South Georgia State College, Douglas, Georgia, management report for fiscal year ended 2015 June 30

SOUTH GEORGIA STATE COLLEGE
DOUGLAS, GEORGIA
MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2015
A Member Institution of the University System of Georgia
Georgia Department of Audits and Accounts Greg S. Griffin State Auditor

SOUTH GEORGIA STATE COLLEGE - TABLE OF CONTENTS -

SECTION I
FINANCIAL
LETTER OF TRANSMITTAL
SELECTED FINANCIAL INFORMATION
EXHIBITS
A STATEMENT OF NET POSITION - (GAAP BASIS)
B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (GAAP BASIS)
C STATEMENT OF CASH FLOWS - (GAAP BASIS)
D SELECTED FINANCIAL NOTES
SUPPLEMENTARY INFORMATION
SCHEDULES
1 BALANCE SHEET - (STATUTORY BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT
(STATUTORY BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET
BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND
4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND
5 RECONCILIATION OF BUDGET TO GAAP 6 RECONCILIATION OF SALARIES AND TRAVEL

Page
2 3 4 6
24 25 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

SOUTH GEORGIA STATE COLLEGE - TABLE OF CONTENTS -
SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

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 4, 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. Virginia Carson, President South Georgia State College

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 South Georgia State College. Accordingly, the financial statements and compliance activities of South Georgia State College 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 South Georgia State College 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 South Georgia State College, members of the Board of Regents of the University System of Georgia and the Southern Association of Colleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties.

Respectfully,

GSG:er

Greg S. Griffin State Auditor

SELECTED FINANCIAL INFORMATION - 1 -

SOUTH GEORGIA STATE COLLEGE STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2015
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Due from Affiliated Organizations Inventories Prepaid Items
Total Current Assets
Noncurrent Assets Due from USO - Capital Liability Reserve Fund Investments Notes Receivable, Net Capital Assets, Net (Note 4)
Total Noncurrent Assets
Total Assets
Deferred Outflows of Resources Relatd to Defined Benefit Pension Plans
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits 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"

$

4,147,144

22,926 351,884 102,525 253,304 353,297

5,231,080

266,644 476,584
49,273 55,558,133
56,350,634
61,581,714

863,354

765,369 45,370 31,459 28,699 5
378,798 199,983 243,750 497,054 353,148
2,543,635
35,826,763 203,568
7,952,438
43,982,769
46,526,404
3,521,553

19,234,316
296,490 351,672 -7,485,367

$

12,397,111

SOUTH GEORGIA STATE COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - (GAAP BASIS)
YEAR ENDED JUNE 30, 2015

EXHIBIT "B"

OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) Less: Scholarship Allowances
Grants and Contracts Federal State
Sales and Services Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Loss
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Other Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues
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

$

7,754,748

-4,644,978

493 21,666 28,709
424

1,297,083 1,296,705
912,271 10,066
489,885 101,195
72,887

7,341,154

4,159,686 4,949,002 2,970,470
244,522 291,280 3,282,349 1,342,702 6,695,943 2,645,825
26,581,779
-19,240,625
10,961,193
7,538,856 37,975
377,687 16,445
-1,738,156 813
17,194,813
-2,045,812
395,872
-1,649,940
14,047,051

Net Position - End of Year - 3 -

$

12,397,111

SOUTH GEORGIA STATE COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Intercollegiate Athletics Other Organizations Other Receipts 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 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
Net Increase in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year

EXHIBIT "C"

$

2,931,953

1,194,604

28,709

-11,338,917

-9,051,873

-3,282,349

1,285,565 1,354,030
908,159 10,066
491,739 102,022 -293,238 -24,283

-15,683,813

10,961,193 893,840
7,954,517 813
19,810,363

395,872 -1,450,535
-427,620 -1,738,156
-3,220,439

16,323 922,434 3,224,710

$

4,147,144

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SOUTH GEORGIA STATE COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2015
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 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"

$

-19,240,625

2,645,825
1,306,110 145,366 -295,823 238,280 9,239 -30,031 -29,924 49,036
3,521,553 -71,619
-3,931,200

$

-15,683,813

$

122

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SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY South Georgia State College 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 South Georgia State College 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. South Georgia State College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, South Georgia State College 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 College'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 College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues, are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-College transactions have been eliminated.
NEW ACCOUNTING PRONOUNCEMENTS In fiscal year 2015, the College 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 College's financial statements.
In fiscal year 2015, the College 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 College's financial statements.

