GEORGIA PERIMETER COLLEGE DECATUR, GEORGIA MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30,2011 A Member Institution of the University System of Georgia Georgia Department of Audits and Accounts Russell W.M t o n - State Alldit0~ GEORGIA PERIMETER COLLEGE - TABLE OF CONTENTS - SECTION I LETTER OF TRANSMITTAL SELECTED FINANCIAL INFORMATION EXHIBITS A STATEMENT OF NET ASSETS - (GAAP BASIS) B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (GAAP BASIS) C STATEMENT OF CASH FLOWS - (GAAP BASIS) D SELECTED FINANCIAL NOTES SUPPLEMENTARY INFORMATION SCHEDULES 1 BALANCE SHEET - (STATUTORY BASIS) BUDGET FUND 18 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND 19 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND 2 0 4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND 2 2 5 RECONCILIATION OF SALARIES AND TRAVEL 2 5 SECTION II ENTITY'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS GEORGIA PERIMETER COLLEGE - TABLE OF CONTENTS - SECTION Ill FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENOTF AUDITSAND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 December 13,2011 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 Anthony Tricoli, President Georgia Perimeter College Ladies and Gentlemen: As part of our audits of the basic financial statements of the University System of Georgia presented in the AnnualFinancialReportfor the University System of Georgia, the basic financial statements of the State of Georgia presented in the State o f Georgia ComprehensiveAnnual FinancialReportand the issuance of a State o f Georgia SingleAudit Reportpursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2011, we have performed certain audit procedures at Georgia Perimeter College. Accordingly, the financial statements and compliance activities of Georgia Perimeter College were examined to the extent considered necessary in order to express an opinion as to the fair presentation of the financial statements contained in the foregoing documents and to issue reports on compliance and internal control as required by the Single Audit Act Amendments of 1996. This Management Report contains information pertinent to the financial and compliance activities of Georgia Perimeter College as of and for the year ended June 30, 2011. 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 Georgia Perimeter - College, members of the Board of Regents of the University System of Georgia and the Southern Association of Colleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, \I R)ussell W. Hinton, CPA, CGFM State Auditor SELECTED FINANCIAL INFORMATION GEORGIA PERIMETER COLLEGE STATEMENT OF NET ASSETS - (GAAP BASIS) JUNE 30,2011 ASSETS Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable. Net (Note 3) Federal Financial Ass~stance Other Inventories (Note 4) Prepaid Items Total Current Assets Noncurrent Assets Noncurrent Cash Notes Receivable, Net Capital Assets, Net (Note 4) Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deferred Revenue (Note 6) Other L~abilities Deposits Held for Other Organ~zat~ons Lease PurchaseObligations Compensated Absences Total Current Liabilities Noncurrent Liabilities Lease PurchaseObligations Compensated Absences Total Noncurrent Liab~lities Total L~abilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for Nonexpendable Expendable Capital Projects Unrestricted Total Net Assets EXHIBIT "A" GEORGIA PERIMETER COLLEGE STATEMENT OF REVENUES, EXPENSESAND CHANGES IN NETASSETS - (GAAP BASIS) YEAR ENDED JUNE 30,2011 OPERATING REVENUES Student Tuition and Fees Less: Scholarship Allowances Grants and Contracts Federal State Other Sales and Sew~cesof Educational Departments Rents and Royalties Auxilialy Enterprises Bookstore Food Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Salaries Faculty Staff Employee Benefits Other PersonalSewices Travel Scholarshipsand Fellowships Utilities Supplies and Other Services De~reciation Total Operating Expenses Operating lncome (Loss) NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal lnterest and Other Investment Income Interest Expense Other Nonoperatlng Revenues Net Nonoperating Revenues lncome (Loss) Before Other Revenues, Expenses,Gains, or Losses Cap~taGl rants and Gifts State Increase in Net Assets Net Assets - Beginningof Year Net Assets - End of Year GEORGIA PERIMETER COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS) YEAR ENDEDJUNE 30.2011 CASH FLOWS FROM OPERATING ACTlVlTiES Tuition and Fees Grants and Contracts Sales and S e ~ i c e osf Educational Departments Payments to Supplies Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students Auxil~atyEnterprise Charges: Bookstore Food Services Intercollegiate Athletics Other Organizations Other Receipts (Payments) Net Cash Provided (Used) by Operatlng Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTiVlTlES State Appropriatlons Agency Funds Transactions Gifts and Grants Received for Other than Capltal Purposes Net Cash Flows Provided (Used) by Noncapital Financing Actlvltles CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Gifts and Grants Received Proceeds from Sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases lnterest Paid on Capital Debt and Leases Net Cash Provided (Used) by Capltal and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on 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 Operatlng Income to Net Cash Provided (Used) by Operatlng Activities Depreciation Change in Assets and Liabilities: Accounts Rece~vableN, et lnventorles Prepaid Items Notes Receivable. Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (Used) by Operating Activities GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2011 EXHIBIT "D" NOTE 1:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY Georgia Perimeter College is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanyingfinancial statements reflect the operations of Georgia Perimeter College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Perimeter College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Perimeter College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Re~ortinSgtandards. 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. Restrided 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. Restrided 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. Unrestriictednet asseh: 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 $113,576.62. GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30,2011 EXHIBIT "D" NOTE 1:SUMMARY OF SIGNIFICANTACCOUNT1NG POLICIES 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. 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. At June 30, 2011, the carrying value of deposits was $1,722,964 and the bank balance was $2,775,872. Of the College's deposits, $2,754,616 were uninsured. Of these uninsured deposits, $2,754,616 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2011 EXHIBIT "D" NOTE 2: DEPOSITS AND INVESTMENTS INVESTMENTS At June 30, 2011, the carrying value of the College's investment was $3,152,078, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and/or Office of the State Treasurer investment pools as follows: Investment Pools Office of the State Treasurer Georgia Fund 1 The Board of Regents lnvestment 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 lnvestment Pool is voluntary. The Board of Regents lnvestment Pool is not rated. The Board of Regents Short-Term Fund is reported as Cash and Cash Equivalents on Exhibit " A of this report. The Georgia Fund 1lnvestment Pool, managed by the Office of the State Treasurer, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the lnvestment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1lnvestment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 5 9 days. NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2011: Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State and Private Funds Other $ 2,203,573 351,363 775,495 4,875,870 Less Allowance for Doubtful Accounts Net Accounts Receivable GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2011 EXHIBIT "D" NOTE 4: CAPITAL ASSETS Followingare the changes in the College's capital assets for the year ended June 30, 2011: Beginning Balance July 1,2010 Additions Reductions Ending Balance June 30.2011 Capital Assets, Not Being Depreciated: Land Construction Work-In-Progress $ 5,022,604 $ 5,022,604 3,279.329 $ 3,973,608 $ 4,589,663 2,663,274 Total Capital Assets, Not Being Depreciated $ 8,301,933 $ 3,973,608 $ 4,589,663 $ 7,685.878 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections $ 104,062,892 $ 9,955,054 12,722,385 79,580,508 13,532,260 13,101,712 3,527,140 $ 2,175,052 696,557 $ 2,752,576 1,594.880 497,631 117,164.604 10,729,618 13,302,557 79,580,508 13,731,186 Total Assets Being Depreciated $ 219,853,099 $ 19,500,461 $ 4,845,087 $ 234,508,473 Less: Accumulated Depreciation: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections $ 39,924,030 $ 2,680,070 8,700,557 3,755,194 10,683,124 2,148,751 90,017 2,127,360 $ 2,345,481 580,213 $ 1,166,004 464.136 42,072,781 2,770.087 9,661.913 6,100,675 10,799,201 Total Accumulated Depreciation $ 65,742,975 $ 7,291,822 $ 1,630.140 $ 71,404,657 Total Capital Assets. Being Depreciated, Net $ 154,110,124 $ 12,208,639 $ 3,214,947 $ 163,103.816 Capital Assets, Net NOTE 5: DEFERRED REVENUE Deferred revenue consisted of the following a t June 30, 2011: Prepaid Tuition and Fees Other Deferred Revenue Total Deferred Revenue $ 4,325,904 GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30,2011 EXHIBIT "D" NOTE 6: LONG-TERM LlABlLIT1ES The College's Long-Term liability activity for the year ended June 30, 2 0 1 1 was as follows: Beginning Balance July 1,2010 Addit~ons Reductions Ending Balance June 30,2011 Current Portion Leases Lease Obligations $ 80,780,887 Other Liabilities Compensated Absences 3,740,448 $ 3,039,821 2,552,256 4,228,013 2,371,345 Total LonETerrn Obligations $ 84,521,335$ 3,039,821$ 3,462,315$ 84,098,841$ 3,387,160 NOTE 7: NET ASSETS Changes in Net Asset activity for the year ended June 3 0 , 2 0 1 1 are as follows: Beginning Balance July 1,2010 Additions Reductions Ending Balance June 30.2011 Invested in Capital Assets Net of Related Debt Restricted Net Assets 782.808 55,731,933 56,186,261 328,480 