STANDARD II - FINANCE

DESCRIPTION OF FINANCIAL STATUS AND PLANNING

At North, all business and financial functions are directed by the manager of business and finance who reports directly to the president of the college. In managing the financial resources of the college, the manager and staff work closely with the State Board for Community and Technical Colleges (SBCTC), the vice chancellor of finance for Seattle Community Colleges, and the staff in district offices responsible for payroll, benefits, purchasing, accounting, and human resources. The business manager meets regularly with the other SCCD business and finance personnel in a business services’ group that reviews and develops district wide financial policies and procedures.

The goals of the college’s business and financial office are (1) to manage and plan fiscal resources and related business services for the college so that the college’s strategic plan is realized and (2) to ensure compliance with federal, state, district, and college policies, procedures, laws, regulations, and employee union agreements. Specific responsibilities of the staff include:

  • Budget planning
  • Budget establishment and management
  • Expenditure authorization
  • Capital project funding authorization
  • Financial and grant compliance reporting
  • Use management reporting on facilities and assets
  • Risk and liability management
  • Management of college accounts receivable and accounts payables
  • Payroll processing management
  • Processing of tuition and student fees
  • Processing of self-support student enrollment
  • Development and implementation of business and payroll processes and procedures
  • Training of college personnel on budgetary matters and procedures
  • Transportation program management
  • Collaboration with the district business group including the vice chancellor of finance, campus business managers, district purchasing, accounting and budget managers on drafting policies and procedures.

Summary Reports of Current Financial Data

The five tables found at the end of this standard itemize the college’s operating revenues, costs, sources of financial aid, instructional costs per FTE for the current and previous three years, and gifts and endowments.

Budget Preparation and Approval Procedures

As one of the 33 community and technical colleges in Washington, North receives the majority of its operating revenue, approximately 58%, from the state general fund. The colleges project biennial operating budgets based upon the current year’s level of spending.

Each year, Seattle Community Colleges receive a budget from the state board that has been allocated by the Office of Financial Management (OFM) upon authority of the Washington State Legislature. The flow chart below shows the distribution of state dollars from the state legislature to the state agencies and, ultimately, the community colleges. The vice chancellor of finance disperses funds to the district office for its operations and then to the campuses of the district, based upon the state board’s budgetary model.

Using the anticipated allocation from SCCD, the college’s business and finance office prepares a target budget which includes projected revenues from tuition and local discretionary funds and known future costs. Planning sheets are prepared and distributed to divisions and units of the college based upon the current permanent budget and a projected timeline responsive to the district’s targeted submission of the budget to the SCCD Board of Trustees. The timeline includes deadlines for budget review by the College Council, the President’s Cabinet, and meetings of the president, vice-presidents, and the business manager.

All divisions and units of the college prepare their budget requests and submit them to their respective vice-president who in turn prepares and submits a budget proposal to the business and finance office.

In consultation with the college president, the business and finance office prepares a proposed budget plan. The plan consists of spreadsheets and text that include the allocation, projected revenues, known future costs, the vice-presidents’ proposed budgets and changes submitted by divisions. The plan is submitted for review to the College Council, the President’s Cabinet, and, finally, to the SCCD Board of Trustees.

At North, budgetary planning is a collaborative process. It actually begins with the College Council where the mission and objectives of the college are reviewed and the college’s priorities established. All divisions and units must consider these priorities when preparing their budget requests. When the budget is drafted each spring, the council holds an open hearing on the campus where faculty, staff and students review the proposed budget in light of the college’s priorities and provide input to the president and cabinet members.

Expenditure Control

Division administrators and unit managers are responsible for developing their budgets and operating within them. They have authority to purchase up to $500 without prior approval; however, purchases of $500 or more require approval of the respective vice-president. In 1996, this purchasing process won the Exemplary Practices Award for financial resources from the Community College Business Officers Association. Computing software and equipment require approval from the associate dean of instructional and information support services as well as the respective vice-president. The business and finance office reviews and approves all expenditures and payroll documents to ensure proper coding, the availability of funds, and compliance with college, state, and federal policies and regulations. Problems or concerns are reviewed by the business and finance manager with the respective vice-president and/or division administrator or unit manager.

