Albany State University, Albany, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
I
ALBANY STATE UNIVERSITY ALBANY, GEORGIA R E P 0RT O N A UDlT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2006
Russell W. Hinton State Auditor

ALBANY STATE UNIVERSITY
- TABLE OF CONTENTS -
SECTION I FINANCIAL INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS EXHIBITS A STATEMENT OF NET ASSETS B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS C STATEMENT OF CASH FLOWS D NOTES TO THE FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION SCHEDULES
1 BALANCE SHEET - (NON-GAAP BASIS) BUDGET FUND
2 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND
3 RECONCILIATION OF SALARIES AND TRAVEL
SECTION I1 AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION I11 CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 6, 2006

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Everette J. Freeman, President Albany State University
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying basic financial statements (Exhibits A through D) of Albany State University, an organizational unit of the State of Georgia as of and for the year ended June 30,2006. These financial statements are the responsibility of the University's management. Our responsibility is to express an opinion on these financial statements based on our audit.
Except as discussed in the following paragraph, we conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
The University did not provide sufficient documentary evidence to support the amounts reported as beginning Net Assets for fiscal year 2006 in the basic financial statements, nor did the University's records provide sufficient information for the application of other auditing procedures to reasonably determine whether beginning net assets were fairly stated.

As discussed in Note 1, the financial statements of Albany State 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 Albany State University. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine documentation supporting beginning Net Assets and, except for the effects on the basic financial statements of the matter discussed in the previous paragraph, the basic financial statements referred to above present fairly, in all material respects, the financial position of Albany State University as of June 30,2006, and the respective changes in financial position and cash flows, where applicable, thereof, for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Management's Discussion and Analysis is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit this information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Albany State University taken as a whole. The accompanying supplementary information (Schedules 1 through 3) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Respectfully submitted,
Russell W. Hinton, CPA, CGFM State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

ALBANY STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Albany State University is one of the 35 institutions of the University System of Georgia. The University, located in Albany, Georgia, was founded in 1903 and has become known as a leader in teacher education, nursing, criminal justice, business, public administration and the sciences. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,600 students each year. The University experienced minimal growth during the period as shown by the comparison numbers that follow.

Faculty

Students

Overview of the Financial Statements and Financial Analysis
Albany State University is proud to present its financial statements for fiscal year 2006. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets 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 2005 and fiscal year 2006.
Statement of Net Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Albany State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the Notes to the Financial Statements.
From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.
Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's

equity in property, plant and equipment owned by the institution. The next asset category is
restricted net assets, which consists of restricted - expendable and restricted capital projects.
Restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors andlor external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net
assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

June 30,2006

June 30,2005

Assets Current Assets Capital Assets, Net Other Assets

Total Assets

$104.374.01 5.74 $108,504,752.21

Liabilities Current Liabilities Noncurrent Liabilities

Total Liabilities

$ 4,520,247.68 $ 5,708,155.5 1

Net Assets
Invested in Capital Assets, Net of Debt
Restricted - Expendable Restricted - Capital Projects
Unrestricted

$ 98,302,818.88 326,001.57
1,224,947.6 1

$102,089,522.40 44 1,921.94 52,433.00 212,719.36

Total Net Assets

$ 99,853,768.06 $102.796.596.70

The total assets of the institution decreased by $4,130,736.47. A review of the Statement of Net Assets will reveal that the decrease was primarily due to a decrease of $3,786,703.52 of investment in plant, net of accumulated depreciation.

The total liabilities for the year decreased by $1,187,907.83. The combination of the decrease in total assets of $4,130,736.47 and the decrease in total liabilities of $1,187,907.83 yields a decrease in total net assets of $2,942,828.64. The decrease in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $3,786,703.52.

Statement of Revenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. 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, gains and losses received or spent by the institution. Generally speaking 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.

The Statement of Revenues, Expenses and Changes in Net Assets reflects a neutral year with a decrease in the net assets at the end of the year primarily due to capital asset depreciation. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows:

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30,2006

June 30,2005

Operating Revenues Operating Expenses

Operating Loss

$ -22,679,729.47 $ -23,740,071.81

Nonoperating Revenues and Expenses

19,736,900.83

19.672,058.77

Increase (Decrease) in Net Assets

$ -2,942,828.64 $ -4,068,013.04

Net Assets at Beginning of Year

102,796,596.70

106,864,609.74

Net Assets at End of Year

$ 99,853,768.06 $102,796.596.70

Revenue By Source For The Years Ended June 30,2006 and June 30,2005

June 30,2006

June 30,2005

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other

$ 8,161,717.80 15,060,485.46
1,064,948.59 7,368,544.44
250,341.6 1

$ 5,103,653.37 15,309,852.94
287,528.09 7,669,142.61
121,272.58

Total Operating Revenue

$ 3 1.906.037.90 $ 28,491,449.59

Nonoperating Revenue State Appropriations Gifts Investment Income Other

Total Nonoperating Revenue

$ 19,736,900.83 $ 19,675,558.21

Total Revenues

$ 51.642.938.73 $ 48,167,007.80

Expenses (By Functional Classification) For The Years Ended June 30,2006 and June 30,2005

June 30,2006

June 30,2005

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

Total Operating Expenses

$ 54,585,767.37 $ 52,231,521.40

Nonoperating Expenses Interest Expense (Capital Assets)

3,499.44

Total Expenses

$ 54,585.767.37 $ 52,235,020.84

Revenues associated with student tuition and fees, net of scholarship allowances, category increased by $3,058,064.43 during the year. The increase can be attributed to the increase in fees charged and hours registered along with one time adjustments made in the prior year.

The compensation and employee benefits category increased by $704,497.87.

Utilities increased by $313,318.54 during the past year.

Under nonoperating revenues (expenses) state appropriations increased by $570,820.38. The net increase in nonoperating revenues (expenses) was $64,842.06.

