Clayton State University, Morrow, Georgia, management report for fiscal year ended June 30, 2014 [June 30, 2014]

CLAYTON STATE UNIVERSITY
MORROW, GEORGIA
MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2014
A Member Institution of the University System of Georgia
Georgia Department of Audits and Accounts Greg S. Griffin State Auditor

CLAYTON 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
5 RECONCILIATION OF BUDGET TO GAAP 6 RECONCILIATION OF SALARIES AND TRAVEL

Page
2 3 4 5
20 21 22 24 26 27

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
January 26, 2015

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the State Board of Regents of the University System of Georgia
and Honorable Tim Hynes, President Clayton State University
Ladies and Gentlemen:
As part of our audits of the basic financial statements of the University System of Georgia presented in the Annual Financial Report for the University System of Georgia, the basic financial statements of the State of Georgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2014, we have performed certain audit procedures at Clayton State University. Accordingly, the financial statements and compliance activities of Clayton State University were examined to the extent considered necessary in order to express an opinion as to the fair presentation of the financial statements contained in the foregoing documents and to issue reports on compliance and internal control as required by the Single Audit Act Amendments of 1996.
This Management Report contains information pertinent to the financial and compliance activities of Clayton State University as of and for the year ended June 30, 2014. Information contained in this report is a by-product of our audits of the basic financial statements of the University System of Georgia and the basic financial statements of the State of Georgia and is the representation of management. Accordingly, we do not express an opinion or any other form of assurance on it. The particular information provided which includes a section on findings and other items reported in accordance with Commission on Colleges regulation 2.11.1 is enumerated in the Table of Contents.
This report is intended solely for the information and use of the management of Clayton 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,

GSG:as

Greg S. Griffin State Auditor

SELECTED FINANCIAL INFORMATION - 1 -

CLAYTON STATE UNIVERSITY STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2014
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Due from Affiliated Organizations Inventories Prepaid Items
Total Current Assets
Noncurrent Assets Noncurrent Cash Short-Term Investments Due from USO - Capital Liability Reserve Fund Notes Receivable, Net Capital Assets, Net (Note 4)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Advances (Including Tuition and Fees) (Note 5) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET POSITION
Net Investment in Capital Assets Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Position
- 2 -

EXHIBIT "A"

$

7,174,753

1,652,988 93,139 23,245
1,433,421 348,298

10,725,844

2,551 1,426,732
578,205 77,000
120,953,623
123,038,111
133,763,955

1,035,562 104,261 67,950 5,456
1,045,213 65,114
395,823 493,767 1,427,254
4,640,400
76,351,321 693,307
77,044,628
81,685,028

44,108,535
1,434,732 -26,269
6,561,929

$

52,078,927

CLAYTON STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - (GAAP BASIS)
YEAR ENDED JUNE 30, 2014
OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) Less: Scholarship Allowances
Grants and Contracts Federal State Other
Sales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Loss
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Other Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Expenses
Net Nonoperating Revenues
Loss Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State
Decrease in Net Position
Net Position - Beginning of Year, Restated
Net Position - End of Year

EXHIBIT "B"

$

37,817,885

-10,178,838

1,329,714 1,500
350,865 1,883,811
8,155

6,320,143 3,865,689
309,527 534,894 774,177 2,548,312 405,915 132,604

46,104,353

20,191,767 19,926,573 11,836,255
277,710 527,907 10,799,745 2,713,667 16,151,703 5,844,510
88,269,837
-42,165,484

23,401,932
18,070,280 276,060 1,009 231,512
-4,365,626 -50,833
37,564,334
-4,601,150
499,324
-4,101,826
56,180,753

