College of Coastal Georgia, Brunswick, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2012

COLLEGE OF COASTAL GEORGIA
BRUNSWICK, GEORGIA
REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2012
Georgia Department of Audits and Accounts Greg S. Griffin State Auditor

COLLEGE OF COASTAL GEORGIA - 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 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND 4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND 5 BUDGET TO GAAP RECONCILIATION 6 RECONCILIATION OF SALARIES AND TRAVEL
SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

Page
i
2 3 5 6
24 25 26 28 30 31

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
November 26, 2012

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Valerie A. Hepburn, President College of Coastal Georgia
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 the College of Coastal Georgia, a unit of the University System of Georgia, which is an organizational unit of the State of Georgia, as of and for the year ended June 30, 2012. These financial statements are the responsibility of the College of Coastal Georgia'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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the College of Coastal Georgia's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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.
In accordance with section 50-6-1(c) of the Official Code of Georgia Annotated, Greg S. Griffin was appointed State Auditor on July 1, 2012. During the year under review, Mr. Griffin served as the State Accounting Officer. As the State Accounting Officer, Mr. Griffin was responsible for the State's accounting and financial reporting practices.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the College of Coastal Georgia as of June 30, 2012, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
12ARL-62

As discussed in Note 1, the financial statements of the College of Coastal Georgia 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 the College of Coastal Georgia. They do not purport to, and do not, present fairly the financial position of the State of Georgia as of June 30, 2012, 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.
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages i through vi be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consists of inquires of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of the College of Coastal Georgia taken as a whole. The accompanying supplementary information (Schedules 1 through 6) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting or other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Respectfully,

GSG:as 12ARL-62

Greg S. Griffin State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

COLLEGE OF COASTAL GEORGIA
Management's Discussion and Analysis

Introduction

College of Coastal Georgia is one of the 35 institutions of higher education of the University System of Georgia. The College, located in Brunswick, Georgia, was founded in 1961 and now offers challenging academic programs that lead to bachelor's degrees in Business Administration,

Biological Sciences, Education, Health Informatics, Mathematics, Nursing, Psychology, and Public Affairs. This wide range of educational opportunities continues to attract a highly qualified faculty

and positions the College to be an institution of choice for students across Georgia. The College is well positioned for growth due to the continued use of the Strategic Master Plan and the Institutional Strategic Plan. During 2012, the College had its accreditation by the Southern Association of

Colleges and Schools, Commission on Colleges (SACSCOC) reaffirmed for the next ten years without any recommendations for follow-up.

Students

Students

Faculty

(Headcount)

(FTE)

Fiscal Year 2012 Fiscal Year 2011 Fiscal Year 2010

91

3,474

99

3,438

52

3,080

Overview of the Financial Statements and Financial Analysis

2,910 2,839 2,412

College of Coastal Georgia is proud to present its financial statements for fiscal year 2012. 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 College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2012 and fiscal year 2011.

Statement of Net Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College 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 College of Coastal Georgia. 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 is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are

i

available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

June 30, 2012

June 30, 2011

Assets Current Assets Capital Assets, Net Other Assets

$

4,100,065

81,929,133

105,727

$

4,551,040

65,053,234

104,287

Total Assets

$ 86,134,925

$ 69,708,561

Liabilities Current Liabilities Noncurrent Liabilities

$

3,067,781

27,571,915

$

2,719,147

15,647,814

Total Liabilities

$ 30,639,696

$ 18,366,961

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

$ 54,276,089 68,879 53,034
1,097,227

$ 49,693,463 68,879 52,441
1,526,817

Total Net Assets

$ 55,495,229

$ 51,341,600

The total assets increased by $16,426,364. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $16,875,899 in the category of Capital Assets due mainly to the completed construction of the Campus Center and renovation projects in the Library, Andrews Center and Academic Commons North.

The total liabilities increased for the year by $12,272,735 primarily due to the lease for the Campus Center in the amount of $12,532,326. The combination of the increase in total assets and in total liabilities yields an increase in total net assets of $4,153,629.

