Management report for the fiscal year ended 2015 June 30 (University of North Georgia)

Blue Ridge Cumming Dahlonega Gainesville Oconee www.ung.edu
MANAGEMENT REPORT
for the
FISCAL YEAR ENDED JUNE 30, 2015
A Member Institution of the University System of Georgia

UNIVERSITY OF NORTH GEORGIA - 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

Page
2 3 4 7

SUPPLEMENTARY INFORMATION

1 BALANCE SHEET - (STATUTORY BASIS) BUDGET FUND

26

2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(STATUTORY BASIS) BUDGET FUND

27

3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET

BY PROGRAM AND FUNDING SOURCE

(STATUTORY BASIS) BUDGET FUND

28

4 STATEMENT OF CHANGES TO FUND BALANCE

BY PROGRAM AND FUNDING SOURCE

(STATUTORY BASIS) BUDGET FUND

30

5 RECONCILIATION OF BUDGET TO GAAP

33

6 RECONCILIATION OF SALARIES AND TRAVEL

34

SECTION II 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
September 30, 2015

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 Honorable Bonita Jacobs, President University of North Georgia
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 University of North Georgia. Accordingly, the financial statements and compliance activities of University of North Georgia 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 University of North Georgia 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 University of North Georgia, 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:as

Greg S. Griffin State Auditor

SELECTED FINANCIAL INFORMATION - 1 -

UNIVERSITY OF NORTH GEORGIA STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2015
ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Due from Affiliated Organizations Inventories Prepaid Items
Total Current Assets
Noncurrent Assets Noncurrent Cash 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 Benefits Payable Contracts Payable and Retainage Payable Deposits Advances (Including Tuition and Fees) (Note 5) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences Net Pension Liability
Total Noncurrent Liabilities
Total Liabilities
Deferred Inflows of Resources Deferred Gain on Debt Refunding Related to Defined Benefit Pension Plans
Total Deferred Inflows of Resources
NET POSITION
Net Investment in Capital Assets Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Position
- 2 -

EXHIBIT "A"

$

31,412,613

1,971,785

1,966,711 5,350,555
229,878 1,333,437
145,764

42,410,743

1,067,358 1,431,532
986,051 1,227,100 266,692,175
271,404,216
313,814,959

7,922,770

2,916,258 269,579 284,218 46,401
1,621,362 4,871,883 1,104,177 2,022,078 2,331,606
15,467,562
130,252,181 1,750,395
51,006,609
183,009,185
198,476,747
540,617 17,770,990
18,311,607
133,877,299
2,683,370 2,368,200 -33,979,494
$ 104,949,375

UNIVERSITY OF NORTH GEORGIA 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
Sales and Services Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Loss
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal State Other Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues (Expenses)
Net Nonoperating Revenues
Loss Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State Special Item - Capital Asset Transfer
Total Other Revenues, Expenses, Gains or Losses
Decrease in Net Position
Net Position - Beginning of Year, Originally Reported
Prior Year Adjustments
Net Position - Beginning of Year, Restated
Net Position - End of Year

EXHIBIT "B"

$

79,630,013

-18,294,497

2,413,381

142,594

10,575,126 6,821,182 7,829,479 3,837,623 926,643 2,727,964 92,474 726,924

97,428,906

37,878,942 39,342,141 22,843,835
524,435 1,642,303 12,204,609 4,758,388 39,734,802 15,231,022
174,160,477
-76,731,571

49,363,086
25,986,887 74,311
2,883,108 503,759 90,037
-8,715,138 393,231
70,579,281
-6,152,290
1,373,412 4,655,872
6,029,284
-123,006
168,171,761
-63,099,380
105,072,381

$

104,949,375

- 3 -

UNIVERSITY OF NORTH GEORGIA 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 Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts
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 Used by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from Sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments
Net Cash Provided by Investing Activities
Net Increase in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year

EXHIBIT "C"

$

62,253,481

-1,231,245

2,413,381

-70,321,821

-76,712,561

-12,204,609

-85,468

153,155

10,885,059 6,975,809 7,647,106 3,903,556 930,938 2,734,839 93,129 1,635,056

-60,930,195

49,363,086 -2,042,855 29,448,066
431,998
77,200,295

2,218,073 541,042
-5,586,480 -2,810,372 -8,715,138
-14,352,875

18,186 131,971 150,157 2,067,382 30,412,589

$

32,479,971

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UNIVERSITY OF NORTH GEORGIA 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
Provided (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 Net Pension Liability Change in Deferred Inflows/Outflows of Resources: Deferred Inflows of Resources Deferred Outflows of Resources
Net Cash Used by Operating Activities
NONCASH ACTIVITY Change in Accounts Receivable Related to GSFIC Gifts Change in Fair Value of Investments Recognized as a Component of Interest Income Special Item - Capital Asset Transfer Special Item - Bond Defeasance Amortization of Bond Issuance Costs Reducing Interest Paid

