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

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

GEORGIA REGENTS UNIVERSITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S REPORT

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET POSITION B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION C STATEMENT OF CASH FLOWS D STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUNDS E STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FIDUCIARY FUNDS F NOTES TO THE FINANCIAL STATEMENTS

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF FUNDING PROGRESS 2 SCHEDULE OF CONTRIBUTIONS 3 SCHEDULES OF EMPLOYERS' AND NONEMPLOYERS' NET PENSION LIABILITY 4 SCHEDULE OF CHANGES IN NET PENSION LIABILITY 5 SCHEDULE OF INVESTMENT RETURNS 6 NOTES TO REQUIRED SUPPLEMENTARY INFORMATION

SUPPLEMENTARY INFORMATION

7 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND 8 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT
(NON-GAAP BASIS) BUDGET FUND 9 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET
BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
10 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
11 RECONCILIATION OF BUDGET TO GAAP 12 RECONCILIATION OF SALARIES AND TRAVEL

Page
i
2 3 4 6 7 8
36 37 38 39 40 41
43 44
45
47 49 51

GEORGIA REGENTS UNIVERSITY - TABLE OF CONTENTS -
SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
December 31, 2014

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Ricardo Azziz, President
INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying basic financial statements (Exhibits A through F) of Georgia Regents University, a unit of the University System of Georgia, which is an organizational unit of the State of Georgia, as of and for the year ended June 30, 2014.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to Georgia Regent's University's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Georgia Regent's University's internal control. Accordingly, we express
14ARL-62

no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of Georgia Regents University as of June 30, 2014, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1, the financial statements of Georgia Regents University are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of Georgia Regents University. They do not purport to, and do not, present fairly the financial position of the State of Georgia as of June 30, 2014, the changes in its financial position or its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
As described in Note 1 to the financial statements, in 2014, Georgia Regents University adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans - an amendment of GASB Statement No. 25. Our opinion is not modified with respect to this matter.
As described in Note 1 to the financial statements, in 2014, Georgia Regents University adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. Our opinion is not modified with respect to this matter.
As discussed in Note 1 to the financial statements, the prior period financial statements have been restated to properly reflect the University's Early Retirement Plan as a Pension Trust Fund. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis, Schedule of Funding Progress, Schedule of Contributions, Schedules of Employers' and Nonemployers' Net Pension Liability, Schedule of Changes in Net Pension Liability, Schedule of Investment Returns and Notes to Required Supplementary Information, as presented on pages i through vi and pages 36 through 41, respectively, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquires of management about the methods of
14ARL-62

preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Georgia Regents University. The accompanying supplementary information (Schedules 7 through 12) is presented for purposes of additional analysis and is not a required part of the basic financial statements.
The accompanying supplementary information (Schedules 7 through 12) is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting or other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Other Reporting Required by Governm ent Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 31, 2014, on our consideration of Georgia Regents University's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Georgia Regents University's internal control over financial reporting and compliance.
Respectfully,

GSG:as 14ARL-62

Greg S. Griffin State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

GEORGIA REGENTS UNIVERSITY
Management's Discussion and Analysis

Introduction
Georgia Regents University is one of the 31 institutions of higher education of the University System of Georgia. The Health Sciences campus was incorporated in 1828 as the Medical Academy of Georgia and is known for its world-class instructional, clinical, and research programs. The campus offers more than 40 academic programs in allied health sciences, dentistry, graduate studies, medicine, and nursing at the baccalaureate, masters, doctoral, and professional levels. The Summerville campus is the primary public institution of higher learning in Georgia committed to the advancement of knowledge and the enrichment of its community. It is well known for its dedication to expanding educational opportunities for people of all ages and backgrounds. The wide range of educational opportunities attracts a highly qualified faculty and student body. A brief historical comparison of student levels is shown by the comparison numbers that follow.

Students (Headcount)

Students (FTE)

Fiscal Year 2014 Fiscal Year 2013 Fiscal Year 2012

8,995 9,557 9,689

8,280 8,672 8,754

Overview of the Financial Statements and Financial Analysis

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

Statement of Net Position
The Statement of Net Position presents the assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position of the University as of the end of the fiscal year. The Statement of Net Position is a point-of-time financial statement. The Statement of Net Position presents a fiscal snapshot of Georgia Regents University. The Statement of Net Position presents end-of-year data concerning assets (current and noncurrent) plus deferred outflows, and liabilities (current and noncurrent) plus deferred inflows, and net position (assets plus deferred outflows minus liabilities plus deferred inflows). The differences between current and noncurrent assets are discussed in the Notes to the Financial Statements.

From the data presented, readers of the Statement of Net Position are able to determine the assets available to continue the operations of the institution and how much the institution owes vendors.
Finally, the Statement of Net Position provides a picture of the net position (assets plus deferred outflows of resources minus liabilities plus deferred inflows of resources) and their availability for expenditure by the institution. Net position is divided into three major categories. The first category, net investment in capital assets, provides the institution's equity in property, plant, and equipment owned by the institution. The next category is restricted, which is divided into two categories, nonexpendable and expendable.

i

The corpus of nonexpendable, restricted resources is available only for investment purposes. Expendable, restricted resources are available for expenditure by the institution, but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted. Unrestricted resources are available to the institution for any lawful purpose.
Statement of Net Position, Condensed

June 30, 2014

June 30, 2013

Assets Current Assets Capital Assets, Net Other Assets

$ 138,092,112 470,856,169 71,743,647

$ 118,061,072 485,226,134 102,313,534

Total Assets

$ 680,691,928

$ 705,600,740

Liabilities Current Liabilities Noncurrent Liabilities

$ 104,904,735 69,334,953

$ 123,132,038 69,644,066

Total Liabilities

$ 174,239,688

$ 192,776,104

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

$ 415,713,919
2,133,850 49,967,553 34,904,154
3,732,764

$ 428,889,825
1,864,982 49,422,282 34,905,141 -2,257,594

Total Net Position

$ 506,452,240

$ 512,824,636

Total assets decreased by $24,908,812 which was primarily due to a decrease of $30,569,887 in the category of other assets. The balance of the decrease was mostly due to the reclassification of the Early Retirement Plan to the Pension Trust Fund.
Total liabilities decreased for the year by $18,536,416. The decrease in liabilities was primarily due to an increase in advance for tuition and fees offset by a decrease in accounts payable related to the reclassification of the Early Retirement Plan.
The combination of the decrease in total assets of $24,908,812 and the decrease in total liabilities of $18,536,416 yields a decrease in net position of $6,372,396. The decrease in net position is primarily in the category of net investment in capital assets, in the amount of $13,175,906.
Statement of Revenues, Expenses and Changes in Net Position
Changes in total net position as presented on the Statement of Net Position are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Position. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses,

ii

gains and losses received or spent by the institution. Generally, operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. For example state appropriations are nonoperating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.
Statement of Revenues, Expenses and Changes in Net Position, Condensed

June 30, 2014

June 30, 2013

Operating Revenues Operating Expenses

$ 558,821,262 758,413,070

$ 522,505,092 717,166,668

Operating Loss

$ -199,591,808

$ -194,661,576

Nonoperating Revenues and Expenses

191,435,691

203,319,370

Income (Loss) Before Other Revenues, Expenses, Gains or Losses

$ -8,156,117

$

8,657,794

Other Revenues, Expenses, Gains or Losses

1,783,721

10,355,204

Increase (Decrease) in Net Position

$ -6,372,396

$ 19,012,998

Net Position at Beginning of Year

512,824,636

493,811,638

Net Position at End of Year

$ 506,452,240

$ 512,824,636

The Statement of Revenues, Expenses and Changes in Net Position reflects a negative year as evidenced by the decrease in net position at the end of the year. Some highlights of the information presented on this statement are as follows:

iii

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

June 30, 2014

June 30, 2013

Operating Revenue

Tuition and Fees

$

Grants and Contracts

Sales and Services of Educational Departments

Auxiliary

Other

77,795,381 454,251,359
9,549,610 16,700,182
524,730

$ 72,453,759 424,467,679 9,819,487 15,160,666 603,501

Total Operating Revenue

$ 558,821,262

$ 522,505,092

Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other

$ 173,404,460 14,899,446 4,061,192 2,068,543 -31,419

$ 161,880,219 19,889,409 23,761,862 1,473,811 -244,508

Total Nonoperating Revenue

$ 194,402,222

$ 206,760,793

Capital Grants and Gifts State Other

$

1,783,721

$ 10,346,120 9,084

Total Capital Grants and Gifts

$

1,783,721

$ 10,355,204

Total Revenues

$ 755,007,205

$ 739,621,089

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

June 30, 2014

June 30, 2013

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

$ 157,906,135 47,261,760 44,380,532 58,934,000 6,066,854 69,706,638 37,196,509 7,911,350 17,368,438
311,680,854