$

52,078,927

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CLAYTON STATE UNIVERSITY STATEMENT OF CASH FLOWS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts (Exchange) Sales and Services of Educational Departments 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 Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts, Net
Net Cash Used by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Expenses, Net
Net Cash Flows Provided by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest and Executory Cost Paid on Capital Debt and Leases
Net Cash Used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments
Net Cash Provided by Investing Activities
Net Decrease in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES:
Operating Loss Adjustments to Reconcile Operating Loss to Net Cash
Used by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Inventories Other Assets Prepaid Items Notes Receivable, Net Accounts Payable Advances (Including Tuition and Fees) Other Liabilities Compensated Absences
Net Cash Used by Operating Activities
- 4 -

EXHIBIT "C"

$

27,059,535

996,259

1,883,811

-31,909,358

-40,097,082

-10,799,745

37,019

5,946,731 3,589,593
282,327 527,069 755,751 2,483,884 398,753
16,896

-38,828,557

23,401,932 407,580
17,848,028 -20,584
41,636,956

499,324 -1,558,742
-296,795 -4,365,626
-5,721,839

2,340 231,512 233,852 -2,679,588 9,856,892

$

7,177,304

$

-42,165,484

5,844,510
-64,982 -286,688 -119,147
-32,877 29,092 -154,190 -1,431,653 -428,603 -18,535

$

-38,828,557

CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY Clayton State University (University) is one of thirty-one (31) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Clayton State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Clayton State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Clayton State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
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 University's assets, deferred outflow of resources, liabilities, deferred inflows of resources, net position, revenues, expenses, changes in net position and cash flows.
BASIS OF ACCOUNTING For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-University transactions have been eliminated.
RESTATEMENT OF PRIOR YEAR NET ASSETS Clayton State University has a restatement of prior year net assets increasing beginning net assets by $6,826. This is due to adding a capital asset that did meet the capitalization threshold but was not originally recorded properly in a prior year.
NEW ACCOUNTING PRONOUNCEMENTS In fiscal year 2014, the University adopted the Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. The provisions of this Statement clarify the use of deferred inflows of resources and deferred outflows of resources. Certain items, including those items which were previously reported as assets and liabilities, will now be reported as outflows of resources or inflows of resources. As of June 30, 2014, the University did not have any deferred outflows of resources or deferred inflows of resources.
In fiscal year 2014, the University adopted Governmental Accounting Standards Board (GASB) Statement No. 66, Technical Corrections - 2012, an amendment to GASB Statements No. 10 and No. 62. The objective of this Statement is to resolve conflicting guidance by amending GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues and GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in PreNovember 30, 1989 FASB and AICPA Pronouncements. GASB Statement No. 10 was amended by

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CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

removing the provision that limited fund based reporting of an entity's risk and financing activities to certain funds. GASB Statement No. 62 was amended by modifying guidance on (1) operating lease payments that vary from a straight-line basis, (2) purchases of a loan or a group of loans, and (3) recognition of servicing fees on mortgage loans that are sold when the stated service fee rate differs from a current (normal) servicing fee rate. The adoption of this statement does not have a significant impact on the University's financial statements.
In fiscal year 2014, the University adopted Governmental Accounting Standards Board (GASB) Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. This Statement establishes accounting and reporting requirements for state and local governments that extend or receive financial guarantees that are nonexchange transactions. The adoption of this statement does not have a significant impact on the University's financial statements.
FUTURE ACCOUNTING PRONOUNCEMENTS In fiscal year 2015, the University will adopt Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this Statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this Statement will require the University to record a liability for its proportionate share of the Net Pension Liability of pension plans in which it participates. Actuarial estimates are currently being made to determine the University's liability, the effects of which are believed to be material.
NET POSITION The University's net position is classified as follows:
Net Investment in Capital Assets: This represents the University's total investment in capital assets, net of outstanding debt obligations and deferred inflows, or resources 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 the net investment in capital assets.
Restricted - nonexpendable: Nonexpendable restricted net position consists of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted - expendable: Restricted expendable net position includes resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Unrestricted: Unrestricted net position represents resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Clayton State University and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). At June 30, 2014, there was no surplus to be refunded.

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CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 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, 2014, the carrying value of deposits was $6,484,233 and the bank balance was $7,763,851. Of the University's deposits, $7,593,805 were uninsured. Of these uninsured deposits, $7,593,805 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name.

