DARTON STATE COLLEGE ALBANY, GEORGIA MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2012 A Member Institution of the University System of Georgia Georgia Department of Audits and Accounts Greg S. Griffin State Auditor DARTON STATE COLLEGE - TABLE OF CONTENTS - SECTION I FINANCIAL LETTER OF TRANSMITTAL SELECTED FINANCIAL INFORMATION EXHIBITS A STATEMENT OF NET ASSETS - (GAAP BASIS) B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (GAAP BASIS) C STATEMENT OF CASH FLOWS - (GAAP BASIS) D SELECTED FINANCIAL NOTES SUPPLEMENTARY INFORMATION SCHEDULES 1 BALANCE SHEET - (STATUTORY BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND 4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND 5 RECONCILIATION OF SALARIES AND TRAVEL Page 2 3 4 5 20 21 22 24 27 SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SECTION I FINANCIAL Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 November 28, 2012 Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the State Board of Regents of the University System of Georgia and Honorable Peter J. Sireno, President Darton State College Ladies and Gentlemen: As part of our audits of the basic financial statements of the University System of Georgia presented in the Annual Financial Report for the University System of Georgia, the basic financial statements of the State of Georgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2012, we have performed certain audit procedures at Darton State College. Accordingly, the financial statements and compliance activities of Darton State College were examined to the extent considered necessary in order to express an opinion as to the fair presentation of the financial statements contained in the foregoing documents and to issue reports on compliance and internal control as required by the Single Audit Act Amendments of 1996. This Management Report contains information pertinent to the financial and compliance activities of Darton State College as of and for the year ended June 30, 2012. Information contained in this report is a by-product of our audits of the basic financial statements of the University System of Georgia and the basic financial statements of the State of Georgia and is the representation of management. Accordingly, we do not express an opinion or any other form of assurance on it. The particular information provided which includes a section on findings and other items reported in accordance with Commission on Colleges regulation 2.11.1 is enumerated in the Table of Contents. This report is intended solely for the information and use of the management of Darton State College, members of the Board of Regents of the University System of Georgia and the Southern Association of Colleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties. Respectfully, GSG:as Greg S. Griffin State Auditor SELECTED FINANCIAL INFORMATION - 1 - DARTON STATE COLLEGE STATEMENT OF NET ASSETS - (GAAP BASIS) JUNE 30, 2012 ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories Total Current Assets Noncurrent Assets Capital Assets, Net (Note 4) Total Assets LIABILITIES Current Liabilities Accounts Payable Salaries Payable Deposits Deferred Revenue (Note 5) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations Deferred Revenue Compensated Absences Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets EXHIBIT "A" $ 6,256,165 553,957 1,695,016 12,500 $ 8,517,638 79,769,319 $ 88,286,957 $ 71,203 241,542 141,900 2,765,163 662,628 200,765 546,396 $ 4,629,597 $ 45,011,735 500,000 490,740 $ 46,002,475 $ 50,632,072 $ 34,556,819 3,098,066 $ 37,654,885 - 2 - DARTON STATE COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - (GAAP BASIS) YEAR ENDED JUNE 30, 2012 OPERATING REVENUES Student Tuition and Fees Less: Scholarship Allowances Grants and Contracts Federal State Other Sales and Services of Educational Departments Auxiliary Enterprises Residence Halls Bookstore Food Services 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 Income (Loss) NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal Federal Stimulus Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues Net Nonoperating Revenues Income (Loss) Before Other Revenues, Expenses, Gains, or Losses Capital Grants and Gifts State Other Total Other Revenues, Expenses, Gains, or Losses Increase (Decrease) in Net Assets Net Assets - Beginning of Year Net Assets - End of Year - 3 - EXHIBIT "B" $ 