$ 141,423,407 48,157,202 74,132,179 54,228,508 6,847,220 66,316,795 34,285,130 9,617,703 15,604,660
266,553,864

Total Operating Expenses
Nonoperating Expenses Interest Expense (Capital Assets)

$ 758,413,070 2,966,531

$ 717,166,668 3,441,423

Total Expenses

$ 761,379,601

$ 720,608,091

iv

Operating revenues increased by $36,316,170 in fiscal year 2014. Although tuition and fees included a 7% increase, the largest increase was in grants and contracts. Auxiliary revenue also increased with only a slight decrease in the remaining categories.
The auxiliary revenue increase of $1,539,516 is largely a result of mandatory fees which were applied to all students in fiscal year 2014 rather than just certain fees by campus as in the previous fiscal year.
Nonoperating revenues decreased by $12,358,571 for the year primarily due to a decrease of $19,700,670 in gifts which last year included a large donation to partially finance the GSFIC managed construction of the J. Harold Harrison Education Commons Building.
The compensation and employee benefits category increased by $25,250,538 and primarily affected the Instruction, Auxiliary Enterprises, and Patient Care categories. The increase was due to merit increases and the implementation of a three-year equalization plan.
Utilities increased by $1,167,504 during the past year. The increase was primarily associated with the natural gas and fuel oil costs that were experienced in the winter of fiscal year 2014 and affected the Plant Operations and Maintenance category.

Statement of Cash Flows
The final statement presented by the Georgia Regents University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Position.
Cash Flows for the Years Ended June 30, 2014 and June 30, 2013, Condensed

June 30, 2014

June 30, 2013

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

$

-160,102,951

196,322,284

-15,031,668

-4,343,247

$

-171,664,389

199,516,871

-49,077,003

19,807,667

Net Change in Cash Cash, Beginning of Year Cash, Prior Period Adjustment

$

16,844,418

21,376,809

-2,204,355

$

-1,416,854

22,793,663

Cash, End of Year

$

36,016,872

$

21,376,809

v

Capital Assets Georgia Regents University had capital asset additions totaling $13,252,689 in fiscal year 2014. The University did not have any individually significant capital asset additions during the year. Other on-going projects funded by the Georgia State Financing and Investment Commission (GSFIC) included $2,116,532. Projected funding by GSFIC for fiscal year 2015 will be approximately the same. For additional information concerning Capital Assets, see Notes 1, 7, 10, and 11 in the Notes to the Financial Statements. Long-Term Liabilities Georgia Regents University had Long-Term Liabilities of $91,228,396 of which $21,893,443 was reflected as current liability at June 30, 2014. For additional information concerning Long-Term Liabilities, see Notes 1 and 9 in the Notes to the Financial Statements. Early Retirement Pension Plan This fund was approved by the Board of Regents as authorized pursuant to the Official Code of Georgia Annotated Section 47-21-21 for the purpose of accumulating funds necessary to provide additional retirement funds to employees who retired under the plan which was devised as a means of manpower reduction. For additional information concerning the Early Retirement Pension Plan, please refer to Note 13 in the Notes to the Financial Statements. Economic Outlook Along with all other institutions of the University System of Georgia, the University continues to respond to pressures to hold costs to lower levels and tuition to very modest increases. For fiscal year 2015, the state appropriations budget has not been reduced and undergraduate tuition was held to a 3.9% increase for continuing students. The longer-term outlook is somewhat more optimistic as the State and National economies continue to show promise of slow but positive growth and strong budget support for education is shown by Georgia Governor Nathan Deal and the General Assembly.
Ricardo Azziz, M.D., President Georgia Regents University
vi

BASIC FINANCIAL STATEMENTS

GEORGIA REGENTS UNIVERSITY STATEMENT OF NET POSITION
JUNE 30, 2014
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Margin Allocation Funds Receivables - Other Inventories (Note 4) Prepaid Items (Note 5)
Total Current Assets
Noncurrent Assets Investments Investments (Externally Restricted) Due from USO - Capital Liability Reserve Fund Notes Receivable, Net Capital Assets, Net (Note 7)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Advances (Including Tuition and Fees) (Note 8) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET POSITION
Net Investment in Capital Assets Restricted for:
Nonexpendable Expendable Capital Projects Unrestricted
Total Net Position
The notes to the financial statements are an integral part of this statement. - 2 -

EXHIBIT "A"

$

36,016,872

7,900,817 4,396,995 44,038,185 1,798,084 43,941,159

138,092,112

46,842,223 21,776,692
197,730 2,927,002 470,856,169
542,599,816
680,691,928

26,742,888 1,527,351 425,222 85
52,620,695 1,695,051 1,680,814
20,212,629
104,904,735
53,461,436 15,873,517
69,334,953
174,239,688
415,713,919
2,133,850 49,967,553 34,904,154
3,732,764
$ 506,452,240

GEORGIA REGENTS UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
YEAR ENDED JUNE 30, 2014
OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) Less: Scholarship Allowances
Grants and Contracts Federal Federal Stimulus State Other
Sales and Services Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Loss
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Other Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Expenses
Net Nonoperating Revenues
Loss Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State
Decrease in Net Position
Net Position - Beginning of Year
Net Position - End of Year
The notes to the financial statements are an integral part of this statement.
- 3 -

EXHIBIT "B"

$

91,736,853

-13,941,472

53,024,999 104,764
185,370,226 215,751,370
9,549,610 516,469

3,726,894 2,701,006
175,391 2,438,254 1,905,292 2,804,181 2,949,164
8,261

558,821,262

189,240,231 207,103,702 117,326,730
351,826 3,756,333 9,110,343 11,561,206 192,825,359 27,137,340
758,413,070
-199,591,808

173,404,460
10,502,451 4,396,995 4,061,192 2,068,543 -2,966,531 -31,419
191,435,691
-8,156,117
1,783,721
-6,372,396
512,824,636

$

506,452,240

GEORGIA REGENTS UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2014
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 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 Expenses
Net Cash Flows Provided by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from Sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments
Net Cash Used by Investing Activities
Net Increase in Cash
Cash and Cash Equivalents - Beginning of Year - Originally Reported
Early Retirement Plan Cash Moved to Fiduciary Fund - See Note 1
Cash and Cash Equivalents - Beginning of Year - Restated
Cash and Cash Equivalents - End of Year

EXHIBIT "C"

$

79,708,644

458,929,552

9,595,781

-320,773,637

-394,204,426

-9,110,343

-461,822

865,207

3,839,091 2,837,617
180,029 2,437,542 2,004,788 3,001,157 2,856,849 -1,808,980

-160,102,951

173,404,460 1,176,247
21,970,726 -229,149
196,322,284

1,783,721 1,192,025 -13,589,549 -1,451,334 -2,966,531
-15,031,668

8,000 274,184 -4,625,431
-4,343,247
16,844,418
21,376,809
-2,204,355
19,172,454

$

36,016,872

- 4 -

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

EXHIBIT "C"

