The University of Georgia, report on audit of the financial statements for the fiscal year ended 2014 June 30

REPORT ON AUDIT OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED
JUNE 30, 2014
Georgia Department of Audits and Accounts Greg S. Griffin State Auditor

UNIVERSITY OF GEORGIA - TABLE OF CONTENTS -

SECTION I
FINANCIAL
INDEPENDENT AUDITOR'S REPORT
REQUIRED SUPPLEMENTARY INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
BASIC FINANCIAL STATEMENTS
EXHIBITS
A STATEMENT OF NET POSITION
B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
C STATEMENT OF CASH FLOWS
D NOTES TO THE FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION
SCHEDULES
1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT
(NON-GAAP BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO
BUDGET BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
5 RECONCILIATION OF BUDGET TO GAAP 6 RECONCILIATION OF SALARIES AND TRAVEL

Page
i
2 3 4 6
30 31 32 36 40 43

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
INDEPENDENT AUDITOR'S 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

UNIVERSITY OF GEORGIA - TABLE OF CONTENTS -
SECTION III FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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
January 9, 2015

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Jere W. Morehead, President University of Georgia
INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying basic financial statements (Exhibits A through D) of the University of Georgia, a unit of the University System of Georgia, which is an organizational unit of the State of Georgia, as of and for the year ended June 30, 2014.
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.
Auditor's Responsibility
Our responsibility is to express an opinion 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 from 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 auditor's 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 University of Georgia'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
14ARL-62

opinion on the effectiveness of the University of Georgia'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.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the University of Georgia as of June 30, 2014, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1, the financial statements of the University of Georgia are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of the University of Georgia. They do not purport to, and do not, present fairly the financial position of the State of Georgia as of June 30, 2014, 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.
As described in Note 1 to the financial statements, in 2014, the University of Georgia adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities, Statement No. 66, Technical Corrections - 2012, and Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages i through vii 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 inquires 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 an opinion on the basic financial statements of the University of Georgia. The accompanying supplementary information (Schedules 1 through 6) is presented for purposes of additional analysis and is not a required part of the basic financial statements.
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The accompanying supplementary information (Schedules 1 through 6) 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. 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 or 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 taken as a whole.
Respectfully,

GSG:as 14ARL-62

Greg S. Griffin State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

UNIVERSITY OF GEORGIA
Management's Discussion and Analysis

Introduction

The University of Georgia is one of the 31 institutions of higher education of the University System of Georgia. The University of Georgia was incorporated by an act of the General Assembly on January 27, 1785. Georgia became the first state to charter a state-supported university.

The University of Georgia, a land-grant and sea-grant university with state-wide commitments and responsibilities is the state's flagship institution of higher education. It is also the state's oldest, most comprehensive, and most diversified institution of higher education. Its motto, "to teach, to serve, and to inquire into the nature of things, "reflects the University's integral and unique role in the conservation and enhancement of the state's and nation's intellectual, cultural, and environmental heritage. As a comprehensive land-grant and sea-grant institution, the University of Georgia offers baccalaureate, master's, doctoral and professional degrees in the arts, humanities, social sciences, biological sciences, physical sciences, agricultural and environmental sciences, business, environmental design, family and consumer sciences, forest resources, journalism and mass communication, education, law, pharmacy, social work, and veterinary medicine. A comparison of Faculty and Student numbers follow:

Students

Students

Faculty

(Headcount)

(FTE)

Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012

1,930 1,886 1,866

34,536 34,518 34,816

33,257 33,119 33,422

Overview of the Financial Statements and Financial Analysis

The University of Georgia is pleased to present its financial statements for fiscal year 2014. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Position; the Statement of Revenues, Expenses and Changes in Net Position; and the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2014 and fiscal year 2013.

Statement of Net Position
The Statement of Net Position presents the assets, deferred outflows of resources, liabilities, deferred inflows of resources and net position of the University as of the end of the fiscal year. The Statement of Net Position is a point-of-time financial statement. The Statement of Net Position presents a fiscal snapshot of the University of Georgia. The Statement of Net Position presents end-of-year data concerning assets (current and noncurrent) plus deferred outflows, and liabilities (current and noncurrent) plus deferred inflows, and net position (assets plus deferred outflows minus liabilities plus deferred inflows). The differences between current and noncurrent assets are discussed in the Notes to the Financial Statements.
From the data presented, readers of the Statement of Net Position are able to determine the assets available to continue the operations of the institution and how much the institution owes vendors.

i

Finally, the Statement of Net Position provides a picture of the net position (assets plus deferred outflows of resources minus liabilities plus deferred inflows of resources) and their availability for expenditure by the institution. Net position is divided into three major categories. The first category, net investment in capital assets, provides the institution's equity in property, plant and equipment owned by the institution. The next category is restricted, which is divided into three categories, nonexpendable, expendable and capital projects.
The corpus of nonexpendable, restricted resources is available only for investment purposes. Expendable, restricted resources are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted. Unrestricted resources are available to the institution for any lawful purpose.

Statement of Net Position, Condensed

June 30, 2014

June 30, 2013 (1)

Assets Current Assets Capital Assets, Net Other Assets

$ 414,075,792 1,690,097,604 95,068,743

$ 374,569,087 1,637,202,052 84,621,630

Total Assets

2,199,242,139

2,096,392,769

Liabilities Current Liabilities Noncurrent Liabilities

152,037,816 287,467,289

132,412,134 289,022,018

Total Liabilities

439,505,105

421,434,152

Net Position Net Investment in Capital Assets Restricted Nonexpendable Expendable Capital Projects Unrestricted

1,411,848,296
75,806,989 81,610,377
4,826,352 185,645,020

1,360,617,195
71,829,738 78,265,059
3,749,702 160,496,923

Total Net Position

$ 1,759,737,034

$ 1,674,958,617

(1) The June 30, 2013 amounts have not been restated for the effects of the merger with Skidaway Institute of Oceanography. See Note 17 - Mergers and Transfers of Operations.

Total assets increased by $102,849,370 which was primarily due to an increase of $52,895,552 in the category of Capital Assets, Net. The balance of the increase is mainly in receivable categories.

Total liabilities increased for the year by $18,070,953, mainly due to an increase of $15,795,014 in deposits held for other organizations. The combination of the increase in total assets of $102,849,370 and the increase of $18,070,953 in total liabilities yields an increase in net position of $84,778,417. The increase in net position is primarily in the categories of Net Investment in Capital Assets and unrestricted net position, in the amounts of $51,231,101 and $25,148,097, respectively.

ii

Statement of Revenues, Expenses and Changes in Net Position
Changes in total net position as presented on the Statement of Net Position are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Position. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally, operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. For example, state appropriations are nonoperating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Position, Condensed

June 30, 2014

June 30, 2013 (1)

Operating Revenues Operating Expenses

$ 806,169,341 1,253,332,393

$ 779,387,613 1,225,847,104

Operating Loss

-447,163,052

-446,459,491

Nonoperating Revenues and Expenses

488,015,089

463,329,987

Income Before Other Revenues, Expenses, Gains or Losses

40,852,037

16,870,496

Other Revenues, Expenses, Gains or Losses

34,009,193

98,560,350

Increase in Net Position

74,861,230

115,430,846

Net Position at Beginning of Year (1)

1,684,875,804

1,559,527,771

Net Position at End of Year

$ 1,759,737,034

$ 1,674,958,617

(1) The June 30, 2013 amounts have not been restated for the effects of the merger with Skidaway Institute of Oceanography. See Note 17 - Mergers and Transfers of Operations.

iii

The Statement of Revenues, Expenses and Changes in Net Position reflect a positive year, which is represented by an increase of $74,861,230 in net position at the end of the year. Some highlights of the information presented on this statement are as follows:

Revenue by Source For the Years Ended June 30, 2014 and June 30, 2013

June 30, 2014

June 30, 2013 (1)