Statement of Cash Flows

The final statement presented by the Albany State 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 Assets.

Cash Flows for the Years Ended June 30,2006 and June 30,2005, Condensed

June 30,2006

June 30.2005

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

$ -19,428,992.64 19,915,904.39 -436,408.82 17 1,808.80

$ -18,570,500.19 19,407,503.12 -357,415.39 7,463.71

Net Change in Cash Cash, Beginning of Year

Cash, End of Year

$ 1,547.212.62 $ 1,324,900.89

Capital Assets

The University had no significant capital asset additions during fiscal year 2006.

For additional information concerning Capital Assets, see Notes 1 and 6 in the Notes to the Financial Statements.

Long- Term Liabilities
Albany State University had Long-Term Liabilities of $1,374,957.22 of which $657,632.83 was reflected as current liability at June 30, 2006.
For additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements.
Economic Outlook
The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues.
Everette J. Freeman, President Albany State University

BASIC FINANCIAL STATEMENTS

ALBANY STATE UNIVERSITY STATEMENT OF NET ASSETS
JUNE 30, 2006
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Notes Receivable, Net Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Deposits Deferred Revenue (Note 7) Other Liabilities Funds Held for Others Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Compensated Absences
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Expendable Unrestricted
Total Net Assets
The notes to the financial statements are an integral part of this statement.
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EXHIBIT " A

ALBANY STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30,2006
OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal State Other
Sales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parkingllransportation 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 Gifts Interest and Other Investment Income Other Nonoperating Revenues
Net Nonoperating Revenues
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

EXHIBIT "B"

The notes to the financial statements are an integral part of this statement.
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ALBANY STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30,2006
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 Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parkingrrransportation 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 Purchases of Capital Assets
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

EXHIBIT "C"

ALBANY STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30,2006
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Activities

EXHIBIT "C"

The notes to the financial statements are an integral part of this statement
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ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Albany State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
REPORTING ENTITY Albany State University 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 Albany State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Albany State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Albany State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt 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 15 for additional information.
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. 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, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required.

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "DM

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
BASIS OF ACCOUNTING For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-University transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of petty cash and demand deposits in authorized financial institutions.
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 each residing 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 grant 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 are valued at cost using the average-cost basis.
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 $5,000.00 or more, and an estimated usehl life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000.00 and 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

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS incurred. Depreciation 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 will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To obtain the total picture of 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. The bonds so issued 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.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Albany State University when complete. For the year ended June 30, 2006, GSFIC did not transfer any capital additions to Albany State University.
DEPOSITS Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
DEFERREDREVENUES Deferred revenues 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. Deferred revenues 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 accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses, and Changes in Net Assets. Albany State University had accrued liability for compensated absences in the amount of $1,240,279.06 as of July 1, 2005. For fiscal year 2006, $887,069.37 was earned in compensated absences and employees were paid $752,391.21, for a net increase of $134,678.16. The ending balance as of June 30, 2006 in accrued liability for compensated absences was $1,374,957.22.

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NONCURRENT LIABILITIES Noncurrent liabilities include liabilities that will not be paid within the next fiscal year
NET ASSETS The University's net assets are classified as follows:
Invested in capital assets, net of related debt: 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 but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. 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 net assets - expendable: Restricted expendable net assets include resources in which
the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Expendable Restricted Net Assets include the following:
June 30,2006
Restricted - E & G and Other Organized Activities
Federal Loans Institutional Loans
Total Restricted Expendable
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 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 $50.71. Unexpended state appropriations must be rehnded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "DM

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NET ASSETS Unrestricted Net Assets includes the following items which are quasi-restricted by management.

June 30,2006

R & R Reserve Reserve for Encumbrances Other Unrestricted

Total Unrestricted Net Assets

$ 1.224.947.6 1

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 Albany State 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 The University has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises, net of scholarship allowances, (3) most Federal, state and local grants and contracts, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues 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, such as state appropriations and investment income.

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 Assets. 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 Pel1 grants, and other Federal, state or nongovernmental programs are recorded as either operating or

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "DM

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SCHOLARSHIP ALLOWANCES 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.
NOTE 2: DEPOSITS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2 . Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
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.

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "DM

NOTE 2: DEPOSITS
DEPOSITS At June 30, 2006, the carrying value of deposits was $1,538,042.62 and the bank balance was $3,657,82 1.71. Of the University's deposits, $3,557,821.71 was uninsured. Of these uninsured deposits, $3,096,265.72 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $461,555.99 were uncollateralized.
NOTE 3: ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at June 30, 2006.
Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Other

Less Allowance for Doubtful Accounts

Net Accounts Receivable

NOTE 4: INVENTORIES

Inventories consisted of the following at June 30,2006.

Bookstore

$ 672,410.75

NOTE 5: NOTESILOANS RECEIVABLE

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. 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.

NOTE 6: CAPITAL ASSETS

Following are the changes in capital assets for the year ended June 30, 2006:

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "DM

NOTE 6: CAPITAL ASSETS

Beginning Balance July 1, 2005

Additions

Reductions

Ending Balance June 30,2006

Capital Assets, Not Being Depreciated:

Land

$ 2,922,366.00

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

$ 12,621,336.00 1 15,643,413.00 4,317,641.04 6,241,803.80 $ 21 6,470.19 5,648.523.15

561,258.74 $ 33,885.40

$ 12,621,336.00

1 15,643,413.00

4,3 17,641.04

2,216,658.82 4,586,403.72

216,470.19

0.00

19,695.00 5,662,713.55

Total Assets Being Depreciated

$ 144,689,187.18 $ 595,144.14 $ 2.452.824.01 $ 142,831,507.31

Less: Accumulated Depreciation:

Infrastructure

$ 2,084,418.76 $

Building and Building Improvements 31,468,808.89

Facilities and Other Improvements

3,019,690.69

Equipment

3,994,078.54

Capital Leases

61,333.22

Library Collections

4,889,689.00

Capitalized Collections

4.01 1.68

210,763.67 2,601,962.79
147,510.00 $ 366,660.97
188,573.00

$ 2,295,182.43

34,070,771.68

22,329.66 3,144,871.03

1,483,088.90 2,877,650.61

61,333.22

0.00

19,695.00 5,058,567.00

4,011.68

Total Accumulated Depreciation

$ 45,522,030.78 $ 3,s 15,470.43 $ 1,586,446.78 $ 47.45 1,054.43

Total Capital Assets, Being Depreciated,

Net

$ 99,167,156.40 $ -2.920.326.29 $ 866,377.23 $ 95.380.452.88

Capital Assets, Net

$ 102.089.522.40 $ -2,920326.29 $ 866.377.23 $ 98302.81 8.88

NOTE 7: DEFERRED REVENUE

Deferred revenue consisted of the following at June 30, 2006.

Prepaid Tuition and Fees Other Deferred Revenue

Totals

NOTE 8: LONG-TERM LIABILITIES

Long-term liability activity for the year ended June 30, 2006 was as follows:

Other Liabilities Compensated Absences

Beginning Balance July 1. 2005

Additions

Reductions

Ending Balance June 30,2006

Current Portion

$ 1.240:279.06 $ 887.069.37 $ 752.391.21 $ 1274.957.22 $ 657.632.83

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "D"

NOTE 9: LEASE OBLIGATIONS

OPERATING LEASES Albany State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment.

Albany State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2006 through 2010. Certain 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 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.

Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2006, were as follows:

Year Ending June 30

Operating Leases

Total Minimum Lease Payments
During 2006 fiscal year, Albany State University's operating lease expense for rental of real property and equipment was $430,504.17.
NOTE 10: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA
Plan Description Albany State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts.

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "DM

NOTE 10: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Funding Policy Employees of Albany State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Albany State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2006, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description Albany State University participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia.
The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected 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. All other members are "new plan" members subject to the modified plan provisions.
Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.
Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. 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.

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP 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 SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.
The ERS issues a financial report each fiscal year, which may be obtained through ERS.
Funding Policy As established by State statute, all hll-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2006, for employees covered by ERS was $28,840.00. The University's total payroll for all employees was $24,372,592.57.
Under the old plan, member contributions consist of 7.41% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30,2006, the ERS employer contribution rate for the University amounted to 10.41% of covered payroll and included the amounts contributed on behalf of the employees under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees.
Total contributions to the plan made during fiscal year 2006 amounted to $3,434.88, of which $3,002.28 was made by the University and $432.60 was made by employees. These contributions met the requirements of the plan.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2006, financial report, which may be obtained through ERS.
REGENTS RETIREMENT PLAN
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was createdlestablished by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is 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

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Plan Description 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 Albany State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2006, the employer contribution was 9.65% of 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.
Albany State University and the covered employees made the required contributions of $543,076.39 (9.65%) and $280,868.18 (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 Albany State 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 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 $3,500.00 credited to hislher 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 hislher account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "D"

NOTE 10: 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 rehndable upon request by the member.
Total contributions made by employees during fiscal year 2006 amounted to $52,253.20 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
NOTE 11: RISK MANAGEMENT
The University System of Georgia offers its employees and retirees access to two different self-
insured healthcare plan options - a PPOIPPO Consumer healthcare plan, and an indemnity
healthcare plan. Albany State University 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 two plans are considered to be a self-sustaining risk fund. Both self-insured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. 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 two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two h l l y insured HMO healthcare plan options are also offered to System employees.
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. Albany State University, as an organizational unit of the Board of Regents of the University System of

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "D"

NOTE 11: RISK MANAGEMENT
Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
NOTE 12: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Albany State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Albany State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30,2006.
NOTE 13: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-3 1, 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, andlor, dependent life insurance coverage, such costs are borne entirely by the employee.

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "D"

NOTE 13: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS

As of June 30, 2006, there were 147 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Albany State University recognized as incurred $628,798.70 of expenditures, which was net of $220,626.64 of participant contributions.

NOTE 14: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The University's operating expenses by functional classification for fiscal year 2006 are shown below:

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

Instruction

Functional Classification

Research

Public Service

Academic Support

Student Services

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

Institutional Support

Functional Classification

Plant

Operations and Scholarships

Auxiliary

Maintenance and Fellowships

Enterprises

Total Operating Expenses

NOTE 15: AFFILIATED ORGANIZATIONS

In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of GASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, the Albany State University Foundation has

ALBANY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2006

EXHIBIT "D"

NOTE 15: AFFILIATED ORGANIZATIONS
been determined to be a legally separate, tax exempt organization whose activities primarily support Albany State University, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office has determined Component Units of the State of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, Albany State University has not included financial activity for Albany State University Foundation in these financial statements.

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SUPPLEMENTARY INFORMATION

ALBANY STATE UNIVERSITY
BALANCE SHEET - (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30,2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Benefits Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Resewed Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted Funds Uncollectible Accounts Receivable Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

Actual amounts were prepared on a prescribed basis of accounting that demonstrated 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 -

ALBANY STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30,2006

SCHEDULE "2"

REVENUES
State Appropriations State General Funds
Federal Funds Other Funds
Total Revenues
EXPENDITURES
Public SewicelSpecial Funding Initiatives Office of Minority Business Teaching
Total Expenditures
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Resewed Unresewed
ADJUSTMENTS
Prior Year PayablelExpenditures Prior Year Receivables/Revenues Unresewed Fund Balance (Surplus) Returned
to Office of Treasury and Fiscal Services Year Ended June 30,2005
FUND BALANCE JUNE 30
SUMMARY OF FUND BALANCE
Resewed Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted Funds Uncollectible Accounts Receivable
Total Resewed
Unresewed Surplus
Total Fund Balance

