Report on the

Lurleen B. Wallace Community College Andalusia, Alabama October 1, 2015 through September 30, 2016

Filed: February 10, 2017

Department of Examiners of Public Accounts 50 North Ripley Street, Room 3201 P.O. Box 302251 Montgomery, Alabama 36130-2251 Website: www.examiners.alabama.gov

Ronald L. Jones, Chief Examiner 17-174

State of Alabama Department of

Examiners of Public Accounts P.O. Box 302251, Montgomery, AL 36130-2251 50 North Ripley Street, Room 3201 Montgomery, Alabama 36104-3833 Telephone (334) 242-9200 FAX (334) 242-1775

Ronald L. Jones Chief Examiner

Honorable Ronald L. Jones Chief Examiner of Public Accounts Montgomery, Alabama 36130

Dear Sir: Under the authority of the Code of Alabama 1975, Section 41-5-21, I submit this report on the results of the audit of Lurleen B. Wallace Community College, Andalusia, Alabama, for the period October 1, 2015 through September 30,2016.

Respectfully submitted, Sworn to and subscribed before me this the d!f!!!._ day of?!_ Ill~ .' 2017._.

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Notary Public rb

17-174

[email protected] B. Pickens Examiner of Public Accounts

Table of Contents Page Summary

A

Contains items pertaining to state and federal legal compliance, College operations and other matters. Comments

C

Contains information pertaining to College operations, compliance and other matters. Independent Auditor’s Report

D

Reports on whether the financial information constitutes a fair presentation of the financial position and results of financial operations in accordance with generally accepted accounting principles (GAAP). Management’s Discussion and Analysis

H

Provides information required by the Governmental Accounting Standards Board (GASB) that is prepared by management of the College introducing the basic financial statements and providing an analytical overview of the College’s financial activities for the year. This information has not been audited, and no opinion is provided about the information. Basic Financial Statements

1

Provides the minimum combination of financial statements and notes to the financial statements that is required for the fair presentation of the College’s financial position and results of operations in accordance with GAAP. Lurleen B. Wallace Community College Exhibit #1

Statement of Net Position

2

Exhibit #2

Statement of Revenues, Expenses and Changes in Net Position

4

Exhibit #3

Statement of Cash Flows

5

Lurleen B. Wallace Community College Foundation Exhibit #4

Statement of Financial Position

7

Exhibit #5

Statement of Activities

8

Lurleen B. Wallace Community College Andalusia, Alabama

Table of Contents Page Douglas MacArthur State Technical College Foundation Exhibit #6

Statement of Financial Position

10

Exhibit #7

Statement of Activities

11

Notes to the Financial Statements Lurleen B. Wallace Community College

13

Lurleen B. Wallace Community College Foundation

33

Douglas MacArthur State Technical College Foundation

43

Required Supplementary Information

51

Provides information required by the GASB to supplement the basic financial statements. This information has not been audited and no opinion is provided about the information. Exhibit #8

Exhibit #9

Schedule of the College’s Proportionate Share of the Net Pension Liability

52

Schedule of the College’s Contributions

53

Supplementary Information

54

Contains financial information and notes relative to federal financial assistance. Exhibit #10

Schedule of Expenditures of Federal Awards

55

Notes to the Schedule of Expenditures of Federal Awards

57

Additional Information

58

Provides basic information related to the College, including reports and items required by generally accepted government auditing standards and/or Title 2 U. S. Code of Federal Regulations, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) for federal compliance audits. Exhibit #11

College Officials – a listing of the College officials.

Lurleen B. Wallace Community College Andalusia, Alabama

59

Table of Contents Page Exhibit #12

Exhibit #13

Exhibit #14

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards – a report on internal controls related to the financial statements and on whether the College complied with laws and regulations which could have a direct and material effect on the College’s financial statements.

60

Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance – a report on internal controls over compliance with requirements of laws, regulations, contracts, and grants applicable to major federal programs and an opinion on whether the College complied with laws, regulations, and the provisions of contracts or grant agreements which could have a direct and material effect on each major program.

62

Schedule of Findings and Questioned Costs – a schedule summarizing the results of audit findings relating to the financial statements as required by Government Auditing Standards and findings and questioned costs for federal awards as required by the Uniform Guidance.

65

____________________________________________

Lurleen B. Wallace Community College Andalusia, Alabama

Department of

Examiners of Public Accounts SUMMARY Lurleen B. Wallace Community College October 1, 2015 through September 30, 2016 Lurleen B. Wallace Community College Foundation January 1, 2015 through December 31, 2015 Douglas MacArthur State Technical College Foundation January 1, 2015 through December 31, 2015

Lurleen B. Wallace Community College (the “College”) provides general education at the freshman and sophomore levels leading to the Associate in Arts and Associate in Science degrees that is designated to facilitate transfer to a senior college or university. Lurleen B. Wallace Community College also provides the following technical, vocational and career education programs that prepare students for employment in an occupational field and leads to Certificates, and/or Associate in Applied Science degrees: Child Development; Computer Science; Diagnostic Medical Sonography; Emergency Medical Services; Forest Technology; Industrial Electronics Technology; Associate Degree Nursing; Office Administration; Air Conditioning and Refrigeration Technology; Automotive Mechanics; Cosmetology; Diesel and Heavy Equipment Mechanics; Welding; EMT – Paramedic Certificate; Practical Nursing (LPN); and Surgical Operating Room Technology; Esthetics Technology, Nail Technology and Culinary Arts. Lurleen B. Wallace Community College is a publicly supported institution in the Alabama Community College System. The College is under the direction and control of the Alabama Community College System Board of Trustees through the Alabama Community College System office. Lurleen B. Wallace Community College Foundation (the “Foundation”) was organized to pursue financial support and to promote the programs of Lurleen B. Wallace Community College. The Foundation receives, administers, and distributes funds for the benefit of Lurleen B. Wallace Community College. Douglas MacArthur State Technical College Foundation (the “Foundation”) was organized for the purpose of educational, scientific, and charitable purposes, and specifically to assist and aid Lurleen B. Wallace Community College-MacArthur Campus in fulfilling and performing its educational and public service programs and activities.

17-174

A

This report presents the results of an audit, the objectives of which were to determine whether the financial statements present fairly the financial position and results of financial operations and whether the College complied with applicable laws and regulations, including those applicable to its major federal financial assistance programs. This report also presents the results of an audit of the College’s component units, the Foundations, which were audited by other auditors. The College’s audit was conducted in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, as well as, the requirements of the Department of Examiners of Public Accounts under the authority of the Code of Alabama 1975, Section 41-5-14. The Foundations’ audits were conducted in accordance with auditing standards generally accepted in the United States of America. An unmodified opinion was issued on the basic financial statements of the College and its component units, which means the financial statements present fairly, in all material respects, the financial positions and the results of operations for the fiscal years ending September 30, 2016, December 31, 2015, and December 31, 2015, respectively. There were no findings in the prior audit. Tests performed during the audit did not disclose any significant instances of noncompliance with applicable state laws and regulations. The following officials/employees were invited to an exit conference to discuss the results of the audit. Dr. Herbert H. J. Riedel, President; Lynne Dayton, Director of Finance and Comptroller; Debra Moody, Director of Business Services; Donna Bass, Director of Financial Aid; Jimmy Baker, Acting Chancellor of the Alabama Community College System. The following individuals attended the exit conference: Dr. Herbert H. J. Riedel, President; Lynne Dayton, Director of Finance and Comptroller; Debra Moody, Director of Business Services; and Donna Bass, Director of Financial Aid. Representing the Alabama Community College System via teleconference were: Jane Leatherwood, Executive Director of Fiscal Services; Sara Calhoun, Director of Fiscal Services; Cory Rambo, Assistant Director of Fiscal Services; Linda Jones, Accountant; Pamela Watkins, Accountant; Todd Russell, Senior Associate Counsel/Director of Facilities; Donna Boutwell, Director of Compliance; and Akeem Alexander, Compliance Accountant. Representing the Department of Examiners of Public Accounts were: Mary Ann DuBose, Audit Manager; and Byron Pickens, Examiner.

17-174

B

Department of

Examiners of Public Accounts COMMENTS Lurleen B. Wallace Community College October 1, 2015 through September 30, 2016 Lurleen B. Wallace Community College was created by action of the Alabama State Board of Education on January 23, 2003. The Board action consolidated Lurleen B. Wallace Junior College and Douglas MacArthur State Technical College. Lurleen B. Wallace Community College is a multi-campus comprehensive community college with campuses in Andalusia, Greenville, and Opp, Alabama. Douglas MacArthur State Technical College had its origin on May 3, 1963 when Act Numbers 92, 93, and 94 of Acts of Alabama 1963 were approved. Act Number 92 on page 257 provided funds to pay the principal and interest on bonds, not exceeding $15,000,000, issued and sold by the public corporation known as the Alabama Trade School and Junior College Authority. Act Number 93 on page 259 authorized the Governor, the Director of Finance, and the State Superintendent of Education to become a corporation, to be known as the Alabama Trade School and Junior College Authority, for the object of providing for the construction and equipment of educational institutions within the state known as junior colleges and trade schools. Act Number 94 on page 268 vested in the Alabama State Board of Education the authority and responsibility for the operation, management, control, supervision, maintenance, regulation, upkeep, improvement, equipment, and enlargement of, and additions to, educational institutions known as trade schools and junior colleges. A local trade school committee, chaired by Opp City Schools Superintendent Vernon L. St. John, directed plans for the construction of the technical college located one mile north of downtown Opp on a 100 acre campus provided by the city of Opp and the Covington County Board of Revenue. On November 22, 1965, the College opened its doors admitting 116 students in twelve departments. The campus at that time had four buildings consisting of the George C. Wallace Administration Building and three shop buildings. Lurleen B. Wallace Junior College in Andalusia had its origin on December 14, 1967 when the Alabama State Board of Education authorized the development of a junior college to be located in Andalusia, Alabama. A Junior College Executive Committee was organized and over $100,000 was raised locally to purchase land and provide initial capital to start the junior college to serve Butler, Covington, and Crenshaw counties. On August 15, 1968, the State Board of Education named the college the Lurleen Burns Wallace State Junior College in honor of the former governor. In September of 1969, the College opened in the Bethune School, a temporary location leased from the Covington County Board of Education. In May of 1970, the College moved to a new campus consisting of 112 acres, an administrative/classroom building and physical education dressing rooms.

17-174

C

This Page Intentionally Blank

Independent Auditor’s Report

D

Independent Auditor’s Report To: Mr. Jimmy Baker, Acting Chancellor – Alabama Community College System Dr. Herbert H. J. Riedel, President – Lurleen B. Wallace Community College, Andalusia, Alabama Report on the Financial Statements We have audited the accompanying basic financial statements of Lurleen B. Wallace Community College, as of and for the year ended September 30, 2016, as listed in the table of contents as Exhibits 1 through 3. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these basic financial statements based on our audit. We did not audit the financial statements of Lurleen B. Wallace Community College Foundation and Douglas MacArthur State Technical College Foundation, component units. Those financial statements were audited by other auditors whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for Lurleen B. Wallace Community College Foundation and Douglas MacArthur State Technical College Foundation, are based on the report of other auditors. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the basic financial statements are free of material misstatement. The financial statements of Lurleen B. Wallace Community College Foundation and Douglas MacArthur State Technical College Foundation were not audited in accordance with Government Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 17-174

E

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of Lurleen B. Wallace Community College, as of September 30, 2016, Lurleen B. Wallace Community College Foundation, as of December 31, 2015, and Douglas MacArthur State Technical College Foundation, as of December 31, 2015, and the respective changes in financial position and where applicable, cash flows thereof for the years then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis (MD&A), the Schedule of the College’s Proportionate Share of the Net Pension Liability, and the Schedule of the College’s Contributions be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Lurleen B. Wallace Community College, taken as a whole. The accompanying Schedule of Expenditures of Federal Awards (Exhibit 10) is presented for purposes of additional analysis as required by Title 2 U. S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), and is not a required part of the basic financial statements.

