Georgia Highlands College, Rome, Georgia, management report for fiscal year ended 2016 June 30

GEORGIA HIGHLANDS COLLEGE
Management Report Fiscal Year Ended June 30, 2016
Rome, Georgia

GEORGIA HIGHLANDS COLLEGE - TABLE OF CONTENTS -

SECTION I
FINANCIAL
LETTER OF TRANSMITTAL
SELECTED FINANCIAL INFORMATION
EXHIBITS
A STATEMENT OF NET POSITION - (GAAP BASIS)
B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (GAAP BASIS)
C STATEMENT OF CASH FLOWS - (GAAP BASIS)
D SELECTED FINANCIAL NOTES
SUPPLEMENTARY INFORMATION
SCHEDULES
1 BALANCE SHEET - (STATUTORY BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT
(STATUTORY BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET
BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND
4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND

Page
2 3 4 6
25 26 28 30

SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

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Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
November 15, 2016

Kristina A Turner
DIRECTOR
(404) 656-2174

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the State Board of Regents of the University System of Georgia
and Dr. Donald Green, President Georgia Highlands College
Ladies and Gentlemen:
This Management Report contains information pertinent to the Georgia Highlands College's compliance with the requirements of the Southern Association of Colleges and Schools Commission on Colleges (COC) Core Requirement 2.11.1 (Financial resources) as of and for the year ended June 30, 2016. Additionally, we audited Georgia Highlands College's Federal Student Aid programs for the year ended June 30, 2016 to meet the requirements of COC Comprehensive Standard 3.10.2. Included in this report is a section on findings and other items for any matters that came to our attention during our engagement, including results of our audit of the Federal Student Aid programs. The other information contained in this report is the representation of management. Accordingly, we do not express an opinion or any form of assurance on it.
Additionally, we have performed certain procedures at Georgia Highlands College to support our audits of the basic financial statements of the State of Georgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2016.
This report is intended solely for the information and use of the management of Georgia Highlands College, members of the Board of Regents of the University System of Georgia and the Southern Association of Colleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully,

GSG:es

Greg S. Griffin State Auditor

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SECTION I FINANCIAL

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SELECTED FINANCIAL INFORMATION - 1 -

GEORGIA HIGHLANDS COLLEGE STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2016
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net Receivables - Federal Financial Assistance Receivables - Other Due from Affiliated Organizations Prepaid Items
Total Current Assets
Noncurrent Assets Investments (Externally Restricted) Due from USO - Capital Liability Reserve Fund Capital Assets, Net
Total Noncurrent Assets
Total Assets
Deferred Outflows of Resources Deferred Loss on Defined Benefit Pension Plan
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Benefits Payable Retainage Payable Deposits Advances (Including Tuition and Fees) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences Net Pension Liability
Total Noncurrent Liabilities
Total Liabilities
Deferred Inflows of Resources Deferred Gain on Defined Benefit Pension Plan
NET POSITION
Net Investment in Capital Assets Restricted for:
Permanent Trusts Nonexpendable Expendable
Unrestricted
Total Net Position
- 2 -

EXHIBIT "A"

$

4,789,315

1,159,356 836,864 285 222,220

7,008,040

37,568 115,505 51,428,204
51,581,277
58,589,317

1,665,110

608,238 91,539
212,411 889 425
892,852 41,072
210,499 363,312 634,713
3,055,950
16,121,983 225,731
16,114,176
32,461,890
35,517,840
2,813,481

34,942,909
37,570 37,245 -13,094,618

$

21,923,106

GEORGIA HIGHLANDS COLLEGE STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2016
OPERATING REVENUES
Student Tuition and Fees (Net) Grants and Contracts
Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Bookstore Parking/Transportation Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues (Expenses)
Net Nonoperating Revenues
Loss Before Other Revenues, Expenses, Gains, or Losses
Net Position - Beginning of Year
Net Position - End of Year

EXHIBIT "B"

$

11,737,452

249,856 32,472
380,703 219,630 103,042

253,406 113,605 692,083 245,545 162,468

14,190,262

8,612,595 9,130,082 5,222,141
83,602 195,833 6,305,301 1,392,811 7,646,157 1,930,934
40,519,456
-26,329,194