Operating Revenue

Tuition and Fees

$

Federal Appropriations

Grants and Contracts

Sales and Services of Educational Departments

Auxiliary

Other

364,533,204 13,487,647
185,176,165 69,923,239
169,958,352 3,090,734

$ 349,901,990 12,573,894
187,351,174 64,735,771
162,159,742 2,665,042

Total Operating Revenue

806,169,341

779,387,613

Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other

387,087,925 72,578,935 12,485,412 9,736,591 24,247,014

363,084,970 66,654,852 33,258,706 5,443,652 12,635,283

Total Nonoperating Revenue

506,135,877

481,077,463

Capital Grants and Gifts Federal State Other Capital Gifts and Grants

10,805,000 13,540,353
9,663,840

27,990,565 70,569,785

Total Capital Grants and Gifts

34,009,193

98,560,350

Total Revenues

$ 1,346,314,411

$ 1,359,025,426

(1) The June 30, 2013 amounts have not been restated for the effects of the merger with Skidaway Institute of Oceanography. See Note 17 - Mergers and Transfers of Operations.

iv

Expenses (By Functional Classification) For the Years Ended June 30, 2014 and June 30, 2013

June 30, 2014

June 30, 2013 (1)

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises

$ 272,655,278 323,529,588 160,219,292 90,399,833 41,726,819 71,771,920 120,256,452 21,831,737 150,941,474

$ 264,221,558 316,240,865 153,511,766 90,003,579 40,872,696 74,447,323 119,976,791 20,003,946 146,568,580

Total Operating Expenses

1,253,332,393

1,225,847,104

Nonoperating Expenses Interest Expense (Capital Assets)

18,120,788

17,747,476

Total Expenses

$ 1,271,453,181

$ 1,243,594,580

(1) The June 30, 2013 amounts have not been restated for the effects of the merger with Skidaway Institute of Oceanography. See Note 17 - Mergers and Transfers of Operations.

Operating revenues increased by $26,781,728 in fiscal year 2014 which included a $14,631,214 net increase in tuition and fees and a $5,187,468 increase in sales and services.
As a result of modest fee increases and additional participation in services provided by Auxiliary units, the Auxiliary revenue increased overall by $7,798,610 with $3,311,570 of the increase in residence hall revenues, $1,390,214 increase in food services revenues, and a $1,255,639 increase in parking services revenues.
Nonoperating revenues increased by $25,058,414 for the year primarily due to an increase of $24,002,955 in state appropriations.
Total operating expense increased by $27,485,289 which included a $24,667,203 increase in employee compensation and benefits that primarily affected the Instruction and Research categories. The increase reflects the addition of 44 faculty members, an increase in employer retirement plan contributions, and an increase in the cost of health insurance for the employees of the institution.
Utilities increased by $1,163,388 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2014 and affected the plant operations and maintenance category.

v

Statement of Cash Flows
The final statement presented by the University of Georgia is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Position.

Cash Flows for the Years Ended June 30, 2014 and June 30, 2013, Condensed

June 30, 2014

June 30, 2013 (1)

Cash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities

$ -367,993,323 504,191,004 -101,930,472 -474,252

$ -347,515,892 480,949,417 -94,657,096 -89,556

Net Change in Cash Cash, Beginning of Year

33,792,957 311,286,435

38,686,873 272,613,748

Cash, End of Year

$

345,079,392

$

311,300,621

(1) The June 30, 2013 amounts have not been restated for the effects of the merger with Skidaway Institute of Oceanography. See Note 17 - Mergers and Transfers of Operations.

Capital Assets
The University had several significant capital asset additions for facilities in fiscal year 2014. The new $21.7 million Rutherford residence hall was opened in July 2013 with 261 beds, which is 100 more beds and 80,000 more square feet than the previous hall. In January 2014, the University dedicated the acquisition of the J. Phil Campbell Sr. Research and Education Center from the USDA at a value of $10.8 million. In addition, the $28.4 million Health Sciences campus renovations and the $4.8 million Oglethorpe House renovation were completed and placed into service. In June of 2014, the University also acquired the Hodgson Oil building which totaled $5.5 million.
In 2014, the completion of a new integrated student information system named by the students as Athena was implemented. The total amount added for this new software totaled $18,524,941. The new system will support and enhance student administrative functions to include admissions, registration, financial aid, student accounts and academic records.
The University also recorded the sale and disposition of the College of Agricultural and Environmental Sciences' Plant Sciences Farm. The 522 acre farm was sold for $11.4 million.
The Georgia State Financing and Investment Commission (GSFIC) provided funding of $7.9 million for facility renovations and equipment. Of that amount, $2.8 million was for Rock Eagle 4-H Center cabin and auditorium renovations.

vi

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 10 in the Notes to the Financial Statements. Long-Term Liabilities The University of Georgia had Long-Term Liabilities of $322,777,137 of which $35,309,848 was reflected as current liability at June 30, 2014. For additional information concerning Long-Term Liabilities, see Notes 1, 8 and 10 in the Notes to the Financial Statements. Economic Outlook The University of Georgia continued to manage, monitor and invest its resources wisely in fiscal year 2014 as the State of Georgia stayed on a course of economic recovery. With the new financial reality for public higher education, the University remains fully committed to be more prudent with its resources by spending carefully, wisely, and thoughtfully and allocating its resources strategically to support our core academic and student life missions. The following actions by the University and Board of Regents helped to manage the budget in support of our students, faculty and staff and those core academic missions of instruction, research and public service:
a) The Board of Regents increased undergraduate tuition by $191 per semester from $3,823 to $4,014 (5% increase) for in-state students and from $12,928 to $13,119 (1.5% increase) for out-of-state students.
b) The University furthered its initiatives to implement energy conservation measures to reduce energy use and utility costs.
c) The University continued to redirect administrative cost savings from gained efficiencies to investments in the student experience and faculty support.
As fiscal year 2015 progresses, the University will build on its efforts to reduce costs and redirect resources to continue to elevate the academic stature of the University of Georgia as a world-class institution. At the same time, we will increase the support and service we provide to the citizens of Georgia by offering to the state's best students an excellent and complete educational experience at an affordable cost.
Jere Morehead, President University of Georgia
vii

BASIC FINANCIAL STATEMENTS - 1 -

UNIVERSITY OF GORGIA STATEMENT OF NET POSITION
JUNE 30, 2014
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Due from Affiliated Organizations Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Noncurrent Cash Due from USO - Capital Liability Reserve Fund Investments Notes Receivable, Net Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Advances (Including Tuition and Fees) (Note 7) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences Due to Affiliated Organizations
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences Other Noncurrent Liabilities
Total Noncurrent Liabilities
Total Liabilities
NET POSITION
Net Investment in Capital Assets Restricted for:
Nonexpendable Expendable Capital Projects Unrestricted
Total Net Position
The notes to the financial statements are an integral part of this statement.
- 2 -

EXHIBIT "A"
$ 344,825,899 5,095,627
31,439,852 23,688,164
5,610,967 3,415,283 414,075,792
253,493 1,821,348 83,685,380 9,308,522 1,690,097,604 1,785,166,347 2,199,242,139
29,910,876 8,146,073 2,953,637 1,411,126
44,366,678 1,156,230
28,899,315 5,467,666
29,671,992 54,223
152,037,816
272,781,642 13,973,052 712,595
287,467,289 439,505,105
1,411,848,296 75,806,989 81,610,377 4,826,352
185,645,020
$ 1,759,737,034

UNIVERSITY OF GEORGIA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
YEAR ENDED JUNE 30, 2014
OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) Less: Scholarship Allowances
Federal Appropriations Grants and Contracts
Federal Federal Stimulus State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services 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 Loss
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal State Other Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues
Net Nonoperating Revenues
Income Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts Federal State Other
Total Other Revenues, Expenses, Gains or Losses
Increase in Net Position
Net Position - Beginning of Year - University of Georgia
Merger of Skidaway Institute of Oceanography (Note 17)
Net Position - Beginning of Year - Combined Operations
Net Position - End of Year
The notes to the financial statements are an integral part of this statement.
- 3 -

EXHIBIT "B"
$ 485,085,430 -120,552,226 13,487,647
112,328,473 2,692,600
19,618,668 50,536,424 69,923,239
446,280
52,186,195 3,727,985
43,472,641 20,807,329 20,291,318 25,471,061
4,001,823 2,644,454
806,169,341
210,590,375 443,237,386 199,918,654
777,696 15,674,900 27,447,537 35,057,292 237,391,785 83,236,768
1,253,332,393
-447,163,052
387,087,925
28,252,066 11,487,066 32,839,803 12,485,412
9,736,591 -18,120,788 24,247,014
488,015,089
40,852,037
10,805,000 13,540,353
9,663,840
34,009,193
74,861,230
1,674,958,617
9,917,187
1,684,875,804
$ 1,759,737,034

