East Georgia College, Swainsboro, Georgia, report on review of the financial statements for the fiscal year ended June 30, 2002

GA

' '

A.800

I I )

I t ;' < I
''

'RI

Es"'t

-;loo 1-:lo a.

'

-

-. -STATE Of. GEORGIA

--~:DEPARTMENT-OF AUDITS AND- AccouNTS

\ \,
'

'

~

' I

v

,, ,-

I '

' -

' ,, r

' ,-

I '

'--' ' <
,;

I

' -'

'

,1

'; ',

-'

)

'

-'

'<



'

' ,
' '

-'

-.

'

\

~AST GEORGIA COLLEGE

I

SWAINSBORO, GEORGIA

I

REPORT

'
ON

R' EVIEW

' r

,_ -

OF THE FINANCIAL STATEMENTS

FOR THE FISCAL Y~AR ENDED JUNE 30, 2002

I

'

, '

I ,

,-

-' I
'

,,
-Russell W.,, Hinton State Auditor

, , -

. I

i '

7

. -
- ','
'
,, -:
I ,
I I

\

I
r ,

I

EAST GEORGIA COLLEGE -TABLE OF CONTENTS -

SECTION!

FINANCIAL

INDEPENDENT ACCOUNTANT'S COMBINED REPDRT ON REVIEW OF BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENTS DISCUSSION AND ANALYSIS

2

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

II

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

12

C STATEMENT OF CASH FLOWS

13

D NOTES TO THE FINANCIAL STATEMENTS

14

SUPPLEMENTARY INFORMATION

SCHEDULES

SCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO

BUDGET - (NON-GAAP BASIS)

1

RESIDENT INSTRUCTION

31

2

LOTTERY FOR EDUCATION

32

3 RECONCILIATION OF SALARIES AND TRAVEL

33

SECTIONII CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION! FINANCJAL

llJ',SH L W. Hl~TO"I
STATE AUDITOR \t.04, 6~2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Wshmgton Street !> W !>ullc 214 Atlanta, Georgia 30334-841X)
January I 0, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the Uruvers1ty System of Georgia
and Honorable J. Foster Watkms, Intenm President East Georgia College
INDEPENDENT ACCOUNTANTS COMBINED REPORT ON REVIEW OF BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen
We have reviewed the accompanymg basic financial statements (Exh1b1ts A through D) of East Georgia College, an orgaruzat1onal urut ofthe State ofGeorgia, as ofand for the year ended June 30, 2002, m accordance With Statements on Standards for Accountmg and ReVIew SerVJces issued by the Arnencan lnslltute of Certified Pubhc Accountants. All mformallon mcluded m these financial statements 1s the representallon of the management of East Georgia College
A review consists pnnc1pally ofmqumes ofCollege personnel and analytical procedures apphed to financial data It 1s substanllally less m scope than an audit m accordance with aud1tmg standards generally accepted m the Uruted States of Amenca, the obJecllve ofwluch 1s the expression ofan op1ruon regardmg the financial statements taken as a whole. Accordmgly, we do not express such an opm1on
Based on our review, with the exception of the matters discussed m the fourth and fifth paragraphs, we are not aware of any matenal mochficauons that should be made to the accompanymg financial statements m order for them to be m conformity With accounllng pnnc1ples generally accepted m the Uruted States ofAmenca.
As descnbed m Note 1 to the financial statements, the College did not recogmze June 30, 2001, encumbrances as expenses m the June 30, 2002, basic financial statements To conform to generally accepted accountmg pnnc1ples, encumbrances should be recogruzed as expenses and hab1hlles m the penod that goods and services are received. The effects on the basic financial statements of this departure from generally accepted accounung pnnc1ples were not reasonably deterrnmable.
02ARL-67X

The College's Adjusted Balance July I. 2001, for Capital Assets as reflected in Note 6, did not
reconcile with esllmated cost values established by an independent appraisal As a result of this unexplained vanance, we were unable to sallsfy ourselves as to the accuracy of the Capital Assets amounts reflected in the basic financial statements
As descnbed in Note I, East Georgia College adopted the prov1s1ons of Governmental Accounting Standards Board (GASB) Statement No 35, Basic Fmanczal Statements - and Management's D1scuss1on and Analysis -for Public Colleges and Umversltles, as amended by GASB Statement No 31, Basic Financial Statements - and Management's Discusswn and Ana(vsis - for State and Local Governments, and GASB Statement No 38, Certain Financial Statements Note Dzsc/osures, as of July I, 2001. to implement a new financial reporting model
Management's D1scuss1on and Analysis 1s not a reqwred part ofthe basic financial statements but 1s supplementary infonnallon required by the GASB We have apphed certam hmued procedures, which consisted pnnc1pally ofinqumes ofmanagement regarding the methods ofmeasurement and presentat10n ofth1s supplementary infonnatlon, and we are not aware ofany matenal modificatlons that should be made thereto
Our review was made for the purpose of expressing hm1ted assurance that there are no matenal mod1fical!ons that should be made to the financial statements in order for them to be in conformity with accounting pnnc1ples generally accepted in the Umted States ofAmenca The accompanying supplementary information (Schedules I through 3) 1s presented for add1t1onal analysis purposes Such informatlon has been subjected to the inqumes and analytical procedures applied m the reVlew ofthe financial statements, and we are not aware of any matenal mod1ficat1ons that should be made to such data
~--R...e.spectfully submitted,
\.o~
Sta e Auditor
RWHas 02ARL-67X

REQUIRED SUPPLEMENTARY INFORMATION
-I-

East Georgia College
Management's Discussion and Analysis

Introduction

East Georgia College 1s one ofthe 34 mst1tut10ns ofthe Umvers1ty System of Georgia The College, located m Swamsboro, Georgia, was founded m 1973 and has become known for its state-of-the-art technology, its excellent faculty, and a canng and nurtunng enVIronment for its students The College offers associate degrees m a vanety of subJects This wide range of educational opportumtles attracts a highly quahfied faculty and a student body ofmore than 1,800 students each year The mstJtutlon contmues to grow as shown by the companson numbers that follow

Faculty

Students

FY2002 FY2001 FY2000

35

1,948

32

1,916

27

1,863

Overview ofthe Financial Statements and Financial Analysis

East Georgia College 1s proud to present its financial statements for fiscal year 2002 The emphasis of d1scuss1ons about these statements will be on current year data There are three financial statements presented. the Statement of Net Assets, the Statement of Revenues, Expenses and Changes m Net Assets, and, the Statement of Cash Flows Tins d1scuss1on and anaJys1s of the College's financial statements proVJdes an overview of its financial actlVJtles for the year. East Georgia College has elected to not restate pnor penods for purposes of prov1dmg the comparative data for tins Management's D1scuss1on and AnaJys1s. However, m future years, when pnor penod mformatlon 1s available, a comparative analysis will be presented.