15,297,540
11,074,679 780,789 10,616 -922,043 -16,251
26,225,330
-103,864
22,026,970

$

21,923,106

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GEORGIA HIGHLANDS COLLEGE STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES Payments from Customers Grants and Contracts (Exchange) Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships
Net Cash Used by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes
Net Cash Flows Provided by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Investment Income
Net Increase in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH USED BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income (Loss) to Net Cash
Used by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Prepaid Items Accounts Payable Salaries Payable Benefits Payable Retainage Payable Deposits Advances (Including Tuition and Fees) Other Liabilities Compensated Absences Due to Affiliated Organizations Net Pension Liability Change in Deferred Inflows/Outflows of Resources: Deferred Inflows of Resources Deferred Outflows of Resources
Net Cash Used by Operating Activities
NONCASH ACTIVITY Accrual of Capital Asset Related Payables Unrealized Gain/Loss on Investments
- 4 -

EXHIBIT "C"

$

13,588,552

999,896

-15,346,806

-17,942,360

-6,305,301

-25,006,019

15,297,540 671,236
11,855,468
27,824,244

-319,296 -355,812 -846,234
-1,521,342

9,980 1,306,863 3,482,452

$

4,789,315

$

-26,329,194

1,930,934
481,431 -80,898 47,697 17,733
274 889 125 -11,972 35,022 -19,379 -116,159 2,203,901
-2,985,969 -180,454

$

-25,006,019

$

75,809

$

636

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
As defined by Official Code of Georgia Annotated (O.C.G.A) 20-3-50, Georgia Highlands College (the Institution) is part of the University System of Georgia (USG), an organizational unit of the State of Georgia (the State) under the governance of the Board of Regents (Board). The Board has constitutional authority to govern, control and manage the USG. The Board is composed of 19 members, one member from each congressional district in the State and five additional members from the state-at-large, appointed by the Governor and confirmed by the Senate. Members of the Board serve a seven year term and members may be reappointed to subsequent terms by a sitting governor.
The Institution does not have the right to sue/be sued without recourse to the State. The Institution's property is the property of the State and subject to all the limitations and restrictions imposed upon other property of the State by the Constitution and laws of the State. In addition, the Institution is not legally separate from the State. Accordingly, the Institution is included within the State's basic financial statements as part of the primary government as defined in section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
The accompanying basic financial statements are intended to supplement the State's Comprehensive Annual Financial Report (CAFR) by presenting the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State that is attributable to the transactions of the Institution. They do not purport to, and do not, present fairly the financial position of the State as of June 30, 2016, the changes in its financial position or its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying basic financial statements should be read in conjunction with the State's CAFR. The State's CAFR as of and for the year ended June 30, 2016 has not been issued as of the release of this report. The most recent State of Georgia CAFR can be obtained through the State Accounting Office, 200 Piedmont Avenue, Suite 1604 (West Tower), Atlanta, Georgia 30334 or found at https://sao.georgia.gov/comprehensive-annual-financial-reports.
BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PREPARATION
The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the Institution's assets, deferred outflows, liabilities, deferred inflows, net position, revenues, expenses, changes in net position and cash flows.
The Institution's business-type activities financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Grants and similar items are recognized as revenues in the fiscal year in which eligibility requirements imposed by the provider have been met. All significant intra-Institution transactions have been eliminated.