UNIVERSITY OF GEORGIA STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts (Exchange) Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Payments
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 Other Nonoperating Receipts
Net Cash Flows Provided by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from Sale of Capital Assets 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 Interest on Investments Purchase of Investments
Net Cash Used by Investing Activities
Net Increase in Cash
Cash and Cash Equivalents - Beginning of Year - University of Georgia
Merger of Skidaway Institute of Oceanography (Note 17)
Cash and Cash Equivalents - Beginning of Year - Combinded Operations
Cash and Cash Equivalents - End of Year
- 4 -

EXHIBIT "C"
$ 366,840,184 13,376,792
178,932,316 70,790,082
-485,803,259 -655,046,591
-27,447,537 -2,097,913 1,634,751
51,055,022 3,947,071
43,455,470 20,687,206 20,469,682 27,439,494
4,099,863 -325,956
-367,993,323
387,087,925 18,170,261 85,064,346 13,868,472
504,191,004
14,504,910 11,947,791 -90,226,657 -20,035,728 -18,120,788
-101,930,472
1,797,854 -2,272,106
-474,252
33,792,957
311,300,621
-14,186
311,286,435
$ 345,079,392

UNIVERSITY OF GEORGIA STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2014
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES:
Operating Loss Adjustments to Reconcile Operating Loss to Net Cash
Used by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Unearned Revenue (Including Tuition and Fees) Other Liabilities Compensated Absences
Net Cash Used by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts

EXHIBIT "C"

$ -447,163,052
83,236,768
-4,574,993 453,647 -177,630 -463,161
2,962,882 -121,612
-1,166,829 -979,343
$ -367,993,323

$

21,700,179

$

7,938,737

$

19,504,284

The notes to the financial statements are an integral part of this statement. - 5 -

UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

Note 1. Summary of Significant Accounting Policies
Nature of Operations The University of Georgia (University) serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
Reporting Entity On July 1, 2013, the Skidaway Institute of Oceanography was absorbed into The University of Georgia (See Note 17). The University of Georgia is one of thirty-one (31) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of the University of Georgia as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. The University of Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, the University of Georgia is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt Affiliated Organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential Component Units of the State. See Note 16 for additional information.
Financial Statement Presentation 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 University's assets, liabilities, net position, revenues, expenses, changes in net position and cash flows.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's 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. All significant intra-University transactions have been eliminated.
New Accounting Pronouncements In fiscal year 2014, the University adopted the Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. The provisions of this Statement clarify the use of deferred inflows of resources and deferred outflows of resources. Certain items, including those items which were previously reported as assets and liabilities, will now be reported as outflows of resources or inflows of resources. The adoption of this Statement did not have a significant impact on the University's financial statements. As of
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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

June 30, 2014, the University did not have any deferred outflows of resources or deferred inflows of resources.
In fiscal year 2014, the University adopted Governmental Accounting Standards Board (GASB) Statement No. 66, Technical Corrections - 2012, an amendment to GASB Statements No. 10 and No. 62. The objective of this Statement is to resolve conflicting guidance by amending GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues and GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB Statement No. 10 was amended by removing the provision that limited fund based reporting of an entity's risk and financing activities to certain funds. GASB Statement No. 62 was amended by modifying guidance on (1) operating lease payments that vary from a straight-line basis, (2) purchases of a loan or a group of loans, and (3) recognition of servicing fees on mortgage loans that are sold when the stated service fee rate differs from a current (normal) servicing fee rate. The adoption of this Statement did not have a significant impact on the University's financial statements.
In fiscal year 2014, the University adopted Governmental Accounting Standards Board (GASB) Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. This Statement establishes accounting and reporting requirements for state and local governments that extend or receive financial guarantees that are nonexchange transactions. The adoption of this Statement did not have a significant impact on the University's financial statements. The adoption of this statement does not have a significant impact on the University's financial statements.
Future Pronouncement In fiscal year 2015, the University will adopt Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this Statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this Statement will require the University to record a liability for its proportionate share of the Net Pension Liability of pension plans in which it participates. Actuarial estimates are currently being made to determine the University's liability, the effects of which are believed to be material.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the University's Investment Advisory Account which is invested in short-term, highly liquid U.S. Agencies.
Investments Investments include financial instruments with terms in excess of 13 months, certain other securities for the production of revenue, land, and other real estate held as investments by endowments. The University accounts for its investments at fair value. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Position. The Board of Regents Legal Fund and the Board of Regents Diversified Fund are included under Investments.
Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of whom reside in the State of Georgia. Accounts
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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the average cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Position.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation, which also includes amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, and copyrights, as well as software, is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 30 years for equipment. Residual values generally are 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To fully understand plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. These bonds constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
For projects managed by GSFIC, GSFIC retains construction-in-progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction-in-progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2014, GSFIC did not transfer any capital additions to the University of Georgia.
Capital Liability Reserve Fund In fiscal year 2014, the Board of Regents established a Capital Liability Reserve Fund (Fund) to protect the fiscal integrity of the University System of Georgia (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 Board of Regents. 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 Board of Regents has rental obligations under the PPV program and at the

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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

conclusion of the program, funds will be returned to the University. The University of Georgia's contribution to the fund as of June 30, 2014 was $1,821,348.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Advances Advances include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Advances also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Position, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Position. The University of Georgia had accrued liability for compensated absences in the amount of $44,852,603 as of July 1, 2013. For fiscal year 2014, $32,305,285 was earned in compensated absences and employees were paid $33,512,844, for a net decrease of $1,207,559. The ending balance as of June 30, 2014 in accrued liability for compensated absences was $43,645,044.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Position The University's net position is classified as follows:
Net Investment in Capital Assets: This represents the University's total investment in capital assets, net of outstanding debt obligations, deferred outflows of resources and deferred inflows of resources, if applicable, related to those capital assets. To the extent debt has been incurred or deferred inflows of resources have been received but not yet expended for capital assets, such amounts are not included as a component of the net investment in capital assets. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section.
Restricted - nonexpendable: 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. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted - expendable: includes resources in which the University is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties.

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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

Expendable Restricted include the following at June 30, 2014:

Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans

$

61,050,569

9,527,429

11,032,379

Total Restricted Expendable

$

81,610,377

Restricted - expendable - Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed 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 University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus) of $74,193.63. Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of the State Treasurer. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

Unrestricted resources include the following items which are quasi-restricted by management at June 30, 2014:

R & R Reserve Reserve for Encumbrances Reserve for Inventory Capital Liability Reserve Fund Other Unrestricted

$

26,715,171

62,721,433

1,487,000

1,821,348

92,900,068

Total Unrestricted Net Position

$ 185,645,020

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes The University of Georgia, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues and Expenses The Statement of Revenues, Expenses and Changes in Net Position classify fiscal year activity as operating and nonoperating according to the following criteria:

Operating revenue: includes activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) certain Federal, state and local grants and contracts, and (3) sales and services.

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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

Nonoperating revenue: includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenue by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Operating expenses: Operating expense includes activities that have the characteristics of exchange transactions.
Nonoperating expense: includes activities that have the characteristics of nonexchange transactions, such as capital financing costs and costs related to investment activity.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Position. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, 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 nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances.
Operating and Non-operating Auxiliary Parking/Transportation and Health Service revenues of $20,828,178 and $20,340,907, respectively, are reported net of discounts and allowances of $548,239 and $1,281,137, 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 University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the University) 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.

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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

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, 2014, the carrying value of deposits was $77,024,068 and the bank balance was $69,278,372. Of the University's deposits, $68,834,482 were uninsured. Of these uninsured deposits, $0 were collateralized with securities held by the financial institution's trust department or agent in the University's name, $68,834,482 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $122,567 were uncollateralized.

Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The University has a formal policy for managing exposure to foreign currency credit risk by requiring a maximum balance in a foreign account of $100,000 U. S. currency. The University's exposure to foreign currency risk derives from deposits in foreign banks for operations of studies abroad programs. These deposits are uninsured and uncollateralized in the amount of $122,567 as follows:

Program UGA-Oxford Program UGA-Cortona Art Program UGA-Grady College of Journalism

Institution Barclay's Banca CR Firenze Societe Generale

Currency British Pound European Euro European Euro

U.S. Value $108,023
9,641 4,903 $122,567

Investments The University of Georgia maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws.

