2.11.1 Financial Resources

The institution has a sound financial base and demonstrated financial stability to support the mission of the institution and the scope of its programs and services.

The member institution provides the following financial statements: (1) an institutional audit (or Standard Review Report issued in accordance with Statements on Standards for Accounting and Review Services issued by the AICPA for those institutions audited as part of a system wide or statewide audit) and written institutional management letter for the most recent fiscal year prepared by an independent certified public accountant and/or an appropriate governmental auditing agency employing the appropriate audit (or Standard Review Report) guide; (2) a statement of financial position of unrestricted net assets, exclusive of plant assets and plant-related debt, which represents the change in unrestricted net assets attributable to operations for the most recent year; and(3) an annual budget that is preceded by sound planning, is subject to sound fiscal procedures, and is approved by the governing board.

Audit requirements for applicant institutions may be found in the Commission policy “Accreditation Procedures for Applicant Institutions.”

JUDGMENT: Compliant

STATEMENT OF RATIONALE FOR JUDGMENT OF COMPLIANCE

Mission Statement

Southwest Texas Junior College is a comprehensive, public college serving eleven counties in Southwest Texas. The College provides accessible, affordable, high-quality education that prepares students to successfully transfer to senior colleges and universities; enter the job market; pursue their professional and personal goals; and contribute to the economic growth of the region.

SWTJC defines a sound financial basis as the ability to budget and provide the means to accomplish the College’s mission. Financial stability is SWTJC’s ability to support both day-to-day and long-term operations by properly allocating resources and providing the means to assure that funds are spent as allocated.

The policies and procedures regarding budgeting at SWTJC support a pattern of financial stability regardless of economic conditions. Southwest Texas Junior College engages in a yearly budget process, guided by the Policy Reference Manual for Texas Community Colleges, -in which each Division head, with faculty input, creates a budget for their department in the upcoming fiscal year. The Division head carefully considers the resources needed to support the department’s Unit Action Plan (UAP) that promotes the overall mission and strategic goals of the College. Distance Learning is not segregated during this budgeting process. Each department is budgeted regardless of the method of learning. The proposed budget is then reviewed and fine-tuned, keeping in mind the limits of revenue available, by the Cabinet , and then by the SWTJC President. The Board of Trustees schedule one or more workshops, meetings open to the public, in order to review the budgets. At these workshops there is time to question administration regarding the appropriateness of budget allocations. The Board then, in a meeting open to the public for comment, approves the final SWTJC annual operating budget. . The Operating Budget for the year 2015 was approved by the Board of Trustees in June 2014. Following is an excerpt from the June 19, 2014 minutes of the meeting relating to adoption of the 2014-2015 Operating Budget:

“A motion was made by Victor Lopez and seconded by Tony T. Moreno to approve the 2014 – 2015 Operating Budget. Motion carried unanimously.”

Southwest Texas Junior College’s budget process results in a realistic and sufficient budget for each unit and department. When necessary, annual operating budgets are adjusted to account for unexpected fluctuations in revenue streams. A case in point was the original 2013-2014 Operating Budget, which was adjusted down in response to decreased enrollment in the 2013-2014 academic year (Revised 2013-2014 Operating Budget). Budget adjustments follow the same process as the annual budget process in order to prioritize essential items to promote the mission and strategic goals of the College with available funds. Each department was involved in determining the best method for reducing expenses while insuring promotion of Unit Action Plans, the College mission, and its Strategic Goals. The revised budget was brought to the Board of Trustees on April 17, 2014 and approved unanimously.

Monthly financial statements are prepared and presented to the Board of Trustees in order to contrast actual spending with budgetary allowances; allowing the Board to exercise control over the financial stability of the College.

SWTJC Operational Budget 2015
SWTJC Operational Budget 2014
SWTJC Operational Budget 2013
SWTJC Operational Budget 2012
SWTJC Operational Budget 2011

Southwest Texas Junior College maintains a sound financial base and is financially stable, as evidenced by SWTJC’s annual audited financial statements. The statements incorporate unqualified opinions from SWTJC’s independent auditor (hired by and reporting to the SWTJC Board of Trustees) and are prepared in accordance with Generally Accepted Accounting Principles (GAAP), Governmental Accounting Standards Board (GASB), Financial Accounting Standards Board (FASB), and the requirements of the Texas Higher Education Coordinating Board (THECB) standards. Annual financial statements include a written management letter specific to SWTJC’s compliance for the most recently ended fiscal year. During the audit process, external auditors consider the internal control structure of the institution to determine whether material weaknesses exist or if there is an opportunity to strengthen internal controls or gain operating efficiencies. A material weakness is an internal control that would prohibit the institution from, in the normal course of business, detecting and correcting a material misstatement. SWTJC has received no Management Letter comments.