$

-199,591,808

27,137,340
-7,761,458 -532,242 -371,732 403,385
6,232,882 12,522,266
1,858,416

$

-160,102,951

$

257,275

$

1,794,359

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

GEORGIA REGENTS UNIVERSITY STATEMENT OF FIDUCIARY NET POSITION
FIDUCIARY FUNDS JUNE 30, 2014
ASSETS Cash and Cash Equivalents Investments
Debt Securities - Mutual Bond Fund Bond/Equity Mutual Fund Equity Mutual Funds - International Equity Securities - Domestic Equity Securities - International Real Estate Fund Teachers Retirement System of Georgia
Georgia Pooled Fund
Total Assets
NET POSITION Held in Trust for Plan Participants

EXHIBIT "D"

PENSION TRUST FUND

$

6,348,522

10,018,022 1,360,217 6,174,139
19,940,294 2,031,690 2,573,247

27,747,479

$ 76,193,610

$ 76,193,610

The notes to the basic financial statements are an integral part of this statement. - 6 -

GEORGIA REGENTS UNIVERSITY STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FIDUCIARY FUNDS YEAR ENDED JUNE 30, 2014
ADDITIONS Contributions Employer Investment Earnings Net Increase in Fair Value of Investments Investment Income Total Investment Earnings Less Investment Expense Net Investment Earnings Total Additions
DEDUCTIONS Benefit Payments Change in Net Position
Net Position - Beginning of Year, Restated - See Note 1
Net Position - End of Year

EXHIBIT "E"

PENSION TRUST FUND

$

13,084,672

11,096,562 737,421
11,833,983 -106,232
11,727,751 24,812,423

13,054,512 11,757,911 64,435,699

$

76,193,610

The notes to the basic financial statements are an integral part of this statement. - 7 -

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

EXHIBIT "F"

Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia Regents University serves the local, state, and national communities by providing leadership and excellence in teaching, discovery, clinical care, and service as a student-centered comprehensive research university and academic health center, with a wide range of programs from learning assistance through postdoctoral studies.
Reporting Entity Georgia Regents University is one of thirty-one (31) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Regents University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Regents University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Regents University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt Affiliated Organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential Component Units of the State. See Note 18 for additional information.
Financial Statement Presentation The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the University's assets, deferred outflow of resources, liabilities, deferred inflows of resources, net position, revenues, expenses, changes in net position and cash flows.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-University transactions have been eliminated.
New Accounting Pronouncements In fiscal year 2014, the University adopted the Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. The provisions of this Statement clarify the use of deferred inflows of resources and deferred outflows of resources. Certain items, including those items which were previously reported as assets and liabilities, will now be reported as outflows of resources or inflows of resources. As of June 30, 2014, the University did not have any deferred outflows of resources or deferred inflows of resources.

- 8 -

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

EXHIBIT "F"

In fiscal year 2014, the University adopted Governmental Accounting Standards Board (GASB) Statement No. 66, Technical Corrections - 2012, an amendment to GASB Statements No. 10 and No. 62. The objective of this Statement is to resolve conflicting guidance by amending GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues and GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in PreNovember 30, 1989 FASB and AICPA Pronouncements. GASB Statement No. 10 was amended by removing the provision that limited fund based reporting of an entity's risk and financing activities to certain funds. GASB Statement No. 62 was amended by modifying guidance on (1) operating lease payments that vary from a straight-line basis, (2) purchases of a loan or a group of loans, and (3) recognition of servicing fees on mortgage loans that are sold when the stated service fee rate differs from a current (normal) servicing fee rate. The adoption of this statement does not have a significant impact on the University's financial statements.
In fiscal year 2014, the University adopted Governmental Accounting Standards Board (GASB) Statement No. 67, Financial Reporting for Pension Plans, an amendment of GASB Statement No. 25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans. This Statement establishes new financial reporting standards for state and local governmental pension plans that are administered through a trust or similar arrangement. This statement resulted in changes to the actuarial calculation of total and net pension liability and the related note disclosures and required supplementary information.
In fiscal year 2014, the University adopted Governmental Accounting Standards Board (GASB) Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. This Statement establishes accounting and reporting requirements for state and local governments that extend or receive financial guarantees that are nonexchange transactions. The adoption of this statement does not have a significant impact on the University's financial statements.
Future Accounting Pronouncements In fiscal year 2015, the University will adopt Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this Statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this Statement will require the Institute to record a liability for its proportionate share of the Net Pension Liability of pension plans in which it participates. Actuarial estimates are currently being made to determine the Institute's liability, the effects of which are believed to be material.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Investments Investments include financial instruments with terms in excess of 13 months, certain other securities for the production of revenue, land, and other real estate held as investments by endowments. The University accounts for its investments at fair value. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Position. The Board of Regents Total Return Fund, the Board of Regents Diversified Fund, and the Teacher Retirement System Georgia Pooled Fund are included under Investments.

- 9 -

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

EXHIBIT "F"

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

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

EXHIBIT "F"

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. Georgia Regents University's contribution to the fund as of June 30, 2014 was $197,730.
Deposits Deposits represent an amount provided for use by the military science department to offset mailing costs of recruitment campaign materials.
Deposits Held for Other Organizations Deposits held for other organizations account for assets held by the College as an agent for various students, governments or organizations.
Advances Advances include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Advances also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Position, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Position.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Position The University's net position is classified as follows:
Net Investment in Capital Assets: This represents the University's total investment in capital assets, net of outstanding debt obligations, related to those capital assets. To the extent debt has been incurred or deferred inflows of resources have been received but not yet expended for capital assets, such amounts are not included as a component of the net investment in capital assets. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section.
Restricted - nonexpendable: 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 be either expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted - expendable: Restricted expendable net position includes resources in which the University is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties.

- 11 -

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

EXHIBIT "F"

Expendable Restricted include the following at June 30, 2014:

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

$

35,023,580

6,271,887

1,012,643

7,659,443

Total Restricted Expendable

$

49,967,553

Restricted - expendable - Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.
Unrestricted: Unrestricted net position represents resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus) of $333,056.41. Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of the State Treasurer. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty, and staff.

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

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

$

3,115,562

20,194,903

146,104

197,730

-19,921,535

Total Unrestricted Net Position

$

3,732,764

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Georgia Regents University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues and Expenses The Statement of Revenues, Expenses and Changes in Net Position classifies fiscal year activity as operating and nonoperating according to the following criteria:
Operating revenue includes activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) certain Federal, state and local grants and contracts, and (3) sales and services.
- 12 -

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

EXHIBIT "F"

Nonoperating revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenue by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments, such as state appropriations and investment income.
Operating expenses includes activities that have the characteristics of exchange transactions.
Nonoperating expense includes activities that have the characteristics of nonexchange transactions, such as capital financing costs and costs related to investment activity.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Position. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf.
Certain governmental grants, such as Pell grants, and other Federal, state, or nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances.
Restatement of Prior Year Net Position In conformity with Governmental Accounting Standards Board Statement No. 67, Financial Reporting for Pension Plans, the Georgia Regents University Early Retirement Plan previously reported in Business Type Activities has now been reclassified as a Pension Trust Fund. Beginning net position has been restated for (1) the amount previously reported in Business Type Activities and (2) the initial plan contributions invested in Teachers Retirement System Georgia Pooled Fund.

Business Type Activities Net Position, July 1, 2013, as Previously Reported To Remove Early Retirement Plan: Cash and Investments previously reported in Business Type Activities Liabilities previously reported in Business Type Activities

$ 512,824,636
42,130,557 -42,130,557

Net Position, July 1, 2013, as Restated

$ 512,824,636

Pension Trust Fund Net Position, July 1, 2013, as Previously Reported Cash and Investments previously Reported in Business Type Activities Georgia Pooled Fund

$

0

42,130,557 22,305,142

Net Position, July 1, 2013, as Restated

$

64,435,699

- 13 -

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

EXHIBIT "F"

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.
At June 30, 2014, the carrying value of deposits was $43,637,363 and the bank balance was $50,649,304. Of the University's deposits, $50,399,304 was uninsured. Of these uninsured deposits, $4,153,111 was collateralized with securities held by the financial institution's trust department or agent in the University's name, $46,246,193 was collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name.
Investments Georgia Regents University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws.