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SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

In fiscal year 2015, the College 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 68 had a significant impact on the College's financial statements.
PENSIONS For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teachers' Retirement System of Georgia (TRS) and Employees' Retirement System (ERS), additions to/deductions for TRS's and ERS's fiduciary net position have been determined on the same basis as they are reported by TRS and ERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
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 College. South Georgia State College's contribution to the fund as of June 30, 2015 was $266,643.
NET POSITION The College's net position is classified as follows:
Net Investment in Capital Assets: This represents the College'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 College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code 44-15-7 of Annotated Code of Georgia.
Restricted - expendable: Restricted expendable net position includes resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

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SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

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 determination of Investment in Capital Assets. Included in the net deficit reported is the College's Net Pension liability of $8 million which is required for financial reporting and will not impact the economics of the plan or affect the budgets or cash flows.
RESTATEMENT NOTE DISCLOSURE For fiscal year 2015, the College 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 require the restatement of the June 30, 2014, net position. The result is a decrease in Net Position at July 1, 2014 of $11,091,906, of which $11,883,641 is represented in Net Pension Liability and $791,735 is represented in deferred outflow. 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 College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
At June 30, 2015, the carrying value of deposits was $4,234,075 and the bank balance was $5,054,585. Of the College's deposits, $4,904,585 were uninsured. Of these uninsured deposits, $4,904,585 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name.

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SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

INVESTMENTS At June 30, 2015, the carrying value of the College's investment was $367,527, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows:

Investment Type

Fair Value

Investment Pools Board of Regents Short-Term Fund $ Legal Fund Diversified Fund

40,944 83,596 242,987

$

367,527

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. The Board of Regents Short-Term Fund is reported as Cash and Cash Equivalents on Exhibit "A" of this report.

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

Due from Affiliated Organizations

Other

152,155 126,228
22,926 102,525 248,850

Less Allowance for Doubtful Accounts

652,684 175,349

Net Accounts Receivable

$

477,335

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SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

NOTE 4: CAPITAL ASSETS Following are the changes in the College'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

$

555,936

$

781,382 $ 388,978 $ 781,382

555,936 388,978

Total Capital Assets, Not Being Depreciated

1,337,318

388,978

781,382

944,914

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

3,873,605 44,062,605
2,962,790 2,863,348 37,035,042 2,391,577

595,960 1,070,665
7,778

33,899

3,873,605 44,658,565
2,962,790 3,934,013 37,035,042 2,365,456

Total Assets Being Depreciated
Less: Accumulated Depreciation: Infrastructure Buildings Facilities and Other Improvements Equipment Capital Leases Library Collections

93,188,967 1,674,403

33,899

94,829,471

1,834,624 23,623,043
2,001,069 1,642,383 6,208,726 2,294,481

112,614 991,155
47,077 227,384 1,237,539
30,056

33,899

1,947,238 24,614,198
2,048,146 1,869,767 7,446,265 2,290,638

Total Accumulated Depreciation

37,604,326 2,645,825

33,899

Total Capital Assets, Being Depreciated, Net

55,584,641

-971,422

0

Capital Assets, Net

$ 56,921,959 $ -582,444 $ 781,382 $

40,216,252 54,613,219 55,558,133

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

Fiscal Year

Depreciation Expense

2015 2014 2013

$ 2,645,825 $ 2,598,469 $ 2,519,639

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SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015
NOTE 5: ADVANCES Advances consisted of the following at June 30, 2015.