The Annual Financial Reports, prepared in accordance with GAAP, GASB and FASB, contain the following:

Letter from the President
Transmittal Letter
Organizational Data
Independent Auditor’s Opinion
Management Discussion and Analysis
Statement of Net Position
SWTJC Foundation, Inc. Comparative Statement of Financial Position
Statement of Revenue, Expenses and Changes in Net Position
SWTJC Foundation, Inc. Comparative Statement of Activities
Statement of Cash Flows
SWTJC Foundation, Inc. Comparative Statement of Cash Flows
Notes to Financial Statements
Schedule of Operating Revenues
Schedule of Operating Expenses by Object
Schedule of Non-Operating Revenues and Expenses
Schedule of Net Position by Source and availability
Schedule of Expenditures of Federal Awards
Schedule of Expenditures of State Awards
Report on Internal Control over Financial Reporting
Independent Auditor’s Report on OMB Circular A-133 and Texas Single Audit Circular
Schedule of Findings and Questioned Cost
Required Statistical Supplements

Annual Financial Report 2014
Annual Financial Report 2013
Annual Financial Report 2012
Annual Financial Report 2011
Annual Financial Report 2010

Along with the audit of the College, the auditor audits the Southwest Texas Junior College Foundation, Inc. This audit is presented along-side of the SWTJC audit due to Governmental Standards Board Statement No. 39, Determining Whether Certain Organizations are Component Units, because:

The Governing Board of the Foundation and the College are the same; therefore the College can and does exercise oversight responsibility. Additionally, services rendered by the Foundation are provided entirely or almost entirely to the College and the relationship between the College and the Foundation is such that exclusion would cause the College’s financial statements to be misleading or incomplete.

Southwest Texas Junior College Foundation, Inc. was formed in 1989. The Articles of Incorporation describe its purpose in Article 4 as “for development and expansion of Southwest Texas Junior College. “ The Board members are the Board of Trustee members of SWTJC (Bylaws 2.02). The Foundation is considered a component unit in that looking at the financial condition of the College without considering the foundation would be misleading or incomplete.

Southwest Texas Junior College has increased its net assets with careful, planned growth. In the past ten years SWTJC increased its net position from $13,798,697 to $17,695,255 (28%). The Foundation over the same ten year period has increased its net position from $9,799,942 to $10,851,782 (11%).

For the year 2014, total assets exceed total liabilities by $17,692,255 (33%), of which $7,848,366 (15%) is unrestricted. Of the College’s total assets, $26,304,865 (49%) is represented by capital assets including land, buildings and improvements, furniture, equipment, and library books, net of accumulated depreciation.

Capital Assets, Net of Related Debt is a negative $1,498,379 due to the issuance of a $10,000,000 bond late in the year before construction commenced on a substantial project. Timing of this bond issuance was planned to take advantage of historically low interest rates and allow the College to expand and generate future revenue. The bond will fund the addition of a library and classroom building at the Eagle Pass facility. This teaching facility has experienced extensive growth in the last ten years; requiring Administration to lease all available classrooms from the Eagle Pass Independent School District; artificially capping enrollment. Also, these bond funds will allow AWTJC to build a new library in Crystal City. Administration anticipated this temporary inversion of Capital Assets, Net of Related Debt; which will correct itself when construction begins and capital assets are available to offset the debt. At year end the cash related to this bond issues was in restricted assets as an off-set to the debt.

SWTJC Net Position

For the year ended August 31, 2014, operations of Southwest Texas Junior College were primarily supported by appropriations from the state’s general fund and tuition and fee revenue. Effective as of the 2006 fiscal year, state appropriations are reported as non-operating revenue. Total revenue is supplemented by federal and state grants and contracts, private gifts, and sales and service revenue for auxiliary and educational departments. The College is also supported by ad-valorem taxes of $3,121,746 in the current year, listed as non-operating revenue. Growth in Ad-valorem taxes is due to the development of the Eagle Ford Shale in one of SWTJC’s three county taxing districts. This oil exploration and extraction is expected to continue for several decades; furthering increasing the College District’s revenue without having to raise tax rates.

For Year Ad-valorem Taxes

Ad-valorem Taxes

State appropriations including restricted insurance and retirement payments totaled $8,906,925(26%), $8,075,275 (24%), and $8,613,312 (24%); tuition and fees totaled $5,567,283 (16%), $5,130,032 (15%), and $5,493,939 (15%); and federal grants and contracts totaled $12,729,653 (37%), $15,021,311 (42%), and $14,824,867 (47%), all for years ended August 31, 2014, 2013, and 2012, respectively.

Instruction is the largest component of operating expenses at $12,385,581 (36%) in the current year as compared to the year ended August 31, 2013, of $12,166,721 (35%) and the year ended August 31, 2012 of $11,910,414 (34%). Scholarships of $4,220,402 (12%) in the current year compared to the year ended August 31, 2013, amount of $4,802,594 (14%) and the year ended August 31, 2012, amount of $5,275,942 (15%), passed through to students after being applied to tuition and fees. Included in operating expenses is depreciation of $865,463 in the current year, $ 818,353 for the year ended August 31, 2013, and $823,623 for the year ended August 31, 2012, which represent non-cash expenses.