17-174

F

The Schedule of Expenditures ofFederal Awards is the responsibility of management and was derived from and directly relates to the underlying accounting and other records used to prepare the financial statements. This information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Schedule of Expenditures of Federal Awards is fairly stated in all material respects in relation to the financial statements as a whole .

Other Reporting Required bv Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 9, 2017, on our consideration of Lurleen B. Wallace Community College's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Lurleen B. Wallace Community College's internal control over financial reporting and compliance.

f,Jt~~ Ronald L. Jones Chief Examiner Department of Examiners of Public Accounts Montgomery, Alabama January 9, 2017

17-174

G

Management’s Discussion and Analysis (Required Supplementary Information)

H

Lurleen B. Wallace Community College Management’s Discussion and Analysis Lurleen B. Wallace Community College is a public, two-year institution in the Alabama Community College System under the governance of the Alabama State Board of Education. Lurleen B. Wallace Community College was created following the merger and consolidation of Lurleen B. Wallace Junior College and MacArthur State Technical College with final approval being granted on December 9, 2004 by the Alabama State Board of Education. Lurleen B. Wallace Community College offers career-oriented certificates and associate degrees, as well as university transfer courses and associate degrees. In addition, the College provides workforce development through specialized training for business and industry, non-credit and continuing education, adult education and community services to the residents of its service area. With fundamental principles affirming the value of education, the freedom of teaching and learning, and the worth, dignity and personal development of each individual, the College provides an environment that emphasizes student success and achievement. All programs are supported and offer viable opportunities for educational and professional growth and are accredited by the Southern Association of Colleges and Schools Commission on Colleges. Overview of the Financial Statements and Financial Analysis Lurleen B. Wallace Community College is proud to present its financial statements for fiscal year 2015-2016. There are three financial statements presented: the Statement of Net Position; the Statement of Revenues, Expenses, and Changes in Net Position; and the Statement of Cash Flows. This discussion and analysis of the College’s financial statements provide an overview of its financial activities for the year and comparative amounts for the prior year. The institution received an unmodified opinion upon examination of the fiscal year 2014-2015 records by the State of Alabama Department of Examiners of Public Accounts. Statement of Net Position The Statement of Net Position presents the assets, liabilities, and net position of the College as of the end of the fiscal year. The Statement of Net Position is a point in time financial statement with comparison between current and prior year information. The purpose of the Statement of Net Position is to present to the readers a fiscal snapshot of Lurleen B. Wallace Community College. The Statement of Net Position presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Position (assets minus liabilities).

I

From the data presented, readers of the Statement of Net Position are able to determine the assets available to continue the operations of the College. This includes capital assets held by the College net of depreciation. Readers are also able to determine the College liabilities or how much the institution owes vendors, investors, and lending institutions. Finally, the Statement of Net Position provides a picture of the net position (assets minus liabilities) and their availability for expenditure by the College. Net position is divided into three major categories. The first category, net investment in capital assets, provides the institution’s equity in property, plant, and equipment owned by the institution. The next asset category is restricted assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted assets which are available to the institution for any appropriate purpose of the institution.

Statement of Net Position 2016 Assets: Current Assets Noncurrent Assets Capital Assets, Net Total Assets Deferred Outflow of Resources Liabilities Current Liabilities Noncurrent Liabilities Total Liabilities

Difference

$ 9,284,476 360,000 11,819,810 21,464,286

$ 8,905,206 400,000 12,498,424 21,803,630

$ 379,270 (40,000) (678,614) (339,344)

1,900,438

873,496

1,026,942

2,876,080 15,156,393 18,032,473

2,780,804 13,420,288 16,201,092

95,276 1,736,105 1,831,381

244,662

1,044,662

(800,000)

9,789,811 00 394,348 (5,096,570) $ 5,087,589

10,288,424 00 343,411 (5,200,463) $ 5,431,372

(498,613) 00 50,937 103,893 $ (343,783)

Deferred Inflow of Resources Net Position Net Investment in Capital Assets Restricted – Nonexpendable Restricted – Expendable Unrestricted Total Net Position

2015

J

Total assets and total liabilities consist of both current and noncurrent portions. Current assets at year-end included cash and cash equivalents totaling $6,434,812 and deposits with bond trustees in the amount of $233,701. Non-current assets included long-term accounts receivable from the City of Greenville totaling $360,000. Liabilities include current and non-current bond debt of $2,030,000. Compensated absences liability totaled $545,490. At September 30, 2016, the College reported a liability of $12,783,007.00 for its proportionate share of the collective net pension liability. The collective net pension liability was measured as of September 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of September 30, 2014. The System’s proportion of the collective net pension liability was based on the employers’ shares of contributions to the pension plan relative to the total employer contributions of all participating TRS employers. At September 30, 2015, the System’s proportion was .122140%, which was an increase of 0.002352% from its proportion measured as of September 30, 2014. Capital assets include those with an acquisition cost of $5,000 or more. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction and public service missions of the institution.

K

Statement of Revenues, Expenses and Changes in Net Position Changes in total net position as presented on the Statement of Net Position are based on the activity presented in the Statement of Revenues, Expenses, and Changes in Net Position. The purpose of the statement is to present the revenues received by the institution, both operating and non-operating, and the expenses paid by the institution, operating and non-operating, and any other revenues, expenses, gains and losses received or spent by the institution. Statement of Revenues, Expenses and Changes in Net Position 2016 Operating Revenues Operating Expenses Operating Loss

$ 4,938,635 16,672,202 (11,733,567)

Nonoperating Revenues Nonoperating Expenses

Income (Loss) Before Other Revenues, Expenses, Gains or Losses Other Revenues, Expenses, Gains or Losses Increase (Decrease) in Net Position Net Position at Beginning of Year Restatements Net Position at End of Year

2015

Difference

$ 4,992,400 $ 16,648,942 (11,656,542)

(53,765) 23,260 (77,025)

11,506,447 127,876 11,378,571

11,341,812 208,183 11,133,629

164,635 (80,307) 244,942

(354,996)

(522,913)

167,917

11,213

2,072

9,141

(343,783)

(520,841)

177,058

5,431,372 00 $ 5,087,589

17,108,728 (11,677,356) (11,156,515) 11,156,515 $ 5,431,372 $ (343,783)

Generally speaking, operating revenues are received for providing goods and services to the various students and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Non-operating revenues are revenues received for which goods and services are not provided. For example, state appropriations are non-operating revenues because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues. The Statement of Revenues, Expenses, and Changes in Net Position reflect a decrease of $343,783 in net position at the end of the fiscal year. The restatement of $11,156,515 reported on last year’s Financial Statement was necessitated by GASB 67 and GASB 68 reporting requirements. This Unfunded Pension Liability reporting caused a significant decrease in the Institution’s net position.

L

The following chart displays the operating revenues by type and their relationship with one another:

Operating Revenue

$281,735  $670,439 

$2,499,921 

$87,768 

Student Tuition 51% Federal Contracts 28% Other Revenue 2% State & Local Contracts 13% Auxiliary Enterprises 6%

$1,398,772 

Student tuition and fees (net of scholarship allowances) represent the largest portion of operating revenue at 51 percent. Student tuition and fee revenue derived from Pell Grant is reported as non-operating revenue. Federal contracts were also granted for Work Study, FSEOG, non-Pell student financial aid grants, and the Upward Bound and Student Support Services TRIO Programs. The College was also awarded a new National Science Foundation Grant during this Fiscal Year for the purpose of developing curriculum for the Diesel and Electronics Programs on the MacArthur Campus. The College received State grants in Adult Education to cover Covington, Butler, and Crenshaw Counties. The College also was awarded an Adult Career Pathways Grant in the amount of $56,152. The College was awarded a Perkins Basic Grant. LBWCC also received funds to assist students through the Alabama Student Assistant Program, Ready to Work Program, Work Keys, Workforce Dual Enrollment and Career Coach Grants. Also in 2016, the College received $350,000 for Career Tech Dual Enrollment, $33,100 for an Andalusia Health Academy Grant and $89,204 for a Dual Enrollment Welding Capacity Building Grant. These were supplemental awards from the Education Trust Fund. During the academic year of 2015-2016, tuition and fees were $144 per credit hour for in-state students ($115/credit hour tuition, $9/credit hour facility fee, $9/credit hour technology fee, $10 credit hour special building fee, and $1/credit hour bond reserve fee). The Special Building Fee was increased from $9 per credit hour to $10 per credit hour beginning with the Fall 2015 Semester. During the year, the facility, technology, and bond reserve fee remained the same. The College is in line with the ACCS tuition and fee guidelines and is at the maximum that can be charged under State Board Policy.

M

In auxiliary services, the bookstore is self-supporting and stable. The College operates a child development center to complement the Child Development Program on the Andalusia Campus. The child development center changed from a daycare operation to a pre-school program in August, 2012. The child development center is operated as an auxiliary service. The following chart displays the non-operating revenues by type and their relationship with one another: Non-Operating Revenue Other Gifts/Cash & Non-Cash Investment Income Federal Grant & Contracts State Appropriations

$259,246 $173,639 $465 $4,218,246 $6,854,851

Within the non-operating revenues, the College received $6,854,851 in State appropriations. The College also received a $226,103 local appropriation from Covington County Sales Tax revenues and $15,000 from the City of Andalusia. The balance of non-operating revenue was generated from investing activities, gifts, donation of teaching equipment and library books, and sale of surplus property.

N

As reflected in the following chart, operating expenses are divided into functional areas that represent the college’s total operating expenses of $16,672,202:

$6,573,039

Operating Expenses by Function

$2,118,753 $1,955,618

$1,629,540

$1,593,697

$1,468,677

$804,859

Instruction 39%

Academic Support 9%

Student Services 12%

$528,019

Institutional Plant Depreciation Student Aid Auxiliary Support 13% Maintenance 5% 10% Enterprises 9% 3%

Operating cost by functional area increased by $23,260 as compared to the prior fiscal year. Non-Operating cost decreased by $80,307 for the fiscal year. Statement of Cash Flows The final statement presented by the College is the Statement of Cash Flows which presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from non-operating, non-investing, and non-capital financing purposes. The third section reflects the cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section deals with investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses, and Changes in Net Position.

O

Statement of Cash Flows For the Year ending September 30, 2016 2016 Cash Provided (used) by: Operating Activities Noncapital Financing Activities Capital Financing Activities Investing Activities Net Change in Cash Cash, Beginning of Year Cash, End of Year

$(10,731,330) 11,497,320 (389,684) 465 376,770 6,058,042 $ 6,434,812

2015

$(10,920,604) 11,354,979 (590,709) 38 (156,296) 6,214,338 $ 6,058,042

The primary cash receipts from operating activities consist of tuition and fees, grant, and contracts. Cash outlays include payment of wages, benefits, supplies, utilities and scholarships. State appropriations are the primary source of noncapital financing activities. This source of revenue is categorized as non-operating even though the College’s budget depends on this to continue the current level of operations. Other non-operating activities include Pell Grant, donations/gifts, local tax appropriations, and other miscellaneous revenues. Investing activities reflect purchase, sales, and interest income earned on investments. Investments identified in the cash flow statement as investing activities include both short-term and long-term investments. Economic Outlook The College’s overall financial position is currently strong. However, based on state and national economic conditions, the College is concerned about future proration and severe reductions in the state allocation and federal grants for the upcoming years. The College will maintain a close guard over resources to preserve the College’s ability to react to unknown internal and external issues. The College will adhere to established ACCS guidelines, which are based on sound financial judgments. The College will take steps to meet the needs of students and the community while remaining financially conservative. The College is not aware of any other currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during the fiscal year beyond those unknown variations having a global effect on virtually all types of business operations.