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CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

INVESTMENTS At June 30, 2014, the carrying value of the University's investment was $2,075,716, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and Office of State Treasurer investment pools as follows:

Investment Pools Board of Regents Short-Term Fund Total Return Fund

$

296,009

1,426,732

Office of the State Treasurer Georgia Fund 1

1,722,741 352,975

Total Investments

$

2,075,716

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 Short-Term Fund is reported as Cash and Cash Equivalents on Exhibit "A" of this report. 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.

The Georgia Fund 1 Investment Pool, managed by the Office of State Treasurer, is not registered with the Securities and Exchange Commission as an investment company, and does not operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the fund is 62 days.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2014.

Student Tuition and Fees

$

Auxiliary Enterprises and Other Operating Activities

Federal, State and Private Funds

Due from Affiliated Organizations

Other

-375,885 647,756 1,652,988
23,245 218,446

Less Allowance for Doubtful Accounts

2,166,550 397,178

Net Accounts Receivable

$

1,769,372

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CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

NOTE 4: CAPITAL ASSETS Following are the changes in the University's capital assets for the year ended June 30, 2014:

Beginning Balance July 1, 2013 (Restated)

Additions

Reductions

Ending Balance June 30, 2014

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

$

2,195,001

448,070 $

441,557 $

$

2,195,001

0

889,627

Total Capital Assets, Not Being Depreciated

2,643,071

441,557

0

3,084,628

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

82,943,445 145,440
7,471,006 76,088,876
7,368,180

725,901 459,234

479,617 7,719

82,943,445 145,440
7,717,290 76,088,876
7,819,695

Total Assets Being Depreciated

174,016,947

1,185,135

487,336

174,714,746

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

31,363,566 65,624
5,222,441 9,412,197 5,387,679

2,169,404 7,229
613,371 2,294,196
760,310

239,740 6,945
437,429 -242,098
8,250

33,293,230 65,908
5,398,383 11,948,491
6,139,739

Total Accumulated Depreciation

51,451,507

5,844,510

450,266

56,845,751

Total Capital Assets, Being Depreciated, Net

122,565,440

Capital Assets, Net
NOTE 5: ADVANCES

$ 125,208,511 $

Advances consisted of the following at June 30, 2014.

-4,659,375 -4,217,818 $

37,070

117,868,995

37,070 $ 120,953,623

Prepaid Tuition and Fees Research Other Advances
Total Advances

$

890,555

2,551

152,107

$

1,045,213

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CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

NOTE 6: LONG-TERM LIABILITIES The University's Long-Term liability activity for the year ended June 30, 2014 was as follows:

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

Current Portion

Leases Lease Obligations

$ 77,141,883

$

296,795 $ 76,845,088 $

493,767

Other Liabilities Compensated Absences

2,139,094 $ 1,516,474

1,535,007

2,120,561

1,427,254

Total Long-Term Obligations $ 79,280,977 $ 1,516,474 $ 1,831,802 $ 78,965,649 $ 1,921,021

NOTE 7: NET POSITION

Changes in Net Position for the year ended June 30, 2014 are as follows:

Beginning

Balance

July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

Invested in Capital Assets Net of Related Debt

$

48,059,802 $

-3,914,197 $

37,070 $

44,108,535

Restricted Net Position

1,250,218

20,012,017

19,853,772

1,408,463

Unrestricted Net Position

6,863,907

65,598,407

65,900,385

6,561,929

Total Net Position

$

NOTE 8: LEASE OBLIGATIONS

56,173,927 $

81,696,227 $

85,791,227 $

52,078,927

Clayton State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities), and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment.

CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2014 and 2042. Expenses for fiscal year 2014 were $4.3 million of which $4 million represented interest and $303,955 represented executory cost. Total principal paid on capital leases was $296,793 for the fiscal year ended June 30, 2014. Interest rates range from 4.795 percent to 4.832 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2014:

Outstanding

Net Assets Held

Balances

Under Capital

per Lease

Accumulated

Lease at

Schedules at

Description

Gross Amount

Depreciation

June 30, 2014

June 30, 2014

(+)

(-)

(=)

Buildings - (PPV)

$

76,088,876 $ 11,948,491 $ 64,140,385 $ 76,845,088

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CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

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.
Clayton State University had three capital leases with related entities in the current fiscal year. In June 2008, Clayton State University entered into a capital lease of $45,948,759 at 4.83 percent with the CSU Foundation Real Estate I, LLC, whereby the University leases two buildings (Laker Hall and Student Activity Center) for a thirty-year period that began June 2008 and expires June 2038. In July 2011 the University entered into a capital lease of $30,140,117 at 4.795 percent with the CSU Foundation Real Estate II, LLC, whereby the University leases land and a building for a thirty-year period that began July 2012 and expires June 2042. The outstanding liability at June 30, 2014 on these capital leases is $45,623,372 and $31,221,716 respectively. The University at its option may terminate the lease and purchase CSU Real Estate Foundation's interest for the unamortized principal balance and the payment of $1.
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, 2014, were as follows:

Capital Leases

Operating Leases

Year Ending June 30: 2015 2016 2017 2018 2019 2020 - 2024 2025 - 2029 2030 - 2034 2035 - 2039 2040 - 2042

$

4,497,668 $

213,632

4,820,791

4,937,993

5,038,624

5,165,823

27,292,555

29,563,643

32,179,383

30,366,526

7,452,841

Total Minimum Lease Payments

$

151,315,847 $

213,632

Less: Interest Less: Executory Costs (if paid)

62,303,951 12,166,808

Principal Outstanding

$

76,845,088

For fiscal year 2014, expense for rental of real property and equipment under operating leases was $229,098.

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CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS
Clayton State University participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia. These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that Clayton State University participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.
Employees' Retirement System of Georgia
The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers Retirement System of Georgia. One of the ERS System plans, the Employees' Retirement System of Georgia (ERS), is a cost-sharing multiple-employer defined benefit pension plan that was established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract.
On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1, 1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415.
The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are "new plan" members subject to the modified plan provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009 also have the option to change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided

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CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, Clayton State University pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Clayton State University contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. Clayton State University is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These Clayton State University contributions are not at any time refundable to the member or his/her beneficiary.
Employer contributions required for fiscal year 2014 were based on the June 30, 2011 actuarial valuation as follows:

Old Plan* New Plan GSEPS

18.46% 18.46% 15.18%

* 13.71% exclusive of contributions paid by the employer on behalf of old plan members
Members become vested after 10 years of service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions; the member forfeits all rights to retirement benefits.

Teachers Retirement System of Georgia

The Teachers Retirement System of Georgia (TRS) is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS.

On October 25, 1996, the Board created the Supplemental Retirement Benefit Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

- 13 -

CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2014 were 6.00% of annual salary. Employer contributions required for fiscal year 2014 were 12.28% of annual salary as required by the June 30, 2011 actuarial valuation.

The following table summarizes the Clayton State University contributions by defined benefit plan for the years ending June 30, 2014, June 30, 2013, and June 30, 2012:

Fiscal Year

ERS

Required

Percentage

Contribution Contributed

TRS

Required

Percentage

Contribution Contributed

2014

$

2013

$

2012

$

Regents Retirement Plan

11,907 7,699 6,450

100% 100% 100%

$ 2,214,062 $ 1,996,588 $ 1,769,829

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 Clayton State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2014, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 6% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.

