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JOHN TYLER COMMUNITY COLLEGENOTES TO FINANCIAL STATEMENTSAS OF JUNE 30, 20011.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe financial statements of John Tyler Community College have been prepared in accordancewith generally accepted accounting principles for colleges and universities. The significant policiesfollowed by the College are as follows:A.Reporting EntityJohn Tyler Community College (JTCC) was established in 1967 as a part of theVirginia Community College System (VCCS) to serve primarily the cities of ColonialHeights, Hopewell, and Petersburg, and the counties of Amelia, Charles City, Chesterfield,Dinwiddie, Prince George, Surry, and Sussex. The College has campuses in Chester andMidlothian.The Virginia Community College System was established as an institution of highereducation in 1965. The System includes the State Board for Community Colleges, a SystemOffice located in Richmond, an Information Technology Utility that serves and administersthe information technology needs for the individual colleges and 23 community collegeslocated on 39 campuses throughout the Commonwealth. The System is governed by the StateBoard for Community Colleges, which follows higher education policy guidelines establishedby the State Council of Higher Education for Virginia. Operating and administrativeresponsibilities rest with the System Office in Ric hmond.The System is a discrete component unit of the Commonwealth of Virginia and isincluded in the general purpose financial statements of the Commonwealth. A separate reportis prepared for the Commonwealth of Virginia, which includes all agencies, boards,commissions, and authorities over which the Commonwealth exercises or has the ability toexercise oversight authority.The accompanying financial statements include the accounts of John TylerCommunity College. The College has an educational foundation that is defined as a relatedparties. The assets of the foundation, which is separately incorporated and managed by itsown board, is not included in these statements. Related parties are described in Note 2.B.Fund AccountingTo ensure the observance of limitations and restrictions placed on the use ofresources, the accounts are maintained in accordance with the principles of “fundaccounting.” Resources are classified for accounting and reporting purposes into funds thatmay be used for activities or objectives specified. Separate accounts are maintained for eachfund, however, in the accompanying financial statements, funds that have similarcharacteristics have been combined into fund groups. Accordingly, all financial transactionshave been recorded and reported by fund group.10

Within each fund group, fund balances restricted by outside sources are so indicatedand are distinguished from unrestricted funds allocated to specific purposes by action of theCollege Board. Externally restricted funds may only be utilized in accordance with thepurposes established by the source of such funds, and are in contrast with unrestricted fundsover which the governing board retains full control and use in achieving any of itsinstitutional purposes, subject only to prescribed policies governing the use of stateappropriations.Unrestricted revenue is accounted for in the Unrestricted Current Fund. Restrictedgifts, grants, appropriations, and other restricted resources are accounted for in theappropriate restricted funds. Restricted Current Funds are reported as revenues andexpenditures when expended for current operating purposes.A summary of fund group definitions is as follows:C.1.Current Funds - Current funds balances are separated intothose, which are restricted by donors and those, which areunrestricted. Restricted funds may only be expended for thepurposes indicated by the donor or grantor whereasunrestricted funds are available for current operations at thediscretion of the System.2.Loan Funds - Loan funds represent funds, which are limitedby the terms of their donors or by action of the Board for thepurpose of making loans to students.3.Plant Funds - Plant funds are divided into three groups:unexpended; renewals, replacements, and debt retirement; andinvestment in plant. Unexpended plant funds represent funds,which were specified by external sources or designated for theacquisition and construction of physical properties. Renewals,replacements, and debt retirement funds represent funds forthe renovation and replacement of physical properties andthose resources held for the retirement of both principal andinterest on debt. Investment in plant represents the capitalizedvalue of physical property, less associated long-term debt.4.Agency Funds - Agency funds reflect funds held in trust bythe College as custodian.Basis of AccountingThe financial statements of the College have been prepared in accordance withgenerally accepted accounting principles for colleges and universities. The College utilizesthe accrual basis of accounting, except for depreciation as explained in Note 1F, inaccordance with the American Institute of Certified Public Accountants audit guide, Audits ofColleges and Universities. Under the accrual basis of accounting, revenues are recordedwhen earned and expenses are recorded at the time liabilities are incurred through the receipt11

