-otherStudent servicesInstitutional supportOperation and maintenance-physical plantStudent aid and scholarships

TOTAL EDUCATIONAL AND GENERAL EXPENDITURES

Mandatory transfers for:Principal and interestLoan fund matching contribution

TOTAL EDUCATIONAL AND GENERAL

Auxiliary enterprises:ExpendituresMandatory transfers for principal and interest

TOT AL AUXILIARY ENTERPRISES

TOTAL EXPENDITURES AND MANDATORY TRANSFERS

EXCESS REVENUES OVER EXPENDITURES AND MANDATORY TRANSFERS

OTHER TRANSFERS AND ADDITIONS (DEDUCTIONS):Non-mandatory transfers to Unexpanded Plant FundIndirect cost remitted to State General FundExcess of restricted receipts over (under) transfers to revenues

NET INCREASE (DECREASE) IN FUND BALANCES

See accompanying Notes to Financial Statements.

22

Unrestricted$ 47,313,630

31,611,470371,816

200,000533,466686,008249, 133

20, 153,598

1,307,934102,427,055

Totals

$1999~~~6~~t,~~~33,416, 73531,216,808

780,05719, 134

224,4441 ,014,946

195,000505,685706,003199, 183

19,573,8147,500

1,232,813132,713,925

37,958,262897,897

1,010,1023,664,6194,946,2774,939,9778,301,313

11 ,050,6292,322, 197

75,091,273

1,164,8202,110,354

469,451

39, 123,0823,008,2511,479,5533,664,6194,946,2774,939,9778,301,313

11,050,62938,436,102

114,949,803

34,902,8222, 704,8541,212,3873,423,8664,787,8314,617,1077,265,708

10,542,97436, 184,476

105,642,02536, 113,90539,858,530

1 ,095,631

9,716

116,055,150

1,024,302

13,261

106,679,588

1,095,6319,716

76,196,620 39,858.530

18, 164,7301,696,613

19,861,343

135,916,493

6,369,092

16,808, 7871 ,698,845

18,507,632

125, 187,220

7,526,705

18,164,7301,696,613

19,861,343

96,057,963

6,369,092

39,858,530

(7,991,921)

(33,213)

(56,844)

$ (555,273)

(6,373,641)

(17,321)

(6,373,641 )(17,321)(17,697)

$ (39,567)(17,697)

$ (17,697)$ (21,870)

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2000

Restricted

$

4,943,305

32,863,321

663,089

8,991

294,539

1,079,044

6,241

39,858,530

Totals$ 471313,630

36,554,77533,235, 137

663,0898,991

294,5391 ,0791044

200,00053314666861008249, 133

20, 153,5986,241

1,307 ,9341421285,585

body including situations in which the votingmajority consists of the primary entity's officialsserving as required by law (e.g., employees whoserve in an ex offico capacity on the componentunit's board are considered appointments by theprimary entity) and ( 1) it is able to impose its willon that organization or (2) there is a potential forthe organization to provide specific financialbenefits to, or impose specific financial burdenson, the primary entity .The primary entity alsomay be financially accountable if an organizationis fiscally dependent on it even if it does notappoint a voting majority of the board. Anorganization is fiscally dependent on the primarygovernment or entity that holds one or more ofthe following powers:

COLLEGE OF CHARLESTONNOTES TO FINANCIAL STATEMENTSJune 30, 2000

NOTE 1 -SUMMARY OFSIGNIFICANT ACCOUNTINGPOLICIES

(1)

The Governmental Accounting Standards Board(GASB) is the recognized standard-setting bodyfor generally accepted accounting principles(GAAP) for all state governmental entitiesincluding colleges and universities. The financialstatements of the College have been preparedin accordance with GAAP, as outlined inGovernmental Accounting Standards Board(GASB) Statement No.15. That statementpermits the entity to use the American I nstituteof Certified Public Accountants (AICPA) CollegeGuide model. The AICPA College Guide modelis the accounting and financial reportingguidance as defined by the AICPA IndustryAudit Guide, Audits of Colleges and Universities,as amended by the AICPA Statement of Position(SOP) 74-8, Financial Accounting and Reportingby Colleges and Universities, as modified byapplicable Financial Accounting StandardsBoard (FASB) pronouncements issued throughNovember 30, 1999, and as modified by allapplicable GASB pronouncements. A summaryof significant accounting policies follows:

(2)

(3)

Determines its budget without anothergovernment's having the authority toapprove or modify that budget.Levies taxes or sets rates or chargeswithout approval by another

government.Issues bonded debt without approval byanother government.

The organization is fiscally independent if itholds all three of those powers. Based on thesecriteria, the College has determined it is not acomponent of another entity and it has nocomponent units. This financial reporting entityis the College, a primary entity .

Prima~ EntitYThe College is a State-supported coeducationalinstitution of higher education. The College isgranted an annual appropriation for operatingpurposes as authorized by the South CarolinaGeneral Assembly. The appropriation asenacted becomes the legal operating budget forthe institution. The Appropriation Act authorizesexpenditures from funds appropriated from theGeneral Fund of the State and authorizesexpenditures of total operating funds. The lawsof the State and the policies ahd proceduresspecified by the State for State agencies andinstitutions are applicable to the activities of theCollege. The College was established as aninstitution of higher education by Section 59-101-20 of the Code of Laws of South Carolina.The College is part of the primary government ofthe State of South Carolina and its funds arereported in the State's higher education funds inthe Comprehensive Annual Financial Report ofthe State of South Carolina. Generally all Statedepartments, agencies, and colleges are

Reporting Enti~The core of the financial reporting entity is theprimary government which has a separatelyelected governing body. As required bygenerally accepted accounting principles, thefinancial reporting entity includes both theprimary government and all of its componentunits. Component units are legally separateorganizations for which the elected officials ofthe primary government are financiallyaccountable. In turn component units may havecomponent units.

An organization other than a primarygovernment may serve as a nucleus for areporting entity when it issues separate financialstatements. That organization is identified hereinas a primary entity .

A primary government or entity is financiallyaccountable if its officials or appointees appointa voting majority of an organization's governing

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included in the State's reporting entity .Theseentities are financially accountable to and fiscallydependent on the State. Although the State-supported universities operate somewhatautonomously. they lack full corporate powers.In addition, the Governor and/or the GeneralAssembly appoints most of their board membersand budgets a significant portion of their funds.

match gifts and grants; or required matching ofcertain federal loan programs. All other interfundtransfers are reported as nonmandatorytransfers. Non-mandatory transfers are made atthe discretion of the governing body for variouspurposes. They may include the retransfer ofunexpended resources to the fund which initiallyprovided the monies.

The Board of Trustees, whose members areappointed by the Governor with the advice andconsent of the Senate, is the governing body ofthe College. The Board administers, hasjurisdiction over, and is responsible for themanagement of the College.

To the extent that current funds are used tofinance plant assets, the amounts so providedare accounted for as (1) expenditures, in thecase of alterations and renovations andpurchases and normal replacement of movableequipment, library materials and books andcomputer software developed or obtained forinternal use; (2) mandatory transfers in the caseof required provisions; and (3) transfers of anon-mandatory nature in all other cases.

The accompanying financial statements presentthe financial position, changes in fund balances,and current funds revenues, expenditures, andother changes of only that portion of the funds ofthe State of South Carolina that is attributable tothe transactions of the College.

Fund Accountina -Colleae FundsFund accounting is the procedure by whichresources for various purposes are classified foraccounting and reporting purposes into fundsthat are in accordance with specified activities orobjectives in accordance with limitations andrestrictions imposed on sources outside theinstitution or in accordance with directionsissued by the governing board. Separateaccounts are maintained for each fund;however, in the accompanying financialstatements, funds that have similarcharacteristics have been combined into fundgroups and subgroups. Accordingly, all financialtransactions have been recorded and reportedby fund group and subgroup.

Basis of AccountingThe financial statements of the College havebeen prepared on the accrual basis except that,in accordance with accounting practicescustomarily followed by governmentaleducational institutions, no provision is made fordepreciation of physical plant assets, interest onloans to students is recorded when collected,and revenue from tuition and student fees forsummer sessions is reported totally within thefiscal year in which the session is primarilyconducted. Otherwise, revenues are reported inthe accounting period when earned and becomemeasurable and expenditures when materials orservices are received or when incurred, ifmeasurable. Unrestricted state appropriationsare recognized as revenue when received ormade available. The statement of current fundsrevenues, expenditures, and other changes is astatement of financial activities of current fundsrelated to the current reporting period. Thestatement does not purport to present the resultsof operations or the net income or loss for theperiod as would a statement of income or astatement of revenue and expenses.

Within each fund group, fund balances restrictedby outside sources are so indicated and aredistinguished from unrestricted funds allocatedto specific purposes by action of the governingboard. Externally restricted funds may beutilized only in accordance with the purposesestablished by the source of such funds and arein contrast with unrestricted funds, over whichthe governing board retains full control to use inachieving any of its institutional purposes.

All realized gains and losses arising from thesale, collection, or other disposition ofinvestments and other noncash assets areaccounted for in the fund that owns such assets.Ordinary income derived from investments,receivables, and the like is accounted for in thefund owning such assets, except for incomederived from investments of endowment funds

Transfers are amounts moved between fundgroups/subfund groups to be used for theobjectives of the recipient fund. Mandatorytransfers are limited to those arising out ofbinding legal arrangements related to financingthe educational plant (e.g.. construction. repairs.debt amortization. and interest); agreements to

25

which is accounted for in the fund to which it isrestricted. Unexpended income on endowmentfund assets remain in the fund in which theincome was initially reported. All otherunrestricted revenues are accounted for inunrestricted current funds. Restricted gifts,grants, appropriations, endowment income, andother restricted resources are accounted for inthe appropriate restricted funds.

institutional matching grants. Loan funds havebeen divided into those provided by the federalgovernment and those provided by othersources. Expenditures include costs of loancollections, loan cancellations, andadministrative costs under the federal loanprograms. To the extent that current funds areused to meet required provisions for grantmatching, they are accounted for as mandatorytransfers.

