BAY MILLS COMMUNITY COLLEGE Year Ended June 30, 2017 Financial Statements and Single Audit Act Compliance BAY MILLS COMMUNITY COLLEGE Table of Contents Page Independent Auditors’ Report 1-3 Management’s Discussion and Analysis 4-12 Basic Financial Statements Government-wide Financial Statements: Statement of Net Position Statement of Activities Fund Financial Statements: Balance Sheet – Governmental Funds Reconciliation of Fund Balances of Governmental Funds to Net Position of Governmental Activities Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds Reconciliation of Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities Statement of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual: General Fund Department of Interior Special Revenue Fund Department of Education Special Revenue Fund Statement of Net Position – Proprietary Funds Statement of Revenues, Expenses and Changes in Fund Net Position – Proprietary Funds Statement of Cash Flows – Proprietary Funds Statement of Net Position – Fiduciary Funds Statement of Changes in Net Position - Fiduciary Funds Notes to Financial Statements 13 14-15 16-17 18 19-20 21 22 23 24 25 26 27 28 29 30-45 Combining and Individual Fund Financial Statements and Schedules Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual - Capital Projects Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds - Classified by Object Combining Statement of Net Position – Internal Service Funds Combining Statement of Revenues, Expenses and Changes in Net Position – Internal Service Funds 46 47-48 49 50 BAY MILLS COMMUNITY COLLEGE Table of Contents Page Single Audit Act Compliance Independent Auditors’ Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance Schedule of Expenditures of Federal Awards Notes to Schedule of Expenditures of Federal Awards Independent Auditors’ 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 Auditors’ Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by the Uniform Guidance Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings  51 52-53 54 55-56 57-58 59 60-62 Rehmann Robson 902 South Huron Cheboygan, MI 49721 Ph: 231.627.3143 Fx: 231.627.5787 rehmann.com INDEPENDENT AUDITORS' REPORT December 8, 2017 Board of Regents Bay Mills Community College Brimley, Michigan Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Bay Mills Community College, (the “College”), a discretely presented component unit of Bay Mills Indian Community, as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the College’s basic financial statements as listed in the table of contents. 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. Independent Auditors’ Responsibility Our responsibility is to express opinions on these financial statements based on our audit. 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 financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ 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. Rehmann is an independent member of Nexia International. CPAs & Consultants Wealth Advisors Corporate Investigators We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to previously present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the College, as of June 30, 2017, and the respective changes in financial position and, where applicable, cash flows thereof, and the respective budgetary comparison for the General Fund and each major special revenue fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis 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. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the College’s basic financial statements. The combining and individual fund financial statements and schedules are presented for purposes of additional analysis and are not a required part of the financial statements. The combining and individual fund financial statements and schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 2 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards , we have also issued our report dated December 8, 2017 on our consideration of the 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 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 the College’s internal control over financial reporting and compliance. 3 This page intentionally left blank. BAY MILLS COMMUNITY COLLEGE Management's Discussion and Analysis Management’s Discussion and Analysis (“MD&A”) provides an overview of the financial position and activities of Bay Mills Community College (the “College” or “BMCC”) for the year ended June 30, 2017, and should be read in conjunction with the financial statements and notes thereto. The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") as applied to governmental units. GAAP includes all relevant Governmental Accounting Standards Board ("GASB") pronouncements. The College has prepared the financial statements using the current financial reporting model. The reporting model focuses on the College as a whole (government-wide) and the fund financial statements. Overview of the Financial Statements The College’s financial statements consist of government-wide financial statements and fund financial statements. The government-wide financial statements provide information about the activities of the College as a whole and provide both long-term and short-term information about the College’s overall financial status. Fund financial statements explain how services were financed in the short-term as well as providing detailed information about the College’s major funds, with all other funds presented in one column as nonmajor governmental funds. Government-Wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the College's finances, in a manner similar to a private-sector business. The statement of net position includes all assets and liabilities of the College using the full accrual basis of accounting and presents the financial position of the College at a specified time. The difference between total assets and total liabilities is net position, which is one indicator of the financial position of the College. The changes in net position that occur over time indicate improvements or deterioration in the College’s financial position. The statement of net position includes governmental activities and businesstype activities. Governmental activities are financed through tuition and fees, grants and contracts, or nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties for goods or services. The statement of activities provides information about the revenues and expenses of the College using the accrual basis of accounting and measures the change over the year in net position. All current year revenues and expenses are taken into account regardless of when cash is received or paid. The expenses are classified by function in the governmental and business-type activities. The revenues are classified as program revenues or general revenues. The program revenues consist of charges for services, operating grants and contributions, and capital grants and contributions. The general revenues consist of investment income, donations not specifically designated for a particular function, contributions for permanent and quasi-endowment funds. Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The fund financial statements can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. These funds each use a different accounting measurement focus. 4 BAY MILLS COMMUNITY COLLEGE Management's Discussion and Analysis Governmental Funds. Governmental funds are used to account for the same functions reported as governmental activities in the government-wide financial statements, except these funds are reported using the modified accrual basis of accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund financial statements provide a detailed short-term view that helps readers determine whether there are financial resources that can be spent in the near future to finance the College’s programs. Because the focus of the governmental funds is narrower than that of the government-wide financial statements, reconciliations are presented to facilitate the comparison between governmental fund statements and the governmental activities reported in the government-wide financial statements. The governmental fund financial statements have separate columns for the major funds which consist of the General Fund, Department of Interior and Department of Education Special Revenue Funds, Title III QuasiEndowment Fund, Capital Projects Fund, Permanent Fund, and Debt Service Fund. There is a separate column for nonmajor governmental funds, which is the total of other governmental funds. The governmental fund expenditures are presented by function in the financial statements. A separate statement showing the governmental fund expenditures by object is presented with the combining and individual fund financial statements. Proprietary Funds. Proprietary funds are used to account for services for which the College charges outside customers or other internal programs a fee. Proprietary funds, like the government-wide financial statements, use the accrual basis of accounting. Enterprise funds are used to report the same functions as business-type activities in the government-wide financial statements, but they provide more detail and additional information including the statement of cash flows. The Composites Enterprise Fund is the only proprietary fund of the College. Internal service funds are used to report activities that provide services to the College’s other programs. The College includes space costs and indirect costs as internal service funds. Fiduciary Funds. Fiduciary funds are used to report assets held in a trustee or agency capacity for others. The College is the trustee, or fiduciary, for its private-purpose trusts which consist of several funds that are used to provide scholarships for students. Agency funds are used to report resources held in a purely custodial capacity (assets equal liabilities). The College reports student council funds and other student organizations approved by the student council as agency funds. The College is responsible for ensuring that the assets reported in the fiduciary funds are used for their intended purposes. The College’s fiduciary activities are reported on the statement of net position-fiduciary funds and the statement of changes in net position-fiduciary funds . These activities are excluded from the College’s government-wide financial statements because the College cannot use these assets to finance its operations. Notes to the Financial Statements. The notes provide additional information that are essential to a full understanding of the data provided in the government-wide and fund financial statements. Other Information. In addition to the basic financial statements and accompanying notes, this report also presents management's discussion and analysis, which is required supplementary information. 5 BAY MILLS COMMUNITY COLLEGE Management's Discussion and Analysis Government-wide Financial Analysis Net Position Governmental Activities Business-type Activities 2017 2016 $ 18,235,266 6,653,995 24,889,261 $ 15,333,201 5,980,470 21,313,671 Liabilities Other liabilities Long-term liabilities Total liabilities 984,728 158,677 1,143,405 290,502 150,116 440,618 Net position Investment in capital assets Restricted Unrestricted (deficit) 6,653,995 7,482,666 9,609,195 5,980,470 6,338,405 8,554,178 $ 23,745,856 $ 20,873,053 Assets Current and other assets Capital assets, net Total assets Total net position 2017 Total 2016 2017 2016 $ 14,572,381 7,868,968 22,441,349 $ 12,375,758 7,313,193 19,688,951 984,728 158,677 1,143,405 290,502 150,116 440,618 1,332,723 (2,957,443) 7,868,968 7,482,666 5,946,310 7,313,193 6,338,405 5,596,735 $ (2,447,912) $ (1,624,720) $ 21,297,944 $ 19,248,333 $ (3,662,885) $ (2,957,443) 1,214,973 1,332,723 (2,447,912) (1,624,720) - 1,214,973 (3,662,885) - Total assets of business-type activities reflect the elimination of interfund balances due to governmental activities of $3,715,513 and $3,205,403 for fiscal years 2017 and 2016, respectively, resulting in negative total asset balances reported in business-type activities within the statement of net position for both years. The College’s total net position increased by $2,049,611 (11%) over the course of this fiscal year’s operations, which consisted of an increase of $2,872,803 from governmental activities and a decrease of $(823,192) from business-type activities. The largest portion of the College’s net position (37%) reflects its investment in capital assets. The College uses the capital assets to provide services; consequently, these assets are not available for future spending. An additional portion of the College’s net position (35%) represents resources that are subject to external restrictions on how they may be used. The majority of restricted net position is from the permanent and quasi-endowment funds, which consists of $1,366,528 in nonexpendable endowments and $6,027,306 in expendable endowments. The total unrestricted net position increased by $349,575, from $5,596,735 in 2016 to $5,946,310 in 2017. Even though the unrestricted net position from business-type activities decreased by $(705,442), there was a large increase of $1,055,017 in the unrestricted net position of governmental activities. The majority of the increase in unrestricted net position of governmental activities was from income generated by charter school oversight while the decrease in unrestricted net position of business-type activities was from start up costs, operational expenses, and the purchase of equipment for research and production of Direct Re-Inforced Fiber Technology ("DRIFT") materials. 