- 14 -

CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

Clayton State University and the covered employees made the required contributions of $2,368,487 (9.24%) and $1,154,953 (6%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
Georgia Defined Contribution Plan
Plan Description Clayton State University participates in the Georgia Defined Contribution Plan (GDCP) which is a singleemployer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2014 amounted to $144,053 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
NOTE 10: RISK MANAGEMENT
The University System of Georgia offers its employees and retirees access to four different self-insured healthcare plan options. For the University System of Georgia's Plan Year 2014, the following health care options were available:
Blue Choice HMO plan (Blue Cross Blue Shield) HSA Open Access POS plan (Blue Cross Blue Shield) Open Access POS plan Kaiser Permanente HMO plan
University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these plans are considered to be a selfsustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a
- 15 -

CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

wholly owned subsidiary of WellPoint, to serve as the claims administrator for the self-insured healthcare plan products. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental loses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
NOTE 11: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Clayton State University expects such amounts, if any, to be immaterial to its overall financial positions.
Litigation, claims and assessments filed against Clayton State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2014.
NOTE 12: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.

- 16 -

CLAYTON STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2014

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 University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2014 plan year, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.
As of June 30, 2014, there were 202 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2014, Clayton State University recognized as incurred $877,779 of expenditures, which was net of $437,526 of participant contributions.
NOTE 13: AFFILIATED ORGANIZATIONS
The Clayton State University Real Estate Foundation, Inc., and Spivey Hall Foundation are legally separate, tax exempt organizations whose activities primarily support Clayton State University. These affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statement No. 61, The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of the affiliated organizations are not included in these financial statements. Copies of the financial statements for the affiliated organizations may be obtained from Clayton State University.

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SUPPLEMENTARY INFORMATION - 19 -

CLAYTON STATE UNIVERSITY BALANCE SHEET (STATUTORY BASIS)
BUDGET FUND JUNE 30, 2014
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Advances Funds Held for Others Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

3,928,623.24

1,652,987.70 335,683.45 280,211.78

$

6,197,506.17

$

103,188.77

3,166,952.16

196,024.67

619,448.79

-2,886.25

68,461.74

4,151,189.88

397,580.63 359,284.38 141,809.88 326,667.36 820,974.04
2,046,316.29

$

6,197,506.17

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 20 -

CLAYTON STATE UNIVERSITY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2014

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

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 23,414,055.00 $ 23,414,055.00 $

0.00

59,463,062.00

56,438,979.64

-3,024,082.36

82,877,117.00

79,853,034.64

-3,024,082.36

0.00 82,877,117.00

1,194,728.59 81,047,763.23

1,194,728.59 -1,829,353.77

162,133.00 82,714,984.00

82,877,117.00

$

0.00

162,133.00 79,090,761.68

0.00 3,624,222.32

79,252,894.68

3,624,222.32

1,794,868.55 $ 1,794,868.55

1,445,076.19 12,122.29

1,100.14
-12,122.29 -1,194,728.59 $ 2,046,316.29

SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over
Total Fund Balance

$

397,580.63

359,284.38

141,809.88

326,667.36

820,974.04

$ 2,046,316.29

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.
- 21 -

CLAYTON STATE UNIVERSITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2014

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

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

162,133.00 $

162,133.00 $

162,133.00 $

162,133.00

23,251,922.00 58,033,951.00
81,285,873.00

23,251,922.00 59,347,577.00
82,599,499.00

23,251,922.00 59,463,062.00
82,714,984.00

23,251,922.00 56,438,979.64
79,690,901.64

$

81,448,006.00 $

82,761,632.00 $

82,877,117.00 $ 79,853,034.64

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.
- 22 -

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Positive (Negative)

Expenditures Compared to Budget

Variance

Actual

Positive (Negative)

Excess of Funds Available
Over Expenditures

$

0.00 $

0.00 $

162,133.00 $

0.00 $

162,133.00 $

0.00 $

0.00

0.00 1,194,728.59
1,194,728.59

0.00 0.00
0.00

23,251,922.00 57,633,708.23
80,885,630.23

0.00 -1,829,353.77
-1,829,353.77

23,251,922.00 55,838,839.68
79,090,761.68

0.00 3,624,222.32
3,624,222.32

0.00 1,794,868.55
1,794,868.55

$ 1,194,728.59 $

0.00 $ 81,047,763.23 $

-1,829,353.77 $ 79,252,894.68 $

3,624,222.32 $

1,794,868.55

- 23 -

CLAYTON STATE UNIVERSITY STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2014

