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MCC Belt Tightening

November 20, 2018

LOWELL -- It wasn’t too long ago when Middlesex Community College administrators saw a rising deficit heading toward $800,000.

They sent out a notice to staff members, advising them to reduce expenses and cut back purchases. The community college, with Lowell and Bedford campuses, stopped filling positions.

In addition, the board voted to raise fees by 9 percent earlier this year.

All together, these steps have put Middlesex Community College in a strong fiscal position, according to officials.

“We’re in the best financial shape we’ve been in for a long time,” said James Campbell, chairman of the college’s Board of Trustees.

The board recently reviewed an annual independent audit performed by O’Connor & Drew, P.C., an accounting firm based in Braintree. Per state law, the college must be audited yearly.

The audit showed no irregularities, officials said.

“This is a clean opinion, which is the best opinion you want,” said Frank Nocella, chief financial officer for the college.

They closed the $800,000 mid-year deficit, and the college ended Fiscal 2018 with a positive $1,598,000 operating contribution to fund balance -- excess revenue over expenses to help the college’s sustainability. That figure in Fiscal 2017 was $455,000.

“We’ve taken positive and proactive steps over the last couple of years, making sure we have the resources we need to sustain our institution over the long-term,” President James Mabry said.

Cash on hand also improved in Fiscal 2018 -- $15.6 million compared to $10 million the previous year. The $15.6 million equates to 64 days of operating expenses on hand, progress from the 38 days in Fiscal 2017. The national best-practice standard is having 90 days on hand.

In previous years, the cash on hand was lower because of significant capital expenditures, including building projects.

Officials anticipated that the total net position of the college would go down in Fiscal 2018 because the state passed back the Other Postemployment Benefits (OPEB) liability associated with retirement medical coverage. The OPEB adjustments, previously on the state, came out to $35.3 million.

That significant change affected the college’s total net position. It went from $33.6 million in Fiscal 2017 down to $10 million in Fiscal 2018.

“It’s an accounting change that everyone in the commonwealth and country had to do,” Nocella said. “But the college has constructed sound budgets to stay financially strong as our operating expenses trend favorably.”

Financial challenges at the college have stemmed from enrollment challenges and declining public funding over the last several years, according to college officials. Declining enrollment is a state and national trend.

It will be another six or seven years until the population growth catches up for enrollment, Campbell said.

As a result of these challenges, the college took numerous steps to “tighten our belt,” he added.

“I really have to applaud the board for their overall long-term actions,” Campbell said.

Nocella added about closing the gap: “It’s a great thank you to the college community, the faculty, the staff and the board. The goal at the end of the day is to be in a positive position, and everybody worked hard to get here.”

Laurie Elliott, a member of the Board of Trustees, said the college is in better financial shape because of the increase in fees.

“It was a good audit, a basic annual audit,” Elliott said. “There’s nothing unusual in it.”

The chairman called it a “tough” vote to increase fees by 9 percent in April. A full-time student taking 15 credits is now paying about $250 more per semester. Each credit now costs $215, resulting in a total semester bill of $3,225 for full-time, in-state students.

But that difficult vote, combined with reducing expenses and not filling positions, led to the college’s strong financial position, the chairman said.

The positive $1,598,000 operating contribution to fund balance -- excess revenue over expenses -- falls into the undesignated balance of $3,458,000. This amount, dealing with unanticipated needs and deferred maintenance, is critical for the college’s financial strength, Nocella said.

“It’s sound fiscal management to look ahead for future expenses,” Campbell said.

Those expenses include updating and renovating classrooms, labs and capital projects.

It’s important to have a certain amount of cash around for unanticipated needs, such as emergency repairs, Mabry said. The college has a number of older buildings.

“We always aim to have a positive cash position at the end of the year and throughout the year,” he said.

Mabry said the college’s budget managers regularly look at their cash flow throughout the year, and alert him if there are any problems.

“At the moment, there are no red flags,” he said.

Follow Rick Sobey on Twitter @rsobeyLSun.

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