Armstrong State University, Savannah, Georgia, management report for fiscal year ended 2016 June 30

ARMSTRONG STATE UNIVERSITY
SAVANNAH, GEORGIA
MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2016
A Member Institution of the University System of Georgia

ARMSTRONG STATE UNIVERSITY - TABLE OF CONTENTS -

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

Page
2 3 4 6
26 27 28 30

SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

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SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
August 31, 2017

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the State Board of Regents of the University System of Georgia
and Dr. Jennifer L. Frum, President Armstrong State University

Ladies and Gentlemen:

This Management Report contains information pertinent to the Armstrong State University's compliance with the requirements of the Southern Association of Colleges and Schools Commission on Colleges (COC) Core Requirement 2.11.1 (Financial resources) as of and for the year ended June 30, 2016. Included in this report is a section on findings and other items for any matters that came to our attention during our engagement. The other information contained in this report is the representation of management. Accordingly, we do not express an opinion or any form of assurance on it.

Additionally, we have performed certain procedures at Armstrong State University to support our audits of the basic financial statements of the State of Georgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report
pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2016.

This report is intended solely for the information and use of the management of Armstrong State University, members of the Board of Regents of the University System of Georgia and the Southern Association of Colleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties.

Respectfully,

Greg S. Griffin State Auditor

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SELECTED FINANCIAL INFORMATION - 1 -

ARMSTRONG STATE UNIVERSITY STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2016
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net Receivables - Federal Financial Assistance Receivables - Student Tuition and Fees, net Georgia State Financing & Investment Commission Receivables - Other Due from Affiliated Organizations Prepaid Items
Total Current Assets
Noncurrent Assets Non-current Cash (Externally Restricted) Investments (Externally Restricted) Due from USO - Capital Liability Reserve Fund Investments Capital Assets, Net
Total Noncurrent Assets
Total Assets
Deferred Outflows of Resources Deferred Loss on Defined Benefit Pension Plan
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Retainages Payable Deposits Advances (Including Tuition and Fees) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences Net Pension Liability
Total Noncurrent Liabilities
Total Liabilities
Deferred Inflows of Resources Deferred Gain on Defined Benefit Pension Plan Deferred Gain on Debt Refunding
Total Deferred Inflows of Resources
NET POSITION
Net Investment in Capital Assets Restricted for
Nonexpendable Expendable Unrestricted
Total Net Position
- 2 -

EXHIBIT "A"

$

20,215,819

897,897 1,458,909
843,469 706,496
69,719 768,382

24,960,691

155,711 2,816,601
220,862 271,909 109,351,838
112,816,921
137,777,612

2,842,014

582,502 177,226 166,694 204,166 151,590
62,637 3,541,601
66,500 1,221,222
819,796 1,355,744
8,349,678
38,118,235 581,033
24,075,146
62,774,414
71,124,092
2,370,285 3,137,922
5,508,207

66,920,129
2,936,644 355,106
(6,224,552)

$

63,987,327

ARMSTRONG STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - (GAAP BASIS)
YEAR ENDED JUNE 30, 2016

EXHIBIT "B"

OPERATING REVENUES
Student Tuition and Fees (Net) Grants and Contracts
Federal State Other Sales and Services Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Loss
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues (Expenses)
Net Nonoperating Revenues
Income Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State
Increase in Net Position
Net Position - Beginning of Year
Net Position - End of Year

$

35,897,629

1,372,606 78,418
1,704,721 164,557 25

3,651,986 252,715
3,589,720 473,576 283,128
2,793,805 2,600,677
651,418

53,514,981

20,803,103 20,907,255 12,042,288
313,888 806,756 10,979,260 2,678,063 21,354,359 5,017,090
94,902,062
(41,387,081)

29,919,942
12,706,099 801,532 103,072
(1,823,286) (32,087)
41,675,272
288,191
3,466,521
3,754,712
60,232,615

$

63,987,327

- 3 -

ARMSTRONG STATE UNIVERSITY STATEMENT OF CASH FLOWS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES Payments from Customers Grants and Contracts (Exchange) Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships
Net Cash Used by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes
Net Cash Flows Provided by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from Sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Investment Income
Net Cash Provided by Investing Activities
Net Increase in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year