P

This Page Intentionally Blank

Basic Financial Statements

1

Statement of Net Position September 30, 2016

ASSETS Current Assets Cash Deposit with Bond Trustee Accounts Receivable Inventories Total Current Assets

$

Noncurrent Assets Accounts Receivable Capital Assets: Land Improvements Other Than Buildings Buildings Equipment and Furniture Library Holdings Construction in Progress Less: Accumulated Depreciation Total Capital Assets, Net of Depreciation

6,434,812.02 233,701.25 2,354,819.73 261,142.56 9,284,475.56

360,000.00 411,892.50 1,790,722.82 17,148,052.66 3,970,723.61 692,478.84 5,000.00 (12,199,060.00) 11,819,810.43

Total Noncurrent Assets

12,179,810.43

Total Assets

21,464,285.99

Deferred Outflow of Resources Pension Total Deferred Outflow of Resources

$

1,900,438.00 1,900,438.00

The accompanying Notes to the Financial Statements are an integral part of this statement.

Lurleen B. Wallace Community College Andalusia, Alabama

2

Exhibit #1

LIABILITIES Current Liabilities Deposits Accounts Payable and Accrued Liabilities Unearned Revenue Compensated Absences Bonds Payable Total Current Liabilities

$

279,383.87 1,066,872.44 1,327,719.49 12,104.65 190,000.00 2,876,080.45

Noncurrent Liabilities Compensated Absences Bonds Payable Net Pension Liability Total Noncurrent Liabilities

533,385.83 1,840,000.00 12,783,007.00 15,156,392.83

Total Liabilities

18,032,473.28

Deferred Inflow of Resources Pension Total Deferred Inflow of Resources

244,662.00 244,662.00

NET POSITION Net Investment in Capital Assets Restricted for: Expendable: Scholarships and Fellowships Loans Debt Service Unrestricted

9,789,810.43

27,937.28 6,180.13 360,230.73 (5,096,569.86)

Total Net Position

Lurleen B. Wallace Community College Andalusia, Alabama

$

3

5,087,588.71

Exhibit #1

This Page Intentionally Blank

Statement of Revenues, Expenses and Changes in Net Position For the Year Ended September 30, 2016

OPERATING REVENUES Student Tuition and Fees (Net of Scholarship Allowances of $3,629,144.82) Federal Grants and Contracts State and Local Grants and Contracts Sales and Services of Educational Departments Auxiliary Enterprises: Bookstore (Net of Scholarship Allowances of $309,643.32) Vending Child Care Center Other Operating Revenues Total Operating Revenues

$

2,499,920.85 1,398,771.58 670,438.80 34,620.56 271,053.13 7,722.24 2,960.00 53,147.76 4,938,634.92

OPERATING EXPENSES Instruction Institutional Support Academic Support Student Services Operation and Maintenance Scholarships and Financial Aid Depreciation Auxiliary Enterprises: Bookstore Vending Total Operating Expenses

6,573,039.29 2,118,752.61 1,468,677.49 1,955,618.16 1,593,696.74 1,629,540.08 804,858.88 527,626.47 392.45 16,672,202.17

Operating Income (Loss)

(11,733,567.25)

NONOPERATING REVENUES (EXPENSES) State Appropriations Federal Grants Gifts Local Sales Tax Appropriation Investment Income Interest on Capital Asset Related Debt Other Nonoperating Revenues (Expenses) Net Nonoperating Revenues Income Before Other Revenues, Expenses, Gains or Losses Capital Grants, Contracts and Gifts Changes in Net Position Total Net Position - Beginning of Year Total Net Position - End of Year

$

6,854,851.00 4,218,246.01 188,639.00 226,103.24 465.09 (87,402.50) (22,330.49) 11,378,571.35 (354,995.90) 11,212.52 (343,783.38) 5,431,372.09 5,087,588.71

The accompanying Notes to the Financial Statements are an integral part of this statement.

Lurleen B. Wallace Community College Andalusia, Alabama

4

Exhibit #2

Statement of Cash Flows For the Year Ended September 30, 2016

CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Payments to Suppliers Payments to Utilities Payments to Employees Payments for Benefits Payments for Scholarships Auxiliary Enterprise Charges: Bookstore Vending Child Care Center Sales and Services of Educational Activities Other Receipts Net Cash Provided (Used) by Operating Activities

$

278,158.57 7,722.24 2,960.00 34,620.56 51,588.76 (10,731,330.42)

CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Federal Grants Local Sales Tax Appropriations Bond Surety Fee Expense Gifts and Grants for Other Than Capital Purposes Agency Transactions Other Net Cash Provided (Used) by Noncapital Financing Activities

6,854,851.00 4,203,245.93 226,103.24 (38,644.50) 173,639.00 44,982.50 33,143.01 11,497,320.18

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets Principal Paid on Capital Debt Interest Paid on Capital Debt Deposit with Trustees Other Net Cash Provided (Used) by Capital and Related Financing Activities

(115,032.99) (180,000.00) (87,402.50) (5,500.00) (1,749.00) (389,684.49)

CASH FLOWS FROM INVESTING ACTIVITIES Investment Income Net Cash Provided (Used) by Investing Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents - Beginning of Year Cash and Cash Equivalents - End of Year

2,587,723.84 2,178,855.93 (2,919,525.40) (580,362.44) (8,109,762.87) (2,633,769.53) (1,629,540.08)

465.09 465.09

$

376,770.36 6,058,041.66 6,434,812.02

The accompanying Notes to the Financial Statements are an integral part of this statement.

Lurleen B. Wallace Community College Andalusia, Alabama

5

Exhibit #3

Reconciliation of Net Operating Revenues (Expenses) to Net Cash Provided (Used) by Operating Activities: Operating Income (Loss) Adjustments to Reconcile Net Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities: Depreciation Expense Changes in Assets, Deferred Outflows, Liabilities and Deferred Inflows: (Increase)/Decrease in Accounts Receivables (Increase)/Decrease in Inventories (Increase)/Decrease in Deferred Outflows Increase/(Decrease) in Accounts Payable Increase/(Decrease) in Compensated Absences Increase/(Decrease) in Unearned Revenue Increase/(Decrease) in Deposits Held for Others Increase/(Decrease) in Pension Liability Increase/(Decrease) in Deferred Inflows Net Cash Provided (Used) by Operating Activities

Lurleen B. Wallace Community College Andalusia, Alabama

6

$ (11,733,567.25)

804,858.88 69,714.10 (11,713.31) (1,026,942.00) (92,094.36) 24,132.64 134,447.88 (1,167.00) 1,901,000.00 (800,000.00) $ (10,731,330.42)

Exhibit #3

This Page Intentionally Blank

Statement of Financial Position Lurleen B. Wallace Community College Foundation December 31, 2015

ASSETS Cash and Cash Equivalents Cash and Cash Equivalents - Restricted Accounts Receivable Prepaid Insurance Investments Land Capital Assets, Net of Depreciation Total Assets

$

396,268.00 141,321.00 23,889.00 9,039.00 3,400,871.00 119,000.00 2,711,267.00 6,801,655.00

LIABILITIES AND NET ASSETS LIABILITIES Accounts Payable Accrued Interest Payable Security Deposits Note Payable Total Liabilities

3,486.00 88,938.00 22,891.00 2,846,000.00 2,961,315.00

NET ASSETS Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets Total Liabilities and Net Assets

2,185,830.00 219,478.00 1,435,032.00 3,840,340.00 6,801,655.00

$

The accompanying Notes are an integral part of the financial statements.

Lurleen B. Wallace Community College Andalusia, Alabama

7

Exhibit #4

Statement of Activities Lurleen B. Wallace Community College Foundation For the Year Ended December 31, 2015

Unrestricted SUPPORT AND REVENUES Contributions Contributed Services Rental Income and Fees Events and Fundraising Net Investment Returns (Losses) Net Assets Released from Restrictions: Satisfaction of Purpose Total Support and Revenues

$

11,251.00 $ 21,600.00 356,158.00 89,083.00 (111,585.00) 1,000.00 367,507.00

EXPENSES Program Expenses: Interest Expense Utilities and Maintenance Management and Security Community Assistance Residents Insurance Office and Other Expenses Bad Debt Depreciation Supporting Expenses: Administrative Expenses Events and Fundraising Professional Services Insurance Office Expenses Bank and Investment Fees Foreign Taxes Total Expenses

Temporarily Restricted

2,740.00

59,721.00 (1,000.00) 61,461.00

88,938.00 74,904.00 18,050.00 8,848.00 13,834.00 4,722.00 2,427.00 84,080.00 21,600.00 22,701.00 15,000.00 2,176.00 4,732.00 357.00 968.00 363,337.00

Change in Net Assets

4,170.00

NET ASSETS - Beginning of Year Reclassification of Net Assets $

NET ASSETS - End of Year

61,461.00

2,300,090.00 (118,430.00)

39,587.00 118,430.00

2,185,830.00 $

219,478.00

The accompanying Notes are an integral part of the financial statements.

Lurleen B. Wallace Community College Andalusia, Alabama

8

Exhibit #5

Permanently Restricted

$

28,058.00

Total

$

28,058.00

42,049.00 21,600.00 356,158.00 89,083.00 (51,864.00)

457,026.00

88,938.00 74,904.00 18,050.00 8,848.00 13,834.00 4,722.00 2,427.00 84,080.00 21,600.00 22,701.00 15,000.00 2,176.00 4,732.00 357.00 968.00 363,337.00

$

28,058.00

93,689.00

1,406,974.00

3,746,651.00

1,435,032.00 $

3,840,340.00

Lurleen B. Wallace Community College Andalusia, Alabama

9

Exhibit #5

This Page Intentionally Blank

Statement of Financial Position Douglas MacArthur State Technical College Foundation December 31, 2015

ASSETS Cash and Cash Equivalents Investments Total Assets

$

NET ASSETS Unrestricted Temporarily Restricted Permanently Restricted Total Net Assets

$

170,258.00 1,056,721.00 1,226,979.00

470,435.00 244,252.00 512,292.00 1,226,979.00

The accompanying Notes are an integral part of the financial statements.

Lurleen B. Wallace Community College Andalusia, Alabama

10

Exhibit #6

Statement of Activities Douglas MacArthur State Technical College Foundation For the Year Ended December 31, 2015

Unrestricted SUPPORT AND REVENUES Contributions Contributed Services Events and Fundraising Net Investment Return (Losses) Net Assets Released from Restrictions: Satisfaction of Purpose Total Support and Revenues

$

5,520.00 $ 7,200.00 18,660.00 (87,228.00) 19,157.00 (36,691.00)

EXPENSES Program Expenses: Scholarships Other Support Supporting Expenses: Contributed Administrative Services Events and Fundraising Bank and Investment Fees Professional Fees Insurance Miscellaneous Office Expenses Foreign Taxes Total Expenses

Temporarily Restricted

1,000.00

24,660.00 (19,157.00) 6,503.00

22,286.00 997.00 7,200.00 2,219.00 15,626.00 19,550.00 1,119.00 235.00 1,162.00 39.00 70,433.00

Change in Net Assets

(107,124.00)

NET ASSETS - Beginning of Year $

NET ASSETS - End of Year

6,503.00

577,559.00

237,749.00

470,435.00 $

244,252.00

The accompanying Notes are an integral part of the financial statements.