The Current Funds group includes thoseeconomic resources which are expendable foroperating purposes to perform the primarymissions of the College, which are instruction,research, and public service. For a moremeaningful disclosure, the current funds aredivided into two subgroups: unrestricted andrestricted. Separate accounts are maintainedfor auxiliary enterprises operations. Currentfunds are considered unrestricted unless therestrictions imposed by the donor or otherexternal agency are so specific that theysubstantially reduce the College's flexibility intheir utilization. Unrestricted gifts are recognizedas revenue when received and otherunrestricted resources are recorded as revenuewhen earned. Receipts that are restricted arerecorded initially as additions to restricted fundbalances and recognized as revenue to theextent that such funds are expended for therestricted purposes during the current fiscal yearand met all related requirements. Revenue fromearmarked student activity fees for student clubsand groups are reported in the unrestrictedcurrent fund.

The Endowment Fund is a singular endowmentheld by the State Treasurer of South Carolina.Endowment funds are subject to the restrictionsof gift instruments requiring in perpetuity that theprincipal be invested and the income only beutilized for the restricted purpose. The term"principal" is construed to include the originalvalue of an endowment and subsequentadditions and realized and unrealizedgains/losses attributable to investmenttransactions. Other endowments are held by theCollege of Charleston Foundation for the benefitof the College. These endowments includeterm, quasi-endowment, and pure endowmentfunds and are subject to the restrictions imposedby various donors. The College of CharlestonFoundation is reported herein (Note 18) as arelated party .

The Plant Funds group consists of three self-

balancing subgroups: ( 1) unexpended plantfunds, (2) funds for retirement of indebtedness,and (3) investment in plant. The unexpendedplant fund subgroup accounts for the resourcesderived from various sources to finance theacquisition of long-Iife assets and to provide forroutine renewal and replacement of existingplant assets and debt related to unexpendedresources are included in this subgroup.Receipts legally designated solely for plantimprovements or renewals and replacementsare recorded directly in the College's plant fundsas revenue. The retirement of indebtednesssubgroup accounts for resources that arespecifically assessed and/or specificallyaccumulated for interest and principal payments,debt service reserve funds, other debt servicecharges related to plant fund indebtedness(except for capital lease obligations), and federalinterest subsidies. The investment in plantsubgroup accounts for all long-Iife assets in theservice of the College, all construction inprogress, and related debt for funds borrowedand expended for the acquisition of plant assetsincluded in this fund subgroup. Net investment

Current Funds Auxiliary Enterprises areessentially self-supporting business entities andactivities that exist for the purpose of furnishinggoods and services primarily to students, faculty ,staff, or departments and for which charges aremade that directly relate to such goods andservices. Revenue and expenditures arereported separately as unrestricted currentfunds. Assets, liabilities, and fund balances arecombined with other unrestricted current fundsfor reporting purposes; however, each separateenterprise maintains its own assets, liabilities,and fund balance. Auxiliary enterprises activitiesinclude athletics, housing, bookstore, foodservices, student health services, parking,rentals, and vending machine operations.

The Loan Funds group accounts for theresources available for loans to students fromdonors, government agencies, and mandatory

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in plant represents the excess of the carryingvalue of plant assets over the related liabilities.

leave up to the maximum, but are not entitled toany payment for unused sick leave. Thecompensated absences liability includesaccrued annual leave earned for which theemployees are entitled to paid time off orpayment at termination. The College calculatesthe compensated absences liability based onrecorded balances of unused leave for which theemployer expects to compensate employeesthrough paid time-off or cash payments attermination. That liability is inventoried at fiscalyear-end current salary costs and the cost of thesalary-related benefit payments and is recordedin unrestricted current funds. The net change inthe liability is recorded in the current year in theapplicable current funds functional expenditure

categories.

The Agency Funds group accounts for theassets held on behalf of others in the capacity ofcustodian or fiscal agent; consequently,transactions relating to agency funds do notaffect the operating statements of the College.They include the accounts of students, relatedstudent and professional organizations, andother groups directly associated with the

College.

Use of EstimatesThe preparation of financial statements inconformity with generally accepted accountingprinciples requires management to makeestimates and assumptions that affect thereported amounts of assets, liabilities, revenues,and expenditures/expenses and affect'disclosure of contingent assets and liabilities atthe date of the financial statements. Actualresults could differ from those estimates.

Investment in PlantPhysical plant assets and equipment, except forthose assets acquired prior to July 1, 1970 orunder capital leases, are stated at cost at thedate of acquisition or fair market value at thedate of donation in the case of gifts. Plantassets and equipment acquired prior to July 1,1970 are stated at historical cost whendeterminable or at estimated historical cost.Capital assets purchased through installmentpurchase contracts are capitalized in theinvestment in plant funds subgroup in the year ofacquisition at their total cost, excluding interestcharges. Plant assets and equipment acquiredunder capital leases are stated at the lower ofthe present value of minimum lease payments,including the down payment, at the beginning ofthe lease term or fair value at the inception ofthe lease. Payments of principal, interest andother costs on such installment contracts arerecorded in the applicable educational andgeneral expenditure categories of the currentfunds group as the installments are paid.

Indirect Cost Recoveries

Infrastructure assets include streets, sidewalks,parking lots, drainage systems, lighting systems,utility systems, and similar assets that areimmovable and of value only to the College arereported as land improvements and valued atcost.

Compensated AbsencesGenerally all permanent full-time Stateemployees and certain part-time employeesscheduled to work at least one-half of theagency's workweek are entitled to accrue andcarry forward at calendar year-end maximums of180 days of sick leave and of 45 days annualvacation leave, except that faculty members donot accrue annual leave. Upon termination ofState employment, employees are entitled to bepaid for accumulated unused annual vacation

Construction expenditures are recorded at costin the unexpended plant funds when incurredand simultaneously capitalized at totalexpenditures less noncapitalized costs asconstruction in progress in the investment inplant funds subgroup. Upon completion of aproject, the costs are capitalized in the

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The College records restricted current fundsrevenue for governmental grants and contractsin amounts equal to direct costs incurred. TheCollege reports as unrestricted revenuerecoveries of indirect costs applicable tosponsored programs at negotiated fixed rates foreach year. The recoveries are also recorded asadditions and deductions of restricted currentfunds. Indirect cost recoveries must be remittedto the State General Fund except those receivedunder research and student aid grants whichmay be retained by the College. Also, federalgrants and contracts whose annual award is twohundred thousand dollars or less are exemptedfrom the requirement to remit recoveries to theState General Fund. For fiscal year 2000, theCollege remitted $17,321 of indirect cost to theState General Fund.

appropriate asset accounts in investment in

plant.CaRitalized InterestThe College capitalizes as a component ofconstruction in progress interest cost in excessof earnings on debt associated with the capitalprojects. Therefore asset values in theinvestment in plant subgroup do include suchinterest costs. There was no capitalized interestfor the current fiscal year.

Library books, periodicals, microfilms, and otherlibrary materials on computer data storagedevices are recorded at cost when purchased orfair market value at the date of donation.

Effective beginning fiscal year 2000, computersoftware costs to be capitalized include theexternal direct costs of materials and servicesconsumed in developing or obtaining internal-use computer software, payroll and payroll-related costs for employees who are directlyassociated with and who devote time to theinternal-use computer software project; interestcosts incurred when developing computersoftware; and costs to develop or obtainsoftware that allows for access or conversion ofold data by new systems. These costs areincurred during the application developmentstage. The costs of computer softwaredeveloped or obtained for internal use areamortized on a straight-Iine basis over anestimated useful life of five years. See Note 23regarding the related accounting change.

Information Technolog~ CostsNon-capitalized information technology (IT)costs related to the College's mission ofinstruction, research and public service arebudgeted and reported in the academic supportfunctional expenditure category .All other non-capitalized IT costs are budgeted and therelated costs are reported in the institutionalsupport functional expenditure category.

Capitalized IT costs are reported in theapplicable functional expenditure categories inthe unrestricted current funds.

Deferred and Unearned Student

RevenuesIn unrestricted current funds, deferred andunearned revenues consist of receipts collectedin advance which have not been earned.These revenues include primarily student tuitionand fees and room and board collected inadvance for the summer and fall academicterms. Revenues are recognized in the period inwhich the sessions are predominantly conductedand services are provided or the semester forwhich the fee is applicable and earned.

Current funds expenditures for acquisition ofcapital assets are simultaneously recorded inboth the current funds expenditure accounts ofthe various operating departments and in theinvestment in plant funds subgroup.

The College capitalizes major additions andrenovations to plant assets; qualifyingequipment and software with a unit value inexcess of $5,000 and a useful life in excess ofone year; and all library books and materialsregardless of cost.

Student DeRositsStudent deposits represent dormitory roomdeposits, security deposits for possible roomdamage and key loss, other deposits, andstudent fee refunds. Student deposits arerecognized as revenue during the semester forwhich the fee is applicable and earned when thedeposit is nonrefundable to the student underthe forfeit terms of agreement.

When plant assets and equipment are sold,retired, or otherwise disposed of, the carryingvalue at cost, estimated historical cost, or fairmarket value at date of gift, where applicable, isremoved from the investment in plant subgroup.Library books and materials are disposed ofwhen they no longer serve the needs of theCollege at amounts based on the average costat the beginning of each fiscal year of similarlibrary books and materials. When capitalizedinternal use software is retired, the unamortizedbalance is removed. In accordance withpractices followed by governmental educationalinstitutions, depreciation on physical plantassets and equipment is not recorded.

