SAVANNAH STATE UNIVERSITY SAVANNAH, GEORGIA MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2015 A Member Institution of the University System of Georgia SAVANNAH STATE UNIVERSITY - TABLE OF CONTENTS - SECTION I FINANCIAL LETTER OF TRANSMITTAL SELECTED FINANCIAL INFORMATION EXHIBITS A STATEMENT OF NET POSITION - (GAAP BASIS) B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (GAAP BASIS) C STATEMENT OF CASH FLOWS - (GAAP BASIS) D SELECTED FINANCIAL NOTES SUPPLEMENTARY INFORMATION SCHEDULES 1 BALANCE SHEET - (STATUTORY BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND 4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND 5 RECONCILIATION OF BUDGET TO GAAP 6 RECONCILIATION OF SALARIES AND TRAVEL Page 2 3 4 7 23 24 26 28 30 31 SECTION II ENTITY'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS (This page left intentionally blank) SAVANNAH STATE UNIVERSITY - TABLE OF CONTENTS - SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS (This page left intentionally blank) SECTION I FINANCIAL (This page left intentionally blank) 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 26, 2016 Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the State Board of Regents of the University System of Georgia and Dr. Cheryl Dozier, President Savannah State University Ladies and Gentlemen: As part of our audits of the basic financial statements of the University System of Georgia presented in the Annual Financial Report for the University System of Georgia, the basic financial statements of the State of Georgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2015, we have performed certain audit procedures at Savannah State University. Accordingly, the financial statements and compliance activities of Savannah State University were examined to the extent considered necessary in order to express an opinion as to the fair presentation of the financial statements contained in the foregoing documents and to issue reports on compliance and internal control as required by the Single Audit Act Amendments of 1996. In addition, we have audited compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on its Federal programs for the year ended June 30, 2015. This Management Report contains information pertinent to the financial and compliance activities of Savannah State University as of and for the year ended June 30, 2015. Information contained in this report is a by-product of our audits of the basic financial statements of the University System of Georgia and the basic financial statements of the State of Georgia and is the representation of management. Accordingly, we do not express an opinion or any other form of assurance on it. The particular information provided which includes a section on findings and other items reported in accordance with Commission on Colleges regulation 2.11.1 is enumerated in the Table of Contents. This report is intended solely for the information and use of the management of Savannah State University, members of the Board of Regents of the University System of Georgia and the Southern Association of Colleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties. Respectfully, GSG:er Greg S. Griffin State Auditor (This page left intentionally blank) SELECTED FINANCIAL INFORMATION - 1 - SAVANNAH STATE UNIVERSITY STATEMENT OF NET POSITION - (GAAP BASIS) JUNE 30, 2015 ASSETS Current Assets Cash and Cash Equivalents Short-Term Investments (Externally Restricted) Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Inventories Prepaid Items Total Current Assets Noncurrent Assets Noncurrent Cash Short-Term Investments (Externally Restricted) Investments (Externally Restricted) Due from USO - Capital Liability Reserve Fund Notes Receivable, Net Capital Assets, Net (Note 4) Total Noncurrent Assets Total Assets Deferred Outflows of Resources Related to Defined Benefit Pension Plans LIABILITIES Current Liabilities Accounts Payable Salaries Payable Advances (Including Tuition and Fees) (Note 5) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations Compensated Absences Net Pension Liability Total Noncurrent Liabilities Total Liabilities Deferred Inflows of Resources Related to Defined Benefit Pension Plans NET POSITION Net Investment in Capital Assets Restricted for: Nonexpendable Expendable Unrestricted Total Net Position - 2 - EXHIBIT "A" $ 5,975,703 408,276 1,721,098 2,970,527 67,243 373,258 11,516,105 48,449 28,787 6,452,327 844,039 844,792 147,540,396 155,758,790 167,274,895 2,609,034 1,363,350 133,634 1,741,117 1,521 1,555,762 2,052,110 892,477 7,739,971 103,995,783 1,023,948 22,509,556 127,529,287 135,269,258 7,912,477 41,492,503 6,321,045 1,207,923 -22,319,277 $ 26,702,194 SAVANNAH STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - (GAAP BASIS) YEAR ENDED JUNE 30, 2015 OPERATING REVENUES Student Tuition and Fees (Net of Allowance for Doubtful Accounts) Less: Scholarship Allowances 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 Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues (Expenses) Net Nonoperating Revenues Loss Before Other Revenues, Expenses, Gains, or Losses Capital Grants and Gifts State Decrease in Net Position Net Position - Beginning of Year, Restated Net Position - End of Year - 3 - EXHIBIT "B" $ 29,393,220 -16,374,538 8,715,350 84,250 3,202 417,436 802,863 57,249 14,035,105 195,753 9,786,537 766,353 656,989 4,787,424 34,385 265,049 53,626,627 15,118,160 20,016,181 10,086,798 387,580 1,151,211 6,406,945 3,888,406 27,347,169 7,461,696 91,864,146 -38,237,519 19,458,854 17,609,545 582,592 414,352 -5,558,917 29,590 32,536,016 -5,701,503 350,821 -5,350,682 32,052,876 $ 26,702,194 SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS - (GAAP BASIS) YEAR ENDED JUNE 30, 2015 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts (Exchange) Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (Payments) Net Cash Provided (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 (Expenses) Net Cash Flows Provided (Used) by Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash Provided (Used) by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Purchase of Investments Net Cash Provided