Unrestricted Net Assets Total Net Assets NOTE 8: LEASE OBLIGATIONS Georgia Perimeter College is obligated under capital leases 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 2 0 1 1 and 2035. Expenditures for fiscal year 2 0 1 1 were $3.9 million of which $3.0 million represented interest. Total principal paid on capital leases was $0.9 million for the fiscal year ended June 30, 2011. Interest rates range from 4.743 percent to 4.813 percent. OPERATING LEASES Georgia Perimeter College had no expense for rental of real property and equipment under operating leases in fiscal year 2011, and had no operating leases having remaining terms of more than one year a t June 30,2011. GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30,2011 EXHIBIT "D" NOTE 8: LEASE OBLIGATIONS FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30,2011, were as follows: Real Property and Equipment Capital Leases Year Ending June 30: 2012 2013 2014 2015 2016 2017 - 2021 2022 - 2026 2027 - 2031 2032 - 2035 Total Minimum Lease Payments $ 139,884,751 Less: Interest Less: Executoty Costs (if paid) 60,008,613 5,310 Principal Outstanding NOTE 9: RETIREMENT PLANS Georgia Perimeter College 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 Georgia Perimeter College 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. GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2011 EXHIBIT "D" NOTE 9: RETIREMENT PLANS 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 multipleemployer 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 1 0 years of creditable service and attainment of age 6 0 or 3 0 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 2 4 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. GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2011 EXHIBIT "Dl1 NOTE 9: RETIREMENT PLANS 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, Georgia Perimeter College pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Georgia Perimeter College 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. Georgia Perimeter College 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 Georgia Perimeter College contributions are not at any time refundable to the member or his/her beneficiary. Employer contributions required for fiscal year 2 0 1 1 were based on the June 30, 2008 actuarial valuation for the old and new plans and were set by the Board of Trustees on September 18, 2008 for GSEPS as follows: Old Plan* New Plan GSEPS 10.41% 10.41% 6.54% * 5.66% exclusive of contributions paid by the employer on behalf of old plan members Members become vested after 1 0 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 3 0 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. GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2011 EXHIBrT "D" NOTE 9: RETIREMENT PLANS 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 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 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 1 0 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, 2 0 1 1 were 5.53% of annual salary. Employer contributions required for fiscal year 2 0 1 1 were 10.28% of annual salary as required by the June 30, 2008 actuarial valuation. The following table summarizes the Georgia Perimeter College contributions by defined benefit plan for the years ending June 30,2011, June 2010, and June 2009 (dollars in thousands): Fiscal Year ERS Required Percentage Contribution Contributed TRS Required Percentage Contribution Contributed Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30,2011 EXHIBIT "D" NOTE 9: RETIREMENT PLANS Funding Policy Georgia Perimeter College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2011, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Georgia Perimeter College and the covered employees made the required contributions of $2,129,268 (9.24%) and $1,152,204 (5%),respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Georgia Defined Contribution Plan Plan Description Georgia Perimeter College 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 2 0 1 1 amounted to $748,411 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. GEORGIA PERIMETER COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2011 EXHIBIT "DM NOTE 10: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2010 and 2 0 1 1 plan years, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%. As of June 30, 2011, there were 347 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2011, Georgia Perimeter College recognized as incurred $1,581,420 of expenditures, which was net of $1,101,507 of participant contributions. NOTE 11: AFFILIATED ORGANIZATIONS Georgia Perimeter College Foundation, Georgia Perimeter College Real Estate Foundation, Georgia Perimeter College Research Foundation, and Peachtree State Athletic Foundation are legally separate tax exempt organizations whose activities primarily support Georgia Perimeter College, a unit of the University System of Georgia (an organizational unit of the State of Georgia). These affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of these affiliated organizations are not included in these financial statements. Copies of the financial statements for the affiliated organizations may be obtained from Georgia Perimeter College. (This page left intentionally blank) SUPPLEMENTARY INFORMATION GEORGIA PERIMETER COLLEGE BALANCE SHEET (STATUTORY BASIS) BUDGET FUND JUNE 3 0 . 