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.

ii

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

June 30, 2012

June 30, 2011

Operating Revenues Operating Expenses

$ 11,345,303 34,761,582

$

9,640,710

33,834,888

Operating Gain/Loss

$ -23,416,279

$ -24,194,178

Nonoperating Revenues and Expenses

21,166,094

24,126,409

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

$ -2,250,185

$

-67,769

Other Revenues, Expenses, Gains or Losses

6,403,814

15,075,142

Increase (Decrease) in Net Assets

$

4,153,629

$ 15,007,373

Net Assets at Beginning of Year

51,341,600

36,334,227

Net Assets at End of Year

$ 55,495,229

$ 51,341,600

The Statement of Revenues, Expenses and Changes in Net Assets reflect a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows:

Revenue by Source For the Years Ended June 30, 2012, and June 30, 2011

June 30, 2012

June 30, 2011

Operating Revenue

Tuition and Fees

$

Grants and Contracts

Sales and Services of Educational Departments

Auxiliary

Other

Total Operating Revenue

$

Nonoperating Revenue

State Appropriations

$

Grants and Contracts

Gifts

Investment Income

Total Nonoperating Revenue

$

Capital Grants and Gifts

State

$

Total Revenues

$

6,273,803 25,222 4,440
4,994,217 47,621
11,345,303
12,153,995 10,076,066
365,044 8,221
22,603,326
6,403,814
40,352,443

$

6,195,783

27,497

38,408

3,318,791

60,231

$

9,640,710

$ 12,731,580 10,092,952 1,278,929 22,948
$ 24,126,409

$ 15,075,142 $ 48,842,261

iii

Expenses (By Functional Classification) For the Years Ended June 30, 2012, and June 30, 2011

June 30, 2012

June 30, 2011

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

$ 11,055,800 75,127
2,110,572 2,538,470 4,351,137 4,970,437 4,557,229 5,102,810

$ 10,779,927 42,243
1,726,349 2,614,718 4,240,311 5,765,626 6,305,150 2,360,564

Total Operating Expenses

$ 34,761,582

$ 33,834,888

Nonoperating Expenses Interest Expense (Capital Assets) Other

1,423,931 13,301

Total Nonoperating Expenses

$

1,437,232

Total Expenses

$ 36,198,814

$ 33,834,888

Operating revenues increased by $1,704,593 in fiscal year 2012 primarily due to Auxiliary revenues.
Scholarship and Fellowships decreased by $1,611,550 mainly due to a decrease in Pell Scholarships of $1,010,345.
The Auxiliary revenue increased by $1,675,426 as a result of the changing environment of Residential Life on the College's campus. In 2012 the College opened its first residential hall and completed its first year of contracted bookstore operations and dining services.
Nonoperating revenues decreased by $1,523,083 for the year primarily due to a decrease of in gifts and state appropriations.
Nonoperating expenses were increased by $1,437,232 for the year due to interest expense on Capital Assets.
The compensation and employee benefits category increased by $1,576,095 primarily due to increases in Instruction, Auxiliary Services and Plant Operations.
Utilities increased by $205,406 during the past year. The increase is associated with the added space from the Campus Center and Residence Hall.
Statement of Cash Flows
The final statement presented by the College of Coastal Georgia 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
iv

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, 2012, and 2011, Condensed

June 30, 2012

June 30, 2011

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

$

-19,930,966

22,595,003

-2,270,446

6,081

$

-23,387,177

24,124,737

-2,015,208

5,632

Net Change in Cash Cash, Beginning of Year

$

399,672

$

-1,272,016

914,520

2,186,536

Cash, End of Year Capital Assets

$

1,314,192

$

914,520

The College had significant capital asset additions for facilities in fiscal year 2012. The new Campus Center building was completed in August 2012. It is a 50,000 square foot building with space for dining services, bookstore, health center, student gathering space and a theater.

College of Coastal Georgia also completed major renovations to the Library, Andrews Center and the Academic Commons North.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 10 in the Notes to the Financial Statements.

Long-Term Liabilities

College of Coastal Georgia had Long-Term Liabilities of $28,391,318, of which $819,403 was reflected as current liability at June 30, 2012.

For additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements.

v

Economic Outlook 2012 Economic Outlook The College has continued to make significant progress related to the mission change of four years ago. The baccalaureate degree program offerings will stand at nine beginning Fall 2012. The offerings will include the newly approved baccalaureate degree programs in Public Affairs. The College plans to continue adding programs that will enhance its appeal to a variety of students. Enrollment growth is expected to be moderate with notable increases in FTE and credit hours per student. The College's overall financial position does remain strong. The College had a significant increase in Net Assets during the fiscal year associated with the addition of the Campus Center. During fiscal year 2013, the College will open the new Teacher Education and Learning Center. Additionally, the College expects occupancy of housing to meet or exceed the levels needed to address required debt service payments. The continued weakness in the state economy, the new round of budget reductions and the challenges of anticipated Federal funds reductions require continued vigilance in state public higher education and a conservative, market-driven approach to investment and risk. Management will maintain a close watch over resources to maintain the College's ability to react to all internal and external issues as it continues to move forward. Dr. Valerie A. Hepburn, President College of Coastal Georgia
vi

BASIC FINANCIAL STATEMENTS - 1 -

COLLEGE OF COASTAL GEORGIA STATEMENT OF NET ASSETS JUNE 30, 2012
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Investments Notes Receivable Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue (Note 7) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Assets
The notes to the financial statements are an integral part of this statement. - 2 -

EXHIBIT "A"

$

1,314,192

381,777 1,523,220
33,960 846,916

$

4,100,065

$

102,253

3,474

81,929,133

$

82,034,860

$

86,134,925

$

604,731

57,580

313,937

3,884

1,167,027

101,219

434,756

384,647

$

3,067,781

$

27,218,288

353,627

$

27,571,915

$

30,639,696

$

54,276,089

68,879 53,034 1,097,227

$

55,495,229

COLLEGE OF COASTAL GEORGIA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2012
OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) Less: Scholarship Allowances
Grants and Contracts Federal
Sales and Services Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Federal Stimulus Other Gifts Investment Income Interest Expense Other Nonoperating Revenues (Expenses)
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement.
- 3 -

EXHIBIT "B"

$

11,422,619

-5,148,816

25,222 4,440 2,703

1,287,519 187,896
1,462,099 1,008,001 1,048,702
44,918

$

11,345,303

$

6,080,231

8,286,391

4,077,986

104,303

244,046

4,921,129

1,362,224

6,718,286

2,966,986

$

34,761,582

$

-23,416,279

$

12,153,995

8,373,271 660,000
1,042,795 365,044 8,221
-1,423,931 -13,301

$

21,166,094

$

-2,250,185

6,403,814

$

4,153,629

$

51,341,600

$

55,495,229

(This page left intentionally blank)

COLLEGE OF COASTAL GEORGIA STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts (Exchange) Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Intercollegiate Athletics Other Organizations Other Receipts (Payments)
Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Interest Paid on Capital Debt and Leases
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Purchase of Investments
Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income (loss) to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Change in Accrued Interest Payable Affecting Interest Paid Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts
The notes to the financial statements are an integral part of this statement.
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EXHIBIT "C"

$

6,248,168

326,923

4,440

-13,302,135

-14,392,151

-4,921,129

700

1,327,390 383,580
1,869,769 981,116 512,867
1,029,496

$

-19,930,966

$

12,153,995

-101

10,441,109

$

22,595,003

$

5,986,079

-7,335,522

-921,003

$

-2,270,446

$

7,900

-1,819

$

6,081

$

399,672

914,520

$

1,314,192

$

-23,416,279

2,966,986
795,145 9,942
45,561 700
-300,109 -108,606
-3,429 79,123

$

-19,930,966

$

12,532,326

$

321

$

502,927

$

417,735

COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

Note 1: Summary of Significant Accounting Policies
Nature of Operations College of Coastal Georgia serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge of Georgia citizens.
Reporting Entity College of Coastal Georgia 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 College of Coastal Georgia as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. College of Coastal Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, College of Coastal Georgia is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt Affiliated Organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential Component Units of the State. See Note 16 for additional information.
Financial Statement Presentation The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets and cash flows.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than one fiscal year. For fiscal year 2011 and 2012, the calculation used to determine this split was based on the academic calendar of days taught. For consistency and transparency, this will be the basis used for this calculation by College of Coastal Georgia.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-College transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
Investments Investments include financial instruments with terms in excess of 13 months, certain other securities for the production of revenue, land, and other real estate held as investments by endowments. The College accounts for its investments at fair value. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Assets. The Board of Regents Total Return Fund is included under Investments.
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 College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies 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 College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation, which also includes amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, and copyrights, as well as software is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values 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.
For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2012, GSFIC transferred capital additions valued at $417,735 to College of Coastal Georgia.