by Investing Activities Net Decrease in Cash Cash and Cash Equivalents - Beginning of Year Cash and Cash Equivalents - End of Year EXHIBIT "C" $ 13,297,571 9,091,629 802,863 -43,928,606 -35,114,892 -6,406,945 55,325 14,091,769 195,753 9,781,762 711,772 654,665 4,636,768 33,199 407,791 -31,689,576 19,458,854 -572,007 18,192,138 6,159 37,085,144 350,821 -1,830,433 -1,826,594 -5,558,917 -8,865,123 241,871 -230,774 11,097 -3,458,458 9,482,610 $ 6,024,152 - 4 - SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS - (GAAP BASIS) YEAR ENDED JUNE 30, 2015 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (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 Salaries Payable Advances (Including Tuition and Fees) Other Liabilities Compensated Absences Change in Deferred Inflows/Outflows of Resources: Deferred Inflows of Resources Deferred Outflows of Resources Net Pension Liability Net Cash Used by Operating Activities NONCASH ACTIVITY Change in Fair Value of Investments Recognized as a Component of Interest Income EXHIBIT "C" $ -38,237,519 7,461,696 -576,457 -22,458 3,250 55,325 283,104 91,202 207,330 24,916 100,960 7,912,477 -376,895 -8,616,507 $ -31,689,576 $ 172,481 - 5 - (This page left intentionally blank) SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY Savannah State University is one of thirty (30) 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 Savannah State University 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. Savannah State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Savannah State University 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. FINANCIAL STATEMENT PREPARATION The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the University's assets, deferred outflows, liabilities, deferred inflows, 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 2015, the University adopted 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 requires a restatement to beginning net position. The adoption of this statement has a significant impact on the University's financial statements. In fiscal year 2015, the University adopted Governmental Accounting Standards Board (GASB) Statement No. 69, Government Combinations and Disposals of Government Operations. This statement provides specific accounting and financial reporting guidance for combinations in the governmental environment. This statement also requires that disclosures be made by governments about combination arrangements in which they engage and for disposals of government operations. The adoption of this statement does not have a significant impact on the University's financial statements. - 7 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" In fiscal year 2015, the University adopted Governmental Accounting Standards Board (GASB) Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB No. 68. The objective of this statement is to improve accounting and financial reporting by addressing an issue in Statement No. 68, Accounting and Financial Reporting for Pensions, concerning transition provisions related to certain pension contributions made to defined benefit pension plans prior to implementation of statement. This statement amends paragraph 137 of Statement No. 68 which limited recognition of pension-related deferred outflows of resources and deferred inflows of resources at the transition to circumstances in which it is practical to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions. Adoption of this statement in conjunction with GASB No. 68 had a significant impact on the University's financial statements. NET PENSION LIABILITY For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teachers Retirement System of Georgia (TRS) and additions to/deductions for TRS's fiduciary net position have been determined on the same basis as they are reported by TRS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. CAPITAL LIABILITY RESERVE FUND In fiscal year 2014, the Capital Liability Reserve Fund (Fund) was established by the Board of Regents 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 conclusion of the program, funds will be returned to the University. The amount due Savannah State University as of June 30, 2015 was $844,039. 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 and deferred inflows, or resources related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of the net investment in capital assets. Restricted - nonexpendable: Nonexpendable restricted net position consist of 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 either be 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. - 8 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" Restricted - expendable-: Restricted expendable net position includes resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Unrestricted: Unrestricted net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the categories above. Included in the net deficit reported is the University's Net Pension Liability of $22.5 million which is required for financial reporting and will not impact the economics of the plan or affect budgets of cash flows. RESTATEMENT NOTE DISCLOSURE For fiscal year 2015, the University made prior period adjustments due to the adoption of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71 Pension Transition for Contributions Made Subsequent to the Measurement Date, which requires the restatement of the June 30, 2014, net position. The result is a decrease in Net Position at July 1, 2014 of $28,893,923 attributable to a Net Pension Liability of $31,126,063 less plan contributions of $2,232,140 made during fiscal year 2014. This change is in accordance with generally accepted accounting principles. 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. 