19,434,612 -7,692,540 610,359 1,024,266 663,386 182,991 2,629,303 110,488 1,249,909 44,190 1,228,968 195,436 188,800 $ 19,870,168 $ 9,881,536 10,301,268 5,604,271 93,904 175,978 9,708,061 1,210,998 8,088,583 3,033,224 $ 48,097,823 $ -28,227,655 $ 13,259,325 15,276,120 565,932 304,632 36,345 -2,696,177 -85 $ 26,746,092 $ -1,481,563 $ 82,839 100,000 $ 182,839 $ -1,298,724 38,953,609 $ 37,654,885 DARTON COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS) YEAR ENDED JUNE 30, 2012 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Health Services Intercollegiate Athletics Other Organizations Other Receipts (Payments) Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Net Cash Flows Provided (Used) by Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Gifts and Grants Received Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash Provided (Used) by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Net Increase (Decrease) in Cash Cash and Cash Equivalents - Beginning of Year Cash and Cash Equivalents - End of Year RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (Used) by Operating Activities NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Accrued Interest Payable Affecting Interest Paid - 4 - EXHIBIT "C" $ 12,143,826 2,238,041 183,781 -14,991,228 -20,190,888 -9,708,061 2,709,199 10,389 1,287,453 45,377 1,344,817 189,270 2,146,251 $ -22,591,773 $ 13,259,325 -769,586 16,146,685 $ 28,636,424 $ 182,839 -1,514,919 -92,925 -2,303,196 $ -3,728,201 $ 36,345 $ 2,352,795 3,903,370 $ 6,256,165 $ -28,227,655 3,033,224 1,633,319 3,753 177,901 23,549 743,398 -43,598 64,336 $ -22,591,773 $ 12,974,208 $ 392,981 DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY Darton State College is one of thirty-five (35) 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 Darton State College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Darton State College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Darton State College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. FINANCIAL STATEMENT PREPARATION The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets and cash flows. BASIC OF ACCOUNTING For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues, are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-College transactions have been eliminated. The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. NET ASSETS The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. - 5 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NET ASSETS Unrestricted net assets: Unrestricted net assets represent 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 College 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 $845.18. 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 State Treasurer. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. NOTE 2: DEPOSITS DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia. 2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia. 3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose. 4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. 5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. - 6 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 2: DEPOSITS DEPOSITS At June 30, 2012, the carrying value of deposits was $6,245,565 and the bank balance was $8,895,330. Of the College's deposits, $8,394,986 were uninsured. Of these uninsured deposits, $8,394,986 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2012. Student Tuition and Fees $ Auxiliary Enterprises and Other Operating Activities Federal, State and Private Funds Other 178,971 84,015 553,957 1,819,894 Less Allowance for Doubtful Accounts $ 2,636,837 387,864 Net Accounts Receivable $ 2,248,973 - 7 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 4: CAPITAL ASSETS Following are the changes in the College's capital assets for the year ended June 30, 2012: Beginning Ending Balance Balance July 1, 2011 Additions Reductions June 30, 2012 Capital Assets, Not Being Depreciated: Land Construction Work-In-Progress $ 989,113 1,634,161 $ 1,160,552 $ $ 175,509 989,113 2,619,204 Total Capital Assets, Not Being Depreciated $ 2,623,274 $ 1,160,552 $ 175,509 $ 3,608,317 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections $ 45,549,271 $ 175,508 1,518,927 4,433,709 258,274 $ 32,623,849 12,974,207 3,549,351 96,093 $ 985,546 636 45,724,779 1,518,927 3,706,437 45,598,056 3,644,808 Total Assets Being