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

Deferred Revenues 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 compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Assets. College of Coastal Georgia had accrued liability for compensated absences in the amount of $659,151 as of July 1, 2011. For fiscal year 2012, $560,631 was earned in compensated absences and employees were paid $481,508, for a net increase of $79,123. The ending balance as of June 30, 2012, in accrued liability for compensated absences was $738,274.

Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.

Net Assets The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. 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 - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

Expendable Restricted Net Assets include the following:

Restricted - E&G and Other Organized Activities

$

46,403

Institutional Loans

6,631

Total Restricted Expendable

$

53,034

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus) of $0. Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of the State Treasurer. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

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

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

$

96,147

1,111,521

21,000

-131,441

Total Unrestricted Net Assets

$

1,097,227

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes College of Coastal Georgia, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues and Expenses The Statement of Revenues, Expenses and Changes in Net Assets classify fiscal year activity as operating and nonoperating according to the following criteria:

Operating Revenues: Operating revenue includes activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) certain Federal, state and local grants and contracts, and (3) sales and services.

Nonoperating Revenues: Nonoperating revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenue by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

Operating Expenses: Operating expense includes activities that have the characteristics of exchange transactions.

Nonoperating Expenses: Nonoperating expense includes activities that have the characteristics of nonexchange transactions, such as capital financing costs and costs related to investment activity.

Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances.
Restatement of Prior Year Capital Assets and Liabilities College of Coastal Georgia has a restatement of prior year Capital Assets and Long-Term Liabilities, decreasing each by $741,980. This is due to a recalculation of the asset cost and related lease liability in Fiscal Year 2012 for the Residential Housing Building added in the prior year. The University of Georgia Real Estate LLC Foundation recalculated their receivables for the PPV projects from the GHEFA III bond issue and subsequently restated the values of the asset and the long-term liability. The restatement does not affect Prior Year Net Assets.
Note 2: Deposits and Investments
Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

At June 30, 2012, the carrying value of deposits was $1,310,792 and the bank balance was $2,010,033. Of the College's deposits, $1,760,033 was uninsured. Of these uninsured deposits, $1,760,033 was collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name.
Investments At June 30, 2012, the carrying value of the College's investments was $102,253, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows:

Investment Pools Board of Regents Total Return Fund

$

102,253

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

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The College does not have a formal policy for managing interest rate risk.

The Effective Duration of the Total Return Fund is 2.93 years. Of the College's total investment of $102,253 in the Total Return Fund, $31,346 is invested in debt securities.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The College does not have a formal policy for managing credit quality risk.

Note 3: Accounts Receivable

Accounts receivable consisted of the following at June 30, 2012:

Student Tuition and Fees

$

Auxiliary Enterprises and Other Operating Activities

Federal Financial Assistance

Georgia State Financing and Investment Commission

Due from Affiliated Organizations

Other

$ Less Allowance for Doubtful Accounts

213,629 72,155
381,777 664,711 540,380 116,159
1,988,811 83,814

Net Accounts Receivable

$

1,904,997

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

Note 4: Inventories

Inventories consisted of the following at June 30, 2012:

Other Note 5: Notes/Loans Receivable

$

33,960

Institutional loans comprise all of the loans receivable at June 30, 2012. The allowance for uncollectible loans is $0.
Note 6: Capital Assets

Following are the changes in capital assets for the year ended June 30, 2012:

Beginning Balance July 1, 2011 (Restated)