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. - 9 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" 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, 2015, the carrying value of deposits was $6,459,675, which includes $437,063 in Certificates of Deposit that are reported as Short-Term Investments, and the bank balance was $7,662,043. Of the University's deposits, $6,638,491 were uninsured. Of these uninsured deposits, $6,638,491 were collateralized with securities held by the financial institution's trust department or agent in the University's name. INVESTMENTS At June 30, 2015, the carrying value of the University's investment was $6,452,327, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows: Investment Pool Board of Regents Legal Fund $ Total Return Fund 835,045 5,617,282 Total Investments $ 6,452,327 The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia - System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits and Accounts - Education Audit Division or on their web site at http://www.audits.ga.gov. NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2015. Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Georgia State Financing and Investment Commission Other $ 1,476,268 1,450,973 1,721,098 200,007 932,262 Less Allowance for Doubtful Accounts 5,780,608 1,088,983 Net Accounts Receivable $ 4,691,625 - 10 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" NOTE 4: CAPITAL ASSETS Following are the changes in the University's capital assets for the year ended June 30, 2015: Beginning Balance July 1, 2014 Additions Reductions Ending Balance June 30, 2015 Capital Assets, Not Being Depreciated: Land Construction Work-In-Progress $ 975,219 $ 975,219 620,558 $ 1,353,469 $ 714,828 1,259,199 Total Capital Assets, Not Being Depreciated 1,595,777 1,353,469 714,828 2,234,418 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections 88,834,136 4,436,200 8,784,489 110,333,789 8,245,876 55,285 714,828 460,335 165,129 16,326 10,522 89,548,964 4,436,200 9,228,498 110,333,789 8,400,483 55,285 Total Assets Being Depreciated 220,689,775 1,340,292 26,848 222,003,219 Less: Accumulated Depreciation: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections 36,904,415 2,168,426 5,217,430 17,826,032 7,002,789 18,233 2,187,003 133,953 846,513 4,036,566 256,279 1,382 -108,742 10,522 39,091,418 2,302,379 6,172,685 21,862,598 7,248,546 19,615 Total Accumulated Depreciation 69,137,325 7,461,696 -98,220 76,697,241 Total Capital Assets, Being Depreciated, Net 151,552,450 -6,121,404 125,068 145,305,978 Capital Assets, Net $ 153,148,227 $ -4,767,935 $ 839,896 $ 147,540,396 A comparison of depreciation expense for the last three fiscal years is as follows: Fiscal Year Depreciation Expense 2015 2014 2013 $ 7,461,696 $ 7,060,300 $ 7,389,919 - 11 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" NOTE 5: ADVANCES Advances consisted of the following at June 30, 2015. Prepaid Tuition and Fees $ Other Advances 366,343 1,374,774 Total Advances $ 1,741,117 NOTE 6: LONG-TERM LIABILITIES The University's Long-Term liability activity for the year ended June 30, 2015 was as follows: Beginning Balance July 1, 2014 (Restated) Additions Reductions Ending Balance June 30, 2015 Current Portion Leases Lease Obligations $ 107,874,487 $ 0 $ 1,826,594 $ 106,047,893 $ 2,052,110 Other Liabilities Compensated Absences Net Pension Liability 1,815,465 31,126,063 1,294,780 1,193,820 8,616,507 1,916,425 22,509,556 892,477 Total 32,941,528 1,294,780 9,810,327 24,425,981 892,477 Total Long-Term Obligations $ 140,816,015 $ 1,294,780 $ 11,636,921 $ 130,473,874 $ 2,944,587 NOTE 7: NET POSITION Changes in Net Position for the year ended June 30, 2015 are as follows: Beginning Balance July 1, 2014 (Restated) Additions Reductions Ending Balance June 30, 2015 Net Investments in Capital Assets $ 45,273,738 $ 3,805,529 $ 7,586,764 $ 41,492,503 Restricted Net Position 7,105,059 26,170,701 25,746,792 7,528,968 Unrestricted Net Position -20,325,921 39,124,134 41,117,490 -22,319,277 Total Net Position $ 32,052,876 $ 69,100,364 $ 74,451,046 $ 26,702,194 - 12 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" The amounts within each category at June 30, 2015 were as follows: Net Investments in Capital Assets $ 41,492,503 Restricted for Nonexpendable Permanent Endowment 6,321,045 Expendable Federal Loans Institutional Loans Term Endowments 976,129 23,876 207,918 Total Expendable 1,207,923 Unrestricted R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted 7,112,743 1,457,074 63,205 -30,952,299 Total Unrestricted -22,319,277 TOTAL NET POSITION $ 26,702,194 NOTE 8: ENDOWMENTS Investments of the University's endowment funds are pooled, unless required to be separately invested by the donor. For University controlled, donor-restricted endowments, where the donor has not provided specific instructions, the Board of Regents permits Savannah State University to budget for current spending an amount of realized and unrealized endowment appreciation as they determined to be prudent. Realized and unrealized appreciation in excess of the amount budgeted for current spending is retained by the endowments. Current year net appreciation for the endowment accounts was $238,614 and is reflected as restricted net position. For endowment funds where the donor has not provided specific instructions, investment return of the University's endowment funds is predicated on the total return concept. Annual payouts from the University's endowment funds are based on a spending policy which limits spending between 3% and 5% of the endowments principal's market value. To the extent that the total return for the current year exceeds the payout, the excess is added to principal. If current year earnings do not meet the payout requirements, the University uses accumulated income and appreciation from restricted expendable net asset endowment balances to make up the difference. NOTE 9: LEASE OBLIGATIONS Savannah State University 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. - 13 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2015 and 2041. Payments for fiscal year 2015 were $7,385,511 of which $5,558,917 represented interest. Total principal paid on capital leases was $1,826,594 for the fiscal year ended June 30, 2015. Interest rates range from 4.486 percent to 6.262 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2015: Description Gross Amount (+) Accumulated Depreciation (-) Net Capital Assets Held Under Capital Lease at June 30, 2015 (=) Outstanding Balances per