- 14 -

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

EXHIBIT "F"

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

The University does not have a formal policy addressing variable-rate securities. The University relies upon the judgment of its Investment Managers and the policies of the investment vehicles related to Georgia Regents University's investment assets.
The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia - System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits - Education Audit Division or on their web site at http://www.audits.ga.gov.
The Teachers Retirement System Georgia Pooled Fund 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. The investment pool is not rated.
- 15 -

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

EXHIBIT "F"

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University's Investment Policy and Guidelines manages interest rate risk by recognizing that short-term loss of principal may be necessary in order to achieve long-term safety and growth of principal; and that in order to maximize income from debt instruments with maturities longer than sixty days, market values may be exposed to short-term volatility.
The Effective Duration of the Total Return Fund is 5.25 years. Of the University's total investment of $575,305 in the Total Return Fund, $17,609 is invested in debt securities.

The Effective Duration of the Diversified Fund is 5.05 years. Of the University's total investment of $9,424,261 in the Diversified Fund, $2,867,614 is invested in debt securities.
Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the University will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University does not have a formal policy for managing custodial credit risk for investments. Investment Managers are held accountable for custodial safety. The University's Investment Policy and Guidelines require that managers be registered in good standing as investment advisors; and will be experienced with proven track records.
At June 30, 2014, $67,303,756 of the University's applicable investments were uninsured and held by the investment's counterparty's trust department or agent, in the University's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University does not have a formal policy for managing credit quality risk. All investment vehicles are designed to comply with Georgia Code 50-17-63.

The investments subject to credit quality risk are reflected below:

Fair Value

Unrated

Related Debt Investments U. S. Agency Securities Bond Securities Mutual Bond Fund

$

37,017,202 $

37,017,202

13,113,908

13,113,908

10,018,022

10,018,022

$

60,149,132 $

60,149,132

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The University's Investment Policy and Guidelines for managing concentration of credit risk requires that stocks and debt issues be diversified. The University also relies upon the concentration of credit risk policy of the individual investment vehicles related to Georgia Regents University's investment assets. More than 5% of the University's investments are in the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, and iShares Core Total U. S. Aggregate Exchange-traded Fund. These investments are 27.0%, 9.6%, and 5.4% respectively of the University's total investments.

- 16 -

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

EXHIBIT "F"

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

Student Tuition and Fees

$

Auxiliary Enterprises and Other Operating Activities

Federal Financial Assistance

Georgia State Financing and Investment Commission

Margin Allocation Funds

Other

12,063,907 1,122,014 7,900,817 404,747 4,396,995
30,900,533

Less Allowance for Doubtful Accounts

56,789,013 453,016

Net Accounts Receivable

$

56,335,997

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

Bookstore

$

Other

Total Inventories

$

1,659,439 138,645
1,798,084

Note 5. Prepaid Items Prepaid Items consisted of the following at June 30, 2014:

Georgia State Financing and Investment Commission Early Retirement Program - Net Pension Asset Miscellaneous

$ 34,904,154 7,178,658 1,858,347

Total Prepaid Items

$ 43,941,159

Note 6. Notes/ Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2014. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U. S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2014, the allowance for uncollectible loans was approximately $388,839.

- 17 -

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

EXHIBIT "F"

Note 7. Capital Assets Following are the changes in capital assets for the year ended June 30, 2014:

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

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

$

28,306,359

87,006

4,774,011 $

4,316,363 $

$ 3,464,928

28,306,359 87,006
5,625,446

Total Capital Assets, Not Being Depreciated

33,167,376

4,316,363

3,464,928

34,018,811

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

6,526,145 551,901,015
14,632,413 112,773,498
61,299,006 29,524,581

4,164,142 407,500
6,023,288 257,275
1,549,049

4,161,932 86,795 85,402

6,526,145 556,065,157
15,039,913 114,634,854
61,469,486 30,988,228

Total Assets Being Depreciated

776,656,658

12,401,254

4,334,129

784,723,783

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

1,351,884 198,303,424
5,664,070 83,425,655 14,257,955 21,594,912

301,393 14,811,885
517,540 8,116,574 2,024,810 1,365,138

3,681,743 81,670 85,402

1,653,277 213,115,309
6,181,610 87,860,486 16,201,095 22,874,648

Total Accumulated Depreciation

324,597,900

27,137,340

3,848,815

347,886,425

Total Capital Assets, Being Depreciated, Net

452,058,758

-14,736,086

485,314

436,837,358

Capital Assets, Net

$

485,226,134 $

-10,419,723 $

3,950,242 $

Note 8. Advances (Including Tuition and Fees)

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

470,856,169

Prepaid Tuition and Fees Research Other Advances

$ 17,739,272 24,733,417 10,148,006

Total Advances

$ 52,620,695

- 18 -

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

EXHIBIT "F"

Note 9. Long-Term Liabilities Long-Term liability activity for the year ended June 30, 2014 was as follows:

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

Current Portion

Leases Lease Obligations

$ 56,336,309 $

257,275 $ 1,451,334 $ 55,142,250 $ 1,680,814

Other Liabilities Compensated Absences

34,227,730

25,765,725

23,907,309

36,086,146

20,212,629

Total Long-Term Obligations $ 90,564,039 $ 26,023,000 $ 25,358,643 $ 91,228,396 $ 21,893,443

Note 10. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,543,044 as of June 30, 2014. This amount is not reflected in the accompanying basic financial statements.
Note 11. Lease Obligations
Georgia Regents University is obligated under various operating leases for the use of equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of equipment and real property.
CAPITAL LEASES
Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various fiscal years between 2015 and 2036. Expenditures for fiscal year 2014 were $4,595,439 of which $2,966,531 represented interest and $177,574 represented executory costs. Total principal paid on capital leases was $1,451,334 for the fiscal year ended June 30, 2014. Interest rates range from 3.48% to 13.54%. The following is a summary of the carrying values of assets held under capital lease at June 30, 2014:

Description

Gross Amount (+)

Accumulated Depreciation
(-)

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

Outstanding Balances per Lease Schedules at June 30, 2014

Equipment Buildings - (PPV Only)

$

1,852,772 $ 1,010,796 $

59,616,714

15,190,299

841,976 $ 44,426,415

868,464 54,273,786

Total Assets Held Under Capital Lease

at June 30, 2014

$ 61,469,486 $ 16,201,095 $

45,268,391 $

55,142,250

- 19 -

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

EXHIBIT "F"

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.
Georgia Regents University had three capital leases with affiliated organizations in the current fiscal year.
In November 2004, Georgia Regents University entered into a capital lease of $27,659,678 at 6.85% with the MCG-PPG Cancer Research Center, LLC, whereby the University leases the third, fourth, and fifth floors of the Cancer Research Center for a thirty year period that began January 2006 and expires December 2035. At the end of the lease, title to the building is transferred to the University. The outstanding liability at June 30, 2014, on this capital lease is $24,474,650.
In August 2004, Georgia Regents University entered into a capital lease of $20,246,137 at 5.23% with the Augusta State University Foundation whereby the University leases a student housing complex for a thirty year period that began September 2005 and will expire January 2035. In November 2012, the original bond was refunded at 4.26% for the same term. The outstanding liability at June 30, 2014, on this capital lease is $19,522,828.
In February 2005, the University entered into another capital lease of $11,782,962 at 4.72% with the Augusta State University Foundation whereby the University leases a student activities center for a twenty-nine year term that began March 2006 and will expire in June 2034. The outstanding liability at June 30, 2014, on this capital lease is $10,276,308.
Georgia Regents University also has various capital leases for equipment with an outstanding balance at June 30, 2014 in the amount of $868,464.
OPERATING LEASES
Georgia Regents University's noncancellable operating leases having remaining terms of two years or less. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

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

EXHIBIT "F"

FUTURE COMMITMENTS
Future commitments for capital leases (which here and on the Statement of Net Position include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2014, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2015 2016 2017 2018 2019 2020 - 2024 2025 - 2029 2030 - 2034 2035 - 2036

$

4,740,649 $

4,753,275

4,606,578

4,545,104

4,518,402

22,775,653

22,992,350

22,423,863

4,113,831

1,066 2,441

Total Minimum Lease Payments

$

95,469,705 $

3,507

Less: Interest Less: Executory Costs (if paid)

35,842,494 4,484,961

Principal Outstanding

$

55,142,250

Georgia Regents University's fiscal year 2014 expense for rental of equipment under operating leases was $16,650.