Fee WaiversStudent tuition and fees revenues include allsuch amounts assessed against students (net ofrefunds) for educational purposes even in thosecases in which there is no intention of collection.These revenue amounts are offset by equalexpenditures. The amounts of such remissionsor waivers are recorded and classified asstudent aid and scholarships expenditures or as

28

staff benefits in the applicable current fundsfunctional expenditure categories. State lawprovides that educational fee waivers may beoffered to no more than two percent of theundergraduate student body.

The State's internal cash management poolconsists of a general deposit account andseveral special deposit accounts. The Staterecords each fund's equity interest in the generaldeposit account; however, all earnings on thataccount are credited to the General Fund of theState. The College records and reports itsdeposits in the special deposit accounts at fairvalue. Investments held by the pool arerecorded at fair value. Interest earned by theCollege's special deposit accounts is posted toits account at the end of each month and isretained. 1nterest earnings are allocated basedon the percentage of the College's accumulateddaily interest income receivable to the totalincome receivable of the pool. Reported incomeincludes interest earnings at the stated rate.realized gains/losses, and unrealizedgains/losses arising from changes in the fairvalue on investments held by the pool. Realizedgains and losses are allocated daily and areincluded in the accumulated income receivable.Unrealized gains and losses are allocated atyear-end based on the College's percentageownership in the pool.

Educational Activities RevenueRevenues from sales and services ofeducational activities generally consist ofamounts received from instructional, laboratory ,research, and public service activities thatincidentally create goods and services whichmay be sold to students, faculty, staff, and thegeneral public. The College receives suchrevenues primarily from the operation of theEarly Childhood Development Center and SottileAuditorium.

Pregaid ItemsExpenditures for rental of property, travel andother similar services paid for in the current orprior fiscal years and benefiting more than oneaccounting period are allocated amongaccounting periods. For the year ended June 30,2000, amounts reported in this asset accountconsist primarily of rent for the sports complex(see Note 6), operational expenditures for theGovernor's School, and deposits for librarypurchases and travel reservations.

For credit risk information pertaining to theState's internal cash management pool, see thecash and deposits disclosures (Note 15).

Some State Treasurer accounts are not includedin the State's internal cash management poolbecause of restrictions on the use of the funds.For those accounts, cash equivalents includeinvestments in short-term, highly liquid securitieshaving an initial maturity of three months or lessat the time of acquisition.

Cash and Cash EauivalentsThe amounts shown in the financial statementsin College funds as "cash and cash equivalents"represent petty cash, cash on deposit in banks,cash on deposit with the State Treasurer, andcash invested in various instruments by theState Treasurer as part of the State's internalcash management pool.

For the College's funds not held by the StateTreasurer, cash equivalents include threedemand deposit accounts.

Most State agencies including the Collegeparticipate in the State's internal cashmanagement pool. Because the cashmanagement pool operates as a demanddeposit account, amounts invested in the poolare classified as cash and cash equivalents.The State Treasurer administers the cashmanagement pool. The pool includes somelong-term investments such as obligations of theUnited States and certain agencies of the UnitedStates, obligations of the State of SouthCarolina and certain of its political subdivisions,certificates of deposit, collateralized repurchaseagreements, and certain corporate bonds.

Rebatable ArbitrageArbitrage involves the investment of proceedsfrom the sale of tax-exempt securities in ataxable investment that yields a higher rate,resulting in income in excess of interest costs.Federal law requires entities to rebate to thegovernment such income on tax-exempt debtissued. Governmental units may avoid therequirement to rebate the "excess" earnings tothe federal government under certaincircumstances, if they issue no more than $5million in total of all such debt in a calendar year

29

or if they meet specified targets forexpenditures of the proceeds and interestearnings thereon. For this purpose, tax-exemptindebtedness includes bonds and certain capitalleases and installment purchases. The federalgovernment only requires arbitrage becalculated, reported, and paid every five yearsor at maturity of the debt, whichever is earlier.However, the potential liability is calculatedannually for financial reporting purposes.Arbitrage expenditures are valued using therebate method by professional firms contractedby the State Treasurer. The expenditure andliability , if any, are recorded in the retirement ofindebtedness subgroup and a reserve fund toliquidate the liability is established.

in accordance with

accounting principles.generally accepted

To enhance comparability, some prior yearamounts have been reclassified to conform withthe current year financial statement presentationas described in Note 1 and have been restatedfor the matters discussed in Note 23.

Income TaxesThe College is a political subdivision of the Stateof South Carolina and is exempt from federaland state income taxes.

NOTE 2 -STATE APPROPRIA TIONS

The College is granted an annual appropriationfor operating purposes as authorized by theGeneral Assembly of the State of SouthCarolina. State appropriations are recognized asrevenue when received and available. Amountsthat are not expended by fiscal year-end lapseand are required to be returned to the GeneralFund of the State unless the College receivesauthorization from the General Assembly tocarry the funds over to the next year.

Comparative Amounts and Totals

(Memorandum Only) Columns~Amounts in the "Totals" ("Memorandum Only")columns of the balance sheet and the statementof changes in fund balances present anaggregation of financial statement line-items tofacilitate financial analysis. Such amounts arenot comparable to a consolidation and do notpresent financial information in conformity withGAAP. Interfund eliminations have not beenmade in the aggregation of this data except forexpenditure reimbursements.

The original appropriation is the College's basebudget amount presented in the General Fundscolumn of Section SE of Part 1A of the 1999-2000 Appropriation Act. The following is areconciliation of the original appropriation asenacted by the General Assembly to stateappropriations revenue reported in the financialstatements for the fiscal year ended June 30,2000:

Comparative amounts and totals for the prioryear are included to provide a summarizedcomparison with current year amounts. Theprior year totals are not intended to present allof the information necessary for a fairpresentation of financial position and operations

30

$25,928,107Original Appropriation

State Budget and Control Board Allocations:Employee Base Pay Increase and Related Employee Benefits (Proviso 63C. 10)Matching Contributions to 401 (K) Deferred Compensation Plan (Proviso 72.48)

808,34515,956

7,521956, 793

30,494 (A)2,819,031 (A)

1 ,500 (A)85, 786 (A)

3,346,213

State Commission on Higher Education Allocations:Access and Equity {Proviso 5A.6)Performance Funding {Proviso 5A.19)Need-Based Student GrantsLIFE Scholarships {1998 Act 418)STAR Scholarships {EIA Funding)Academic Endowment Incentive Match {Code of Laws 59-118-40)From Supplemental Appropriations of Surplus 1999 State GeneralFund Revenues {Part IV of the 2000 Appropriation Act) for:Access and EquityPerformance FundingAcademic Endowment Incentive Match

From Capital Reserve Fund Appropriations {August 1999Joint Resolution R201, H3697) for:Performance Funding

From Children's Education Endowment Fund for:Palmetto Fellows ScholarshipsNeed-Based Student Grants

1, 167,621 (A)731.642 (A)

Revised Appropriation -Legal Basis 36,554,775

Less: Higher Education GranUScholarship Funding ReportedIn Restricted Current Funds 4.943.305 (A)

Funding Reported in Unrestricted Current Funds $31,611,470

Proviso 72.48 of the 1999-2000 AppropriationAct authorized each agency to bring forwardunspent State General Fund appropriations fromthe prior year into the current fiscal year up to amaximum of ten percent of its originalappropriation less any appropriation reductions.Agencies which have separate carry-forwardauthority had to exclude the amount broughtforward by such separate authority from theirbase for purposes of calculating the ten percentcarry-forward. Pursuant to this proviso, theCollege brought forward $2, 754, 144.

From supplemental appropriations authorized byPart IV of the 2000 Appropriations Act to theState Commission on Higher Education, theCollege received $101,800 to fund certain grantsprojects. In addition to the appropriationsrevenue, the College received the followingState grants and contracts:

.

$479,07161,721.

.

40,07221,000

Proviso 72.44 of the 2000-2001 AppropriationAct authorizes agencies to carry forwardunspent appropriations up to a maximum of tenpercent with limitations similar to those for theprior year. Pursuant to this proviso, the Collegecarried forward $2,654,315 to fiscal year 2001.

State Department ofEducationUniversity of South CarolinaSouth Carolina Departmentof Natural ResourcesSouth Carolina Arts CommissionEducation OversightCommitteeOther

.

.

15,00016.017.

31

24, 191524,344107,231(A)

$714,681 of the revenue from appropriationsand State grants and contracts is recorded in therestricted current funds and the remaining$20,000 is recorded in the unexpended plantfund. The $20,000 is to be used for installingnew windows as part of the Avery renovation

project.

Budget and Control Board, the bond proceedsare allocated to the projects. When the fundsare authorized, the College records theproceeds as revenue in the unexpended plantfund subgroup. These authorized funds can berequested as needed once State authoritieshave given approval to begin specific projects.The College is not obligated to repay thesefunds to the State. The total balance receivablefor the undrawn portions of the authorizations isreported in the balance sheet as "capitalimprovement bond proceeds receivable". Asummary of the activity in the balances availablefrom these authorizations during the year endedJune 30, 2000 follows:

NOTE 3 -STATE CAPITALIMPROVEMENT BONDS

In the current and prior years, the Stateauthorized funds for improvements andexpansion of College facilities using theproceeds of State Capital Improvement Bonds.As capital projects are authorized by the State

Amounts Drawn

In Prior Years

$ 5,777,775

4,821,989

400,000

BalanceReceivable

June 30. 2000$ 78, 116

1,146,01111,600,00015.000.000

$ 27,824,127

Total

Authorized

$ 5,900,000

5,978,000

12,000,000

15.000.000

$ 38,878,000

Act538 of 1986522 of 1992111of1997

28 of 1999Totals $ 101999,764 $ 54, 108

The balances are reported in the unexpendedplant fund subgroup. All of the balancesavailable at June 30, 2000 are now available tobe drawn by the College as needed forconstruction project expenditures. During fiscalyear 2000 no undrawn state capitalimprovement bond proceeds were deauthorized.The State capital improvement bonds approvedfor fiscal year 1999-2000 include $12,000,000for a physical education center and $3,000,000for improvements to the Simons Art Center.