Lease Schedules at June 30, 2015 Buildings - (PPV) $ 110,333,789 $ 21,862,598 $ 88,471,191 $ 106,047,893 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. The following capital lease schedule lists the pertinent information for each lease including the building name, lessor, total principal amount, lease term, lease begin date, lease end date, and remaining long-term debt as of June 30, 2015. Description Lessor (1) CAPITAL LEASE SCHEDULE Original Principal Lease Term Begin Outstanding Principal Balance End at June 30, 2015 Tiger Point Tiger Place Camillia Hubert University Commons University Village Sports Complex Student Building C Student Center/Stadium SSU Community Development $ SSU Community Development SSU Community Development SSU Community Development SSU Community Development SSU Community Development SSU Community Development SSU Community Development 6,160,184 8,182,797 4,821,572 24,586,826 29,229,205 4,233,414 15,369,019 17,750,772 30 years 30 years 30 years 25 years 25 years 30 years 30 years 30 years 2011 2011 2011 2008 2008 2012 2012 2011 2041 $ 2041 2041 2033 2032 2041 2041 2041 6,016,995 7,985,201 4,711,764 23,920,887 26,691,855 4,211,308 15,333,788 17,176,095 $ 110,333,789 $ 106,047,893 (1) All of Savannah State University's capital leases are with related entities. OPERATING LEASES Savannah State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2015 through 2016. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers, other small business equipment, and buildings. - 14 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Position includes other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2015, were as follows: Real Property and Equipment Capital Operating Leases Leases Year Ending June 30: 2016 2017 2018 2019 2020 2021 - 2025 2026 - 2030 2031 - 2035 2036 - 2040 2041 $ 7,272,359 $ 7,408,858 7,527,075 7,639,697 7,754,687 40,584,849 43,997,729 33,229,479 20,011,423 3,411,276 107,411 Total Minimum Lease Payments 178,837,432 $ 107,411 Less: Interest 72,789,539 Principal Outstanding $ 106,047,893 Savannah State University's fiscal year 2015 expense for rental of real property and equipment under operating leases was $554,450. NOTE 10: RETIREMENT PLANS Savannah State University participates in the Teacher's Retirement System of Georgia retirement plan administered by the State of Georgia. This plan issues publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the administrative office. The significant retirement plan that Savannah State University participates in is 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. Teachers' Retirement System of Georgia General Information about the Teachers' Retirement System Plan description: All teachers of the College as defined in 47-3-60 of the Official Code of Georgia Annotated (O.C.G.A.) are provided a pension through the Teachers' Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. TRS issues a publicly available financial report that can be obtained at www.trsga.com/publications. - 15 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" Benefits provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death. Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6.00% of their annual pay during fiscal year 2015. The University's contractually required contribution rate for the year ended June 30, 2015 was 13.15% of annual University payroll. University contributions to TRS were $2,609,034 and $2,232,140 for the fiscal year ended June 30, 2015 and June 30, 2014, respectively. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2015, the University reported a liability for its proportionate share of the Net Pension Liability for TRS totaling $22,509,556. The Net Pension Liability was measured as of June 30, 2014. The total pension liability used to calculate the Net Pension Liability was based on an actuarial valuation as of June 30, 2013. An expected total pension liability as of June 30, 2014 was determined using standard roll-forward techniques. The University's proportion of the Net Pension Liability was based on contributions to TRS during the fiscal year ended June 30, 2014. At June 30, 2014, the University's TRS proportion was 0.178171%, which was a decrease of 0.000459% from its proportion measured as of June 30, 2013. For the year ended June 30, 2015, the University recognized pension expense of $1,528,109 for TRS. At June 30, 2015, the University reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: - 16 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" TRS Deferred Deferred Outflow of Inflows of Resources Resources Net difference between projected and actual earnings on pension plan investments $ 7,847,308 Changes in proportion and differences between University contributions and proportionate share of contributions University contributions subsequent to the measurement date $ 2,609,034 65,169 Total $ 2,609,034 $ 7,912,477 University contributions subsequent to the measurement date of $2,609,034 are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ended June 30: TRS 2016 2017 2018 2019 2020 $ -1,976,638 $ -1,976,638 $ -1,976,638 $ -1,976,640 $ -5,923 Actuarial assum ptions: The total pension liability as of June 30, 2014 was determined by an actuarial valuation as of June 30, 2013 using the following actuarial assumptions, applied to all periods included in the measurement: Teachers' Retirement System: Inflation Salary increases Investment rate of return 3.00% 3.75% - 7.00% 7.50% average, including inflation net of pension plan investment expense including inflation Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females set back two years for males and set back three years for females. The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 - June 30, 2009. The long-term expected rate of return on TRS pension plan investments was determined using a lognormal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) - 17 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Target Allocation Long-Term Expected Real Rate of Return * Fixed Income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities 30.00% 39.70% 3.70% 1.60% 18.90% 6.10% 3.00% 