Lurleen B. Wallace Community College Andalusia, Alabama

11

Exhibit #7

Permanently Restricted

$

27,155.00

Total

$

27,155.00

33,675.00 7,200.00 18,660.00 (62,568.00)

(3,033.00)

22,286.00 997.00 7,200.00 2,219.00 15,626.00 19,550.00 1,119.00 235.00 1,162.00 39.00 70,433.00 27,155.00

$

(73,466.00)

485,137.00

1,300,445.00

512,292.00 $

1,226,979.00

Lurleen B. Wallace Community College Andalusia, Alabama

12

Exhibit #7

This Page Intentionally Blank

Notes to the Financial Statements For the Year Ended September 30, 2016 Note 1 – Summary of Significant Accounting Policies The financial statements of Lurleen B. Wallace Community College (the “College”) are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for establishing governmental accounting and financial reporting principles. The more significant accounting policies of the College are described below. A. Reporting Entity For financial reporting purposes, Lurleen B. Wallace Community College is part of the primary government of the State of Alabama. The State of Alabama, through the Board of Trustees, governs the Alabama Community College System. The Alabama Community College System, through its Chancellor, has the authority and responsibility for the operation, management, supervision and regulation of Lurleen B. Wallace Community College. B. Component Units The Lurleen B. Wallace Community College Foundation and the Douglas MacArthur State Technical College Foundation are organized exclusively for charitable, scientific, and educational purposes for the benefit of the College. Because of the significance of the relationship between the College and the Foundations, the Foundations are considered component units of the College. The Foundations’ financial statements and accompanying notes are reported separately because of the difference in the reporting model for the Foundations. The Foundations follow the Financial Accounting Standards Board (FASB) rather than the Governmental Accounting Standards Board (GASB). As a result, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. No modifications have been made to the Foundation’s financial statements for these differences. C. Measurement Focus, Basis of Accounting and Financial Statement Presentation The financial statements of Lurleen B. Wallace Community College have been prepared using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. It is the policy of the College to first apply restricted resources when an expense is incurred and then apply unrestricted resources when both restricted and unrestricted resources are available.

Lurleen B. Wallace Community College Andalusia, Alabama

13

Notes to the Financial Statements For the Year Ended September 30, 2016 The Statement of Revenues, Expenses and Changes in Net Position distinguishes between operating and nonoperating revenues. Operating revenues, such as tuition and fees, result from exchange transactions associated with the principal activities of the College. Exchange transactions are those in which each party to the transactions receives or gives up essentially equal values. Nonoperating revenues arise from exchange transactions not associated with the College’s principal activities, such as investment income and from all nonexchange transactions, such as state appropriations. D. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources and Net Position 1. Deposits and Investments Cash and cash equivalents include cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition. Statutes authorize the College to invest in the same type of instruments as allowed by Alabama law for domestic life insurance companies. This includes a wide range of investments, such as direct obligations of the United States of America, obligations issued or guaranteed by certain federal agencies, and bonds of any state, county, city, town, village, municipality, district or other political subdivision of any state or any instrumentality or board thereof or of the United States of America that meet specified criteria. Investments are reported at fair value based on quoted market prices, except for money market investments and repurchase agreements, which are reported at amortized cost. 2. Receivables Accounts receivable relate to amounts due from federal grants, state grants, private grants, third party tuition and auxiliary enterprise sales from the bookstore. 3. Inventories The inventories are comprised of items held for resale. Inventories are valued using the first in/first out (FIFO) method.

Lurleen B. Wallace Community College Andalusia, Alabama

14

Notes to the Financial Statements For the Year Ended September 30, 2016 4. Capital Assets Capital assets, other than intangibles, with a unit cost of over $5,000 and an estimated useful life in excess of one year, and all library books, are recorded at historical cost or estimated historical cost if purchased or constructed. The capitalization threshold for intangible assets such as capitalized software and internally generated computer software is $1 million and $100,000 for easements and land use rights and patents, trademarks and copyrights. In addition, works of art and historical treasures and similar assets are recorded at their historical cost. Donated capital assets are recorded at acquisition value (an entry price). Land, Construction in Progress and intangible assets with indefinite lives are the only capital assets that are not depreciated. Depreciation is not allocated to a functional expense category. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend its life are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. The amount of interest to be capitalized is calculated by offsetting interest expense incurred from the date of the borrowing until completion of the project with interest earned on invested proceeds over the same period. Maintenance and repairs are charged to operations when incurred. Betterments and major improvements which significantly increase values, change capacities or extend useful lives are capitalized. Upon the sale or retirement of fixed assets being depreciated using the straight-line method, the cost and related accumulated depreciation are removed from the respective accounts and any resulting gain or loss is included in the results of operation. The method of depreciation and useful lives of the capital assets are as follows:

Assets Improvements Other Than Buildings Buildings and Improvements Equipment Library Materials Capitalized Software Internally Generated Computer Software Easement and Land Use Rights Patents, Trademarks, and Copyrights

Lurleen B. Wallace Community College Andalusia, Alabama

15

Depreciation Method

Useful Lives

Composite Straight-Line Composite Composite Straight-Line Straight-Line Straight-Line Straight-Line

25 years 50 years 5 – 10 years 20 years 10 years 10 years 20 years 20 years

Notes to the Financial Statements For the Year Ended September 30, 2016 5. Deferred Outflows of Resources Deferred outflow of resources is reported in the Statement of Net Position. Deferred outflows of resources are defined as a consumption of net assets by the government that is applicable to a future reporting period. Deferred outflows of resources increase net position, similar to assets. 6. Long-Term Obligations Long-term debt and other long-term obligations are reported as liabilities in the Statement of Net Position. Bond premiums and discounts are deferred and amortized over the life of the bonds. 7. Compensated Absences No liability is recorded for sick leave. Substantially all employees of the College earn 12 days of sick leave each year with unlimited accumulation. Payment is not made to employees for unpaid sick leave at termination or retirement. All non-instructional employees earn annual leave at a rate which varies from 12 to 24 days per year depending on duration of employment, with accumulation limited to 60 days. Instructional employees do not earn annual leave. Payment is made to employees for unused leave at termination or retirement. 8. Deferred Inflows of Resources Deferred inflows of resources are reported in the Statement of Net Position. Deferred inflows of resources are defined as an acquisition of net assets by the government that is applicable to a future reporting period. Deferred inflows of resources decrease net position, similar to liabilities. 9. Unearned Tuition and Fee Revenue Tuition and fee revenues received but related to the period after September 30, 2016, have been deferred.

Lurleen B. Wallace Community College Andalusia, Alabama

16

Notes to the Financial Statements For the Year Ended September 30, 2016 10. Net Position Net position is required to be classified for accounting and reporting purposes into the following categories:  Net Investment in Capital Assets – Capital assets, including restricted capital assets, reduced by accumulated depreciation and by outstanding principal balances of debt attributable to the acquisition, construction or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are also included in this component of net position. Any significant unspent related debt proceeds or inflows of resources at year-end related to capital assets are not included in this calculation.  Restricted:  Nonexpendable – Net position subject to externally imposed stipulations that they be maintained permanently by the College. Such assets include the College’s permanent endowment funds.  Expendable – Net position whose use by the College is subject to externally imposed stipulations that can be fulfilled by actions of the College pursuant to those stipulations or that expire by the passage of time.  Unrestricted – Net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position. Unrestricted resources may be designated for specific purposes by action of management or the Alabama Community College System Board of Trustees. 11. Federal Financial Assistance Programs The College participates in various federal programs. Federal programs are audited in accordance with Title 2 U. S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). 12. Scholarship Allowances and Student Aid Student tuition and fees are reported net of scholarship allowances and discounts. The amount for scholarship allowances and discounts is the difference between the stated charge for goods and services provided by the College and the amount that is paid by the student and/or third parties making payments on behalf of the student. The College uses the case-by-case method to determine the amount of scholarship allowances and discounts.

Lurleen B. Wallace Community College Andalusia, Alabama

17

Notes to the Financial Statements For the Year Ended September 30, 2016 E. Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, the Teachers’ Retirement System of Alabama (the “Plan”) financial statements are prepared using the economic resources measurement focus and accrual basis of accounting. Contributions are recognized as revenues when earned, pursuant to plan requirements. Benefits and refunds are recognized as revenues when due and payable in accordance with the terms of the Plan. Expenses are recognized when the corresponding liability is incurred, regardless of when the payment is made. Investments are reported at fair value. Financial statements are prepared in accordance with requirements of the Governmental Accounting Standards Board (GASB). Under these requirements, the Plan is considered a component unit of the State of Alabama and is included in the State’s Comprehensive Annual Financial Report. Note 2 – Deposits and Investments A. Deposits The College’s deposits at year-end were held by financial institutions in the State of Alabama’s Security for Alabama Funds Enhancement (SAFE) Program. The SAFE Program was established by the Alabama Legislature and is governed by the provisions contained in the Code of Alabama 1975, Sections 41-14A-1 through 41-14A-14. Under the SAFE Program all public funds are protected through a collateral pool administered by the Alabama State Treasurer’s Office. Under this program, financial institutions holding deposits of public funds must pledge securities as collateral against those deposits. In the event of failure of a financial institution, securities pledged by that financial institution would be liquidated by the State Treasurer to replace the public deposits not covered by the Federal Deposit Insurance Corporation (FDIC). If the securities pledged fail to produce adequate funds, every institution participating in the pool would share the liability for the remaining balance. The Statement of Net Position classification “cash” includes all readily available cash such as petty cash and demand deposits. Deposit With Trustees As of September 30, 2016, the College had a cash balance of $233,701.25 in the principal and interest account administered by its bond trustee.

Lurleen B. Wallace Community College Andalusia, Alabama

18

Notes to the Financial Statements For the Year Ended September 30, 2016 B. Investments The College may invest its funds in securities and investments authorized by the Code of Alabama 1975, Section 16-13-2, Sections 27-1-8 and 27-1-9, and Sections 27-41-1 through 27-41-41. These laws provide that the College may invest in the same type of instruments as allowed by Alabama law for domestic life insurance companies. This includes a wide range of investments, such as direct obligations of the United States of America, obligations issued or guaranteed by certain federal agencies, and bonds of any state, county, city, town, village, municipality, district or other political subdivision of any state or any instrumentality or board thereof of the United States of America that meet specified criteria. The College’s investment policy permits investments in the following: 1) U. S. Treasury bills, notes, bonds, and stripped Treasuries 2) U. S. Agency notes, bonds, debentures, discount notes and certificates, 3) certificates of deposit (CDs), checking and money market accounts of savings and loan associations, mutual savings banks, or commercial banks whose accounts are insured by FDIC/FSLIC, and who are designated a Qualified Public Depository (QPD) under the SAFE Program; 4) mortgage backed securities (MBSs), 5) mortgage-related securities including collateralized mortgage obligations (CMOs) and real estate mortgage investment conduits (REMIC) securities, 6) repurchase agreements, and 7) stocks and bonds which have been donated to the institution. Note 3 – Receivables Receivables are summarized as follows: Accounts Receivable: Federal State 3rd Party Tuition and Fees Definitive Project Agreement Other Total Accounts Receivable

Lurleen B. Wallace Community College Andalusia, Alabama

19

$1,664,937.95 177,761.78 463,085.25 400,000.00 9,034.75 $2,714,819.73

Notes to the Financial Statements For the Year Ended September 30, 2016 Note 4 – Capital Assets Capital asset activity for the year ended September 30, 2016, was as follows: Beginning Balance Land Buildings Improvements Other Than Buildings Equipment Construction in Progress Library Holdings Total Less: Accumulated Depreciation Improvements Other Than Buildings Buildings Equipment Library Holdings Total Accumulated Depreciation Total Capital Assets, Net

$

Additions

411,892.50 17,134,502.66 1,790,722.82 4,320,763.99

$

Deductions $

13,550.00

677,390.86 24,335,272.83

86,512.50 5,000.00 21,183.01 126,245.51

1,133,730.76 7,126,019.20 3,033,419.40 543,679.67 11,836,849.03 $12,498,423.80

58,719.56 379,785.21 331,730.17 34,623.94 804,858.88 $(678,613.37)

436,552.88 6,095.03 442,647.91

436,552.88 6,095.03 442,647.91 $

Ending Balance $ 411,892.50 17,148,052.66 1,790,722.82 3,970,723.61 5,000.00 692,478.84 24,018,870.43

1,192,450.32 7,505,804.41 2,928,596.69 572,208.58 12,199,060.00 $11,819,810.43

Note 5 – Defined Benefit Pension Plan A. Plan Description The Teachers’ Retirement System of Alabama (TRS), a cost-sharing multiple employer public employee retirement plan, was established as of September 15, 1939, under the provisions of Act Number 419 of the Legislature of 1939 for the purpose of providing retirement allowances and other specified benefits for qualified persons employed by State-supported educational institutions. The responsibility for the general administration and operation of the TRS is vested in its Board of Control. The TRS Board of Control consists of 15 trustees. The plan is administered by the Retirement Systems of Alabama (RSA). Title 16-Chapter 25 of the Code of Alabama, grants the authority to establish and amend the benefit terms to the TRS Board of Control. The Plan issues a publicly available financial report that can be obtained at www.rsa-al.gov.