EXHIBIT "C"

$

-76,731,571

15,231,022
13,720 107,335
49,259 67,687 1,820,374 72,972 412,931 -150,629 421,256 -12,092,771
17,770,990 -7,922,770

$

-60,930,195

$

-844,661

$

-41,934

$

4,655,872

$

542,425

$

-1,808

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UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY University of North Georgia 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 University of North Georgia as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. University of North Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, University of North Georgia is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
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, 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-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.
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,

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UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

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.
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. University of North Georgia's contribution to the fund as of June 30, 2015 was $986,051.
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 consists 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.
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 determination of Investment in Capital Assets. Included in the net deficit reported is the University's Net Pension liability of $51 million which will be funded by appropriating resources each year as payments come due, rather than accumulating resources in advance.
Special Item Transfer On May 14, 2015, the University of North Georgia transferred Owen Hall dormitory building with a reported gross book balance value of $10,938,390 and accumulated depreciation of $4,093,861, for a net book value of $6,844,529 to the University System Office. The net effect of the transfer of this asset of $4,655,872 is noted as a Special Item Transfer on the Statement of Revenue, Expenses and Changes in Net Position. This dormitory was included in Public-Private Partnership (P3) master

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UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

agreement between the University System of Georgia and the vendor established during fiscal year 2015. To help facilitate consistent accounting treatment throughout the life of the 65 year P3 agreement and since the agreement affects nine institutions within the University System of Georgia, the Service Concession arrangement including the capital assets are being reflected on the University System Office's accounting records. See the service concession arrangement note disclosure within the University System Office's financial statements for more information.
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 require the restatement of the June 30, 2014, net position. The result is a decrease in Net Position at July 1, 2014 of $63,099,380 attributable to a net pension liability of $68,161,045 less plan contributions of $5,061,665 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 5017-59:
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.

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UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

At June 30, 2015, the carrying value of deposits was $23,628,374 and the bank balance was $13,210,932. Of the University's deposits, $12,110,992 were uninsured. Of these uninsured deposits, $11,823,552 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $287,440 were uncollateralized.

INVESTMENTS At June 30, 2015, the carrying value of the University of North Georgia's investment was $12,237,734, which is materially the same as fair value. The University's investments as of June 30, 2015 are presented below:

Investment Type

Fair Value

Less Than 1 Year

Investment Maturity

1 - 5 Years

6 - 10 years

More than 10 Years

General Obligation Bonds

$

Other Investments Equity Mutual Funds - Domestic Miscellaneous Holdings

Investment Pools Board of Regents Short-Term Fund Office of the State Treasurer Georgia Fund 1

Total Investments

$

1,052,793 $
406,244 2,084
10,635,555 141,058
12,237,734

0$

763,241 $

157,436 $

162,116

Investment Pool 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. Both the Board of Regents Short-Term Fund and the Georgia Fund 1 Investment Pool are reported as Cash and Cash Equivalents in the financial statements.
The Georgia Fund 1 Investment Pool, managed by the Office of the State Treasurer, is not registered with the Securities and Exchange Commission as an investment company, and the State does not consider Georgia Fund 1 to be a 2a7-like pool. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAf rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 56 days.

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UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