of goods or services. The Statement of Current Funds Revenues, Expenditures, and OtherChanges is a statement of financial activities of current funds related to the current reportingperiod. It does not purport to present the results of operations or the net income or loss forthe period as would a statement of income or a statement of revenues and expenses.D.InvestmentsInterest-bearing temporary investments and investments are stated at fair marketvalue in accordance with GASB 31, Accounting and Financial Reporting for CertainInvestments and for External Investment Pools.E.InventoriesInventories are stated at cost (primarily first-in, first-out method) and consist mainlyof goods purchased for resale and expendable supplies.F.Investment in PlantPlant assets consisting of land, buildings, improvements, equipment, and constructionin progress are stated at appraised historical cost or actual cost where determinable. Currentfund expenditures for equipment are capitalized when the unit acquisition cost is 5,000 orgreater and the estimated useful life is two years or more. All equipment purchased under theEquipment Trust Fund program that is titled to the Virginia College Building Authority hasbeen capitalized on these statements. Library acquisitions are capitalized using publishedaverage prices for library acquisitions. The accompanying financial statements include noprovision for depreciation of plant assets.G.Deferred RevenueDeferred revenue consists primarily of student tuition collected for the summeracademic term but not earned as of June 30, 2001. Revenues and expenditures for thesummer academic term occur within two fiscal years because the term extends from Maythrough August and the fiscal year ends on June 30. Expenses and an equal amount ofrevenue have been reported as revenues and expenses of the current period for the portion ofthe 2001 summer academic term covering the period of May 16 through June 30, 2001.H.Accrued Compensated AbsencesAccrued compensated absences reflected in the accompanying financial statementsrepresents the amounts of vacation, sick, and compensatory leave earned by employees of theCollege but not taken at June 30, 2001, as well as related fringe benefits. The amount reflectsall earned vacation, sick, and compensatory leave payable under the Commonwealth ofVirginia’s leave payout policy and the System’s faculty and administrator’s leave payoutpolicy upon employment termination. An additional liability amount has been included forthose employees with less than five years of service based on the probability they willeventually become vested. Also included in the liability is the College’s share of the FICAtaxes on leave balances for which employees will be compensated.12

2.AFFILIATED ORGANIZATIONSThe College has an organized educational foundation that provides exclusive benefit to thecollege. The educational foundation is a non-profit organization created to raise funds supportingcollege programs, students, and related activities.Limited members of the College Board represent the College on the foundation’s governingboard. The educational foundation is independently audited. The following is a condensed summaryof the financial condition of the foundation at December 31, 2000:3.Assets 2,213,934Net Assets 2,213,934Revenues 562,731Expenditures 645,888CASH AND INVESTMENTSA.Cash and Cash EquivalentsAll state funds of the College are held by the Treasurer of Virginia pursuant toSection 2.1-177, et seq., Code of Virginia, who is responsible for the collection,disbursement, custody, and investment of state funds. Cash and cash equivalents representdeposits and short-term investments with maturities of less than three months. Each fund’sequity in pooled state funds is reported as “Cash and Cash Equivalents” on the balance sheetand is not categorized as to credit risk.Deposits with banks and savings institutions are covered by federal depositoryinsurance or collateralized in accordance with the Virginia Security for Public Deposits Act.Under this Act, banks holding public deposits in excess of the amounts insured by FDIC mustpledge collateral in the amount of 50 percent of excess deposits to a collateral pool in thename of the State Treasury board. Savings institutions are required to collateralize 100percent of deposits in excess of FSLIC limits.Cash equivalents maintained by the College are investments with maturities of lessthan three months.InvestmentsCertain deposits and investments held by the College are represented by specific identifiableinvestment securities held by the Treasurer of Virginia . Such investments are reported separatelyfrom cash and cash equivalents. Investments represent securities with maturities of more than 3months and for which management intends to hold the securities to maturity. All investments held bythe College are mutual fund investments and since they are not represented by specific identifiablesecurities, they are not categorized as to investment risk.13

4.ALLOWANCE FOR DOUBTFUL ACCOUNTSNotes receivables in Loan Funds is reported net of an allowance for doubtful accounts of 2,400 at June 30, 2001.5.PENSION PLANEmployees of the College are employees of the Commonwealth. Substantially all full-timeclassified salaried employees of the College participate in a defined benefit pension plan administeredby the Virginia Retirement System (VRS). The VRS also administers life insurance and healthrelated plans for retired employees. Information relating to these plans is available at the statewidelevel only in the Commonwealth of Virginia’s Comprehensive Annual Financial Report (CAFR).The Commonwealth, not the College nor the System, has overall responsibility for contributions tothese plans.Most full-time faculty and certain administrative staff participate in one of five optionalretirement plans. Each is a fixed contribution program where the retirement benefits received arebased on the employer’s contributions plus interest and dividends. As with VRS, the employees’contributions are assumed by the employer. Total pension costs under these programs were 171,856for the year ended June 30, 2001. Contributions to these programs were calculated using the basesalary amount of 1,652,462 for the year ended June 30, 2001. The contribution percentageamounted to 10.4 percent. The total payroll for fiscal year 2001 was 22,247,1466.APPROPRIATIONS – UNRESTRICTEDAll Commonwealth Unrestricted Current Funds Revenues must be appropriated by theGeneral Assembly and are provided on an annual basis. Unspent balances of these appropriations atthe close of the fiscal year revert to the Commonwealth's General Fund. During the fiscal year, theVirginia Community College System received supplemental appropriations in accordance with theAppropriation Act of 2001-02, Chapter 1073, Acts of Assembly. During the year ended June 30,2001, the College received an allocation of 13,602,888 of the total System appropriation.7.NOTES PAYABLENotes payable represents an agreement with the Virginia Public Building Authority (VPBA)to finance parking improvements for the Midlothian campus The balance is to be repaid in ten annualinstallments ranging from 35,000 to 45,000 with an average interest rate of 4.72% payablesemiannually. The final installment of 45,000 is due September 1, 2008. The outstanding balance atJune 30, 2001 is 325,000.8.EQUIPMENT TRUST FUNDThe College is a participant in the Higher Education Equipment Trust Fund of the VirginiaCollege Building Authority (VCBA). The Higher Education Equipment Trust Fund provides funds topublic colleges and universities for equipment acquisition. In prior years, funds were provided in theform of a lease. During the year ended June 30, 2001, the VCBA financed the ETF program withstate funds, which will not require repayment. However, prior debt obligations are outstanding14