2 0 1 1 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories Total Assets LIABILITIESAND FUND EOUiTY Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue Funds Held for Others Total Liabilities Fund Balances Resewed Department Sales and Sewices Indirect Cost Recoveries Technologf Fees Capital Outlay Restricted/Sponsored Funds UncollectibleAccounts Receivable Tuition Carry-Over Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances SCHEDULE "1" Statutory Basisfinancial information was preparedon a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulationsof the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. GEORGIA PERIMETER COLLEGE SUMMARY BUDGET COMPARISONAND SURPLUSANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30.2011 REVENUES State Appropriation State General Funds Other Funds Total Revenues BUDGET Transfersfrom Reserved Fund Balance Adjustments and Program Transfers Total Funds Available EXPENDITURES Special Funding lnlttatlve Teaching Total Expend~tures Excess of Funds Available over Expenditures FUND BALANCF JULY 1 Reserved Unreserved ADJUSTMENTS Pr~oYr ear Payables/Expendltures Pr~oYr ear Rece~vables/Revenues Unreserved Fund Balance (Surplus) Returned to Board of Regents Un~versitySystem Office Year EndedJune 30,2010 Early Return of Surplus In Current Year Pr~oYr ear Reserved Fund Balance Included In Funds Ava~lable FUND BALANCEJUNE 3Q SUMMMY OF FUND BALANCE Reserved Department Sales and Services lnd~recCt ost Recoveries Technology Fees Capital Outlay Restricted/Sponsored Funds UncollectibleAccounts Rece~vable Tuition Carry-Over lnventorles Total Reserved Unreserved Surplus Total Fund Balance Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetarystatutes and regulations of the State of Georg~a. which is a comprehensivebasis of accountingother than generallyaccepted accounting principles. ACTUAL SCHEDULE "2" VARIANCE - FAVORABLE (UNFAVORABLE) GEORGIA PERIMETER COLLEGE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30,2011 Special Funding Initiatives State Appropriation State General Funds Teaching State Appropriation State General Funds Federal Funds American Recoveryand ReinvestmentAct of 2009 Federal Stabilization Funds Other Funds Total Teaching Total Operating Activity Original Appropriat~on Amended Appropriation Final Budget Current Year Revenues Statutory Basisfinancial information was preparedon a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, wh~chIS a comprehensivebasis of accounting other than generally accepted accounting principles. SCHEDULE " 3 Funds Available Compared to Budget Prior Year Adjustments and Total Carr-Over Program Transfers Funds Available Variance Positive lNeaativel Expenditures Compared to Budget Actual Variance Positive (Neeativel Excess (Deficiency) of Funds Available Over/(Under) ExDenditures GEORGIA PERIMETER COLLEGE STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDEDJUNE 30.2011 Special Funding Initiatives 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 Inventories Uncollectible Accounts Receivable Budget Unit Totals Beginning Fund Balance/(Deflcit) July 1 Fund Balance Carried Over from Prlor Period as FundsAvailable Return of FiscalYear 2010 Surplus Prior Period Adjustments Statutory Basis financial ~nforrnationwas prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia. which is a comprehenslve basis of accounting other than generally accepted accounting principles. SCHEDULE "4" Other Adjustments Early Return Fiscal Year 2011 Surplus Excess (Deficiency) of Funds Available Over/(Under) Expenditures End~ngFund Balance/(Deficit) June 3 0 Analys~sof Ending Fund Balance Reserved Surplus/(Deficit) Total Summary of Ending Fund Balance Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Capital Outlay Restncted/Sponsored Funds Uncollectible Accounts Rece~vable Tuition Carty-Over Inventories Unreserved Surplus Total Ending Fund Balance -June 3 0 (This page left intentionally blank) GEORGIA PERIMETER COLLEGE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDEDJUNE 3 0 , 2 0 1 1 SCHEDULE '5" Totals per Annual Supplement Accruals June 3 0 , 2 0 1 1 June 30,2010 Compensated Absences June 3 0 , 2 0 1 1 June 30,2010 Adjustments Shared Services on Jointly Staffed Personnel Atlanta Metropolitan College Godfrey Noe Ossie Carney Silveree Benson Boardof Regents Virginia Michelich Felita Williams Fort Valley State University Shae Anderson Georgia Gwinnett College Janita Rawls Stephanie Whittington Georgia Highlands College Merry Clark Georgia Institute of Technology Demetris Geddis Georgia Southwestern State University James Kahiga Georgia State University Robert Jenkins Sarah Paschal Sarah Spencer Gordon College Darren Broom Kennesaw State University Amy Hopk~ns North Georgia College and State University Pamela Moolinar Wirsiy University of West Georgia Meda Rollings