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 Assitance

Georgia State Financing and Investment Commission

Due from Affiliated Organizations

Other

1,110,283 756,010
1,966,711 213,540 229,878
4,157,813

Less Allowance for Doubtful Accounts

8,434,235 887,091

Net Accounts Receivable

$

7,547,144

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

Special Item Transfer/Asset
Reclass

Additions

Reductions

Ending Balance June 30, 2015

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

$

7,993,893

1,295,792 $

$

0$

1,635,727 $ 2,276,432

7,993,893 655,087

Total Capital Assets, Not Being Depreciated

9,289,685

0

1,635,727

2,276,432

8,648,980

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

4,933,066.00 193,624,974
14,488,191 12,716,146 152,286,952
9,981,813

3,862,331 -14,800,721

2,615,247 513,321
2,755,519
322,968

108,393
921,913 11,933 3,210

8,795,397.00 196,131,828
15,001,512 14,549,752 137,474,298 10,301,571

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

388,031,142
2,931,109 58,858,330
7,021,277 7,988,097 29,681,898 7,599,548

-10,938,390 -4,093,861

6,207,055
1,297,050 5,946,353
892,811 1,521,244 5,055,972
517,592

1,045,449
108,393 886,102
8,552 3,210

382,254,358
4,228,159 64,696,290
7,914,088 8,623,239 30,635,457 8,113,930

Total Accumulated Depreciation

114,080,259

Total Capital Assets, Being Depreciated, Net

273,950,883

Capital Assets, Net

$ 283,240,568 $

-4,093,861 -6,844,529 -6,844,529 $

15,231,022 -9,023,967 -7,388,240 $

1,006,257 39,192
2,315,624 $

124,211,163 258,043,195 266,692,175

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UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

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

Fiscal Year

Depreciation Expense

2015 2014 2013

$

15,231,022

$

15,171,543

$

16,318,538

NOTE 5: ADVANCES

Advances consisted of the following at June 30, 2015:

Prepaid Tuition and Fees Other Advances

$

3,399,855

1,472,028

Total Advances

$

4,871,883

NOTE 6: LONG-TERM LIABILITIES

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

Leases Lease Obligations

Beginning Balance July 1, 2014 (Restated)

Special Item Transfer

Additions

Reductions

Ending Balance June 30, 2015

Current Portion

$ 146,585,032 $

11,500,401

$ 2,810,372 $ 132,274,259 $ 2,022,078

Other Liabilities Compensated Absences Net Pension Liability

3,660,745 68,161,045

0 $ 2,892,996

2,471,740 17,154,436

4,082,001 51,006,609

2,331,606

Total

71,821,790

Total Long-Term Obligations $ 218,406,822 $

0 11,500,401 $

2,892,996

19,626,176

55,088,610

2,892,996 $ 22,436,548 $ 187,362,869 $

2,331,606 4,353,684

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UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

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 Investment in Capital Assets Restricted Net Position Unrestricted Net Position Total Net Position

$ 136,655,536 $

5,566,350 $

8,344,587 $ 133,877,299

4,835,986

28,871,481

28,655,897

5,051,570

-36,419,141

150,736,438

148,296,791

-33,979,494

$ 105,072,381 $ 185,174,269 $ 185,297,275 $ 104,949,375

The amounts within each category at June 30, 2015 were as follows:

Net Investment in Capital Assets Restricted for
Nonexpendable Permanent Endowment
Expendable Restricted E&G and Other Organized Activities Federal Loans Institutional Loans

$ 133,877,299
2,683,370 343,358 612,324
1,412,518

Total Expendable

2,368,200

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

9,233,604 15,445,587
65,655 -58,724,340

Total Unrestricted

-33,979,494

Total Net Position

$ 104,949,375

NOTE 8: ENDOWMENTS
Donor Restricted 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 the University of North Georgia 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 $31,278 and is reflected as restricted net position.
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UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

For endowment funds where the donor has not provided specific instructions, investment return of the University'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
University of North Georgia is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. There is one capital lease with the USG Real Estate Foundation for the Gainesville Parking Deck (GHEFA), all other capital leases reside with the UNG Real Estate Foundation as related party transactions.
CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2023 and 2040. Payments for fiscal year 2015 were $11.5 million of which $8.7 million represented interest. Total principal paid on capital leases was $2.8 million for the fiscal year ended June 30, 2015. Interest rates range from 2.4 percent to 6.12 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2015:

Description
Infrastructure - (PPV) Buildings - (PPV)

Net

Outstanding

Capital Assets Held

Balances

Under Capital

per Lease

Accumulated

Lease at

Schedules at

Gross Amount

Depreciation

June 30, 2015

June 30, 2015

(+)

(-)

(=)

$

5,367,608 $

894,601 $

4,473,007 $

4,747,449

132,106,690

29,740,856

102,365,834

127,526,810

Total Assets Held Under Capital Lease

at June 30, 2015

$

137,474,298 $ 30,635,457 $ 106,838,841 $ 132,274,259

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:

- 14 -

Description

UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

Lessor

CAPITAL LEASE SCHEDULE

Original Principal

Lease Term

Begin Date

End Date

Outstanding Principal Balance at June 30,
2015

Church Street Parking Deck

North Georgia Parking & Recreation Center, LLC $

9,554,796 29 Years

11/2008

6/2037 $

9,100,882

Recreation Center

North Georgia Parking & Recreation Center, LLC

14,332,194 29 Years 11/2008

6/2037

13,651,323

Office Building/Land Patriot Hall North Georgia Suites Walker Drive Parking Deck Dining Hall Military Dorm/Liberty Hall Chestatee Building Galliard Hall Renovation Pilgrim Mill
Gainesville Paking Structure
Gainesville - Oconee Campus
Total Leases

North Georgia Parking & Recreation Center, LLC North Georgia PHD, LLC North Georgia PHD, LLC North Georgia PHD, LLC North Georgia PHD, LLC North Georgia MBA, LLC North Georgia MBA, LLC North Georgia MBA, LLC Pilgrim Mill Center, LLC
USG Real Estate Foundation I, LLC GSC Foundation Real Estate Holding Company,
LLC

2,440,000 13,113,772 20,337,066 14,570,979 19,515,524
9,670,553 9,358,040 7,679,383 4,050,000

29 Years 30 Years 30 Years 30 Years 29 Years 29 Years 29 Years 28 Years 11 Years

4,747,449 31 Years

7,660,088 19 Years

$ 137,029,844

3/2007 8/2010 8/2010 8/2010 8/2011 8/2011 8/2011 8/2012 8/2012
8/2009
1/2009

6/2036 6/2040 6/2040 6/2040 6/2040 6/2040 6/2040 6/2040 6/2023
6/2040
6/2028
$

2,245,638 13,113,709 20,301,924 14,363,526 19,559,868
9,640,358 9,284,990 7,545,661 3,058,705
4,747,449
5,660,226
132,274,259

OPERATING LEASES University of North Georgia's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2015 to 2026. 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.
University of North Georgia's fiscal year 2015 expense for rental of real property and equipment under operating leases was $205,130.
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:

- 15 -

UNIVERSITY OF NORTH GEORGIA 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

$ 10,261,273 $ 10,297,258 10,390,086 10,517,174 10,664,088 54,522,453 54,638,706 55,860,263 47,451,839

298,827 246,104 222,062 195,581 188,200 449,912 101,500

Total Minimum Lease Payments

264,603,140 $

1,702,186

Less: Interest

132,328,881

Principal Outstanding

$ 132,274,259

NOTE 10: RETIREMENT PLANS

University of North Georgia participates in various retirement plans administered by the State of Georgia under two major retirement systems: Teachers' Retirement System of Georgia (TRS) and Employees' Retirement System of Georgia (ERS). These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective administrative offices.

The significant retirement plans that University of North Georgia participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.

Teachers' Retirement System of Georgia and Employees' Retirement System of Georgia

Summary of Significant Accounting Policies

Pensions: For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teachers' Retirement System of Georgia (TRS) and Employees' Retirement System (ERS), additions to/deductions for TRS's and ERS's fiduciary net position have been determined on the same basis as they are reported by TRS and ERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

General Information about the Teachers' Retirement System

Plan description: -All teachers of the University 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

- 16 -

UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. TRS issues a publicly available financial report that can be obtained at www.trsga.com/publications.
Benefits provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death.
Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6.00 % 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 $6,059,396 for the reporting period (fiscal year ended June 30, 2015) and $5,026,872 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
Plan description: - ERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.
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, postretirement cost-of-living adjustments may also be made to members' benefits, provided the members were hired prior to July 1, 2009. The normal retirement

- 17 -

UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Contributions: Member contributions under the old plan are 4% of annual compensation, up to $4,200, plus 6% of annual compensation in excess of $4,200. Under the old plan, the state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The University'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 University's contributions to ERS totaled $72,433 for the reporting period (fiscal year ended June 30, 2015) and $34,793 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 University reported a liability for its proportionate share of the net pension liability for TRS and ERS totaling $51,006,609. 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 and ERS during the fiscal year ended June 30, 2014. At June 30 2014, the University's TRS proportion was 0.401%, which was an increase of 0.013% from its proportion measured as of June 30, 2013. At June 30, 2014, the University's ERS proportion was 0.008%, which was a decrease of 0.001% from its proportion measured as of June 30, 2013.
For the year ended June 30, 2015, the University recognized pension expense of $2,177,647 for TRS and $66,905 for ERS. At June 30, 2015, the University 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

$

17,672,531

$

76,629

Changes in proportion and differences between University contributions and proportionate share of contributions $