EXHIBIT "C"

$

50,115,846

3,724,545

(37,443,798)

(42,373,198)

(10,979,260)

(36,955,865)

29,919,942 (165,271)
13,390,118
43,144,789

3,869,192 6,750
(6,681,969) (376,978)
(2,000,848)
(5,183,853)

43,477 62,712 106,189 1,111,260 19,260,270

$

20,371,530

- 4 -

ARMSTRONG STATE UNIVERSITY STATEMENT OF CASH FLOWS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2016
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES:
Operating Loss Adjustments to Reconcile Operating Loss to Net Cash
Used by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Prepaid Items Accounts Payable Salaries Payable Deposits Advances (Including Tuition and Fees) Other Liabilities Compensated Absences Net Pension Liability Change in Deferred Inflows/Outflows of Resources: Deferred Inflows of Resources Deferred Outflows of Resources
Net Cash Used by Operating Activities
NONCASH ACTIVITY Non-capital Financing Activities Accounts Receivable, Net of Allowances Capital Financing Activities Accounts Receivable Accrual, Net of Allowances Loss on Disposal of Capital Assets Accrual of Capital Asset Related Payables Gain on Capital Debt Refunded Amortization of Deferred Gain of Capital Debt Refunded Unrealized Gain on Investments

EXHIBIT "C"

$ (41,387,081)
5,017,090
374,706 (433,059) 106,823
56,060 496
(41,296) (60,685) 154,038 3,330,910
(4,751,227) 677,360
$ (36,955,865)

$

117,513

$

3,292,319

$

(38,837)

$

(355,755)

$

(3,315,484)

$

177,562

$

40,360

- 5 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY As defined by Official Code of Georgia Annotated (O.C.G.A) 20-3-50, Armstrong State University (the Institution) is part of the University System of Georgia (USG), an organizational unit of the State of Georgia (the State) under the governance of the Board of Regents (Board). The Board has constitutional authority to govern, control and manage the USG. The Board is composed of 19 members, one member from each congressional district in the State and five additional members from the state-at-large, appointed by the Governor and confirmed by the Senate. Members of the Board serve a seven year term and members may be reappointed to subsequent terms by a sitting governor.
The Institution does not have the right to sue/be sued without recourse to the State. The Institution's property is the property of the State and subject to all the limitations and restrictions imposed upon other property of the State by the Constitution and laws of the State. In addition, the Institution is not legally separate from the State. Accordingly, the Institution is included within the State's basic financial statements as part of the primary government as defined in section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
The accompanying basic financial statements are intended to supplement the State's Comprehensive Annual Financial Report (CAFR) by presenting the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State that is attributable to the transactions of the Institution. They do not purport to, and do not, present fairly the financial position of the State as of June 30, 2016, the changes in its financial position or its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The accompanying basic financial statements should be read in conjunction with the State's CAFR. The State's CAFR as of and for the year ended June 30, 2016 can be obtained through the State Accounting Office, 200 Piedmont Avenue, Suite 1604 (West Tower), Atlanta, Georgia 30334 or found at https://sao.georgia.gov/comprehensive-annual-financial-reports.
BASIS OF ACCOUNTING AND FINANCIAL STATEMENT PREPARATION The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the Institution's assets, deferred outflows, liabilities, deferred inflows, net position, revenues, expenses, changes in net position and cash flows.
The Institution's business-type activities financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. Grants and similar items are recognized as revenues in the fiscal year in which eligibility requirements imposed by the provider have been met. All significant intra-Institution transactions have been eliminated.