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NEW ACCOUNTING PRONOUNCEMENTS
For fiscal year 2016, the Institution adopted Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application. This Statement addresses accounting and financial reporting issues related to fair value measurements. The adoption of this Statement does not have a significant impact on the Institution's financial statements.
For fiscal year 2016, the Institution adopted GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That are not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68. The objective of this Statement is to improve the usefulness of information about pensions included in the general purpose external financial reports of state and local governments for making decisions and assessing accountability. The adoption of this Statement does not have a significant impact on the Institution's financial statements.
For fiscal year 2016, the Institution adopted GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The objective of this Statement is to identify--in the context of the current governmental financial reporting environment--the hierarchy of GAAP. The "GAAP hierarchy" consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This Statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and non-authoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. The adoption of this Statement does not have a significant impact on the Institution's financial statements.
For fiscal year 2016, the Institution adopted GASB Statement No. 79, Certain External Investment Pools and Pool Participants. This Statement addresses accounting and financial reporting for certain external investment pools and pool participants. The adoption of this Statement does not have a significant impact on the Institution's financial statements.
DUE FROM USO - CAPITAL LIABILITY RESERVE FUND
The Capital Liability Reserve Fund (Fund) was established by the Board of Regents to protect the fiscal integrity of the USG to maintain the strongest possible credit ratings associated with Public Private Venture (PPV) projects and to ensure that the Board of Regents can effectively support its long-term capital lease obligations. The Fund is financed by all USG institutions participating in the PPV program. The Fund serves as a pooled reserve that is managed by the University System Office. The Fund shall only be used to address significant shortfalls and only insofar as a requesting USG institution is unable to make the required PPV capital lease payment to the designated cooperative organization. The Fund will continue as long as the USG has rental obligations under the PPV program. At the conclusion of the Institution's participation in the program, funds will be returned to the Institution. The balance included on the Institution's Statement of Net Position represents the Institution's contribution to the Fund.

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NET POSITION
The Institution's net position is classified as follows:
Net Investment in Capital Assets: This represents the Institution's total investment in capital assets, net of accumulated amortization/depreciation and reduced by outstanding debt obligations related to those capital assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction or improvement of capital assets or related debt are included in Net Investment in Capital Assets. If there are significant unspent related debt proceeds or deferred inflows of resources at the end of the reporting period, the portion of the debt or deferred inflows of resources attributable to the unspent amount are not included in Net Investment in Capital Assets.
Restricted non-expendable includes endowment and similar type funds, in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may be either expended or added to principal. For Institution-controlled, donorrestricted endowments, the by-laws of the Board of Regents of the University of Georgia permits each individual Institution to use prudent judgment in the spending of current realized and unrealized endowment appreciation. Donor-restricted endowment appreciation is periodically transferred to restricted-expendable accounts for expenditure as specified by the purpose of the endowment. The Institution maintains pertinent information related to each endowment fund including donor; amount and date of donation; restrictions by the source of limitations; limitations on investments, etc.
Restricted - expendable includes resources in which the Institution is legally or contractually obligated to spend resources in accordance with restrictions by external third parties.
Unrestricted: Unrestricted represents resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institution, and may be used at the discretion of the Institution to meet current expenses for those purposes, except for unexpended state appropriations (surplus) in the amount of $31,533.65. Unexpended state appropriations must be refunded to the Office of the State Treasurer. Unrestricted Net Position also includes resources specifically designated by management, such as:
Auxiliary Enterprises Operations These resources are used for the continued operation of auxiliary enterprise activities, which are substantially self-supporting business operations conducted on campuses that provide services to students, faculty, and staff.
Auxiliary Enterprises Renewals and Replacement (R&R) Reserve These resources can be used for renewals and replacement of capitalizable assets related to auxiliary services. This R&R reserve can also be used for major renovations and rehabilitations auxiliary projects that do not meet the capitalization threshold.

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

SCHOLARSHIP ALLOWANCES
Scholarship allowances are the differences between the stated charge for goods and services provided by the Institution, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or non-governmental programs are recorded as either operating or non-operating revenues in the Institution's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institution has recorded contra revenue for scholarship allowances. Student tuition and fees and auxiliary revenues reported on the Statement of Revenues, Expenses, and Changes in Net Position are net of discounts and allowances of $6,251,066 and $40,023, respectively.
NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS
The custodial credit risk for deposits is the risk that in the event of a bank failure, the Institution's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Institution) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
At June 30, 2016, the carrying value of deposits was $4,785,565 and the bank balance was $5,492,166. Of the Institution's deposits, $4,991,515 were uninsured. Of these uninsured deposits, $754,948 were collateralized with securities held by the financial institution's trust department or agent in the Institution's name and $4,236,567 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the Institution's name.