6 BAY MILLS COMMUNITY COLLEGE Management's Discussion and Analysis Changes in Net Position Governmental Activities Program revenues Charges for services Operating grants Capital grants General revenues Investment income Donations Gain on sale of capital asset Total revenues Expenses Instruction Academic support Student services Public service Research Institutional support Scholarships/grant-in aid Operation and maintenance of plant Technology Unallocated depreciation Composites Total expenses Change in net position, before contributions and transfers Contribution to BMIC Contributions for: Permanent fund Quasi-endowment fund Transfers Change in net position (deficit) Net position (deficit): Beginning of year End of year Total Business-type Activities 2017 2016 2017 $ 6,395,337 4,538,287 165,860 $ 6,331,248 4,914,227 122,943 2017 2016 26,717 - $ 6,434,561 4,538,287 165,860 $ 6,357,965 4,914,227 122,943 726,844 50,920 5,500 11,882,748 55,159 84,866 11,508,443 39,224 26,717 726,844 50,920 5,500 11,921,972 55,159 84,866 11,535,160 1,313,664 410,922 874,901 1,953,470 41,069 2,233,499 1,656,511 1,272,108 299,845 874,401 1,579,034 11,770 2,213,434 1,715,734 - - 1,313,664 410,922 874,901 1,953,470 41,069 2,233,499 1,656,511 1,272,108 299,845 874,401 1,579,034 11,770 2,213,434 1,715,734 345,827 188,685 352,213 9,370,761 397,105 228,495 329,366 8,921,292 870,910 870,910 875,276 875,276 345,827 188,685 352,213 870,910 10,241,671 397,105 228,495 329,366 875,276 9,796,568 2,511,987 (143,527) 2,587,151 (432,396) (831,686) - (848,559) - 1,680,301 (143,527) 1,738,592 (432,396) 14,669 498,168 (8,494) 24,234 480,526 (59,429) 59,429 14,669 498,168 - 24,234 480,526 - (789,130) 2,049,611 1,810,956 (1,624,720) (835,590) $ (2,447,912) $ (1,624,720) 19,248,333 $ 21,297,944 17,437,377 $ 19,248,333 2,872,803 2,600,086 20,873,053 $ 23,745,856 18,272,967 $ 20,873,053 7 $ 2016 39,224 - 8,494 (823,192) $ BAY MILLS COMMUNITY COLLEGE Management's Discussion and Analysis In comparison with the prior fiscal year, total revenues increased by $386,812, total expenses increased by $445,103, contribution to Bay Mills Indian Community ("BMIC") decreased by $288,869, contributions for permanent funds decreased by $9,565, contributions for quasi-endowment fund increased by $17,642, and the total change in net position increased by $238,655. The increase in the change in net position was primarily due to fluctuations in the fair market value of investments. Charges for services (54%) and operating grants (38%) accounted for the majority of the College’s total revenues. The charges for services revenue consisted mainly of charter school oversight in the amount of $5,474,460, tuition and fees in the amount of $1,004,835, less an adjustment of $249,084 for the required matching funds reported as contributions for the quasi-endowment fund. In comparison with the prior fiscal year, the charges for services revenue increased by $76,596, which was predominantly made up of an increase in charter school oversight revenue of $113,401 and a decrease in tuition and fees of $69,595. The operating grant revenue consists primarily of revenue from the Department of Education of $2,107,144 and Department of Interior of $1,697,440. Pell grants awarded to students of $933,880 and Title III grants of $794,820 make up the majority of the Department of Education funding. Compared with the prior fiscal year, there was a decrease of $67,419 in Pell grants awarded to students due to a reduction in student count. The timing of expenses in the Title III grants resulted in a decrease in operating grant revenue of $262,495. The Department of Interior operating grant revenue decreased by $86,960 due to an enrollment decline of 59.17 full time Indian students between fiscal year 2016 and 2015. The Department of Interior funding for the current fiscal year is based on the Indian Student Count from the prior fiscal year. BMCC received a new grant from the Department of Health and Human Services to develop an online Bachelor of Arts in Early Childhood Education (ECE), which increased operating grant revenue by $62,678. The capital grant revenue consisted of USDA Rural Development grants for a multi-purpose cultural center and campus updates. Fluctuations in the fair market value of investments was the primary reason for the large increase of $671,685 in investment income. Functional expenses represent the type of programs and services that the College provides. The largest functional expenses were instruction (13%), public service (19%), institutional support (22%), and scholarships/grant-in aid (16%). In comparison with the prior fiscal year, total expenses increased by $445,103, which primarily consisted of an increase in public service of $374,436, an increase in academic support of $111,077, and a decrease in scholarships/grant-in aid of $59,223. The settlement of the lawsuit with Quality Performance Resource Group, LLC (QPRG) for $295,000 was the primary reason why public service expenses increased. Academic support expenses were higher because the College used a portion of the USDA Rural Development grant to purchase tables and chairs for classrooms and incurred costs for the development of the online Bachelor's degree in ECE with funds from the new Health and Human Services grant. The reduction in Pell grants awarded to students was the primary reason for the decrease in scholarships/grant-in aid. In 2017, the contribution to BMIC of $143,527 consisted of a transfer of $112,144 for the cultural center, $7,680 for the water storage replacement project, $8,572 for the skidsteer, and $15,131 for the maintenance garage. In 2016, the contribution to BMIC of $432,396 consisted of $269,028 for the cultural center and $163,368 for the water storage replacement project. The cultural center was completed in 2017 and the water storage replacement project is ongoing. During the fiscal year, the College elected to use 20% of the Title III grant awards (Part A and F) and the required matching funds to increase the Title III Quasi-Endowment Fund. The total contribution for the quasiendowment fund was $498,168, which consisted of $249,084 from the Department of Education and $249,084 in matching funds from the College’s General Fund. Because the Title III grant awards were higher than the prior year, this was an increase of $17,642 in comparison with last year's total contribution of $480,526. 8 BAY MILLS COMMUNITY COLLEGE Management's Discussion and Analysis The total increase in net position of governmental activities and business-type activities was $2,049,611. Of this amount, $555,775 was the result of an increase in the net investment in capital assets, $1,144,261 was an increase in restricted net position, and $349,575 was an increase in unrestricted net position. Financial Analysis of the College’s Funds Governmental Funds. At the end of the fiscal year, the College’s governmental funds reported combined ending fund balances of $17,156,882, which is categorized as follows: $5,441,127 in nonspendable, $6,031,738 in restricted, and $5,684,017 in unassigned. The net change in the fund balance for the General Fund was an increase of $1,115,052, from a beginning fund balance of $8,638,164 to an ending fund balance of $9,753,216. This increase primarily resulted from charter school activities. Of the net change in the fund balance for the General Fund, the portion of unassigned fund balance increased by $122,734 and the nonspendable fund balance increased by $992,318 in comparison with the prior fiscal year. The General Fund advanced $660,331 to the Composites Enterprise Fund and $318,600 to the Debt Service Fund during the fiscal year, which were the primary reasons for the increase in nonspendable fund balance. The General Fund advance to the Composites Enterprise Fund was $3,715,513 at June 30, 2017. Under the terms of the USDA Rural Development loan for the new administration/classroom facility, the College was required to put $2,700 per month into a reserve account until it accumulated a sum of $324,000. The College invested the full amount this fiscal year, which consisted of the required reserve amount of $5,400 plus an advance from the General Fund of $318,600. Proprietary Funds. The proprietary fund statements include the Composites Enterprise Fund and Internal Service Funds. The Composites Enterprise Fund was established on June 18, 2013 when the College entered into agreements with Bay Mills Indian Community to lease the composites building located in Dafter and purchase their DRIFT production line and associated equipment to carry out educational, research, and manufacturing activities related to the production of composite items. In addition, the College entered into an agreement with Bay Mills Indian Community to act as the exclusive manufacturer and distributor of DRIFT material under an exclusive provider agreement. At June 30, 2017, the net position of the Composites Enterprise Fund was a deficit $2,447,912. The General Fund has advanced $3,715,513 to cover the costs of the noncurrent assets, start up costs, and operating expenses. The College is hoping that the Composites Enterprise Fund earns enough revenue to cover expenses in the near future and establish a repayment schedule for the advance. The internal service funds have a combined net position of $14,656 which represents a carryover net position that will be adjusted on the next space cost allocation plan. 9 BAY MILLS COMMUNITY COLLEGE Management's Discussion and Analysis General Fund Budgetary Highlights The General Fund budgeted a net change in fund balance of $1,202,313, which when compared with the actual change in fund balance of $1,115,052, resulted in an unfavorable budget variance of $87,261. Total revenues were $78,789 higher than budgeted, total expenditures were $160,292 higher than budgeted, and transfers out were $5,758 higher than budgeted. There was a favorable budget variance in state aid oversight revenue of $9,695, tuition and fees of $13,470, other grant revenue of $35,357, and investment income of $15,082. The state aid oversight revenue was slightly higher than expected due to adjustments made later in the year on the state aid financial status report. The grant revenue was higher than anticipated because the College received $35,354 from the American Indian College Fund for unrestricted operational expenses. Tuition and fees for the summer semester were slightly higher than expected. The fair market value of short term investments was higher than anticipated which resulted in additional investment income. The expenditures were higher than expected primarily due to the timing of construction on the new administration/classroom facility, which resulted in an unfavorable budget variance of $210,328 in capital outlay. The College met the required cash contribution on the loan this fiscal year rather than incurring a portion next fiscal year. Favorable budget variances of $17,594 in public service, $14,340 in operation and maintenance of plant, $10,192 in institutional support, and $8,900 in student services offset a portion of the additional capital outlay expenditures. The Board of Regents approved the original budget on April 28, 2017 and the modified budget on June 23, 2017. Each of the general fund line items were reviewed for reasonableness based on actual costs incurred through March and estimated costs for the remainder of the year. The original budget was modified to increase public service for the settlement of the lawsuit with Quality Performance Resource Group, LLC and capital outlay expenditures were reduced based on the construction progress for May. Capital Asset and Debt Administration Capital Assets. As of June 30, 2017, the College's governmental activities had $6,653,995 invested in capital assets, net of accumulated depreciation of $3,388,492. Depreciation from governmental activities was $352,213 for the current year. The College also had capital assets from business-type activities of $1,214,973, net of accumulated depreciation of $1,164,304. Depreciation from business-type activities was $126,244 for the current year. The governmental activities additions included construction-in-progress of $951,734, equipment of $76,780, and vehicles of $34,810. The construction-in-progress addition was for construction of the new administration/classroom facility. The equipment additions were for improvements on the Boston Whaler boat, which will be used for academic and research purposes, a bulldozer donated through the U.S. General Services Administration (GSA), and a white light scanning system for composites research. The College traded in the 2012 Ford Escape and purchased a 2017 Chevrolet Traverse. The College also transferred a skid steer and maintenance garage to Bay Mills Indian Community. The maintenance garage had to be moved because it was in the way of the new administration/classroom facility. The trailer at the farm was sold because Gitigaan Hall, the classroom facility completed in the prior fiscal year, provides the needed office and meeting space. The business-type activity additions of $8,494 consisted of an industrial band saw purchased from the Department of Energy Advanced Manufacturing grant, which was passed through AIHEC. 