NOTE 4- PRIVATE GIFTSRECEIVABLE -UNEXPENDEDPLANT FUND

The receivable balance of $6,259,265 in theunexpended plant fund subgroup is due from theCollege of Charleston Foundation and includes$6,000,000 from private sources for theconstruction of the new library and $259,565also from private sources for the renovation ofthe Avery Institute (See Note 18).

32

Amounts DrawnIn Fiscal

Year EndedJune 30. 2000$ 44,108

10,000

NOTE 5- BONDS PAYABLE

At June 30, 2000, bonds payable consisted ofthe following liability which is reported in theinvestment in plant subgroup:

FiscalJune 30, 2000 Year 2001

Balances MaturitiesYear ofMaturityInterest Rates

Housing and AuxiliaryFacilities Revenue RefundingBonds Series 1992 A 5.10-6.125% 2013 $ 151200,000 $ 825,000

Facilities and ImprovementRevenue Refunding BondsSeries 1992 5.00- 5.5% 2007 4.185.000 505.000

Total $ 19,385,000 $1,330,000

Housing and Auxiliary Facilities

Revenue Refunding Bonds, Series

1992AThe College receives a loan subsidy from theU.S. Department of Housing and UrbanDevelopment (HUD) in the amount of $13,462designated for debt service on the Housing andAuxiliary Facilities Revenue Refunding BondsSeries 1992. The HUD subsidy is recorded asfederal grants revenue in the Retirement ofIndebtedness fund. These subsidies willcontinue until the defeased Student FacultyHousing Revenue Bonds are paid by escrow

agent. The various bond indentures restrict theuse of particular revenue sources. All housing,cafeteria and parking revenues including anyloan subsidies are restricted, up to the amountof annual debt service requirement, for thepayment of principal and interest on the Housingand Auxiliary Revenue Refunding Bond Series1992. Interest is paid semi-annually and theprincipal annually. These debt servicerequirements are funded twice yearly and arereported as Mandatory Transfers from theAuxiliary Enterprise activities supporting theSeries 1992 bonds which are as follows:

Mandatory TransfersAmount PercentActivity Revenues Expenditures

$ 6,611,161

4,429, 187

1,056,030

HousingCafeteria

Parking

$ 4,438,234

4,357,320

951 ,083

$1,526,951

98,404

71,258

90.0

5.8

4.2

The College purchased a bond insurance policyin favor of the bond Trustee for the Series1992A Bonds. The insurance covers payments

of principal and interest for any period wherefees would not be sufficient to pay the debtservice payment. Accordingly, there is noreserve requirement for these bonds.

33

Beginning on or after October l' 2002, theSeries 1992A bonds maturing may be redeemedprior to the mandatory redemption dates andfinal maturities at the option of the College'sBoard of Trustees. The bonds redeemed aresubject to a redemption price equal to the parvalue of the bond and accrued interest to date.

term. Payments are made on principal annuallyand interest semi-annually. The bond covenantrequires the fee allocation be so structured thatit will raise not less than 110% of the annualdebt service requirements for the next ensuingfiscal year of all bonds outstanding. The Collegefee allocation for this purpose exceeds this

requirement.Facilities and Improvement Revenue

Refunding Bonds. Series 1992An allocation of College fee revenue asdetermined each year by the Board of Trustees,is used to pay principal and interest on thebonds. The bond covenant states that theCollege will collect each semester amountssufficient to meet debt requirements.

Beginning on or after January 1, 2003, theFacilities and Improvement Revenue RefundingBonds Series 1992 maturing on and afterJanuary 1, 2003, may be redeemed prior tomandatory redemption dates and final maturitiesat the option of the College's Board of Trustees.The bonds redeemed are subject to thefollowing terms:

With the State Treasurer of South Carolina, asTrustee, the College makes semi-annualpayments to accounts held by the Treasurer topay the necessary principal and interestpayments. The Series 1992 bond covenantterms require the College to maintain with theTrustee a debt service reserve fund amount notexceeding the lesser of (1) the maximum annualprincipal and interest requirements of the bondsthen outstanding for any subsequent fiscal yearor (2) a sum permitted as reserve by theregulations of the United States Treasuryrelating to arbitrage bonds shall be held as areserve. A debt service reserve fund balance of$754,599 (after deducting $7, 701 of unrealizeddepreciation) was on deposit with the StateTreasurer to meet the reserve requirement. Thisamount represents the sum allowable by theUnited States Treasury relating to arbitragebonds.

(1) if the redemption is made beforeJanuary l' 2004, the redemptionpremium shall be two percent (2%) ofthe principal amount of each Series1992 Bond redeemed;

(2) if the redemption is made on or afterJanuary l' 2004. but before January 1.2005, the redemption premium shall beone percent (1 %) of the principalamount of each Series 1992 Bondredeemed.

(3) if the redemption is made on or afterJanuary 1, 2005, there shall be no

redemption premium.

Bond MaturitiesAll of the bonds are payable in semi-annualinstallments plus interest. Amounts includinginterest required for payment of the revenuebond obligations as of June 30, 2000 are asfollows:

All student fees are reported as revenue in theunrestricted current funds and the portionallocated for debt service on these bonds isrecorded as a mandatory transfer to theretirement of indebtedness fund each academic

34

Year Endina June 30 Principal Interest Total

$ 1 ,330,000

1,410,0001 ,490,000

1,575,000

1 ,615,000

11,965.000

$ 19,385,000

2001

2002

2003

2004

2005

2006-13

Total Obligations

$ 11092,613

1,023,619

948,093

866,028

777,625

2.906.035

$ 7,614,013

$ 2,422,613

2,433,619

2,438,093

2,441,028

2,392,625

14.871.035

$ 26,999,013

During fiscal year 2000, the College paidprincipal in the amount of $1,250,000 for thetwo bonds, and reported interest expendituresand other charges on the bonds of $1' 141,411.No arbitrage costs were incurred during 1999-2000.

NOTE 6 -LEASE OBLIGA TIONS

The College is obligated under various operatingleases for the use of real property (land,buildings, and office facilities) and equipment.In addition, the entity is obligated under acapital lease for the acquisition ofequipment.In prior years, the College defeased certain

bonds by placing the proceeds of new bonds inan irrevocable trust to provide for all future debtservice payments (principal and interest) on theold bonds. Accordingly, the trust account assetsand the liability for the defeased bonds are notincluded in these financial statements. At June30, 2000, $3,907,000 of bonds outstanding isconsidered defeased.

Future commitments for capital leases andoperating leases having remainingnoncancelable terms in excess of one year as ofJune 30, 2000, are as follows:

Year Endina June 30 Capital Lease

Equipment2001 $ 59,31220022003

20042005

2006 through 2062Total Minimum

Lease Payments

Operatina LeasesReal Property Equipment

$ 1,546,731 $ 199,465

1,559,859 112,437474,154 84,753426,181 61,912243,948 7,231

6.810.000

$ 59,312 $111060,873 $ 465, 798

Less: Interest $ (3.156)

Principal Outstanding/Present Value of NetMinimum Payments

35

In the case of operating leases for real propertyfrom commercial vendors, there exist two leaseswith escalation clauses limited to the cost ofliving. The leased properties consist of a parkinglot and a warehouse. Additionally, the Collegepays the commercial vendor property taxes. TheCollege performs routine maintenance on theseproperties. These costs are not included in theschedule of lease commitments.

CaRital LeasesDuring the prior fiscal year, the College enteredinto a capital lease for computer equipment inthe total amount of $153,807 and at an annualinterest rate of 5.62%. Capital leases aregenerally payable in monthly installments fromunrestricted current funds resources. Capitallease expenditures for the copier and thecomputer for fiscal year 2000 were $62,997, ofwhich $6,427 represented interest and $760executory costs. The carrying value of thecomputer equipment held under capital lease atJune 30, 2000 is $153,807. The copier leasethat had a principal balance of $24,919 at June30, 1999 and scheduled to terminate inDecember, 2000 was cancelled during fiscalyear 2000 resulting in an early termination creditof $22,277. The $78,850 carrying value of thecopier is included in disposals of property andequipment in the investment in plant fund for theyear ended June 30, 2000.

Additionally, the College leases a sportscomplex field from the Patriots PointDevelopment Authority , a State Agency, withannual rents of $90,000 per year ($7 ,500 permonth) April 1, 1997 through March 31, 2002and $10,000 per month April 1, 2002 throughMarch 311 2062 with annual increases equal tothe Consumer Price Index beginning April 1 I2003. A one-time payment of $500,000 waspaid in fiscal year 1998 with a correspondingcharge to prepaid expenditures. It is beingamortized ratably over the 65 year lease termutilizing the straight line method of calculation.The lease agreements make no provisionsbeyond the 65 year period. The unamortizedbalance at June 30, 2000 is $475,001.Amortization of the prepaid rent balance forfiscal year 2000 was $7,692 and is reported inoperating lease expenditures. The Collegeprovides maintenance to the tax exemptproperty .The College paid the Patriots PointDevelopment Authority $90,000 in rent in fiscalyear 2000.

Certain capital leases provide for renewal and/orpurchase options. Generally purchase optionsat bargain prices of one dollar are exercisable atthe expiration of the lease terms.

Operating LeasesThe College's noncancelable operating leaseshaving remaining terms of more than one yearexpire in various fiscal years from 2001 through2062. Certain operating leases provide forrenewal options for periods of one to three yearsat their fair rental value at the time of renewal.In the normal course of business, operatingleases are generally renewed or replaced byother leases. Operating leases are generallypayable on a monthly basis.

Total operating lease expenditures for fiscal year2000 were $1,447,985. The College reports allof these operating lease costs in the applicablecurrent funds functional expenditure categories.