Lurleen B. Wallace Community College Andalusia, Alabama

20

Notes to the Financial Statements For the Year Ended September 30, 2016 B. Benefits Provided State law establishes retirement benefits as well as death and disability benefits and any ad hoc increase in postretirement benefits for the TRS. Benefits for TRS members vest after 10 years of creditable service. TRS members who retire after age 60 with 10 years or more of creditable service or with 25 years of service (regardless of age) are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a formula method, with the member receiving payment under the method that yields the highest monthly benefit. Under the formula method, members of the TRS are allowed 2.0125% of their average final compensation (highest 3 of the last 10 years) for each year of service. Act Number 377 of the Legislature of 2012 established a new tier of benefits (Tier 2) for members hired after January 1, 2013. Tier 2 TRS members are eligible for retirement after age 62 with 10 years or more of creditable service and are entitled to an annual retirement benefit, payable monthly for life. Service and disability retirement benefits are based on a guaranteed minimum or a formula method, with the member receiving payment under the method that yields the highest monthly benefit. Under the formula method, Tier 2 members of the TRS are allowed 1.65% of their average final compensation (highest 5 of the last 10 years) for each year of service. Members are eligible for disability retirement if they have 10 years of creditable service, are currently in-service, and determined by the RSA Medical Board to be permanently incapacitated from further performance of duty. Preretirement death benefits are calculated and paid to the beneficiary based on the member’s age, service credit, employment status and eligibility for retirement. C. Contributions Covered members of the TRS contributed 5% of earnable compensation to the TRS as required by statute until September 30, 2011. From October 1, 2011 to September 30, 2012, covered members of the TRS were required by statute to contribute 7.25% of earnable compensation. Effective October 1, 2012, covered members of the TRS were required by statute to contribute 7.50% of earnable compensation. Certified law enforcement, correctional officers and firefighters of the TRS contributed 6% of earnable compensation as required by statute until September 30, 2011. From October 1, 2011 to September 30, 2012, certified law enforcement, correctional officers, and firefighters of the TRS were required by statute to contribute 8.25% of earnable compensation. Effective October 1, 2012, certified law enforcement, correctional officers, and firefighters of the TRS are required by statute to contribute 8.50% of earnable compensation. Tier 2 covered members of the TRS contribute 6% of earnable compensation to the TRS as required by statute. Tier 2 certified law enforcement, correctional officers, and firefighters of the TRS are required by statute to contribute 7% of earnable compensation.

Lurleen B. Wallace Community College Andalusia, Alabama

21

Notes to the Financial Statements For the Year Ended September 30, 2016 Participating employers’ contractually required contribution rate for the year ended September 30, 2016, was 11.94% of annual pay for Tier 1 members and 10.84% of annual pay for Tier 2 members. These required contribution rates are a percent of annual payroll, actuarially determined as an amount that, when combined with member contributions, is expected to finance the costs of benefits earned by members during the year, with an additional amount to finance any unfunded accrued liability. Total employer contributions to the pension plan from the College was $877,437.65 for the year ended September 30, 2016. The percentages of the contributions and the amount of contributions made by the College and its employees equal the required contributions for each year as follows:

Fiscal Year Ended September 30, Total Percentage of Covered Payroll Contributions: Percentage Contributed by College Percentage Contributed by Regular Employees Percentage Contributed by Law Enforcement Employees Contributed by College Contributed by Employees Total Contributions

Tier 1 2016

Tier 2 2016

Tier 1 2015

Tier 2 2015

19.44%

16.84%

19.21%

17.05%

11.94% 7.50% 8.50%

10.84% 6.00% 7.00%

11.71% 7.50% 8.50%

11.05% 6.00% 7.00%

$ 817,504.31 513,507.72 $1,331,012.03

$59,933.34 33,173.43 $93,106.77

$ 852,845.23 542,369.46 $1,395,214.69

$48,448.48 26,306.87 $74,755.35

D. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At September 30, 2016, the College reported a liability of $12,783,007.00 for its proportionate share of the collective net pension liability. The collective net pension liability was measured as of September 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of September 30, 2014. The College’s proportion of the collective net pension liability was based on the employers’ shares of contributions to the pension plan relative to the total employer contributions of all participating TRS employers. At September 30, 2015, the College’s proportion was 0.122140%, which was an increase of 0.002352% from its proportion measured as of September 30, 2014.

Lurleen B. Wallace Community College Andalusia, Alabama

22

Notes to the Financial Statements For the Year Ended September 30, 2016 For the year ended September 30, 2016, the College recognized pension expense of $979,263.00. At September 30, 2016, the College reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Differences between expected and actual experience Changes of assumptions Net difference between projected and actual earnings on pension plan investments Changes in proportion and differences between Employer contributions and proportionate share of contributions Employer contributions subsequent to the measurement date Total

$

$ 68,662.00

837,000.00 186,000.00 877,438.00 $4,997,207.00

176,000.00 $244,662.00

The $877,438.00 reported as deferred outflows of resources related to pensions resulting from College contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended September 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the pension will be recognized in pension expense as follows: Year Ending: September 30, 2017 2018 2019 2020 2021 Thereafter

$132,000.00 $132,000.00 $132,000.00 $376,000.00 $ 6,338.00 $

E. Actuarial Assumptions The total pension liability was determined by an actuarial valuation as of September 30, 2014, using the following actuarial assumptions, applied to all periods included in the measurement: Inflation Investment Rate of Return (*) Projected Salary Increases

3.00% 8.00% 3.5%-8.25%

(*) Net of pension plan investment expense

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Notes to the Financial Statements For the Year Ended September 30, 2016 The actuarial assumptions used in the actuarial valuation as of September 30, 2014, were based on the results of an investigation of the economic and demographic experience for the TRS based upon participant data as of September 30, 2010. The Board of Control accepted and approved these changes on January 27, 2012, which became effective at the beginning of fiscal year 2012. Mortality rate for TRS were based on the RP-2000 Combined Mortality Table for Males and Females, as appropriate, with adjustments for mortality improvements based on Scale AA projected to 2015 and set back one year for females. The long-term expected rate of return on pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected further real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target asset allocation and best estimates of geometric real rate of return for each major asset class are as follows: Long-Term Target Expected Rate Allocation of Return (*) Fixed Income U. S. Large Stocks U. S. Mid Stocks U. S. Small Stocks International Developed Market Stocks International Emerging Market Stocks Real Estate Cash Total

25.00% 34.00% 8.00% 3.00% 15.00% 3.00% 10.00% 2.00% 100.00%

5.00% 9.00% 12.00% 15.00% 11.00% 16.00% 7.50% 1.50%

(*) Includes assumed rate of inflation of 2.50%

F. Discount Rate The discount rate used to measure the total pension liability was 8%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that the employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, components of the pension plan’s fiduciary net position were projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

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Notes to the Financial Statements For the Year Ended September 30, 2016 G. Sensitivity of the College’s Proportionate Share of the Net Pension Liability to Changes in the Discount Rate The following table presents the College’s proportionate share of the net pension liability calculated using the discount rate of 8%, as well as what the College’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower (7%) or 1-percentage-point higher (9%) than the current rate: 1% Decrease Current Rate (7.00%) (8.00%) College’s proportionate share of collective net pension liability

$16,911

$12,783

1% Increase (9.00%)

$9,282

(Dollar Amounts in Thousands)

H. Pension Plan Fiduciary Net Position Detailed information about the pension plan’s fiduciary net position is available in the separately issued RSA Comprehensive Annual Report for the fiscal year ended September 30, 2015. The supporting actuarial information is included in the GASB Statement Number 67 Report for the TRS prepared as of September 30, 2015. The auditor’s report dated October 17, 2016 on the total pension liability, total deferred outflows of resources, total deferred inflows of resources, total pension expense for the sum of all participating entities as of September 30, 2015 along with supporting schedules is also available. The additional financial and actuarial information is available at www.rsa-al-gov.

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Notes to the Financial Statements For the Year Ended September 30, 2016 Note 6 – Other Postemployment Benefits (OPEB) A. Plan Description The College contributes to the Alabama Retired Education Employees’ Health Care Trust (the “Trust”), a cost-sharing multiple-employer defined benefit postemployment healthcare plan. The Trust provides health care benefits to state and local school system retirees and was established in 2007 under the provisions of Act Number 2007-16, Acts of Alabama, as an irrevocable trust fund. Responsibility for general administration and operations of the Trust is vested with the Public Education Employees’ Health Insurance Board (PEEHIB) members. The Code of Alabama 1975, Section 16-25A-4, provides the PEEHIB with the authority to amend the benefit provisions in order to provide reasonable assurance of stability in future years. The Trust issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained at the Public Education Employees’ Health Insurance Plan website, http://www.rsa-al.gov/index.php/members/peehip under the Employer’s Financial Reports section. The Plan’s financial report for fiscal year 2016 will be available at the end of January 2017. The provisions of GASB Statement Number 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other than Pensions were implemented prospectively.