Statement ofNet Assets

The Statement ofNet Assets presents the assets, hab1ht1es, and net assets ofthe College as ofthe end of the fiscal year. The Statement ofNet Assets 1s a pomt oftime financial statement The purpose of the Statement ofNet Assets 1s to present to the readers ofthe financ1aJ statements a fiscaJ snapshot of East Georgia College. The Statement of Net Assets presents end-of-year data concemmg Assets (current and non-current), L1ab1ht1es (current and non-current), and Net Assets (assets mmus hab1ht1es)

From the data presented, readers of the Statement of Net Assets are able to determme the assets available to contmue the operations ofthe 1nstJ.tutJ.on. They are aJso able to determme how much the mstltutlon owes vendors, mvestors and lendmg mstltutlons

Fmally, the Statement ofNet Assets provides a picture ofthe net assets (assets mmus hab1ht1es) and their availab1hty for expenditure by the mst1tutJ.on Net assets are d1v1ded mto three maJOr categones The first category, mvested m cap1taJ assets, net ofdebt, provides the 1nstJ.tutlon's eqmty

-2 -

in property, plant and equipment owned by the institution The next asset category 1s restncted net assets, which 1s d1v1ded into two categones, nonexpendable and expendable The corpus of nonexpendable restncted resources 1s only available for investment purposes Expendable restncted net assets are avrulable for expenditure by the institution but must be spent for purposes as determined by donors and/or external entitles that have placed time or purpose restnct1ons on the use of the assets The final category 1s unrestncted net assets Unrestncted assets are available to the institution for any lawful purpose of the institution

Statement of Net Assets, Condensed (thousands of dollars)

Assets Current Assets Capital Assets, Net Other Assets

$ 1,858 7,483 41

Total Assets

$ 9,382

Liabilities Current L1ab1ht1es Non-Current L1ab1ht1es

$ 986 58

Total Liabilities

$ I 044

Net Assets Invested m Capital Assets, Net of Debt Restncted - Nonexpendable Restncted - Expendable Unrestncted

$ 7,483 36 31
788

Total Net Assets Statement ofRevenues, Expenses and Changes in Net Assets

S 8.338

Changes m total net assets as presented on the Statement of Net Assets are based on the activity presented m the Statement of Revenues, Expenses and Changes m Net Assets The purpose of the statement 1s to present the revenues received by the mstlt1Jtlon, both operating and nonoperatmg, and the expenses prud by the mstlt1Jtlon, operatmg and nonoperatmg, and any other revenues, expenses, gruns and losses received or spent by the mstlrutlon Generally speakmg operatmg revenues are received for providing goods and services to the vanous customers and const1ruenc1es of the mst1t1Jt1on. Operating expenses are those expenses prud to acqwre or produce the goods and services provided m return for the operatmg revenues, and to carry out the m1ss10n of the 1nst1tut1on. Nonoperatmg revenues are revenues received for which goods and services are not provided For example state appropnatlons are nonoperatmg because they are provided by the Legislature to the mst1t1Jtlon Without the Legislature directly rece1vmg commensurate goods and services for those revenues

-3-

Statement of Revenues, Expenses and Changes m Net Assets, Condensed (thousands of dollars)

Operatmg Revenues Operatmg Expenses

$ 2,592 -7 749

Operatmg Loss

$ -5,157

Nonoperatmg Revenues

5.462

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

$ 305

Other Revenues

504

Increase m Net Assets

$ 809

Net Assets at Begmrung of Year, as Onginally Reported

$ 14,472

Cumulative Effect of Changes m Accountmg Pnnc1ple

-6.943

Net Assets at Begmnmg of Year Restated

$ 7,529

Net Assets at End of Year

$ 8,338

Toe Statement of Revenues, Expenses and Changes m Net Assets reflects a positive year with an mcrease m the net assets at the end ofthe year Some lughhghts ofthe mformahon presented on the Statement of Revenues, Expenses and Changes m Net Assets are as follows

-4-

Revenue By Source (thousands of dollars) For The Year Ended June 30, 2002

Operatmg Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Aux1hary Other
Total Operatmg Revenue
Nonoperatmg Revenue State Appropnahons Grants and Contracts Investment Income Other
Total Nonoperatmg Revenue
Total Revenues

$ 1,070 1,456 26 24 16
$ 2.592
$ 5,307 113 41 504
$ 5,965
$ s.~~z

Expenses (thousands of dollars) For The Year Ended June 30, 2002

Operatmg Expenses Instruction Academic Support Student Services Inst1tut1onal Support Plant Operations and Mamtenance Scholarships and Fellowslups Auxihary Enterpnses Unallocated Deprec1auon

$ 2,959 907 529
1,159 845 837 11 501

Total Operatmg Expenses

$ 7,748

Statement ofCash Flows

The final statement presented by the East Georgia College 1s the Statement of Cash Flows The Statement of Cash Flows presents detaJled mformauon about the cash activity of the mstitutlon dunng the year The statement is d1v1ded mto five parts The first part deals with operatmg cash flows and shows the net cash used by the operatJng acuvitles of the mstltullon The second section reflects cash flows from non-capital financmg act1v1t1es This sect10n reflects the cash received and

-5-

spent for nonoperatmg, non-mvestmg, and non-capital financmg purposes The tlurd section reflects the cash flows from mvestmg activities and shows the purchases, proceeds, and mterest received from mvestmg act1v1t1es The fourth section deals with cash flows from capital and related financmg act1vllles This sect10n deals with the cash used for the acqms1t1on and construct10n of capital and related items The fifth sec!Jon reconciles the net cash used to the operatmg mcomc or loss reflected on the Statement of Revenues, Expenses and Changes m Net Assets

Cash Flows for the Year Ended June 30, 2002, Condensed (thousands of dollars)

Cash Provided (Used) By. Operatmg ActJv1ttes Non-Capital Fmancmg Act1v1t1es Investmg ActlVJ!Jes Capital and Related Fmancmg Acliv1t1es
Net Change m Cash Cash, Begmmng of Year

S -5,397 5,482 23 -68
$ 40
518

Cash, End of Year Capital Assets

$ 558

The College had one s1gmficant capital asset add1t10n for fac1ht1es m fiscal year 2002 An add!tJonal 19 795 acres was donated to the College to provide a parcel of property for our proposed Georgia
Rural Economic Development and Technology Center. Tlus new property 1s adjacent to the Swainsboro/Emanuel County Technology Park and the proposed new fac1hty will serve the dual purpose ofprov1dmg an mstructlonal fac1hty for our Information Technology program and proVId!ng classroom and office space for the Georgia Rural Econonuc Development Center/ICAPP partnership The Georgia State Fmancmg and Investment Comrmss1on (GSFIC) Classroom Add.lb.on and ActIVIty Center construction projects will be completed m Fiscal Year 2003, and the complete cost of the pro3ects will be cap1tahzed at that time Tlus constructJon will be accounted for m the financial statements of GSFIC untd the project 1s completed.