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

INVESTMENTS
At June 30, 2016, the carrying value of the Institution's investments were $37,568, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows:

Investment Type

Investment Pools

Board of Regents

Balanced Income Fund

$

Value 37,568

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits and Accounts Education Audit Division or on their web site at http://www.audits.ga.gov.
NOTE 3: ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at June 30, 2016:

Student Tuition and Fees

$

Auxiliary Enterprises and Other Operating Activities

Federal Financial Assistance

Georgia State Financing and Investment Commission

Due from Affiliated Organizations

Due from Other USG Institutions

Other

631,576 13,812
1,159,356 77,690 285
115,505 357,671

Less Allowance for Doubtful Accounts

2,355,895 243,885

Net Accounts Receivable

$

2,112,010

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NOTE 4: CAPITAL ASSETS Following are the changes in capital assets for the year ended June 30, 2016:

Beginning Balance July 1, 2015

Capital Leases Recategorization

Additions

Reductions

Ending Balance June 30, 2016

Capital Assets, Not Being Depreciated: Land

$ 3,069,490

0

0

0 $ 3,069,490

Total Capital Assets, Not Being Depreciated
Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections
Total Assets Being Depreciated

3,069,490

0

2,093,230 45,168,495
1,149,942 3,838,522 17,858,542 3,495,163

17,858,542 -17,858,542

73,603,894

0

0
123,656 195,640 319,296

0

3,069,490

107,204 38,985
146,189

2,093,230 63,027,037
1,149,942 3,854,974
0 3,651,818
73,777,001

Less: Accumulated Depreciation: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections

1,362,345 14,715,544
983,420 2,460,118 1,600,839 2,495,026

2,150,761 -2,150,761

46,144 854,021
5,387 266,358 549,922 209,102

90,952 38,987

1,408,489 17,720,326
988,807 2,635,524
0 2,665,141

Total Accumulated Depreciation

23,617,292

0 1,930,934

129,939

25,418,287

Total Capital Assets, Being Depreciated, Net

49,986,602

Capital Assets, Net

$ 53,056,092 $

0 -1,611,638 0 $ -1,611,638 $

16,250

48,358,714

16,250 $ 51,428,204

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

A comparison of depreciation expense for the last three fiscal years is as follows:

Fiscal Year

Depreciation Expense

2016 2015 2014

$

1,930,934

$

1,958,498

$

1,877,727

NOTE 5: ADVANCES (INCLUDING TUITION AND FEES)

Advances (Including Tuitions and Fees) consisted of the following at June 30, 2016:

Prepaid Tuition and Fees Other Advances

Current Liabilities

$

810,103

82,749

Total

$

892,852

NOTE 6: LONG-TERM LIABILITIES

The Institution's Long-Term liability activity for the year ended June 30, 2015 was as follows:

Leases Lease Obligations

Beginning Balance June 30, 2015

Additions

Reductions

Ending Balance June 30, 2016

Current Portion

$ 16,841,107 $

0 $ 355,812 $ 16,485,295 $

363,312

Other Liabilities Compensated Absences Net Pension Liability

879,823 13,910,275

685,922 2,203,901

705,301

860,444 16,114,176

634,713

Total

14,790,098

2,889,823

705,301

16,974,620

634,713

Total Long-Term Obligations $ 31,631,205 $ 2,889,823 $ 1,061,113 $ 33,459,915 $

998,025

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NOTE 7: NET POSITION Changes in Net Position for the year ended June 30, 2016 are as follows:

Beginning Balance July 1, 2015

Additions

Reductions

Ending Balance June 30, 2016

Net Investments in Capital Assets $ 36,214,985 $

675,108 $ 1,947,184 $ 34,942,909

Restricted Net Position

73,190

11,724,604

11,722,979

74,815

Unrestricted Net Position

-14,261,205

29,629,281

28,462,694

-13,094,618

Total Net Position

$ 22,026,970 $ 42,028,993 $ 42,132,857 $ 21,923,106

The amounts within each category at June 30, 2016 were as follows:

Net Position

Net Investments in Capital Assets
Restricted for Nonexpendable Permanent Endowment Expendable Organized Activities