through 2003. The associated liability is combined with capital leases payable on the balance sheet inthe Investment in Plant Fund. A summary of future obligations under prior lease agreements for theCollege follows:Year EndingJune 3020022003Equipment TrustFund Obligation 126,38553,634Total gross minimumlease payments180,019Less: Amount of interest10,093Present value of minimumlease payment9. 169,926COMMITMENTSAt June 30, 2001, the John Tyler Community College had future commitments forconstruction contracts totaling approximately 646,554.10.ACCOUNTING CHANGESThe College adopted GASB Statement Number 33 – Accounting and Financial Reporting forNonexchange Transactions for the year ended June 30, 2001. This Statement sets guidelines for whento record revenue and expenditures for nonexchange transactions. Revenues and expendituresassociated with transactions that do not meet the eligibility requirements are classified as deferredrevenues and advances, respectively. The College did not have any related balances as of June 30,2001.Statement Number 35 of the Government Accounting Standards Board Basic FinancialStatements – and Management’s Discussion and Analysis – for Public Colleges and Universities,issued November 1999, will be effective for the Virginia Community College System, including JohnTyler Community College, for the fiscal year ending June 30, 2002. This statement imposes newstandards for financial reporting. The titles and format of the financial statements will changesignificantly because of this Statement. In addition, management will be required to provide amanagement’s discussion and analysis that gives readers and analysis of the overall financial positionand results of operations including a comparison of current year results with the prior year. TheVirginia Community College System is currently assessing the changes required by this Statementand preparing for its implementation.11.DEFICIT FUND BALANCEThe 68,424 deficit in current unrestricted funds is the result of the accrual of compensatedabsences and other payables.15

12.RISK MANAGEMENTThe College is exposed to various risks of loss related to torts; theft or, damage to, anddestruction of assets; errors and omissions; non-performance of duty; injuries to employees; andnatural disasters. The College participates in insurance plans maintained by the Commonwealth ofVirginia. The Department of Human Resource Management administers the state employee healthcare plan and the Department of General Services’ Division of Risk Management administers the riskmanagement insurance plans. Risk management insurance includes worker’s compensation, property,general liability, faithful performance of duty bond, automobile, and air and watercraft plans. TheCollege pays premiums to each of these Departments for its insurance coverage. Information relatingto the Commonwealth’s insurance plans is available at the statewide level in the Commonwealth ofVirginia’s Comprehensive Annual Financial Report.16

JOHN TYLER COMMUNITY COLLEGEChester, VirginiaSTATE BOARD FOR COMMUNITY COLLEGESRobert B. Seidensticker, ChairAnne Marie Morgan, Vice ChairThomas E. AlbroMary Ann Steger ConradJoseph R. DanielMarcia A. GilliamFrank NunezBenjamin T. King, Jr.James Chinn LeeBruce D. LeftwichVictoria D. MalickMary Louise JacksonJerry W. KilgoreWilbur E. ThomasSYSTEM CHANCELLORArnold R. OliverCOLLEGE BOARDMavis Wray FarrarThomas R. FulghumJohn L. GrohuskySarah Clarke GunnStephanie HeadleyOnza E. HyattYvonne Smith-JonesErnest Priddy, Jr.Ann SalsterRebecca S. SlagleJerry F. TatumRoslyn C. TylerLorraine F. WaddillGladys WashingtonCOLLEGE OFFICERSDr. Marshall W. Smith, PresidentTimothy C. Brown, Dean of Financial and Administrative Services17

John Tyler Community College (JTCC) was established in 1967 as a part of the Virginia Community College System (VCCS) to serve primarily the cities of Colonial Heights, Hopewell, and Petersburg, and the counties of Amelia, Charles City, Chesterfield, Dinwiddie, Prince George, Surry, and Sussex. The College has campuses in Chester and