Additions

Reductions

Ending Balance June 30, 2012

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

$

1,578,017

406,108 $

2,737,206 $

$ 101,433

1,578,017 3,041,881

Total Capital Assets, Not Being Depreciated $

1,984,125 $

2,737,206 $

101,433 $

4,619,898

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

$

3,803,334

53,984,414 $

3,859,235

2,768,304

3,964,282

1,492,997 $

14,617,791

12,532,326

1,768,821

77,835

$
213,775 20,264

3,803,334 57,843,649
2,768,304 5,243,504 27,150,117 1,826,392

Total Assets Being Depreciated

$

80,906,946 $

17,962,393 $

234,039 $

98,635,300

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

$

537,438 $

13,648,958

760,987

2,372,500

0

1,259,934

130,740 1,390,543
145,860 368,864 $ 835,380
95,599

$
200,474 20,264

668,178 15,039,501
906,847 2,540,890
835,380 1,335,269

Total Accumulated Depreciation

$

18,579,817 $

2,966,986 $

220,738 $

21,326,065

Total Capital Assets, Being Depreciated, Net $

62,327,129 $

14,995,407 $

13,301 $

77,309,235

Capital Assets, Net

$

64,311,254 $

17,732,613 $

114,734 $

81,929,133

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

Note 7: Deferred Revenue Deferred revenue consisted of the following at June 30, 2012:

Prepaid Tuition and Fees Other Deferred Revenue

$

755,926

411,101

Total Deferred Revenue Note 8: Long-Term Liabilities

$

1,167,027

Long-Term liability activity for the year ended June 30, 2012, was as follows:

Beginning Balance July 1, 2011 (Restated)

Additions

Reductions

Ending Balance June 30, 2012

Current Portion

Leases Lease Obligations

$ 14,617,791 $ 13,035,253

$ 27,653,044 $

434,756

Other Liabilities Compensated Absences

659,151

560,631 $

481,508

738,274

384,647

Total Long-Term Obligations

$ 15,276,942 $ 13,595,884 $

Note 9: Significant Commitments

481,508 $ 28,391,318 $

819,403

The College of Coastal Georgia had significant unearned, outstanding, construction or renovation contracts executed in the amount of $801,556 as of June 30, 2012. This amount is not reflected in the accompanying basic financial statements.
Note 10: Lease Obligations

The College of Coastal Georgia 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 2012 and 2042. Expenses for fiscal year 2012 were $1,423,931 in interest expense of which $502,927 was capitalized. Interest rates range from 5.19 percent to 5.22 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2012:

Outstanding

Net Assets Held

Balances

Under Capital

per Lease

Accumulated

Lease at

Schedules at

Description

Gross Amount

Depreciation

June 30, 2012

June 30, 2012

(+)

(-)

(=)

Buildings

$

27,150,117 $

835,380 $ 26,314,737 $ 27,653,044

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

In 2011, the College entered into a capital lease of $14,617,791 for Lakeside Village Residence Hall for a period of 30 years at in interest rate of 5.19%. The lease expires in 2041 and has an outstanding principal balance of $14,894,813 as of June 30, 2012.
In 2012, the College entered into a capital lease of $12,532,326 for a Campus Center for a period of 30 years at in interest rate of 5.22%. The lease expires in 2042 and has an outstanding principal balance of $12,758,231 as of June 30, 2012.
OPERATING LEASES
The College of Coastal Georgia had no operating leases having remaining terms of more than one year at June 30, 2011.
FUTURE COMMITMENTS
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) as of June 30, 2012, were as follows:

Year Ending June 30: 2013 2014 2015 2016 2017 2018 - 2022 2023 - 2027 2028 - 2032 2033 - 2037 2038 - 2042

Real Property Capital Leases

$

1,975,073

1,978,444

1,981,917

1,985,493

1,989,177

10,005,127

10,115,286

10,242,989

10,391,032

7,510,118

Total Minimum Lease Payments

$ 58,174,656

Less: Interest Less: Executory Costs (if paid)

25,440,233 5,081,379

Principal Outstanding

$ 27,653,044

College of Coastal Georgia had no expense for rental of real property and equipment under operating leases in fiscal year 2012.
Note 11: Retirement Plans

College of Coastal Georgia participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia. These two systems issue separate publicly