$

34,942,909

37,570 37,245

Total Restricted
Unrestricted Auxiliary Operations R & R Reserve Reserve for Encumbrances Other Unrestricted USO Reserve Fund

74,815
932,489 211,344 1,806,546 -16,160,502 115,505

Total Unrestricted

-13,094,618

Total Net Position

$

21,923,106

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NOTE 8: ENDOWMENTS
Donor Restricted Endowments: Investments of the Institution's endowment funds are pooled, unless required to be separately invested by the donor. For Institution controlled, donor-restricted endowments, where the donor has not provided specific instructions, the Board of Regents permits Georgia Highlands College to develop policies for authorizing and spending realized and unrealized endowment income and appreciation as they determined to be prudent. Realized and unrealized appreciation in excess of the amount budgeted for current spending is retained by the endowments. Current year net appreciation for the endowment accounts was $37,750.
For endowment funds where the donor has not provided specific instructions, investment return of the Institution's endowment funds is predicated under classical trust doctrines. Unless the donor has stipulated otherwise, capital gains and losses are accounted for as part of the endowment principal and are not available for expenditure.
NOTE 9: LEASE OBLIGATIONS
The Institution is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in 2041. Expenditures for fiscal year 2016 were $1,338,019 of which $922,043 represented interest and $60,164 represented executory costs. Total principal paid on capital leases was $355,812 for the fiscal year ended June 30, 2016. The interest rate was 3.9%. The following is a summary of the carrying values of assets held under capital lease at June 30, 2016:

Description Buildings - (PPV Only)

Gross Amount

Accumulated Depreciation

Under Capital Lease at
June 30, 2016

Per Lease Schedules at June 30, 2016

(+)

$

17,858,542 $

(-) 2,140,762 $

(=) 15,717,780 $

16,485,295

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

The following capital lease schedule lists the pertinent information for each lease including the building name, lessor, total principal amount, lease term, lease begin date, lease end date, and remaining long-term debt as of June 30, 2016.

Description
Cartersville Student Center

Lessor (1)

Original Principal

Georgia Highlands College Foundation $

17,858,542

Lease Term

Begin

Outstanding Principal Balance

End

at June 30, 2016

30 Years 7/2012 6/2041 $

16,485,295

(1) This capital lease is with a related entity.

OPERATING LEASES

The Institution's non-cancellable operating leases having remaining terms of more than one year expire in 2017. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis.

Facilities and equipment rented through operating leases are not recorded as assets on the balance sheet. Operating lease expenditures totaled $926,817 for the fiscal year ended June 30, 2016.

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GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Position includes other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2016, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2017 2018 2019 2020 2021 2022 - 2026 2027 - 2031 2032 - 2036 2037 - 2041

$

1,342,487 $

1,344,346

1,348,160

1,351,923

1,354,146

6,832,424

6,930,274

7,046,441

7,172,231

926,817

Total Minimum Lease Payments

34,722,432 $

926,817

Less: Interest Less: Executory Costs (if paid)

15,977,818 2,259,319

Principal Outstanding

$

16,485,295

NOTE 10: RETIREMENT PLANS
The Institution participates in various retirement plans administered by the State of Georgia under two major retirement systems: Teachers Retirement System of Georgia (TRS) and Employees' Retirement System of Georgia (ERS). These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective administrative offices.
In addition to the retirement plan administered by TRS and ERS, USG administers the Regents Retirement Plan as an optional retirement plan.
The significant retirement plans that the Institution participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.

- 16 -

GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

A. Defined Benefit Plans:
Teachers Retirement System of Georgia and Employees' Retirement System of Georgia
Summary of Significant Accounting Policies
Pensions: For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teachers Retirement System of Georgia (TRS) and Employees' Retirement System (ERS), additions to/deductions for TRS's and ERS's fiduciary net position have been determined on the same basis as they are reported by TRS and ERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
General Information about the Teachers Retirement System
Plan description: All teachers of the Institution as defined in 47-3-60 of the Official Code of Georgia Annotated (O.C.G.A.) are provided a pension through the Teachers Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. TRS issues a publicly available financial report that can be obtained at www.trsga.com/publications.
Benefits provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death.
Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6% of their annual pay during fiscal year 2016. The Institution's contractually required contribution rate for the year ended June 30, 2016 was 14.27% of annual Institution payroll. Institution contributions to TRS were $1,634,939 for the year ended June 30, 2016. Contributions are expected to finance any unfunded accrued liability
General Information about the Employees' Retirement System
Plan description: ERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.