Public Service/Special Funding Initiative State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity
Prior Year Reserves Not Available for Expenditure Uncollectible Accounts Receivable

Beginning Fund Balance July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2013
Surplus

Prior Period Adjustments

$

8,824.84 $

0.00 $

-8,824.84 $

0.00

304.74 1,197,721.30
1,198,026.04
1,206,850.88

0.00 -1,194,728.59
-1,194,728.59
-1,194,728.59

-304.74 -2,992.71
-3,297.45
-12,122.29

0.00 1,100.14
1,100.14
1,100.14

250,347.60

0.00

0.00

0.00

Budget Unit Totals

$

1,457,198.48 $

-1,194,728.59 $

-12,122.29 $

1,100.14

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.
- 24 -

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2014
Surplus

Excess of Funds Available
Over Expenditures

Ending Fund Balance June 30

Analysis of Ending Fund Balance

Reserved

Surplus

Total

$

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

0.00 -76,319.76
-76,319.76
-76,319.76

0.00 0.00
0.00
0.00

0.00 1,794,868.55
1,794,868.55
1,794,868.55

0.00 1,719,648.93
1,719,648.93
1,719,648.93

0.00 1,719,648.93
1,719,648.93
1,719,648.93

0.00 0.00
0.00
0.00

0.00 1,719,648.93
1,719,648.93
1,719,648.93

76,319.76

0.00

0.00

326,667.36

326,667.36

0.00

326,667.36

$

0.00 $

0.00 $

1,794,868.55 $ 2,046,316.29 $ 2,046,316.29 $

0.00 $ 2,046,316.29

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

$ 397,580.63 $ 359,284.38 141,809.88 326,667.36 820,974.04
$ 2,046,316.29 $

0.00 $

397,580.63 359,284.38 141,809.88 326,667.36 820,974.04

0.00 $ 2,046,316.29

- 25 -

CLAYTON STATE UNIVERSITY RECONCILIATION OF BUDGET TO GAAP
YEAR ENDED JUNE 30, 2014

SCHEDULE "5"

Presented below is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A.
Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "1")
Amounts reported for Business-Type Activities in the Statement of Net Position are different because:
Capital Assets used in Business-Type Activities are not reported in the Budget Fund.
Uncollectible accounts receivable are reported as an asset and reserved fund balance in the Budget Fund and as a contra-asset account on the Statement of Net Position.
Changes in the Fair Market Value of Investments are recognized on the Statement of Net Position, 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 Position. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Reimbursement from grantors reported as revenues in the Budget Fund that are for expenditures based on encumbrances are deferred for GAAP reporting. Total Net Effect of Encumbrance Activity
Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Capital Leases Payable Compensated Absences Payable Contracts Payable Total Liabilities
Rounding Variance

$

2,046,316.29

120,953,623.00

$ 1,218,939.94 -1,218,939.94

$ 3,437,430.00 87,834.00

$ 1,434,731.67 0.00

$

-27,769.26

0.00

$ 1,199,499.30 -397,100.96

-326,667.00 186,855.00
0.00 3,525,264.00 1,434,731.67
-27,769.26 802,398.34

$ 3,166,952.00 -649,178.00

2,517,774.00

$ -76,845,088.00 -2,120,561.00 -67,950.00

-79,033,599.00 -0.04

Net Position 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 special purpose framework. The information was derived from, and relates directly to, the same information used to prepare the financial statements. However, the budgetary statutes and regulations of the State of Georgia require reporting of certain information that is not in accordance with generally accepted accounting principles. Presented on this schedule is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A.
- 26 -

$ 52,078,927.00

CLAYTON STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2014

SCHEDULE "6"