Depreciated Less: Accumulated Depreciation: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections $ 87,675,107 $ 13,504,082 $ $ 13,384,038 $ 1,297,637 3,079,348 1,145,520 3,078,336 1,191,539 36,674 423,909 $ 1,285,724 95,378 986,182 $ 100,193,007 $ 985,462 636 14,575,577 1,334,311 2,517,795 2,431,244 3,173,078 Total Accumulated Depreciation $ Total Capital Assets, Being Depreciated, Net $ Capital Assets, Net $ 21,984,879 $ 65,690,228 $ 68,313,502 $ 3,033,224 $ 10,470,858 $ 11,631,410 $ 986,098 $ 84 $ 175,593 $ 24,032,005 76,161,002 79,769,319 NOTE 5: DEFERRED REVENUE Deferred revenue consisted of the following at June 30, 2012. Prepaid Tuition and Fees Other Deferred Revenue $ 1,745,023 1,020,140 Total Deferred Revenue $ 2,765,163 Long-term deferred revenue totaling $500,000 related to the donation for the new bookstore facility. - 8 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 6: LONG-TERM LIABILITIES The College's Long-Term liability activity for the year ended June 30, 2012 was as follows: Beginning Balance July 1, 2011 Additions Reductions Ending Balance June 30, 2012 Current Portion Leases Lease Obligations $ 31,938,236 $ 13,367,189 $ 92,925 $ 45,212,500 $ 200,765 Other Liabilities Compensated Absences 972,800 685,936 621,600 1,037,136 546,396 Total Long-Term Obligations $ 32,911,036 $ 14,053,125 $ 714,525 $ 46,249,636 $ 747,161 NOTE 7: NET ASSETS Changes in Net Asset activity for the year ended June 30, 2012 are as follows: Beginning Balance July 1, 2011 Additions Reductions Ending Balance June 30, 2012 Invested in Capital Assets Net of Related Debt $ 36,375,266 $ 11,724,335 $ 13,542,782 $ 34,556,819 Restricted Net Assets 0 18,140,063 18,140,063 0 Unrestricted Net Assets 2,578,343 31,355,298 30,835,575 3,098,066 Total Net Assets $ 38,953,609 $ 61,219,696 $ 62,518,420 $ 37,654,885 NOTE 8: LEASE OBLIGATIONS Darton State College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2040 and 2041. Expenses for fiscal year 2012 were $2,789,102 of which $2,696,177 represented interest. Total principal paid on capital leases was $92,925 for the fiscal year ended June 30, 2012. Interest rates range from 5.78 percent to 6.14 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2012: - 9 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 8: LEASE OBLIGATIONS CAPITAL LEASES Description Equipment $ Buildings Outstanding Net Assets Held Balances Under Capital per Lease Accumulated Lease at Schedules at Gross Amount Depreciation June 30, 2012 June 30, 2012 (+) (-) (=) 747,060 $ -747,060 $ 0$ 0 45,598,056 -2,431,244 43,166,812 45,212,500 Total Assets Held Under Capital Lease at June 30, 2012 $ 46,345,116 $ -3,178,304 $ 43,166,812 $ 45,212,500 Darton State College had three capital leases with related entities in the current fiscal year. In July 2010 the College entered into a capital lease with GHEFA whereby the College leases a student center building for a thirty year period that expires June 2040. The liability for the capital lease for the student center was $21,562,137 at June 30, 2012, and the interest rate on the bond is 6.14%. In December 2010 the College entered into a capital lease with the Darton Boosters, Inc. to lease the Darton Commons student housing building. The lease is for thirty years and will expire in December 2041. The lease carries an interest rate of 5.78% and the outstanding balance at June 30, 2012 was $10,604,579. In July 2011 the College entered into a second capital lease with the Darton Boosters, Inc. to lease the Darton Village South student housing building. The lease is for thirty years and will expire in June 2041. The lease carries an interest rate of 5.93% and the outstanding balance at June 30, 2012 was $13,045,784. OPERATING LEASES Darton State College's noncancellable operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers, other small business equipment, and buildings. Noncancellable operating lease rental expenses in 2012 were $111,796 for real property and/or equipment. - 10 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 8: LEASE OBLIGATIONS FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2012, were as follows: Capital Leases Operating Leases Year Ending June 30: 2013 2014 2015 2016 2017 2018 - 2022 2023 - 2027 2028 - 2032 2033 - 2037 2038 - 2041 $ 2,905,041 $ 2,990,107 3,050,673 3,111,172 3,181,377 17,452,535 17,422,480 17,471,452 17,527,628 12,302,264 81,669 66,383 51,807 12,745 Total Minimum Lease Payments $ 97,414,729 $ 212,604 Less: Interest 52,202,229 Principal Outstanding $ 45,212,500 NOTE 9: RETIREMENT PLANS Darton State College participates in a retirement plan administered by the State of Georgia under the Teachers Retirement System of Georgia. The system issues separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the system office. More detailed information can be found in the plan agreements and related legislation. The plan, including benefit and contribution provisions, was established and can be amended by State law. 