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that College of Coastal Georgia participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.
Employees' Retirement System of Georgia
The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers Retirement System of Georgia. One of the ERS System plans, the Employees' Retirement System of Georgia (ERS), is a cost-sharing multiple-employer defined benefit pension plan that was established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract.
On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1, 1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415.
The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are "new plan" members subject to the modified plan provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009, also have the option to irrevocably change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, College of Coastal Georgia pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these College of Coastal Georgia 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. College of Coastal Georgia is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These College of Coastal Georgia contributions are not at any time refundable to the member or his/her beneficiary.
Employer contributions required for fiscal year 2012 were based on the June 30, 2009 actuarial valuation as follows:

Old Plan* New Plan GSEPS

11.63% 11.63%
7.42%

* 6.88% exclusive of contributions paid by the employer on behalf of old plan members
Members become vested after 10 years of service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions; the member forfeits all rights to retirement benefits.
Teachers Retirement System of Georgia
The Teachers Retirement System of Georgia (TRS) is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS.
On October 25, 1996, the Board created the Supplemental Retirement Benefit Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2012, were 5.53% of annual salary. Employer contributions required for fiscal year 2012 were 10.28% of annual salary as required by the June 30, 2009, actuarial valuation.
The following table summarizes the College of Coastal Georgia contributions by defined benefit plan for the years ending June 30, 2012, June 30, 2011, and June 30, 2010 (dollars in thousands):

Fiscal Year

ERS

Required

Percentage

Contribution

Contributed

TRS

Required

Percentage

Contribution

Contributed

2012

$

2011

$

2010

$

Regents Retirement Plan

30,552 27,347 27,347

100% $ 100% $ 100% $

581,313 517,053 519,068

100% 100% 100%

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible University system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy College of Coastal Georgia makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2012, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.

College of Coastal Georgia and the covered employees made the required contributions of $592,313 (9.24%) and $ 320,517 (5%), respectively.

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

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 College of Coastal Georgia participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2012 amounted to $48,113 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 12: Risk Management
The University System of Georgia offers its employees and retirees access to three different selfinsured healthcare plan options. Effective January 1, 2012, The Blue Cross Blue Shield of Georgia PPO and HDHP plan names were changed to BCBS Open Access PPO and HAS/HDHP Open Access POS, respectively; both plans will use the Blue Cross Blue Shield Open Access POS network. Also effective January 1, 2012, the Consumer Choice Option was eliminated and the Blue Cross Blue Shield of Georgia HMO and the Kaiser Permanente HMO were frozen for new enrollment for active employees only; the Senior Advantage Plan 65+ remained open for new enrollment.
College of Coastal Georgia and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator

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COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

for the self-insured healthcare plan products. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental 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. College of Coastal Georgia, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 13: 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 College of Coastal Georgia expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against College of Coastal Georgia (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2012.
Note 14: 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.

- 19 -

COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2012 plan year, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.
As of June 30, 2012, there were 83 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2012, College of Coastal Georgia recognized as incurred $392,031 of expenditures, which was net of $156,926 of participant contributions.
Note 15: Natural Classifications with Functional Classifications
The College's operating expenses by functional classification for fiscal year 2012 are shown below:

Functional Classification

Natural Classification

Instruction

Public Service

Academic Support

Student Services

Institutional Support

Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation

$

5,741,963 $

1,757,269

1,772,228

10,000

107,760

12,323

54,315

1,028,555

571,387

2,673 $ 42,428
888

262,477 $ 994,103 284,239

48,430

96 29,042

6,803 292,788 221,732

30,618 1,351,228 $
334,717 4,000
26,417

2,058,771 1,068,578
90,303 28,854

13,478 675,106 102,906

60,313 1,003,990
40,328

Total Operating Expenses

$ 11,055,800 $

75,127 $ 2,110,572 $

2,538,470 $ 4,351,137

Natural Classification

Plant Operations and
Maintenance

Functional Classification

Scholarships

and

Auxiliary

Fellowships

Enterprises

Total Operating Expenses

Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation

$

42,500 $ 6,080,231

$

1,472,306

610,286

8,286,391

503,605

113,731

4,077,986

-55,928

55,928

104,303

4,741

27,844

244,046

$ 4,557,229

351,577

4,921,129

1,020,702

206,517

1,362,224

880,892

2,807,913

6,718,286

1,144,119

886,514

2,966,986

Total Operating Expenses

$

4,970,437 $ 4,557,229 $

5,102,810 $ 34,761,582

- 20 -

COLLEGE OF COASTAL GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2012

EXHIBIT "D"

Note 16: 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, College of Coastal Georgia Foundation is a legally separate tax exempt organization whose activities primarily support College of Coastal Georgia, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office determined Component Units of the State of Georgia, as required by GASB Statement No. 39 should not be assessed in relation to their significance to College of Coastal Georgia, but instead based on their significance to the State of Georgia.
Therefore, the financial statements of this affiliated organization are not included in these financial statements. Copies of the financial statements for the affiliated organization may be obtained from College of Coastal Georgia.