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ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NEW ACCOUNTING PRONOUNCEMENTS For fiscal year 2016, the Institution adopted Governmental Accounting Standards Board (GASB) Statement No. 72, Fair Value Measurement and Application. This statement addresses accounting and financial reporting issues related to fair value measurements. The adoption of this statement does not have a significant impact on the Institution's financial statements.
For fiscal year 2016, the Institution adopted GASB Statement No. 73, Accounting and Financial Reporting for Pensions and Related Assets That are not within the Scope of GASB Statement No. 68, and Amendments to Certain Provisions of GASB Statements No. 67 and 68. The objective of this statement is to improve the usefulness of information about pensions included in the general purpose external financial reports of state and local governments for making decisions and assessing accountability. The adoption of this statement does not have a significant impact on the Institution's financial statements.
For fiscal year 2016, the Institution adopted GASB Statement No. 76, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The objective of this statement is to identify--in the context of the current governmental financial reporting environment--the hierarchy of GAAP. The "GAAP hierarchy" consists of the sources of accounting principles used to prepare financial statements of state and local governmental entities in conformity with GAAP and the framework for selecting those principles. This statement reduces the GAAP hierarchy to two categories of authoritative GAAP and addresses the use of authoritative and non-authoritative literature in the event that the accounting treatment for a transaction or other event is not specified within a source of authoritative GAAP. The adoption of this statement does not have a significant impact on the Institution's financial statements.
For fiscal year 2016, the Institution adopted GASB Statement No. 79, Certain External Investment Pools and Pool Participants. This statement addresses accounting and financial reporting for certain external investment pools and pool participants. The adoption of this statement does not have a significant impact on the Institution's financial statements.
DUE FROM USO - CAPITAL LIABILITY RESERVE FUND The Capital Liability Reserve Fund (Fund) was established by the Board of Regents to protect the fiscal integrity of the USG to maintain the strongest possible credit ratings associated with Public Private Venture (PPV) projects and to ensure that the Board of Regents can effectively support its long-term capital lease obligations. The Fund is financed by all USG institutions participating in the PPV program. The Fund serves as a pooled reserve that is managed by the University System Office. The Fund shall only be used to address significant shortfalls and only insofar as a requesting USG institution is unable to make the required PPV capital lease payment to the designated cooperative organization. The Fund will continue as long as the USG has rental obligations under the PPV program. At the conclusion of the Institution's participation in the program, funds will be returned to the Institution. The balance included on the Institution's Statement of Net Position represents the Institution's contribution to the Fund.

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ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NET POSITION The Institution's net position is classified as follows:
Net Investment in Capital Assets: This represents the Institution's total investment in capital assets, net of accumulated amortization/depreciation and reduced by outstanding debt obligations related to those capital assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction or improvement of capital assets or related debt are included in Net Investment in Capital Assets. If there are significant unspent related debt proceeds or deferred inflows of resources at the end of the reporting period, the portion of the debt or deferred inflows of resources attributable to the unspent amount are not included in Net Investment in Capital Assets.
Restricted non-expendable includes endowment and similar type funds, in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may be either expended or added to principal. For Institution-controlled, donorrestricted endowments, the by-laws of the Board of Regents of the University System of Georgia permits each individual Institution to use prudent judgment in the spending of current realized and unrealized endowment appreciation. Donor-restricted endowment appreciation is periodically transferred to restricted-expendable accounts for expenditure as specified by the purpose of the endowment. The Institution maintains pertinent information related to each endowment fund including donor; amount and date of donation; restrictions by the source of limitations; limitations on investments, etc.
Restricted expendable includes resources in which the Institution is legally or contractually obligated to spend resources in accordance with restrictions by external third parties.
Unrestricted: Unrestricted represents resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institution, and may be used at the discretion of the Institution to meet current expenses for those purposes, except for unexpended state appropriations (surplus) in the amount of $6,068.40. Unexpended state appropriations must be refunded to the Office of the State Treasurer. Unrestricted Net Position also includes resources specifically designated by management, such as:
Auxiliary Enterprises Operations These resources are used for the continued operation of auxiliary enterprise activities, which are substantially self-supporting business operations conducted on campuses that provide services to students, faculty, and staff.
Auxiliary Enterprises Renewals and Replacement (R&R) Reserve These resources can be used for renewals and replacement of capitalizable assets related to auxiliary services. This R&R reserve can also be used for major renovations and rehabilitations auxiliary projects that do not meet the capitalization threshold.