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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

The University's investments as of June 30, 2014 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Less Than 3 months

Investment Maturity

1 - 5 Years

6 - 10 years

More than 10 years

Debt Securities U. S. Treasuries U. S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt Repurchase Agreements

$

153,907

7,057,216 59,336,226 $
101,419 2,508,498

$

69,157,266 $

$
146,716 2,508,498 2,655,214 $

10,181 $
574,221 15,152,900
14,069
15,751,371 $

50,356 $
6,482,995 7,403,543
87,350
14,024,244 $

93,370 36,633,067 36,726,437

Other Investments Cash Equivalent Money Market Bond/Equity Mutual Funds - Domestic Bond/Equity Mutual Funds - International Equity Mutual Funds - Domestic Equity Mutual Funds - International Equity Securities - Domestic Miscellaneous Holdings Real Estate Held for Investment Purposes Real Estate Investment Fund Other - Equity Securities Other - International Fixed

322,824 199,925 132,891 672,240
64,929 361,824
606
5,708,942 229,339 4,833 4,247

Investment Pools Board of Regents Legal Fund Diversified Fund Office of the State Treasurer Georgia Fund 1

14,511,981 61,200,067
198,874,339

Total Investments

$ 351,446,253

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 - Education Audit Division or on their web site at http://www.audits.ga.gov.
The Georgia Fund 1 Investment Pool, managed by the Office of the State Treasurer, is not registered with the Securities and Exchange Commission as an investment company. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAf rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 62 days.

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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University's policy for managing interest rate risk is divided between Short-Term and Long-Term investments. Short-term investments will have a maximum maturity of three years and Long-Term investments will have a maximum maturity of ten years.
The Effective Duration of the Legal Fund is 3.2 years. Of the University's total investment of $14,511,981 in the Legal Fund, $444,183 is invested in debt securities.
The Effective Duration of the Diversified Fund is 5.05 years. Of the University's total investment of $61,200,067 in the Diversified Fund, $18,621,956 is invested in debt securities.
Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the University will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University does not have a formal policy for managing custodial credit risk for investments.
At June 30, 2014, $68,886,631 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name and $2,263,687 were uninsured and held by the investment's counterparty's trust department or agent, but not in the University's name.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University's policy for managing credit quality risk focuses on investment of loan and endowment funds which are funded by private sources. For loan and endowment funds, investments should have an average rating of "AAA". All other investments follow Board of Regents investment guidelines.
The investments subject to credit quality risk are reflected below:

Credit Quality Risk

Fair Value

AAA

AA

A

BBB

Unrated

Related Debt Investments

U. S. Agency Securities $ 59,336,226 $

Corporate Debt

101,419

Repurchase Agreements

2,508,497

1,396,308 $

27,560 $ 2,508,497

57,037 $

$ 16,822

57,939,918

$ 61,946,142 $ 1,396,308 $ 2,536,057 $

57,037 $

16,822 $ 57,939,918

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The University's policy for managing concentration of credit risk is divided between Short-Term and Long-Term investments. For Short-Term investments, certificates of deposit and repurchase agreements should comprise 25-50%, investment in the Office of Treasury and Fiscal Services, Georgia Fund I should not exceed 50%, and investment in U.S. Treasury obligations or U.S. Government agency securities can be 100%. For Long-Term investment of loan and endowment funds, equities comprise 50-75%, fixed income can range between 25-50%, and cash and cash equivalents will range between 1025%.

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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

As of June 30, 2014, applicable investments in a single issuer where those investments exceed 5% of the total investments were as follows:

FNMA

$ 44,303,838

12.6%

Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2014:

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 USO - Capital Liability Reserve Fund

Other

4,392,671 2,384,823 5,095,627 4,477,178 23,688,164 1,821,348 21,037,737

Less Allowance for Doubtful Accounts

62,897,548 852,557

Net Accounts Receivable

$

62,044,991

Accounts Receivable totaled $62,044,911 of which $60,223,643 was reflected as current and $1,821,348 was reflected as noncurrent.

Note 4. Inventories
Inventories consisted of the following at June 30, 2014:

Food Services Physical Plant Other

$

1,699,581

1,123,118

2,788,268

Total Inventories

$

5,610,967

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2014. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U. S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2014, the allowance for uncollectible loans was approximately $1,016,530.

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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

Note 6. Capital Assets
Following are the changes in capital assets for the year ended June 30, 2014:

Balance July 1, 2013

Additions

Reductions

Balance June 30, 2014

Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-In-Progress

$

49,315,587 $

9,430,000 $

630,042 $

58,115,545

20,589,627

538,341

8,500

21,119,468

87,170,935

25,654,170

68,185,749

44,639,356

Total Capital Assets, Not Being Depreciated

157,076,149

35,622,511

68,824,291

123,874,369

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Software

66,903,682 1,715,983,398
200,242,629 382,647,880
535,560 281,989,603
0

2,813,465 97,909,369
369,568 28,773,899
13,167,030 18,524,941

152,501
15,584,029 350,320 24,987

69,717,147 1,813,740,266
200,612,197 395,837,750
185,240 295,131,646
18,524,941

Total Assets Being Depreciated

2,648,302,752

161,558,272

16,111,837 2,793,749,187

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

25,778,736 540,136,149
60,976,871 304,762,264
361,848 226,197,977
0

2,238,010 42,906,661
5,537,983 23,203,282
27,470 9,860,550
719,281

136,133
14,762,605 257,405 24,987

28,016,746 582,906,677
66,514,854 313,202,941
131,913 236,033,540
719,281

Total Accumulated Depreciation

1,158,213,845

84,493,237

15,181,130 1,227,525,952

Total Capital Assets, Being Depreciated, Net Capital Assets, Net

1,490,088,907

77,065,035

$ 1,647,165,056 $ 112,687,546 $

930,707 1,566,223,235 69,754,998 $ 1,690,097,604

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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

Note 7. Advances (Including Tuition and Fees)
Advances (Including Tuitions and Fees) consisted of the following at June 30, 2014:

Prepaid Tuition and Fees Research Other Advances

$

17,242,768

12,643,454

14,480,456

Total Advances

$

44,366,678

Note 8. Long-Term Liabilities
Long-Term liability activity for the year ended June 30, 2014 was as follows:

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

Current Portion

Leases Lease Obligations

$ 276,584,857 $ 21,700,179 $ 20,035,728 $ 278,249,308 $ 5,467,666

Other Liabilities Compensated Absences Pollution Remediation Obligation

44,852,603 955,515

32,305,285 46,605

33,512,844 119,335

43,645,044 882,785

29,671,992 170,190

Total Total Long-Term Obligations

45,808,118

32,351,890

33,632,179

44,527,829

29,842,182

$ 322,392,975 $ 54,052,069 $ 53,667,907 $ 322,777,137 $ 35,309,848

Note 9. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $13,439,529 as of June 30, 2014. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
The University of Georgia 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.

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UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

CAPITAL LEASES
The University of Georgia occupies fifteen real properties and holds various equipment items under capital leases. The real property leases expire in fiscal years 2028, 2033, three in 2034, 2035, 2037, 2038, two in 2039 and five in 2040. The equipment capital leases expire in 2015 and 2016. Reductions in principal on capital leases were $20,035,728 with $18,120,788 in interest expense for a total of $38,156,516 in fiscal year 2014. Interest rates range from 3.26 percent to 9.00 percent. The carrying value of assets held under capital lease at June 30, 2014 were as follows:

Description

Gross Amount (+)

Accumulated Depreciation
(-)

Net Position Held Under Capital Lease at June 30, 2014
(=)

Outstanding Balances per Lease Schedules at June 30, 2014

Equipment Buildings - (PPV Only)