Note 12. Retirement Plans
Georgia Regents University participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia. These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that Georgia Regents University participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.
Employees' Retirement System of Georgia
The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers Retirement System of Georgia. One of the ERS System plans, the Employees' Retirement System of Georgia (ERS), is a cost-sharing multiple-employer defined benefit pension plan that was established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is

- 21 -

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

EXHIBIT "F"

directed by a Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract.
On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1, 1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415.
The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are "new plan" members subject to the modified plan provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009 also have the option to change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, Georgia Regents University pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Georgia Regents University 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. Georgia Regents University is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These Georgia Regents University contributions are not at any time refundable to the member or his/her beneficiary.

- 22 -

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

EXHIBIT "F"

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

Old Plan* New Plan GSEPS

18.46% 18.46% 15.18%

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

Members become vested after 10 years of service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions; the member forfeits all rights to retirement benefits.
Teachers Retirement System of Georgia
The Teachers Retirement System of Georgia (TRS) is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS.
On October 25, 1996, the Board created the Supplemental Retirement Benefit Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2014 were 6.00% of annual salary. Employer contributions required for fiscal year 2014 were 12.28% of annual salary as required by the June 30, 2011 actuarial valuation.

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

EXHIBIT "F"

The following table summarizes the Georgia Regents University contributions by defined benefit plan for the years ending June 30, 2014, June 30, 2013, and June 30, 2012 (dollars in thousands):

Fiscal Year

ERS

Required

Percentage

Contribution

Contributed

TRS

Required

Percentage

Contribution

Contributed

2014 2013 2012

$

104,806

$

89,395

$

65,638

100% 100% 100%

$ 21,780,531 $ 19,623,178 $ 18,166,483

100% 100% 100%

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or all exempt full and partial benefit eligible employees, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (VALIC, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Georgia Regents University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2014, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 6% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Georgia Regents University and the covered employees made the required contributions of $13,359,010 (9.24%) and $8,674,685 (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 Georgia Regents University 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.

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

EXHIBIT "F"

Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2014 amounted to $589,537 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 13. Early Retirement Pension Plan

Plan Description Georgia Regents University Early Retirement Pension Plan (ERP) is a single-employer defined benefit pension plan administered by Bryan, Pendleton, Swats, and McAlister. The plan was derived by the Georgia Regents University as a means of manpower reduction and was approved by the Board of Regents of the University System of Georgia (BOR) effective January 1, 2000.
The plan was intended to provide eligible participants additional benefits above the amounts payable through Teachers Retirement System of Georgia (TRS). The plan was designed to allow vested employees aged 55 or employees of any age with 25 years of creditable service to retire without penalties as applied by the Teachers Retirement System of Georgia (TRS) for early retirement. The plan would allow for all participants to retire as if they were vested and aged 60 or had attained 30 years of creditable service. Any member who opted into the Optional Retirement Plan aged 55 with 10 years of service by June 30, 2000 was also eligible to participate in the plan.
The plan is closed to new entrants. There were no active plan participants. As of January 1, 2014, plan participants consisted of the following:

Inactive Plan Participants: Retirees and Beneficiaries Currently Receiving Benefits Terminated Employees Entitled to Deferred Benefits Disabled Employees Entitled to Deferred Benefits
Total

656 0 0
656

TRS provides a benefit equal to 2% of the participant's average annual compensation during the two consecutive years of creditable service which produce the highest such average, multiplied by the number of years of creditable service, limited to 40 years. If the participant has less than 30

- 25 -

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

EXHIBIT "F"

years of creditable service and has not attained age 60 at the time of retirement, the benefit will be reduced by the lesser of 1/12 of 7% for each month that retirement precedes age 60 or 7% for each year or fraction of a year by which the participant has less than 30 years of creditable service at the time of retirement.
The ERP provides the additional benefits that would have been payable under TRS based on the following adjustments:
Age of the participant was increased five years Participant's creditable service was increased five years Participant's annual rate of earnings as of August 1, 1999 was projected five years
into the future with 3% increases each year
ERP benefits will be increased 3% a year as a cost-of-living adjustment (COLA): 1-1/2% on each January 1 and July 1. The ERP provided COLA's for both the ERP and TRS benefits until actual eligibility for a COLA through TRS occurred. Since that time, the ERP has provided COLA's only on the portion of the benefit paid by the ERP, and TRS has provided COLA's under the terms of the TRS plan.
The ERP does not issue a standalone report
Funding Policy The fund sources that provided for an employee's salary, as of December 31, 1999, would be responsible for funding the plan to provide for retiree benefits. There is no additional cost to the employee/retiree, Board of Regents, or State of Georgia for this plan. Contributions are made by the University based on the actuarial valuation for the plan. For fiscal year 2014, affiliated organizations contributed $5,886,802 to the plan on-behalf of the University.
Since this plan was not pre-funded, Georgia Regents University approach is to deposit as much into the ERP fund in the earlier years as is possible, thereby, realizing a greater return on investment. Effective January 1, 2009, the period to amortize the unfunded accrued liability was extended 4 years to 14 years. The funding policy is reasonable and in compliance with minimum funding requirements set forth in Code Section 47-20-10 of the Public Retirement Systems Standards Law. With this change, the plan should be fully funded by June 30, 2023.

- 26 -

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

EXHIBIT "F"

Annual Pension Cost and Net Pension Asset The ERP's annual pension cost and net pension asset for the current year were as follows:

Total

Annual Required Contribution Interest on Net Pension Asset Adjustments on Annual Required Contribution

$ 13,045,051 -576,154
1,119,167

Annual Pension Cost

13,588,064

Contributions Made (1)

-13,084,672

Decrease in Net Pension Asset

-503,392

Net Pension Asset Beginning of Year

7,682,050

Net Pension Asset End of Year (2)

$ 7,178,658

(1) Includes $5,886,802 in contributions made by affiliated organizations on-behalf of the University. (2) Net pension asset is recorded as a prepaid item of the Statement of Net Position.

Three-Year Trend Information

Fiscal Year Ending

Annual Pension
Cost

Actual Contribution

Percentage Contributed

Net Pension
Asset

6/30/2012 $ 13,300,187 $ 13,225,850 6/30/2013 $ 13,549,860 $ 13,225,850 6/30/2014 $ 13,588,064 $ 13,084,672

99.4% $ 97.6% $ 96.3% $

8,006,060 7,682,050 7,178,658

Funded Status and Funding Progress As of January 1, 2014, the most recent actuarial valuation date, the plan was 43.5% funded. The actuarial accrued liability for benefits was $146,615,477, and the actuarial value of assets was $63,711,746, resulting in an unfunded actuarial accrued liability (UAAL) of $82,903,731.