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Notes to the Financial Statements For the Year Ended September 30, 2016 B. Funding Policy The Public Education Employees’ Health Insurance Fund (PEEHIF) was established in 1983 under the provisions of Act Number 255, Acts of Alabama, to provide a uniform plan of health insurance for current and retired employees of state educational institutions. The plan is administered by the PEEHIB. Any Trust fund assets used in paying administrative costs and retiree benefits are transferred to and paid from the PEEHIF. The PEEHIB periodically reviews the funds available in the PEEHIF and if excess funds are determined to be available, the PEEHIB authorizes a transfer of funds from the PEEHIF to the Trust. Retirees are required to contribute monthly as follows: Fiscal Year 2016 Individual Coverage – Non-Medicare Eligible Individual Coverage – Medicare Eligible Family Coverage – Non-Medicare Eligible Retired Member and Non-Medicare Eligible Non-spousal Dependent(s) Family Coverage – Non-Medicare Eligible Retired Member and Non-Medicare Eligible Dependent(s) With Non-Medicare Eligible Spouse Family Coverage – Non-Medicare Eligible Retired Member and Non-Spousal Dependent Medicare Eligible Family Coverage – Non-Medicare Eligible Retired Member and Spouse Dependent Medicare Eligible Family Coverage – Medicare Eligible Retired Member and Non-Medicare Eligible Dependent(s) – No Spouse Family Coverage – Medicare Eligible Retired Member and Non-Medicare Eligible Dependent(s) – With Non-Medicare Eligible Spouse Family Coverage – Medicare Eligible Retired Member and Non-spousal Dependent Medicare Eligible Family Coverage – Medicare Eligible Retired Member and Spousal Dependent Medicare Eligible Surviving Spouse – Non-Medicare Eligible Surviving Spouse – Non-Medicare Eligible and Dependent Non-Medicare Eligible Surviving Spouse – Non-Medicare Eligible and Dependent Medicare Eligible Surviving Spouse – Medicare Eligible Surviving Spouse – Medicare Eligible and Dependent Non-Medicare Eligible Surviving Spouse – Medicare Eligible and Dependent Medicare Eligible

$ 151.00 $ 10.00 $ 391.00 $ $ $ $

416.00 250.00 260.00 250.00

$ 275.00 $ 109.00 $ 119.00 $ 740.00 $ 987.00 $1,033.00 $ 425.00 $ 679.00 $ 725.00

For employees that retire other than for disability on or after October 1, 2005, and before January 1, 2012, for each year under 25 years of service, the retiree pays two percent of the employer premium and for each year over 25 years of service, the retiree premium is reduced by two percent of the employer premium. Employees who retire on or after January 1, 2012, with less than 25 years of service are required to pay 4% for each year under 25 years of service. In addition, non-Medicare eligible employees who retire on or after January 1, 2012, are required to pay 1% more for each year less than 65 (age premium) and to pay the net difference between the active employee subsidy and the non-Medicare eligible subsidy (subsidy premium). When the retiree becomes Medicare eligible, the age and subsidy premium no longer applies, but the years of service premium (if applicable to the retiree) will continue to be applied throughout retirement. These changes are being phased in over a 5 year period. The tobacco premium is $50.00 per month for retired members who use tobacco products.

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Notes to the Financial Statements For the Year Ended September 30, 2016 The College is required to contribute at a rate specified by the State for each active employee. The College’s share of premiums for retired employees health insurance is included as part of the premium for active employees. The following shows the required contributions in dollars and the percentage of that amount contributed for retirees:

Fiscal Year Ended September 30, 2016 2015 2014

Active Health Insurance Premiums Paid By College

Amount of Premium Attributable to Retirees

Percentage of Active Employee Premiums Attributable to Retirees

Total Amount Paid Attributable to Retirees

Percentage of Required Amount Contributed

$780.00 $780.00 $714.00

$211.21 $180.76 $220.09

27.08% 23.17% 30.83%

$310,723.50 $275,064.97 $346,879.95

100% 100% 100%

Each year the PEEHIB certifies to the Governor and to the Legislature the contribution rates based on the amount needed to fund coverage for benefits for the following fiscal year and the Legislature sets the premium rate in the annual appropriation bill. This results in a pay-as-you-go funding method. Note 7 – On-Behalf Payments The U. S. Department of Health and Human Services makes Employer Group Waiver Program (EGWP) payments under the provisions of Medicare Part D directly to the Public Education Employees’ Health Insurance Plan (PEEHIP) on behalf of the College. The Early Retiree Reinsurance Program (ERRP) was created as part of the Patient Protection and Affordable Care Act of 2010. This program provides reimbursements to employers for eligible healthcare costs for certain early retirees. EGWP and ERRP reimbursements are considered to be voluntary non-exchange transactions between the federal government and the employers. For the period October 1, 2015, through September 30, 2016, these payments totaled $86,659.48. Note 8 – Significant Commitments As of September 30, 2016, the College had been awarded approximately $2,110,103.39 in contracts and grants on which performance had not been accomplished and funds had not been received. These awards, which represent commitments of sponsors to provide funds for specific purposes, have not been reflected in the financial statements.

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Notes to the Financial Statements For the Year Ended September 30, 2016 Definitive Project Agreement The College entered into a Definitive Project Agreement with the City of Greenville for $800,000.00. The City of Greenville will pay the sum of forty thousand dollars per year to the College beginning January 1, 2007 and on the first day of January each year thereafter for a period of twenty years. These payments are to be made for the purpose of offsetting a portion of the indebtedness incurred by the College in constructing the technology building on the Greenville campus and for the use thereof by the City, its departments, agencies, and public corporations created by and within the City. Amounts due are presented in the chart below: Fiscal Years

Total

2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025 2025-2026 Total

$ 40,000.00 40,000.00 40,000.00 40,000.00 40,000.00 40,000.00 40,000.00 40,000.00 40,000.00 40,000.00 $400,000.00

Note 9 – Accounts Payable Accounts payable and accrued liabilities represent amounts due at September 30, 2016, for goods and services received prior to the end of the fiscal year. Accounts Payable Salaries and Wages Benefits Interest Payable Bond Surety Fee Total

Lurleen B. Wallace Community College Andalusia, Alabama

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$ 698,421.30 266,949.70 51,078.19 43,701.25 6,722.00 $1,066,872.44

Notes to the Financial Statements For the Year Ended September 30, 2016 Note 10 – Long-Term Liabilities Long-term liabilities activity for the year ended September 30, 2016, was as follows: Beginning Balance

Ending Balance

Current Portion

Additions

Reductions

$(180,000.00) (180,000.00)

$2,030,000.00 2,030,000.00

$190,000.00 190,000.00

$(180,000.00)

545,490.48 545,490.48 $2,575,490.48

12,104.65 12,104.65 $202,104.65

Bonds Payable: Revenue Bonds Total Bonds Payable

$2,210,000.00 2,210,000.00

$

Other Liabilities: Compensated Absences Total Other Liabilities Total Long-Term Liabilities

521,357.84 521,357.84 $2,731,357.84

24,132.64 24,132.64 $24,132.64

Revenue Bonds of $3,700,000.00 were issued March 2005 to provide funds to construct and equip a Technology Building on the Greenville campus and a Child Development and Child Care Center on the Andalusia Campus. Principal and interest maturity requirements on bond debt are as follows:

Fiscal Years 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025 Totals

Revenue Bonds Principal Interest $ 190,000.00 195,000.00 205,000.00 215,000.00 225,000.00 235,000.00 245,000.00 255,000.00 265,000.00 $2,030,000.00

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$ 82,652.50 74,002.50 66,002.50 57,495.00 48,418.75 38,609.38 28,109.38 17,171.88 5,796.88 $418,258.77

Totals $ 272,652.50 269,002.50 271,002.50 272,495.00 273,418.75 273,609.38 273,109.38 272,171.88 270,796.88 $2,448,258.77

Notes to the Financial Statements For the Year Ended September 30, 2016 Pledged Revenues Lurleen B. Wallace Community College has pledged student tuition fee revenues to repay $3,700,000.00 in Revenue Bonds, Series 2005 issued in March 2005 to provide funds for financing capital improvements. Future revenues in the amount of $2,448,258.77 are pledged to repay principal and interest on the bonds at September 30, 2016. Pledged revenues in the amount of $5,700,338.82 were received during the fiscal year ended September 30, 2016, with $267,402.50 being used to pay principal and interest payments during this fiscal year. The Series 2005 Bonds are scheduled to mature in fiscal year 2025. Note 11 – Risk Management The College is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The College has insurance for its buildings and contents through the State Insurance Fund (SIF), part of the State of Alabama, Department of Finance; Division of Risk Management which operates as a common risk management and insurance program for state owned properties. The College pays an annual premium based on the amount of coverage requested. The SIF provides coverage up to $2 million per occurrence and is self-insured up to a maximum of $6 million in aggregate claims. The SIF purchases commercial insurance for claims which in the aggregate exceed $6 million. The College purchases commercial insurance for its automobile coverage, general liability, and professional legal liability coverage. In addition, the College has fidelity bonds on the College’s President, Director of Finance and Comptroller, Financial Aid Officer, as well as on all other College personnel who handle funds. Employee health insurance is provided through the Public Education Employees’ Health Insurance Fund (PEEHIF) administered by the Public Education Employees’ Health Insurance Board (PEEHIB). The Fund was established to provide a uniform plan of health insurance for current and retired employees of state educational institutions and is self-sustaining. Monthly premiums for employee and dependent coverage are determined annually by the plan’s actuary and based on anticipated claims in the upcoming year, considering any remaining fund balance on hand available for claims. The College contributes a specified amount monthly to the PEEHIF for each employee and this amount is applied against the employee’s premiums for the coverage selected and the employee pays any remaining premium. Settled claims resulting from these risks have not exceeded the College’s coverage in any of the past three fiscal years. Claims which occur as a result of employee job-related injuries may be brought before the State of Alabama Board of Adjustment. The Board of Adjustment serves as an arbitrator and its decision is binding. If the Board of Adjustment determines that a claim is valid, it decides the proper amount of compensation (subject to statutory limitations) and the funds are paid by the College.

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Notes to the Financial Statements For the Year Ended September 30, 2016 Note 12 – Component Units Lurleen B. Wallace Community College Foundation and Douglas MacArthur State Technical College Foundation are discretely presented component units of the College’s financial statements because they operate almost exclusively for the benefit of the College. During the College’s fiscal year ended September 30, 2016, the Douglas MacArthur State Technical College Foundation, distributed $18,166.89 to the College for various scholarships. Separate financial statements of the Lurleen B. Wallace Community College Foundation and the Douglas MacArthur State Technical College Foundation can be obtained from the Foundation’s auditors Rabren, Odom, Pierce & Hayes, P.C., 1600 Dr. Martin Luther King, Jr. Expressway, Andalusia, Alabama 36420. Note 13 – Subsequent Event Lurleen B. Wallace Community College has engaged a company to assist the College in calculations of arbitrage earnings on the $1,000,000.00 Alabama State Board of Education, Lurleen B. Wallace State Junior College, Revenue Bonds, Series 1994. These calculations have resulted in a positive arbitrage amount that may have to be remitted to the IRS. The amount that may need to be remitted, if any, has not been determined.

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Notes to the Financial Statements Lurleen B. Wallace Community College Foundation December 31, 2015 Note 1 – Organization The Lurleen B. Wallace Community College Foundation (the Foundation), a component unit of Lurleen B. Wallace Community College, is a nonprofit corporation as described in Section 501(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes. The Foundation is organized for educational, scientific, and charitable purposes, and specifically to assist and aid Lurleen B. Wallace Community College in fulfilling and performing its educational and public service programs and activities. The Foundation receives, administers and distributes funds for the benefit of Lurleen B. Wallace Community College. Note 2 – Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents For purposes of the statement of cash flows, the Foundation considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents, except cash equivalents included in long-term investment portfolios. The carrying value of cash and cash equivalents approximates fair value because of the short maturities of those financial instruments. At December 31, 2015, the Foundation had cash in the amount of $141,321 restricted for tenant’s security deposits. Investments The Foundation carries investments in marketable securities with readily determinable fair values and all investments in debt securities at their fair values in the statement of financial position. Net investment return (including realized and unrealized gains and losses on investments, interest, and dividends) is reported as an increase or decrease in unrestricted net assets, unless such income or loss is temporarily or permanently restricted by explicit donor stipulations or by law.

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Notes to the Financial Statements Lurleen B. Wallace Community College Foundation December 31, 2015 Capital Assets Capital assets are defined by the Foundation as assets with an initial, individual cost of $1,000 or more and an estimated useful life in excess of one year. Purchases of capital assets are recorded at cost. Donations of property and equipment are recorded as contributions at their estimated value on the date received. Such donations are reported as unrestricted contributions unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted contributions. Absent donor stipulations regarding how long those donated assets must be maintained, the Foundation reports expirations of donor restrictions when the donated or acquired assets are placed in service. Capital assets are depreciated using the straight line method over the asset’s estimated useful life. The estimated useful lives are defined as follows: Buildings and Improvements Land Improvements Equipment Furniture and Fixtures Vehicles

15 – 40 years 3 – 20 years 3 – 20 years 3 – 20 years 3 – 5 years

Revenue Recognition Revenues are recorded on the accrual basis. pledged.