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. - 11 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 9: RETIREMENT PLANS Teachers Retirement System of Georgia 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. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. 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, 2012, were 5.53% of annual salary. Employer contributions required for fiscal year 2012 were 10.28% of annual salary as required by the June 30, 2009, actuarial valuation. The following table summarizes the Darton State College contributions by defined benefit plan for the years ending June 30, 2012, June 30, 2011, and June 30, 2010 (dollars in thousands): TRS Required Percentage Fiscal Year Contribution Contributed 2012 2011 2010 $ 1,158,177 $ 1,111,213 $ 980,948 100% 100% 100% - 12 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 9: RETIREMENT PLANS 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 a principal administrator, 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 (AIG-VALIC, American Century, 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 Darton State College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2012, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Darton State College and the covered employees made the required contributions of $347,413 (9.24%) and $187,994 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Georgia Defined Contribution Plan Plan Description Darton State College participates in the Georgia Defined Contribution Plan (GDCP) which is a singleemployer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute. - 13 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 9: RETIREMENT PLANS Georgia Defined Contribution Plan 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 2012 amounted to $159,358 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 10: RISK MANAGEMENT The University System of Georgia offers its employees and retirees access to three different selfinsured healthcare plan options. Effective January 1, 2012, The Blue Cross Blue Shield of Georgia PPO and HDHP plan names were changed to BCBS Open Access PPO and HAS/HDHP Open Access POS, respectively; both plans will use the Blue Cross Blue Shield Open Access POS network. Also effective January 1, 2012, the Consumer Choice Option was eliminated and the Blue Cross Blue Shield of Georgia HMO and the Kaiser Permanente HMO were frozen for new enrollment for active employees only; the Senior Advantage Plan 65+ remained open for new enrollment. The College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare 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 these plans. The reserves for these plans are considered to be a selfsustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the self-insured healthcare plan products. 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. 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 loses 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 properly, employee and automobile liability, fidelity and certain other risks. Darton State College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. - 14 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 10: RISK MANAGEMENT A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. NOTE 11: 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 Darton State College expects such amounts, if any, to be immaterial to its overall financial positions. Litigation, claims and assessments filed against Darton State College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2012. NOTE 12: 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 College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2011 and 2012 plan years, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%. As of June 30, 2012, there were 102 