During the year ended June 30, 2014, the State of Tennessee made payments of $22,151 on behalf of the college for retirees participating in the Medicare Supplement Plan. The amount for the year ended June 30, 2013, was $17,209. The Medicare Supplement Plan is a postemployment benefit healthcare plan and is discussed further in Note 10. The plan is reported in the Tennessee Comprehensive Annual Financial Report. That report is available on the state’s website at www.tn.gov/finance/act/cafr.shtml.
Note 15. Component Unit
The Cleveland State Community College Foundation is a legally separate, tax-exempt organization supporting Cleveland State Community College. The foundation acts primarily as a fund-raising organization to supplement the resources that are available to the college in support of its programs. The 34-member board of the foundation is self-perpetuating and consists of graduates and friends of the college. Although the college does not control the timing or amount of receipts from the foundation, the majority of resources, or income thereon, that the foundation holds and invests are restricted to the activities of the college by the donors. Because these restricted resources held by the foundation can only be used by, or for the benefit of, the college, the foundation is considered a component unit of the college and is discretely presented in the college’s financial statements.
The foundation is a nonprofit organization that reports under Financial Accounting Standards Board (FASB) standards. As such, certain revenue recognition criteria and presentation features are different from GASB revenue recognition criteria and presentation features. With the exception of necessary presentation adjustments, no modifications have been made to the foundation’s financial information in the college’s financial statements for these differences.
During the year ended June 30, 2014, the foundation made distributions of $625,648 to or on behalf of the college for both restricted and unrestricted purposes. During the year ended June 30, 2013, the foundation made distributions of $184,278 to or on behalf of the college for both restricted and unrestricted purposes. Complete financial statements for the foundation can be obtained from Adam Lowe, Cleveland State Community College, P.O. Box 3570, Cleveland, TN 37320.
Fair-value Measurements
The foundation reports certain assets at fair value. Fair value has been determined using quoted prices in active markets for identical assets that are accessible at the measurement date (Level 1), inputs other than quoted market prices included in Level 1 that are directly or indirectly observable for the asset (Level 2), or significant unobservable inputs (Level 3). The following table categorizes the recurring fair-value measurements for assets at June 30, 2014, and at June 30, 2013.
Notes to the Financial Statements (Continued)
Investments 7,896,912 7,879,422 - 17,490
Interest receivable 6,651 6,651 - -
Investments 6,902,921 6,885,431 - 17,490
Interest receivable 5,915 5,915 - -
Total assets $ 7,348,341 $ 7,330,851 $ - $ 17,490
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposit accounts and money market funds. The bank balances of deposits at June 30, 2014, were entirely insured. The bank balances of deposits at June 30, 2013, were entirely insured.
Investments
Investments are recorded on the date of contribution and are stated at fair value. Unrealized gains and losses are determined by the difference between fair values at the beginning and end of the year.
Investments held at June 30, 2014, were as follows:
Cost Fair Value
U.S. agency obligations $ 100,000 $ 100,069
Certificates of deposit 82,399 82,399
Mutual bond funds 1,077,819 1,087,431
Mutual equity funds 4,468,604 5,001,277
Notes to the Financial Statements (Continued)
Common stock 1,040,557 1,608,246
Closely held equity investments 14,850 17,490
Total investments $ 6,784,229 $ 7,896,912
Investments held at June 30, 2013, were as follows:
Cost Fair Value
U.S. agency obligations $ 100,000 $ 101,083
Certificates of deposit 82,379 82,379
Mutual bond funds 1,349,269 1,329,821
Mutual equity funds 3,688,098 4,117,108
Common stock 921,634 1,255,040
Closely held equity investments 14,850 17,490
Total investments $ 6,156,230 $ 6,902,921
Alternative investments – The foundation had investments in Bradley County Financial. The estimated fair value of these assets was $17,490 at June 30, 2014, and $17,490 at June 30, 2013.
The foundation believes the carrying amount of its alternative investments is a reasonable estimate of fair value as of June 30, 2014, and as of June 30, 2013. Because these investments are not readily marketable, the estimated value is subject to uncertainty and, therefore, may differ from the value that would have been used had a ready market for the investments existed, and such differences could be material. These investments are made in accordance with the foundation’s investment policy that approves the allocation of funds to various asset classes in order to ensure the proper level of diversification. These investments are designed to enhance diversification and provide reductions in overall portfolio volatility. These fair values are estimated using various valuation techniques.
This investment is privately held and not publicly traded. The value is based on the off market trading prices times the number of shares as of June 30, 2014, and as of June 30, 2013.
Pledges Receivable
Pledges receivable are summarized below. Historically, any differences in amounts promised and amounts collected have not been material. Accordingly, no provision has been made for uncollectible promises to give.
Notes to the Financial Statements (Continued)
June 30, 2014 June 30, 2013
Current pledges $ 108,500 $ 110,500
Pledges due in one to five years 9,000 77,500
Subtotal 117,500 188,000
Less discount to net present value (7,319) (15,134)
Total pledges receivable, net $ 110,181 $ 172,866 Endowments
The Cleveland State Community College Foundation’s endowments consist of 243 individual funds established for a variety of purposes. Its endowment is made up of donor-restricted endowment funds. As required by accounting principles generally accepted in the United States of America, net position associated with endowment funds is classified and reported based on the existence or absence of donor-imposed restrictions.
Interpretation of relevant law – The Board of Trustees of the Cleveland State Community College Foundation has interpreted the Uniform Prudent Management of Institutional Funds Act (the Act) as adopted by Tennessee as being applicable to the operation of the foundation. As a result of this interpretation, the Cleveland State Community College 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 the foundation appropriates those amounts for expenditure in a manner consistent with the standard of prudence prescribed by the Act. In accordance with the Act, 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 fund; (2) the purposes of the foundation and the endowment fund; (3) general economic conditions; (4) the possible effect of inflation or deflation; (5) the expected total return from income and the appreciation of investments; (6) other resources of the foundation; and (7) the investment policies of the foundation.
Composition of Endowment by Net Position Class As of June 30, 2014
Permanently Restricted
Temporarily
Restricted Total Donor-restricted endowment funds $5,222,572 $2,348,334 $7,570,906