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ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

SCHOLARSHIP ALLOWANCES Scholarship allowances are the differences between the stated charge for goods and services provided by the Institution, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or non-operating revenues in the Institution's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institution has recorded contra revenue for scholarship allowances. Student tuition and fees and auxiliary revenues reported on the Statement of Revenues, Expenses and Changes in Net Position are net of discounts and allowances of $11,520,498 and $52,686, respectively.
NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the Institution's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Institution) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
At June 30, 2016, the carrying value of deposits was $10,271,948 and the bank balance was $11,884,144. Of the Institution's deposits, $11,884,144 were uninsured. Of these uninsured deposits, $11,884,144 were collateralized with securities held by the financial institution's trust department or agent, but not in the Institution's name.

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ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

INVESTMENTS At June 30, 2016, the carrying value of the Institution's investments was $13,179,692, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pool as follows:

Investment Type

Value

Investment Pool Board of Regents Short-Term Fund
Legal Fund Diversified Fund

10,091,182
257,409 2,831,101

Total Investment Pools

$

13,179,692

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits and Accounts Education Audit Division or on their web site at http://www.audits.ga.gov.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2016:

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Georgia State Financing and Investment Commission Due from Affiliated Organizations Due from Other USG Institutions Other
Less Allowance for Doubtful Accounts

$

1,315,757

895,812

897,897

843,469

69,719

220,862

706,496

4,950,012 752,660

Net Accounts Receivable

$

4,197,352

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ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NOTE 4: CAPITAL ASSETS Following are the changes in capital assets for the year ended June 30, 2016:

Beginning Balance July 1, 2015

Capital Leases Recategorization

Additions

Reductions

Ending Balance June 30, 2016

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

$

5,318,254 $

10,553,517

- $

- $

- $

-

6,162,515

13,253,362

5,318,254 3,462,670

Total Capital Assets, Not Being Depreciated
Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections
Total Assets Being Depreciated

15,871,771

-

6,162,515

13,253,362

8,780,924

3,782,462 78,853,276
3,246,634 12,372,748 48,158,488 10,767,963
16,575
157,198,146

48,158,488
(48,158,488)
-
-

12,265,639
814,231
114,807 -
13,194,677

-
811,977
47,398 -
859,375

3,782,462 139,277,403
3,246,634 12,375,002
10,835,372
16,575
169,533,448

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

1,668,723 31,728,021
2,030,622 8,356,175 10,910,665 10,065,172
6,604
64,765,982

10,910,665
(10,910,665) -
-

133,209 3,428,400
90,573 1,123,044
241,450
414
5,017,090

773,140 47,398 -
820,538

1,801,932 46,067,086
2,121,195 8,706,079
10,259,224
7,018
68,962,534

92,432,164

-

8,177,587

38,837

100,570,914

$ 108,303,935 $

- $ 14,340,102 $ 13,292,199 $ 109,351,838

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ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

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

Fiscal Year

Depreciation Expense

2016 2015 2014

$

5,017,090

$

6,715,967

$

6,813,165

NOTE 5: ADVANCES (INCLUDING TUITION AND FEES) Advances (Including Tuitions and Fees) consisted of the following at June 30, 2016:

Prepaid Tuition and Fees

$

3,031,798

Other - Advances

509,803

Totals

$

3,541,601

NOTE 6: LONG-TERM LIABILITIES

The Institution's Long-Term Liability activity for the year ended June 30, 2016 was as follows:

Leases Lease Obligations

Beginning Balance July 1, 2015

Additions

Reductions

Ending Balance June 30, 2016

Current Portion

$ 42,630,493 $

- $ 3,692,462 $ 38,938,031 $

819,796

Other Liabilities Compensated Absences Net Pension Liability

1,782,738 20,161,073

1,445,882 3,979,150

1,291,843 65,077

1,936,777 24,075,146

1,355,744 -

Total

21,943,811

5,425,032

1,356,920

26,011,923

1,355,744

Total Long-Term Obligations $ 64,574,304 $ 5,425,032 $ 5,049,382 $ 64,949,954 $

2,175,540

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ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NOTE 7: NET POSITION Changes in Net Position for the year ended June 30, 2016 are as follows:

Beginning Balance July 1, 2015

Additions

Reductions

Ending Balance June 30, 2016

Net Investments in Capital Assets $

65,673,442 $ 9,796,292 $

8,549,605 $ 66,920,129

Restricted Nonexpendable

3,283,548

17,545,226

17,537,024

3,291,750

Unrestricted Net Position

(8,724,375)