6.50% 10.00% 13.00% 6.50% 11.00% 100.00% * Rates shown are net of the 3.00% assumed rate of inflation Discount rate: The discount rate used to measure the total TRS pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the TRS pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the University's proportionate share of the net pension liability to changes in the discount rate: The following presents the University's proportionate share of the Net Pension Liability calculated using the discount rate of 7.50%, as well as what the University's proportionate share of the Net Pension Liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate: Teachers' Retirement System: University's proportionate share of the net pension liability 1% Decrease (6.50%) Current Discount Rate (7.50%) 1% Increase (8.50%) $ 41,482,091 $ 22,509,556 $ 6,886,067 Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS financial report which is publically available at www.trsga.com/publications. - 18 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" 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 three 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 Savannah State University 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 2015, 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 non-forfeitable at all times. Savannah State University and the covered employees made the required contributions of $929,578 (9.24%) and $603,622 (6%), respectively. VALIC, Fidelity and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. NOTE 11: RISK MANAGEMENT The 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 2015, the following healthcare plan options were available: BlueChoice HMO Comprehensive Care Plan Consumer Choice HSA Plan Kaiser Permanente HMO Savannah State University 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 BlueChoice HMO, Comprehensive Care Plan and Consumer Choice HSA Plan. The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to serve as the claims administrator for the selfinsured healthcare plans. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser Permanente. - 19 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" 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. Savannah State University, 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. NOTE 12: CONTINGENCIES Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Savannah State University expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Savannah State University (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 against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015. NOTE 13: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. - 20 - SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" 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 2015 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, 2015, there were 236 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2015, Savannah State University recognized as incurred $908,293 of expenditures, which was net of $455,485 of participant contributions. NOTE 14: AFFILIATED ORGANIZATIONS The Savannah State University Foundation, Savannah State University Real Estate Foundation, Savannah State University Research Foundation, and Savannah State University are legally separate, tax exempt organizations whose activities primarily support Savannah State University. These affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statement 61, 39 and 14. Therefore, the financial statements of these affiliated organizations are not included in these financial statements. Copies of the financial statements for the affiliated organizations may be obtained from Savannah State University. - 21 - SUPPLEMENTARY INFORMATION SAVANNAH STATE UNIVERSITY BALANCE SHEET (STATUTORY BASIS) BUDGET FUND JUNE 30, 2015 ASSETS Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories Total Assets LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances SCHEDULE "1" $ 8,275.65 1,721,098.01 3,241,645.68 200,016.35 67,243.36 $ 5,238,279.05 $ 942,835.61 101,837.28 921,837.83 210,592.97 1,741,116.68 6,368.72 3,924,589.09 24,048.84 209,887.82 163,294.53 736,307.64 105,033.43 63,204.93 11,912.77 1,313,689.96 $ 5,238,279.05 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. - 23 - SAVANNAH STATE UNIVERSITY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015 SCHEDULE "2" REVENUES State Appropriation State General Funds Other Funds Total Revenues CARRY-OVER FROM PRIOR YEARS Transfers from Reserved Fund Balance Total Funds Available EXPENDITURES Teaching Excess of Funds Available over Expenditures FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned to Board of Regents - University System Office Year Ended June 30, 2014 Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30 BUDGET ACTUAL VARIANCE FAVORABLE (UNFAVORABLE) $ 19,467,891.00 $ 19,467,891.00 $ 0.00 61,514,283.00 54,566,186.80 -6,948,096.20 80,982,174.00 74,034,077.80 -6,948,096.20 0.00 80,982,174.00 1,576,989.08 75,611,066.88 1,576,989.08 -5,371,107.12 80,982,174.00 75,101,428.52 5,880,745.48 $ 0.00 509,638.36 $ 509,638.36 2,372,081.68 9,036.84 8,959.00 -9,036.84 -1,576,989.08 $ 1,313,689.96 SUMMARY OF FUND BALANCE Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over Inventories Total Reserved Unreserved Surplus Total Fund Balance Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. - 24 - $ 24,048.84 209,887.82 163,294.53 736,307.64 105,033.43 63,204.93 1,301,777.19 11,912.77 $ 1,313,689.96 (This page left intentionally blank) SAVANNAH STATE UNIVERSITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015 Teaching State Appropriation State General Funds Other Funds Total Teaching Original Appropriation Amended Appropriation Final Budget Current Year Revenues $ 19,467,891.00 $ 19,467,891.00 $ 19,467,891.00 $ 19,467,891.00 59,432,627.00 59,432,627.00 61,514,283.00 54,566,186.80 $ 78,900,518.00 $ 78,900,518.00 $ 80,982,174.00 $ 74,034,077.80 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. - 26 - SCHEDULE "3" Funds Available Compared to Budget Prior Year Adjustments and Total Carry-Over Program Transfers Funds Available Variance Negative Expenditures