BUDGET

ACTUAL

VARIANCE -
FAVORABLE (UNFAVORABLE)

Actual amounts were prepared on a prescribed basis of accounting that demonstrated compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

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ALBANY STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30,2006

SCHEDULE "3"

Totals per Annual Supplement

Accruals June 30,2006 June 30,2005

Compensated Absences June 30,2006 June 30.2005

Adjustments

Shared Services on Jointly Staffed Personnel

Georgia Southwestern University

Abayomi,

Babatunde

Unidentified Variance

SALARIES $ 24,231,900.33 $

TRAVEL 382,984.42

SECTION I1 AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

ALBANY STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2006
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
FINDING CONTROL NUMBER AND STATUS
Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted
Partially Resolved - See Corrective Action/Responses
Previously Reported Corrective Action Implemented Partially Resolved - See Corrective Action/Responses
Unresolved - See Corrective Action/Responses
Previously Reported Corrective Action Implemented Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented
CORRECTIVE ACTIONIRESPONSES
CASH AND CASH EQUIVALENTS INVENTORIES
REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS
GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-52 1-05-01
The University employed a seasoned University System of Georgia financial officer during January 2006 to lead the University's Fiscal Operations. The Vice President for Fiscal Affairs (consultant) has been employed with the University throughout the fiscal year end close and the preparation of the University's Annual Financial Report.
Cash and Cash Equivalents
The University understands the need to accurately reconcile the bank statement to the general ledger in a timely manner and has reconciled bank accounts for the entire fiscal year under review. The Statement of Cash Flows reported on the University's annual financial statement will also be accurately substantiated.
Inventories
The University has reviewed and corrected the mark-up percentages of the Bookstore's resale inventory. The inventory mark-ups now are in agreement with the University's pricing policies. In addition, maintenance of the inventory control system has been strengthened to ensure the accuracy of the subsidiary records.

ALBANY STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2006
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
CASH AND CASH EQUIVALENTS INVENTORIES
REVENUESIRECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS
GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-52 1-05-01
The University is aware of the need to bring the general ledger in agreement with the BANNER subsystem. To aid in this reconciliation, the University had requested the services of Mr. Rich Loftus, Board of Regents BANNER system expert. In addition, the University has begun closing the BANNER system every day. Using the daily closing information and comparing that to the general ledger mapped information, the daily variances can and will be identified and mapping errors can and will be corrected. Once the mapping between the systems reveals no further variances, then the amount necessary to bring the system in line can be accurately determined and a request will be made to correct our general ledger. Any non-student receivable accounts have been assigned to individuals who are responsible for their reconciliation.
General Ledger
The University conducted a review of all journal entries posted in fiscal year 2006. Tightened controls have been implemented to ensure that journal entries have been properly approved and have adequate documentation attached. In order to reconcile with the State Auditors reported net asset balances, all prior audit entries will be reviewed and the necessary entries will be posted.
EXPENDITURES/LIABILITIES/DISBURSEMENTS
Improper Use of Purchase Cards Finding Control Number: FS-52 1-05-03
All Purchasing Card transactions have been reviewed for fiscal year 2006. Any found to be lacking the necessary documentation was researched and resolution was implemented to correct exceptions noted during the review.

ALBANY STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2006
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
EMPLOYEE COMPENSATION Inappropriate Payments to Student-Athletes Finding Control Number: FS-52 1-05-04
The University held campus wide meetings with University employees, and implemented an automated system to mitigate this internal control weakness. Accordingly, internal controls have been strengthened to ensure that the reporting of the student's time accurately reflects the time when the students are allowed to work. In addition, the deadline to turn in the timesheets to Human Resources has been extended so that the approval of the timesheet should never be in advance of the period worked.
ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Finding Control Number: FS-52 1-05-06
The University's IT policies were recently revised and have been distributed, approved and posted on the University website.
Both doors that access the server room have been replaced with steel doors containing no glass windows. The University has installed iron security bars on the section of the internal wall that did not reach the ceiling to prevent anyone from crawling over the top to access the server room. The server room is monitored by a secured surveillance system that records the activity inside the room. The University requested and received a quote to replace the wet fire protection system with a monitoring system that provides a dry solution. The fire protection system has been requisitioned and will be immediately installed during a "down time" period.
Users that had passwords that were discovered were required to change them immediately. The University has requested occasional scans by OIIT to continue to test for vulnerabilities.
The permissions for one of the users in question have been revoked back to a basic user and the permissions of the other user in question were modified to have limited access via roles. All access to systems must be requested in writing by the Department Head.
The University periodically generates the user list indicating their BANNER permissions to verify that they had adequate rights to perform their job responsibilities. The Business Office must submit a formal request indicating a time frame for the users that help during

ALBANY STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2006
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Finding Control Number: FS-521-05-06
the registration period and are required to have a cashiering session. All users with multiple ID'S were corrected and individuals who had accounts but they are no longer employed at the University were disabled. People leaving the University are required to obtain signatures from the various departments indicating that they have cleared all of their requirements to exit employment. The University now revokes the individual's system access as soon as they come to obtain clearance from Information Technology.
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
FINDING CONTROL NUMBER AND STATUS
Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented
Partially Resolved - See Corrective Action/Responses
Previously Reported Corrective Action Implemented
Unresolved - See Corrective Action/Responses
Previously Reported Corrective Action Implemented
Unresolved - See Corrective Action/Responses
CORRECTIVE ACTIONIRESPONSES
ELIGIBILITY Overpayment of Student Financial Aid Student Financial Aid Cluster Program Questioned Cost: $5 1,875.80 Finding Control Number: FA-52 1-05-01
Additional system edits are being initiated to resolve issues of this type before they occur in the future.