NOTE7-NON-MANDATORYTRANSFERS

In 2000, the College entered into real propertyoperating leases with College of CharlestonFoundation, a related party, for sixteen differentlocations for offices, dormitories and parkingfrom July l' 1999 through June 30, 2000 forannual rentals of $363,351. The agreementscontain renewal options. Under theseagreements, the College paid the Foundation$363,351 in the current year. These leasesprovide that the College assumes responsibilityfor the maintenance of the property .There areno escalation clauses in the leases nor is theCollege liable for property taxes. During thesubsequent fiscal year, the College renewed allexisting leases with the Foundation with nochanges in the terms or lease period.

Debt service funds become available for transferbecause of the maintenance of minimumbalances including reserves for payment of debtservice and facility operating costs as requiredby bond indentures and law. Tuition, fees, andrevenues pledged for debt service whencollected and transferred to the retirement ofindebtedness plant funds subgroup remain inthe debt service accounts until they aretransferred by the State Treasurer into a general

capital improvements funding account. Forhousing and auxiliary bonds and facilities andimprovement bonds issued by the College, a

36

written request for the transfer of funds inexcess of required minimum balances issubmitted by the College to the State Treasurer.As needed, monies are transferred from thegeneral capital funding account to specificcapital projects accounts. For the most part,institutions are authorized to make transfers forspecific projects with notification to the StateTreasurer.

Carolina Retirement System (SCRS), a cost-sharing multiple-employer defined benefitpension plan administered by the RetirementDivision, a public employee retirement system.Generally all State employees are required toparticipate in and contribute to the SCRS as acondition of employment unless exempted bylaw as provided in Section 9-1-480 of the SouthCarolina Code of Laws. This plan providesretirement annuity benefits as well as disability Icost of living adjustment, death, and group-lifeinsurance benefits to eligible employees andretirees.

The College reports its general capital fundingaccount in the unexpended plant fundssubgroup and the unexpended balance thereofas unrestricted fund balance. In fiscal year 2000,the College transferred $580,273 for thatpurpose which is reported as a non-mandatorytransfer from the retirement of indebtednesssubgroup and the unexpended plant fundssubgroup is reported in unrestricted fundbalance. During the current year, the Collegetransferred $20, 712, 740 within that subgroupfrom the general capital projects funding accountto finance specific capital projects. Unexpendedbalances of the specific capital project accountsare reported as restricted fund balances in theunexpended plant funds subgroup.

Under the SCRS, employees are eligible for afull service retirement annuity upon reaching age65 or completion of 30 years credited serviceregardless of age. The benefit formula for fullbenefits effective since July l' 1989, for theSCRS is 1.82 percent of an employee's averagefinal compensation multiplied by the number ofyears of credited service. Early retirementoptions with reduced benefits are available asearly as age 55. Employees are vested for adeferred annuity after five years service andqualify for a survivor's benefit upon completionof 15 years credited service. Disability annuitybenefits are payable to employees totally andpermanently disabled provided they have aminimum of five years credited service. Agroup-life insurance benefit equal to anemployee's annual rate of compensation ispayable upon the death of an active employeewith a minimum of one year of credited service.

The College also reports a non-mandatorytransfer of $6,373,641 from unrestricted currentfunds group to the unexpended plant fundswhich included $4,138,309 for specific capitalprojects and $2,535,332 for unspecified futureprojects. The $4, 138,309 represents collegefees approved by the State Budget and ControlBoard for educational and general capital

projects. Since July l' 1988, employees participating inthe SCRS have been required to contribute 6.0percent of all compensation. Effective July 1 ,1999, the employer contribution rate became9.50 percent which included a 1.95 percentsurcharge to fund retiree health and dentalinsurance coverage. Effective January l' 2000,the surcharge to fund retiree health and dentalinsurance coverage was increased to 2.16percent and the employer rate became 9.71percent to cover the cost of providing suchservices. The College's actual contributions tothe SCRS for the three most recent fiscal yearsending June 30, 2000, 1999, and 1998, were$2,320,000, $2, 180,000, and $2,096,000,respectively, and equaled the requiredcontributions of 7.55 percent (excluding thesurcharge) for each year. Also, the College paidapproximately $46,000 for employer group-lifeinsurance contributions in the current fiscal yearat the rate of. 15 percent of compensation and

NOTE 8 -PENSION PLANS

The Retirement Division of the State Budget andControl Board maintains four independentdefined benefit plans and issues its own publiclyavailable Comprehensive Annual FinancialReport (CAFR) which includes financialstatements and required supplementaryinformation. A copy of the separately issuedCAFR may be obtained by writing to theRetirement Division, 202 Arbor Lake Drive,Columbia, South Carolina 29223. Furthermore,the Division and the four pension plans areincluded in the CAFR of the State of SouthCarolina.

The majority of employees of the College are

covered by a retirement plan through the South

37

$4, 700 for the employer's 7.55 percent share ofpension costs for employees buying retirementtime.

$60,000, respectively, and equaled the requiredcontribution of 10.3 percent (excluding thesurcharge) for each year. (Effective January 1,1999, the College became responsible for thepublic safety services on its campus and beganparticipating in PORS.) Also, the College paidemployer group-life insurance contributions of$2,531 and accidental death insurancecontributions of $2,531 in the current fiscal yearfor PORS participants. The rate for each ofthese insurance benefits is .20 percent of

compensation.

The South Carolina Police Officers RetirementSystem (PORS) is a cost-sharing multiple-employer defined benefit public employeeretirement plan. Generally all full-timeemployees whose principal duties arepreservation of public order or the protection orprevention and control of property destruction byfire are required to participate in and contributeto the System as a condition of employment.This plan provides annuity benefits as well asdisability and group-Iife insurance benefits toeligible employees and retirees. In addition,participating employers in the PORS contributeto the accidental death fund which providesannuity benefits to beneficiaries of police officersand firemen killed in the actual performance oftheir duties. These benefits are independent ofany other retirement benefits available to thebeneficiary .

The amounts paid by the College for pension,group-life insurance, and accidental deathbenefits are reported as employer contributionsexpenditures within the applicable current fundsfunctional expenditure categories to which therelated salaries are charged.

Employees covered under PORS are eligible fora monthly pension payable at age 55 with aminimum of five years service or 25 yearscredited service regardless of age. In addition,employees who have five years of creditedservices prior to age 55 can retire yet deferreceipt of benefits until they reach age 55. Amember is vested for a deferred annuity with fiveyears service. The benefit formula for fullbenefits effective since July l' 1989, for thePORS is 2.14 percent of the employee'saverage final salary multiplied by the number ofyears of credited service. Disability annuitybenefits and the group-life insurance benefits forPORS members are similar to those for SCRSparticipants. Accidental death benefits provide amonthly pension of 50 percent of the member'sbudgeted compensation at the time of death.

Article X, Section 16, of the South CarolinaConstitution requires that all State-operatedretirement systems be funded on a soundactuarial basis. Title 9 of the South CarolinaCode of Laws of 1976, as amended, prescribesrequirements relating to membership, benefits,and employee/employer contributions for eachpension plan. Employee and employercontribution rates to SCRS (and PORS) areactuarially determined. The surcharges to fundretiree health and dental insurance are not partof the actuarially established rates. Annualbenefits, payable monthly for life, are based onlength of service and on average finalcompensation (an annualized average of theemployee's highest 12 consecutive quarters ofcompensation).The Systems do not make separatemeasurements of assets and pension liabilitiesfor individual employers. Under Title 9 of theSouth Carolina Code of Laws, the College'sliability under the plans is limited to the amountsof contributions stated as a percentage ofcovered payroll established by the State Budgetand Control Board. Therefore, the College'sliability under the pension plans is limited to thecontribution requirements for the applicable yearfrom amounts appropriated therefor in the SouthCarolina Appropriation Act and amounts fromother applicable revenue sources. Accordingly,the College recognizes no contingent liability forunfunded costs associated with participation inthe plans.

Since July l' 1998, employees participating inthe PORS have been required to contribute6.5% of all compensation. Effective July 1,1999, the employer contribution rate became12.25 percent which, as for the SCRS, includedthe 1.95 percent surcharge. Effective January 1 ,2000, the surcharge to fund retiree health anddental insurance coverage was increased to2.16 percent and the employer rate became12.46 percent to cover the cost of providing suchservices. The College's actual contributions tothe PORS for the years ending June 30, 2000and 1999, were approximately $156,000, and

At retirement, employees participating in theSCRS or PORS receive additional service credit

38

at a rate of 20 days equals one month of servicefor up to 90 days for accumulated unused sickleave.

System effective July l' 2000, with someprovisions effective January 1, 2001. Theamendment will enact the Teacher andEmployee Retention Incentive Program, reducefrom thirty to twenty-eight years the c creditableservice required to retire at any age withoutpenalty and make other changes to the SCRS.

Certain State employees may elect to participatein the Optional Retirement Program (ORP), adefined contribution plan. The ORP wasestablished in 1987 under Title 9, Chapter 17, ofthe South Carolina Code of Laws. The ORPprovides retirement and death benefits throughthe purchase of individual fixed or variableannuity contracts which are issued to, andbecome the property of, the participants. TheState assumes no liability for this plan other thanfor payment of contributions to designatedinsurance companies.

NOTE9-POSTEMPLOYMENTAND

OTHER EMPLOYEE BENEFITS

In accordance with the South Carolina Code ofLaws and the annual Appropriation Act, theState of South Carolina provides certain healthcare, dental, and life insurance benefits tocertain active and retired State employees andcertain surviving dependents of retirees. Allpermanent full-time and certain permanent part-time employees of the College are eligible toreceive these benefits. The State providespostemployment health and dental benefits toemployees who retire from State service or whoterminated with at least 20 years of State servicewho meet one or more of the eligibilityrequirements, such as age, length of service,and hire date. Generally those who retire musthave at least 10 years of retirement servicecredit to qualify for these State-funded benefits.Benefits are effective at date of retirement whenthe employee is eligible for retirement benefits.