Schedule of Funding Progress The schedule of funding progress which follows, presents multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits:

- 27 -

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

EXHIBIT "F"

Actuarial Valuation
Date

Actuarial Value of Assets
(a)

Actuarial Accrued Liability
(b)

Unfunded AAL (UAAL) (b-a)

Funded Ratio (a/b)

Annual Covered Payroll
(c)

UAAL as a Percentage of Covered
Payroll ((b-a)/c)

1/1/2005 $ 41,322,743 $ 147,352,588 $ 106,029,845

28.0%

N/A

N/A

1/1/2006 $ 43,203,598 $ 148,323,853 $ 105,120,255

29.1%

N/A

N/A

1/1/2007 $ 47,722,236 $ 148,253,721 $ 100,531,485

32.2%

N/A

N/A

1/1/2008 $ 52,044,359 $ 148,797,058 $

96,752,699

35.0%

N/A

N/A

1/1/2009 $ 37,818,696 $ 148,605,625 $ 110,786,929

25.4%

N/A

N/A

1/1/2010 $ 42,540,252 $ 147,961,323 $ 105,421,071

28.8%

N/A

N/A

1/1/2011 $ 47,778,455 $ 147,266,514 $

99,488,059

32.4%

N/A

N/A

1/1/2012 $ 52,241,174 $ 147,750,673 $

95,509,499

35.4%

N/A

N/A

1/1/2013 $ 57,220,244 $ 146,762,529 $

89,542,285

39.0%

N/A

N/A

1/1/2014 $ 63,711,746 $ 146,615,477 $

82,903,731

43.5%

N/A

N/A

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

Investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price. The University's Investment Policy and Guidelines for managing concentration of credit risk requires that stocks and debt issues be diversified. The University also relies upon the concentration of credit risk policy of the individual investment vehicles related to plan assets. More than 5% of the plan's investments are in iShares Core Total U. S. Aggregate Exchangetraded Fund (ETF), iShares Russell 1000 Growth ETF, iShares Russell 1000 Value ETF, iShares Russell Midcap Growth ETF, iShares iBoxx Investment Grade Corporate Bond ETF, T Rowe Price Real Estate Fund, Oppenheimer Developing Markets Fund and iShares Russell 2000 Growth ETF. These investments are 17.7%, 16.2%, 10.8%, 7.4%, 6.1%, 6.1%, 5.9% and 5.7% of the plan's investments.

For the fiscal year ended June 30, 2014, the annual money-weighted rate of return on pension plan investments, net of pension plan investment expense, was 18.35%.
The following table summarizes the adopted asset allocation policy at June 30, 2014:

Asset Class Domestic Equities International Equities Fixed Income Real Estate Cash

60% - 65% 10% - 15% 10% - 15%
3% - 5% 5% - 10%

Total

100%

- 28 -

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

EXHIBIT "F"

Net Pension Liability (NPL) The components of the net pension liability at June 30, 2014 were as follows:

Total Pension Liability Plan Fiduciary Net Position

$ 145,384,819 -76,193,610

Net Pension Liability

$ 69,191,209

Plan Fiduciary Net Position as a percentage of total pension liability is 52.41%.
Actuarial Methods and Assumptions The annual required contribution for the current year was determined as part of the January, 2013 actuarial valuation using the Entry Age Normal method. The remaining amortization period is 10 years using the Level Dollar amortization method. The actuarial assumptions include (a) rate of return of 7.5% per annum, compounded annually, (b) inflation of 3% per annum, compounded annually, and (c) annual cost of living increase of 3.00% per annum, compounded annually. Plan assumptions and methods are reviewed annually for reasonableness by the actuary.
Mortality rates were based on the RP-2000 Mortality Table for Healthy Annuitants with projected improvement from year 2000 to year 2021 under Projection Scale AA.

Mortality Rates (per 1,000 lives)

AGE

60

65

70

75

Male Female

5.84 5.58

9.98 9.33

16.17 15.07

28.14 23.74

The projection of cash flows used to determine the discount rate of 7.5% per annum, compounded annually assumes that employer contributions will be made at rates equal to the actuarially determined contribution rates. Based on that assumption, the 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.

The long-term expected rate of return on pension plan investments was determined using a buildingblock method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and 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 inflation. Best estimates of arithmetic real rates of return for each major asset class included in the pension plan's target asset allocation are summarized in the following table:

Asset Class

Target Allocation

Long-Term Expected Real Rate of Return

Domestic Equity International Equity Fixed Income Real Estate Cash

62.58% 10.71% 14.93%
3.38% 8.40%

6.50% 7.25% 1.25% 5.75% 0.50%

- 29 -

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

EXHIBIT "F"

The following represents the net pension liability calculated using the stated discount rate, as well as what the net pension liability would be if it were calculated using a discount rate that is 1-percentagepoint lower or 1-percentage-point higher than the current rate:

1% Decrease Current Rate

6.50%

7.50%

1% Increase 8.50%

Net Pension Liability

$ 81,395,268 $ 69,191,209 $ 58,570,968

Note 14. Risk Management
The University System of Georgia offers its employees and retirees access to four different healthcare plan options. For the University System of Georgia's Plan Year 2014, the following healthcare plan options were available:

BlueChoice HMO Health Savings Account (HSA) Open Access POS Open Access Point-of-Service (POS) Kaiser Permanente HMO
Georgia Regents University and participating employees and retirees pay premiums to the healthcare plan options to access benefits coverage. The respective health plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with the self-insured plans; including the HSA Open Access POS. the Open Access POS and the BlueChoice HMO. The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to serve as the claims administrator for the self-insured healthcare plans. 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. Georgia Regents University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.

- 30 -

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

EXHIBIT "F"

Georgia Regents University is responsible for asbestos abatement as a small part of the project costs for various projects. The University has recorded a liability and expense related to this pollution remediation in the amount of $1,234. The liability is reflected on the Statement of Net Position in accounts payable and on the Statement of Revenues, Expenses and Changes in Net Position in supplies and other services. The liability is the remaining amount of project abatement costs at June 30, 2014. The University does not anticipate any significant changes to the expected remediation outlay. Pollution remediation liability activity in fiscal year 2014 was a follows:

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

Current Portion

Pollution Remediation

Obligations

$

26,023 $

63,395 $

88,184 $

1,234 $

1,234

Note 15. 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 Georgia Regents University expects such amounts, if any, to be immaterial to its overall financial position.

Litigation, claims and assessments filed against Georgia Regents University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2014.
Note 16. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
The Board of Regents Retiree Health Benefit Plan is a single-employer, defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2014 plan year, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.

- 31 -

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

EXHIBIT "F"

As of June 30, 2014, there were 1,828 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2014, Georgia Regents University recognized as incurred $11,115,366 of expenditures, which was net of $4,760,320 of participant contributions.
Note 17. Natural Classifications with Functional Classifications
The University's operating expenses by functional classification for fiscal year 2014 are shown below:

Functional Classification

Natural Classification

Instruction

Research

Public Service

Academic Support

Student Services

Institutional Support

Salaries

Faculty

$

Staff

Employee Benefits

Other Personal Services

Travel

Scholarships and Fellowships

Utilities

Supplies and Other Services

Depreciation

67,365,694 $ 26,305,026 28,447,096
95,583 1,811,363
179,263 824,355 25,496,289 7,381,466

12,521,465 $ 10,822,186
6,347,297 1,522
446,474 27,160 2,140
16,454,411 639,105

10,777,608 $ 14,379,669
7,951,648 24,916
454,635 79,283
132,801 10,158,891
421,081

14,913,003 $ 23,084,015 14,330,299
12,332 292,672
4,954 150,991 4,409,442 1,736,292

518,177 $ 2,914,688 1,189,513
11,717 90,488 60,784 80,323 1,167,860 33,304

8,469,915 18,707,408 12,009,758
202,536 181,667
284,928 20,767,347
9,083,079

Total Operating Expenses

$ 157,906,135 $ 47,261,760 $ 44,380,532 $ 58,934,000 $ 6,066,854 $ 69,706,638

Natural Classification
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses

Plant Operations and
Maintenance

Functional Classification

Scholarships

and

Auxiliary

Fellowships

Enterprises

Patient Care

Total Operating Expenses

$ $ 10,471,444
4,051,577 -734,472 31,923 $ 7,911,350
9,421,973 7,373,371 6,580,693

261,017 $ 4,209,492 1,551,204
737,684 79,866
847,549 275,583 8,143,723 1,262,320

74,413,352 $ 96,209,774 41,448,338
8 367,245
388,112 98,854,025

189,240,231 207,103,702 117,326,730
351,826 3,756,333 9,110,343 11,561,206 192,825,359 27,137,340

$ 37,196,509 $ 7,911,350 $ 17,368,438 $ 311,680,854 $ 758,413,070

Note 18. Affiliated Organizations
The MCG Health, Inc., MCG Health System, Inc., Medical College of Georgia Foundation, Inc., Medical College of Georgia Physicians Practice Group Foundation, Georgia Regents Research Institute, Inc., Georgia Regents University College of Dental Medicine Faculty Practice Group, and Augusta State University Foundation are legally separate, tax exempt organizations whose activities primarily support Georgia Regents University. These affiliated organizations are considered potential component units

- 32 -

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

EXHIBIT "F"

of the State of Georgia in accordance with GASB Statement No. 61, The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of the affiliated organizations are not included in these financial statements. Copies of the financial statements for the affiliated organizations may be obtained from Georgia Regents University.
MCG Health, Inc., MCG Health System, Inc., and Medical College of Georgia Foundation, Inc. have been determined significant to the State of Georgia for the year ended June 30, 2014, and as such are reported as a component unit in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). Significant discretely presented affiliated organizations issue separate audited financial statements that can be obtained from each institution.