82,966,921

80,467,098

(6,224,552)

Total Net Position

$

60,232,615 $ 110,308,439 $ 106,553,727 $ 63,987,327

The amounts within each category at June 30, 2016 were as follows:

Net Position

Net Investments in Capital Assets
Restricted for Nonexpendable Permenant Endowment
Expendable Restricted E&G and Other Organized Activities

$

66,920,129

2,936,644

355,106

Unrestricted Auxiliary Operations R & R Reserve Reserve for Encumbrances Other Unrestricted USO Reserve Fund
Total Unrestricted
Total Net Position

15,897,539 2,390,628 5,408,183
(30,141,764) 220,862
(6,224,552)

$

63,987,327

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ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NOTE 8: ENDOWMENTS
Donor Restricted Endowments: Investments of the Institution's endowment funds are pooled, unless required to be separately invested by the donor. For Institution controlled, donor-restricted endowments, where the donor has not provided specific instructions, the Board of Regents permits Institutions to develop policies for authorizing and spending realized and unrealized endowment income and appreciation as they determined to be prudent. Realized and unrealized appreciation in excess of the amount budgeted for current spending is retained by the endowments. Current year net appreciation for the endowment accounts was $4,503 and is reflected as a decrease in expendable restricted net position.
For endowment funds where the donor has not provided specific instructions, investment return of the Institution's endowment funds is predicated on the total return concept. Annual payouts from the Institution's endowment funds are based on a spending policy which limits spending to 4.5% of the endowments principal's market value. To the extent that the total return for the current year exceeds the payout, the excess is added to principal. If current year earnings do not meet the payout requirements, the Institution uses accumulated income and appreciation from restricted expendable net asset endowment balances to make up the difference.
NOTE 9: LEASE OBLIGATIONS
The Institution is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.
CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2017 and 2039. Expenditures for fiscal year 2016 were $2,377,826 of which $2,000,848 represented interest. Total principal paid on capital leases was $376,978 for the fiscal year ended June 30, 2016. Interest rates range from 2 percent to 5 percent.
During fiscal year 2016 the Armstrong Education Properties Foundation (EPFI) refinanced the bond debt associated with the Armstrong Center and the Student Recreation Center, As a result, the University recognized a deferred gain on the associated capital leases of $3,315,484. For fiscal year 2016, the University realized $177,562 of this gain, leaving $3,137,922 to be amortized over the remaining lives of the leases.
The following is a summary of the carrying values of assets held under capital lease at June 30, 2016:

Description Leased Buildings and Building Improvements

Gross Amount

Accumulated Depreciation

Net Capital Assets Held Under
Capital Lease at
June 30, 2016

Outstanding Balance Per Lease
Schedules at
June 30, 2016

(+)

(-)

(=)

$ 51,688,801 $ 14,276,119 $

37,412,682 $

38,938,031

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.

- 14 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

The following capital lease schedule lists the pertinent information for each lease including the building name, lessor, total principal amount, lease term, lease begin date, lease end date, and remaining long-term debt as of June 30, 2016:

Description

Lessor (1)

CAPITAL LEASE SCHEDULE

Original Principal

Lease Term

Begin

Outstanding Principal Balance

End

at June 30, 2016

Student Rec Center Student Union Armstrong Center
Total Leases

EPFI Foundation $ EPFI Foundation EPFI Foundation
$

5,284,696 23,162,477 17,506,253
45,953,426

26 years 26 years 25 years

7/2006 3/2010 6/2010

5/2033 $ 6/2039 5/2035
$

3,531,506 22,912,224 12,494,301
38,938,031

(1) These capital leases are with related entities.

OPERATING LEASES The Institution's non-cancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2017 through 2021. 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.

Facilities and equipment rented through operating leases are not recorded as assets on the balance sheet. Operating lease expenditures totaled $856,448 for the fiscal year ended June 30, 2016.