- 17 -

GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

Benefits provided: The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan (GSEPS). Employees under the old plan started membership prior to July 1, 1982 and are subject to plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are new plan members subject to modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS.
Under the old plan, the new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, post retirement cost-of-living adjustments may also be made to members' benefits, provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Contributions: Member contributions under the old plan are 4% of annual compensation, up to $4,200, plus 6% of annual compensation in excess of $4,200. Under the old plan, the state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The Institution's contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2016 was 21.96% of annual covered payroll for old and new plan members and 18.87% for GSEPS members. The Institution's contributions to ERS totaled $22,136 for the year ended June 30, 2016. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2016, the Institution reported a liability for its proportionate share of the net pension liability for TRS and ERS. The net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2014. An expected total pension liability as of June 30, 2014 was determined using standard roll-forward techniques. The Institution's proportion of the net pension liability was based on contributions to TRS and ERS during the fiscal year ended June 30, 2015. At June 30 2015, the Institution's TRS proportion was 0.104586%, which was a decrease of 0.004197% from its proportion measured as of June 30, 2014. At June 30, 2015, the Institution's ERS proportion was 0.004739%, which was an increase of 0.000287% from its proportion measured as of June 30, 2014.

- 18 -

GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

For the year ended June 30, 2016, the Institution recognized pension expense of $685,985 for TRS and $-587 for ERS. At June 30, 2016, the Institution reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

TRS

Deferred

Deferred

Outflows of

Inflows of

Resources

Resources

ERS

Deferred

Deferred

Outflows of

Inflows of

Resources

Resources

Differences between expected and actual experience

$

140,044

$

1,534

Net difference between projected and actual earnings on pension plan investments

1,343,053

13,853

Changes in proportion and differences between Institution contributions and proportionate share of contributions

1,305,400 $

8,035

9,597

Institution contributions subsequent to the

measurement date

$

1,634,939

22,136

Total

$

1,634,939 $

2,788,497 $

30,171 $

24,984

Institution contributions subsequent to the measurement date of $1,634,939 for TRS and $22,136 for ERS are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ending June 30:

TRS

ERS

2017 2018 2019 2020 2021

$ -1,008,589 $

$ -1,008,589 $

$ -1,008,590 $

$ 271,440 $

$

-34,169

-11,438 -4,007 -6,174 4,670

Actuarial assumptions: The total pension liability as of June 30, 2015 was determined by an actuarial valuation as of June 30, 2014 using the following actuarial assumptions, applied to all periods included in the measurement:

- 19 -

GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

Teachers Retirement System:

Inflation Salary increases Investment rate of return

3.00% 3.75 7.00%, average, including inflation 7.50%, net of pension plan investment expense, including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females set back two years for males and set back three years for females.

The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.

Employees' Retirement System:

Inflation Salary increases Investment rate of return

3.00%
5.45 9.25%, including inflation 7.50%, net of pension plan investment expense, including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table for the periods after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back eleven years for males for the period after disability retirement.
The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.
The long-term expected rate of return on TRS and ERS pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class

Target Long-Term Expected Allocation Real Rate of Return *

Fixed Income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities

30.00% 39.70%
3.70% 1.60% 18.90% 6.10%

3.00% 6.50% 10.00% 13.00% 6.50% 11.00%

100.00%

* Rates shown are net of the 3.00% assumed rate of inflation - 20 -

GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

Discount rate: The discount rate used to measure the total TRS and ERS pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the TRS and ERS pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
Sensitivity of the Institution's proportionate share of the net pension liability to changes in the discount rate: The following presents the Institution's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the Institution's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50 %) than the current rate:

Teachers Retirement System:
Institution's proportionate share of the net pension liability

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

1% Increase (8.50%)