ORP participation is limited to faculty andadministrative staff of the State's four-yearhigher education institutions and effective July,1998 to certain teachers and administrators ofthe State's publicly-supported technical collegeswho meet all eligibility requirements formembership in the SCRS. To elect participationin the ORP, eligible employees must irrevocablywaive SCRS membership within their first ninetydays of employment.

Under State law, contributions to the ORP arerequired at the same rates as for the SCRS,7.55 percent plus the retiree surcharge of 1.95percent from July 1, 1999 to December 31, 1999and 2.16 percent from January 1, 2000 to June30, 2000 from the employer in fiscal year 2000.

These benefits are provided through annualappropriations by the General Assembly to theCollege for its active employees and to the StateBudget and Control Board for all participatingState retirees except the portions fundedthrough the pension surcharge and providedfrom other applicable fund sources of theCollege for its active employees who are notfunded by State General Fund appropriations.The State finances health and dental planbenefits on a pay-as-you-go basis.Approximately 20,000 State retirees met theseeligibility requirements as of June 30, 1999.

Certain of the College's employees have electedto be covered under optional retirement plans.For the fiscal year, total contributionrequirements to the ORP were approximately$779,000 excluding the surcharge from theCollege as employer and approximately$619,000 from its employees as plan members.In addition, the College paid approximately$15,500 for group-life insurance coverage forthese employees. All amounts were remitted tothe Retirement Division of the State Budget andControl Board for distribution to the respectiveannuity policy providers. The obligation forpayment of benefits resides with the insurance

companies.

The College recorded employer contributionsexpenditures within the applicable functionalexpenditure categories for these insurancebenefits for active employees in the amount ofapproximately $2,671,000 for the year endedJune 30, 2000. As discussed in Note 8, the

College paid approximately $844,000 applicableto the 1.95 percent surcharge for July 1, 1999 toDecember 31, 1999 and the 2.16 percentsurcharge for January 1, 2000 to June 30, 2000

An Act passed in the last General Assemblysession, which had not been signed by theGovernor as of June 30, 2000, will amendChapter 1, Title 9, of the 1976 Code of Laws,relating to the South Carolina Retirement

39

included with the employer contributions forretirement benefits. These amounts wereremitted to the South Carolina RetirementSystems for distribution to the Office ofInsurance Services for retiree health and dentalinsurance benefits.

The State appropriated funds from unspentFiscal Year 1999 General Fund appropriationsabove the ten percent set aside, forcontributions to 401 (K) accounts of eligible stateemployees whose salaries are funded fromState General Fund appropriations. In addition,the 2000 Appropriation Act required agencies tomatch certain 401 (K) contributions byemployees whose salaries are funded from itsother applicable revenue sources. Theappropriated 401(K) match is limited to $300. Tobe eligible an employee must meet the following

eligibility requirements:

Information regarding the cost of insurancebenefits applicable to College retirees is notavailable. By State law, the College has noliability for retirement benefits. Accordingly, thecost of providing these benefits for retirees is notincluded in the accompanying financialstatements.In addition, the State General Assemblyperiodically directs the Retirement Systems topay supplemental (cost of living) increases toretirees. Such increases are primarily fundedfrom System's earnings; however, a portion ofthe required amount is appropriated from theState General Fund annually for the SCRS andPORS benefits.

The employee was a permanent fu 11-time State employee for 24 continuousmonths as of July l' 1999 andemployed on the date of distribution,

and,

2 The employee must have established a401 (K) account with annualcontributions equal to the match (thisrequirement is not required foremployees earning less than $20,000.

NOTE 10 -DEFERREDCOMPENsA TION PLANS

In April 2000, the College made contributionsfrom State appropriations and other applicablefunding sources of $118 in total to the 401 (K)account of each eligible State employee, for atotal of $43,953 for all of the College'semployees. The contributions were reported asemployee benefits in the applicable functionalexpenditure categories in the appropriate fundgroups.

Several optional deferred compensation plansare available to State employees and employersof its political subdivisions. Certain employees ofthe College have elected to participate. Themultiple-employer plans, created under InternalRevenue Code Sections 457, 401 (K), and 403(8), are administered by third parties and are notincluded in the Comprehensive Annual FinancialReport of the State of South Carolina.Compensation deferred under the plans isplaced in trust for the contributing employee.The State has no liability for losses under theplans. Employees may withdraw the currentvalue of their contributions when they terminateState employment. Employees may alsowithdraw contributions prior to termination if theymeet requirements specified by the applicable

plan.

NOTE 11 INVENTORIES

Inventories for internal use are valued at cost.Other inventories for resale are valued at thelower of cost or market. The following is asummary by inventory category of costdetermination method and value at June 30,2000:

Method

Moving weighted averageFirst-in, first-out

$1,768,487215.279

$1,983, 766

CateQorv

Bookstore

Central Supply

Total

40

NOTE 12 -INTERFUND LIABILITIESAND BORROWINGS

current funds in the amount of $307,039. Thisamount represents reimbursable amounts forfederal programs to be received during fiscalyear 2001 and the liability will be repaid withoutinterest satisfying the interfund borrowings.

For the most part, the College operates out ofone cash account which is recorded inunrestricted current funds. At fiscal year-end,entries are made to properly reflect cashbalances by fund group and subgroup and toreport interfund liabilities for deficit cashbalances in the State's internal cashmanagement pool accounts by fund. In addition,during the year, certain interfund borrowingsoccurred. At June 30, 2000, the restrictedcurrent funds were obligated to the unrestricted

NOTE 13- STUDENT LOANS,ACCOUNTS AND OTHERRECEIV ABLES

The College has the following significant and/orunique receivables in its various fund groupsand subgroups:

$ 197,532

307,510

1,524,172

184.455

Unrestricted Current Funds:Cafeteria, Sottile Auditorium and Vending CommissionsBookstore Book Credit MemosStudent Academic Fees Receivable, NetStudent Auxiliary Service Fees, Net

$ 2,213,669

$ 590,00052.192

Restricted Current Funds:Grants and ContractsFederal

Non-governmental642,192

Loan Funds:Perkins Loan ProgramBaruch Loan Program

$ 2,080,503

800

2,081,303

Agency Funds:Advances for the benefit of future activities 6.468

Total $ 4,943,632

At June 30, 2000, accounts receivable in theunrestricted current funds group are reported netof the applicable allowance for doubtfulaccounts. With minor exceptions, the allowancefor losses for various accounts receivable areestablished based upon actual lossesexperienced in prior years and evaluations of thecurrent account portfolios. At June 30, 2000, theallowance for student academic fees receivableand student auxiliary service fees accountsreceivable in the unrestricted current funds arevalued at $120,000 and $30,000, respectively.

Losses for student loans receivable in the loanfund group are not estimated or recorded inallowance for uncollectible accounts Thisamount is not considered material enough toadversely affect the financial statements. At thetime a loan is considered to be uncollectible, itis charged to the principal of the fund from whichthe loan was made. Any account receivablewritten off is recognized in the period in whichthe receivable is considered uncollectible.

41

NOTE 14 -CONSTRUCTION COSTSAND COMMITMENTS

$46,000,000. Of the total cost, approximately$44,300,000 was unexpended at June 30, 2000.The College capitalized substantially completeand in use projects costing $6,886,060in the applicable plant asset categories for theyear ended June 30, 2000. The College hadoutstanding commitment balances ofapproximately $1,060,000 with certainengineering firms, construction contractors, andother vendors related to these projects. Majorcapital projects at June 30, 2000, whichconstitute construction in progress that are to becapitalized when completed are listed below.

The College has obtained the necessary fundingfor the acquisition, construction, renovation, andequipping of certain facilities which will becapitalized in the applicable plant assets

categories upon completion. Managementestimates that the College has sufficientresources available and/or future resourcesidentified to satisfactorily complete theconstruction of such projects which are expectedto be completed in varying phases over the nextfive years at an estimated total cost of

Estimated Cost

$ 1,647,000

162,414

24, 150,000

495,000

185,000

AmountExpended

$ 232,866

105,888

1,145,988

177,317

5,919

Project TitleProgram Academic ConversionADA Compliance AlterationsNew LibrarySailing Center

Campus SecurityOther approved projects for which no costs

have been expendedTotal

19.318.000

$ 45,957,414 $ 1;667,978

At June 30, 2000, the College had in progressother capital projects which are not to becapitalized when completed. These projects arefor replacements, repairs, and/or renovations toexisting facilities. Costs incurred to date onthese projects amounted to approximately$1,474,000 at June 30, 2000, and the estimatedcost to complete is approximately $1,051,000. AtJune 30, 2000 , the College had outstanding

commitment balances of$142,000 related to these projects.

approximately

The College anticipates funding these projectsout of current resources. future bond issues,state capital improvement bond proceeds,private gifts, student fees and State

appropriations.

42

NOTE 15 CASH AND DEPOSITS institutions with the approval of the StateTreasurer's office.

All deposits of the College are under the controlof the State Treasurer who, by law, has soleauthority for State funds. Certain monies aredeposited with or managed by financial

The following schedule reconciles deposits andinvestments within the footnotes to the balancesheet amounts:

Balance Sheet Footnotes

Cash and Cash Equivalents $36,133,932 $ 27, 150

36,080,044

26,738

$ 36, 133,932

Cash on HandDeposits Held by State TreasurerOther Deposits

$36,133,932Totals

NOTE16-ENDOWMENTFUNDDeposits Held by State TreasurerState law requires full collateralization of allState Treasurer bank balances. The StateTreasurer must correct any deficiencies incollateral within seven days.

The Endowment Fund is held by the StateTreasurer of South Carolina as cash and cashequivalents for the College. Interest earnings areavailable to the College and recorded in therestricted current funds. The reported amount ofthe endowment fund was $98, 763 at June 30,2000. .