1,790,941

21,830

University contributions subsequent to the measurement date

6,059,396

$

72,433

Total

$

7,850,337 $

17,672,531 $

72,433 $

98,459

- 18 -

UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

University contributions subsequent to the measurement date of $6,059,396 for TRS and $72,433 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:

Year Ended June 30:

TRS

ERS

2016 2017 2018 2019 2020

$

-4,011,099 $

-32,801

-4,011,099

-27,344

-4,011,099

-19,157

-4,011,103

-19,157

162,811

-

Actuarial assumptions: 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%, average, including inflation 7.50%, net of pension plan investment expense, including inflation

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

The actuarial assumptions used in the June 30, 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

3.00%

Salary increases Investment rate of return

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

Mortality rates were based on the RP-2000 Combined Mortality Table for the periods after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back eleven years for males for the period after disability retirement.

The actuarial assumptions used in the June 30, 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:
- 19 -

UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

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

1% Decrease (6.50%)

Current discount rate
(7.50%)

1% Increase (8.50%)

$ 93,419,743 $ 50,692,645 $ 15,507,767

1% Decrease (6.50%)

Current discount rate
(7.50%)

1% Increase (8.50%)

$

457,822 $

313,964 $

191,508

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

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UNIVERSITY OF NORTH GEORGIA 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 University of North Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers' Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 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.
University of North Georgia and the covered employees made the required contributions of $2,085,564 (9.24%) and $1,354,262 (6%), respectively.
VALIC, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
Georgia Defined Contribution Plan
Plan Description University of North Georgia participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and parttime and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.

- 21 -

UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

Total contributions made by employees during fiscal year 2015 amounted to $168,977 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
NOTE 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
University of North Georgia and participating employees and retirees pay premiums to the healthcare plan options to access benefits coverage. The respective health plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with the self-insured plans; including the 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.
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. University of North Georgia, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1.
The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.

- 22 -

UNIVERSITY OF NORTH GEORGIA SELECTED FINANCIAL NOTES JUNE 30, 2015

EXHIBIT "D"

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 University of North Georgia expects such amounts, if any, to be immaterial to its overall financial positions.
Litigation, claims and assessments filed against University of North Georgia (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending 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.
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 306 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, University of North Georgia recognized as incurred $1,786,825 of expenditures, which was net of $752,320 of participant contributions.
NOTE 14: AFFILIATED ORGANIZATIONS
The University of North Georgia Foundation and University of North Georgia Real Estate Foundation are legally separate, tax exempt organizations whose activities primarily support University of North Georgia. These affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statement No. 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements No. 14 and No. 34. 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 University of North Georgia. University of North Georgia Rest Estate Foundation has been determined significant to the State of Georgia for the year ended June 30, 2015, and as such, is reported as a component unit in the Comprehensive Annual Financial Report of the State of Georgia (CAFR).

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SUPPLEMENTARY INFORMATION - 25 -

UNIVERSITY OF NORTH GEORGIA 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 Inventories Tuition Carry-Over Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

15,692,952.93

1,572,785.27

1,966,710.75 3,948,077.12
136,182.87 62,190.06

23,378,899.00

$

243,859.05

12,425,973.69

1,516,261.99

4,256,725.96

18,442,820.69

919,439.65 593,977.92 383,644.84 431,274.65 691,716.59
65,654.99 1,794,709.29
55,660.38
4,936,078.31

$

23,378,899.00

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.
- 26 -

UNIVERSITY OF NORTH GEORGIA 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
ADJUSTMENTS AND PROGRAM TRANSFERS
CARRY-OVER FROM PRIOR YEARS
Transfers from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Teaching
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2014
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30
SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Tuition Carry-Over
Total Reserved
Unreserved Surplus
Total Fund Balance

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$

49,381,387.00 $

49,381,387.00 $

109,492,493.00

107,748,273.41

158,873,880.00

157,129,660.41

0.00

-4,872.64

0.00 -1,744,219.59
-1,744,219.59
-4,872.64

0.00 158,873,880.00

3,531,932.85 160,656,720.62

3,531,932.85 1,782,840.62

158,873,880.00

$

0.00

156,423,219.31 4,233,501.31 $

2,450,660.69 4,233,501.31

4,188,202.92 18,301.26

12,198.44 34,108.49

-18,301.26 -3,531,932.85

$

4,936,078.31

$

919,439.65

593,977.92

383,644.84

431,274.65

691,716.59

65,654.99

1,794,709.29

4,880,417.93

55,660.38

$

4,936,078.31

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.
- 27 -

UNIVERSITY OF NORTH GEORGIA 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