- 15 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Position includes other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2016, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2017 2018 2019 2020 2021 2022 - 2026 2027 - 2031 2032 - 2036 2037 - 2039

$

2,705,852 $

2,737,149

2,760,698

2,806,516

2,826,618

14,657,400

15,621,373

14,843,881

5,919,780

819,687 830,206 796,374 844,873
70,577

Total Minimum Lease Payments

64,879,267 $

3,361,717

Less: Interest

25,941,236

Principal Outstanding

$

38,938,031

NOTE 10: RETIREMENT PLANS
The Institution participates in various retirement plans administered by the State of Georgia under two major retirement systems: Teachers Retirement System of Georgia (TRS) and Employees' Retirement System of Georgia (ERS). These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective administrative offices.
In addition to the retirement plans administered by TRS and ERS, USG administers the Regents Retirement Plan as an optional retirement plan.

- 16 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

The significant retirement plans that the Institution participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.
A. Defined Benefit Plans:
Teachers Retirement System of Georgia and Employees' Retirement System of Georgia
Summary of Significant Accounting Policies
Pensions: For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teachers Retirement System of Georgia (TRS) and Employees' Retirement System (ERS), additions to/deductions for TRS's and ERS's fiduciary net position have been determined on the same basis as they are reported by TRS and ERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
General Information about the Teachers Retirement System
Plan description: All teachers of the Institution as defined in 47-3-60 of the Official Code of Georgia Annotated (O.C.G.A.) are provided a pension through the Teachers Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. TRS issues a publicly available financial report that can be obtained at www.trsga.com/publications.
Benefits provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death.
Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6% of their annual pay during fiscal year 2016. The Institution's contractually required contribution rate for the year ended June 30, 2016 was 14.27% of annual Institution payroll. Institution contributions to TRS were $2,381,333 for the year ended June 30, 2016. Contributions are expected to finance any unfunded accrued liability.

- 17 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

General Information about the Employees' Retirement System
Plan description: ERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.
Benefits provided: The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan (GSEPS). Employees under the old plan started membership prior to July 1, 1982 and are subject to plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are new plan members subject to modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS.
Under the old plan, the new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, postretirement cost-of-living adjustments may also be made to members' benefits, provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Contributions: Member contributions under the old plan are 4% of annual compensation, up to $4,200, plus 6% of annual compensation in excess of $4,200. Under the old plan, the state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The Institution's contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2016 was 24.72% of annual covered payroll for old and new plan members and 21.69% for GSEPS members. The Institution's contributions to ERS totaled $24,247 for the year ended June 30, 2016. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.

- 18 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2016, the Institution reported a liability for its proportionate share of the net pension liability for TRS and ERS. The net pension liability was measured as of June 30, 2015. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2014. An expected total pension liability as of June 30, 2015 was determined using standard roll-forward techniques. The Institution's proportion of the net pension liability was based on contributions to TRS and ERS during the fiscal year ended June 30, 2015. At June 30 2015, the Institution's TRS proportion was 0.155913%, which was an increase of 0.000471% from its proportion measured as of June 30, 2014. At June 30, 2015, the Institution's ERS proportion was 0.008366%, which was a decrease of 0.002406% from its proportion measured as of June 30, 2014.
For the year ended June 30, 2016, the Institution recognized pension expense of $2,164,167 for TRS and $42,004 for ERS. At June 30, 2016, the Institution reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

TRS

Deferred

Deferred

Outflows of

Inflows of

Resources

Resources

ERS

Deferred

Deferred

Outflows of

Inflows of

Resources

Resources

Differences between expected and actual

experience

$

Net difference between projected and actual earnings on pension plan investments

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

- $

208,772 $

-

2,002,174

423,051

64,817

- $ 13,383

2,708 24,455 67,359

Institution contributions subsequent to the

measurement date

2,381,333

-

24,247

-

Total

$

2,804,384 $

2,275,763 $

37,630 $

94,522

- 19 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

Institution contributions subsequent to the measurement date of $2,381,333 for TRS and $24,247 for ERS are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ending June 30:

TRS

ERS

2017 2018 2019 2020 2021

$ (870,445) $

$ (870,445) $

$ (870,446) $

$

771,648

$

$

(13,024) $

(44,229) (34,256) (10,900)
8,246 -

Actuarial assumptions: The total pension liability as of June 30, 2015 was determined by an actuarial valuation as of June 30, 2014 using the following actuarial assumptions, applied to all periods included in the measurement:

Teachers Retirement System:

Inflation Salary increases Investment rate of return

3.00% 3.75 7.00%, average, including inflation 7.50%, net of pension plan investment expense, including inflation

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

The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.