Revenues are recognized when promised or

Restricted and Unrestricted Revenue and Support Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities, as net assets released from restrictions.

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Notes to the Financial Statements Lurleen B. Wallace Community College Foundation December 31, 2015 Contributed Services The Foundation recognizes donated services that create or enhance nonfinancial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Expenses Expenses are recognized in the period they are incurred. If an expense, such as an award scholarship, includes conditions, the Foundation recognizes the expense when the conditions are met. The Foundation reports expenses by their functional classification in the statement of activities. For the year ended December 31, 2015, the Foundation reported rental expenses as program expenses. All other expenses were reported as supporting expenses. Basis of Presentation The Foundation is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.  Unrestricted net assets are not subject to donor-imposed stipulations or any other external stipulation.  Temporarily restricted net assets are subject to donor-imposed stipulations that may or will be met by actions of the Foundation and/or the passage of time.  Permanently restricted net assets are subject to donor-imposed stipulations or other external stipulations that neither expire with the passage of time nor can be fulfilled or otherwise removed by actions of the Foundation. Board designated net assets are unrestricted funds which the Board of Directors has identified to be used for specific purposes. Board designated funds have not been restricted by donors; therefore they are classified as unrestricted net assets. The Foundation had five Board designated funds as of December 31, 2015, totaling $126,789.

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Notes to the Financial Statements Lurleen B. Wallace Community College Foundation December 31, 2015 Tax Status The Foundation has been recognized by the Internal Revenue Service as exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Therefore, no provision for income taxes has been made in the accompanying financial statements. In addition, the Internal Revenue Service has determined the Foundation to not be a “private foundation” within the meaning of Section 509(a) on the Internal Revenue Code. The Foundation’s Forms 990, Return of Organization Exempt from Income Tax, for the years ending 2013, 2014, and 2015 are subject to examination by the Internal Revenue Service, generally for three years after they were filed. Note 3 – Investments The Foundation has a written investment policy. Investments at December 31, 2015, are carried at fair value and consist of the following: Money Market Funds Mutual Funds Corporate and Government Bonds Unit Trusts

$

30,464 3,013,781 243,063 113,563 $3,400,871

The following schedule summarizes the investment return and its classification in the statement of activities for the year ended December 31, 2015:

Investment Income Net Appreciation (Depreciation)

Lurleen B. Wallace Community College Andalusia, Alabama

Unrestricted

Temporarily Restricted

$ 96,759 (208,344) $(111,585)

$59,721 0 $59,721

36

Total $ 156,480 (208,344) $ (51,864)

Notes to the Financial Statements Lurleen B. Wallace Community College Foundation December 31, 2015 Note 4 – Fair Value Measurements The fair value measurement accounting literature establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels: Level 1 – Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2 – Observable inputs other than quoted prices in active markets. Level 3 – One or more unobservable inputs, which are deemed significant to the determination of the fair value, for which there is little or no market data available. The fair value hierarchy gives the lowest priority to Level 3 inputs. Fair values of assets measured within the fair value hierarchy on a recurring basis at December 31, 2015, are as follows: Quoted Prices in Active Markets for Identical Assets (Level 1) Money Market Funds Mutual Funds Corporate and Government Bonds Unit Trusts

$

30,464 3,013,781 243,063 113,563 $3,400,871

Investments are exposed to various risks such as interest rate, market and credit risks. Because of these risks, it is at least reasonably possible that changes in the fair values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the statements of financial position and the statements of activities and changes in net assets.

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Notes to the Financial Statements Lurleen B. Wallace Community College Foundation December 31, 2015 Note 5 – Capital Assets Capital asset activity for the year ended December 31, 2015, is as follows: Balance 01/01/2015 Land Buildings Furniture and Fixtures Land Improvements Equipment

$ 119,000 2,543,435 156,317 102,874 91,918 3,013,544

Accumulated Depreciation Total Capital Assets, Net of Accumulated Depreciation

Additions

(109,197)

$2,904,347

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$

Balance 12/31/2015

Retirements

0 0 0 0 10,000 10,000

$0 0 0 0 0 0

$ 119,000 2,543,435 156,317 102,874 101,918 3,023,544

(84,080)

0

(193,277)

$(74,080)

$0

$2,830,267

Notes to the Financial Statements Lurleen B. Wallace Community College Foundation December 31, 2015 Note 6 – Debt The following is a summary of the Foundation’s long-term debt: Balance 01/01/2015 United States Department of Agriculture Loan at 3.125% maturing January 8, 2044, Secured by Real Estate:

Additions

$2,846,000

Deletions

$0

$0

Balance 12/31/2015

$2,846,000

Long-term debt maturities are as follows: Year Ending December 31, 2016 2017 2018 2019 2020 2021 and Thereafter

Principal $

0 65,089 67,123 69,220 71,383 2,573,185 $2,846,000

Interest $

88,938 88,937 86,903 84,806 82,643 1,122,289 $1,554,516

At December 31, 2015, the related debt service reserve bank accounts had been established and funded in accordance with the debt agreement.

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Notes to the Financial Statements Lurleen B. Wallace Community College Foundation December 31, 2015 Note 7 – Net Assets Endowment Funds As of December 31, 2015, the Foundation’s endowment consisted of donor-restricted funds and funds designated by the Board of Directors to function as endowments. The endowment funds were established for future scholarships and programs. As required by generally accepted accounting principles, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The Foundation has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Foundation classifies as permanently restricted net assets (1) the original value of gifts donated to the permanent endowment, (2) the original value of subsequent gifts to the permanent endowment, and (3) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. Any remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Foundation in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Foundation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the various funds, (2) the purposes of the donor-restricted endowment funds, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of the Foundation, and (7) the Foundation's investment policies. The Foundation has adopted an investment policy for endowment assets that attempts to maximize total return consistent with an acceptable level of risk that will provide predictable funding to maintain expenditures supported by its endowment. The Foundation operates to provide equitable benefit from the endowment for current and future programs. Appropriation of funds for scholarships, programs and operating expenses are determined by the return on the endowment assets.

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Notes to the Financial Statements Lurleen B. Wallace Community College Foundation December 31, 2015 The composition of donor restricted net assets and the changes in donor restricted net assets as of and for the year ended December 31, 2015 is as follows: Temporarily Restricted Donor Restricted Net Assets, January 1, 2015 Investment Return: Investment Income Contributions Net Assets Released from Restrictions Donor Restricted Net Assets, December 31, 2015

Permanently Restricted

$ 39,587

$1,406,974

59,721 2,740 (1,000) $101,048

0 28,058 0 $1,435,032

Board Designated Endowments As of December 31, 2015, the Board had three Board Designated Endowment funds amounting to $75,500. Spending Policy The Foundation has established scholarship award levels based upon individual endowment fund balances and pursuant to donor agreements. The Foundation expects the current spending policy to allow its endowment to grow annually. This is consistent with the Foundation’s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. Funds with Deficiencies From time to time, the fair value of assets associated with individual donor permanently restricted funds may fall below the level that the donor or UPMIFA requires the Foundation to retain as a fund of perpetual duration. As of December 31, 2015, there were no deficiencies of this nature required to be reported.

Lurleen B. Wallace Community College Andalusia, Alabama

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Notes to the Financial Statements Lurleen B. Wallace Community College Foundation December 31, 2015 Note 8 – Concentrations of Credit Risk The Foundation’s investments consist primarily of financial instruments including cash deposits, stocks, bonds, mutual funds and other fixed income securities. These financial instruments may subject the Foundation to concentrations of credit risk as, from time to time, cash balances and investments may exceed amounts insured by the Federal Deposit Insurance Corporation and the Security Investor Protection Corporation; the market value of securities are dependent on the ability of the issuer to honor its contractual commitments, and the investments are subject to changes in market values. Cash balances totaling $141,321 were uninsured at December 31, 2015. Note 9 – Related-Party Transactions The Foundation’s endowed scholarships during the year ended December 31, 2015, were paid by Lurleen B. Wallace Community College. Total scholarships awarded on behalf of the Foundation amounted to $46,860. Lurleen B. Wallace Community College donated administrative services with an estimated value of $21,600 to the Foundation during the year ended December 31, 2015. This amount has been reported as contributed services and administrative expenses in the statement of activities. During the year ended December 31, 2015, Lurleen B. Wallace Community College provided office space, utilities, use of equipment and supplies to the Foundation. The values of these inkind contributions have not been estimated and are not reflected in these financial statements. Note 10 – Reclassification of Net Assets As of December 31, 2015, the Foundation had a total of $118,430 in the debt service reserve bank accounts temporarily restricted for future debt service as stated in the debt agreement. This balance was reclassified from unrestricted net assets and reported as temporarily restricted net assets as of December 31, 2015. Note 11 – Subsequent Events Subsequent events have been evaluated as of September 23, 2016, which is the date the financial statements were available to be issued.

Lurleen B. Wallace Community College Andalusia, Alabama

42

Notes to the Financial Statements Douglas MacArthur State Technical College Foundation December 31, 2015 Note 1 – Organization The Douglas MacArthur State Technical College Foundation (The “Foundation”), a component unit of Lurleen B Wallace Community College, is a nonprofit corporation as described in Section 501(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes. The Foundation is organized for educational, scientific, and charitable purposes, and specifically to assist and aid Lurleen B. Wallace Community College – MacArthur Campus in fulfilling and performing its educational and public service programs and activities. The Foundation receives, administers and distributes funds for the benefit of Lurleen B. Wallace Community College – MacArthur Campus. Note 2 – Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents For purposes of the statement of cash flows, the Foundation considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value because of the short maturities of those financial instruments. As of December 31, 2015, the Foundation had cash and cash equivalents in the amount of $170,258. Investments The Foundation carries investments in marketable securities with readily determinable fair values and all investments in debt securities at their fair values in the statement of financial position. Net investment return (including realized and unrealized gains and losses on investments, interest, and dividends) is reported as an increase or decrease in unrestricted net assets, unless such income or loss is temporarily or permanently restricted by explicit donor stipulations or by law. Revenue Recognition Revenues are recorded on the accrual basis. pledged. Lurleen B. Wallace Community College Andalusia, Alabama

Revenues are recognized when promised or

43

Notes to the Financial Statements Douglas MacArthur State Technical College Foundation December 31, 2015 Restricted and Unrestricted Revenue and Support Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donorrestricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities, as net assets released from restrictions. Contributed Services The Foundation recognizes donated services that create or enhance nonfinancial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Expenses Expenses are recognized in the period they are incurred. If an expense, such as an award scholarship, includes conditions, the Foundation recognizes the expense when the conditions are met. The Foundation reports expenses by their functional classification in the statement of activities. For the year ended December 31, 2015, the Foundation reported scholarships and other related support as program expenses and all other expenses were reported as supporting expenses.