For the year ended August 31, 2014, the result of operations was an operating loss of $22,640,978, compared to the year ended August 31, 2013, amount of $22,912,495 and the year ended August 31, 2012, amount of $22,763,672. The current year operating loss combined with the current year net non-operating revenue of $23,079,933 results in an increase in net position of $438,955 (due to the State of Texas law requiring the college’s to report state funding and ad-valorem taxes as non-operating revenues.

SWTJC Net Assets

Change in Net Position

Figures from Schedule D Annual Financial Statement 2014.

Southwest Texas Junior College has long-term liabilities (i.e. bond obligations based on S&P ratings) for the purpose of increasing and maintaining the physical plant, not to support day-to-day operations.

In 2006, Southwest Texas Junior College incurred $9,000,000 in long-term debt through two revenue bond issues. The first, $3.5 million, is a private placement issue with proceeds used for the construction of a new student services building and the subsequent renovations of existing spaces. Refer to note 8 in the notes to the financial statements for further details. Construction of the new building was completed in May of 2008.

The second, $5.5 million, is a private placement issue with proceeds used for the construction of a new educational facility for Sul Ross State University Rio Grande College (SR – RGC), a state college that offers third and fourth year classes in the SWTJC service area. Refer to note 8 in the notes to the financial statements for more information. The building was completed in December 2007. SR –RGC rents buildings and classrooms at all SWTJC locations.

In 2012, Southwest Texas Junior College incurred $2,500,000 in long term debt through a maintenance tax note issue. It is a private placement with proceeds used for updating energy systems. The energy savings acquired will provide the payment for the note. Refer to note 9 in the notes to the financial statements for more information. Energy systems work were completed in the fall semester 2013.

In 2013, Southwest Texas Junior College incurred $7,500,000 in long term debt through a revenue bond issue. It is a private placement with proceeds used for an administration building and a classroom building on the Del Rio campus. Refer to note 8 in the notes to the financial statements for more information. At fiscal year ended 2014, the building was under construction and was completed in November 2014.

As noted earlier, in 2014, Southwest Texas Junior College incurred $10,000,000 in long term debt through a revenue bond issue. It is a public placement with proceeds to be used for a library and classroom building on the Eagle Pass campus, a library building on the Crystal City campus, and renovations on the Uvalde campus. Refer to note 8 in the notes to the financial statements for more information. At fiscal year ended 2014, the buildings were being designed. Ground will be broken for the Eagle Pass building in January of 2015; with the rest to follow. It should be noted that the timing of this bond issue caused the College to report an “Invested in Capital Assets, Net of Related Debt” as a negative number. The cash, received by the College before year end is in the “Restricted Assets” under the “Unused Bond” and “Debt Service” categories. These funds are restricted and can only be used for the construction.

The College was rated by Standards and Poor’s on February 14, 2014:
“Pursuant to your request for a Standard & Poor’s Ratings Services (“Ratings Services”) rating on the above-referenced obligations, Ratings Services has assigned a rating of "BBB". Standard & Poor's views the outlook for this rating as “stable.”

Standard & Poor’s “BBB” reflects:

Consistently balanced financial results on a full accrual basis
Good revenue diversity, with 23% of fiscal 2013 revenues derived from state operating appropriations, 17% from net tuition, fees and auxiliary services, 10% from grants and contracts, and 8% from property taxes
Broad revenue pledge, which includes tuition, various student fees, and auxiliary revenues

Subsequent to fiscal year ended 2014, the college incurred $3,000,000 in long term debt through a revenue bond issue. It is a private placement with proceeds used for the purchase and renovation of a technical facility in Eagle Pass. Refer to subsequent events in the notes to the financial statements for more information. SWTJC will receive the funds for this issue in November of 2014. Property analysis demonstrated that the investment in this location would result in a positive cash flow for the College.

Increases in Unrestricted Net Assets, exclusive of Plant and Plant Related Debt also demonstrate SWTJC’s sound financial base and financial stability.

For Year Unrestricted

UNAEP

Southwest Texas Junior College is able to demonstrate a sound financial base as evidenced by its core financial ratios as reported by the Texas Higher Education Coordinating Board:

For Year Ended 2013

For comparison to all 50 Texas community colleges click here.

Find the entire report from the Texas Higher Education Coordinating Board here (the 2014 report based on year end 2013 is the most recent published).

The sound financial base demonstrated by SWTJC supports the mission by allowing the college to maintain affordable, high-quality education. Affordability, reflected in competitive tuition costs, better “prepares students to successfully transfer to senior colleges and universities; enter the job market; pursue their professional and personal goals; and contribute to the economic growth of the region.”

Further, financial stability allows SWTJC to support the scope of the mission by supporting operation in a wide range of programs in 11 counties, covering over 16,500 square miles in its service region.

Evidence