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2012, Darton State College recognized as incurred $506,677 of expenditures, which was net of $201,167 of participant contributions. - 15 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 EXHIBIT "D" NOTE 13: AFFILIATED ORGANIZATIONS The Darton State College Foundation, Inc., and the Darton Boosters Inc. are legally separate, tax exempt organizations whose activities primarily support Darton State College. These affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of these affiliated organizations are not included in these financial statements. Copies of the financial statements for the affiliated organizations may be obtained from Darton State College. NOTE 14: SUPPLEMENTARY INFORMATION 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 comprehensive basis of accounting other than generally accepted accounting principles. 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 below is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Assets of business-type activities, as reported on Exhibit A. - 16 - DARTON STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2012 Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "1") Amounts reported for Business-Type Activities in the Statement of Net Assets are different because: Capital Assets used in Business-Type Activities are not reported in the Budget Fund. Uncollectible accounts receivable are reported as an asset and reserved fund balance in the Budget Fund and as a contra-asset account on the Statement of Net Assets. Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activity Fund Activity The budgetary basis of accounting implemented by the State of Georgia recognizes expenditures when encumbered. The following adjustments were made to eliminate this activity for reporting on the Statement of Net Assets. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Payables for goods and services provided in the current fiscal year reported in the Budget Fund as encumbrances payable are reported as accounts payable for GAAP reporting. Total Net Effect of Encumbrance Activity Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Accrued Summer Salaries Payable Capital Leases Payable Compensated Absences Payable Total Liabilities Net Assets of Business-Type Activities (Exhibit "A") EXHIBIT "D" $ 876,014 79,769,319 -347,853 $ -751,827 751,827 0 $ 1,724,493 -969,973 754,520 $ 2,255,978 -265,335 1,990,643 $ 1,077,115 -49,820 1,027,295 $ -165,417 -45,212,500 -1,037,136 -46,415,053 $ 37,654,885 - 17 - (This page left intentionally blank) SUPPLEMENTARY INFORMATION - 19 - DARTON STATE COLLEGE BALANCE SHEET (STATUTORY BASIS) BUDGET FUND JUNE 30, 2012 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Inventories Total Assets LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrances Payable Deferred Revenue Funds Held for Others Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances SCHEDULE "1" $ 2,856,913.16 553,956.88 828,329.57 12,500.56 $ 4,251,700.17 $ 68,312.94 1,077,115.14 2,230,357.83 -100.00 $ 3,375,685.91 $ 75,101.00 113,786.45 13,094.53 347,852.91 312,833.63 12,500.56 845.18 $ 876,014.26 $ 4,251,700.17 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. - 20 - DARTON STATE COLLEGE SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2012 SCHEDULE "2" REVENUES State Appropriation State General Funds $ Other Funds Total Revenues $ CARRY-OVER FROM PRIOR YEARS Transfers from Reserved Fund Balance Total Funds Available $ EXPENDITURES Teaching $ Excess of Funds Available over Expenditures $ FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned to Board of Regents - University System Office Year Ended June 30, 2011 Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30 BUDGET 13,279,661.00 $ 36,872,553.00 50,152,214.00 $ 0.00 50,152,214.00 $ 50,152,214.00 $ 0.00 $ $ ACTUAL VARIANCE FAVORABLE (UNFAVORABLE) 13,279,661.00 $ 35,228,900.11 48,508,561.11 $ 0.00 -1,643,652.89 -1,643,652.89 112,954.83 48,621,515.94 $ 112,954.83 -1,530,698.06 48,097,278.89 $ 524,237.05 $ 2,054,935.11 524,237.05 466,046.52 20,335.31 -1,319.48 5.00 -20,335.31 -112,954.83 876,014.26 SUMMARY OF FUND BALANCE Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over Inventories Total Reserved Unreserved Surplus $ 75,101.00 113,786.45 13,094.53 347,852.91 312,833.63 12,500.56 $ 875,169.08 845.18 Total Fund Balance $ Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. - 