Chattanooga State Community College ended fiscal 2024 on solid financial footing, adding nearly $15.5 million to its net position despite operating at a loss on paper and receiving one internal control finding from state auditors.
The Tennessee Comptroller’s Division of State Audit gave the college an unmodified opinion – the highest available – on its financial statements for the years ended June 30, 2024, and June 30, 2023. The clean opinion affirms that Chattanooga State’s books fairly present its financial position in accordance with generally accepted accounting principles.
The lone audit finding concerned inadequate internal controls in four areas. Details were omitted from the public report under a state law that classifies certain security-related information as confidential. College officials have submitted a corrective action plan, and auditors will follow up to ensure compliance.
“We observed conditions that violated college policies or industry-accepted best practices,” auditors wrote, noting the omission of specifics under Tennessee Code Annotated 10-7-504(i).
Net position climbs despite operating loss
Chattanooga State’s net position – the difference between its assets and liabilities – rose to $149.1 million in 2024 from $133.6 million the prior year. That improvement reflects more cash on hand, growth in capital assets and healthy state funding.
The boost came despite an operating loss of $74.9 million, a gap common among public colleges because state appropriations and many grants are classified as nonoperating revenue under accounting rules.
When nonoperating revenues, capital appropriations and gifts are factored in, Chattanooga State finished the year with $15.5 million in positive results. That follows a $31.3 million increase in 2023, which was buoyed by pandemic-related Higher Education Emergency Relief Fund (HEERF) grants.
State support, enrollment lift revenues
Total operating revenues fell 7% to $21.7 million, largely due to steep drops in certain state and federal grants.
Grants and contracts were down $1.9 million overall, including nearly $900,000 less for the Construction Career Center, $551,000 less for the TBR Construction Center Equipment grant and $504,000 less for the THEC GIVE 2.0 grant.
Those losses were partly offset by a 3.2% enrollment increase that pushed tuition and fee revenues up by $874,000. Student aid also grew, with Pell Grants up $2 million and Tennessee Lottery scholarships up $326,000.
On the nonoperating side, state appropriations increased $2.8 million to $49.1 million, reflecting higher funding levels in Nashville. Investment income nearly doubled, fueled by higher interest rates in the state’s Local Government Investment Pool.
Salaries, pensions drive expenses
Operating expenses climbed to $96.6 million in 2024, an increase of $2.4 million from the previous year, largely due to higher compensation costs. Salaries and wages rose by $1.5 million following a 5% across-the-board raise, while benefits grew by $2.3 million, driven by higher pension expenses for defined benefit plans and the salary adjustments. Scholarship and fellowship expenses declined by $2.2 million overall, though the mix changed significantly: pandemic-related HEERF student aid fell by $5.2 million, but Pell Grants, dual enrollment scholarships and lottery awards all saw increases.
Major capital investments underway
Chattanooga State reported $91.4 million in capital assets at year-end, an increase of $6.5 million from 2023. The growth was driven by several major projects, including $8.1 million added to the Advanced Manufacturing Building project in progress, $6.1 million in transferred work for renovations to the Center for Engineering Technology, Arts & Sciences and $1.9 million in new equipment purchases.
At June 30, the college had $52.9 million in outstanding construction commitments, with $50.4 million expected to be covered by future state capital appropriations.
Capital funding in 2024 included $10.6 million in state appropriations, down from $18.6 million the previous year. The decline reflects a winddown of certain large projects, including the Advanced Manufacturing Building and Transportation and Logistics Center.
Debt remains low, credit ratings strong
Long-term debt totaled $1.15 million, down slightly from 2023. The balance includes Tennessee State School Bond Authority bonds with interest rates ranging from 0.34% to 5%, maturing through 2042.
The TSSBA’s credit ratings remain high – AA+ from Fitch, Aa1 from Moody’s and AA+ from Standard & Poor’s – helping the college maintain favorable borrowing costs.
Foundation Assets and Support
The Chattanooga State Community College Foundation, a discretely presented component unit in the audit, ended the year with $11 million in assets, including $9.8 million in investments. The foundation provided $405,827 in direct support to the college in 2024, down from $473,746 in 2023.
Foundation contributions and investment income help fund scholarships, instructional programs and equipment purchases.
Confidential internal control finding
The audit’s single finding notes that Chattanooga State “did not provide adequate internal controls in four areas.” While the report omits specifics for security reasons, such findings typically relate to systems or processes that could expose the college to financial loss or data compromise if publicly detailed.
The college’s written response, included in the report, outlines steps to strengthen oversight and align practices with industry standards.
The Comptroller’s Office will conduct a follow-up review to ensure those measures are in place.
This is the first audit finding for Chattanooga State since at least 2022; the previous audit had no reported deficiencies.
Cash flow and liquidity
Chattanooga State ended the year with $66.7 million in cash and cash equivalents, up from $61.9 million in 2023. The increase reflects net inflows from noncapital financing activities – primarily state appropriations and student aid – that exceeded outflows for operations and capital projects.
Operating activities consumed $69.2 million in cash, underscoring the importance of recurring state support and tuition revenues.
Economic outlook
The college’s financial outlook remains closely tied to Tennessee’s economy and budget priorities. State appropriations accounted for 58.3% of Chattanooga State’s total educational and general revenues in 2024, with tuition and fees contributing 37.5%.
Ongoing construction and renovation projects suggest an expansion of the college’s technical training capacity, particularly in advanced manufacturing – a sector targeted by state workforce initiatives.
Management notes in the audit that future economic conditions, enrollment trends and state budget decisions will all influence Chattanooga State’s ability to sustain its momentum.
Bottom line
The 2024 audit paints a picture of a financially stable institution investing heavily in facilities and equipment while maintaining relatively low debt.
The clean financial opinion reinforces confidence in Chattanooga State’s accounting practices, even as the confidential internal control finding signals a need for procedural improvements.
If current trends hold – with steady state support, growing enrollment and a robust capital plan – Chattanooga State appears positioned to expand its role in regional workforce development in the years ahead.
Source: Tennessee Comptroller