$

49,381,387.00 $

49,381,387.00 $

49,381,387.00 $ 49,381,387.00

97,693,890.00

97,693,890.00

109,492,493.00

107,748,273.41

$

147,075,277.00 $

147,075,277.00 $

158,873,880.00 $ 157,129,660.41

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.
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SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Positive (Negative)

Expenditures Compared to Budget

Variance

Actual

Positive

Excess of Funds Available
Over Expenditures

$

0.00 $

3,531,932.85

0.00 $ 49,381,387.00 $

-4,872.64

111,275,333.62

0.00 $ 49,372,127.81 $

1,782,840.62

107,051,091.50

9,259.19 $ 2,441,401.50

9,259.19 4,224,242.12

$ 3,531,932.85 $

-4,872.64 $ 160,656,720.62 $

1,782,840.62 $ 156,423,219.31 $

2,450,660.69 $

4,233,501.31

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UNIVERSITY OF NORTH GEORGIA 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 Operating Activity
Prior Year Reserves Not Available for Expenditure Inventories Uncollectible Accounts Receivable

Beginning Fund Balance July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2014
Surplus

Prior Period Adjustments

$

6,915.36 $

0.00 $

3,543,318.75

-3,531,932.85

3,550,234.11

-3,531,932.85

-6,915.36 $ -11,385.90
-18,301.26

2,388.57 43,918.36
46,306.93

62,494.19 593,775.88

0.00 0.00

0.00 0.00

0.00 0.00

Budget Unit Totals

$

4,206,504.18 $

-3,531,932.85 $

-18,301.26 $

46,306.93

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.
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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

$

-3,160.80 $

-97,940.71

-101,101.51

0.00 $ 0.00
0.00

9,259.19 $ 4,224,242.12
4,233,501.31

8,486.96 $

0.00 $

4,170,219.77

4,123,046.35

4,178,706.73

4,123,046.35

8,486.96 $ 47,173.42

8,486.96 4,170,219.77

55,660.38

4,178,706.73

3,160.80 97,940.71

0.00 0.00

0.00 0.00

65,654.99 691,716.59

65,654.99 691,716.59

0.00 0.00

65,654.99 691,716.59

$

0.00 $

0.00 $

4,233,501.31 $ 4,936,078.31 $ 4,880,417.93 $

55,660.38 $ 4,936,078.31

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

$ 919,439.65 593,977.92 383,644.84 431,274.65 691,716.59 65,654.99
1,794,709.29
$
$ 4,880,417.93 $

$

919,439.65

593,977.92

383,644.84

431,274.65

691,716.59

65,654.99

1,794,709.29

55,660.38

55,660.38

55,660.38 $ 4,936,078.31

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UNIVERSITY OF NORTH GEORGIA 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.
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. Encumbrances and Payables adjustment on BCR to report invoices as payable 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 assets, deferred outflow of resources, liabilities and deferred inflow of resources 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 Defined Benefit Pension Plan Total Liabilities
Net Position of Business-Type Activities (Exhibit "A")

SCHEDULE "5"

$

4,936,078.31

266,692,174.88

$

1,682,930.65

-1,682,930.65

$ 17,843,827.84 -3,305,380.27

$

2,143,561.43

0.00

$

2,024,841.59

0.00

$

2,957,323.10

-330,304.65

-691,716.59 0.00
14,538,447.57 2,143,561.43 2,024,841.59 2,627,018.45

$ 12,425,973.69 1,057,374.28 -1,330,006.26
-2,216,882.79

9,936,458.92

$ -132,274,258.92 -4,082,000.56 -46,401.50 7,922,770.42
-51,006,609.00 -17,770,990.00

-197,257,489.56

$ 104,949,375.00

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.
- 33 -

UNIVERSITY OF NORTH GEORGIA 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 Allen, Avram Allen, Jennifer Ambo, Aiola Arp, Michell Arriaga, Donna Bermudez, Stanley Brantley, Rebecca Chambers, Sharon Chapman, Joe Collantes, Hugo Combier, Elizabeth Cooper, Anthony Davis, Linda Geraghty, Michael Gilhooly, Dan Glenn, Julie Gonzalez, Josefina Grib, Jonathan Huff, Kristie Iannelli, Danielle Jones, Nyya Knaus, Kathryn Law, Michael Maamoun, Eman McCoy-Wilson, Sonya Miles, Jessica Mohanty, Bijoy Nocholson, Tyler Nunez, Janet Potts, Casey Rhym, Darren Riggot, John Rogers, Mike Schueneman, Laura Snowden, Ray-Lynn Waller, Robert West, Christina Windley, Mary Woodruff, Dusty