Lurleen B. Wallace Community College Andalusia, Alabama

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Notes to the Financial Statements Douglas MacArthur State Technical College Foundation December 31, 2015 Basis of Presentation The Foundation is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.  Unrestricted net assets are not subject to donor-imposed stipulations.  Temporarily restricted net assets are subject to donor-imposed stipulations that may or will be met by actions of the Foundation and/or the passage of time.  Permanently restricted net assets are subject to donor-imposed stipulations that neither expire with the passage of time nor can be fulfilled or otherwise removed by actions of the Foundation. Board designated net assets are unrestricted funds which the Board of Directors has identified to be used for specific purposes. Board designated funds have not been restricted by donors; therefore they are classified as unrestricted. The Foundation had no Board designated funds as of December 31, 2015. Tax Status The Foundation has been recognized by the Internal Revenue Service as exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Therefore, no provision for income taxes has been made in the accompanying financial statements. In addition, the Internal Revenue Service has determined the Foundation to not be a “private foundation” within the meaning of Section 509(a) on the Internal Revenue Code. The Foundation’s Forms 990, Return of Organization Exempt from Income Tax, for the years ending 2013, 2014, and 2015 are subject to examination by the Internal Revenue Service, generally for 3 years after they were filed.

Lurleen B. Wallace Community College Andalusia, Alabama

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Notes to the Financial Statements Douglas MacArthur State Technical College Foundation December 31, 2015 Note 3 – Investments The Foundation has a written investment policy. Investments at December 31, 2015, are carried at fair value and consist of the following: Stocks, Options, ETFs Unit Investment Trusts

$ 881,406 175,315 $1,056,721

The following schedule summarizes investment returns and losses and their classification in the statement of activities for the year ended December 31, 2015:

Unrestricted Investment Income Net Appreciation (Depreciation)

Lurleen B. Wallace Community College Andalusia, Alabama

$

18,791 (106,019) $ (87,228)

46

Temporarily Restricted $24,660 0 $24,660

Total $

43,451 (106,019) $ (62,568)

Notes to the Financial Statements Douglas MacArthur State Technical College Foundation December 31, 2015 Note 4 – Fair Value Measurements The fair value measurement accounting literature establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three broad levels: Level 1 – Quoted prices in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2 – Observable inputs other than quoted prices in active markets. Level 3 – One or more unobservable inputs, which are deemed significant to the determination of the fair value, for which there is little or no market data available. The fair value hierarchy gives the lowest priority to Level 3 inputs. Fair values of assets measured within the fair value hierarchy on a recurring basis at December 31, 2015, are as follows: Quoted Prices in Active Markets for Identical Assets (Level 1) Stocks, Options, ETFs Investment Trusts

$ 881,406 175,315 $1,056,721

Investments are exposed to various risks such as interest rate, market and credit risks. Because of these risks, it is at least reasonably possible that changes in the fair values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the statement of financial position and the statement of activities.

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Notes to the Financial Statements Douglas MacArthur State Technical College Foundation December 31, 2015 Note 5 – Endowment Net Assets Endowment Funds At December 31, 2015, the Foundation had donor-restricted endowment net assets that consisted of twenty-five individual funds established for future scholarships and programs. As required by generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. The Foundation has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Foundation classifies as permanently restricted net position (1) the original value of gifts donated to the permanent endowment, (2) the original value of subsequent gifts to the permanent endowment, and (3) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net position is classified as temporarily restricted net position until those amounts are appropriated for expenditure by the Foundation in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Foundation considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the various funds, (2) the purposes of the donor-restricted endowment funds, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of the Foundation, and (7) the Foundation's investment policies. The Foundation has adopted an investment policy for endowment assets that attempts to maximize total return consistent with an acceptable level of risk that will provide predictable funding to maintain expenditures supported by its endowment. The Foundation operates to provide equitable benefit from the endowment for current and future programs. Appropriation of funds for scholarships, programs and operating expenses are determined by the return on the endowment assets.

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Notes to the Financial Statements Douglas MacArthur State Technical College Foundation December 31, 2015 The composition of donor restricted net assets and the changes in donor restricted net assets as of and for the year ended December 31, 2015, is as follows: Temporarily Restricted Donor Restricted Net Assets, January 1, 2015 Investment Return: Investment Income Contributions Net Assets Released from Restrictions Donor Restricted Net Assets, December 31, 2015

Permanently Restricted

$237,749

$485,137

24,660 1,000 (19,157) $244,252

0 27,155 0 $512,292

Spending Policy The Foundation has established scholarship award levels based upon individual endowment fund balances and pursuant to donor agreements. The Foundation expects the current spending policy to allow its endowment to grow annually. This is consistent with the Foundation’s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. Funds with Deficiencies From time to time, the fair value of assets associated with individual donor permanently restricted funds may fall below the level that the donor or UPMIFA requires the Foundation to retain as a fund of perpetual duration. As of December 31, 2015, there were no deficiencies of this nature. Note 6 – Concentrations of Credit Risk The Foundation’s investments consist primarily of financial instruments including cash deposits, stocks, and fixed income securities. These financial instruments may subject the Foundation to concentrations of credit risk as, from time to time, cash balances may exceed amounts insured by the Federal Deposit Insurance Corporation; the market value of securities are dependent on the ability of the issuer to honor its contractual commitments, and the investments are subject to change in market values.

Lurleen B. Wallace Community College Andalusia, Alabama

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Notes to the Financial Statements Douglas MacArthur State Technical College Foundation December 31, 2015 Note 7 – Related-Party Transactions The Foundation receives donated administrative services from Lurleen B. Wallace Community College. The Foundation estimates the fair value of the administrative services to be $7,200 for the year ended December 31, 2015. This amount has been reported as contributed services and administrative expenses in the statement of activities. During the year ended December 31, 2015, Lurleen B. Wallace Community College provided office space, utilities, use of equipment and supplies to the Foundation. The values of these in-kind contributions have not been estimated and are not reflected in these financial statements. Note 8 – Subsequent Events Subsequent events have been evaluated through September 8, 2016, which is the date the financial statements were available to be issued.

Lurleen B. Wallace Community College Andalusia, Alabama

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Required Supplementary Information

Lurleen B. Wallace Community College Andalusia, Alabama

51

Schedule of the College's Proportionate Share of the Net Pension Liability For the Year Ended September 30, 2016 (Dollar amounts in thousands)

College's proportion of the net pension liability

2016

2015

0.122140%

0.119788%

College's proportionate share of the net pension liability

$

12,783

$

10,882

College's covered-employee payroll during the measurement period (*)

$

7,670

$

7,567

College's proportionate share of the collective net pension liability as a percentage of its covered-employee payroll Plan fiduciary net position as a percentage of the total collective pension liability

166.66%

143.81%

67.51%

71.01%

(*) Per GASB 82, which amends GASB 68, covered payroll is defined as the payroll on which contributions to a pension plan are based, also known as pensionable payroll. For fiscal year 2016, the measurement period for covered payroll is October 1, 2014 - September 30, 2015. This schedule is intended to show information for 10 years. Additional years will be displayed as they become available.

Lurleen B. Wallace Community College Andalusia, Alabama

52

Exhibit #8

Schedule of the College's Contributions For the Year Ended September 30, 2016 (Dollar amounts in thousands)

2016

2015

Contractually required contribution

$

877

$

873

Contributions in relation to the contractually required contribution

$

877

$

873

Contribution deficiency (excess)

$

College's covered-employee payroll

$

Contributions as a percentage of covered-employee payroll

$ 7,400

$

7,670

11.85%

11.38%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. Per GASB 82, which amends GASB 68, covered payroll is defined as the payroll on which contributions to a pension plan are based, also known as pensionable payroll. For fiscal year 2016, the covered payroll is for the reporting fiscal year October 1, 2015 - September 30, 2016. The amount of contractually required contributions is equal to the amount that would be recognized as additions from the employer's contributions in the pension plan's schedule of changes in fiduciary net position during the period that coincides with the employer's fiscal year. For participants in TRS, this includes amounts paid for Accrued Liability, Normal Cost, Term Life Insurance, Pre-Retirement Death Benefit and Administrative Expenses.

Lurleen B. Wallace Community College Andalusia, Alabama

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Exhibit #9

This Page Intentionally Blank

Supplementary Information

Lurleen B. Community College Andalusia, Alabama

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Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2016

Federal Grantor/ Pass-Through Grantor/ Program Title

Federal CFDA Number

Student Financial Assistance Cluster U. S. Department of Education Direct Programs Federal Pell Grant Program Federal Supplemental Educational Opportunity Grants Federal Work-Study Program Total Student Financial Assistance Cluster (M) Research and Development Cluster National Science Foundation Direct Program Education and Human Resources

Pass-Through Grantor's Indentifying Number

84.063 84.007 84.033

47.076

TRIO Cluster U. S. Department of Education Direct Programs TRIO - Student Support Services TRIO - Upward Bound Total TRIO Cluster

84.042 84.047

Other Federal Awards U. S. Department of Education Passed Through Alabama Community College System Adult Education - Basic Grants to States

84.002

V002A150001

Passed Through the Alabama State Department of Education Career and Technical Education - Basic Grants to States

84.048

V048A150001

U. S. Department of Labor Direct Program Trade Adjustment Assistance Community College and Career Training (TAACCCT) Grants

17.282

Total Expenditures of Federal Awards (M) = Major Program N.A.= Not Available The accompanying Notes to the Schedule of Expenditures of Federal Awards are an integral part of this schedule.

Lurleen B. Wallace Community College Andalusia, Alabama

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Exhibit #10

Pass-Through to Subrecipients

Total Federal Expenditures

$

4,243,736.36 49,877.00 171,051.10 4,464,664.46

8,211.43

536,101.25 294,173.00 830,274.25

148,268.39

83,318.58

100,848.83 $

5,635,585.94

Lurleen B. Wallace Community College Andalusia, Alabama

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Exhibit #10

Notes to the Schedule of Expenditures of Federal Awards For the Year Ended September 30, 2016 Note 1 – Basis of Presentation The accompanying Schedule of Expenditures of Federal Awards (the “Schedule”) includes the federal award activity of Lurleen B. Wallace Community College and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U. S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Lurleen B. Wallace Community College, it is not intended to and does not present the financial position, changes in net position, or cash flows of Lurleen B. Wallace Community College. Note 2 – Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement, Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Note 3 – Indirect Cost Rate Lurleen B. Wallace Community College has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance.

Lurleen B. Wallace Community College Andalusia, Alabama

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Additional Information

Lurleen B. Wallace Community College Andalusia, Alabama

58

College Officials October 1, 2015 through September 30, 2016

Officials

Position

Mr. Jimmy Baker

Acting Chancellor, Alabama Community College System

Dr. Herbert H. J. Riedel

President

Dr. James D. Krudop

Vice-President

Mrs. Lynne Dayton

Director of Finance and Comptroller

Lurleen B. Wallace Community College Andalusia, Alabama

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Exhibit #11

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Independent Auditor’s Report To: Mr. Jimmy Baker, Acting Chancellor – Alabama Community College System Dr. Herbert H. J. Riedel, President – Lurleen B. Wallace Community College, Andalusia, Alabama We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Lurleen B. Wallace Community College as of and for the year ended September 30, 2016, and the related notes to the financial statements, which collectively comprise Lurleen B. Wallace Community College’s basic financial statements, and have issued our report thereon dated January 9, 2017. Our report includes a reference to other auditors who audited the financial statements of Lurleen B. Wallace Community College Foundation and Douglas MacArthur State Technical College Foundation as described in our report on Lurleen B. Wallace Community College’s financial statements. The financial statements of Lurleen B. Wallace Community College Foundation and Douglas MacArthur State Technical College Foundation were not audited in accordance with Government Auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered Lurleen B. Wallace Community College’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Lurleen B. Wallace Community College’s internal control. Accordingly, we do not express an opinion on the effectiveness of Lurleen B. Wallace Community College’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Lurleen B. Wallace Community College Andalusia, Alabama

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Exhibit #12

Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters As part of obtaining reasonable assurance about whether Lurleen B. Wallace Community College's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of Jaws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose o(this Report This report is intended solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

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