EXHIBIT "D"

Prepaid Tuition and Fees $ Other Advances

359,704 19,094

Total Advances

$ 378,798

NOTE 6: LONG-TERM LIABILITIES

The College'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

$ 36,751,437 $

0$

427,620 $ 36,323,817 $

497,054

Other Liabilities Compensated Absences Net Pension Liability

507,679 11,883,641

411,001

361,964 -3,931,200

556,716 7,952,438

353,148

Total

12,391,320

411,001

-3,569,236

8,509,154

353,148

Total Long-Term Obligations $ 49,142,757 $

411,001 $ -3,141,616 $ 44,832,971 $

NOTE 7: NET POSITION

Changes in Net Position for the year ended June 30, 2015 are as follows:

850,202

Beginning Balance July 1, 2014 (Restated)

Additions

Reductions

Ending Balance June 30, 2015

Net Investments in Capital Assets

$

20,170,522 $

-154,824 $

781,382 $

19,234,316

Restricted Net Position

612,988

7,594,407

7,559,233

648,162

Unrestricted Net Position

-6,736,458

19,230,412

19,979,321

-7,485,367

Total Net Position

$

14,047,052 $ 26,669,995 $ 28,319,936 $

12,397,111

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SOUTH GEORGIA STATE COLLEGE 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

$

19,234,316

Restricted for Nonexpendable Permanent Endowment

296,490

Expendable Organized Activities Institutional Loans

298,800 52,872

Total Expendable

351,672

Unrestricted R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted

995,554 1,774,702
11,746 -10,267,369

Total Unrestricted

-7,485,367

TOTAL NET POSITION

$

12,397,111

NOTE 8: ENDOWMENTS

Donor Restricted Endowments: Investments of the College's endowment funds are pooled, unless required to be separately invested by the donor. For College controlled, donor-restricted endowments, where the donor has not provided specific instructions, the Board of Regents permits South Georgia State College 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 $5,000 and is reflected as restricted net position.

For endowment funds where the donor has not provided specific instructions, investment return of the College's endowment funds is predicated under classical trust doctrines. Unless the donor has stipulated otherwise, capital gains and losses are accounted for as part of the endowment principal and are not available for expenditure.

NOTE 9: LEASE OBLIGATIONS

South Georgia State College 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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SOUTH GEORGIA STATE COLLEGE 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 2037 and 2040. Expenses for fiscal year 2015 were $2,165,776 of which $1,738,156 represented interest. Total principal paid on capital leases was $427,620 for the fiscal year ended June 30, 2015. Interest rates range from 4.481 percent to 5.102 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

$

37,035,042 $

7,446,265 $ 29,588,777 $ 36,323,817

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
Tiger Village I Clower Student Activities Ctr Tiger Village II Dining Hall Total Leases

Lessor (1)

Original Principal Lease Term

Begin Date

End Date

Outstanding Principal Balance at June 30, 2015

SGC Real Estate Foundation, LLC $ SGC Real Estate Foundation, LLC SGC Real Estate Foundation, LLC SGC Real Estate Foundation, LLC

13,289,289 3,021,752 14,410,000 6,314,001

30 Years 30 Years 29 Years 29 Years

8/2007 8/2007 7/2010 7/2011

8/2037 $ 8/2037 7/2039 7/2040

12,635,222 (1) 2,837,640 (1)
14,678,200 (1) 6,172,755 (1)

$ 37,035,042

$

36,323,817

(1) All of South Georgia State College's capital leases are with related entities.

OPERATING LEASES South Georgia State College's noncancellable operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. 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. Examples of property under operating leases are copiers, other small business equipment, and buildings.
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:

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SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

Capital Leases

Operating Leases

Year Ending June 30: 2016 2017 2018 2019 2020 2021 - 2025 2026 - 2030 2031 - 2035 2036 - 2040

$ 2,385,238 $ 31,155

2,433,245

27,583

2,484,786

26,309

2,537,878

5,100

2,593,074

13,702,402

15,142,929

16,160,896

10,372,942

Total Minimum Lease Payments

67,813,390 $ 90,147

Less: Interest Less: Executory Costs (if paid)

25,869,384 5,620,189

Principal Outstanding

$ 36,323,817

South Georgia State College fiscal year 2015 expense for rental of real property and equipment under operating leases was $32,684.

NOTE 10: RETIREMENT PLANS

South Georgia State College 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 administrative offices.

The significant retirement plans that South Georgia State College 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.

Teachers' Retirement System of Georgia and Employees' Retirement System of Georgia
General Information about the Teachers' Retirement System
P lan 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.
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.