ALBANY STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30,2006
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTIONJRESPONSES
REPORTING Reports Not Reconciled Student Financial Aid Cluster Program Finding Control Number: FA-52 1-05-03
The University has reconciled all financial aid expenditures up through spring semester 2006. All W r e amounts reported on the FISAP and IPEDS report will be provided by the Director of Financial Operations to ensure the accuracy of the information.
SPECIAL TESTS AND PROVISIONS Inadequate Control Procedures Student Financial Aid Cluster Program Finding Control Number: FA-52 1-05-05
The University's SFA Office has re-established the position of Work-Study Coordinator. The Coordinator's responsibilities include monitoring the FWS timesheets to ensure that they have been properly reviewed and include a certification from the student's supervisor verifying that the student has worked and earned the amount being paid.
The University has performed a self-audit of all work-study timesheets completed in fiscal year 2006, year to date. Any problems are being addressed and controls have been strengthened to ensure that the reporting of the student's time accurately reflects the time when the students are allowed to work. In addition, the deadline to turn in the timesheets to Human Resources has been extended so that the approval of the timesheet should never be in advance of the time period worked.
SPECIAL TESTS AND PROVISIONS Failure to Properly Return Funds Upon Withdrawal Student Financial Aid Cluster Program Finding Control Number: FA-52 1-05-07
Additional internal controls have been implemented to ensure that the employee responsible for Title IV refunds is not allowed to calculate their own refund.

SECTION I11 CURRENT YEAR FINDINGS AND QUESTIONED COSTS

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS INVENTORIES
REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS
GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-52 1-06-01

Condition:

The accounting procedures of the University were insufficient to provide for adequate controls over (1) Cash and Cash Equivalents; (2) Inventories; (3) Revenues/Receivables/Receipts;(4) Expenditures/Liabilities/Disbursements; and (5) General Ledger.

Criteria:

NCGA Statement 1, paragraph 1, prescribes that an accounting system (1) present fairly and fully disclose the funds of the governmental unit in accordance with generally accepted accounting principles and (2) demonstrate compliance with finance related legal and contractual provisions. Additional administrative requirements contained in the University System of Georgia, Board of Regents Business Procedures Manual and pertinent sections of the Official Code of Georgia Annotated (O.C.G.A.).

Questioned Cost: N/A

Information:

We noted the following weaknesses/deficiencies relating to various control categories:

1.) Cash and Cash Equivalents
An examination of the March 2006 and June 2006 bank reconciliations revealed the following:

a.) The amount of outstanding checks listed on the March 2006 bank reconciliation did not agree to the outstanding check listing provided
by $19,215.53.

b.) The bank reconciliations chosen for testing contained numerous reconciling items that were either unidentified variances or could not
be adequately documented by University personnel.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS INVENTORIES
REVENUESIRECEIVABLESIRECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS
GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-52 1-06-01
c.) Numerous reconciling items outstanding in excess of one year were located on the reconciliations chosen for testing, including outstanding checks dating to October of 200 1. This indicates a lack of controls in place to ensure the propriety of reconciling items.
d.) Documentation of supervisory review of the March 2006 operating bank reconciliation was not available.
2.) Inventories
a.) Tests of the perpetual inventory system revealed errors between physical counts taken by the auditors and the inventory subsidiary records.
a.) The student information system (BANNER) acts as a subsidiary ledger for student accounts receivable, collections of student tuition and fees, and various other revenues. The University is required to prepare reconciliations of the BANNER activity to the GeorgiaFIRST system to ensure that accuracy of the interfaced data. Section 1.7.2 of the Business Procedures Manual published by the Board of Regents, recommends that these reconciliations be performed weekly and requires them to be performed on a monthly basis. Performance of monthly reconciliations is a necessary control to detect and correct variances between BANNER and GeorgiaFIRST in a timely manner. The University completed and submitted five of the twelve monthly reconciliations to the Board of Regents as required. All five reconciliations were submitted with out of balance conditions. The failure of the University to adhere to the Board of Regents policies and recommendations, results in an internal control structure that cannot be relied upon to ensure accuracy of BANNER activity recorded on the general ledger.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS INVENTORIES
REVENUESIRECEIVABLESIRECEIPTS EXPENDITURESILIABILITIESIDISBURSEMENTS
GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-52 1-06-01
b.) An examination of the student accounts receivable subsidiary ledger (BANNER) at June 30, 2006, revealed that $1,116,647.89 in receivables were over ninety days old and were not supported by approved financial aid.
c.) Numerous other accounts receivable accounts were deemed invalid, including one account totaling $3 1,483.90 for which no documentation was provided. The total balance for all invalid accounts is $196,027.89.
d.) Uncollectible accounts receivable reserve was set up as an estimate, which is against Board of Regents policy. In correcting the reserve to agree with accounts receivable aged more than 120 days, the University reduced the Resident Instruction reserve by $415,250.18. The reduction was used to cover a current year deficit in the Resident Instruction fund.
a.) The student information system (BANNER) acts as a subsidiary ledger for student scholarship disbursements. As noted in 3.a.) above, the University is required to prepare reconciliations of the BANNER activity to the GeorgiaFIRST system to ensure the accuracy of the interfaced data. The University completed and submitted five of the twelve monthly reconciliations to the Board of Regents as required. All five reconciliations were submitted with out of balance conditions.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS INVENTORIES REVENUESIRECEIVABLESIRECEIPTS
EXPENDITURESILIABILITIESIDISBURSEMENTS
GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-52 1-06-01