With respect to investments in the State'sinternal cash management pool, all of the StateTreasurer's investments are insured orregistered or are investments for which thesecurities are held by the State or its agents inthe State's name. Information pertaining to thereported amounts, fair values, and credit risk ofthe State Treasurer's investments is disclosed inthe Comprehensive Annual Financial Report ofthe State of South Carolina. Cash and cashequivalent balances reported on the balancesheet reflect $155,987 in unrealized depreciationas of June 30, 2000.

NOTE 17- GIFTS AND PLEDGES

Gifts include resources donated to the Collegefor unrestricted or restricted institutionalpurposes. Gifts are non-exchange transactions.

Pledges of gifts for the benefit of the College arereceived and managed by the College ofCharleston Foundation (Foundation) and are

reported herein as a related party .As disclosed in Note 5, retirement ofindebtedness funds include $ 754,599 ofrestricted cash held by the State Treasurer fordebt service reserve funds as required by thebond indenture.

Pledges to the Foundation will be recorded asrevenue to the College only after paymentconditions for scholarships, construction andother costs have been met. Accordingly, it is notpractible to estimate the net realizable value ofuncollected pledges to the Foundation.

Other DeRositsThe College's other deposits at year-end wereentirely covered by federal depository insuranceor by collateral held by the College's custodialbanks in the College's name. The $26, 738consists of $13,555 in restricted cash for a loanparticipation deposit, $3,183 in the revolvingstudent Baruch Loan account and $10,000 in thereturn check clearing account. These accountshave been approved by the State Treasurer.

NOTE 18- RELATED PARTIES

Certain separately chartered legal entitieswhose activities are related to those of theCollege exist primarily to provide financialassistance and other support to the College andits educational program. They include theCollege of Charleston Foundation and the

43

Cougar Club. The financial statements of theCollege of Charleston Foundation are audited byindependent auditors retained by theorganization. The activities of these twoorganizations are not included in the College'sfinancial statements. However, the College'sstatements include transactions between theCollege and these related parties.

organizations project, the GASB is currentlystudying other circumstances under whichorganizations that do not meet financialreporting accountability criteria would beincluded in the financial reporting entity .Depending on the outcome of that project andother future GASB pronouncements, some or allof these organizations may become componentunits of the College and/or part of the financialreporting entity .In conjunction with its- implementation of GASB

statement No.14, and each fiscal yearthereafter, management annually reviews itsrelationships with the entities described in thisnote. The College excluded these entities fromthe reporting entity because it is not financiallyaccountable for them. As part of its affiliated

The College of Charleston Foundation is aseparately chartered entity which existsexclusively to benefit the College. Transactionsbetween the College and the Foundation duringthe year ended June 30, 2000 were as follows:

Unrestricted Current Funds -educational and general expenditures:Rents paid by the College to the Foundation for therental of certain real property (excludes approximately $2,000 for premiumsfor insurance coverage on leased properties owned by the Foundation). $ 263,851

Restricted Current Funds -private gifts:Scholarships awarded by the College and reimbursed by the Foundation $ 1,030,992

Unexpended Plant Fund -private gifts receivable fromCollege of Charleston Foundation (See Note 13):

For construction of new library-gift made during fiscal year ended June 30, 2000For renovation of Avery Institute-gift made in prior year

$ 6,000,000

259,565

Agency Funds -deposits held for others:Deposit held by the College for the Foundation $ 31,244

See Note 6 regarding lease transactions with the Foundation. Also the Foundation reimbursed theCollege $911 ,409 for certain expenditures that were paid by the College for the benefit of the Foundation.

The financial statements of the Foundation as ofDecember 31, 1999, and for the year thenended were examined by independent auditors.The assets, liabilities and operating activities ofthe foundation as of December 31, 1999, and

for the year then ended, presented below arefrom the Foundation's audited financialstatements and are not included in theaccompanying financial statements of the

College.

44

Statement of Financial PositionAs of December 31,1999

In Thousands

$ 1,620

2,286

30,666391

18

34

9,240215

$ 44,470

AssetsCash and short term investmentsPromises to giveInvestmentsAccounts and notes receivable

Prepaid expensesInventoryProperty and equipmentOther assets

Total Assets

LiabilitiesDeferred revenuesAccrued expensesNotes payable

Annuity payableTotal Liabilities

$ 70

237

619

392

1.318

499

25,770

16.883

43.152

Net Assets:UnrestrictedTemporarily restricted

Permanently restrictedTotal Net Assets

Total Liabilities and Net Assets

Statement of Activities

Year Ended December 31, 1999

$ 4,808

1,314

(27}

2.337

8.432

Revenue. Gains and Other SUDDOrt:Contributions -cash and non-cashInvestment and other incomeChanges in value of split interest agreementNet realized and unrealized gains

Total revenue, gains and other support

2,715731

3.446

Expenses and Losses:

Program

SupportingTotal expenses and losses

Chanaes in Net AssetsNet Assets. Beainnina of Year

Net Assets. End of Year

4,98638.166

$ 43, 152

45

The Cougar Club is another organization relatedto the College whose activities are to solicit andprovide funds to the athletic department in theform of scholarships and general revenues fromseason ticket sales and fund raising activities.Season basketball tickets are only availablethrough Cougar Club membership. The Collegereceived $200,000 from the Cougar Club infiscal year 2000, primarily for athleticscholarships which are reported as part ofprivate gifts for auxiliaries in the unrestrictedcurrent fund and $125,000 for basketball ticketsales which is reported as sales and services of

Auxiliary Enterprises in unrestricted currentfunds..

The financial statements of the Cougar Club asof June 30, 1998, and for the year then ended,was examined by independent auditors. Theassets, liabilities and operating activities of theCougar Club as of June 30, 1998, and the yearthen ended, presented below, are from theCougar Club's audited financial statements andare not included in the accompanying financialstatements of the College.

Statement of Financial PositionAs of June 30, 1998

In Thousands

1203

12427

$ 274

AssetsCashAccounts receivableInvestmentsEquipment (Net of accumulated depreciation)

Total Assets

$ 4

16124

$ 144

LiabilitiesAccounts payableLoan payableIncentive compensation contract

Total Liabilities

6268

$ 130

Net Assets:

UnrestrictedTemporarily restricted

Total Net Assets

Total Liabilities and Net Assets $ 274

46

Office of Insurance Services of the State Budgetand Control Board-$583,664 for insurance;Patriot's Point Development Authority -$90,000for lease of land on which the College has built asports complex; the South Carolina Departmentof Natural Resources -$48,000 for chilled waterservices; $2,521 for telephone services andXerox charges; and $151,000 for Fort Johnsonfacility upgrade; The State Board of Technicaland Comprehensive Education -$69,686 formaintenance fees; The Department ofTransportation-$1 , 712 for maintenance andsupplies; and, The State Law EnforcementDivision -$5,455 for background checks andequipment. Generally these amounts arerecorded as expenditures in the current funds

groups.

position of the College. Therefore. an estimatedliability has not been recorded.

The College has examined its potential forenvironmental remediation liabilities and hasdetermined that its operations have not involvedany potential liability .The College utilizes anapproved hazardous waste plan for itsoperations.

The various federal programs administered bythe College for fiscal year 2000 and prior yearsare subject to examination by the federal grantoragencies. At the present time, amounts whichmay be due federal grants, if any, have not beendetermined but the College believes that anysuch amounts in the aggregate would not have amaterial adverse effect on the financialstatements. Therefore an estimate has not beenrecorded.

The College did pass certain federal grant fundsto other state agencies as subrecipient granteesin the amount of $103,077 to the University ofSouth Carolina, South Carolina State University,Clemson University, the Citadel, CoastalCarolina University and the Medical University ofSouth Carolina.

NOTE 21 -RISK MANAGEMENT

Insurance CoverageThe College is exposed to various risks of lossand maintains State or commercial insurancecoverage for each of those risks. Managementbelieves such coverage is sufficient to precludeany significant uninsured losses for the coveredrisks. There were no significant reductions ininsurance coverage from coverage in the prioryear. The costs of settled claims and claimlosses have not exceeded this coverage in anyof the past three years. The College paysinsurance premiums to certain other Stateagencies and commercial insurers to cover risksthat may occur in normal operations. Theinsurers promise to pay to or on behalf of theinsured for covered economic losses sustainedduring the policy period in accord with insurancepolicy and benefit program limits.

The College provided no services to other Stateagencies during the year.

NOTE 20- CONTINGENCIES ANDLITIGA TION

The College is involved in three legalproceedings and claims with various partieswhich arose in the normal course of business.One lawsuit involved a vendor who is suing theCollege based on a claim that the College failedto pay interest on payments to the vendor thatexceeded thirty working days. The secondlawsuit is by a former student who alleges dueprocess violation arising out of a gradeassignment. The plaintiffs in both cases lost andhave appealed. The third is a class actionlawsuit that challenges the constitutionality andadministration of the State's Debt Set Off Act. Anorder was issued in February , 2000 finding thatnumerous State agencies and politicalsubdivisions had failed to give proper noticeprior to setting off debts against the debtor'sincome tax refunds. An appeal and otherproceedings are pending. Although any litigationhas an element of uncertainty, it is the opinion ofmanagement and counsel that the risk ofmaterial loss in excess of insurance coveragefor these lawsuits is remote and the outcomes oflegal proceedings and claims are not expectedto have a material adverse effect on the financial

State management believes it is moreeconomical to manage certain risks internallyand set aside assets for claim settlement.Several State funds accumulate assets and theState itself assumes substantially all risks for the

following:

1 Claims of State employees for

unemployment compensation benefits(Employment Security Commission);

2. Claims of covered employees forworkers' compensation benefits for jobrelated illnesses or injuries (StateAccident Fund);

48

3. Claims of covered public employees forhealth and dental insurance benefits(Office of Insurance Services); and,

State agencies and other entities are the primaryparticipants in the State's Health and DisabilityInsurance Fund and in the IRF .