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SUPPLEMENTARY INFORMATION - 23 -

COLLEGE OF COASTAL GEORGIA BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2012
ASSETS
Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Cash Overdraft Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue Contracts Payable
Total Liabilities
Fund Balances Reserved Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Inventories
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

21,809.03

175,998.75 2,223,761.24
737,829.95 33,959.56

$

3,193,358.53

$

648,610.49

55,577.74

1,106,764.11

149,690.69

517,553.61

313,937.49

$

2,792,134.13

$

30,944.66

30,129.32

34,838.36

77,312.06

207,000.00

21,000.00

$

401,224.40

$

3,193,358.53

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 24 -

COLLEGE OF COASTAL GEORGIA SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2012

SCHEDULE "2"

REVENUES State Appropriation State General Funds Other Funds Total Revenue
ADJUSTMENTS AND PROGRAM TRANSFERS CARRY-OVER FROM PRIOR YEARS
Transfers from Reserved Fund Balance Total Funds Available
EXPENDITURES Teaching Excess of Funds Available over Expenditures
FUND BALANCE JULY 1 Reserved
ADJUSTMENTS Prior Year Receivables/Revenues Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30
SUMMARY OF FUND BALANCE Reserved Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Inventories
Total Fund Balance

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 12,153,995.00 $ 12,153,995.00 $

22,094,281.00

21,436,901.40

$ 34,248,276.00 $ 33,590,896.40 $

0.00

0.00

0.00 -657,379.60
-657,379.60
0.00

0.00

102,639.12

$ 34,248,276.00 $ 33,693,535.52 $

102,639.12 -554,740.48

$ 34,248,276.00 $ 33,345,380.32 $

$

0.00 $

348,155.20 $

902,895.68 348,155.20

155,975.82

-267.50 -102,639.12

$

401,224.40

$

30,944.66

30,129.32

34,838.36

77,312.06

207,000.00

21,000.00

$

401,224.40

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 25 -

COLLEGE OF COASTAL GEORGIA STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2012

Teaching State Appropriation State General Funds Other Funds
Total Teaching

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

12,299,995.00 $ 12,299,995.00 $ 12,153,995.00 $ 12,153,995.00

25,566,109.00

25,566,109.00

22,094,281.00

21,436,901.40

$

37,866,104.00 $ 37,866,104.00 $ 34,248,276.00 $ 33,590,896.40

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 26 -

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers Funds Available

Variance Positive (Negative)

Expenditures Compared to Budget

Variance

Actual

Positive (Negative)

Excess (Deficiency) of Funds Available
Over/(Under) Expenditures

$

0.00 $

102,639.12

$ 102,639.12 $

0.00 $ 12,153,995.00 $ 0.00 21,539,540.52

0.00 $ 12,153,995.00 $ -554,740.48 21,191,385.32

0.00 $ 902,895.68

0.00 348,155.20

0.00 $ 33,693,535.52 $

-554,740.48 $ 33,345,380.32 $

902,895.68 $

348,155.20

- 27 -

COLLEGE OF COASTAL GEORGIA STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2012

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

Beginning Fund Balance/(Deficit)
July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2011
Surplus

Prior Period Adjustments

$

0.00 $

102,639.12

$

102,639.12 $

0.00 $ -102,639.12
-102,639.12 $

21,000.00 32,336.70

0.00 0.00

0.00 $ 0.00
0.00 $

0.00 -267.50
-267.50

0.00 0.00

0.00 0.00

Budget Unit Totals

$

155,975.82 $

-102,639.12 $

0.00 $

-267.50

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 28 -

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2012
Surplus

Excess (Deficiency) of Funds Available
Over/(Under) Expenditures

Ending Fund Balance/(Deficit)
June 30

Analysis of Ending Fund Balance

Reserved

Surplus/(Deficit)