SALARIES

$

76,793,926 $

TRAVEL 1,630,292

269,579 -196,607

12,011

3,791,919 -3,400,599

-600 -269 5,166 -7,913 11,864 2,325 4,870 -4,563 -2,415 -2,780 -1,200 3,611 -3,000 3,044 4,844 -5,073 -9,043 -2,368 2,153 11,864 12,582 11,864 10,334 23,414 2,584 -10,000 15,932 400 5,813 -3,768 -4,306 10,334 7,751 1,033 -18,000 32,944 431 5,064 2,790

- 34 -

UNIVERSITY OF NORTH GEORGIA RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2015

SCHEDULE "6"

Compensation included in Other Personal Services
Extra Compensation Correction Formica, Sarah
Moving Expense Adams, Carol Ayala, Cesar Conner-Kerr, Teresa Kieu, Thinh Kronenberg, Steven Leyba, John D Mantry, Guatam (Sonny) Mienie, Edward Novobilski, Andrew J

SALARIES

$

-182,590

77

5,000 2,000 5,834
51 2,000 3,000
500 4,280 5,000

TRAVEL

$

77,221,083 $

1,642,303

- 35 -

SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

UNIVERSITY OF NORTH GEORGIA 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 Inadequate Separation of Duties

Compliance Requirement: Activities Allowed or Unallowed

Eligibility

Internal Control Impact: Significant Deficiency

Compliance Impact:

N/A

Federal Awarding Agency: U.S. Department of Education

CFDA Number and Title: 84.SFA Student Financial Assistance

Description: Policies and procedures were insufficient to provide adequate Separation of Duties and internal controls over change management and logical access IT general controls for certain significant financial applications.

Criteria: Management of the University is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are properly processed and reported and password standards meet minimum requirements.

Condition: Our review of the established internal control structure associated with significant financial applications at the University revealed design and operating effectiveness deficiencies in change management, including separation of duties, and logical access controls intended to protect financial and student financial assistance information from unauthorized access, manipulation, and corruption. The details related to these deficiencies have been provided to University Management in accordance with Official Code of Georgia Annotated 50-6-9.

- 1 -

UNIVERSITY OF NORTH GEORGIA 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 these deficiencies with the University, management stated that the cause was directly related to ineffective policies and failure to adequately monitor change management, general security settings, and user access to the financial application.

Effect or Potential Effect: Failure to maintain adequate internal controls related to change management and logical access increases the risk that misappropriation of assets, fraud, errors, irregularities, and/or noncompliance with federal regulations could occur.

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: We concur with this finding. UNG will review relevant State, USG and UNG policies and will continue to develop procedures to provide adequate separation of duties and internal controls over change management and logical access to IT general controls. These procedures will be developed and applied to ensure all accounts are handled correctly to limit risk. User account permissions will be evaluated for the appropriate level of access across the system. The principle of least privilege will be applied. The accounts will be monitored for recertification on a quarterly basis.

Contact Person: Rick Crain, Assistant CIO, Enterprise Information Systems Telephone: (678) 717-3623; E-mail: rick.crain@ung.edu

FA 2015-002 Return of Title IV Funds

Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: CFDA Number and Title:

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

Description: The University did not properly perform the refund process and ensure that unearned Title IV funds were returned in a timely manner.

Criteria: 34 CFR 668.22 provides requirements over the treatment of Title IV funds when a student withdraws. The University is required to determine the amount of 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 Title IV programs when the total amount of Title IV grant or loan assistance, or both, that the student earned is less than the amount of the Title IV grant or loan assistance that was disbursed to the student as of the withdrawal date.