10 BAY MILLS COMMUNITY COLLEGE Management's Discussion and Analysis Long-Term Debt. As of June 30, 2017, long-term debt consisted of $158,677 from accrued compensated absences. It consists of earned but unused vacation and personal leave time, subject to limitations as stated in the College’s personnel policy. On May 18, 2017, the College entered into a 35 year, $7,500,000 promissory note bearing interest rate at 2.375%, with the U.S. Department of Agriculture Rural Development for construction of a new administration/classroom facility. The loan is secured by all present and future revenues and accounts receivable, arising in connection with the administration/classroom facility. The College's required cash contribution of $1,222,280 was met as of June 30, 2017. Draw down of loan funds for construction costs began on July 31, 2017. An interest only payment is due on May 1, 2018 with yearly payments of $324,000 plus interest due on May 1 thereafter. Further information regarding capital asset and long-term debt activity can be found in the notes to the financial statements. Economic Factors and Next Year’s Budgets BMCC had an exceptional year financially and was able to add $122,734 to the unassigned general fund balance after completing payment of the remaining cash contribution for the new administration/classroom facility. The required contribution was a total of $1,222,280, of which $951,734 was paid this fiscal year. BMCC also settled the lawsuit with QPRG over payments which extended past the contract termination date and this ended up costing $295,000 to settle this issue. These were the only known expenses of consequence that BMCC had so their payment and fully funding the building loan reserve account in the amount of $324,000 should make way for another good year financially in fiscal 2018 for the College. BMCC is still pursuing business for Great Lakes Composites and hopes to secure a sizable contract for composite tape production this year. This program is viewed as an economic driver by the Bay Mills Community; an opportunity to generate financial prospects outside of the gaming market and to allow BMCC to expand its educational focus to include components of STEM learning and advanced manufacturing. There are many tribal members that don't want to spend their life in the tourist or service industry and would like to work in production. The Upper Peninsula has never been a strong industrial area; however, management believes that the right products could and will be successful. The quest will continue as long as it does not in any way jeopardize the operations of the College. The pursuit of industry is not presently hurting College operations as management has continued to add to the quasi-endowment fund, even after making the payments described above. The quasi-endowment investments now stand at approximately $4.5 million and management plans to add to it for at least the next three years. This is the remaining term of the Title III Part F grant from the Department of Education, which was the driving force behind starting this endowment. It is funding that was derived from a budget reconciliation resolution which provided 10 years of additional Title III funding. BMCC has a Title III Part A grant and this additional funding is known as Title III Part F. Management is also planning to transfer another million dollars from the checking account to the short term investment account as the checking account has grown to a level which is in excess of operational needs. 11 BAY MILLS COMMUNITY COLLEGE Management's Discussion and Analysis Finally, management has put into operation new recruitment activities to turn the tide on our falling enrollment. BMCC staff have started to schedule student visits in their high schools, rather than competing at college fairs, and are following up on the contacts made to assist the students and therefore make them comfortable with BMCC. This will be continued going forward and will be supplemented through the use of phone, text, and email messages using contacts that have been developed through a review of new internal reports. These reports track the student's admission and enrollment activities, including financial aid, in an effort to make their transition to BMCC from high school a good and easy experience. Early reports seem to indicate that the new efforts are showing some success which can translate into increased grant funding and a more stable financial future. For fiscal year 2018, the timing of the loan financing and construction schedule for the new administration/classroom facility will have a significant impact on the budgeted expenditures for capital outlay and debt service. In addition, the estimated amount to be received from grants and contracts, student tuition and fees, charter school oversight activities, and research and production activities of the Composites Enterprise Fund are all factors impacting the fiscal year 2018 budget. Requests for Information This financial report is designed to provide a general overview of the College’s finances and to show the College’s accountability for the revenue it receives. If you have questions about this report or need additional information, contact Laura Postma, CPA, CGFM at (906) 248-3354, extension 8420. 12 BASIC FINANCIAL STATEMENTS BAY MILLS COMMUNITY COLLEGE Statement of Net Position June 30, 2017 Assets Pooled cash and cash equivalents Investments Accounts receivable, net Internal balances Prepaid expenses Inventory Other Capital assets, not being depreciated Capital assets being depreciated, net Total assets Governmental Activities Business-type Activities $ $ 5,469,353 8,752,955 183,359 3,715,513 22,139 12,947 79,000 1,410,780 5,243,215 24,889,261 Liabilities Accounts payable Accrued liabilities Deferred revenue Long-term liability (due in more than one year): Accrued compensated absences Total liabilities Net position (deficit) Investment in capital assets Restricted for: Grants and contracts Artifact collection Debt service - nonexpendable Debt service - expendable Endowments - nonexpendable Endowments - expendable Unrestricted (deficit) Total net position (deficit) (2,447,912) $ 5,469,353 8,752,955 183,359 22,139 65,575 79,000 1,410,780 6,458,188 22,441,349 671,744 277,274 35,710 - 671,744 277,274 35,710 158,677 - 158,677 1,143,405 - 1,143,405 6,653,995 1,214,973 7,868,968 190 79,000 5,400 4,242 1,366,528 6,027,306 9,609,195 (3,662,885) 190 79,000 5,400 4,242 1,366,528 6,027,306 5,946,310 (2,447,912) $ 21,297,944 $ 23,745,856 The accompanying notes are an integral part of these financial statements. 13 (3,715,513) 52,628 1,214,973 Total $ BAY MILLS COMMUNITY COLLEGE Statement of Activities For the Year Ended June 30, 2017 Program Revenues Functions / Programs Primary institution Governmental activities Education: Instruction Academic support Student services Public service Research Institutional support Scholarships/grant-in-aid Operation and maintenance of plant Technology Unallocated depreciation Capital improvements Total governmental activities Business-type activities Composites Total primary government Expenses Charges for Services Operating Grants and Contributions Capital Grants and Contributions $ 1,313,664 410,922 874,901 1,953,470 41,069 2,233,499 1,656,511 $ 1,004,835 5,390,502 - $ 1,252,072 230,728 769,083 163,307 40,943 568,443 1,163,826 345,827 188,685 352,213 - - 175,750 121,633 52,502 3,642 67,052 37,857 9,370,761 6,395,337 4,538,287 165,860 870,910 39,224 - - $10,241,671 $ 6,434,561 $ 4,538,287 $ $ 46,696 1,471 8,144 998 - 165,860 Net (Expense) Revenue $ 943,243 (133,498) (104,347) 3,608,483 (126) (1,664,058) (492,685) (166,435) (352,213) 90,359 1,728,723 (831,686) $ 897,037 Continued… The accompanying notes are an integral part of these financial statements. 14 BAY MILLS COMMUNITY COLLEGE Statement of Activities For the Year Ended June 30, 2017 Governmental Activities Changes in net position Net revenue (expense) $ 1,728,723 General revenues, contributions, and transfers General revenues: Investment income Donations Gain on sale of capital asset Contributions to Bay Mills Indian Community Contributions for permanent funds Contributions for quasi-endowment fund Transfers 726,844 50,920 5,500 (143,527) 14,669 498,168 (8,494) Business-type Activities $ (831,686) 8,494 $ 897,037 726,844 50,920 5,500 (143,527) 14,669 498,168 - Total general revenues, contributions, and transfers 1,144,080 Change in net position 2,872,803 (823,192) 2,049,611 20,873,053 (1,624,720) 19,248,333 $ 23,745,856 $ (2,447,912) $ 21,297,944 Net position (deficit), beginning of year Net position (deficit), end of year 8,494 Total 1,152,574 Concluded The accompanying notes are an integral part of these financial statements. 15 This page intentionally left blank. FUND FINANCIAL STATEMENTS BAY MILLS COMMUNITY COLLEGE Balance Sheet Governmental Funds June 30, 2017 General Fund Assets Pooled cash and cash equivalents Investments Accounts receivable, net Due from other funds Prepaid expenditures Inventory Advance to Debt Service Fund Advance to Composites Enterprise Fund Total assets Liabilities Accounts payable Accrued liabilities Due to other funds Deferred revenue Advance from the General Fund Department Department Title III Quasiof Interior of Education Endowment Special Revenue Special Revenue Special Revenue Fund Fund Fund $ 5,316,925 1,185,839 44,833 86,438 22,139 12,947 318,600 3,715,513 $ - $ 38,449 - $ 4,558,473 - $ 10,703,234 $ - $ 38,449 $ 4,558,473 $ 671,744 277,274 1,000 - $ - $ 38,449 - $ - Total liabilities 950,018 - 38,449 - Fund balances Nonspendable: Prepaid expenditures Inventory Advance to Debt Service Fund Advance to Composites Enterprise Fund Sii Ha Sin Maintenance Endowment Tribally Controlled Colleges Endowment Debt Service Fund Restricted for: Grants and contracts Endowments - expendable Debt Service - expendable Unassigned 22,139 12,947 318,600 3,715,513 - - - - 5,684,017 - - 4,558,473 - Total fund balances 9,753,216 - - 4,558,473 Total liabilities and fund balances $ 10,703,234 $ The accompanying notes are an integral part of these financial statements. 16 - $ 38,449 $ 4,558,473 Capital Projects Fund Permanent Fund Debt Service Fund Nonmajor Governmental Funds Total Governmental Funds $ 60,103 - $ 135,787 2,697,042 2,532 - $ 16,641 311,601 - $ 39,974 - $ 5,469,353 8,752,955 183,359 88,970 22,139 12,947 318,600 3,715,513 $ 60,103 $ 2,835,361 $ 328,242 $ 39,974 $ 18,563,836 $ 60,103 - $ - $ 318,600 $ 5,074 34,710 - $ 671,744 277,274 103,626 35,710 318,600 $ 60,103 - 318,600 39,784 1,406,954 - 112,595 1,253,933 - 5,400 - 22,139 12,947 318,600 3,715,513 112,595 1,253,933 5,400 - 1,468,833 - 4,242 - 190 - 190 6,027,306 4,242 5,684,017 - 2,835,361 9,642 190 17,156,882 60,103 $ 2,835,361 $ 328,242 $ 39,974 17 $ 18,563,836 This page intentionally left blank. BAY MILLS COMMUNITY COLLEGE Reconciliation Fund Balances of Governmental Funds to Net Position of Governmental Activities June 30, 2017 Fund balances - total governmental funds $ 17,156,882 Amounts reported for governmental activities in the statement of net position are different because: Internal service funds are used by management to allocate indirect and space costs to individual funds. The assets and liabilities of the internal service funds are included in governmental activities in the statement of net position. 14,656 Other assets consisting of an artifact collection donated to the College are not financial resources and therefore not reported in the fund financial statements. 