- 33 -

(This page left intentionally blank)

REQUIRED SUPPLEMENTARY INFORMATION

GEORGIA REGENTS UNIVERSITY REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF FUNDING PROGRESS DEFINED BENEFIT PENSION PLAN
YEAR ENDED JUNE 30, 2014

Actuarial Valuation
Date

Actuarial Value of Assets
(a)

Actuarial Accrued Liability
(b)

Unfunded AAL (UAAL) (b-a)

Funded Ratio (a/b)

1/1/2005 $ 1/1/2006 $ 1/1/2007 $ 1/1/2008 $ 1/1/2009 $ 1/1/2010 $ 1/1/2011 $ 1/1/2012 $ 1/1/2013 $ 1/1/2014 $

41,322,743 $ 43,203,598 $ 47,722,236 $ 52,044,359 $ 37,818,696 $ 42,540,252 $ 47,778,455 $ 52,241,174 $ 57,220,244 $ 63,711,746 $

147,352,588 $ 148,323,853 $ 148,253,721 $ 148,797,058 $ 148,605,625 $ 147,961,323 $ 147,266,514 $ 147,750,673 $ 146,762,529 $ 146,615,477 $

106,029,845 105,120,255 100,531,485
96,752,699 110,786,929 105,421,071
99,488,059 95,509,499 89,542,285 82,903,731

28.0% 29.1% 32.2% 35.0% 25.4% 28.8% 32.4% 35.4% 39.0% 43.5%

Annual Covered Payroll
(c)
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

SCHEDULE "1"
UAAL as a Percentage of Covered
Payroll ((b-a)/c)
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

- 36 -

GEORGIA REGENTS UNIVERSITY REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF CONTRIBUTIONS DEFINED BENEFIT PLAN
YEAR ENDED JUNE 30, 2014

SCHEDULE "2"

Fiscal Year Ending

Actuarially Determined Contribution

Actual Contribution

Contribution Excess
(Deficiency)

Percentage Contributed

6/30/2005 $ 6/30/2006 6/30/2007 6/30/2008 6/30/2009 6/30/2010 6/30/2011 6/30/2012 6/30/2013 6/30/2014

12,948,607 $ 12,874,094 13,363,491 13,510,767 13,778,696 13,410,238 13,368,807 13,300,187 13,549,860 13,588,064

12,591,344 $ 12,905,079 12,936,540 12,996,492 13,225,850 13,225,850 13,225,850 13,225,850 13,225,850 13,084,672

(357,263) 30,985
(426,951) (514,275) (552,846) (184,388) (142,957)
(74,337) (324,010) (503,392)

97.2% $ 100.2%
96.8% 96.2% 96.0% 98.6% 98.9% 99.4% 97.6% 96.3%

Net Pension
Asset
9,870,829 9,901,814 9,474,863 8,960,588 8,407,742 8,223,354 8,080,397 8,006,060 7,682,050 7,178,658

Covered Employee
Payroll
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

Contributions as a % of Covered
Employee Payroll
N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 37 -

GEORGIA REGENTS UNIVERSITY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULES OF EMPLOYERS' AND NONEMPLOYERS' NET PENSION LIABILITY
DEFINED BENEFIT PENSION PLAN YEAR ENDED JUNE 30, 2014

SCHEDULE "3"

Total Pension Liability Plan Fiduciary Net Position
Net Pension Liability
Plan Fiduciary Net Position as a Percentage of the Total Pension Liability
Covered Employee Payroll
Employers' and Nonemployers' Net Pension Liability as a Percentage of Covered Employee Payroll

2014

$

145,384,819

-76,193,610

$

69,191,209

52.41%

0.0

N/A

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 38 -

GEORGIA REGENTS UNIVERSITY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CHANGES IN NET PENSION LIABILITY
DEFINED BENEFIT PLAN YEAR ENDED JUNE 30, 2014
Total Pension Liability Interest Differences Between Expected and Actual Experience Benefit Payments/Refunds Net Change in Total Pension Liability Total Pension Liability - Beginning
Total Pension Liability - Ending (a) Plan Fiduciary Net Position Contributions - Employer Net Investment Income Benefit Payments/Refunds Net Change in Plan Fiduciary Net Position Plan Fiduciary Net Position - Beginning
Plan Fiduciary Net Position - Ending (b)
Net Pension Liability - Ending (a-b)

SCHEDULE "4"

DOLLAR AMOUNT IN MILLIONS 2014

$

10.6

-0.1

-13.1

-2.6 148.0

$

145.4

$

13.1

11.8

-13.1

$

11.8

64.4

$

76.2

$

69.2

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 39 -

GEORGIA REGENTS UNIVERSITY REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF INVESTMENT RETURNS DEFINED BENEFIT PLAN
YEAR ENDED JUNE 30, 2014
Annual Money-Weighted Rate of Return, Net of Investment Expense

SCHEDULE "5"
2014 18.35%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 40 -

GEORGIA REGENTS UNIVERSITY NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
METHODS AND ASSUMPTIONS DEFINED BENEFIT PLAN
YEAR ENDED JUNE 30, 2014

SCHEDULE "6"

This note provides information about changes of benefit terms, changes of assumptions, and methods and assumptions used in calculations of actuarially determined contributions.
Changes of benefit terms : None
Changes of assumptions : None
Methods and assumptions used to determine contribution rates: Actuarially determined contribution rate are determined as of January 1, 2013. Actuarial valuation method: Entry Age Normal Amortization method: Level Dollar Remaining amortization period: 10 years Asset valuation method: Method recognizes a portion of the difference between the market value of assets and expected actuarial value of assets, based on the assumed interest rate of return. The amount recognized each year is 20% of the difference between market value and expected actuarial value.

Inflation: 3.0% per annum, compounded annually
Cost of living adjustments: 3.0% per annum, compounded annually
Investment rate of return: 7.5% per annum, compounded annually
Mortality Rates (per 1,000 lives): RP-2000 Mortality Table for Healthy Annuitants with projected improvement from year 2000 to year 2021 under Projection Scale AA

Male Female

60
5.84 5.58

AGE

65

70

9.98 9.33

16.17 15.07

75
28.14 23.74

- 41 -

SUPPLEMENTARY INFORMATION

GEORGIA REGENTS UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2014
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Margin Allocation 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 Early Retirement Program Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "7"

$ 12,415,302.23 55,136,216.97
5,484,045.96 51,245,845.51
4,396,995.00 8,945,935.45
138,645.47
$ 137,762,986.59

$

1,485,706.47

19,779,093.38

985,242.97

51,379,387.72

73,629,430.54

2,699,832.26 23,899,975.00
98,463.77 26,737,278.60
265,316.03 2,166,453.00
146,103.90 7,787,077.08
333,056.41
64,133,556.05

$ 137,762,986.59

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 43 -

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

SCHEDULE "8"

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
Special Funding Initiative Teaching
Total Expenditures
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2013
Early Return of Surplus in Fiscal Year 2014 Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 173,656,330.00 $ 173,656,330.00 $