Employees' Retirement System

Inflation Salary increases Investment rate of return

3.00%
5.45 9.25%, including inflation 7.50%, net of pension plan investment expense, including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table for the periods after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back eleven years for males for the period after disability retirement.
The actuarial assumptions used in the June 30, 2014 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.

- 20 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

The long-term expected rate of return on TRS and ERS pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class

Target Allocation

Long-Term Expected Real Rate of Return *

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

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

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

100.00%

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

- 21 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

Sensitivity of the Institution's proportionate share of the net pension liability to changes in the discount rate: The following presents the Institution's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the Institution's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate:

Teachers Retirement System:
Institution's proportionate share of the net pension liability

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

1% Increase (8.50%)

$ 40,788,875 $ 23,736,206 $ 9,680,749

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

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

1% Increase (8.50%)

$

480,460 $

338,940 $

218,289

Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS and ERS financial reports which are publically available at www.trsga.com/publications and www.ers.ga.gov/formspubs/formspubs, respectively.
B. Defined Contribution Plan:
Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or all exempt full and partial benefit eligible employees, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (VALIC, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy The Institution 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 2016, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 6.00% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
The Institution and the covered employees made the required contributions of $1,792,481 (9.24%) and $1,163,949 (6%), respectively.
- 22 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

VALIC, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
NOTE 11: RISK MANAGEMENT
The USG offers its employees and retirees under the age of 65 access to four different healthcare plan options. For the USG's Plan Year 2016, the following healthcare plan options were available:
BlueChoice HMO Comprehensive Care Consumer Choice HSA Kaiser Permanente HMO
The Institution, participating employees and retirees pay premiums to the healthcare plan options to access benefits coverage. The respective health plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the USG share the risk of loss for claims associated with the self-insured plans; including the BlueChoice HMO, Comprehensive Care, and Consumer Choice HSA Plan.
Retirees age 65 and older participate in a secondary healthcare coverage for Medicare-eligible retirees and dependents provided through a retiree healthcare exchange option. The USG makes contributions to a health reimbursement account, which can be used by the retiree to pay premiums and out-ofpocket healthcare-related expenses.
The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to serve as the claims administrator for the selfinsured healthcare plans. In addition to the self-insured healthcare plan options offered to the employees of the USG, a fully insured HMO healthcare plan is 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. The Institution, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1.
The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.

- 23 -

ARMSTRONG STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2016

EXHIBIT "D"

NOTE 12: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the Institution expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against the Institution (an organizational unit 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, 2016.
NOTE 13: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
The Board of Regents Retiree Health Benefit Plan is a single-employer, defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The Institution pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year.
As of June 30, 2016, there were 217 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2016, the Institution recognized as incurred $1,004,329 of expenditures, which was net of $358,960 of participant contributions.
NOTE 14: SUBSEQUENT EVENT
The Board of Regents of the University System of Georgia (USG) has directed the Chancellor of the USG to pursue consolidation of Georgia Southern University and Armstrong State University, pending Southern Association of Colleges and Schools Commission on Colleges (SACSCOC) approval. If approved by SACSCOC and the Board of Regents of the University System of Georgia, the consolidation is expected to be effective January 2018.

- 24 -

SUPPLEMENTARY INFORMATION - 25 -

ARMSTRONG STATE UNIVERSITY BALANCE SHEET (STATUTORY BASIS)
BUDGET FUND JUNE 30, 2016
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

5,292,193.50

11,000.00

376,635.17 5,068,449.50
528,104.70

$

11,276,382.87

$

171,327.93

5,216,828.01

15,968.04

3,071,484.04

8,475,608.02

880,931.79 625,122.44 140,790.46 360,899.22 451,984.86 334,977.68
6,068.40
2,800,774.85

$

11,276,382.87

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 26 -

ARMSTRONG STATE UNIVERSITY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2016

SCHEDULE "2"

REVENUES State Appropriation State General Funds Other Funds Total Revenues
CARRY-OVER FROM PRIOR YEARS Transfers from Reserved Fund Balance Total Funds Available
EXPENDITURES Teaching