4 Claims of covered public employees forlong-term disability and group-lifeinsurance benefits (Office of Insurance

Services).

The College also purchases a portion of its

medical malpractice insurance coverage forhealthcare providers through the State'sinsurance enterprise, the Medical MalpracticePatient's Compensation Fund.

Employees elect health coverage through eithera health maintenance organization or throughthe State's self-insured plan. All of the othercoverages listed above are through theapplicable State self-insured plan exceptdependent and optional life premiums areremitted to commercial carriers.

The College obtains coverage through acommercial insurer for employee fidelity bondinsurance for all employees for losses arisingfrom theft or misappropriation.

The College has recorded insurance premiumexpenditures in the applicable functionalexpenditure categories of the College'sunrestricted current funds. These expendituresdo not include estimates for probable premiumadjustments resulting from actual lossexperience for all coverages by the insurers forthe fiscal year because the College's actualhistory indicates the amount is immaterial. TheCollege is insured for such coverage under aretrospectively rated policy and premiums areaccrued based on the ultimate cost of theexperience to date of a group of entities.

The College and other entities pay premiums tothe State's Insurance Reserve Fund (IRF) whichissues policies, accumulates assets to cover therisks of loss, and pays claims incurred forcovered losses related to the following Collegeassets, activities, and/or events:

Theft of, damage to, or destruction ofassets;

2 Real property , its contents, and other

equipment;The College has not transferred the portion ofthe risk related to insurance policy deductibles,unreported claims, underinsurance, and co-insurance for any coverages to a State orcommercial insurer. The College did not reportany expenditures in the current year for actualclaims payments and/or costs related to suchretained risks of loss. The College has notreported an estimated claims loss expenditureand the related liability at June 30, 2000, basedon the requirements of GASB Statements No.10 and No.30, which state that a liability forclaims must be reported if information prior toissuance of the financial statements indicatesthat it is probable that an asset has beenimpaired or a liability has been incurred on orbefore June 30, 2000, and the amount of theloss is reasonably estimable. Liabilities wouldinclude an amount for incurred but not reported(IBNR) losses when it is probable a claim will beasserted. Claims liabilities when recorded arebased on estimates of the ultimate cost ofsettling known but not paid claims and IBNRclaims at June 30 including the effects ofinflation and other societal and economic factorsand using past experience adjusted for currenttrends and other factors that would modify pastexperience. The claims liability would include

3. Motor vehicles and watercraft (inland

marine);

Torts;4

5. Business interruptions;

6. Natural disasters; and,

7. Medical malpractice claims againstcovered infirmaries, clinics, hospitals,employees, and third- and fourth-yearmedical students.

The IRF is a self-insurer and purchasesreinsurance to obtain certain services andspecialized coverage and to limit losses in theareas of property, boiler and machinery,automobile liability , and medical professionalliability insurance. Also, the IRF purchasesreinsurance for catastrophic property andmedical professional liability insurance.Reinsurance permits partial recovery of lossesfrom reinsurers, but the IRF remains primarilyliable. The IRF purchases insurance for aircraftand ocean marine coverage. The IRF's rates aredetermined actuarially.

49

deductions for estimated recoveries on unsettledand settled claims and estimated costs ofspecific incremental claims adjustment

expenditures.

NOTE 22- FUND BALANCES

The College records accrued compensatedabsences for leave benefits as they are earnedby employees based on the requirements ofGASB Statement No. 16 Accountina forCompensated Absences. The State establishesleave policy, but it does not fund the relatedliability for the College's employees funded fromthe State General Fund appropriations untilemployees are paid for the leave. Also, theCollege does not accumulate assets to fund theliability to be paid to employees funded fromother revenue sources. The difference betweenthe funding policy and the required accountingtreatment that affected the components of fundbalance of unrestricted current funds at June 30,2000 are as follows:

In management's opinion, claim losses in excessof insurance coverage are unlikely and, ifincurred, would be insignificant to the College'sfinancial position. Furthermore, there is noevidence of asset impairment or otherinformation to indicate that a loss expenditureand liability should be recorded at year-end.Therefore, no loss accrual has been recorded.

$ 41032,472

(2.156.174)

$ 1.876.298

Unrestricted Current Fund Balance:Educational and GeneralLess, Portion Attributable to Compensated Absences and Related BenefitsTotal Fund Balance. net

$ 5,865,422

(215.387)

$ 5.650.035

Auxiliary EnterprisesLess, Portion Attributable to Compensated Absences and Related BenefitsTotal Fund Balance, net

Total Unrestricted Fund Balance$ 7,526,333

The remaining fund balances at June 30, 2000 are as follows:

Restricted Current Fund Balance:Grants and Contracts

$ 150,459

Loan Funds Balance:

U.S. Government grants refundableDonor Restricted

Total Loan Funds

$ 2,409,570

7.041

$ 2,416,611

Endowment Fund Balance:Restricted $ 98, 763

$44,034,842

10.126.403

$54,161,245

Plant Funds:

Unexpended plant fund:Restricted

Unrestricted -designatedTotal Unexpended Plant Fund

Retirement of Indebtedness Fund:Restricted

$ 754,599

50

NOTE 23 -ACCOUNTING CHANGES effect on the fund balances for the years endedJune 30, 2000 and June 30, 1999..

Accounting principles include not onlyaccounting principles and practices but also themethods of applying them.

Effective July 1, 1999, the College adoptedNACUBO Advisory Report 99-7, Accounting andReporting for Capitalization of Software whichmodified the Financial Accounting and ReportingManual for Higher Education (FARM). Thisreport adopted AICPA Statement of Position 98-1, Accounting for Costs of Computer SoftwareDeveloped or Obtained for Internal Use forpublic not-for-profit higher education institutions.In previous years, all information technologycosts including computer software costs werereported in the applicable fund group/subgroupin the functional expenditure categories ofacademic support and institutional support. Thatexpenditure reporting treatment is unchangedbut the College now capitalizes the costs ofcomputer software for internal use. Thisstatement does not require restatement of priorcosts. Note 1 describes the College's policy forcapitalizing computer software developed orobtained for internal use in a separate capitalasset account in the investment in plant fundsubgroup; for reporting a deduction for theannual amortization of the capitalized costs;and, for reporting both capitalized and non-capitalized information technology costs. Forfiscal year ended June 30, 2000, $224,246 ofcomputer software was capitalized and $22,425in amortization was charged for the year. Also,$69,686 was acquired in fiscal year ended June30, 1999.

Effective July l' 1999, the College adoptedNACUBO Advisory Report 99-1 Accounting andReporting for Nongovernmental Grants andContracts and Gifts, which modifies theFinancial Accounting and Reporting Manual forHigher Education (FARM). In previous yearsrevenues from private gifts and private grantsand contracts were reported in one revenueaccount in all affected fund groups/subgroups.The two classifications have been separated toprovide better disclosure and accountability forresources that are a result of donor activity andof resources that are a result of acquiring grantsand contracts from nongovernmental entitiesincluding individuals and other private sources.This change did not have an effect on the fundbalances for the fiscal years ended June 30,2000 and 1999. Certain restatements orrevenues did result and they are presented onthe following pages.

Effective July l' 1999, the College adoptedNACUBO Advisory Report 99-6, ReportingSafety and Security Expenses by HigherEducation which modifies the FinancialAccounting and Reporting Manual for HigherEducation (FARM). Safety and securityexpenditures are now reported in the operationand maintenance of plant current fundsfunctional expenditure category .For the yearended June 30, 1999, $1,912, 182 of thoseexpenses were reported as institutional support.Such expenditures were $1,775,615 for fiscalyear 2000. These changes did not have an

Following is a summary of the restated amountsfor the year ended June 30, 1999 for the abovedescribed accounting changes:

51

Fiscal Year 1999Restricted Unexpended Investment

Current Current in

Funds Funds Plant

Totals(Memorandum Only)

FY 1999 FY 2000

BALANCE SHEET

ASSETS:

Grants and Contracts

ReceivableAs previously reported $ 366, 751 $ 559,565Increase (decrease) O (559.565)As restated $ 366, 751 $ 0

$ 926,316

(559,565)

$ 366, 751 $ 642,192

Private gifts receivableAs previously reportedIncrease (decrease)As restated

$ O

559.565

$ 559,565

$ O

559.565$ 559,565 $ 6,259,565

52

Fiscal Year 1999Restricted Unexpended Investment

Current Plant inFunds Fund Plant

Totals(Memorandum Only)

FY 1999 FY 2000

STATEMENT OF CHANGESIN FUND BALANCES

REVENUES:Private gifts, grants and

contracts -restricted

As previously reported

Increase (decrease)As restated

$ 1,249, 185(1.249.185)

$ 0

$ 429,304

(429.304)

$ 0

$ 246,363(246.363)

$ 0

Non-governmental grantsand contracts -restricted

As previously reportedIncrease (decrease)As restated

$ O

224.444

$ 224,444

$ 0224.444

$ 224,444 $ 307,064

Private giftsAs previously reportedIncrease (decrease)As restated

$ 01.024.741

$ 1,024,741

$ 0

429.304

$ 429,304

$ O

246.363

$ 246,363

$ 01.700.408

$1,700,408 $7,027,388

53

NOTE 24-SUBSEQUENTEVENTS

In accordance with State statue 59-130-35, theRemley's Point property was offered for saleAugust 27, 2000 by way of sealed bidding at aminimum bid of $3,200,000. The sealed bidopening was September 22, 2000. One bid wasaccepted for not less than the minimum bid. Acontract of sale is expected to be executed witha closing ninety days thereafter.

The State Budget and Control Board approvedan exchange of College property with anadjoining property owner. The exchange isexpected to occur in fiscal year 2001.

55