Due to the budget holdbacks m MRR fundmg for fiscal year 2002, East Georgia College did not
complete any major repaus and renovation projects. We did complete the design work for the final phase ofour A/C Improvement project and 1t 1s anllc1pated that fundmg for the construction portion of the project will be remstated m fiscal year 2003

For add11Ional mformallon concermng Capital Assets, see Notes I and 6 m the Notes to the Fmanc1al Statements.
Economic Outlook
The College 1s not aware of any currently known facts, dec1s1ons, or cond11Ions that are expected to have a s1gn1ficant effect of the financial pos1t1on or results of operations dunng tlus fiscal year beyond those unknown vanatJons havmg a global effect on virtUally all types ofbusmess operations

-6-

The East Georgia College overall financial position 1s strong Even with a relatively flat funded year, the College was able to generate a modest increase m Net Assets The College anticipates the current fiscal year will be much hke last and will mamtam a close watch over resources to mamtam the College's ab1hty to react to unknown mtemal and external issues
J. Foster Watkins, Intenm President East Georgia College
- 7-

BASIC FINANCIAL STATEMENTS -9-

EAST GEORGIA COLLEGE STATEMENT Of NET ASSETS
JUNE 30 2002
ASSETS
Current Assets Cash and Gash Equivalents Short-Term lnveslments Accounts Receivable, Net Federal F1nanaal Assistance Other Prepaid Items lnventones
Totel Current Assets
Noncurrenl Assets Investments Notes Receivable
Caprtal Assets, Net /See Note 6)
Tatel Noncum,nl Assets
Total Assets
LIABILmEs
Current L1ab1lmes Salanes Payable Payroll Wrthhold1ngs Accounts Payable Deferred Revenue Funds Held for Others Compensated Absences
Total Current Llablllbes
Noncum,nt l.Jab1hbes Compensa1ed Absences
Tatel Llablllbes
NETASSETS
Invested 1n Capital Assets, Net of Relaled Debt Res1ncted for
Nonexpendable Expendable Unrestnded
Tatel Net Assets
See Independent Accountant's Combined Report on ReVl8W of Basic Finanaal Sta1ements and Supplementary lnformabon
The notes to the finanaal sta1ements are an integral part of this ste1ement
- 11 -

EXHIBIT"A"

$ 557,517 97 827,195 91
132,069 01 132,574 12 200,24245
8 67660
$ 1,858,276 06

$

35,834 54

4 94950

7 483 472 47

$ 7,524,256 51

$ 9,382,532 57

$

15,576 91

3,837 19

430 844 07

323,333 97

78,06519

134 631 16

$ 986,28849

58 377 51 $ 1,044,666 00

$ 7,483,472 47
35,834 54 30,716 96 787 84260

EAST GEORGIA COLLEGE STATEMENT OE RE\/ENUES EXPENSES AND CHANGES IN NET ASSETS
YEAR ENPEP JUNE 30 2002
OPERATING REVENUES
Student Tutti.on and Feea Less Sctio1Brsh1p Allowances
Gninta and Contnilcts F-.1 Nongovernmental
Sales and SeMCes of Educational Department& Awo~ary Enterpnaes
S-.tore Food SeMCa Other Organlzattons Other Operating Revenues
Total Operatrng Revenues
OPERATING EXPENSES
Salane.s Faculty Staff
Employee Beneftta Other Personal Servtces Travel Scholarv,lpo and Fenowshlpa UbibH Supplte1 and Other S.MCel Depreaation
Total Operatng Expenaea
Operat,ng Income (Lou)
NONOPFRATING REVENUES
State Apprepnallona
Granto and ContJacts
State Nongovernmental lnternt and Other Investment Income
Total Nonoperabng Revenua
tncome Before Other Revenuea, Expenses, Ga111 er Loue1
Capital Grant& and Gifts Stale Nongovernmental
Total Other Revenues
lncreasel{DecteaH) 1n Net Aueta
NetAnets Net A.aaeta, Begrnnlng of Year as Ong1nalty Reported Cumulatlve Effect of Change, In Accounting Prlnclpje
Net Aaets - BeglMlng of Year Reatated
Ne\Asaets-EndofYear
See Independent Aecountanfa Combined Report on Review of Buie: Finanael Statements and Supplementary tnformabon
The notes to the finlll'ICI.III statements are en integral part of this tttemant 12

EXHIBIT "B"

$ 1 652 819 39 -582 612 29
1 455 1-43 72 1 161 00
26 402 55
20 689 93 "465 7,4
2 570 61 15 507 06
s 2 !592 1"47 71

s 166546-185
2 029,32"4 12 981 348 1-4 14 960 00 54 420 73 903 067 18 345,732 17
1,252,813 66 501 "461 83
s 7 7,48 592 68
s -!S 1!58 44,4 97

s 5,306,827 23

11,ee8 21 35 943 03 .. , 133 95

s !S "81 572 42

s

30!5 127 4'5

s

.C34,542 39

69 100 00

s

503842 39

s

808 769 84

s 1-4,471 9"'7 76
-619421851 03
s 7 529 096 73

s 8 337 666 57

EAST GEORGIA COLLEGE
STATEMENT OE CASH FLOWS VEAR ENPEP JUNE 30 2002

CASH FLOWS FROM OPERATING ACTMTIES Turuon and Fees
Grants and Contracts Sates and Servtee8 of Educabonal Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fel\owal"ups Loans Issued to Students and Employees Collecbon of Loans to Students and Employeea Awclkary Enterpnse Charges
Bookstore Food Services
Other Org..-.zatlona Other Roce,pts (Payments)

Net Cuh Providod (UNd) by Operetmg ActMbes

CASH FLOWS FROM NONCAPITAL FINANCING ACTMTIES StateAppropriabons Agonc:y FIA'lds Transacbons Gifts and Grants Rec:etV9d for Other than Capttal Purposes

Net Cuh Flow> Provided (UIIOd) by Noncapltal Fnonong AdMbea

CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTMTIES

-

of Capital Aueta

CASH FLOWS FROM INVESTING ACTMTIES lnterat on lrr.eatments

Net lncraasel(~) " Cuh
Cash end Cash Eq,,.avalenla - June 30 2001 Lesa Short-Tern, Investments

Cash end Cash Eq,..,valonb - Begjnnlng of Yeer

Cash and Cuh EquMllenta. End ofYr

RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTMTIES
Operabng Income (Lou)
AdJUOtments to Reccncde Net lnCOme (L.ou) to Net Cash Prowled UNd by Opera!Jng ActNtllH
Deprwaet,on Change In Aaaeta end L.Jobjbbes
Acccunta Rece,vables, Net lnven1ones Prope,d ltoma Noeea Receivables Net Acco.rrta Payable Salanes Peyable Payroll w;,t,-ng Deferred Rewnue Compensated Abaencee
Net Cuh Providod (Uoed) by Operabng AdMbes
See lndopendon1 Aca>untant'a Con1b<ned Report on R.-w of Buie Fnnclal Stataments and Supplementary tnformabon
The notes to the finanaal etatementa ...., an Integral pen of ttu statement
13 -

EXHIBIT "C"

s 1 128 64e 68
1,292 880 88 26,402 55
-3 243 -471 53 -3 740 375 29
-903,067 18 -1 067 00 1 200 00
23 352 31 -465 7-4
2 570 e1
15 507 oe
s -5 396 953 17

s 5,306,827 23
59 106 35 11596676
s 5 481 900 3-4

s

-68 383 43

s

23 342 46

s

39 906 20

s 1,362 303 91
-844 692 14

s

517 611 77

s

557 517 97

$ -5 156,444 g7
501,-461 83
-236,017 -40 942 92
-58,123 14 133 00
-557,956 97 2,289 09 ,409,49
133,697 52 -27 344 54
S -5,396,953 17