79,000 Capital assets used in governmental activities are not financial resources and therefore not reported in the fund financial statements. Capital assets not being depreciated Capital assets being depreciated, net 1,410,780 5,243,215 Liabilities that are not due and payable in the current period are not reported in governmental funds. Accrued compensated absences Net position of governmental activities (158,677) $ 23,745,856 The accompanying notes are an integral part of these financial statements. 18 BAY MILLS COMMUNITY COLLEGE Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds For the Year Ended June 30, 2017 General Fund Revenues Grant revenue-federal and state State aid oversight revenue Tuition and fees Other grant revenue and contributions Other revenue Investment income $ Total revenues 5,474,460 1,004,835 35,757 178,035 59,858 Department Department Title III Quasiof Interior of Education Endowment Special Revenue Special Revenue Special Revenue Fund Fund Fund $ 1,703,177 - $ 2,107,144 - $ 249,084 458,196 6,752,945 1,703,177 2,107,144 707,280 59,318 131,945 105,635 1,768,942 126 1,099,014 494,094 105,779 - 1,032,580 33,219 79,320 125 408,462 143,734 - 161,310 158,528 608,811 458,719 993,915 23,809 121,634 39,060 - 74,286 1,006,334 - 7,680 - - Total expenditures 4,845,473 1,697,440 2,534,406 39,060 Revenues over (under) expenditures 1,907,472 5,737 (427,262) 668,220 Expenditures Current: Instruction Academic support Student services Public service Research Institutional support Scholarships/grant-in-aid Operation and maintenance of plant Technology Capital contributions to Bay Mills Indian Community Capital outlay Other financing sources (uses) Transfers in Transfers out (792,420) (5,737) 427,262 - 249,084 - Total other financing sources (uses) (792,420) (5,737) 427,262 249,084 Net change in fund balances 1,115,052 - - 917,304 Fund balances, beginning of year 8,638,164 - - 3,641,169 Fund balances, end of year $ 9,753,216 $ The accompanying notes are an integral part of these financial statements. 19 - $ - $ 4,558,473 Capital Projects Fund $ $ Permanent Fund 165,859 - $ Debt Service Fund 6,063 204,409 $ 4,381 Nonmajor Governmental Funds Total Governmental Funds $ $ 540,206 193,498 - 4,765,470 5,474,460 1,004,835 235,318 178,035 726,844 165,859 210,472 4,381 733,704 12,384,962 46,696 1,471 8,144 998 3,642 67,051 750 - 139 - 58,182 30,211 80,965 156,676 40,943 150,643 192,628 15,839 - 1,311,390 400,599 876,202 1,933,887 41,069 2,157,785 1,680,637 292,803 188,685 37,857 - - - 36,328 119,823 1,042,662 165,859 750 139 762,415 10,045,542 - 209,722 4,242 (28,711) 2,339,420 - 8,606 (1,203) 5,400 - 37,395 (8,494) 727,747 (807,854) - 7,403 5,400 28,901 (80,107) - 217,125 9,642 190 2,259,313 - 2,618,236 - - 14,897,569 - $ 2,835,361 $ 9,642 $ 190 20 $ 17,156,882 BAY MILLS COMMUNITY COLLEGE Reconciliation Net Changes in Fund Balances of Governmental Funds to Change in Net Position of Governmental Activities For the Year Ended June 30, 2017 $ Net change in fund balances - total governmental funds 2,259,313 Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported as expenditures in governmental funds. In the statement of activities, the cost of capital assets is allocated over their estimated useful lives and reported as depreciation expense. Capital asset additions Capital asset disposals - transferred to Bay Mills Indian Community Capital asset disposal Depreciation expense 1,048,161 (23,703) (13,883) (352,213) Donated assets are reported as a general donation on the statement of activities, but not included with governmental funds because it does not provide current financial resources. 15,163 Internal service funds are used by management to allocate indirect and space costs to individual funds. The change in net position of the internal service funds is reported with governmental activities. (51,474) Some expenses reported in the statement of activities do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Increase in compensated absences Change in net position of governmental activities (8,561) $ The accompanying notes are an integral part of these financial statements. 21 2,872,803 BAY MILLS COMMUNITY COLLEGE Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - General Fund For the Year Ended June 30, 2017 Actual Over (Under) Final Budget Original Budget Final Budget Actual $ 5,464,765 991,365 400 172,850 44,776 $ 5,464,765 991,365 400 172,850 44,776 $ 5,474,460 1,004,835 35,757 178,035 59,858 Total revenues 6,674,156 6,674,156 6,752,945 78,789 Expenditures Current: Instruction Academic support Student services Public service Research Institutional support Scholarships/grant-in-aid Operation and maintenance of plant Capital contributions to Bay Mills Indian Community Capital outlay 59,380 136,600 114,535 1,491,536 1,109,206 488,513 120,119 74,286 1,206,334 59,380 136,600 114,535 1,786,536 1,109,206 488,513 120,119 74,286 796,006 59,318 131,945 105,635 1,768,942 126 1,099,014 494,094 105,779 74,286 1,006,334 (62) (4,655) (8,900) (17,594) 126 (10,192) 5,581 (14,340) 210,328 Total expenditures 4,800,509 4,685,181 4,845,473 160,292 Revenues over expenditures 1,873,647 1,988,975 1,907,472 (81,503) Revenues State aid oversight revenue Tuition and fees Other grant revenue and contributions Other revenue Investment income Other financing uses Transfers out (786,662) (786,662) 1,086,985 1,202,313 1,115,052 Fund balance, beginning of year 8,638,164 8,638,164 8,638,164 $ 9,725,149 $ 9,840,477 $ 9,753,216 The accompanying notes are an integral part of these financial statements. 22 9,695 13,470 35,357 5,185 15,082 (5,758) (792,420) Net change in fund balance Fund balance, end of year $ (87,261) $ (87,261) BAY MILLS COMMUNITY COLLEGE Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Department of Interior For the Year Ended June 30, 2017 Actual Over (Under) Final Budget Original Budget Final Budget Actual $ 1,703,177 $ 1,703,177 $ 1,703,177 Expenditures Instruction Academic support Student services Public service Institutional support Operation and maintenance of plant 1,022,278 35,631 82,128 125 410,138 147,140 1,022,278 35,631 82,128 125 410,138 147,140 1,032,580 33,219 79,320 125 408,462 143,734 Total expenditures 1,697,440 1,697,440 1,697,440 - 5,737 5,737 5,737 - (5,737) (5,737) (5,737) - Revenues Grant revenue-federal Revenues over expenditures Other financing uses Transfers out $ - 10,302 (2,412) (2,808) (1,676) (3,406) Net change in fund balance - - - - Fund balance, beginning of year - - - - Fund balance, end of year $ - The accompanying notes are an integral part of these financial statements. 23 $ - $ - $ - BAY MILLS COMMUNITY COLLEGE Statement of Revenues, Expenditures and Changes in Fund Balances Budget and Actual - Department of Education For the Year Ended June 30, 2017 Original Budget Revenues Grant revenue-federal $ Final Budget 2,716,954 Expenditures Current: Instruction Academic support Student services Institutional support Scholarships/grant-in-aid Operation and maintenance of plant Technology Capital contributions to Bay Mills Indian Community $ 2,716,954 $ Actual Actual Over (Under) Final Budget 2,107,144 $ (609,810) 187,172 199,202 804,325 56,320 990,516 25,409 361,404 92,606 187,172 199,202 804,325 56,320 990,516 25,409 361,404 92,606 161,310 158,528 608,811 458,719 993,915 23,809 121,634 7,680 (25,862) (40,674) (195,514) 402,399 3,399 (1,600) (239,770) (84,926) 2,716,954 2,716,954 2,534,406 (182,548) Revenues under expenditures - - (427,262) (427,262) Other financing sources Transfers in - - 427,262 427,262 Net change in fund balance - - - - Fund balance, beginning of year - - - - Total expenditures Fund balance, end of year $ - The accompanying notes are an integral part of these financial statements. 24 $ - $ - $ - BAY MILLS COMMUNITY COLLEGE Statement of Net Position Proprietary Funds June 30, 2017 Assets Current assets: Due from other funds Inventory Total current assets Business-type Activities Governmental Activities Composites Enterprise Fund Internal Service Funds $ Noncurrent assets: Capital assets being depreciated, net 52,628 52,628 $ 14,656 14,656 1,214,973 - Total assets 1,267,601 14,656 Liabilities, noncurrent Advance from the General Fund 3,715,513 - Net position (deficit) Net investment in capital assets Unrestricted (deficit) 1,214,973 (3,662,885) Total net position (deficit) $ The accompanying notes are an integral part of these financial statements. 25 (2,447,912) 14,656 $ 14,656 BAY MILLS COMMUNITY COLLEGE Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds For the Year Ended June 30, 2017 Operating revenues Cost recoveries Other revenue Business-type Activities Governmental Activities Composites Enterprise Fund Internal Service Funds $ 39,224 $ 1,742,722 1,000 Total operating revenues 39,224 1,743,722 Operating expenses Salaries Fringes Purchases - materials Travel and training Dues and fees Advertising Computer costs Utilities Supplies Contractual Amortization Depreciation Space costs-main campus Maintenance Telephone Insurance Leases Accounting and audit Bad debt expense Other 222,917 50,742 17,355 7,573 1,250 30,578 790 41,806 94,878 126,244 1,543 4,627 5,926 19,209 2,418 1,011,228 379,738 54,902 8,022 206 1,440 94,523 60,274 123,525 31,065 27,637 14,011 19,741 6,000 29,250 5,247 Total operating expenses 627,856 1,866,809 Operating loss (588,632) Nonoperating expense Other expense (243,054) Loss before other financing sources (831,686) Other financing sources Transfers in (123,087) (123,087) 8,494 Change in net position 71,613 (823,192) Net position (deficit), beginning of year (51,474) (1,624,720) Net position (deficit), end of year $ The accompanying notes are an integral part of these financial statements. 26 (2,447,912) 66,130 $ 14,656 BAY MILLS COMMUNITY COLLEGE Statement of Cash Flows Proprietary Funds For the Year Ended June 30, 2017 Cash flows from operating activities Receipts from customers Receipts from other funds Payments to suppliers Payments to employees Business-type Activities Governmental Activities Composites Enterprise Fund Internal Service Funds $ 20,015 (163,633) (273,659) $ 1,743,722 (475,843) (1,390,966) Net cash used in operating activities (417,277) (123,087) Cash flows from noncapital financing activities Transfers in Change in interfund receivables Other expense Advance from the general fund (243,054) 660,331 71,613 51,474 - 417,277 123,087 Net cash provided by noncapital financing activities Cash flows from capital and related financing activities Purchase of capital assets Transfers in - purchase of capital assets (8,494) 8,494 - Net cash from capital and related financing activities - - Net change in cash and cash equivalents - - Cash and cash equivalents, beginning of year - - Cash and cash equivalents, end of year $ Reconciliation of operating loss to net cash used in operating activities Operating loss Adjustments to reconcile operating loss to net cash used in operating activities: Depreciation expense Amortization Change in operating assets and liabilities that used cash: Inventory $ Net cash used in operating activities $ The accompanying notes are an integral part of these financial statements. 27 - (588,632) $ $ - (123,087) 126,244 94,878 - (49,767) - (417,277) $ (123,087) BAY MILLS COMMUNITY COLLEGE Statement of Net Position Fiduciary Funds June 30, 2017 Private Purpose Trust Fund Assets Pooled cash and cash equivalents Investments Accounts receivable $ Total assets Liabilities Held on behalf of student and other organizations Net position Held in trust for private purposes $ The accompanying notes are an integral part of these financial statements. 28 Agency Funds 4,844 67,135 751 $ 5,598 72,730 $ 5,598 - $ 5,598 72,730 BAY MILLS COMMUNITY COLLEGE Statement of Changes in Net Position Fiduciary Funds For the Year Ended June 30, 2017 Private Purpose Trust Fund Additions Investment income Contributions $ 728 8,285 Total additions 9,013 Deductions Fundraising costs Scholarships/grant-in-aid 4,334 2,950 Total deductions 7,284 Change in net position 1,729 Net position, beginning of year 71,001 Net position, end of year $ The accompanying notes are an integral part of these financial statements. 