Cause:

b.) A review by the University of expenditures charged to Student Activities and Technology Fees funds revealed that the University had incorrectly charged Resident Instruction fund expenditures to those funds in fiscal years 2002 through 2006 due to a lack of internal controls over expenditures. In fiscal year 2006 the University reclassified $255,106.01 in Student Activity prior year expenditures and $380,608.74 in Technology Fees prior year expenditures back to the Resident Instruction fund.
5.) General Ledger
a.) The GeorgiaFIRST financial system performs an edit check on all journal entries before they are allowed to post to the general ledger. Entries that are not in balance, or contain other validation errors remain unposted until corrections are made. In order to post the entries, University personnel must research the cause of these errors and make necessary adjustments. At June 30,2006, there were 101 unposted journal entries in the accounting system. Some of the entries date back to 2002, the year of implementation of the GeorgiaFIRST system
b.) During review of journal entry documentation, it was noted that journal entries were not posted to the general ledger in a timely manner. Thirty entries were noted to have been posted at least one month after the transaction date. This resulted in a numbering sequence of the journal entries that is not in chronological order.
University management failed to implement satisfactory controls to: (1) safeguard cash and cash equivalents; (2) ensure accuracy of resale inventories; (3) ensure revenues, receivables, and receipts were properly documented and recorded in the accounting records; (4) ensure expenditures, liabilities, and disbursements were properly documented and recorded in the accounting records; and (5) ensure amounts posted to the general ledger were accurate and timely.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS INVENTORIES
REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS
GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-52 1-06-01

Effect:

Without satisfactory accounting controls and procedures in place, the University could place itself in a position where potential misappropriation of assets could occur. In addition, the lack of controls and failure to adhere to Board of Regents policies could impact reporting of its financial position and results of operations.

Recommendation:

The University should review the accounting controls and procedures currently in place, identify weaknesses, and design and implement procedures necessary to strengthen controls over the accounting functions for the above mentioned control categories.

REVENUESIRECEIVABLESIRECEIPTS
Failure to Monitor Sponsored Projects Finding Control Number: FS-52 1-06-02

Condition:

The University did not adequately monitor their Sponsored Projects which resulted in funds due to the University becoming uncollectible. These uncollectible amounts for certain Sponsored Projects in Restricted Funds were funded by General Operations (Resident Instruction Fund).

Criteria:

The Board of Regents of the University System of Georgia's Business Procedures Manual, Section 10.4.1 (4), as revised, requires that uncollectible accounts must be identified by fund and that "fund integrity must be maintained at all times with regard to the uncollectible accounts". Section 10.4.3 also state "Federal receivables resulting from contract or grant activity are to be considered for write-off purposes, as disallowed charges. The funding source for disallowed charges is indirect cost recoveries (revenue)".

Questioned Cost: N/A

Information:

An examination disclosed that $755,432.95 was reimbursed by the Resident Instruction Fund to fund uncollectible Sponsored Project accounts receivable.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS
Failure to Monitor Sponsored Projects Finding Control Number: FS-52 1-06-02

Cause:

Management at the University failed to adequately monitor charges to and collections of certain Sponsored Projects with the Restricted Funds of the University.

Effect:

As a result of the weakness identified, certain Sponsored Projects reflected accounts receivable which were uncollectible due to inadequate collection procedures and/or disallowed charges. These uncollectible amounts were funded by General Operations (Resident Instruction Fund) of the University. However, the funding source for these uncollectibles should be the Indirect Cost Recoveries Fund.

Recommendation: University management should strengthen controls to ensure that charges against Sponsored Projects are made in a timely manner to facilitate prompt billing. Also, accounts receivable related to these charges should be closely monitored to ensure proper collection fi-om Sponsors.

EXPENDITURES/LIABILITIES/DISBURSEMENTS
Improper Use of Purchase Cards Finding Control Number: FS-52 1-06-03

Condition:

The University did not have adequate procedures in place to ensure purchasing card expenditures were properly documented and allowable.

Criteria:

Purchasing card transactions must comply with purchasing guidelines established in the University's Purchasing Card Program Policies and Procedures Handbook.

Questioned Cost: N/A

Information:

The following deficiencies were noted in the review of the purchasing card expenditures:

The University did not follow the guidelines as prescribed in the University's Purchasing Card Program Policies and Procedures Handbook. A review of the purchasing card expenditures revealed the following:

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS
Improper Use of Purchase Cards Finding Control Number: FS-52 1-06-03

1.) According to the University's policy, purchases for telecommunications, firearms and explosives are not allowable. Our review revealed several instances in which purchases were made for telecommunications and ammunition. No reimbursement was sought by the University from employees who purchased these items.

2.) The University's policy states, "The cardholder statements must be reviewed monthly to ensure that a receipt or other acceptable documentation supports each purchase. Failure to have the appropriate supporting documentation, authorization signatures, etc., will result in revocation of the card and/or termination of employment." There were ten transactions tested that had inadequate documentation to support the transaction.

Cause:

University management failed to adhere to transaction limits and guidelines established in the Purchasing Card Program Policies and Procedures Handbook.

Effect:

The purchasing card program was designed to simplify and streamline the purchasing process and lower overall transaction costs for smaller supplies and materials purchases. However, the University has placed itself in a position in which the benefits of using the purchasing cards could be diminished because of misuse and failure to follow purchasing card guidelines.

Recommendation: The University should establish and implement appropriate procedures to ensure that purchasing card guidelines are followed for all purchasing card transactions.

EMPLOYEE COMPENSATION Inappropriate Payments to Student-Athletes Finding Control Number: FS-52 1-06-04

Condition:

Student-athletes participating in the University's institutional work-study program were paid from timesheets which indicated that they had worked during class times or during intercollegiate athletic events where their participation was documented in official game records.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inappropriate Payments to Student-Athletes Finding Control Number: FS-52 1-06-04

Criteria:

University employees, including work-study program participants, should only be paid based on actual time worked. Supervisory controls should be designed such that time records accurately reflect time work-study participants actually worked and should not conflict with class schedules and/or athletic events.

Questioned Cost:

A questioned cost was not calculated, however, University's accounting records indicated that $401,003.51was paid from the College Work-study Department and the Health and P. E. Department of the Resident Instruction find for the institutional work-study program. The Board of Regents should review activity charged to these Departments to determine the amount of overpayments. Also, since these payments were made from general operating finds of the University which are subject to lapsing provisions of State law, a determination should be made as to whether any of these h n d s are subject to be returned as lapsed surplus to the State treasury.