$

185,240 $

131,913 $

53,327 $

43,835

309,840,007

41,989,439

267,850,568

278,205,473

Total Assets Held Under Capital Lease

at June 30, 2014

$

310,025,247 $ 42,121,352 $ 267,903,895 $ 278,249,308

All of the University of Georgia's current real property capital leases are with the University of Georgia Real Estate Foundation (UGAREF), a related entity. In August of 2001, the University of Georgia entered into a capital lease with the UGAREF, whereby the University leases the Carlton Street Parking Deck for a 30-year period that began September 30, 2001 and expired August 31, 2031. In June of 2014, The University of Georgia purchased this leased property. In November of 2002, the University of Georgia entered into the second capital lease with the UGAREF whereby the University leased the East Village Parking Deck for a 30-year period that began on November 1, 2002 and originally expired July 31, 2032. In August of 2010, the University of Georgia purchased this leased property. In September of 2003, The University of Georgia entered into the third capital lease with the UGAREF, whereby, the University leases the Complex Carbohydrate Research Center for a 30-year period that began on September 25, 2003 and expires September 30, 2033. The University of Georgia entered into the fourth and fifth capital leases with the UGAREF, whereby the University leases the East Campus Village dormitory complex and the East Village Commons dining hall for a 30-year period that began July 1, 2004, and expires June 30, 2034. The University of Georgia entered into a sixth capital lease with UGAREF whereby the University leases the Coverdell Center for a 30-year period that began December 9, 2005 and expires June 30, 2035. During fiscal year 2009, the University entered into the seventh and eighth capital lease with UGAREF whereby the University leases the Tate Student Center Parking Deck and Tate Student Center Expansion for 29-year periods that expire June 30, 2037 and June 30, 2038, respectively. During fiscal year 2010, the University entered into seven new leases with UGAREF whereby the University leases the Intramural Parking Deck and Performing Arts Center Parking Deck for 30-year periods that expire June 30, 2039, four houses in the new Greek Park for 30-year periods expiring July 31, 2039, and the Medical Partnership Building for a 19-year period that expires June 30, 2028. The University of Georgia entered into a capital lease with the UGAREF whereby the University leases East Campus Housing Phase II (Building 1516) for a 30-year period that began July 25, 2010 and expires June 30, 2040. In fiscal year 2014, the University entered into a capital lease with the UGAREF whereby the University leases

- 18 -

UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

Rutherford Hall for a 20-year period that began July 25, 2013 and expires June 30, 2033. The outstanding liability at June 30, 2014 on these capital leases is $278,205,473.
The University of Georgia also has various capital leases for equipment with an outstanding balance at June 30, 2014 in the amount of $43,835.
OPERATING LEASES
The University of Georgia is Lessee under a number of one-year operating leases, which generally provide for four (4) renewal option periods. All agreements are cancelable 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.
Properties are leased for a variety of functions, from farm acreage to office space to parking lots.
FUTURE COMMITMENTS
Future commitments for capital leases (which here and on the Statement of Net Position include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2014, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2015 2016 2017 2018 2019 2020 - 2024 2025 - 2029 2030 - 2034 2035 - 2039 2040

$

24,810,357 $ 4,736,070

24,789,007

24,777,366

24,777,446

24,777,077

123,860,387

122,421,252

113,150,613

48,125,429

3,888,526

Total Minimum Lease Payments

$

535,377,460 $ 4,736,070

Less: Interest Less: Executory Costs (if paid)

231,314,720 25,813,432

Principal Outstanding

$

278,249,308

The University of Georgia's fiscal year 2014 expense for rental of real property and equipment under operating leases was $7,437,327. No expenditures were made for equipment under noncancellable leases.
- 19 -

UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

Note 11. Retirement Plans
The University of Georgia participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia. 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 system offices. The significant retirement plans that the University of Georgia 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.
Employees' Retirement System of Georgia
The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers Retirement System of Georgia. One of the ERS System plans, the Employees' Retirement System of Georgia (ERS), is a cost-sharing multiple-employer defined benefit pension plan that was 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 and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract.
On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1, 1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415.
The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the 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 the modified plan provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009 also have the option to change their membership to the GSEPS plan.
Under the old plan, 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 a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided
- 20 -

UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

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.

Member contribution rates are set by law. 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 University of Georgia pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these University of Georgia 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 University of Georgia is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These University of Georgia contributions are not at any time refundable to the member or his/her beneficiary.

Employer contributions required for fiscal year 2014 were based on the June 30, 2011 actuarial valuation as follows:

Old Plan* New Plan GSEPS

18.46% 18.46% 15.18%

*13.71% exclusive of contributions paid by the employer on behalf of old plan members

Members become vested after 10 years of service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions; the member forfeits all rights to retirement benefits.

Teachers Retirement System of Georgia

The Teachers Retirement System of Georgia (TRS) is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS.

On October 25, 1996, the Board created the Supplemental Retirement Benefit Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member 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. A member is eligible for early retirement after 25 years of creditable service.

- 21 -

UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2014 were 6.00% of annual salary. Employer contributions required for fiscal year 2014 were 12.28% of annual salary as required by the June 30, 2011 actuarial valuation.
The following table summarizes the University of Georgia contributions by defined benefit plan for the years ending June 30, 2014, June 30, 2013, and June 30, 2012 (dollars in thousands):

Fiscal Year

ERS

Required

Percentage

Contribution

Contributed

TRS

Required

Percentage

Contribution

Contributed

2014 2013 2012

$ 317,853 $ 230,629 $ 155,689

100% 100% 100%

$ 44,121,973 $ 40,130,129 $ 35,647,487

100% 100% 100%

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.
Funding Policy The University of Georgia 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 2014, 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 University of Georgia and the covered employees made the required contributions of $16,772,649 (9.24%) and $10,893,293 (6%), respectively.
- 22 -

UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

VALIC, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
Georgia Defined Contribution Plan
Plan Description The University of Georgia participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2014 amounted to $1,576,865 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. Risk Management
The University System of Georgia offers its employees and retirees access to four different healthcare plan options. For the University System of Georgia's Plan Year 2014, the following healthcare plan options were available:
BlueChoice HMO Health Savings Account (HSA) Open Access POS Open Access Point-of-Service (POS) Kaiser Permanente HMO
The University of Georgia and 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 University System of Georgia share the risk of loss for claims associated with the self-insured plans; including the HSA Open Access POS. the Open Access POS and the BlueChoice HMO. 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 self-insured healthcare plans.
- 23 -

UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser Permanente.
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 University of Georgia, 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.
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.
The University of Georgia is responsible for pollution remediation at the Milledge Avenue landfill site. The University of Georgia has recorded a liability and expense related to this pollution remediation in the amount of $882,785. The liability is reflected on the Statement of Net Assets in Accounts Payable and on the Statement of Revenues, Expenses and Changes in Net Assets in Supplies and Other Services. The liability was determined using a 5 year budget estimate provided by Brown and Caldwell. The University of Georgia does not anticipate any significant changes to the expected remediation outlay. There are no expected recoveries that have reduced the liability. Pollution remediation liability activity in fiscal 2014 was as follows:

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

Current Portion

Pollution Remediation

Obligations

$

955,515 $

46,605 $

119,335 $

882,785 $

170,190

Note 13. 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 University of Georgia expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against the University of Georgia (an organizational unit of the Board of Regents 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

- 24 -

UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2014.
Note 14. 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 University 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. For the 2014 plan year, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.
As of June 30, 2014, there were 4,636 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2014, the University of Georgia recognized as incurred $25,466,338 of expenditures, which was net of $11,845,804 of participant contributions.

- 25 -

UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

Note 15. Natural Classifications with Functional Classifications
The University's operating expenses by functional classification for fiscal year 2014 are shown below:

Functional Classification

Natural Classification

Instruction

Research

Public Service

Academic Support

Student Services

Salaries

Faculty

$

Staff

Employee Benefits

Other Personal Services

Travel

Scholarships and Fellowships

Utilities

Supplies and Other Services

Depreciation

101,939,489 $ 76,112,267 48,601,086 56,308 2,970,704 1,035,472 1,533,947 25,434,879 14,971,126

91,620,100 $ 95,859,691 45,414,771
21,578 7,079,126 1,758,020 1,430,368 59,614,559 20,731,375

15,642,956 $ 71,324,355 31,169,278
6,481 3,416,057
467,150 1,261,554 31,600,719 5,330,742

Total Operating Expenses

$ 272,655,278 $ 323,529,588 $ 160,219,292 $

1,370,284 $ 40,649,346 14,530,458
38,885 537,536
18,050 887,546 17,859,978 14,507,750
90,399,833 $

8,000 17,230,643
5,602,730 45,740
378,033 1,763,649
235,547 14,202,679
2,259,798
41,726,819