EAST GEORGIA COLLEGE
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS East Georgia College serves the state, and national commurut1es by proVldmg its students with acadelillc instruction that advances fundamental knowledge, and by d1ssemmat1ng knowledge to the people of Georgia and throughout the country
REPORTING ENTITY East Georgia College 1s one of thirty-four (34) State supported member institutions of higher education m Georgia which compnse the Umvers1ty System ofGeorgia, an orgaruzanonal urut ofthe State of Georgia. The accompanymg financial statements reflect the operations of East Georgia College as a separate reporting entity.
The Board of Regents has constitutional authonty to govern, control and manage the Umvers1ty System ofGeorgia. This authonty mcludes but 1s not hlillted to the power to designate management, the ab1hty to significantly mfluence operations, the authonty to control mstitullons' budgets, the power to determme allotments of State funds to member mstttutlons and the authonty to prescnbe
accounting systems and admlillstratlve pohc1es for member mstltutlons. East Georgia College does
not have authority to retain unexpended State appropnations (surplus) for any given fiscal year
Accordingly, East Georgia College 1s considered an organizational urut of the Board of Regents of
the Umvers1ty System of Georgia reporting entity for financial reporting purposes because of the significance ofits legal, operational, and financial relationships with the Board ofRegents as defined m Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Fmancial Reporting Standards.
FINANCIAL STATEMENT PRESENTATION
In June 1999, the GASB issued Statement No 34, Basic Financial Statements and Management
Discusswn and Analysisfor State and Local Governments. This was followed m November 1999 by GASB Statement No 35, Basic Financial Statements and Management's Discusswn and Analysis for Public Colleges and Umvers1t1es. The State of Georgia 1s reqwred to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As an orgamzat1onal urut ofthe State of Georgia, the College 1s also reqmred to adopt GASB Statements No. 34 and No 35 as amended by GASB Statements No 37 and No. 38. The financial statement presentation required by GASB Statements No. 34 and No. 35 as amended by GASB Statements No 37 and No. 38 proV1des a comprehensive, enllty-wide perspective of the College's assets, hab1ht1es, net assets, revenues, expenses, changes m net assets, cash flows, and replaces the fund group perspective preVJously reqmred.
The College has elected to not restate its 2001 financial statements to conform with the new financial statement presentation, therefore comparative financial information will not be presented for fiscal year 2002. S1gmficant accounting changes made m order to comply with the new reqmrements include {I) adoption ofdepreciation on capital assets; and (2) recognition ofcompensated absences.

- 14 -

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION Generally Accepted Accountmg Pnnc1ples (GAAP) requires that the report.mg of summer school revenues and expenses be between fiscal years rather than in one fiscal year Due to the lack of matenahty, Insutuuons of the Uruvers1ty System ofGeorgia will contmue to report summer revenues and expenses in the year JO winch the predommate actJv1ty takes place.
At June 30, 2001, encumbrances (contractual obbgations for goods and services not received at fiscal year end) were recorded as expenditures by the College Jnstead of reservauons of fimd balance as required by generally accepted accountJOg pnnc1ples For fiscal year 2002, the College changed its
method ofrecordmg encumbrances such that encumbrances at June 30, 2002 were not recorded as
expenses This change 1s JO accordance with generally accepted accounung pnnc1ples.
No adJustments however, have been made on the financial statements to restate the fimd balance at
July 1, 2001 for the June 30, 2001 enc\llllbrances recorded as expenditures in fiscal year 2001. The net effect of the above accounung treatment resulted in an understatement of expenses on the accompanying financial statements for pnor year encumbrances winch should have been reflected as expenses in the penod when goods and services were received.
BASIS OF ACCOUNTING For financial report.mg purposes, the College 1s considered a special-purpose government engaged only m busJOess-type activities. Accordmgly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accountmg, except as noted JO the preceding paragraphs. Under the accrual basis, revenues are recogruzed when earned, and expenses are recorded when an obhgatJon has been incurred All s1gruficant intra-college transactions have been ehminated.
The College has the option to apply all FJOanc1al Accountmg Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
RESTATEMENT OF NET ASSETS - BEGINNING OF YEAR As a result of the adopuon ofGASB Statement No 34, the College was also reqwred to make certam changes in accounting pnnc1ples, specifically (1) adopllon of depreciation on capital assets, and (2) recordJOg of compensated absences GASB Statement No 34 reqwres certam summer semester revenues be recogruzed between fiscal years rather than the fiscal year JO winch the semester was predommantly conducted The Umvers1ty System of Georgia has chosen to continue to record summer revenue m the year JO winch the semester was predomJOantly conducted Net assets at July I, 200 I were reduced by $6,942,851 03 for the cumulatlve effect of these changes

- 15 -

EAST GEORGIA COLLEGE
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS/SHORT-TERM INVESTMENTS Cash and Cash Equivalents consist of petty cash, demand deposits and tune deposits m authonzed financial mstltullons, and cash management pools that have the general charactensllcs of demand depos1 t accoUilts
INVESTMENTS The College acco\lilts for its investments at fair value in accordance With GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the statements of revenues, expenses, and changes in net assets
ACCOUNTS RECEIVABLE AccoUilts receivable consists oftu11ton and fee charges to students and auxiliary enterpnse services proVIded to students, faculty and staff, the maJonty of each res1dmg in the State of Georgia Accounts receivable also include amounts due from the Federal government, state and local governments, or pnvate sources, in conneclion WIth reimbursement ofallowable expemhtures made pursuant to the College's grant and contracts Accounts receivable are recorded net of esllmated uncollecllble amounts.
INVENTORIES Consumable supplies are recorded on the consumption method and are valued at cost usmg the weighted average method.
Resale Inventones are valued at cost using the weighted average method
PREPAID ITEMS Prepaid Items are payments made to vendors m advance ofthe receipt of goods and services that Will benefit subsequent penods.
NON-CURRENT CASH AND INVESTMENTS Cash and investments that are externally restncted and cannot be used to pay current l!abilllies are classified as non-current assets m the statements of net assets
CAPITAL ASSETS Capital assets are recorded at cost at the date of acqws111on, or fair market value at the date of donation m the case of gifts. For eqwpment, the College's cap1tahza1Ion policy mcludes all items With a umt cost of $5,000.00 or more, and an es!irnated useful hfe of greater than one year. Renovations to buildmgs, mfrastructure, and land unprovements that exceed $100,000 00 and s1gruficantly mcrease the value or extend the useful hfe of the structure are cap1tal1zed Routine repairs and maintenance are charged to operanng expense m the year in wluch the expense was