$ 27,361,062 $ 15,922,180 $ 6,493,819

Employees' Retirement System:
Institution's proportionate share of the net pension liability

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

1% Increase (8.50%)

$ 272,161 $ 191,996 $ 123,652

Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS and ERS financial reports which are publically available at www.trsga.com/publications and www.ers.ga.gov/formspubs/formspubs, respectively.
A. Defined Contribution Plan:
Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq and administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or all exempt full and partial benefit eligible employees, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (VALIC, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

- 21 -

GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

Funding Policy The Institution makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2016, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 6% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
The Institution and the covered employees made the required contributions of $399,560 (9.24%) and $259,454 (6%), respectively.
VALIC, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
NOTE 11: RISK MANAGEMENT
The USG offers its employees and retirees under the age of 65 access to four different healthcare plan options. For the USG's Plan Year 2016, the following healthcare plan options were available:
BlueChoice HMO Comprehensive Care Consumer Choice HSA Kaiser Permanente HMO
The Institution, participating employees and retirees pay premiums to the healthcare plan options to access benefits coverage. The respective health plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the USG share the risk of loss for claims associated with the self-insured plans; including the BlueChoice HMO, Comprehensive Care, and Consumer Choice HSA Plan.
Retirees age 65 and older participate in a secondary healthcare coverage for Medicare-eligible retirees and dependents provided through a retiree healthcare exchange option. The USG makes contributions to a health reimbursement account, which can be used by the retiree to pay premiums and out-ofpocket healthcare-related expenses.
The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to serve as the claims administrator for the selfinsured healthcare plans. In addition to the self-insured healthcare plan options offered to the employees of the USG, fully insured HMO healthcare plan are also offered to System employees.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The Institution, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
- 22 -

GEORGIA HIGHLANDS COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1.
The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
NOTE 12: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the Institution expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against the Institution (an organizational unit of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2016.
NOTE 13: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
The Board of Regents Retiree Health Benefit Plan is a single-employer, defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The Institution pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year.
As of June 30, 2016, there were 139 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2016, the Institution recognized as incurred $576,804 of expenditures, which was net of $214,988 of participant contributions.

- 23 -

SUPPLEMENTARY INFORMATION - 24 -

GEORGIA HIGHLANDS COLLEGE STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2016
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

2,131,149.27

893,183.33 807,343.47 128,114.70

$

3,959,790.77

$

85,028.93

1,802,988.46

391,119.13

733,049.35

3,012,185.87

85,947.81 34,578.63 209,402.41 37,922.66 206,180.88 342,038.86
31,533.65
947,604.90

$

3,959,790.77

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 25 -

GEORGIA HIGHLANDS COLLEGE STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2016

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Other Funds
Total Revenues
CARRY-OVER FROM PRIOR YEARS
Transfers from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Teaching
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2015
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30
SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over
Total Reserved
Unreserved Surplus
Total Fund Balance

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$

15,319,285.00 $

15,319,285.00 $

0.00

29,557,843.00

28,108,946.18

-1,448,896.82

44,877,128.00

43,428,231.18

-1,448,896.82

0.00 44,877,128.00

573,041.87 44,001,273.05

573,041.87 -875,854.95

44,877,128.00

$

0.00

43,234,364.29 766,908.76 $

1,642,763.71 766,908.76

778,881.49 21,745.15

18,666.73 -43,810.21

-21,745.15 -573,041.87

$

947,604.90

$

85,947.81

34,578.63

209,402.41

37,922.66

206,180.88

342,038.86

916,071.25

31,533.65

$

947,604.90

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 26 -

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GEORGIA HIGHLANDS COLLEGE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2016

Teaching State Appropriation State General Funds Other Funds
Total Operating Activity