0.00

618,006,419.00

578,620,800.56

-39,385,618.44

791,662,749.00

752,277,130.56

-39,385,618.44

0.00

0.00

0.00

0.00 791,662,749.00

47,956,194.70 800,233,325.26

47,956,194.70 8,570,576.26

15,910,827.00 775,751,922.00

791,662,749.00

$

0.00

15,910,826.04 728,709,986.41

0.96 47,041,935.59

744,620,812.45

47,041,936.55

55,612,512.81 $ 55,612,512.81

56,188,994.61 232,745.00

307,368.43
-232,745.00 -19,125.10
-47,956,194.70 $ 64,133,556.05

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

$

2,699,832.26

23,899,975.00

98,463.77

26,737,278.60

265,316.03

2,166,453.00

146,103.90

7,787,077.08

63,800,499.64

333,056.41

$ 64,133,556.05

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 44 -

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

Special Funding Initiative State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

15,910,827.00 $

15,910,827.00 $

15,910,827.00 $ 15,910,827.00

163,175,761.00 556,551,524.00
719,727,285.00

159,860,503.00 535,180,161.00
695,040,664.00

157,745,503.00 618,006,419.00
775,751,922.00

157,745,503.00 578,620,800.56
736,366,303.56

$

735,638,112.00 $

710,951,491.00 $

791,662,749.00 $ 752,277,130.56

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 45 -

SCHEDULE "9"

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 (Negative)

Excess of Funds Available Over Expenditures

$

0.00 $

0.00 $ 15,910,827.00 $

0.00 $ 15,910,826.04 $

0.96 $

0.96

0.00 47,956,194.70
47,956,194.70

0.00 0.00
0.00

157,745,503.00 626,576,995.26
784,322,498.26

0.00 8,570,576.26
8,570,576.26

157,718,564.09 570,991,422.32
728,709,986.41

26,938.91 47,014,996.68
47,041,935.59

26,938.91 55,585,572.94
55,612,511.85

$ 47,956,194.70 $

0.00 $ 800,233,325.26 $

8,570,576.26 $ 744,620,812.45 $ 47,041,936.55 $

55,612,512.81

- 46 -

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

Special Funding Initiative State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity
Prior Year Reserves Not Available for Expenditure Inventories Uncollectible Accounts Receivable Early Retirement Program

Beginning Fund Balance July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2012
Surplus

Prior Period Adjustments

$

17,660.08 $

0.00 $

-17,660.08 $ 21,463.24

150,822.53 48,020,457.09
48,171,279.62
48,188,939.70

0.00 -47,956,194.70
-47,956,194.70
-47,956,194.70

-150,822.53 -64,262.39
-215,084.92
-232,745.00

140,232.64 145,672.55
285,905.19
307,368.43

154,885.92 287,032.79 7,790,881.20

0.00 0.00 0.00

0.00 0.00 0.00

0.00 0.00 0.00

Budget Unit Totals

$ 56,421,739.61 $ -47,956,194.70 $

-232,745.00 $ 307,368.43

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 47 -

SCHEDULE "10"

Other Adjustments

Early Return Fiscal Year 2014
Surplus

Excess of Funds Available Over Expenditures

Ending Fund Balance June 30

Analysis of Ending Fund Balance

Reserved

Surplus

Total

$

0.00 $

-822.00 $

0.96 $

20,642.20 $

0.00 $

20,642.20 $

20,642.20

12,586.14 21,716.76
34,302.90
34,302.90

-18,303.10 0.00
-18,303.10
-19,125.10

26,938.91 55,585,572.94
55,612,511.85
55,612,512.81

161,454.59 55,752,962.25
55,914,416.84
55,935,059.04

0.00 55,602,002.63
55,602,002.63
55,602,002.63

161,454.59 150,959.62
312,414.21
333,056.41

161,454.59 55,752,962.25
55,914,416.84
55,935,059.04

-8,782.02 -21,716.76
-3,804.12

0.00 0.00 0.00

0.00 0.00 0.00

146,103.90 265,316.03 7,787,077.08

146,103.90 265,316.03 7,787,077.08

0.00 0.00 0.00

146,103.90 265,316.03 7,787,077.08

$

0.00 $

-19,125.10 $

55,612,512.81 $ 64,133,556.05 $ 63,800,499.64 $

333,056.41 $ 64,133,556.05

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 Early Retirement Program Unreserved Surplus
Total Ending Fund Balance - June 30

$ 2,699,832.26 23,899,975.00 98,463.77 26,737,278.60 265,316.03 2,166,453.00 146,103.90 7,787,077.08
$
$ 63,800,499.64 $

$ 2,699,832.26 23,899,975.00 98,463.77 26,737,278.60 265,316.03 2,166,453.00 146,103.90 7,787,077.08

333,056.41

333,056.41

333,056.41 $ 64,133,556.05

- 48 -

GEORGIA REGENTS UNIVERSITY RECONCILIATION OF BUDGET TO GAAP
YEAR ENDED JUNE 30, 2014

SCHEDULE "11"

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")

$ 64,133,556.05

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.

470,856,169.00

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.

-265,316.03

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.

34,904,153.95

Restricted Funds indirect cost allocation not reported in the Budget Fund, but included as an accounts receivable on the Statement of Net Position.

893,253.98

Revenues from grantors reported on the Statement of Net Position associated with contracts and retainages payable.

66,090.14

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

103,790.90

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

$ 65,710,980.23 -65,710,980.23

0.00

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

$ 6,760,638.41 -1,299,930.46

5,460,707.95

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

$ 9,793,292.14 0.00

9,793,292.14

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

$ 7,285,610.97 -1,080.70

7,284,530.27

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

$ 1,643,634.22 -237,351.69

1,406,282.53

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. Georgia State Financing and Investment activity reported as revenues in the Budget Fund that are for expenditures based on encumbrances are eliminated for GAAP reporting. Reimbursement from grantors reported as revenues in the Budget Fund that are for expenditures based on encumbrances are deferred for GAAP reporting. Total Net Effect of Encumbrance Activity

$ 19,779,093.38 79,404.00
-8,087,230.77
-10,868,683.13 2,566,763.24

3,469,346.72

- 49 -

GEORGIA REGENTS UNIVERSITY RECONCILIATION OF BUDGET TO GAAP
YEAR ENDED JUNE 30, 2014
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 Total Liabilities
Rounding Variance
Net Position of Business-Type Activities (Exhibit "A")

SCHEDULE "11"

$ -55,142,250.44 -36,086,145.62 -425,221.94 $

-91,653,618.00

0.40

$ 506,452,240.00

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.
- 50 -

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

SCHEDULE "12"

Totals per Annual Supplement
Accruals June 30, 2014 June 30, 2013
Compensated Absences June 30, 2014 June 30, 2013
Adjustments Shared Services on Jointly Staffed Personnel Georgia College and State University Robinson, Benjamin
University of West Georgia Woodruff, Sidney Dustin
Prior Year Adjustments Sheils, Wayne C.
Azziz, Ricardo

SALARIES $ 394,372,895 $

TRAVEL 3,693,034

1,527,351 -1,246,260

103,028 -39,729

33,521,733 -31,795,382

-4,990 -9,314 -12,500 -9,600

$ 396,343,933 $

3,756,333

- 51 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
December 31, 2014

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Ricardo Azziz, President
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of Georgia Regents University as of and for the year ended June 30, 2014, and have issued our report thereon dated December 31, 2014.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Georgia Regents University's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Georgia Regents University's internal control. Accordingly, we do not express an opinion on the effectiveness of Georgia Regents University's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
2014YB-10

Compliance and Other Matters
As part of obtaining reasonable assurance about whether Georgia Regents University's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Georgia Regents University in a separate letter dated December 31, 2014.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2014YB-10

Greg S. Griffin State Auditor

SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA REGENTS UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

No matters were reported.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-512-13-01 Partially Resolved See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

FA-512-13-01 Overpayment of Student Financial Assistance

Compliance Requirement: Internal Control Impact: Compliance Impact: Questioned Cost:

Eligibility Significant Deficiency Nonmaterial Noncompliance $2,303.00

The University has modified procedures to ensure compliance with Student Financial Assistance requirements. The University is awaiting final resolution from the U. S. Department of Education.

SECTION IV CURRENT YEAR FINDINGS AND QUESTIONED COSTS

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