- 16 -

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS mcurred. Depreciation 1s computed usmg the straJ.ght-hne method over the estimated useful hves of the assets, generally 40 to 60 years for bwldmgs, 20 to 25 years for mfrastructure and land improvements, IO years for library books, and 3 to 7 years for equipment.
To obtam the total picture ofplant add1t1ons m the Umvers1ty System, 1t 1s necessary to look at the act1v1lies ofthe Georgia State Fmancmg and Investment Comnuss1on (GSFIC)- an orgamzat1on that 1s external to the System. GSFIC issues bonds for and on behalf ofthe State of Georgia, pursuant to powers granted to 1t m the Conslitulion ofthe State of Georgia and the Act creatmg the GSFIC. The bonds so issued constitute direct and general obhgatlons of the State of Georgia, to the payment of which the full faith, credit and taxmg power of the State are pledged.
Effective July I, 2001, the GSFIC retains construclion m progress on their books throughout the construction penod and transfers the enlire proJect to East Georgia College when complete For the year ended June 30, 2002, GSFIC transferred capital adchtions valued at $434,542.39 to East Georgia College
DEFERRED REVENUES Deferred revenues mclude amounts received for twtlon and fees and certam aux1hary aclIVItles pnor to the end ofthe fiscal year but related to the subsequent accounting penod Deferred revenues also mclude amounts received from grant and contract sponsors that have not yet been earned
COMPENSATED ABSENCES Employee vacation pay 1s accrued at year-end for financial statement purposes. The hab1hty and expense mcurred are recorded at year-end as accrued vacation payable m the Statement of Net Assets, and as a component of compensalion and benefit expense m the Statements of Revenues, Expenses, and Changes m Net Assets East Georgia College had accrued habihty for compensated absences m the amount of $220,353.21 as ofJuly I, 2001. For Fiscal Year 2002, $160,137.20 was earned III compensated absences and employees were paid $187,481.74, for a net decrease of $27,344 54
NON-CURRENT LIABILITIES Non-current hab11Itles mclude hab11It1es that WIil not be paid Withm the next fiscal year.
NET ASSETS The College's net assets are classified as follows.
Invested m capital assets. net of related debt Tins represents the College's total mvestment m capital assets, net of outstandmg debt obhganons related to those capital assets To the extent debt has been mcurred but not yet expended for capital assets, such amounts are not mcluded as a component ofmvested m capital assets, net of related debt. (The term "debt obligations" as used m tlns defimtlon does not include debt of the GSFIC as discussed above.)
- 17 -

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS Restricted net assets - nonexpendable Nonexpendable restncted net assets consist of endowment and s1m1lar type funds m which donors or other outside sources have stipulated, as a condition ofthe gift mstrument, that the pnnc,pal 1s to be mamtamed mv1olate and m perpetmty, and mvested for the purpose of producmg present and future mcome, which may either be expended or added to pnnc1pal. The College may accumulate as much ofthe annual net mcome of an mst1tut1onal fund as 1s prudent under the standard estabhshed by Code Section 44-15-7 of Annotated Code of Georgia
Restricted net assets - expendable Restncted expendable net assets mclude resources m which the College 1s legally or contractually obhgated to spend resources m accordance with restnct1ons imposed by external third parties
Unrestricted net assets Unrestncted net assets represent resources denved from student t1ut1on and fees, state appropnallons, and sales and services of educational departments and aux1hary enterpnses These resources are used for transacllons relatmg to the educational and general operations of the College, and may be used at the discretion of the goverrung board to meet current expenses for those purposes, except for unexpended state appropnauons (surplus) of$89,466 02 Unexpended state appropnatlons must be refunded to the Board ofRegents ofthe Umvers1ty System of Georgia - Achmmstratlve Central Office for reriuttance to the Office of Treasury and Fiscal Services. These resources also mclude aux1hary enterpnses, which are substantially self-supporting act1v1t1es that provide sel'V!ces for students, faculty and staff
When an expense 1s mcurred that can be paid usmg either restncted or unrestncted resources, the College's pohcy 1s to first apply the expense towards unrestncted resources, and then towards restncted resources
INCOME TAXES East Georgia College, as a pohtlcal subchv1s1on of the State of Georgia, 1s excluded from Federal mcome taxes under Section I 15(1) of the htternal Revenue Code, as amended
CLASSIFICATION OF REVENUES The College has classified its revenues as either operatmg or non-operatmg revenues m the Statement of Revenues, Expenses, and Changes m Net Assets accordmg to the followmg cntena
Operating revenues Operatmg revenues mclude actlVJtles that have the charactenstlcs ofexchange transactions, such as (I) student tu1t1on and fees, net ofscholarslup allowances, (2) sales and serVJces of aux1hary enterpnses, (3) most Federal, state and local grants and contracts and Federal appropnauons, and (4) mterest on mstltutlonal student loans

- 18 -

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 1 SUMMARY OF SIGNlFICANT ACCOUNTING POLICIES
CLASSIFICATION OF REVENUES Non-operating revenues Non-operating revenues include act1v1t1es that have the charactenst1cs of non-exchange transactions, such as gifts and contnbutlons, and other revenue sources that are defined as non-operating revenues by GASB No. 9, Reponmg Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No 34, such as state appropnatJons and mvestment income
SCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certam other revenues from students, are reported at gross with a contra revenue account of scholarship allowances m the Statement of Revenues, Expenses and Changes m Net Assets Scholarship allowances are the difference between the stated charge for goods and seTVJces provided by the College, and the amount that 1s paid by students and/or tlurd parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues m the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances.
NOTE 2: CASH AND CASH EQUIVALENTS: OTHER DEPOSITS, AND INVESTMENTS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to the State of Georgia (and thus East Georgia College) cannot be placed m a depository paying mterest longer than ten days without the depository proVJding a surety bond to the State In heu of a surety bond, the depository may pledge as collateral any one or more of the following secuntles as enumerated m the Oflic1al Code of Georgia Annotated Section 50-17-59
1. Bonds, bill, certificates ofmdebtedness, notes, or other drrect obhgatJons ofthe Umted States or of the State of Georgia
2 Bonds, bills, certificates of indebtedness, notes, or other obhgatlons of the counties or mumc1pal1t1es of the State of Georgia
3. Bonds of anypubhc authonty created by the laws of the State of Georgia, providing that the statute that created the authonty authonzed the use of the bonds for this purpose
4 Industnal revenue bonds and bonds of development authontles created by the laws of the State of Georgia

- I9 -

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXIITBIT "D"

NOTE 2 CASH AND CASH EOUNALENTS, OTHER DEPOSITS. AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES 5 Bonds, bills, certificates of indebtedness, notes, or other obligations of a subs1d1ary corporation ofthe Uruted States government, wluch are fully guaranteed by the Uruted States government both as to pnnc1pal and interest, or debt obhgatlons issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Cred!t Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Assoc1at1on, and the Federal National Mortgage Association.

6. Guarantee or msurance of accounts provided by the Federal Deposit Insurance Corporation

As authonzed in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted pohc1es wluch allow agencies of the State of Georgia (and thus East Georgia College), the option of exempting demand deposits from the collateral reqwrements.

The Treasurer ofthe Board ofRegents 1s responsible for all details relative to funushmg the reqwred depository protection for all uruts of the Uruvers1ty System of Georgia.

CATEGORIZATION OF DEPOSITS The College's cash deposits are categonzed by nsk as follows:

Category 1 - Amounts covered by depository msurance or collaterahzed with secuntles (at fau value) held by the College or by its agent in the College's name.

Category 2 - Amounts collateralized with secuntles (at fiur value) held by the pledging financial mstttutlon's trust department or agent m the College's name.

Category 3 - Amounts collateralized with secunties (at fair value) held by the pledging financial mstttuuon, or by its trust department or agent but not in the College's name, and amounts uncollateral1zed.

Cash Deposits as of June 30, 2002 are as follows:

Cash Deposits

Canymg
Amount

Bank
BaJances

Risk Cau:sones

s 556 242 22 s 939 309 46 s Joo PP9 oo s 8"9 309 4li s.___o..oo.,.