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$

29,927,995.00 $

29,927,995.00 $

0.00

62,317,476.00

59,763,714.62

(2,553,761.38)

92,245,471.00

89,691,709.62

(2,553,761.38)

0.00 92,245,471.00

2,851,559.29 92,543,268.91

2,851,559.29 297,797.91

92,245,471.00

90,111,000.00

2,134,471.00

Excess of Funds Available over Expenditures

$

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2015
Prior Year Reserved Fund Balance Included in Funds Available

FUND BALANCE JUNE 30

0.00

2,432,268.91 $

2,432,268.91

3,207,761.54 8,053.32

14,648.46 (2,344.77)

(8,053.32) (2,851,559.29)

$

2,800,774.85

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

$

880,931.79

625,122.44

140,790.46

360,899.22

451,984.86

334,977.68

2,794,706.45

6,068.40

Total Fund Balance

$

2,800,774.85

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 27 -

ARMSTRONG STATE UNIVERSITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2016

Teaching State Appropriation State General Funds Other Funds
Total Operating Activity

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

29,912,995.00 $

29,912,995.00 $

29,927,995.00 $ 29,927,995.00

60,949,400.00

60,949,400.00

62,317,476.00

59,763,714.62

$

90,862,395.00 $

90,862,395.00 $

92,245,471.00 $ 89,691,709.62

Statutory basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 28 -

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Positive (Negative)

Expenditures Compared to Budget

Variance

Actual

Positive

Excess of Funds Available Over Expenditures

$

0.00 $

2,851,559.29

0.00 $ 0.00

29,927,995.00 $ 62,615,273.91

0.00 $ 297,797.91

29,927,995.00 $ 60,183,005.00

0.00 $ 2,134,471.00

0.00 2,432,268.91

$ 2,851,559.29 $

0.00 $ 92,543,268.91 $

297,797.91 $ 90,111,000.00 $

2,134,471.00 $

2,432,268.91

- 29 -

ARMSTRONG STATE UNIVERSITY STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2016

Teaching State Appropriation State General Funds Other Funds
Total Teaching
Prior Year Reserves Not Available for Expenditure Uncollectible Accounts Receivable

Beginning Fund Balance July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2015
Surplus

Prior Period Adjustments

$

7,871.01 $

0.00 $

2,851,741.60

(2,851,559.29)

2,859,612.61

(2,851,559.29)

(7,871.01) $ (182.31)
(8,053.32)

5,876.59 6,427.10
12,303.69

356,202.25

0.00

0.00

0.00

Budget Unit Totals

$

3,215,814.86 $

(2,851,559.29) $

(8,053.32) $

12,303.69

Statutory basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 30 -

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2016
Surplus

Excess of Funds Available
Over Expenditures

Ending Fund Balance June 30

Analysis of Ending Fund Balance

Reserved

Surplus

Total

$

0.00 $

(95,782.61)

(95,782.61)

0.00 $ 0.00
0.00

0.00 $ 2,432,268.91

5,876.59 $ 2,342,913.40

0.00 $ 2,342,721.59

2,432,268.91

2,348,789.99

2,342,721.59

5,876.59 $

5,876.59

191.81

2,342,913.40

6,068.40

2,348,789.99

95,782.61

0.00

0.00

451,984.86

451,984.86

0.00

451,984.86

$

0.00 $

0.00 $

2,432,268.91 $ 2,800,774.85 $ 2,794,706.45 $

6,068.40 $ 2,800,774.85

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

$

880,931.79 $

625,122.44

140,790.46

360,899.22

451,984.86

334,977.68

0.00

$ 2,794,706.45 $

0.00 $ 0.00 0.00 0.00 0.00 0.00

880,931.79 625,122.44 140,790.46 360,899.22 451,984.86 334,977.68

6,068.40

6,068.40

6,068.40 $ 2,800,774.85

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SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

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ARMSTRONG STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2016
COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES
The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weakness.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Internal control deficiencies identified during the course of this engagement that were considered to be significant deficiencies and/or material weaknesses are presented below:
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
No matters were reported.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.