21 - 876,014.26 DARTON STATE COLLEGE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2012 Teaching State Appropriation State General Funds Other Funds Total Teaching Original Appropriation Amended Appropriation Final Budget Current Year Revenues $ 13,550,674.00 $ 13,550,674.00 $ 13,279,661.00 $ 13,279,661.00 31,952,553.00 31,952,553.00 36,872,553.00 35,228,900.11 $ 45,503,227.00 $ 45,503,227.00 $ 50,152,214.00 $ 48,508,561.11 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. - 22 - SCHEDULE "3" Funds Available Compared to Budget Prior Year Adjustments and Total Carry-Over Program Transfers Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Excess (Deficiency) of Funds Available Over/(Under) Expenditures $ 0.00 $ 112,954.83 $ 112,954.83 $ 0.00 $ 13,279,661.00 $ 0.00 35,341,854.94 0.00 $ 13,279,134.91 $ -1,530,698.06 34,818,143.98 526.09 $ 2,054,409.02 526.09 523,710.96 0.00 $ 48,621,515.94 $ -1,530,698.06 $ 48,097,278.89 $ 2,054,935.11 $ 524,237.05 - 23 - DARTON STATE COLLEGE STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2012 Teaching State Appropriation State General Funds Other Funds Total Teaching Prior Year Reserves Not Available for Expenditure Inventories Uncollectible Accounts Receivable Beginning Fund Balance/(Deficit) July 1 Fund Balance Carried Over from Prior Period as Funds Available Return of Fiscal Year 2011 Surplus Prior Period Adjustments $ 19,450.84 $ 0.00 $ 113,839.30 -112,954.83 $ 133,290.14 $ -112,954.83 $ -19,450.84 $ -884.47 -20,335.31 $ -1,322.20 7.72 -1,314.48 13,490.93 339,600.76 0.00 0.00 0.00 0.00 0.00 0.00 Budget Unit Totals $ 486,381.83 $ -112,954.83 $ -20,335.31 $ -1,314.48 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. - 24 - SCHEDULE "4" Other Adjustments Early Return Fiscal Year 2012 Surplus Excess (Deficiency) of Funds Available Over/(Under) Expenditures Ending Fund Balance/(Deficit) June 30 Analysis of Ending Fund Balance Reserved Surplus/(Deficit) Total $ 990.37 $ -8,252.15 $ -7,261.78 $ 0.00 $ 0.00 0.00 $ 526.09 $ 523,710.96 524,237.05 $ 194.26 $ 515,466.53 515,660.79 $ 0.00 $ 514,815.61 514,815.61 $ 194.26 $ 650.92 845.18 $ 194.26 515,466.53 515,660.79 -990.37 8,252.15 0.00 0.00 0.00 0.00 12,500.56 347,852.91 12,500.56 347,852.91 0.00 0.00 12,500.56 347,852.91 $ 0.00 $ 0.00 $ 524,237.05 $ 876,014.26 $ 875,169.08 $ 845.18 $ 876,014.26 Summary of Ending Fund Balance Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over Inventories Unreserved Surplus Total Ending Fund Balance - June 30 $ 75,101.00 113,786.45 13,094.53 347,852.91 312,833.63 12,500.56 $ $ 875,169.08 $ $ 845.18 845.18 $ 75,101.00 113,786.45 13,094.53 347,852.91 312,833.63 12,500.56 845.18 876,014.26 - 25 - (This page left intentionally blank) DARTON STATE COLLEGE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2012 SCHEDULE "5" Totals per Annual Supplement Accruals June 30, 2012 June 30, 2011 Compensated Absences June 30, 2012 June 30, 2011 Adjustments Shared Services on Jointly Staffed Personnel Albany State University Elder, Lakeisha Hall, Catherine Jackson, Erica Jones, Anta' Sha Lucas, Jeannette Ramsey, Marlene Seo, Seong Armstrong Atlantic State University McCarthy, Michael Georgia Southern University Bretti, Anthony Georgia Southwestern State University Boesten, Jan Rounding Variance SALARIES $ 20,131,547.39 $ TRAVEL 175,978.36 241,542.30 -310,418.11 963,434.36 -903,669.65 7,750.80 5,199.50 4,607.42 4,578.81 3,875.40 1,937.70 8,612.00 8,073.76 10,500.00 5,233.54 -1.22 -0.36 $ 20,182,804.00 $ 175,978.00 - 27 - SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS DARTON STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2012 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) PUBLIC PRIVATE VENTURE NOT SELF-LIQUIDATING For fiscal year ended June 30, 2012, an analysis of the financial statement activity for the College's Student Center public private venture project, revealed that the project's required capital lease payments and other operating costs exceeded yearly revenues by $6,255.74. The College had sufficient reserves to cover this operating deficit, however, going forward, the management should closely monitor project activity to ensure that revenues are sufficient to service capital lease debt as well as all other associated project costs. Also, management should continue to maintain adequate reserves for the project to protect against potential economic downturns.