Natural Classification

Institutional Support

Functional Classification

Plant Operations

Scholarships

and

and

Maintenance

Fellowships

Auxiliary Enterprises

Total Operating Expenses

Salaries

Faculty

$

Staff

Employee Benefits

Other Personal Services

Travel

Scholarships and Fellowships

Utilities

Supplies and Other Services

Depreciation

Total Operating Expenses

$

1,820 $ 37,976,590 20,392,494
600,142 961,129
427,703 9,877,561 1,534,481

7,726 40,296,883 16,952,888
1,478 108,105
$ 22,917,765 34,731,981
5,239,626

71,771,920 $ 120,256,452 $

$ 21,831,737

$ 63,787,611 17,254,949
7,084 224,210 573,459 6,362,862 44,069,429 18,661,870

210,590,375 443,237,386 199,918,654
777,696 15,674,900 27,447,537 35,057,292 237,391,785 83,236,768

21,831,737 $ 150,941,474 $ 1,253,332,393

Note 16. Affiliated Organizations
The University of Georgia Research Foundation, the University of Georgia Athletic Association, Inc., and the University of Georgia Foundation are legally separate, tax exempt organizations whose activities primarily support University of Georgia. These affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statement No. 61, The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of the affiliated organizations are not

- 26 -

UNIVERSITY OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2014

EXHIBIT "D"

included in these financial statements. Copies of the financial statements for the affiliated organizations may be obtained from University of Georgia.
The University of Georgia Research Foundation, the University of Georgia Athletic Association, Inc., and the University of Georgia Foundation have been determined significant to the State of Georgia for the year ended June 30, 2014, and as such, are reported as component units in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). Significant affiliated organizations issue separate audited financial statements that can be obtained from the Board of Regents of the University System of Georgia.
Note 17. Mergers

On July 1, 2013, the Skidaway Institute of Oceanography was absorbed into the University of Georgia. This merger was initiated by the Board of Regents of the University System of Georgia in an effort to streamline operations and also enhance the research efforts of both the Skidaway Institute of Oceanography and the University of Georgia's marine and coastal programs by creating new opportunities for cross-disciplinary research. The following table provides the statement of net position for the Skidaway Institute of Oceanography as of July 1, 2013:

Assets Current Assets Accounts Receivable Federal Financial Assistance Other
Total Current Assets
Noncurrent Assets Capital Assets, Net
Total Assets

$ 371,704 188,065 559,769
9,963,003 $ 10,522,772

Liabilities Current Liabilities Cash Overdraft Accounts Payable Unearned Revenue Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Compensated Absences
Total Liabilities
Net Position Net Investment in Capital Assets Unrestricted
Total Net Position

$

14,186

107,221

255,961

97,041

474,409

131,176 605,585

9,963,003 -45,816
$ 9,917,187

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SUPPLEMENTARY INFORMATION - 29 -

UNIVERSITY OF GEORGIA BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2014
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Encumbrances Payable Unearned Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$ 182,370,599.13 15,492,335.90 36,922,345.40 1,851,375.13 2,885,681.41
$ 239,522,336.97

$

2,193,188.55

60,407,204.80

51,308,117.02

917,411.56

114,825,921.93

15,055,210.95 15,966,089.88
3,734,325.64 9,517,202.22 68,696,784.34
774,390.76 9,391,217.62 1,487,000.00
74,193.63
124,696,415.04

$ 239,522,336.97

Actual amounts were 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 -

UNIVERSITY OF GEORGIA SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2014

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Other Funds
Total Revenues
ADJUSTMENTS AND PROGRAM TRANSFERS
CARRY-OVER FROM PRIOR YEARS
Prior Year Reserves Available for Expenditure
Total Funds Available
EXPENDITURES
Agricultural Experiment Station Athens and Tifton Veterinary Laboratories Cooperative Extension Service Forestry Cooperative Extension Forestry Research Marine Institute Marine Resources Extension Center Skidaway Institute of Oceanography Teaching Veterinary Medicine Experiment Station Veterinary Medicine Teaching Hospital
Total Expenditures
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, 2013
Early Return of Surplus in Fiscal Year 2014 Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 388,103,374.00 $ 388,103,374.00 $

0.00

936,145,389.00

840,671,323.91

-95,474,065.09

1,324,248,763.00

1,228,774,697.91

-95,474,065.09

0.00

0.00

0.00

0.00 1,324,248,763.00

100,150,928.01 1,328,925,625.92

100,150,928.01 4,676,862.92

99,958,196.00 6,367,072.00
67,193,497.00 1,451,365.00
14,478,344.00 1,340,819.00 2,954,781.00 5,613,568.00
1,106,291,408.00 2,569,841.00
16,029,872.00

1,324,248,763.00

$

0.00

81,586,773.72 5,748,773.79
61,788,328.12 1,092,181.62
12,331,206.63 1,143,276.07 2,502,541.94 4,902,458.11
1,021,281,059.93 2,569,841.00
12,664,826.84

18,371,422.28 618,298.21
5,405,168.88 359,183.38
2,147,137.37 197,542.93 452,239.06 711,109.89
85,010,348.07 0.00
3,365,045.16

1,207,611,267.77

116,637,495.23

121,314,358.15 $ 121,314,358.15

102,352,832.48 852,354.58

1,455,874.46 -112,627.33
-852,354.58 -163,094.71 -100,150,928.01
$ 124,696,415.04

SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Inventories
Total Reserved
Unreserved Surplus
Total Fund Balance
Actual amounts were 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.
- 31 -

$

15,055,210.95

15,966,089.88

3,734,325.64

9,517,202.22

68,696,784.34

774,390.76

9,391,217.62

1,487,000.00

124,622,221.41

74,193.63

$ 124,696,415.04

UNIVERSITY OF GEORGIA STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2014

Agricultural Experiment Station State Appropriation State General Funds Other Funds
Total Agricultural Experiment Station
Athens and Tifton Veterinary Laboratories Other Funds
Cooperative Extension Service State Appropriation State General Funds Other Funds
Total Cooperative Extension Service
Forestry Cooperative Extension State Appropriation State General Funds Other Funds
Total Forestry Cooperative Extension
Forestry Research State Appropriation State General Funds Other Funds
Total Forestry Research
Marine Institute State Appropriation State General Funds Other Funds
Total Marine Institute
Marine Resources Extension Center State Appropriation State General Funds Other Funds
Total Marine Resources Extension Center
Skidaway Institute of Oceanography State Appropriation State General Funds Other Funds
Total Skidaway Institute of Oceanography
Teaching State Appropriation State General Funds Other Funds
Total Teaching

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

35,233,027.00 $

35,233,027.00 $

35,233,027.00 $

35,233,027.00

37,552,919.00

64,725,169.00

64,725,169.00

46,226,158.06

72,785,946.00

99,958,196.00

99,958,196.00

81,459,185.06

4,944,522.00

6,212,114.00

6,367,072.00

5,909,909.02

29,365,384.00 25,083,929.00
54,449,313.00

29,365,384.00 35,383,113.00
64,748,497.00

29,365,384.00 37,828,113.00
67,193,497.00

29,365,384.00 32,839,167.70
62,204,551.70

495,191.00 575,988.00
1,071,179.00

495,191.00 949,720.00
1,444,911.00

495,191.00 956,174.00
1,451,365.00

495,191.00 636,006.56
1,131,197.56

2,562,254.00 10,250,426.00
12,812,680.00

2,562,254.00 11,916,090.00
14,478,344.00

2,562,254.00 11,916,090.00
14,478,344.00

2,562,254.00 9,706,531.91
12,268,785.91

714,567.00 486,281.00
1,200,848.00

714,567.00 586,281.00
1,300,848.00

714,567.00 626,252.00
1,340,819.00

714,567.00 444,583.74
1,159,150.74

1,179,252.00 1,345,529.00
2,524,781.00

1,179,252.00 1,775,529.00
2,954,781.00

1,179,252.00 1,775,529.00
2,954,781.00

1,179,252.00 1,322,761.23
2,502,013.23

1,214,869.00 3,650,620.00
4,865,489.00

1,214,869.00 4,135,878.00
5,350,747.00

1,214,869.00 4,398,699.00
5,613,568.00

1,214,869.00 3,908,733.72
5,123,602.72

313,156,153.00 743,591,875.00
1,056,748,028.00

312,249,854.00 788,862,819.00
1,101,112,673.00

314,382,854.00 791,908,554.00
1,106,291,408.00

314,382,854.00 726,765,263.60
1,041,148,117.60

Funds Avai

- 32 -

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Positive (Negative)