29 72,730 NOTES TO FINANCIAL STATEMENTS BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The financial statements of Bay Mills Community College (the “College” or "BMCC"), a discretely presented component unit of Bay Mills Indian Community (“BMIC”), have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) as applied to governmental units. GAAP includes all relevant Governmental Accounting Standards Board (“GASB”) pronouncements. The accounting and reporting framework and the more significant accounting policies are discussed in subsequent sections of this note. The College is located on the Bay Mills Indian Reservation in Chippewa County, Michigan. The College was granted a corporate charter by the Bay Mills Indian Community pursuant to Tribal Council Ordinance Number 10, which was ratified on June 25, 1984. The College began operations on July 1, 1985. The governing body of the College is the Board of Regents consisting of members as follows: . . . . . . Five members of the Bay Mills Indian Community Executive Council elected for two-year terms. The designated representative of the Sault Ste. Marie Tribe of Chippewa Indians. The designated representative of the Grand Traverse Bay Band of Ottawa and Chippewa Indians. The designated representative of the Little Traverse Bay Bands of Odawa Indians. The executive director of the Inter-Tribal Council of Michigan, Inc. The student body president of the College (non-voting). Government-wide and Fund Financial Statements Government-wide Financial Statements. The statement of net position and statement of activities display information about the College as a whole. These statements include all funds of the College except for fiduciary funds. For the most part, the effect of interfund activity has been removed from these statements. The statements distinguish between governmental and business-type activities. Governmental activities generally are financed through tuition and fees, grants, intergovernmental revenues, and other nonexchange revenues. Business-type activities are financed in whole or in part by fees charged to external parties for goods and services. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Revenues not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual proprietary funds are reported as separate columns in the fund financial statements. 30 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements Fund Financial Statements. Fund financial statements of the College are organized into funds, each of which is considered to be a separate accounting entity. Each fund is accounted for by providing a separate set of self-balancing accounts that constitute its assets, liabilities, fund equity, revenues and expenditures/expenses. Funds are organized into three major categories: governmental, proprietary, and fiduciary. An emphasis is placed on major funds within the governmental and proprietary category. A fund is considered major if it is the primary operating fund of the College or meets the following criteria: Total assets, liabilities, revenues, or expenditures/expenses are at least 10 percent of corresponding totals for all governmental or enterprise funds and at least 5 percent of the aggregate amount for all governmental and enterprise funds. Other funds may be reported as a major fund if the College's officials believe it is particularly important to financial statement users. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The College reports the following governmental fund types: The General Fund is the primary operating fund of the College and is always classified as a major fund. The General Fund is used to account for all the financial resources of the general government, except those accounted for and reported in another fund. Special Revenue Funds are used to account for and report the proceeds of specific revenue sources that are restricted or committed to expenditure for specified purposes other than debt service or capital projects. The Quasi-Endowment Special Revenue Fund accounts for assets held by the College in accordance with an investment policy. This fund was established by the governing board to function as an endowment in that the principal is to be retained, invested, and expended at the board's discretion pursuant to investment policy and the law governing the use of such funds. Discretion is defined as a vote of the Board of Regents authorizing the use of the QuasiEndowment fund. The Capital Projects Fund accounts for long-term construction projects. The Permanent Fund accounts for assets held by the College pursuant to a trust agreement. The principal portion of this fund must remain intact, however the earnings may be used to achieve the objectives of the fund. The College reports the following proprietary funds: Enterprise Fund. This fund is used to account for business-type activities provided to the general public. These activities are financed primarily by user charges and the measurement of financial activity focuses on net income measurement similar to the private sector. The College's sole enterprise fund is the Composites Enterprise Fund. 31 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements Internal Service Funds. These funds are used to report activities that provide services to the College’s other programs. The College includes Space Costs and Indirect Cost Funds as Internal Service Funds. The College also reports the following fiduciary funds (not included in government-wide statements): The Private Purpose Trust Fund is accounted for using the accrual method of accounting. Private Purpose Trust Funds account for assets whereby both the principal and interest may be spent. The Agency Fund is custodial in nature and does not present results of operations or have a measurement focus. The Agency Fund is accounted for using the accrual basis of accounting. This fund is used to account for assets that the College holds in an agency capacity (primarily student activities). Major and nonmajor funds are classified as follows: Fund Major funds General Fund Special Revenue Funds Department of Interior Brief Description The College's primary operating fund that accounts for all the financial resources of the government, except those accounted for and reported in another fund. Accounts for federal grant revenues and expenditures under contracts with the Department of Interior as the funding source. Department of Education Accounts for federal grant revenues and expenditures under contracts with the Department of Education as the funding source. Title III Quasi-Endowment Fund Accounts for activity related to the establishment of the Title III Quasi-Endowment, a program offered by the Department of Education. Capital Projects Accounts for funds received from other federal and private sources used to expand College facilities. Permanent Fund Accounts for activity related to the College’s participation in the Tribally Controlled College Endowment Program offered by the Department of Interior and the Sii Ha Sin Maintenance Endowment Program offered by the American Indian College Fund. Debt Service Fund Accounts for debt service and reserve account activity in accordance with the requirements of the Department of Agriculture Rural Development loan for construction of an administration/classroom facility. 32 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements Major funds - continued Composites Enterprise Fund Nonmajor funds Nonmajor Governmental Funds Accounts for activity related to the research and production of Direct Re-Inforced Fiber Technology (DRIFT) materials. Accounts for funds received from sources not accounted for in other special revenue funds. Internal Service Funds Accounts for services provided to the College’s other programs, including space and indirect cost allocation. Fiduciary Funds Accounts for funds held in a fiduciary or agency capacity for others. The government-wide statement of net position and the statement of activities are presented using the economic resources measurement focus as defined below. In the fund financial statements, the “current financial resources” measurement focus or the “economic resources” measurement focus are used as appropriate. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose the College considers revenues to be available if they are collected within 60 days of the end of the current fiscal period, except expenditure-driven grants which must be collected within one year. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund and fiduciary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Agency funds, a type of fiduciary fund, are unlike all other types of funds, reporting only assets and liabilities. Therefore, agency funds cannot be said to have a measurement focus. They do, however, use the accrual basis of accounting to recognize receivables and payables. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the enterprise funds and of the College's internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 33 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement because the resources of those funds are not available to support the College’s own programs. Assets, Liabilities and Equity Deposits and investments For the purpose of the statement of net position, pooled cash and cash equivalents includes amounts in demand deposits, money market cash balances, as well as short-term investments, with a maturity date within three months of the date acquired by the College. The College operates a centralized cash system for all funds. The interest of each account is allocated to all funds that hold cash. Investments are stated at fair value. Short-term investments are reported at cost, which approximates fair value. Securities traded on a national or international exchange are valued at the last reported sales price at current exchange rates. Investments that do not have established market values are reported at estimated fair value. Cash deposits are reported at carrying amounts, which reasonably approximates fair value. For the purpose of the statement of cash flows, the proprietary funds consider the pooled cash and cash equivalents and all investments with a maturity of three months or less from the date of purchase to be cash and cash equivalents. Receivables and payables During the course of operations, numerous transactions occur between individual funds that may result in amounts owed between funds. Transactions between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the non-current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "internal balances." In the government-wide financial statements, receivables consist of all revenues earned at year-end and not yet received. Allowances for uncollectible accounts receivable are based upon historical trends and the periodic aging of accounts receivable. Major accounts receivable balances include grants receivable and student receivables. Capital assets Capital assets, which include property, plant, and equipment, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The College defines capital assets as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. All capital assets are valued at historical cost or estimated historical cost if actual cost is unavailable, except for donated assets which are recorded at their estimated fair market value at the date of donation. 34 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements Depreciation of capital assets is recorded as an unallocated expense in the statement of activities. Depreciation is provided over the assets estimated useful lives using the straight-line method of depreciation. The range of estimated useful lives by type of asset is as follows: Years Buildings (includes greenhouses) Land and building improvements Equipment Software Vehicles (includes 18-passenger bus) 5-40 10-30 5-7 3-5 5-10 In the fund financial statements, capital assets used in governmental fund operations are accounted for as capital outlay expenditures of the governmental fund upon acquisition. Capital assets used in proprietary fund operations are accounted for the same as in the government-wide financial statements. Other assets In the government-wide financial statements, other assets consist of $79,000 for an artifact collection, which are reported at their estimated fair value as of the date they were donated to the College. The artifact collection is not considered current financial resources; and therefore, is not recorded in the fund financial statements. Compensated absences The College permits employees to accumulate earned but unused vacation, personal, and shortterm leave, subject to certain limitations. In the government-wide financial statements, vacation and personal leave is reported when earned as a long-term liability. In the fund financial statements, leave benefits are recognized as current salary costs when used in the governmental fund types. Equity Equity is classified as net position and displayed in three components: Net investment in capital assets – consists of capital assets including restricted capital assets, net of accumulated depreciation and reduced by debt related to the acquisition, construction, or improvement of capital assets. Restricted net position – consists of net position with constraints placed on the use either by (1) external groups such as creditors, grantors, contributors, or laws or regulations of other governments; or (2) law through constitutional provisions or enabling legislation. Unrestricted net position – consists of net position that does not meet the definition of “restricted” or “net investment in capital assets.” 