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SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

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 College's contractually required contribution rate for the year ended June 30, 2015 was 13.15% of annual College payroll. College contributions to TRS were $809,671 for the reporting period (fiscal year ended June 30, 2015 and $761,865 for the measurement period (fiscal year ended June 30, 2014). 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.
General Information about the Employees' Retirement System
P lan description: ERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.
Benefits provided: The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan (GSEPS). Employees under the old plan started membership prior to July 1, 1982 and are subject to plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are new plan members subject to modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS.
Under the old plan, the new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, post-retirement cost-of-living adjustments may also be made to members' benefits, provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Contributions: Member contributions under the old plan are 4% of annual compensation, up to $4,200, plus 6% of annual compensation in excess of $4,200. Under the old plan, the state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement

- 15 -

SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The College's contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2015 was 21.96% of annual covered payroll for old and new plan members and 18.87% for GSEPS members. The College's contributions to ERS totaled $44,037 for the reporting period (fiscal year ended June 30, 2015) and $29,870 for the measurement period (fiscal year ended June 30, 2014). 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 College reported a liability for its proportionate share of the net pension liability for TRS and ERS totaling $7,952,438. 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 College's proportion of the net pension liability was based on contributions to TRS and ERS during the fiscal year ended June 30, 2014. At June 30, 2014, the College's TRS proportion was 0.060813%, which was a decrease of 0.005475% from its proportion measured as of June 30, 2013. At June 30, 2014, the College's ERS proportion was 0.007186%, which was an increase of 0.000323% from its proportion measured as of June 30, 2013.
For the year ended June 30, 2015, the College recognized pension expense of $349,953 for TRS and $22,487 for ERS. At June 30, 2015, the College reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

TRS

Deferred

Deferred

Outflow of

Inflows of

Resources

Resources

ERS

Deferred

Deferred

Outflow of

Inflows of

Resources

Resources

Net difference between projected and actual earnings on pension plan investments

$

2,678,429

$

65,781

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

777,343 $

9,646

College contributions

subsequent to the measurement date

$

809,671

44,037

Total

$

809,671 $

3,455,772 $

53,683 $

65,781

College contributions subsequent to the measurement date of $809,671 for TRS and $44,037 for ERS are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 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:

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SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

Year Ending June 30:
2016 2017 2018 2019 2020

TRS

$ -846,276 $

$ -846,276 $

$ -846,276 $

$ -846,277 $

$

-70,667 $

ERS
-10,417 -12,827 -16,445 -16,446

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.

Employees' Retirement System:

Inflation Salary increases Investment rate of return

3.00% 5.45% - 9.25%
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 the periods after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back eleven years for males for the period after disability retirement. The actuarial assumptions used in the June 30, 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 and ERS pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

- 17 -

SOUTH GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

Asset Class

Target Long-Term Expected Allocation Real Rate of Return *

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

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

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

100.00%
* Rates shown are net of the 3.00% assumed rate of inflation
Discount rate: The discount rate used to measure the total TRS and ERS pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the TRS and ERS pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.
Sensitivity of the College's proportionate share of the net pension liability to changes in the discount rate: The following presents the College's proportionate share of the net pension liability calculated using the discount rate of 7.50 %, as well as what the College'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:
College's proportionate share of the net pension liability

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

1% Increase (8.50%)

$ 14,158,592 $ 7,682,920 $ 2,350,340

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

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

1% Increase (8.50%)

$

393,013 $

269,518 $

164,398

P ension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS and ERS financial reports which are publically available at www.trsga.com/publications and www.ers.ga.gov/formspubs/formspubs, respectively.

- 18 -

SOUTH GEORGIA STATE COLLEGE 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 South Georgia State College 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.
South Georgia State College and the covered employees made the required contributions of $180,804 (9.24%) and $117,405 (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
South Georgia State College 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 -

SOUTH GEORGIA STATE COLLEGE 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. South Georgia State College, 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 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 South Georgia State College expects such amounts, if any, to be immaterial to its overall financial positions.
Litigation, claims and assessments filed against South Georgia State College (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 -

SOUTH GEORGIA STATE COLLEGE 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 College 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 112 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, South Georgia State College recognized as incurred $537,456 of expenditures, which was net of $248,144 of participant contributions.
NOTE 14: AFFILIATED ORGANIZATIONS
South Georgia State College Foundation, Inc. is a legally separate, tax-exempt organization whose activities primarily support South Georgia State College, a unit of the University System of Georgia. Because the University System of Georgia is an organizational unit of the State of Georgia, this affiliated organization is considered a potential component unit of the State of Georgia in accordance with GASB Statements 61, 39 and 14. Therefore, the financial statements of this affiliated organization are not included in these financial statements. Copies of the financial statements may be obtained from South Georgia State College.