CATEGORIZATION OF INVESTMENTS At June 30, 2002, the College's investments consisted of the followmg

-20-

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 2 CASH AND CASH EQUIVALENTS, OTHER DEPOSITS, AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS Investments Not SubJect to Categonzatlons Board of Regents
Balanced Income Fund Short-Tenn Fund Total Return Fund

$ I 16,677 34 596,507 61 149,845 50

Total Investments

$ 863 030.45

Funds mvested m an mvestment pool managed by another governmental entity are not requued to be categonzed smce the College did not own any specific, 1dennfiable mvestment secunnes ofthe pool

NOTE 3 ACCOUNTS RECEIVABLE

Accounts receivable consisted of the followmg at June 30, 2002

Student Tuition and Fees Auxiliary Enterpnses and Other Operating Act1V1tles FederaJ, State, and Pnvate Funds Other

$ 86,464.03 58 74
173,960 34 9,422 38

$ 269,905 49

Less AJlowance for Doubtful Accounts Net Accounts Receivable

5,262.36
$ ,~.~3.JJ

NOTE 4 INVENTORIES

Inventones consisted of the followmg at June 30, 2002

Bookstore Other

$ 4,374 50 4,302 10

Total NOTE 5 NOTES/LOANS RECEIVABLE

$ 8 676,60

Notes/Loans receivable consists ofstudent loans made through the Student Government Association Loan fund This loan program compnses all ofthe loans receivable at June 30, 2001 and 2000 The use ofth1s small loan fund has decreased as students have mcreased their use of Federal and state loan programs such as subsidized and unsubsidized Stafford Loans and Plus Loans to finance their educations

- 21 -

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE 6 CAPITAL ASSETS

The balance at July I, 2001 was adjusted for accounting changes reqmred in implementing GASB Statements 34 and 35 as disclosed m Note I Followmg are the changes in capital assets for the year ended June 30, 2002

AdJusted Ba1ancc
Jul~ I, QQI

AQQ1t1gns

B~YC[IO!}~

Balance i~ne JO, 20Q2

Capital Assets, Not Being Depreciated

Land and Land Improvements

s I 52,852 45 s

62 IQQ QQ

s 221,952 45

Capital Assets, Bemg Depreciated

Infrastructure

s 1,444,596 00

Bu1ldmg and Building Improvements 7,949,681 00 s

Fac1ht1cs and Other Improvements

421,01700

Equipment

1,164.84041

Library Collcchans

I Q31 54600

s 12 Qll 68Q,41 s

434,542 39 SO.OSI 36
18 3Q2 Q7 s 5Q2 225,82 s

s 1,444,596 00
8,384.223 39 421,017 00
1,214.921 77 547 QQ I Q42.301 07
547QQ s Ii,s 1~.052 23

Less Accumulated Dcprcc1at1on Infrastructure

s 1.036,772 34 s

Bu1ldmg and Bu1ldmg Improvements 1,910,711 30

Fac1h11cs and Other Improvements

346,360 19

Equipment

634,889 55

Library Collcct1ons

822,828 QQ

s 4,751 631 38 s

63,228 25
238,047 so
22,911 79 139,859 29
37.415,00 s
501,461 83 s

$
547QQ

1,100,000 59 2,148,758 80
369,271 98 774,748 84
859,766 QO

5~79:Q s 5,25Z 5~6 I

Total Capital Assets, Bemg Depreciated,

Net

s 7 26Q 049 Q3 s

Capital Assets, Net

s Z412 908 48 s

1463 22 s 20 563 99 s

QQQ s 7.,261,513 Q2 000 s 7 463 472 47

NOTE 7 DEFERRED REVENUE

Deferred revenue consisted of the following at June 30, 2002

PrepaJd Twtlon and Fees Other Deferred Revenue

$ 316,411 46 6,922.51

Totals NOTE 8. LONG-TERM LIABILITIES

$ 323.333 97

Long-terrn hab1hty actlVJty for the year ended June 30, 2002, was as follows

Other L1ab1l1t1es Compensated Absences

Balance
July I 2QQI

Add1tmns

RccluctJons

Balance June 30 2QQ2

Current
Portion

s 2~0 J~l ~I s J~llZ~O s UZ4al 74 s J2J QgS ~7 $ IJ4 ~~I I~

- 22 -

EAST GEORGIA COLLEGE
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE 9 RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description East Georgia College part1c1pates in the Teachers Retrrement System of Georgia (TRS), a costshanng multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of proVJdmg retuement allowances and other benefits for teachers of the State of Georgia. TRS proVJdes SerVJce retirement, disability retirement, and survivor's benefits for its members m accordance with State statute The Teachers Retirement System ofGeorgia issues a separate stand alone financial aucht report and a copy can be obtamed from the Georgia Department of Audits and Accounts

Funding Policy Employees of East Georgia College who are covered by TRS are required by State statute to contribute 5% of their gross earnmgs to TRS. East Georgia College makes monthly employer contnbutlons to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as adVJsed by their mdependent actuary. For fiscal year 2002, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contnbuted

Required Contnbutlon

2002 2001 2000

100% I 00/o 100%

$ 224,620 08 $ 271,426 37 $ 246,974 09

REGENTS RETIREMENT PLAN

Plan Description The Regents Retirement Plan, a smgle-employer defined contnbutlon plan, 1s an optional retirement plan estabhshed and adrmrustered by the Board of Regents of the Uruvers1ty System of Georgia, under winch 1t may purchase annmty contracts for the purpose of providing retirement and death benefits for ehgible faculty and pnnc1pal adm1rustrators Benefits depend solely on amounts contnbuted to the plan plus investment earrungs Benefits are payable to part1c1pating employees or their benefic1anes in accordance with the terms of the annmty contracts.

Funding Policy Member contnbutlon requirements are estabhshed by the Board of Trustees of the Teachers Retirement System. Employer contnbutlons are established by statute and may be amended only by the General Assembly ofthe State of Georgia. The employer contnbutes 9 62% ofthe part1c1pat1ng employee's earnable compensation Employees contnbute 5% of their earnable compensation Amounts attnbutable to all plan contnbutlons are fully vested and non-forfe1table at all times

- 23 -

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE9 RETIREMENTPLANS
REGENTS RETIREMENT PLAN
Funding Policy East Georgia College and the covered employees made the reqmred contnbuuons of $96,017 31 (9.62%) and $50,080 49 (5%), respectively
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description East Georgia College part.Jc1pates m the Georgia Defined Contnbutton Plan (GDCP) which 1s a smgle-employer defined contnbutlon plan established by the General Assembly of Georgia for the purpose ofproV!dmg retirement coverage for State employees who are temporary, seasonal, and parttime and are not members of a public retirement or pension system GDCP 1s adrnlillstered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retrre and elect to receive penodic payments after attamrnent ofage 65 The payment will be based upon mortality tables and interest assumptions to be adopted by the Board ofTrustees. If a member has less than$ 3,500.00 credited to his/her account, the Board ofTrustees has the option ofrequmng a lump sum distribution to the member m lieu ofmalang penod1c payments. Upon the death of a member, a lump sum distribution equahng the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit prov1S1ons are estabhshed by State statute.
Contribntlons and Vesting Member contnbutions are seven and one-halfpercent (7.5%) of gross salary There are no employer contnbutlons Contnbution rates are established by State statute. Earrungs are credited to each member's account m a manner established by the Board of Trustees Upon terrnmauon of employment, the amount of the member's account 1s refundable upon request by the member
Total contnbutions made by employees dunng fiscal year 2002 amounted to $7,150 13 which represents 7.56% of covered payroll These contributions met the requuements of the plan
NOTE JO RISKMANAGEMENT
East Georgia College 1s a participant m the Board of Regents of the Uruvers1ty System of Georgia Health Benefits Plan, which 1s a self-Insurance program ofhealth and dental benefits for employees and retirees ofthe Umvers1ty System of Georgia. East Georgia College and part.Jc1patmg employees and retirees pay premiums to the Health Benefits Plan for this health IOSurance coverage. The Health Benefits Plan 1s included m the financial statements of the Board of Regents of the Uruvers1ty System of Georgia -Adrnm1strat1ve Central Office. All uruts of the Uruvers1ty System of Georgia share the nsk ofloss for clauns of the Health Benefits Plan. The Healt)l Benefits Plan 1s considered
- 24-