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

15,319,285.00 $

15,319,285.00 $

15,319,285.00 $ 15,319,285.00

27,018,011.00

27,018,011.00

29,557,843.00

28,108,946.18

$

42,337,296.00 $

42,337,296.00 $

44,877,128.00 $ 43,428,231.18

Funds Av

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 28 -

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Negative

Expenditures Compared to Budget

Variance

Actual

Positive

Excess of Funds Available
Over Expenditures

$

0.00 $

573,041.87

0.00 $ 0.00

15,319,285.00 $ 28,681,988.05

0.00 $ -875,854.95

15,316,509.75 $ 27,917,854.54

2,775.25 $ 1,639,988.46

2,775.25 764,133.51

$ 573,041.87 $

0.00 $ 44,001,273.05 $

-875,854.95 $ 43,234,364.29 $

1,642,763.71 $

766,908.76

- 29 -

GEORGIA HIGHLANDS COLLEGE STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2016

Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity
Prior Year Reserves Not Available for Expenditure Uncollectible Accounts Receivable

Beginning Fund Balance/(Deficit)
July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2015
Surplus

Prior Period Adjustments

$

8,032.01 $

586,755.01

594,787.02

594,787.02

0.00 $ -573,041.87
-573,041.87
-573,041.87

-8,032.01 $ -13,713.14
-21,745.15
-21,745.15

3,697.02 -28,840.50
-25,143.48
-25,143.48

205,839.62

0.00

0.00

0.00

Budget Unit Totals

$

800,626.64 $

-573,041.87 $

-21,745.15 $

-25,143.48

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 30 -

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2016
Surplus

Excess of Funds Available
Over Expenditures

Ending Fund Balance June 30

Analysis of Ending Fund Balance

Reserved

Surplus

Total

$

0.00 $

-341.26

-341.26

-341.26

0.00 $ 0.00
0.00
0.00

2,775.25 $ 764,133.51
766,908.76
766,908.76

6,472.27 $ 734,951.75

0.00 $ 709,890.37

741,424.02

709,890.37

741,424.02

709,890.37

6,472.27 $ 25,061.38
31,533.65
31,533.65

6,472.27 734,951.75
741,424.02
741,424.02

341.26

0.00

0.00

206,180.88

206,180.88

0.00

206,180.88

$

0.00 $

0.00 $

766,908.76 $

947,604.90 $ 916,071.25 $

31,533.65 $

947,604.90

Summary of Ending Fund Balance Reserved
Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Unreserved Surplus
Total Ending Fund Balance - June 30

$

85,947.81

34,578.63

209,402.41

37,922.66

206,180.88

342,038.86

$

$ 916,071.25 $

$
31,533.65 31,533.65 $

85,947.81 34,578.63 209,402.41 37,922.66 206,180.88 342,038.86
31,533.65
947,604.90

- 31 -

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SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

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GEORGIA HIGHLANDS COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2016
COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES
The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weakness.
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 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.
Internal control deficiencies identified during the course of this engagement that were considered to be significant deficiencies and/or material weaknesses are presented below:
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
No matters were reported.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION)
Accounting Controls Overall Observation: Our examination of Georgia Highlands College included a review of IT General Controls related to significant financial applications. We noted that application developers migrate changes into the production environment instead of personnel independent of the development function. Unauthorized, untested, or unapproved changes placed into production could result in data integrity issues that may go undetected.
Recommendation: Georgia Highlands College should restrict access capability to migrate changes into production to personnel independent of the development function. Additionally, a process to periodically review changes subsequent to promotion into production, including review of the last program change date, should be clearly documented in terms of steps performed and evidence maintained.

GEORGIA HIGHLANDS COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2016
OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION)
Views of Responsible Officials and Corrective Action Plans: Due to the size of our Enterprise Application Services (EAS) staff, we cannot fully separate production developers from test developers. We will remediate this issue by using a cross-promotion of any code moving to production. All code ready for production will be reviewed by a secondary developer before being moved into the production environment.
Additionally, EAS receives and reviews a daily email that contains timestamps of all objects that have been changed or updated into production in the last 24 hours. This email therefore, indicates any unauthorized table updates, programs changes, script modifications or really any object that has changed. This email is then archived in our EAS listserv as documented evidence.
Contact Person: Information Technology Jeffery Patty Telephone: 706-295-6775 Email: jpatty@highlands.edu
Contact Person: Financial Contact Megan Davidson Telephone: 706-368-7735 Email: mdavidso@highlands.edu