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SUPPLEMENTARY INFORMATION - 23 -

SOUTH GEORGIA STATE COLLEGE BALANCE SHEET (STATUTORY BASIS)
BUDGET FUND JUNE 30, 2015
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

2,687,665.07

67,326.24

4,484.00 743,780.12
27,256.89 15,636.37

3,546,148.69

$

42,118.10

1,748,453.93

88,000.51

324,689.22

2,203,261.76

172,069.08 84,606.40
534,790.40 258,705.86
80,445.15 138,354.01
11,745.98
62,170.05
1,342,886.93

$

3,546,148.69

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 -

SOUTH GEORGIA STATE COLLEGE 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
Research Consortium Teaching
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, 2014
Early Return of Surplus in Fiscal Year 2015 Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 10,991,841.00 $ 10,991,841.00 $

0.00

16,600,960.00

15,593,927.53

-1,007,032.47

27,592,801.00

26,585,768.53

-1,007,032.47

0.00 27,592,801.00

879,230.20 27,464,998.73

879,230.20 -127,802.27

27,592,801.00

27,592,801.00

$

0.00

26,299,104.58

1,293,696.42

26,299,104.58

1,293,696.42

1,165,894.15 $ 1,165,894.15

996,526.81 30,647.75

71,387.43 -11,691.26
-30,647.75 -879,230.20 $ 1,342,886.93

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

$

172,069.08

84,606.40

534,790.40

258,705.86

80,445.15

138,354.01

11,745.98

1,280,716.88

62,170.05

$ 1,342,886.93

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

SOUTH GEORGIA STATE COLLEGE 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 Operating Activity

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

10,991,841.00 $

10,991,841.00 $

10,991,841.00 $ 10,991,841.00

15,660,818.00

15,660,818.00

16,600,960.00

15,593,927.53

$

26,652,659.00 $

26,652,659.00 $

27,592,801.00 $ 26,585,768.53

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

Negative

Excess of Funds Available
Over Expenditures

$

0.00 $

879,230.20

0.00 $ 0.00

10,991,841.00 $ 16,473,157.73

0.00 $ -127,802.27

10,991,840.10 $ 15,307,264.48

0.90 $ 1,293,695.52

0.90 1,165,893.25

$ 879,230.20 $

0.00 $ 27,464,998.73 $

-127,802.27 $ 26,299,104.58 $

1,293,696.42 $

1,165,894.15

- 27 -

SOUTH GEORGIA STATE COLLEGE 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

$

21,714.41 $

888,163.54

909,877.95

0.00 $ -879,230.20
-879,230.20

-21,714.41 $ 14,854.94

-8,933.34

44,841.23

-30,647.75

59,696.17

11,745.98 105,550.63

0.00 0.00

0.00 0.00

0.00 0.00

Budget Unit Totals

$ 1,027,174.56 $

-879,230.20 $

-30,647.75 $ 59,696.17

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

$

0.00 $

25,105.48

25,105.48

0.00 $ 0.00
0.00

0.90 $

14,855.84 $

0.00 $

1,165,893.25 1,235,839.96 1,188,525.75

1,165,894.15 1,250,695.80 1,188,525.75

14,855.84 $ 47,314.21

14,855.84 1,235,839.96

62,170.05

1,250,695.80

0.00 -25,105.48

0.00 0.00

0.00 0.00

11,745.98 80,445.15

11,745.98 80,445.15

0.00 0.00

11,745.98 80,445.15

$

0.00 $

0.00 $

1,165,894.15 $ 1,342,886.93 $ 1,280,716.88 $

62,170.05 $ 1,342,886.93

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

$ 172,069.08 84,606.40
534,790.40 258,705.86
80,445.15 138,354.01
11,745.98
$
$ 1,280,716.88 $