Information:

During testing of student-athletes timesheets, irregularities were noted in payments made to student-athletes participating in the non-Federal institutional work-study program. Testing procedures performed consisted of choosing at least two pay periods during the Spring Semester 2006 for two sports. Timesheets submitted by student-athletes were then compared to class schedules, athletic event schedules, and statistics from the athletic events to determine if students received payments for working while in class or participating in athletic events. Numerous conflicts were noted between student work-study timesheets and participation in class or athletic events. It was also noted that timesheets reviewed were signed as approved by supervisors. A summary of the conflicts noted is as follows:

Baseball (1 1 players tested) -For the pay periods tested of January 28, 2006 to February 10, 2006; February 11, 2006 to February 24, 2006; and April 8, 2006 to April 21, 2006:

1. Nine athletes reported time worked that conflicted with their class schedules.
2. Two athletes reported time worked that conflicted with an athletic event held in Carrollton, Georgia on February 8,2006.
3. One athlete reported time worked that conflicted with an athletic event held in Montgomery, Alabama on February 9, 2006.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inappropriate Payments to Student-Athletes Finding Control Number: FS-52 1-06-04

4. One athlete reported time worked that conflicted with an athletic event held in Mt. Vernon, Georgia on February 20, 2006.

Men's Basketball (6 players tested) - For the pay periods tested of December 3 1, 2005 to January 13, 2006 and January 16, 2006 to January 27,2006:

1. Three athletes reported time worked that conflicted with their class schedules.

Cause:

The University failed to implement satisfactory controls to ensure that time records submitted by student-athlete employees reflected actual time worked.

Effect:

Without satisfactory controls and procedures in place, the University has placed itself in a position where abuse of the institutional work-study program could occur.

Recommendation: The Institution should develop and establish policies and procedures to ensure that written time records for each student-athlete employee are properly maintained and reflect actual time worked. As previously stated, the Board of Regents should review this situation to determine the extent of the overpayments, if any reclaim of funds is appropriate, and if these funds are subject to be returned as lapsed funds to the State treasury.

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Overpayment of Student Financial Aid Student Financial Aid Cluster Program Finding Control Number: FA-52 1-06-01

Condition:

The Student Financial Aid (SFA) Office improperly determined the financial need of eligible students.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Overpayment of Student Financial Aid Student Financial Aid Cluster Program Finding Control Number: FA-52 1-06-01

Criteria:

Provisions included in 34 CFR 668 provide general provisions for administering Student Financial Aid (SFA) programs, 34 CFR 685 provide eligibility and other related program requirements that are specific to the Federal Direct Student Loan Program, and 34 CFR 690 provide eligibility and other related program requirements that are specific to the Federal Pel1 Grant Program.

Questioned Cost:

Questioned Costs of $43,830.00 were identified for students who received student financial aid in excess of their eligible need. The projection of Questioned Costs was $3,311,599.08 for students who received student financial aid in excess of their eligible need.

Information:

A sample of fifty-two financial aid files was selected to determine if financial aid was properly calculated and disbursed to eligible students. The items sampled contained financial aid disbursements of $436,437.29 out of a population of $32,975,252.74. The following deficiencies were noted:

1.) Four students were not in compliance with the University's published satisfactory academic progress policies. Federal regulations (34 CFR 668.32 and 668.34) state that a student must maintain satisfactory academic progress to be eligible to receive financial assistance under the Title IV programs. The noncompliance with established published standards of satisfactory progress is as follows:

(a) The University's policy states that an undergraduate student must maintain a 2.00 grade point average. If the student falls below the minimum grade point average, they will be put on probation for one academic year. If the student does not bring his grade point average above a 2.00, he will be put on financial aid suspension and will have to pay out of pocket until he can meet the requirements to come off financial aid suspension. A student may reapply for financial aid if the student takes at least 6 or more hours and receives a grade point average of 2.50 or higher. The student will be checked again at the next evaluation period to make sure they are meeting the requirements.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ELIGIBILITY Overpayment of Student Financial Aid Student Financial Aid Cluster Program Finding Control Number: FA-52 1-06-01
(b) The University's policy states that a student is required to earn a minimum number of hours each academic year depending upon their enrollment status. Undergraduate, post baccalaureate, and graduate students who enroll for full-time, three-quarter time or part-time course work throughout each academic year should successfully complete 67% of all attempted hours registered for during each academic year.
(c) The University's policy states that the maximum number of hours (time frame) allowed is 150% of the number of semester hours required for a student to earn a degree. At Albany State University, the average undergraduate degree requires 120 to 127 semester hours for completion; therefore, students may not receive financial aid after they have attempted 190 semester hours. Students who have earned enough hours to complete degree requirements are no longer eligible to receive financial aid.
One undergraduate student was not meeting satisfactory academic progress due to her grade point average for the second year in a row. This noncompliance resulted in over-disbursements of Federal Direct Student Loan funds in the amount of $8,305.00, and Pell Grant Program funds in the amount of $4,050.00. One undergraduate student was not meeting satisfactory academic progress due to incremental measurement. This noncompliance resulted in over-disbursements of Federal Direct Student Loan funds in the amount of $7,318.00, and Pell Grant Program funds in the amount of $3,900.00. One undergraduate student was not meeting satisfactory academic progress due to maximum time frame requirements. This noncompliance resulted in overdisbursements of Pell Grant Program funds in the amount of $4,050.00. One undergraduate student was not meeting satisfactory academic progress due to his grade point average and due to incremental measurement. This noncompliance resulted in over-disbursements of Federal Direct Student Loan funds in the amount of $9,657.00, and Pell Grant Program funds in the amount of $4,050.00.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Overpayment of Student Financial Aid Student Financial Aid Cluster Program Finding Control Number: FA-52 1-06-01

2.) One student was disbursed Federal Direct Student Loan funds in excess of allowable limits. Federal regulations (34 CFR 668.20) state that only thirty semester hours of remedial course work may be included in a student's enrollment status and cost of attendance determination. The University's published policy states that if courses must be taken beyond 30 hours of academic credit, students must enroll at their own expense. The student in question exceeded the thirty hour limit Summer Semester 2006. This noncompliance resulted in an over-disbursement of $2,500.00.