Compared to Budget Variance Actual Positive Excess of Funds Available Over Expenditures $ 0.00 $ 1,576,989.08 0.00 $ 19,467,891.00 $ 0.00 56,143,175.88 0.00 $ 19,460,255.07 $ -5,371,107.12 55,641,173.45 7,635.93 $ 5,873,109.55 7,635.93 502,002.43 $ 1,576,989.08 $ 0.00 $ 75,611,066.88 $ -5,371,107.12 $ 75,101,428.52 $ 5,880,745.48 $ 509,638.36 - 27 - SAVANNAH STATE UNIVERSITY STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015 Teaching State Appropriation State General Funds Other Funds Total Teaching 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 2014 Surplus Prior Period Adjustments $ 3,309.75 $ 1,582,716.17 1,586,025.92 0.00 $ -1,576,989.08 -1,576,989.08 -3,309.75 $ -5,727.09 -9,036.84 0.00 8,959.00 8,959.00 55,569.00 739,523.60 0.00 0.00 0.00 0.00 0.00 0.00 Budget Unit Totals $ 2,381,118.52 $ -1,576,989.08 $ -9,036.84 $ 8,959.00 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. - 28 - SCHEDULE "4" Other Adjustments Early Return Fiscal Year 2015 Surplus Excess of Funds Available Over Expenditures Ending Fund Balance June 30 Analysis of Ending Fund Balance Reserved Surplus Total $ -7,635.93 $ 3,215.96 -4,419.97 0.00 $ 0.00 0.00 7,635.93 $ 502,002.43 509,638.36 0.00 $ 514,177.39 0.00 $ 0.00 $ 502,264.62 11,912.77 0.00 514,177.39 514,177.39 502,264.62 11,912.77 514,177.39 7,635.93 -3,215.96 0.00 0.00 0.00 0.00 63,204.93 736,307.64 63,204.93 736,307.64 0.00 0.00 63,204.93 736,307.64 $ 0.00 $ 0.00 $ 509,638.36 $ 1,313,689.96 $ 1,301,777.19 $ 11,912.77 $ 1,313,689.96 Summary of Ending Fund Balance Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over Inventories Unreserved Surplus Total Ending Fund Balance - June 30 $ 24,048.84 209,887.82 163,294.53 736,307.64 105,033.43 63,204.93 $ 24,048.84 209,887.82 163,294.53 736,307.64 105,033.43 63,204.93 $ 11,912.77 11,912.77 $ 1,301,777.19 $ 11,912.77 $ 1,313,689.96 - 29 - SAVANNAH STATE UNIVERSITY RECONCILIATION OF BUDGET TO GAAP YEAR ENDED JUNE 30, 2015 SCHEDULE "5" Presented below 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. Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "1") 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. 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. Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity Endowment Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Endowment Fund Activity Loan Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Loan Fund Activity Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activity Fund Activity 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. Georgia State Financing and Investment activity reported as revenues in the Budget Fund to cover encumbrances reported as expenditures are eliminated for GAAP reporting. Total Net Effect of Encumbrance Activity Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Capital Leases Payable Compensated Absences Payable Interest Expense Accrual Net Pension Liability Total Liabilities Net Position of Business-Type Activities (Exhibit "A") $ 1,313,690 147,540,396 $ 2,146,413 -2,146,413 $ 7,588,145 -92,818 $ 6,529,563 0 $ 1,000,005 0 $ -85,725 -2,273 -736,308 0 7,495,327 6,529,563 1,000,005 -87,998 $ 921,838 -1,003,039 -81,201 $ -106,047,893 -1,916,425 -493,963 -27,812,999 -136,271,280 $ 26,702,194 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. - 30 - SAVANNAH STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2015 SCHEDULE "6" Totals per Annual Supplement Accruals June 30, 2015 June 30, 2014 Compensated Absences June 30, 2015 June 30, 2014 Adjustments Shared Services on Jointly Staffed Personnel Armstrong Atlantic State University Brown, Lakeisha Samuel, Linda Columbus State University Hutchinson, Marilyn Moore, Andrea East Georgia State College Vincent, Rebecca Adjustments Barr, Alex Hardy, Nat Howard, Dawn Jones, Cecil Marriott, Karla-Sue Sioufi, Nancy SALARIES $ 35,010,702 $ TRAVEL 1,152,211 133,634 -110,353 1,780,238 -1,686,452 -3,850 -21,850 -563 -282 35,083 -166 -300 -500 -500 -500 -1,000 $ 35,134,341 $ 1,151,211 - 31 - (This page left intentionally blank) SECTION II ENTITY'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS (This page left intentionally blank) SAVANNAH STATE UNIVERSITY ENTITY'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2015 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AUDITEE'S RESPONSE/STATUS SEE AUDITOR'S COMMENTS FA- 548-14-01 Further Action Not Warranted (1) FA- 548-14-02 Unresolved - See Corrective Action/Responses AUDITOR'S COMMENTS (1) Findings/Internal control deficiencies of this nature, that are deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (Yellow Book), will be communicated in a management letter. CORRECTIVE ACTION/RESPONSES SPECIAL TESTS AND PROVISIONS Return of Title IV Funds U.S. Department of Education Student Financial Assistance Cluster Program (CFDA 84.SFA) Finding control Number: FA-548-14-02 The Registrar's Office, Financial Aid Office and Bursar's Office have been working to develop the best process to gather withdrawal information from students to determine official and unofficial withdrawals for accurate and timely calculation of return of Title IV aid. The plan is to develop an automated withdrawal application that captures all pertinent dates to ensure an accurate period for computation. The University will utilize the return of Title IV aid calculation determined by student financial aid system for all future calculations. (This page left intentionally blank) SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS (This page left intentionally blank) SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2015 COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weakness. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Internal control deficiencies identified during the course of this engagement that were considered to be significant deficiencies and/or material weaknesses are presented below: FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FA 2015-001 Undocumented Cost of Attendance Budgets Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: CFDA Number and Title: Eligibility Significant Deficiency Nonmaterial Noncompliance U. S. Department of Education 84.SFA Student Financial Assistance Cluster Description: The University's Student Financial Aid Office did not document the procedures used to establish their Cost of Attendance budgets. Criteria: Provisions included in 34 CFR 668 provide general provisions for administering Student Financial Aid (SFA) programs. Condition: Upon review of the University's Cost of Attendance (COA) budgets, it was noted that University personnel could not provide supporting documentation or explanations for the calculation of several components of the COA budgets, including Books and Supplies, Personal Expenses, Transportation, and Off-Campus Room and Board. Questioned Cost: N/A Cause: In discussing these deficiencies with management, they stated that due to turnover in the SFA Office, the University could not locate documentation for the procedures used in calculating COA budget components or determine if this documentation initially existed. - 1 - SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2015 FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Effect or Potential Effect: The University was not in compliance with Federal regulations concerning the COA budgets used as the basis for determining SFA eligibility. The COA is the cornerstone of establishing a student's financial need and sets a limit on the total aid a student may receive. If the estimated costs used for components in the COA budget are unreasonable and do not represent average costs for students at the University, a majority of the student population may have been significantly over-awarded. Recommendation: The University should reevaluate the components used in the COA budgets and document that these costs represent average costs for students enrolled at the University. The University should modify its procedures to ensure that any future changes to the COA budgets are reasonable and based on documented average costs for students. The University should also contact the U.S. Department of Education regarding resolution of this finding. Views of Responsible Officials and Corrective Action Plans: We concur with this finding. To address the specific deficiencies noted in the audit, the University's Financial Aid Director will review the processes and procedures relate to determining the cost of attendance and maintain documentation. Contact Person: Telephone: Fax: Email: Kenneth Wilson, Director of Financial Aid (912) 358-4162 (913) 650-8114 wilsonk@savannahstate.edu FA 2015-002 Satisfactory Academic Progress Determinations Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: CFDA Number and Title: Eligibility Significant Deficiency Nonmaterial Noncompliance U. S. Department of Education 84.SFA Student Financial Assistance Cluster Description: The University's satisfactory academic progress policy fails to describe how a student's GPA and pace of completion are affected by course incompletes, withdrawals, or repetitions, or transfers of credit from other institutions. Criteria: 34 CFR 668 provides general provisions for administering Student Financial Assistance programs. 34 CFR 668(a)(6) states that an institution's satisfactory academic progress policy is reasonable if "the policy describes how a student's GPA and pace of completion are affected by course incompletes, withdrawals, or repetitions, or transfers of credit from other institutions. Credit hours from another institution that are accepted toward the student's educational program must count as both attempted and completed hours." Condition: The University's satisfactory academic progress policy did not detail how a student's GPA and pace of completion are affected by various grades. In addition, the policy did not include credit hours from another institution that are accepted toward the student's educational program as both attempted and completed hours for calculating the pace of completion. - 2 - SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2015 FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Questioned Cost: N/A Cause: In discussing this deficiency with management, this deficiency was the result of an outdated policy that did not adequately cover specific SAP requirements. Effect or Potential Effect: This deficiency could potentially cause a student to receive Title IV financial aid whom otherwise would not be eligible to receive funds. Recommendation: We recommend that the University review and update internal policies to ensure that satisfactory academic progress determinations are in compliance with federal regulations. Additionally, we recommend the University develop and implement a monitoring process to ensure that controls are properly implemented. Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The University self-reported to the U. S. Department of Education (USDOE) that problems in this area were found to exist. An off-Site Program Review was scheduled to begin July 23, 2015. The Satisfactory Academic Progress policy for 2012-13, 2013-14 2014-15 and the new corrected policy for 2015-16 were reviewed. A Program Review Report was issued on August 19, 2015 to which the University responded. As of the date of this finding response, the USDOE has not issued clearance letter in relation to this matter. The current policy that went into effect for the 2015-2016 school year corrected the issues stated in this finding. In addition, Banner has been modified with additional controls. Contact Person: Telephone: Fax: Email: Kenneth Wilson, Director of Financial Aid (912) 358-4162 (913) 650-8114 wilsonk@savannahstate.edu FA 2015-003 Return of Title IV Funds Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: CFDA Number and Title: Questioned Costs: Repeat of Prior Year Finding: Special Tests and Provisions Significant Deficiency Nonmaterial Noncompliance U. S. Department of Education 84.SFA Student Financial Assistance Cluster $26,489.85 FA-548-14-02 Description: The Student Financial Assistance Office (SFA) did not properly perform the refund process and ensure unearned Title IV funds were accurately calculated and returned in a timely manner. - 3 - SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2015 FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Criteria: 34 CFR 668 provides general provisions for administering Student Financial Assistance programs. 