35 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements Governmental funds report nonspendable fund balance for amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. Restricted fund balance is reported when externally imposed constraints are placed on the use of resources by grantors, contributors, or laws or regulations of other governments. Committed fund balance is reported for amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the College’s highest level of decision-making authority, the Board of Regents. A formal resolution of the Board of Regents is required to establish, modify, or rescind a fund balance commitment. The College reports assigned fund balance for amounts that are constrained by the College’s intent to be used for specific purposes, but are neither restricted nor committed. The Board of Regents has delegated the authority to assign fund balance to the College's President or his designee. Unassigned fund balance is the residual classification for the General Fund. When the College incurs an expenditure for purposes for which various fund balance classifications can be used, it is the College’s policy to use restricted fund balance first, then committed fund balance, assigned fund balance, and finally unassigned fund balance. Proprietary fund equity is classified the same as in the government-wide financial statements. Revenues, Expenditures and Expenses Grant revenue and contributions The College recognizes grant and contract revenues and other contributions at the time that they become available, measurable, and when award eligibility requirements have been satisfied. Revenue from cost reimbursable type contracts is not recognized until the expenditures have been incurred. Operating revenues and expenses Operating revenues and expenses for proprietary funds are those that result from providing services and producing and delivering goods and/or services. They also include all revenue and expenses not related to capital and related financing, noncapital financing, or investing activities. Income taxes The College, a component unit of Bay Mills Indian Community, considers itself exempt from federal and state income tax. Space costs The College’s Main Campus facility is located on Tribal lands. Costs of the Main Campus facility are allocated based upon a space cost allocation plan. The College is leasing the West Campus facility from Bay Mills Indian Community. The College is using the facility for cultural activities and a construction technology program. The costs of the West Campus were allocated to the Tribally Controlled Community College program, which is accounted for in the Department of Interior Special Revenue Fund. 36 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements Indirect costs Indirect costs represent overhead costs charged to programs by the College’s internal service fund in connection with administering and accounting for these programs. The amount charged to each program is determined by a rate which is negotiated between the College and the Department of Health and Human Services, Division of Cost Allocation. The rate does not include carryover provisions. Expenditures/expenses In the government-wide financial statements, expenses are classified by function for both governmental activities and business-type activities. The governmental funds report expenditures of financial resources. They are classified as current (further classified by function) and capital outlay. The proprietary funds report expenses relating to use of economic resources. These expenses are classified as operating and nonoperating. Use of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. Estimates include allowances for doubtful accounts receivable, management's estimate of accrued compensated absences and estimated useful lives of property and equipment. 2. BUDGETARY INFORMATION Budgets are established each year by resolution of the Bay Mills Community College Board of Regents and are employed as a management control device for expenditures. The budgets are adopted on a basis consistent with accounting principles generally accepted in the United States of America. 3. DEPOSITS AND INVESTMENTS Following is a reconciliation of pooled cash and cash equivalents and investments as of June 30, Statement of Net Position Pooled cash and cash equivalents Investments $ 5,469,353 8,752,955 Statement of Net Position - Fiduciary Funds Private Purpose Trust Fund Pooled cash and cash equivalents Investments 4,844 67,135 Total $ 14,294,287 37 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements Deposits and investments Bank deposits: Checking, savings, and money market accounts Certificates of deposit: Maturing in 1 year Maturing in 2 to 5 years Investments Cash on hand Total $ 5,474,062 32,685 146,950 8,640,455 135 $ 14,294,287 The College’s investments are recorded in the General Fund, Permanent Fund, Title III QuasiEndowment Fund, Debt Service Fund, and Private Purpose Trust Fund. The General Fund investments of $1,185,839 consist of a short term investment fund, which has a goal of providing a stable income stream to support the operations of the College while maintaining the corpus. However, these funds are invested in fixed income and equity mutual funds and are subject to risk of loss. The Permanent Fund has been established to track the activity related to the College’s participation in the Tribally Controlled College Endowment and the Sii Ha Sin Maintenance Endowment. These investments are restricted for the uses as described in Notes 13 and 14. The Title III Quasi-Endowment Fund has been established to track the activity related to the College’s participation in the Title III Quasi-Endowment and the investments are intended to function as an endowment in that the principal is to be retained and invested. Note 15 provides more information about the Title III Quasi-Endowment Fund. The College has established a loan reserve investment account, reported in the Debt Service Fund, which complies with U.S. Department of Agriculture Rural Development loan requirements. The investment goals are to maintain at least the minimum required reserve amount and earn a return on investment that may be held for reinvestment or used to support the operations of the College. The College chooses to aggregate its investments for disclosure purposes. As of year-end, the College had the following types of mutual fund investments, which are stated at fair value, as determined by quoted market prices: Mutual funds - fixed income Mutual funds - equities $ 3,919,253 4,721,202 Total $ 8,640,455 Certificates of deposits of $112,500 and $67,135 classified as investments on the statement of net position and the statement of fiduciary net position, respectively, are considered bank deposits for risk purposes. 38 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements Fair Value. The College categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant observable inputs. As of year end, the College's investments in mutual funds were all considered to be level 1. Custodial credit risk – deposits. Custodial credit risk is the risk that in the event of a bank failure, the College’s deposits may not be returned. The College does not have a deposit policy for custodial credit risk; however, bank deposits are protected by sweep investment accounts and federal depository insurance. As of June 30, 2017, $153,982 of the College’s bank balance of $5,769,025 (including $179,635 in certificate of deposits classified as investments on the statement of net position and fiduciary net position) was exposed to custodial credit risk because it was uninsured and uncollateralized. The $153,982 consists of money market accounts in the Permanent Fund, Debt Service Fund, and General Fund. Custodial credit risk – investments. For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the College will not be able to recover the value of the investments or collateral securities that are in possession of an outside party. The College does not have a policy for investment custodial credit risk. As of June 30, 2017, the College has no custodial credit risk exposure for any of its investments. Credit risk. The fixed income securities are limited to those considered investment grade at the time of purchase. Investment grade is defined as those securities rated by Standard & Poor's to be BBB or better, or Moody's BAA or better, or an equivalent rating by a nationally recognized rating agency. The fixed income securities are invested in bond mutual funds. Concentration of Credit Risk . The purchase of fixed income securities from one issuer may not exceed 5% of the assets under management, except for obligations of the U.S. Government and its agencies. Interest Rate Risk . The College does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The bond mutual funds have varying lengths of maturity. Fair Value. The College categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant observable inputs. As of year end, the College's investments were all considered to be level 1. 39 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements 4. RECEIVABLES Accounts receivable balances for the governmental activities at June 30, 2017 consisted of the following: Accounts receivable - students Accounts receivable - grants Accounts receivable - other Allowance for doubtful accounts $ 24,175 138,526 40,577 (19,919) Accounts receivable, net $ 183,359 5. CAPITAL ASSETS Capital assets activity for the primary government was as follows for the year ended June 30, 2017: Beginning Balance Governmental activities Capital assets, not being depreciated: Land $ Construction-in-progress Capital assets, being depreciated: Buildings Building improvements Land improvements Equipment Software Vehicles Less accumulated depreciation for: Buildings Building improvements Land improvements Equipment Software Vehicles Total capital assets being depreciated, net Governmental activities capital assets, net $ 188,500 270,546 Additions $ 951,734 Ending Balance Disposals $ - 188,500 1,222,280 459,046 951,734 5,849,858 1,539,370 496,139 237,990 206,081 264,771 8,594,209 76,780 34,810 111,590 (38,140) (10,000) (25,952) (74,092) 5,811,718 1,539,370 496,139 304,770 206,081 273,629 8,631,707 (1,496,781) (1,024,997) (169,281) (189,217) (41,189) (151,320) (3,072,785) (149,917) (72,778) (25,671) (17,711) (39,382) (46,754) (352,213) 9,126 1,428 25,952 36,506 (1,637,572) (1,097,775) (194,952) (205,500) (80,571) (172,122) (3,388,492) 5,521,424 (240,623) (37,586) 5,243,215 (37,586) $ 6,653,995 5,980,470 $ 40 711,111 - $ $ 1,410,780 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements Beginning Balance Business-type activities Capital assets, being depreciated: Equipment Vehicles $ Less accumulated depreciation for: Equipment Vehicles Business-type activities capital assets, net 2,361,283 9,500 2,370,783 Additions $ (1,032,914) (5,146) (1,038,060) $ 1,332,723 8,494 8,494 $ (124,344) (1,900) (126,244) $ (117,750) Ending Balance Disposals $ - $ 2,369,777 9,500 2,379,277 - (1,157,258) (7,046) (1,164,304) - $ 1,214,973 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities - unallocated depreciation Business-type activities - Composites Total 2017 352,213 126,244 $ 478,457 $ 6. EXCLUSIVE PROVIDER AGREEMENT On June 18, 2013, the College paid $379,512, in the form of compensation from the cancelation of a land contract with BMIC, for the right to act as the exclusive manufacturer and distributor of DRIFT material under an exclusive provider agreement. The exclusive provider agreement was amortized over its estimated useful life of four years. The accumulated amortization at June 30, 2017 was $379,512. The amortization expense of $94,878 for the fiscal year was charged to business-type activities - composites in the statement of activities. On September 18, 2014, the exclusive provider agreement was amended to allow for additional investment by the College, which affects the distribution of profits based on the proportionate share of BMIC and BMCC investment. Any additional investment by BMCC increases the amount of the prior investment with a premium of 10% included in its basis. For the fiscal year ended June 30, 2017, the College paid BMIC $243,054 as an additional investment. This amount is included in expenses of the business-type activities - composites in the statement of activities. In the proprietary fund financial statements, the additional investment is reported as a nonoperating expense. 