- 2 -

UNIVERSITY OF NORTH GEORGIA SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Condition: A sample of 25 students that received Federal financial assistance for the Fall 2014 and Spring 2015 semesters and officially withdrew from the University revealed the following deficiencies:
1. The refund calculation for four students who officially withdrew during the Fall 2014 semester and one student who officially withdrew during the Spring 2015 semester was calculated incorrectly due to the use of inaccurate institutional charges. These students were requested to return $3,688.47 less than the required amount to various Student Financial Assistance programs.
2. The refund calculation for two students who officially withdrew during the Spring 2015 semester was calculated incorrectly due to the use of inaccurate institutional charges and/or incorrect Title IV aid information. These students were required to return $2,287.23 in excess of the required amount to various SFA programs.
3. The proration between the school and student portion of the refund was incorrect for five of the students who officially withdrew during the Fall 2014 semester and four of the students who withdrew during the Spring 2015 semester.
4. Funds were not returned to the appropriate grantor programs within the required time frame of 45 days for two of the officially withdrawn students tested.
Questioned Cost: Questioned costs of $3,688.47, with likely questioned costs of $70,206.71, were identified for refunds calculated incorrectly.
Cause: In discussing the condition with University of North Georgia officials, these issues occurred as a result of an error within the student information system. This error caused the refund calculation process within the student information system to utilize a reduced institutional charge amount based on an incorrect original charge date.
Effect or Potential Effect: The Student Financial Assistance Office did not calculate the correct amount of refunds for the Title IV Federal program and did not apply the SFA refunds to the Title IV programs within the required time frame.
Recommendation: The University should develop and implement procedures to ensure that student financial aid refunds are properly calculated and that unearned funds are correctly returned to the appropriate accounts in a timely manner in accordance with the Higher Education Amendments 1998, Public Law 105-244. The University should also contact the U.S. Department of Education regarding the resolution of this finding.
- 3 -

UNIVERSITY OF NORTH GEORGIA SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Views of Responsible Officials and Corrective Action Plans: We concur with this finding. UNG investigated the cause of the refund calculation error and two issues were found. The first issue was whether bookstore charges were to be classified as institutional charges for the R2T4 calculations. Based on the 2014-2015 Federal Student handbook chapter 5 17, we did not include the bookstore charges since we believed that students had a real and reasonable opportunity to purchase the required books from an independent bookstore. Upon discussion with the auditors and the USDOE, they clarified for us that since we require the students to complete a process to get the funds to use at the other bookstore we cannot state that it is a reasonable opportunity to get the books and we must include the bookstore charges.
The second issue is based on the Federal Regulations regarding Institutional Charges in the Return to Title IV Calculations, it was discovered that the Original Charges Cut-Off Date reflected in Fall 2014 was an incorrect date which caused the inclusion of some reduced original charges in the Banner calculation. The Original Charges Date listed on the SOATERM Screen in Banner was Nov. 11, 2014 for Fall Semester 2014. The Original Charges Cut-Off Date for Spring 2014 was listed as January 5, 2015 in SOATERM. It caused a return of more than required amount. We have developed a new policy to establish the Original Charges Date as the first day following the full session drop/add period during each semester. The Registrar was notified 9/28/15 and the change was made beginning Spring 2015. We have also reviewed the names of the UNG team members who have access to the SOATERM screen and have reduced it to a limited number to eliminate the possibility of this error accruing again. We have corrected the BANNER date issue and updating the institutional charges to reflect any student who used the bookstore credit. We are recalculating all R2T4s to determine the exact calculation error amount and will contact USDOE to resolve the deficiency as quickly as possible.
Contact Person: Jill Rayner, Director of Financial Aid Telephone: (706) 864-1688; E-mail: jill.rayner@ung.edu
OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION)
FINANCIAL REPORTING Observation: Our review of the University's GAAP basis financial statements revealed errors and misclassifications. Several errors found in the Notes to the Financial Statements required adjustment. Also, year-end GAAP entries made resulted in the misclassification of Cash and Investments in the amount of $92,749
Recommendation: While these errors were relatively insignificant to the financial statements, we recommend that the University strengthen internal controls over the financial statement preparation and review process.
UNCOLLATERALIZED DEPOSITS Observation: The University failed to have its bank balances fully collateralized as required by Official Code of Georgia Annotated (O.C.G.A.) 45-8-12 which states in part: "The collecting officer or officer holding public funds may not have on deposit at any one time in any depository for a time longer than ten days a sum of money belonging to the public body when such depository has not given bond to the public body as set forth in this Code section. The aggregate of the face value of such surety bond and the market value of securities pledged shall be equal to not less than 110 percent of the public funds being secured after the deduction of the amount of deposit insurance". It was noted that $287,440 of the bank balances held at BB&T were not collateralized as required by O.C.G.A. 45-8-12.
- 4 -

UNIVERSITY OF NORTH GEORGIA SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015 FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Recommendation: We recommend that the School District implement procedures to monitor the collateralization of bank balances to ensure compliance with State laws governing deposits. Views of Responsible Officials and Corrective Action Plans: We concur. The error of the certificate of deposit at BB&T has now been corrected. The monitoring of investments is now a quarterly activity in the Comptroller's Office.
- 5 -