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE I 0: RISK MANAGEMENT
a self-sustainmg nsk fund that provides health coverage for its members up to a maximum hfet1me benefit of$2,000,000 00 per person and dental coverage up to an annual maximum of$1,000 00 per person The Board of Regents has contracted With Blue Cross Blue Shield of Georgia to process chums m accordance With the Health Benefits Plan as estabhshed by the Board of Regents.
The Department ofAdmmistratlve Services (DOAS) has the respons1b1hty for the State of Georgia of makmg and carrying out decisions that WIii m1mm1ze the adverse effects ofacc1dental losses that mvolve State government assets The State believes 11 1s more economical to manage its nsks mtemally and set aside assets for chum settlement Accordmgly, DOAS processes clmms for nsk of loss to which the State 1s exposed, mcludmg general hab1hty, property and casualty, workers' compensation, unemployment compensation, and law eriforcement officers' mdemmficallon Lmuted amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other nsks. East Georgia College, as an organizational urut ofthe Board ofRegents ofthe Umvers1ty System ofGeorgia, 1s part ofthe State ofGeorgia reportmg enllty, and as such, 1s covered by the State of Georgia nsk management program adm1mstered by DOAS Premiums for the nsk management program are charged to the vanous state org3.lllzallons by DOAS to provide clmms servicmg and cl3.lm5 payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the Umvers1ty System of Georgia under powers authonzed by the Official Code of Georgia Annotated SectJon 45-9-1. The program msures the employees to the extent that they are not immune from hab1hty against personal hab1hty for damages ansmg out of the performance of thelf dulles or m any way connected thereWJth. The program 1s adnumstered by DOAS as a SelfInsurance Fund
NOTE 11 CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result m refunds to the grantor agency for any expenditures which are disallowed under grant terms The amount of expenditures wluch may be disallowed by the grantor cannot be determmed at this lime although East Georgia College expects such amounts, 1fany, to be =atenal to its overall financial pos11Jon
L11Jgat1on, clmms and assessments filed agmnst East Georgia College (an org3.lllzallonal unit ofthe Board ofRegents ofthe Umvers1ty System ofGeorgia), if any, are generally considered to be actions agmnst the State of Georgia Accordmgly, s1gmficant httgatton, clmms and assessments pendmg agmnst the State of Georgia are disclosed m the State of Georgia Comprehensive Annual Fmanc1a\ Report for the fiscal year ended June 30, 2002.

- 25 -

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE 12 POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code ofGeorgia Annotated Section 20-331, the Board of Regents of the Umvers1ty System of Georgia has established group health and hfe msurance programs for regular employees ofthe Umvers1ty System ofGeorgia It 1s the pohcy ofthe Board ofRegents to perrmt employees ofthe Umvers1ty System of Georgia ehgible for retirement or that become permanently and totally disabled to contmue as members of the group health and hfe msurance programs. Employees who are ehg1ble for retirement or d1sab1hty under the cntena estabhshed by the Teachers Retirement System of Georgia and who have at least ten years ofsel'V!Ce with the Uruvers1ty System of Georgia are ehgible for these post-employment health and hfe msurance benefits Orgamzatlonal umts of the Board of Regents of the Umvers1ty System of Georgia pay the employer portion for group msurance for affected md1v1duals
As of June 30, 2002, there were 17 employees who had retired or were disabled that were rece1vmg these post-employment health and hfe msurance benefits For the year ended June 30, 2002, East Georgia College recogmzed as mcurred $54,488.60 ofexpenditures, wluch was net of$ I9,861.60 of part1c1pant contnbutJons.

26

EAST GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBJT"D"

NOTE 13 NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The College's operatmg expenses by functional class1ficat1on are shown below

<itatcmcnt of Operatmg Expcnsc5 - Natural vs Funchonal Oass1ficanons 1-0I" the Fiscal Year Ended June 30, 2002

Natural Qa.wficabon
Salam.s Faculty Staff
Employee Benefits Other Personal ServJccs Travel
Scholarsh,p, and Fcllowsh1ps
Uuhues Supphes and Ollie>
Sc:rv,ces Deprecia11on
Total Operaung Expenses

lnstruchQD

EWJ1aum!l Q!U1U!iill!2!l

AcademJc Sunoo,t

Student !,,ry,rn

lnshhltlonal SJJDOOrt

s 1,665,464 85

s s s 323,432 66

462,479 79

324,749 87

655,456 46

482,323 90

106,969 38

79,917 27

2Z9,821 55

14,96000

10,002 11

18,856 21

4,315 66

20,937 33

7,127.26 33,841 64

3,441 31 35,340 63

4,367 09 9,539 14

50,739 81 18,874 66

436,713 82

279,706 35

106,203 35

168,679 JO

s 2958 906 24 s 906 79] 67 s 529 OQ2 JR s I )'-946911

Natural Classificat10n
Saiancs Faculty ;talf
Employ Benefits Other Personal Services Travel
Scholarsh>ps and
Fellowships Ut1ht1es Supplies and Other
Services Dcprcc1at1on
Total Operatmg Expc:nscs

Plant ()pennons and
Mnmtenu:,cc

E!.!'lumal Cl~Jfi.ilHm

ScholaBlnps
and Fellowshm,

Aux1hary
Entqprug

Unallocated
Pem:eCiatmn

Total
Openhng
Expenses

s 263,205 34
82,31604

30942

s 837,391 71

246,922.29

s

251,922 96

s ~ ~z~ 125 s JZ J9l 71 s

s 1,665,464 85 2,029,324 12 981,348 14 14,960 00 54,420 73

1.213 81

903,067 18 345,732 17

9,587 88
s !501 ,46) 83

1.252,813 66
501 461 83

zz~s 112 121 ~9 s ~I :Kil SJ s

~~ ~

- 27 -

SUPPLEMENfARY INFORMATION -29-

EAST GEORGIA COLLEGE SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUDGET - {NON-GAAP BASIS)
RESIDENT INSTRUCTION YEAR ENDED JUNE 30 2002

SCHEDULE "1"

REVENUES
State Appropnabons Other Revenues Retained

BUDGET

ACTUAL(1)

VARIANCEFAVORABLE (UNFAVORABLE)