Ronald Chilluffo Unidentified Variance SALARIES $ 84,344,064.10 $ TRAVEL 835,049.05 SECTION II ENTITY'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS GEORGIA PERIMETER COLLEGE ENTITY'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 3 0 , 2 0 1 1 PRIOR YEAR FINANCIAL STATEMENT FIND1NGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FS-571-10-01 Partially Resolved - See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES ACCOUNTING CONTROLS (OVERALL) Inadequate Accounting Procedures Finding Control Number: FS-571-10-01 Georgia Perimeter College continues to improve accounting procedures and internal controls through an organizational redesign of Accounting Services to review, determine, and implement: (1)the clear requirements for Accounting Services; (2) improved procedures and strengthened controls, and (3) processes of accountability. The first phase of the reorganization is underway with several steps completed. A completely new Accounting organization, overall enhanced controls, and policies and procedures will be implemented by December 31, 2011. Once fully implemented, Financial Affairs will schedule an engagement with Georgia Perimeter College Internal Audit to assess the effectiveness. The statuses of the corrective actions to the four specific deficiencies follow: 1. Previously Reported Corrective Action lmplemented 2. Previously Reported Corrective Action lmplemented 3. Previously Reported Corrective Action lmplemented 4. Partially Resolved: Georgia Perimeter College is working with ITS to resolve remaining items related to the 2002 conversion of CUFA to Peoplesoft where some assets were not added directly to the AM Module. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. SECTION Ill FINDINGS, QUESTIONEDCOSTS AND OTHER ITEMS GEORGIA PERIMETER COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 3 0 , 2 0 1 1 FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS FINANCIAL REPORTING Errors Noted in Financial Statement Preparation Material Weakness Finding Control Number: FS-571-11-01 Condition: The accounting procedures of the College were insufficient to ensure that various account balances were properly reflected on both the accounting records and the College'sfinancial statements. Criteria: NCGA Statement 1,paragraph 1,prescribes that an accounting system (1) present fairly and fully disclose funds of the governmental unit in accordance with generally accepted accounting principles and (2) demonstrate compliance with finance related legal and contractual provisions. Additional administrative requirements are contained in the University System of Georgia, Board of Regents' Business Procedures Manual. Management is responsible for establishing and implementing policies and procedures over the preparation of financial statements prepared in accordance with generally accepted accounting principles (GAAP). Additionally, the College is required to annually submit GAAP basis financial statements for inclusion in the State of Georgia's Comprehensive Annual Financial Report (CAFR) and the State of Georgia's Single Audit Report. Questioned Cost: N/A Information: The following deficiencies were noted in the financial statements prepared by the College: 1. The College did not adequately monitor Restricted and Agency Fund activity, which resulted in invalid accounts receivable and deficit fund balances. Items noted include: a. Invalid accounts receivable were recorded for HOPE activity, resulting in an overstatement of accounts receivable and deposits held for other organizations of $3,274,133. An entry was proposed and accepted by the College to correct. b. Invalid accounts receivable totaling $1,064,202 were recorded for various Federal grants. An entry was proposed and accepted by the College to correct. c. Accounts receivable totaling $427,384 were noted for grants with prior budget periods and/or grant codes. These items should be reviewed by the College to determine whether the accounts receivable are still valid. d. A prior period adjustment to the HOPE program totaling $1,262,269 was not posted by the College, resulting in an understatement of accounts receivable and deposits held for others. An entry was proposed and accepted by the College to correct. e. Restricted net assets were reported at a negative balance of $310,135. GEORGIA PERIMETER COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 3 0 . 2 0 1 1 FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS FINANCIAL REPORTING Errors Noted in Financial Statement Preparation Material Weakness Finding Control Number: FS-571-11-01 2. Accumulated Depreciation recorded on the financial statements did not agree to the amount on the accounting records by $1,444,308. An entry was proposed and accepted by the College to reduce depreciation expense by this amount. 