Expenditures Compared to Budget

Variance

Actual

Positive

Excess of Funds Available
Over Expenditures

$

0.00 $

17,319,722.66

17,319,722.66

588,640.18

0.00 $ 0.00
0.00

35,233,027.00 $ 63,545,880.72
98,778,907.72

0.00 $ -1,179,288.28
-1,179,288.28

35,233,027.00 $ 46,353,746.72
81,586,773.72

0.00 $ 18,371,422.28
18,371,422.28

0.00 17,192,134.00
17,192,134.00

0.00

6,498,549.20

131,477.20

5,748,773.79

618,298.21

749,775.41

0.00 4,599,752.72
4,599,752.72

0.00 0.00
0.00

29,365,384.00 37,438,920.42
66,804,304.42

0.00 -389,192.58
-389,192.58

29,365,384.00 32,422,944.12
61,788,328.12

0.00 5,405,168.88
5,405,168.88

0.00 5,015,976.30
5,015,976.30

0.00 123,699.85
123,699.85

0.00 0.00
0.00

495,191.00 759,706.41
1,254,897.41

0.00 -196,467.59
-196,467.59

495,191.00 596,990.62
1,092,181.62

0.00 359,183.38
359,183.38

0.00 162,715.79
162,715.79

0.00 2,485,968.19
2,485,968.19

0.00 0.00
0.00

2,562,254.00 12,192,500.10
14,754,754.10

0.00 276,410.10
276,410.10

2,562,254.00 9,768,952.63
12,331,206.63

0.00 2,147,137.37
2,147,137.37

0.00 2,423,547.47
2,423,547.47

0.00 363,804.72
363,804.72

0.00 0.00
0.00

714,567.00 808,388.46
1,522,955.46

0.00 182,136.46
182,136.46

714,567.00 428,709.07
1,143,276.07

0.00 197,542.93
197,542.93

0.00 379,679.39
379,679.39

0.00 159,265.31
159,265.31

0.00 0.00
0.00

1,179,252.00 1,482,026.54
2,661,278.54

0.00 -293,502.46
-293,502.46

1,179,252.00 1,323,289.94
2,502,541.94

0.00 452,239.06
452,239.06

0.00 158,736.60
158,736.60

0.00 147,832.90
147,832.90

0.00 0.00
0.00

1,214,869.00 4,056,566.62
5,271,435.62

0.00 -342,132.38
-342,132.38

1,214,869.00 3,687,589.11
4,902,458.11

0.00 711,109.89
711,109.89

0.00 368,977.51
368,977.51

0.00 72,720,157.41
72,720,157.41

0.00 0.00
0.00

314,382,854.00 799,485,421.01
1,113,868,275.01

0.00 7,576,867.01
7,576,867.01

314,382,854.00 706,898,205.93
1,021,281,059.93

0.00 85,010,348.07
85,010,348.07

0.00 92,587,215.08
92,587,215.08

- 33 -

UNIVERSITY OF GEORGIA STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2014

Veterinary Medicine Experiment Station State Appropriation State General Funds
Veterinary Medicine Teaching Hospital State Appropriation State General Funds Other Funds
Total Veterinary Medicine Teaching Hospital
Total Operating Activity

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

2,569,841.00 $

2,569,841.00 $

2,569,841.00 $

2,569,841.00

386,135.00 9,621,951.00
10,008,086.00

386,135.00 15,643,737.00
16,029,872.00

386,135.00 15,643,737.00
16,029,872.00

386,135.00 12,912,208.37
13,298,343.37

$ 1,223,980,713.00 $ 1,316,160,824.00 $ 1,324,248,763.00 $ 1,228,774,697.91

Funds Avai

Actual amounts were 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.
- 34 -

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Positive (Negative)

Expenditures Compared to Budget

Variance

Actual

Positive

Excess of Funds Available
Over Expenditures

$

0.00 $

0.00 $

2,569,841.00 $

0.00 $

2,569,841.00 $

0.00 $

0.00

0.00 1,642,084.07
1,642,084.07

0.00 0.00
0.00

386,135.00 14,554,292.44
14,940,427.44

0.00 -1,089,444.56
-1,089,444.56

386,135.00 12,278,691.84
12,664,826.84

0.00 3,365,045.16
3,365,045.16

0.00 2,275,600.60
2,275,600.60

$ 100,150,928.01 $

0.00 $ 1,328,925,625.92 $

4,676,862.92 $ 1,207,611,267.77 $ 116,637,495.23 $ 121,314,358.15

- 35 -

UNIVERSITY OF GEORGIA STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2014

Agricultural Experiment Station State Appropriation State General Funds Other Funds
Total Agricultural Experiment Station
Athens and Tifton Veterinary Laboratories Other Funds
Cooperative Extension Service State Appropriation State General Funds Other Funds
Total Cooperative Extension Service
Forestry Cooperative Extension State Appropriation State General Funds Other Funds
Total Forestry Cooperative Extension
Forestry Research State Appropriation State General Funds Other Funds
Total Forestry Research
Marine Institute State Appropriation State General Funds Other Funds
Total Marine Institute
Marine Resources Extension Center State Appropriation State General Funds Other Funds
Total Marine Resources Extension Center
Skidaway Institue of Oceanography State Appropriation State General Funds Other Funds
Total Skidaway Institute of Oceanography
Teaching State Appropriation State General Funds Other Funds
Total Teaching

Beginning Fund Balance July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2013
Surplus