Cause:

SFA office had not performed a risk assessment of its procedures to identify areas subject to nonconformity with eligibility requirements, and thus there were insufficient controls in place to assure that SFA funds were awarded in correct amounts to students based on their financial need.

Effect:

SFA office was not in compliance with Federal regulations concerning the awarding of SFA funds to students. For five students, a total of $43,830.00 was disbursed in excess of their eligibility.

Recommendation: The University should perform a risk assessment of its procedures to assure that a proper eligibility determination of a student's financial aid is made in line with regulations. Where vulnerable, the University should develop and/or modify its policies and procedures to ensure that correct amounts will be awarded to students in conformity with financial need requirements. Additionally, the University should develop and implement a monitoring process to ensure that controls are properly implemented.

REPORTING Reports Not Reconciled Student Financial Aid Cluster Program Finding Control Number: FA-52 1-06-02

Condition:

The Fiscal Operations and Application to Participate (FISAP) Report had amounts reported for various Student Financial Aid Cluster programs that did not reconcile to the accounting records and supporting documentation.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FEDERAL AWARD FINDINGS AND OUESTIONED COSTS

REPORTING Reports Not Reconciled Student Financial Aid Cluster Program Finding Control Number: FA-52 1-06-02

Criteria:

Provisions included in 34 CFR 674, 675, 676 and 690 provide reporting requirements specific to the Federal Work-Study Program and the Federal Perkins Loan Program.

Questioned Cost: N/A

Information:

The FISAP Report had amounts reported for the Federal Work-Study Program that did not reconcile to the Grants Administration and Payments System (GAPS) Reports maintained by the University. The FISAP Report also had amounts reported for the Perkins Loan Program and the Federal Work-Study Program that did not reconcile to the accounting records. Federal regulations (34 CFR 674.19,675.19,676.19 and 690.18) require that the University ensure that reported information is accurate and reconciled as necessary.

Cause:

The deficiencies were a result of management's failure to adequately reconcile reports submitted to the accounting records and supporting documentation.

Effect:

The Student Financial Aid office incorrectly reported amounts to the U.S. Department of Education.

Recommendation:

The University should implement adequate controls to ensure that all reports submitted to the U. S. Department of Education are accurately completed and supported by the accounting records. Detailed reconciliations should be prepared for any variances and maintained as part of the supporting documentation.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Inadequate Control Procedures Student Financial Aid Cluster Program Finding Control Number: FA-52 1-06-03

Condition:

The internal control procedures over the timesheet system for the Federal Work-Study Program (FWS) were inadequate.

Criteria:

Provisions included in 34 CFR 675 provide reporting requirements specific to the Federal Work-Study Program.

Questioned Cost: N/A

Information:

Procedures were not in place to ensure that time sheets were always approved
and/or approved only after the last date indicated as worked on the time sheet. Federal regulations (34 CFR 675.19b) state that "the Institution shall also establish and maintain program and fiscal records that include a certification that each student has worked and earned the amount being paid. The student's supervisor, an official of the Institution or off-campus agency shall sign the certification."

Cause:

The deficiencies were a result of management's failure to implement and monitor the proper procedures to ensure that timesheets were approved on or after the last date indicated as worked to provide an adequate audit trail.

Effect:

Without adequate control procedures in place, the University could place itself in a position where FWS wages are paid to students who have not earned the funds.

Recommendation:

The University should establish appropriate procedures and controls to ensure that timesheets are reviewed and approved after FWS wages are earned to ensure compliance with Federal regulations. Additionally, the University should develop and implement a monitoring process to ensure that controls are adhered to.

ALBANY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Failure to Return Funds in a Timely Manner Student Financial Aid Cluster Finding Control Number: FA-52 1-06-04

Condition:

The Student Financial Aid Office failed to ensure that money was returned to the appropriate Title IV program within the required timeframe.

Criteria:

Provisions included in 34 CFR 668 provides general provisions for administering Student Financial Aid (SFA) programs; provisions included in 34 CFR 682 provide requirements specific to the Federal Family Education Loan Program.

Questioned Cost: N/A

Information: Cause:

An examination of fifty-two students receiving Federal financial aid revealed that two students' refunds were not returned within the required timeframe as required by Federal regulations. One student who withdrew during Fall Semester 2005 received Federal Direct Student Loan Funds and Federal PLUS Loan Funds, and the University returned the required funds 2 15 days after the student's official withdrawal from the University. One student who withdrew during Fall Semester 2005 and Spring Semester 2006 received Federal Direct Student Loan Funds, and the University returned the required funds 101 days and 38 days, respectively, after the student's official withdrawal from the University. Federal regulation (34 CFR 668.22(h) 2iv) states that "The amount of the Title VI, HEA program portion of the refund allocated to the Title IV, HEA programs other than the FWS, Federal Stafford Loan, Federal PLUS, and Federal SLS programs must be returned to the appropriate program account or accounts by the institution within 30 days of the date that the student officially withdraws." In addition, Federal regulation (34 682.607(~)1)states that "A school shall pay a refund that is due within 60 days of the date that the student officially withdraws."
The Student Financial Aid Office failed to return the Federal funds in the
timeframe required by the Federal guidelines.

Effect:

The Student Financial Aid Office was not in compliance with Federal regulations concerning the return of h n d s upon withdrawal.

Recommendation: The University should review internal controls in place and implement a monitoring process to ensure that controls are effective and working properly to return funds by the required deadlines.