3. The Cash Flow Statement did not accurately reflect activity for the following items: a. Principal Paid on Capital Debt was overstated by $24,806,138. Error was corrected. b. Beginning cash on hand did not agree to the prior year ending cash balance by $1,675,475. Error was corrected. c. An unreconciled variance of $44,451 was noted for cash flows for purchases of Capital Assets to Capital Assets additions reported in the Selected Notes to the Financial Statements. d. Other items on the cash flow statement do not appear reasonable in comparison to other financial data presented in the financial statements. Cash flows from operating activities for grants and contracts and other receipts appear overstated based on operating grants and contracts on the Statement of Revenues, Expenses, and Changes in Net Assets. Cash flows for Agency Fund activities appear understated. 4. Various other adjustments to the financial statements were identified by Department of Audits and Accounts and adjusted/corrected during the Board of Regents review process. a. Beginning net assets did not agree to the prior year ending net assets by $21,389,989. b. Net assets on the Statement of Net Assets did not agree to the net assets on the Statement of Revenues, Expenses, and Changes in Net Assets due to various rounding items. c. State appropriations revenue was not reduced by the amount of surplus remitted to the State of Georgia in the current year. Cause: The College's management failed to implement satisfactory procedures to ensure that the financial statements were accurate, adequately documented and presented fairly in accordance with generally accepted accounting principles. GEORGIA PERIMETER COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 3 0 , 2 0 1 1 FINANCIAL STATEMENT FIND1NGS AND OUESTIONED COSTS FINANCIAL REPORTING Errors Noted in Financial Statement Preparation Material Weakness Finding Control Number: FS-571-11-01 Effect: Significant errors were included in the financial statements presented for review. In addition, the lack of satisfactory procedures and failure to adhere to Board of Regents policies could impact reporting of the College's financial position and results of operations. Recommendation: The College should develop procedures to ensure that the financial statements are accurate, adequately documented, and presented fairly in accordance with generally accepted accounting principles. FINANCIAL REPORTING Inadequate Accounting Procedures over Budget Preparation and Execution Significant Deficiency Finding Control Number: FS-571-11-02 Condition: Through our examination, it was determined that the College failed to properly monitor budgetary financial activity during the year. At June 30, 2011, the College maintained several funds in a deficit situation. Criteria: Management is responsible for establishing, maintaining and monitoring procedures, the purpose of which is to ensure the fair presentation of the budget basis financial statements provided for inclusion in the State of Georgia Budgetary Compliance Report. Questioned Cost: N/A Information: The following deficiencies were noted in the College's budget basis financial statements presented in Schedules 1-4: 1. Balances maintained on the College's general ledger did not agree to the budgetary statements for cash ($54,550.64 overstatement) and encumbrances payable ($130,773.26 overstatement). 2. The College was in a reserved deficit in the Department Sales and Services Fund ($271,248.25), Technology Fees Fund ($94,896.75), and Restricted/Sponsored Funds ($200,575.84). 3. Encumbrances Payable with a credit balance of $54,616.04 were determined to be invalid and were removed from the budgetary statements. 4. The budget ledger within the accounting system, was not being properly monitored and maintained. Certain entries posted to the budget ledger were not reflected on the budgetary statements. GEORGIA PERIMETER COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 3 0 , 2 0 1 1 FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS FINANCIAL REPORTING Inadequate Accounting Procedures over Budget Preparation and Execution Significant Deficiency Finding Control Number: FS-571-11-02 Cause: These deficiencies were a result of a lack of adequate procedures over the preparation of the budget basis financial statements. Additionally, the College failed to implement adequate procedures over its expenditures to ensure that they did not exceed the funds available in each fund. Effect: Failure to submit accurate budget basis statements prohibits users from having access to pertinent financial information needed for decision making. Recommendation: The College should design and implement procedures over its expenditures process to ensure that expenditures do not exceed the budget or funds available. Open Purchase Orders should be monitored closely to ensure that encumbrances payable accurately reflect a true obligation of funds. FEDERAL AWARD FINDINGS AND OUESTIONED COSTS No matters were reported. OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) RECONCILIATION OF SALARIES AND TRAVEL Salaries paid totaling $825,257.24 were originally reported as a reconciling item and not reported as payments of salaries to the Department of Audits and Accounts. When brought to the attention of the College, a corrected report was resubmitted to properly report these payments of salary by employee.