The college president and two vice-presidents maintain and distribute a reserve for their areas as needed for emergencies or unanticipated costs such as equipment failures and, as possible, for professional development. For 1996-97, the president’s reserve is $50,000 as is that of the vice-president of instruction. The vice president of student development holds a reserve of $6,000.

The vice-presidents, administrators and managers who report directly to the president communicate frequently, with most meeting on a monthly basis with the business and finance manager. The college’s business and finance office monitors all revenues and expenditures within all funds--the operating budget, special allocations, college-wide budgets, capital projects, grants, contracts and federal funds, self-support, and, to a lesser degree, auxiliary and associated student body accounts.

Budgets are monitored using the Financial Management System (FMS) which was designed by the Communications Technical Center (CTC). It interfaces with the OFM format and provides options for internal college management.

Through FMS, monthly budget status reports that show expenditures, commitments, and balances are generated and distributed to all divisions and units. The business and finance manager also provides reports to the president and the president’s cabinet. Reports to the president include the budgets managed by the president and by administrators who report directly to the president. Reports to the president’s cabinet include the capital projects, summary of the operating budget, campus-wide revenues and expenditures, grants and contracts, self-support and auxiliary funds.

During late winter and early spring, all budgets are monitored weekly and, at times, daily to ensure the fund balances are within regulations mandated by OFM.

Audit Procedures

North is audited annually by the Washington State Auditor’s Office as part of the statewide single audit.

In 1994-95, the Seattle Community College District received an audit finding for not conducting a risk assessment of internal controls required by OFM. In response, during 1995-96, the SCCD business services group conducted a risk assessment and prepared and implemented a new equipment inventory procedure.

North received no other audit findings in 1994-95 but received a management letter concerning the college’s accounting relationship with the college foundation, cash receipts in the international student program, billings and accounts receivable monitoring for the child care program and PELL funds. Corrective actions were taken immediately by the business and program managers. In addition, the business manager has, with support from the president’s cabinet, taken a proactive stance toward prevention of risk and liability by conducting internal audits of various programs on a regular basis.

Current IPEDS

IPEDS reports are on file in the college’s business and finance office. The 1995-96 IPEDS report was not available at the time of this printing, and will be forwarded as an addendum to this report. Current and past IPEDS reports will also be available in the exhibit room.

Summary of Annual Contributions and Endowments

The total endowments of the NSCC Foundation as of June 30, 1996, are $1,012, 022. For the same budgetary year, donations total $686,393, pledges $129,845, and income from events $10,639. See table #5.

ANALYSIS AND APPRAISAL

Effective July 1, 1995, the district’s business services were restructured. The vice-president of administrative services position was eliminated at North, as well as the other SCCD campuses, and replaced with a business manager at each campus and a coordinator at the district office. Staff in facilities, security and the bookstore who reported to the VP’s were re-assigned to other administrators on each campus.

This change in structure has created confusion about lines of authority and processes. Because the college business services’ staff were not involved in the advance planning for the organizational change, they have devoted time during 1995-96 and 1996-97 to accommodating the change through such measures as more frequent meetings and increased communication between staff in business services and facilities. An ongoing issue is that of delineating responsibilities of district and of campus personnel. In certain instances, confusion still exists about who has both responsibility and authority. The business service group also is working to expand the use of technology, to simplify business processes and procedures, and to improve timeliness.

Strengths and Weakness of the Budgeting Process

Strengths of North’s budget preparation and approval process are that (1) opportunity is provided for input from all members of the college community, (2) operational and service priorities are identified, (3) the college mission and goals are reflected in the actual funding of activities, (4) college administrators are increasingly knowledgeable about the revenues available and project costs.

The weaknesses are (1) the time and information available to the college from the legislature and the state board is growing shorter each year, (2) the college’s need for funds are increasing while state funding is decreasing which leads to more reliance on the uncertainties of local revenues and fund-raising, and (3) flexibility that is responsive to changing needs of the institution is difficult to achieve because of the high percentage of the college budget that is already dedicated to salaries and benefits.

FMS Accounting System

As an agency of the State of Washington, the college follows the standard accounting principles for governmental agencies. The policies and procedures are established by OFM. The FMS data base system and reports are now outdated since they were designed over a decade ago by the CTC based upon input from college presidents and business officers, most of whom were former accountants.