Prior Period Adjustments

$

46,558.28 $

0.00 $

17,319,722.66

-17,319,722.66

17,366,280.94

-17,319,722.66

588,640.18

-588,640.18

-46,558.28 $ 0.00
-46,558.28
0.00

42,603.42 $ 17,169.99 59,773.41
3,366.18

4,595.59 4,599,752.72
4,604,348.31

0.00 -4,599,752.72
-4,599,752.72

-4,595.59 0.00
-4,595.59

3,339.40 9,297.46
12,636.86

0.00 123,699.85
123,699.85

0.00 -123,699.85
-123,699.85

0.00 0.00
0.00

0.01 1.00
1.01

382.13 2,485,968.19
2,486,350.32

0.00 -2,485,968.19
-2,485,968.19

-382.13 0.00
-382.13

2,088.07 388.98
2,477.05

0.00 363,804.72
363,804.72

0.00 -363,804.72
-363,804.72

0.00 0.00
0.00

0.00 0.00
0.00

933.56 159,265.31
160,198.87

0.00 -159,265.31
-159,265.31

-933.56 0.00
-933.56

883.12 27.31
910.43

0.32 155,268.46
155,268.78

0.00 -147,832.90
-147,832.90

-0.32 -7,435.56
-7,435.88

0.00 0.00
0.00

791,750.77 72,720,187.18
73,511,937.95

0.00 -72,720,157.41
-72,720,157.41

-791,750.77 -29.77
-791,780.54

186,445.33 1,074,840.93
1,261,286.26

- 36 -

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2014
Surplus

Excess of Funds Available
Over Expenditures

Ending Fund Balance June 30

Analysis of Ending Fund Balance

Reserved

Surplus

Total

0.00 $ -480.00 -480.00
0.00

0.00 $ 0.00
0.00

0.00 $ 17,192,134.00

42,603.42 $ 17,208,823.99

0.00 $ 17,208,823.99

17,192,134.00

17,251,427.41

17,208,823.99

0.00

749,775.41

753,141.59

753,141.59

42,603.42 $

42,603.42

0.00

17,208,823.99

42,603.42

17,251,427.41

0.00

753,141.59

0.00 550.00
550.00

0.00 0.00
0.00

0.00 5,015,976.30
5,015,976.30

3,339.40 5,025,823.76
5,029,163.16

0.00 5,025,823.76
5,025,823.76

3,339.40 0.00
3,339.40

3,339.40 5,025,823.76
5,029,163.16

0.00 0.00
0.00

0.00 0.00
0.00

0.00 162,715.79
162,715.79

0.01 162,716.79
162,716.80

0.00 162,716.79
162,716.79

0.01 0.00
0.01

0.01 162,716.79
162,716.80

0.00 0.00
0.00

0.00 0.00
0.00

0.00 2,423,547.47
2,423,547.47

2,088.07 2,423,936.45
2,426,024.52

0.00 2,423,936.45
2,423,936.45

2,088.07 0.00
2,088.07

2,088.07 2,423,936.45
2,426,024.52

0.00 0.00
0.00

0.00 0.00
0.00

0.00 379,679.39
379,679.39

0.00 379,679.39
379,679.39

0.00 379,679.39
379,679.39

0.00 0.00
0.00

0.00 379,679.39
379,679.39

0.00 0.00
0.00

0.00 0.00
0.00

0.00 158,736.60
158,736.60

883.12 158,763.91
159,647.03

0.00 158,763.91
158,763.91

883.12 0.00
883.12

883.12 158,763.91
159,647.03

0.00 0.00
0.00

0.00 0.00
0.00

0.00 368,977.51
368,977.51

0.00 368,977.51
368,977.51

0.00 368,977.51
368,977.51

0.00 0.00
0.00

0.00 368,977.51
368,977.51

0.00 -54,359.16
-54,359.16

-163,094.71 0.00
-163,094.71

0.00 92,587,215.08
92,587,215.08

23,350.62 93,607,696.85
93,631,047.47

0.00 93,607,696.85
93,607,696.85

23,350.62 0.00
23,350.62

23,350.62 93,607,696.85
93,631,047.47

- 37 -

UNIVERSITY OF GEORGIA STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2014

Veterinary Medicine Experiment Station State Appropriation State General Funds
Veterinary Medicine Teaching Hospital State Appropriation State General Funds Other Funds
Total Veterinary Medicine Teaching Hospital
Total Operating Activity
Prior Year Reserves Not Available for Expenditure Inventories Uncollectible Accounts Receivable

Beginning Fund Balance July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2013
Surplus

Prior Period Adjustments

668.60

0.00

-668.60

904.99

0.00 1,642,084.07
1,642,084.07
101,003,282.59

0.00 -1,642,084.07
-1,642,084.07
-100,150,928.01

0.00 0.00
0.00
-852,354.58

1,024.00 866.94
1,890.94
1,343,247.13

1,487,000.00 714,904.47

0.00 0.00

0.00 0.00

0.00 0.00

Budget Unit Totals

$

103,205,187.06 $

-100,150,928.01 $

-852,354.58 $

1,343,247.13 $

Actual amounts were 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.
- 38 -

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2014
Surplus

Excess of Funds Available
Over Expenditures

Ending Fund Balance June 30

Analysis of Ending Fund Balance

Reserved

Surplus

Total

0.00

0.00

0.00

904.99

0.00

904.99

904.99

0.00 -5,197.13
-5,197.13
-59,486.29

0.00 0.00
0.00
-163,094.71

0.00 2,275,600.60
2,275,600.60
121,314,358.15

1,024.00 2,271,270.41
2,272,294.41
122,435,024.28

0.00 2,271,270.41
2,271,270.41
122,360,830.65

1,024.00 0.00

1,024.00 2,271,270.41

1,024.00

2,272,294.41

74,193.63 122,435,024.28

0.00 59,486.29

0.00 0.00

0.00 0.00

1,487,000.00 774,390.76

1,487,000.00 774,390.76

0.00 0.00

1,487,000.00 774,390.76

0.00 $

-163,094.71 $ 121,314,358.15 $ 124,696,415.04 $ 124,622,221.41 $

74,193.63 $ 124,696,415.04

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

$ 15,055,210.95 15,966,089.88 3,734,325.64 9,517,202.22 68,696,784.34 774,390.76 9,391,217.62 1,487,000.00
$
$ 124,622,221.41 $

$ 15,055,210.95 15,966,089.88 3,734,325.64 9,517,202.22 68,696,784.34 774,390.76 9,391,217.62 1,487,000.00

74,193.63

74,193.63

74,193.63 $ 124,696,415.04

- 39 -

UNIVERSITY OF GEORGIA BUDGET TO GAAP RECONCILIATION
JUNE 30, 2014

SCHEDULE "5"

Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "1")

$

124,696,415

Amounts reported for Business-Type Activities in the Statement of Net Position are different because:

Capital Assets used in Business-Type Activities are not reported in the Budget Fund.

1,690,097,605

Prepaid student tuition and fees for services provided in the subsequent period are reported as revenues in the Statement of Net Position but are deferred for reporting on the Budget Fund.

7,817,141

Uncollectible accounts receivable are reported as an asset and reserved fund balance in the Budget Fund and as a contra-asset account on the Statement of Net Position.

-774,391

Funds placed on deposit with the Georgia State Financing and Investment Commission for use in capital outlay projects are reported as an outlay in the Budget Fund, but are included as a cash item on the Statement of Net Position.

32,771,310

Changes in the Fair Market Value of Investments are recognized on the Statement of Net Position, but are not reported in the Budget Fund.

370,482

Agency Fund activities are not reported as a component of the Budget Fund.

Assets

$

50,427,839

Liabilities

-50,427,839

Total Net Effect of Agency Fund Activity

0

Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund.

Assets

$

Liabilities

Total Net Effect of Auxiliary Enterprises Fund Activity

82,262,572 -3,569,494

78,693,078

Endowment Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Endowment Fund Activity

$

75,806,989

0

75,806,989

Loan Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Loan Fund Activity

$

20,559,808

0

20,559,808

Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activities Fund Activity

$

7,173,655

0

7,173,655

The budgetary basis of accounting implemented by the State of Georgia recognizes expenditures when encumbered. The following adjustments were made to eliminate this activity for reporting on the Statement of Net Position. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting.

60,407,205

Prepaid items reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting.

330,000

Payables for goods and services provided in the current fiscal year reported in the Budget Fund as encumbrances payable are reported as accounts payable for GAAP reporting.

Recording of subsequent payments in the GAAP ledger.

-7,385,075

- 40 -

UNIVERSITY OF GEORGIA BUDGET TO GAAP RECONCILIATION
JUNE 30, 2014

SCHEDULE "5"

Reimbursement from grantors reported as revenues in the Budget Fund that are for expenditures based on encumbrances are deferred for GAAP reporting. Total Net Effect of Encumbrance Activity
Certain receivables are not recorded in the Budget Fund but are reported as receivables and revenue for GAAP reporting.
Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Salaries Payable Capital Leases Payable Compensated Absences Payable Contracts Payable Other Liabilities Total Liabilities
Rounding Variance

$

$

-4,962,478

-278,249,308

-43,645,044

-2,953,637

-1,660,035

53,352,130 643,316
-331,470,502 -2

Net Position of Business-Type Activities (Exhibit "A")

$ 1,759,737,034

The supplementary information presented on Schedules 1, 2, 3 and 4 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. The information was derived from, and relates directly to, the same information used to prepare the financial statements. However, the budgetary statutes and regulations of the State of Georgia require reporting of certain information that is not in accordance with generally accepted accounting principles. Presented on this schedule is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A.
- 41 -

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UNIVERSITY OF GEORGIA RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2014

SCHEDULE "6"

Totals per Annual Supplement
Accruals June 30, 2014 June 30, 2013
Compensated Absences June 30, 2014 June 30, 2013
Prepaid Salaries June 30, 2014 June 30, 2013
Adjustments Salaries/Travel Capitalized as a Part of Capital Construction Subsequent Period Adjustment Posted to Current Period in Error

SALARIES $ 657,129,237 $

TRAVEL 15,675,015

3,175,542 -2,852,202

40,543,469 -41,665,215

4,238,754 -4,015,972

-2,725,229 -623

-115

$ 653,827,761 $ 15,674,900

- 43 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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
January 9, 2015

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Jere W. Morehead, President University of Georgia
INDEPENDENT AUDITOR'S 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
Ladies and Gentlemen:
We have audited, 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, the basic financial statements of the University of Georgia as of and for the year ended June 30, 2014, and have issued our report thereon dated January 9, 2015.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the University of Georgia'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 opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University of Georgia's internal control. Accordingly, we do not express an opinion on the effectiveness of the University of Georgia'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 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.
2014YB-10

Compliance and Other Matters
As part of obtaining reasonable assurance about whether the University of Georgia financial statements are free from 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.
We noted a certain matter that we have reported to management of the University of Georgia in a separate letter dated January 9, 2015.
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 entity'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 entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully,

GSG:as 2014YB-10

Greg S. Griffin State Auditor

SECTION III FINDINGS AND QUESTIONED COSTS

UNIVERSITY OF GEORGIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2014
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.