34 CFR 668.22 provides requirements over the treatment of the Title IV funds when a student withdraws. The University is required to determine the amount of the Title IV grant that the student earned as of the student's withdrawal date when a recipient of a Title IV grant withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance. A refund must be returned to the Title IV programs when the total amount of the Title IV grant that the student earned is less than the amount of Title IV grant that was disbursed to the student as of the withdrawal date. 34 CFR 668.22(j)(1) states that "An institution must return the amount of Title IV funds...as soon as possible but no later than 45 days after the date of the institution's determination that the student withdrew." Condition: The University did not properly perform the refund process for official and unofficial student withdrawals and return unearned Title IV funds to the U.S Department of Education within the required timeframe of forty-five days. Additionally, the University's method of identifying withdrawn students was not detecting all students, including students enrolled only in e-courses, who unofficially withdrew from the University. A sample of twenty-five students that received Federal financial assistance and withdrew, officially or unofficially, from the University were selected to determine if refunds were calculated in conformity with Title IV requirements and returned in a timely manner in accordance with Federal regulations. Our examination revealed the following: 1. Fourteen instances were noted where the University did not correctly calculate the amount of unearned funds. This resulted in an overpayment of Title IV funds returned to the U.S. Department of Education by the University for six students in the amount of $1,684.33 and an underpayment for eight students totaling $5,919.55. 2. Ten refunds were not processed within the required timeframe of forty-five (45) days. In addition, the auditor reviewed the listing of all students who received all failing and/or incomplete grades for which no return of Title IV funds were made to ascertain whether the students sufficiently completed the enrollment period. Refunds were not calculated for six students with all failing and/or incomplete grades and did not complete 60% of the enrollment period. The University did not return $22,254.63 of unearned Title IV funds. Questioned Cost: Known questioned cost of $26,489.85 were identified of unearned Title IV funds not returned to the U.S. Department of Education. Additional questioned costs totaling $205,557.00 were projected to the remaining population. Cause: In discussing these deficiencies with management, they stated that untimely refunds were caused as a result of instructors who did not report student withdrawals in a timely manner. Management also stated that a lack of monitoring of the processing of student financial assistance refunds in accordance with federal regulations and an oversite in reviewing unofficial withdrawals, resulted in refunds not being calculated for these students. Additionally, the University's SFA policy does not address unofficial withdrawal determination for students enrolled in e-courses. - 4 - SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2015 FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Effect or Potential Effect: The University was not in compliance with Federal regulations concerning the return of unearned Title IV funds to the U.S. Department of Education. Refunds were not calculated correctly and the University did not apply SFA refunds to the Title IV Federal programs within the required timeframe. Recommendation: The University should develop, implement, and monitor policies and procedures to ensure that student financial aid refunds are properly calculated and that unearned funds are returned to the U.S. Department of Education in a timely manner. Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The University has implemented procedures to identify and process withdraw students. The Office of Financial Aid review reports to insure timely and accurate calculations are performed. Additional training has been provided to individuals in the Office of Financial Aid that are responsible for monitoring the Return of Title IV process. Contact Person: Telephone: Fax: Email: Kenneth Wilson, Director of Financial Aid (912) 358-4162 (913) 650-8114 wilsonk@savannahstate.edu OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) Accounting Controls Overall Observation: Our examination of Savannah State University included a review of IT General Controls related to significant financial applications. We noted several conditions of inadequate logical access controls to protect the integrity of information maintained in significant financial applications. Recommendation: The University should enhance logical access controls to include general security settings to limit access to unique authorized individuals and formal policies and procedures for rescinding user access to the financial application and access to supporting infrastructure. Formal Logical Access policies and procedures will assist in mitigating the risk of manipulation, corruption, or loss of financial data, to ensure the integrity of information which is utilized by management for decision making and financial reporting. Student Financial Aid Cluster Program Untimely Enrollment Reporting Observation: Our testing of twenty-five students who withdrew during the Fall 2014 and Spring 2015 semesters revealed that withdrawn enrollment statuses for nine of the students (eight unofficial and one official) were not reported to the National Student Loan Data System (NSLDS) within 60 days. Recommendation: The University should develop and/or modify its policies and procedures to ensure that all changes in student enrollment statuses, including the unofficially withdrawn are reported in a timely manner to the NSLDS. - 5 -