Totals per Annual Supplement
Accruals June 30, 2014 June 30, 2013
Compensated Absences June 30, 2014 June 30, 2013
Adjustments Shared Services on Jointly Staffed Personnel Armstrong State University Hendricks, Christopher
Atlanta Metropolitan State College Strong, Nicole
Board of Regents Fuchko, John
Columbus State University Attick, Dennis
Georgia Gwinnett College Stephens, Robert Walsh, Susan
Georgia Institute of Technology Sanford, Dennis
Georgia Perimeter College Shepard-White, Felicia
Georgia State University Blanton, Shelia Curry, Kristina Foster, Victoria Gruszka, William Nteff, Grace Shaw, Sharon Jane Taylor-Hamrick, Terri
University of Georgia Johnson, Corey
University of West Georgia Crafton, Micheal Lane, Robert
Unidentified Variance
- 27 -

SALARIES $ 40,004,282 $

TRAVEL 527,404

104,261 -76,004

1,969,866 -1,987,083

600

-2,800

775

-845

-4,000 2,376

-4,700

-5,000

6,300 5,000 -4,200 5,762 -4,200 -4,200
-743

850

140,833 300

-29,090

503

$ 40,118,340 $

527,907

SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

CLAYTON STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2014

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

FS-528-14-01 Inadequate Accounting Controls

Control Category:

Accounting Controls (Overall)

Internal Control Impact: Significant Deficiency

Description: The University failed to provide adequate documentation to support quarterly reconciliations of subsidiary modules.

Criteria: The University should reconcile subsidiary modules in accordance with guidelines and instructions provided in Section 1.7 of the Board of Regent's Business Procedure Manual.

Condition: The audit revealed inadequate documentation to support the quarterly reconciliation of the activity in the subsidiary modules of the financial account system as it relates to accounts payable and expense, accounts receivable and revenue, employee compensation, purchasing and encumbrances and asset management to the general ledger. As a result of the inadequate reconciliations, the following errors were noted:

1. Three deposits in transit items totaling $232,000 have been reported as reconciling items for six months or more.

2. Tuition and fees accounts receivable resulted in a credit balance of $375,885.

3. Restricted for expendable funds resulted in a deficit at year end.

Questioned Cost: N/A

- 1 -

CLAYTON STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2014
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
Cause: In discussing this deficiency with Clayton State University, management indicated that the cause was attributed to several factors which included legacy processes, transition of key management personnel, system issues and limited exposure to Board of Regent's policy due to transition in staff.
Effect or Potential Effect: Failure to implement satisfactory accounting controls and procedures could cause internal reports to management generated from the general ledger to be inaccurate and misleading. In addition, the University could place itself in a position where potential misrepresentations of financial activities could occur.
Recommendation: The University should review the accounting controls and procedures currently in place, identify weaknesses, and design and implement procedures necessary to strengthen controls over the reconciliation of subsidiary modules.
Views of Responsible Officials and Corrective Action Plans:
We agree and have implemented corrective measures to address these findings.
1. We have taken a proactive approach to identify the root causes related to the reconciliation between the sub-ledgers and the financial statements. Our initial review indicated errors with the batch process within our financial accounting system for open purchase order activity, encumbrance ledger and detail encumbrance ledger. We discovered mapping errors within financial system interface. We also identified prior year transactions in asset management that are causing reconciliation issues with net book value and depreciation. We have an open ticket with Information Technology Services (ITS) at the Board of Regents of the University System of Georgia.
We have been working internally and externally with ITS for over 4 months to address the reconciliation issues with the batch process and asset management. An internal team is currently addressing the mapping errors within financial system interface that were causing the reconciliation challenges. In addition, we will be reconciling all sub-ledgers quarterly to ensure compliance with Section 1.7 of the Board of Regent's Business Procedure Manual.
2. The bank reconciliation was an oversight, which we have corrected by implementing daily reconciliation, sign off and management review.
3. We implemented a new procedure to review, identify and correct any discrepancies for tuition and fees account receivable balances.
4. We have refilled a fulltime position and designated that person to review, identify and correct any deficits in the restricted funds as a major part of their duties.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION)
No matters were reported.
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