41 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements 7. LONG-TERM DEBT Compensated Absences Long-term debt activity consists of the following at June 30, 2017: Beginning Balance Governmental activities Accrued compensated absences $ 150,116 Additions $ 176,623 Ending Balance (Reductions) $ (168,062) $ 158,677 Due Within One Year $ - Line of Credit The College has a revolving line of credit of up to $500,000 with interest charged at prime plus 2.0% (effective rate of 6.25% at June 30, 2017). The agreement, which expired July 28, 2017, was renewed for another year. The line of credit was not utilized during the fiscal year and had no outstanding balance as of June 30, 2017. USDA Rural Development Loan On May 18, 2017, the College entered into a 35 year, $7,500,000 promissory note with interest charged at 2.375%, with the U.S. Department of Agriculture Rural Development for construction of a new administration/classroom facility. The loan is secured by all present and future revenues and accounts receivable, arising in connection with the administration/classroom facility. The College's required cash contribution of $1,222,280 was met as of June 30, 2017. Draw down of loan funds for construction costs began on July 31, 2017. An interest only payment is due on May 1, 2018 with yearly payments of $324,000 plus interest due on May 1 thereafter. 8. INTERFUND RECEIVABLES AND PAYABLES AND TRANSFERS The following balances represent individual fund interfund receivables and payables at June 30, 2017: General Fund Department of Education Capital Projects Fund Permanent Fund Nonmajor governmental funds Internal service fund Due from Other Funds Due to Other Funds $ 86,438 2,532 14,656 $ 38,449 60,103 5,074 - $ 103,626 $ 103,626 42 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements The College reports interfund balances between certain funds. These interfund balances resulted primarily from the time lag between the dates that (1) interfund goods and services are provided or reimbursable expenditures occur, (2) transactions are recorded in the accounting system, and (3) payments between funds are made. The Composites Enterprise Fund has an advance payable to the General Fund with a balance of $3,715,513 at June 30, 2017. The General Fund advanced these funds to cover start up costs, operational expenses, and the purchase of capital assets. The advance is reported as a noncurrent liability in the Composites Enterprise Fund because the repayment terms have not been established. In the fiscal year, revenue was earned from small sales contracts. The business is expected to grow and become self-sustaining in the next couple years. The Debt Service Fund has an advance payable to the General Fund with a balance of $318,600 at June 30, 2017. Under the terms of the USDA Rural Development loan, the College was required to put $2,700 per month into a reserve account until it accumulates a sum of $324,000. The College invested the full amount into the reserve account this fiscal year. Each month, the restricted portion will be recorded as a transfer from the General Fund to the Debt Service Fund, which reduces the amount of the advance. Interfund transfers consisted of the following for the year ended June 30, 2017: Transfers Out Transfers In Department of General Fund Interior Department of Education $ Title III Quasi-Endowment Fund Permanent Fund Debt Service Fund Nonmajor governmental funds Composites Enterprise Fund Internal service funds 427,262 $ 792,420 $ - Nonmajor Governmental Funds Permanent Fund $ - $ Totals - $ 427,262 249,084 2,869 5,400 5,737 - - - 249,084 8,606 5,400 37,395 - - - 37,395 70,410 - 1,203 8,494 - 8,494 71,613 8,494 $ 807,854 $ 5,737 $ 1,203 $ Transfers are used to (1) move revenues from the fund that is required to collect them to the fund that is required or allowed to expend them and (2) use unrestricted revenues collected in the General Fund to finance various programs accounted for in other funds. 43 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements 9. EMPLOYEE RETIREMENT PLAN The Bay Mills Community College Board of Regents established the Bay Mills Community College Defined Contribution Retirement Plan as of July 1, 1986. This plan follows the provisions set forth under Code Section 403(b), Defined Contribution (money purchase) Retirement Plan. Plan contributions are invested at the direction of the participant, in the Teacher’s Insurance and Annuity Association (“T.I.A.A.”) and the College Retirement Equity Funds (“C.R.E.F.”). The plans are administered on behalf of the College by T.I.A.A. and C.R.E.F. The employer contribution of 5% of the covered payroll was $162,371 in 2017 and was fully funded. Employee contributions to the plan in 2017 totaled $152,305. 10. RELATED PARTY TRANSACTIONS On February 20, 2017, the lease agreement between the College and Bay Mills Indian Community for the use of Tribal Lands was extended for an additional twenty-five years beyond the initial twentyfive year term that began on November 2, 2015. The cost of the lease is budgeted as part of the College’s space cost allocation plan. As of June 30, 2017, the monthly lease was $500 per month. Total lease payments paid during the year ended June 30, 2017, amounted to $6,000. Future payments will be $6,000 per year for the next five years. On May 20, 2004, the College entered into a twenty-five year lease agreement with the Bay Mills Indian Community for use of the former Iroquois Ski Lodge. The College refers to this facility as the “West Campus” in the internal service fund financial statements. The College is responsible for the operational costs, buildings, and improvements. The rental rate is $1 for the term of the lease. On June 18, 2013, the College entered into a twenty-five year lease agreement with the Bay Mills Indian Community for use of the building located in Dafter, Michigan to carry out educational, research, and manufacturing activities related to the production of DRIFT materials. The rental rate is $1 for the term of the lease and the College is responsible for the maintenance and operational costs of the building. 11. RISK MANAGEMENT The College is exposed to various risks of loss related to theft of, damage to and destruction of assets; error and omissions; and natural disasters for which commercial insurance with minimal deductibles is maintained. 12. CONTINGENT LIABILITIES Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies, principally the federal government. Any disallowed claims, including amounts already collected, may constitute a liability of the applicable funds. The amount, if any, of expenditures, which may be disallowed by the grantor, cannot be determined at this time although the College expects such amounts, if any, to be immaterial. 44 BAY MILLS COMMUNITY COLLEGE Notes to Financial Statements 13. TRIBALLY CONTROLLED COLLEGE ENDOWMENT (PERMANENT FUND) A permanent fund has been established to track the activity related to the College’s participation in the Tribally Controlled College Endowment Program offered by the Department of the Interior. Capital contributions made by the Department of the Interior require a 50% match by the College. Interest earnings may be used for the operation and improvement of the College. Capital contributions may be used; however, any use of capital funds by the College requires a repayment of capital to the Department of the Interior in an amount double the amount used. It is the intention of the College to accumulate capital in the fund of $1,000,000 and use interest earnings from the capital amount for special improvement projects. As of June 30, 2017, the nonspendable amount was $1,253,933 and the amount restricted as expendable endowment was $1,467,612. 14. SII HA SIN MAINTENANCE ENDOWMENT FUND (PERMANENT FUND) In the fiscal year ending June 30, 2005, the College received $112,595 from the American Indian College Fund to establish the Sii Ha Sin Maintenance Endowment Fund. The corpus of the fund must remain intact, but earnings may be used to support maintenance expenditures at the College. The College has invested in certificates of deposit with varying maturity dates to achieve the highest possible return while addressing the issue of liquidity and providing flexibility to invest at higher rates if interest rates rise. Earnings are transferred from the fund to the General Fund on a yearly basis at the beginning of the College’s fiscal year. As of June 30, 2017, the nonspendable amount was $112,595 and the amount restricted as expendable endowment was $1,221. 15. TITLE III QUASI-ENDOWMENT FUND The Department of Education Strengthening Institutions Program, established under the authority of Title III Part A of the Higher Education Act of 1965, as amended, allows institutions of higher education to use up to twenty percent (20%) of the award to establish or increase the institution’s endowment fund. The grantee institution must match each dollar of Federal grant funds to establish or increase the endowment fund with one dollar of non-federal funds. During the fiscal year ending June 30, 2017, the College added $498,168 to the Title III Quasi-Endowment Fund, which consisted of $249,084 from the Department of Education and $249,084 from the College’s General Fund. The financial objectives are to support the current and future operations of the College and to preserve and enhance the purchasing power of the Title III Quasi-Endowment Fund. As of June 30, 2017, the fund balance restricted for expendable endowment was $4,558,473.  45 0025?2?29 >20 >20 mOImUCrmm BAY MILLS COMMUNITY COLLEGE Schedule of Revenues, Expenditures and Changes in Fund Balance Budget and Actual - Capital Projects For the Year Ended June 30, 2017 Original Budget Revenues Grant revenue-federal $ Expenditures Current: Academic support Student services Public service Institutional support Technology Operation and maintenance of plant Capital contribution to Bay Mills Indian Community Capital outlay Final Budget 180,857 $ Actual Over (Under) Final Budget Actual 180,857 $ 165,859 $ (14,998) 55,695 250 71,150 - 55,695 250 71,150 - 46,696 1,471 8,144 998 67,051 3,642 (8,999) 1,221 8,144 998 (4,099) 3,642 37,857 15,905 37,857 15,905 37,857 - (15,905) 180,857 180,857 165,859 (14,998) Revenues over expenditures - - - - Other financing sources Transfers in - - - - Net change in fund balance - - - - Fund balance, beginning of year - - - - Total expenditures Fund balance, end of year $ - 46 $ - $ - $ - BAY MILLS COMMUNITY COLLEGE Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds - Classified by Object For the Year Ended June 30, 2017 General Fund Revenues Grant revenue-federal and state State aid oversight revenue Tuition and fees Other grant revenue and contributions Other revenue Investment income $ 5,474,460 1,004,835 35,757 178,035 59,858 Department of Interior Special Revenue Fund $ 1,703,177 - Department of Education Special Revenue Fund Title III QuasiEndowment Special Revenue Fund $ $ 2,107,144 - 249,084 458,196 Total revenues 6,752,945 1,703,177 2,107,144 707,280 Expenditures Current: Salaries Fringes Contractual Travel and training Supplies Telephone Dues and fees Administration and advertising Scholarships and grant-in-aid Computer costs Space costs-main campus Space costs-west campus Insurance Indirect costs Legal fees Other Capital contribution to Bay Mills Indian Community Capital outlay 802,996 259,582 771,100 104,152 66,583 14,357 322,984 60,673 494,094 11,310 24,651 8,591 542,977 197,424 83,379 74,286 1,006,334 585,685 213,653 313,129 16,672 13,574 1,172 1,021 338 79,008 64,726 408,462 - 605,837 249,754 32,184 42,653 11,261 4,312 829 863 993,916 124,101 23,809 437,207 7,680 - 39,060 - Total expenditures 4,845,473 1,697,440 2,534,406 39,060 Revenues over (under) expenditures 1,907,472 5,737 (427,262) 668,220 Other financing sources (uses) Transfers in Transfers out (792,420) (5,737) 427,262 - 249,084 - Total other financing sources (uses) (792,420) (5,737) 427,262 249,084 Net change in fund balances 1,115,052 - - 917,304 Fund balances, beginning of year 8,638,164 - - 3,641,169 Fund balances, end of year $ 9,753,216 47 $ - $ - $ 4,558,473 Capital Projects Fund $ $ Permanent Fund 165,859 - $ 6,063 204,409 Nonmajor Governmental Funds Debt Service Fund $ 4,381 $ 540,206 193,498 - Total Governmental Funds $ 4,765,470 5,474,460 1,004,835 235,318 178,035 726,844 165,859 210,472 4,381 733,704 12,384,962 57,309 67,051 3,642 37,857 - 750 - 139 - 161,313 61,885 98,964 31,439 37,591 1,354 4,927 192,628 3,881 15,839 114,054 2,212 36,328 2,155,831 784,874 1,215,377 194,916 186,318 21,195 324,834 66,801 1,680,638 206,343 143,307 64,726 8,591 1,502,700 197,424 129,182 119,823 1,042,662 165,859 750 139 762,415 10,045,542 - 209,722 4,242 (28,711) 2,339,420 - 8,606 (1,203) 5,400 - 37,395 (8,494) 727,747 (807,854) - 