Total

$

0.00 $

-44,975.36

$

-44,975.36 $

0.00 44,975.36

$

0.00 $

0.00 $ 0.00
0.00 $

0.00 $ 348,155.20
348,155.20 $

0.00 $

0.00 $

302,912.34 302,912.34

302,912.34 $ 302,912.34 $

0.00 0.00
0.00 $

0.00 0.00

21,000.00 77,312.06

21,000.00 77,312.06

348,155.20 $

401,224.40 $ 401,224.40 $

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

$ 30,944.66 $ 30,129.32 34,838.36 77,312.06
207,000.00 21,000.00
$ 401,224.40 $

0.00 $ 0.00
0.00 $

0.00 302,912.34
302,912.34

0.00 0.00

21,000.00 77,312.06

0.00 $ 401,224.40

0.00 $ 0.00 $

30,944.66 30,129.32 34,838.36 77,312.06 207,000.00 21,000.00
401,224.40

- 29 -

COLLEGE OF COASTAL GEORGIA BUDGET TO GAAP RECONCILIATION
JUNE 30, 2012
Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "1")
Amounts reported for Business-Type Activities in the Statement of Net Assets are different because:
Capital Assets used in Business-Type Activities are not reported in the Budget Fund.
Uncollectible accounts receivable are reported as an asset and reserved fund balance in the Budget Fund and as a contra-asset account on the Statement of Net Assets.
Changes in the Fair Market Value of Investments are recognized on the Statement of Net Assets, but are not reported in the Budget Fund.
Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity
Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity
Endowment Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Endowment Fund Activity
Loan Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Loan Fund Activity
Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activity Fund Activity
The budgetary basis of accounting implemented by the State of Georgia recognizes expenditures when encumbered. The following adjustments were made to eliminate this activity for reporting on the Statement of Net Assets. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Accounts Receivable items reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Total Net Effect of Encumbrance Activity
Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Capital Leases Payable Compensated Absences Payable Total Liabilities
Net Assets of Business-Type Activities (Exhibit "A")
The supplementary information presented on Schedules 1, 2, 3 and 4 was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. The information was derived from, and relates directly to, the same information used to prepare the financial statements. However, the budgetary statutes and regulations of the State of Georgia require reporting of certain information that is not in accordance with generally accepted accounting principles. Presented on this schedule is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Assets of business-type activities, as reported on Exhibit A.
- 30 -

SCHEDULE "5"

$

401,224.40

81,929,133.00

$

520,542.20

-520,542.20

$ 1,870,355.62 -653,790.26

$

68,879.18

0.00

$

6,630.98

0.00

$

75,803.52

-37,286.60

-77,312.06 11,565.11
0.00 1,216,565.36
68,879.18 6,630.98
38,516.92

$ 1,106,764.11 -815,420.00

291,344.11

$ -27,653,044.00 -738,274.00

-28,391,318.00

$ 55,495,229.00

COLLEGE OF COASTAL GEORGIA RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2012

SCHEDULE "6"

Totals per Annual Supplement
Accruals June 30, 2012 June 30, 2011
Prepaids June 30, 2012 June 30, 2011
Compensated Absences June 30, 2012 June 30, 2011
Adjustments Shared Services on Jointly Staffed Personnel Armstrong Atlantic State University Cunningham, Sherri
Altamaha Technical College Lytle, Cora
Georgia Highlands College Hershey, Jonathon Minor, Frank
Kennesaw State University Mitchell, Beverly
University of Georgia Berry, Stephanie Inscoe, John
University of West Georgia Goodale, Timothy Hazelcorn, Michael
Valdosta State University Auguado, David Mortier, Jane Waters, Laura

SALARIES

$

14,476,329 $

TRAVEL 244,046

57,580 -160,130

-2,119 0

685,810 -612,308

-6,459
-68,617
800 800
538
600 600
-5,294 3,229
1,722 -4,306 -2,153

$

14,366,622 $

244,046

- 31 -

SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS

COLLEGE OF COASTAL GEORGIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2012
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.