$

172,069.08

84,606.40

534,790.40

258,705.86

80,445.15

138,354.01

11,745.98

62,170.05

62,170.05

62,170.05 $ 1,342,886.93

- 29 -

SOUTH GEORGIA STATE COLLEGE RECONCILIATION OF BUDGET TO GAAP
YEAR ENDED JUNE 30, 2015

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.
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 prepaid item on the Statement of Net Position.
Changes in the Fair Market Value of Investments are recognized on the Statement of Net Position, but are not reported in the Budget Fund.
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
Investment in Plant Fund activities are not reported as a component of the Budget Fund. Assets Liabilities
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. Prepaid items reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. 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. 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 Contracts Payable Deferred Loss on Defined Benefit Pension Plan Net Pension Liability Deferred Gain on Defind Benefit Pension Plan Other
Total Liabilities

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

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.

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SCHEDULE "5"

$

1,342,887

55,558,133

-80,445

$

295,102

-295,102

$ 1,573,610 -340,910

$

296,490

0

$

3,578

0

$

73,392

-20,521

$

441,110

-48,303

325,000 43,262 0
1,232,700 296,490 3,578 52,871 392,807

$ 1,748,454 -552,967
-311,882

883,605

$ -36,323,817 -556,716 -28,699 863,354
-7,952,438 -3,521,553
-133,908

-47,653,777

$ 12,397,111

SOUTH GEORGIA STATE COLLEGE 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 Dincola, Andrew Kelly, Rhonda College Work Study Adjustment Shared Services on Jointly Staffed Personnel College of Coastal Georgia Fell, Chuck Georgia Southwestern State University Bragg, Darcy Carson, Paul Champion, Anna Curtin, Joshua Laughlin, Mark Leeder, Michael McLain, Bryan Pace, Kay Ward, Christie Watson, Joseph Middle Georgia State College Sutiff, Danielle Wright, Andrew Valdosta State University Halter, Julie Harper, Joel Hepburn, Lynette Nelson, David Reiman, Richard Smith, Daniel Stelzer, Jiri Ward, Charles

SALARIES

$

9,014,300 $

TRAVEL 291,280

45,370 -36,167

517,153 -471,601

-12,425 -900 -36

10,616
13,185 -7,500 4,500 1,500 8,583 1,366 1,327 -2,250 2,583 1,200
-5,000 1,950
4,200 3,900 1,950 4,200 -8,815 10,499 7,000 -2,000

$

9,108,688 $

291,280

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SECTION II ENTITY'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

SOUTH GEORGIA STATE COLLEGE 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 AND STATUS

FA-588-14-01 FA-588-14-02

Partially Resolved - Pending Response from USDOE Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

SPECIAL TESTS AND PROVISIONS Return of Title IV Funds U.S. Department of Education 84.SFA Student Financial Assistance Cluster Finding Control Number: FA-588-14-02

Management has determined that the refund error calculations for withdrawals, official or unofficial, identified by the auditors were specifically related to one employee who utilized the incorrect number of days in the semester as part of the Title IV refund calculations; this was a direct result of recent personnel changes within the Student Financial Assistance (SFA) office. Training on the refund calculation has since been provided to personnel in the SFA office. SFA personnel are currently recalculating all SFA refunds for fiscal year 2015 in order to specifically identify all under-payments and/or over-payments resulting from any such calculation errors. When these recalculations are complete, Management will be in direct contact with the U.S. Department of Education to resolve this issue as quickly as possible.

The one instance identified where no return of Title IV funds was made for a student who received all failing and/or incomplete grades was directly related to an isolated employee error. The particular student identified by the auditors was coded incorrectly in Banner which resulted in that student not being listed on the withdrawal report that would initiate the refund calculation. Management is currently evaluating the most effective method to review these withdrawal reports to ensure accuracy.

SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

SOUTH GEORGIA STATE COLLEGE 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 Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: CFDA Number and Title:

Return of Title IV Funds Special Tests and Provisions Significant Deficiency Nonmaterial Noncompliance U. S. Department of Education 84.SFA Student Financial Assistance Cluster

Description: This is a repeat finding (FA-588-14-02) from the year ended June 30, 2014. 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.