7,403 5,400 28,901 (80,107) - 217,125 9,642 190 2,259,313 - 2,618,236 - - 14,897,569 - $ 2,835,361 $ 9,642 $ 190 48 $ 17,156,882 BAY MILLS COMMUNITY COLLEGE Combining Statement of Net Position Internal Service Funds June 30, 2017 Governmental Activities - Internal Service Funds Indirect Costs Space CostsMain Campus Space CostsWest Campus Totals Assets, all current Due from other funds $ - $ 14,656 $ - $ 14,656 Net position Unrestricted $ - $ 14,656 $ - $ 14,656 49 BAY MILLS COMMUNITY COLLEGE Combining Statement of Revenues, Expenses and Changes in Net Position Internal Service Funds For the Year Ended June 30, 2017 Governmental Activities - Internal Service Funds Indirect Costs Operating revenues Cost recoveries Other revenue $ 1,502,700 1,000 Space CostsMain Campus Space CostsWest Campus $ $ 175,295 - 64,727 - Totals $ 1,742,722 1,000 Total operating revenues 1,503,700 175,295 64,727 1,743,722 Operating expenses Salaries Fringes Travel and training Dues and fees Advertising Computer costs Utilities Supplies Contractual Space costs-main campus Maintenance Telephone Insurance Leases Accounting and audit Other 991,929 364,994 53,211 8,022 206 1,440 46,081 24,634 31,065 13,613 4,418 29,250 5,247 16,082 12,287 1,409 72,624 11,436 74,134 20,005 332 12,460 6,000 - 3,217 2,457 282 21,899 2,757 24,757 7,632 66 2,863 - 1,011,228 379,738 54,902 8,022 206 1,440 94,523 60,274 123,525 31,065 27,637 14,011 19,741 6,000 29,250 5,247 Total operating expenses 1,574,110 226,769 65,930 1,866,809 (51,474) (1,203) (123,087) 1,203 71,613 Operating loss (70,410) Other financing sources Transfers in 70,410 - Change in net position - (51,474) - (51,474) Net position, beginning of year - 66,130 - 66,130 Net position, end of year $ - 50 $ 14,656 $ - $ 14,656 SINGLE AUDIT ACT COMPLIANCE Rehmann Robson 902 South Huron Cheboygan, MI 49721 Ph: 231.627.3143 Fx: 231.627.5787 rehmann.com Independent Auditors' Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance December 8, 2017 Board of Regents Bay Mills Community College Brimley, Michigan We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Bay Mills Community College , (the “College”), a component unit of the Bay Mills Indian Community, (“BMIC”), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the College’s basic financial statements. We issued our report thereon dated December 8, 2017, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards 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. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The 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 basic financial statements or to the basic 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 basic financial statements as a whole. Rehmann is an independent member of Nexia International. CPAs & Consultants Wealth Advisors Corporate Investigators 51 This page intentionally left blank. BAY MILLS COMMUNITY COLLEGE Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2017 CFDA Number Passed Through Pass-through / Grantor Number Federal Expenditures 10.221 Direct 2014-38421-22021 $ Tribal Colleges Endowment Program 10.222 Direct 20XX-38423-06911 111,964 Bay Mills Extension Services 10.500 Direct 2014-47002-22104 101,978 Community Services Loans and Grants Cluster: USDA-Rural Housing Service: Tribal College Initiatives Grant Multipurpose Cultural Building 10.766 Direct N/A 37,857 USDA-Rural Housing Service: Tribal College Initiatives Grant Campus Updates 10.766 Direct N/A 128,003 165,860 10.U01 Direct N/A 15,163 Federal Agency / Cluster / Program Title U.S. Department of Agriculture Bay Mills Agriculture and Academics Initiative Non-Cash Item - U.S. General Services Administration Crawler Tractor Total U.S. Department of Agriculture 100,039 495,004 U.S. Department of the Interior Tribally Controlled Community College Tribally Controlled Community College Endowment Program 15.027 Direct A16AB00008 1,697,440 15.028 Direct A17AP00007 5,737 Total U.S. Department of the Interior 1,703,177 National Science Foundation BMCC Pre-TI 47.076 Direct 1719668 14,293 U.S. Department of Energy Tribal Colleges and Universities Advanced Manufacturing Network Initiative 81.123 AIHEC DE-NA0002970 16,041 Tribal Colleges and Universities Advanced Manufacturing Network Initiative - Phase II 81.123 AIHEC DE-NA0003332 101,290 Total U.S. Department of Energy 117,331 52 BAY MILLS COMMUNITY COLLEGE Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2017 CFDA Number Passed Through Pass-through / Grantor Number 84.007 Direct P007A168150 Federal Work Study Program 84.033 Direct P033AXX8150 17,657 Federal Pell Grant Program 84.063 Direct P063PXX4637 933,880 970,248 American Indian Tribally Controlled Colleges and Universities Title III Part A 84.031T Direct P031T150002 450,813 American Indian Tribally Controlled Colleges and Universities Title III Part F 84.031D Direct P031D150002 593,091 1,043,904 TRIO Cluster: Student Support Services Program (TRIO) 84.042A Direct P042A150563 253,080 Vocational - Technical Education 84.048A SOM V048A160022 88,996 Federal Agency / Cluster / Program Title U.S. Department of Education Student Financial Assistance Cluster: Federal Supplemental Education Opportunity Grant Federal Expenditures $ Total U.S. Department of Education 18,711 2,356,228 U.S. Department of Health and Human Services Tribal Colleges and Universities Behavior Wellness Study (TCU-BeWell) Administration for Native Americans - Develop an Online Bachelor of Art in Early Childhood Education 93.273 UW 5R01AA022068-04 UWSC7573 2,000 93.612 Direct 90NA8301-01-00 62,678 Total U.S. Department of Health and Human Services 64,678 Total Expenditures of Federal Awards $ See notes to schedule of expenditures of federal awards. 53 4,750,711 BAY MILLS COMMUNITY COLLEGE Notes to Schedule of Expenditures of Federal Awards 1. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the "Schedule") includes the federal grant activity of the Bay Mills Community College (the "College") under programs of the federal government for the year ended June 30, 2017. 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 the College, it is not intended to and does not present the financial position, changes in net position or cash flows of the College. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting, which is described in Note 1 to the College's financial statements. 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. Pass-through entity identifying numbers are presented where available. For purposes of charging indirect costs to federal awards, the College has not elected to use the 10 percent de minimis cost rate as permitted by §200.414 of the Uniform Guidance. For instances where the granting agency did not provide a CFDA number, the granting agency 2 digit prefix is used followed by U, for unknown, and a 2 digit number (XX.U01, XX.U02 etc.). 3. RECONCILIATION OF SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS The following is a reconciliation of the expenditures reported on the Schedule to the grant revenue - federal and state as reported in the financial statements: Amount Total of grant revenue - federal and state on the statement of revenues, expenditures and changes in fund balances - governmental funds $ 15,163 (29,922) Non-cash item - U.S. Forest Service donation of crawler tractor State awards Total expenditures per the Schedule 4. 4,765,470 $ 4,750,711 PASS-THROUGH AGENCIES The College receives certain federal grants as subawards from non-federal entities. Pass-through entities, where applicable, have been identified in the Schedule with an abbreviation, defined as follows: Pass-through Agency Abbreviation AIHEC SOM UW Pass-through Agency Name American Indian Higher Education Consortium State of Michigan University of Washington  54 This page intentionally left blank. Rehmann Robson 902 South Huron Cheboygan, MI 49721 Ph: 231.627.3143 Fx: 231.627.5787 rehmann.com Independent Auditors' 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 December 8, 2017 Board of Regents Bay Mills Community College Brimley, Michigan We have audited, in accordance with the 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 the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of Bay Mills Community College (the “College”), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the College’s basic financial statements, and have issued our report thereon dated December 8, 2017. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the 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 opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the College's internal control. Accordingly, we do not express an opinion on the effectiveness of the 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 a 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. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit 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. Rehmann is an independent member of Nexia International. CPAs & Consultants Wealth Advisors Corporate Investigators 55 Compliance and Other Matters As part of obtaining reasonable assurance about whether the College's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, 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 of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the College’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 College’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. 56 Rehmann Robson 902 South Huron Cheboygan, MI 49721 Ph: 231.627.3143 Fx: 231.627.5787 rehmann.com Independent Auditors' Report on Compliance for Each Major Federal Program and Internal Control over Compliance Required by the Uniform Guidance December 8, 2017 Board of Regents Bay Mills Community College Brimley, Michigan Report on Compliance for Each Major Federal Program We have audited the compliance of the Bay Mills Community College (the “College”) with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the College's major federal programs for the year ended June 30, 2017. The College’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Independent Auditors’ Responsibility Our responsibility is to express an opinion on compliance for each of the College's major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States; and the requirement of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Re-quirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the College's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the College's compliance. Rehmann is an independent member of Nexia International. CPAs & Consultants Wealth Advisors Corporate Investigators 57 Unmodified Opinion on Each Major Federal Program In our opinion, the College complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs identified in the summary of auditors’ results section of the accompanying schedule of findings and questioned costs for the year ended June 30, 2017. Report on Internal Control Over Compliance Management of the College is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the College’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the College's internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. Our consideration of internal control over compliance 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 compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Purpose of this Report The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. 58 BAY MILLS COMMUNITY COLLEGE Schedule of Findings and Questioned Costs For the Year Ended June 30, 2017 SECTION I - SUMMARY OF AUDITORS’ RESULTS Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified Internal control over financial reporting: Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported yes X no Material weakness(es) identified? yes X no Significant deficiency(ies) identified? yes X none reported X no Noncompliance material to financial statements noted? Federal Awards Internal control over major programs: Type of auditors’ report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? yes Identification of major programs and type of auditors’ report issued on compliance for each major program: CFDA Number Name of Federal Program or Cluster Type of Report 84.031 American Indian Tribally Controlled Colleges and Universities Unmodified Dollar threshold used to distinguish between Type A and Type B programs: $ 750,000 X Auditee qualified as low-risk auditee? 59 yes no BAY MILLS COMMUNITY COLLEGE Schedule of Findings and Questioned Costs For the Year Ended June 30, 2017 SECTION II – FINANCIAL STATEMENT FINDINGS No matters were reported. 60 BAY MILLS COMMUNITY COLLEGE Schedule of Findings and Questioned Costs For the Year Ended June 30, 2017 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. 61 BAY MILLS COMMUNITY COLLEGE Summary Schedule of Prior Audit Findings For the Year Ended June 30, 2017 No findings in the prior year. 62