$ 5,206,563 00 $ 5,206,563 00 S

3,416,08300

3,271,751 07

000 -144 331 93

s s 816221846 oo

8,478,314 01 s_ _ _-.:.:144=,33=1..::9,,_3

EXPENDITURES

Personal Serv\OeS

Education, General end Departmental Services

$ 4,424,876 00 $ 4,420,604 98 $

4,271 02

SponsOllld Operabons

TT,461 00

76,831 11

62989

0pera1:ng Expenses

Education, General end Departmental Services

1,478,932 00

1,360,951 86

117,980 14

Sponsored Operabons

1,475,673 00

1,498,644 85

-22,971 85

Capital Outlay

138,754 00

120,047 15

18,706 85

Speaal Fund:ng lnruabve

1,026,950 00

942 571 95

84 378 05



$ 8,622,646 00 $ 8,419,651 90 $ _ __;20=2::.:,994=-'-10=-

Excess of Revenues over Expenditures

$

s____ 58 662 11

5_8.,6_6_2_11_

1

(1) Actual emourrts were prepared on a prescnbed bes:s of ea:ounbng that demonstrates compl:ance with budgetary statutes and regulabons of the State of Georg:a, winch 18 a comprehens:ve basis of eccounbng other than generally aa:epted accounbng pnnaples

See accompanying notes and Independent Accountant's Combined Report on Review of Bas:c F:nanael Statements and Supplementary lnfom,atJon
- 31 -

EAST GEORGIA COLLEGE SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUpGET - INON-GAAP BASIS)
LOTTERY FOR EDUCATION
YEAR ENDED JUNE 30 2002

SCHEDULE "2"

REVENUES
State AppropnatJons

BUDGET

ACTUAL (1)

VARIANCE FAVORABLE (UNFAVORABLE)

$

103,884 00 $

103,884 00 $ _ _ _ _ _.::.0-=0~0

EXPENDIJVRES

Equipment, Technology and Construclton

Trust Fund

s

39,368 00 $

39.218 50 $

Speetal Funding lntbatves

64 516 00

59,253 42

14950 5,262 58

$

103,884 00 $

- - - - ~ - - 98,471 92 $

5,412 08



Excess of Revenues over Expenditures

s

5 412 oa $ _ _ _...,;;5~4_1_2_oa_

(1) Actual amounts were prepared on a prescnbed basis of accounbng \hat demonstrates complance with budgetary stsMes and regulatons of \he State of Georgia, whch s a comprehensive bass of accounting
other than generally accepted sccountng pnnetples

See accompanying notes and Independent Accountant's Combmed Report
on Revew of B8Slc Fmanetal Statements and Supplementary lnformat,on
- 32 -

EAST GEORGIA COLLEGE RECONCIUATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30. 2002

SCHEDULE 3

Totals per Annual Supplement
Accruals June 30. 2002 June 30, 2001
Prepaid Items June 30, 2002 June 30, 2001
Compensated Absences June 30, 2002 June 30, 2001

SALARIES $ 3,734,581 80 $

TRAVEL 54,420 73

15,576 91 -13,287 82

-71,926 41 55,245 83

179,292 77 -204 694 11

s___ $ 3 694,788 e1

54....._4_20_1_3_

1

See accompanying notes and Independent Accountant's Combined Report on ReV1ew of Basic Fmanaal Statements and Supplementary lnformabon
- 33 -

SECTIONil CURRENT YEAR FINDINGS AND QUESTIONED COSTS

EAST GEORGIA COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
ACCOUNTING CONTROLS (OVERALL) Inadequate Closmg Procedures Fmdmg Control Number. FS-572-02-01
Durmg fiscal year 2002, the Board ofRegents ofthe Uruvers1ty System ofGeorgia converted uruts of the Uruvers1ty System from the College Uruvers1ty Fmanc1al Accounting (CUFA) legacy system to the new Georgi.aFIRST System (Financial, Information and Reportmg Systems for Tomorrow) In January of 2002, East Georgia College placed tlus accountmg system mto producllon
The management of East Georgia College 1s responsible for implementmg procedures to estabhsh and mamtam adequate control over the operallon, ullhzatlon, and mtegnty of their data processed with the Georgi.aFIRST System. We encountered problems wtth the financial data presented by the College. The College's failure to estabhsh and adhere to a final closmg for the year ended June 30, 2002, created a situation where data presented for revu:w was mcomplete Extensive review procedures were necessary to determme the vahdity of the mformatlon proVJded.
To reduce the nsk ofreportmg mcomplete mforrnatlon, the College should work with the Board of Regents Central Office to develop procedures that will result m complete reporting ofall financial data m a more efficient a!ld timely manner.
CAPITAL ASSETS Inadequate Capital Assets Records Fmding Control Number: FS-572-02-02
Our review of East Georgia College's accountmg procedures for the Capital Asset Management System determmed that procedures m place were msufficient to proVJde adequate control over the College's capital assets The followmg defic1enc1es were noted.
1) Effective July 1, 2001, the capitalization threshold for equipment was mcreased from $1,000.00 to $5,000.00. The College failed to reconcile the eqwpment component ofthe Asset Ma.J1agement module as of July I, 2001, with the equipment inventory balance as of June 30, 2001
2) The College's Asset Management module, as of July I, 2001, did not reconcile with estimated cost values estabhshed by an independent appraisal. There were assets m the amount of $38,978 00 for Equipment that were mcluded on the mdependent appraisal report that were not mcluded on the Asset Management module, as well as assets m the amount of$163,47l.00 for Facilities and Other Improvements that were mcluded on the Asset Ma.J1agement module that were not mcluded on the mdependent appraisal report The College was unable to proVJde an explanation or documentation for the vanances.
-I-

EAST GEORGIA COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CAPITAL ASSETS Inadequate Capital Assets Records Fmdmg Control Number FS-572-02-02
3) The College's Asset Management module did not reconcile to the Capital Ledger There was an asset mcluded on the Asset Management module that was not added to the Capital Ledger as of June 30, 2002. An aucht adjustment of $434,542 39 was made to record the asset m the Capital Ledger.
These defic1enc1es are a result of management's failure to implement adequate policies and procedures to ensure that the College's capital assets are properly maintained. The College should establish appropnate procedures to strengthen controls and ensure that assets are properly accounted for and safeguarded.
GENERAL LEDGER Inadequacies m Control Over Subs1chary Ledgers Finchng Control Number FS-572-02-03
Our exammaUon mcluded a reVJew ofthe procedures uuhzed by East Georgia College m recordmg
transachons to the vanous modules compnsmg the GeorgiaFIRST accountmg system Our testing
revealed that, at June 30, 2002, the College's general ledger module did not balance with the subs1chary modules This cond11Ion was pnmarily due to errors m posting subsidiary records durmg the conversion from the old College Uruvers1ty Fmanc1al Accounting (CUFA) legacy accountmg system to the new GeorgiaF/RST accounting System and due to transachons bemg posted to the
general ledger module rather than the appropnate subs1chary modules. The College chd not proVJde a
reconc1hation of the general ledger balances to the subs1d1ary records, which resulted m extensive work by the auditors to identify reconcilmg items at June 30, 2002.
Management's failure to ensure that subs1chary records are reconciled with the general ledger causes mternal reports to management, generated from the subsidiary modules, to be maccurate and misleadmg. This conchuon can lead to erroneous dec1S1ons by the College's management and result m maccurate reporting of financial mformatlon.
To ensure accurate and timely reportmg offinanCJal mformation from subs1charyrecords, the College should post transachons correctly to the subs1d1ary ledgers rather than as Journal entnes m the general ledger The College should develop mtcrnal accounting controls and procedures to ensure that reconc1hation of subs1d1ary ledgers and the general ledger are performed on a regular basis.
-2 -