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 College is required to determine the amount of Title IV grants that the student earned as of the student's withdrawal date when a recipient of the 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 a 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."

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SOUTH GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Condition: A sample of eleven students who received Federal financial assistance and withdrew, officially or unofficially, from the College was 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 that refund calculations were incorrect for four students sampled due to the institutional charges and/or amounts of grants and loans paid. In three instances, students were requested to return $534.39 less than the required amount and in one instance, a student was requested to return $237.65 more than the required amount to various SFA programs. The proration between the school and student portion of the refund was also incorrect for these five students. In addition, funds were not returned to the appropriate grantor programs within the required time frame of 45 days for two of the eleven students tested.
Questioned Cost: Questioned costs of $534.39, with likely questioned costs of $3,426.79 were identified for unearned Title IV funds not returned to the U.S. Department of Education by the College.
Cause: In discussing these deficiencies with management, they stated that these issues were the result of clerical errors during the performance and review of financial assistance refund calculations.
Effect or Potential Effect: The College was not in compliance with federal regulations concerning the return of unearned Title IV federal funds to the U.S. Department of Education.
Recommendation: The College should review existing procedures and provide training to ensure that Student Financial Aid refunds are properly calculated and returned in accordance with the Higher Education Amendments of 1998, Public Law 105-244. The College should 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. South Georgia State College (SGSC) self-reported to the United States Department of Education (USDOE) on March 20, 2015, that problems in this area were found to exist. On March 25, 2015, the USDOE notified SGSC that an Off-Site Program Review was scheduled to begin April 7, 2015. A Program Review Report was issued on April 24, 2015, to which SGSC responded on June 23, 2015. As of the date of this finding response, the USDOE has not issued a clearance letter in relation to this matter. Additional training on the refund calculation process has been provided to personnel in the SGSC Student Financial Aid office in response to the four immaterial clerical errors noted for fiscal year 2015.
Contact Person: Marcus J. Latham, Vice President for Fiscal Affairs Telephone: (912) 260-4300; Fax: (912) 260-4445; Email: mark.latham@sgsc.edu
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SOUTH GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015
OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION)
Private Purpose Ventures (PPV's) not Self-Liquidating
Observation: The College's Residence Halls and Dining Hall PPV's were not self-liquidating during the year under review. The PPV's did not cover all of the costs associated with the corresponding capital lease payments and the maintenance of the project and had a net loss of $592,262.31 on the Residence Halls and $186,679.37 on the Dining Hall for the year.
Recommendation: The College should ensure that the revenue streams associated with these PPV's are sufficient to pay all costs pertaining to the funds.
Views of Responsible Officials and Corrective Action Plans: Management is aware of the losses sustained associated with Public Private Venture (PPV) projects; the College is currently working internally and with University System of Georgia personnel to develop and implement steps to prevent such occurrences in the future.
Contact Person: Marcus J. Latham, Vice President for Fiscal Affairs Telephone: (912) 260-4300; Fax: (912) 260-4445; Email: mark.latham@sgsc.edu
Weaknesses in Logical Access IT General Controls
Observation: Our review of the established internal control structure associated with significant financial applications at the College revealed design deficiencies in logical access controls intended to protect information from unauthorized access, manipulation, and corruption. The details related to these deficiencies have been provided to management of the College in accordance with Official Code of Georgia Annotated 50-6-9.
Recommendation: Management should review and enhance their policies and procedures to ensure the integrity and accuracy of the information used within the financial statements and as part of awarding financial assistance to students. Additionally, management should ensure proper separation of duties as it relates to financial and student financial assistance processes.
Views of Responsible Officials and Corrective Action Plans: Management is aware that issues related to logical access controls over the Banner Student Information System exist. These issues are controlled at the system-level by the University System of Georgia (USG) Information Technology Services (ITS); South Georgia State College (SGSC) does not have access to correct these issues. SGSC personnel are currently in communication with the USG ITS to have these issues corrected.
Contact Person: Marcus J. Latham, Vice President for Fiscal Affairs Telephone: (912) 260-4300; Fax: (912) 260-4445; Email: mark.latham@sgsc.edu
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