While the FMS system meets the basic needs of the accounting and operating budget, it does not so effectively accommodate the reporting needs of program managers of grants, contracts, self-support, auxiliary services, and financial aid accounts that are maintained by the institution. Therefore units must develop internal spreadsheets for more careful monitoring of these accounts. In addition, staff often find that the system reports and terminology are difficult to understand as well as untimely. As a consequence, staff rely on internal records and frequently neglect to reconcile these against the monthly reports generated by the accounting system.

The monthly format of the budget status reports generated by the computerized system is difficult to read, untimely and sometimes unreliable. Examples of problems are:

  1. The accounting office makes adjustments without prior knowledge of the college business or program managers. Some adjustments do not offset the budget’s cash or fund balance but they appear on the reports and reflect inaccurate balances.
  2. Encumbrances that should be liquidated at the time of payment remain on the reports.
  3. Payments are sometimes not timely and vendors can wait as long as four to six months for payment.
  4. The salary and wages report provides cumulative expenditures to the penny while the only cumulative information provided for non-salary expenditures and revenues are in summary form (rounded off) on the budget summary report.
  5. The balance column for grants and contracts and revenue generating accounts reflects a hypothetical balance, based on planned budget minus actual expenditures while the real balance is found at the bottom of the expenditure/revenue column.
  6. Salaries are not encumbered, e.g., known salaries payable are not recorded.
  7. Columns appear on the budget reports that confuse rather than assist departments to read the reports.
  8. Revenues are listed in the same columns as expenditures and appear with minus signs, thereby confusing readers.
  9. The reports for the prior month are received on campus after the 15th of the following month and then must be sorted and distributed by the business office staff.

Grants, contracts, self-support and auxiliary reports do not show a cash balance but instead provide a fund balance which includes inventories. The reports provide no cost of goods sold, nor do they provide an easy interpretation in order to prepare an income statement.

Although users have direct access to screens and reports designed by the business office, accessing them is difficult for staff unfamiliar with the FMS. A high prioriy of the SCCD business services’ group and North’s business manager is to improve access of program staff to budget information.

Developing New Sources of Revenue

During the past decade, the college has experienced a decline in support provided by the State of Washington. Because of the increasing cost of social services, higher education’s share of the state’s general fund has gone from 13.5% in 1981-83 to 10.3% in 1995-97. The community college share dropped from 5.6 to 4.0% (Scott Morgan, “Community and Technical Colleges: Past and Future Funding,” presentation to WACTC, September 1996). The state has recognized critical needs in the community college by making special appropriations for workforce training, outcome assessment, child care, computer technology, and minority enhancement. In 1995, for example, the legislature designated approximately $17 million for technology. With added funding for technology, North installed computers in the offices of all full-time faculty and provided Internet services to 99 faculty and 2200 students per quarter. Over $107,000 in cables, hubs, routers, and computers were purchased to connect and segment the network and to connect buildings for voice, data, and video conferencing.

Yet, overall the costs of higher education are being transferred to the students through increases in tuition. Since 1992, students have had a 48.2 per cent increase in tuition. In 1992, the state legislature began allowing colleges to retain the tuition collected from students instead of transferring the funds to the state treasurer. Although this provides the college with greater flexibility in planning, it does not increase the total funds available.

The passage of Initiative 601 in 1994 limits state spending to revenues plus inflation and population growth. The impact of this initiative by the year 2002 is aniticipated to be severe, creating a shortfall of close to three million for higher education in the state.

Because of the decreases in state funding, the college has become more aggressive in seeking alternative sources of funding. The NSCC Foundation was established in 1986. The college also applied for several federal grants and entered international contracts. In 1987-88, grants and contracts comprised 14% of total resources; however, by 1992 the amount had grown to nearly 21%.

To increase funding from alternative sources, SCCD launched a five year “Building the Best” fundraising campaign which extends from 1994 to 1999. The goal is to raise $30 million for Seattle Community Colleges. SCCD has raised more than nine million of the $15 million it pledges to benefit all three campuses. North is more than halfway to its goal of three million dollars in cash, pledges, and in-kind contributions. North’s funding priorities are scholarships and student financial assistance, equipment, and professional development.