EAST GEORGIA COLLEGE SWAINSBORO, GEORGIA MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2009 A Member Institution of the University System of Georgia Georgia Department of Audits and .Accounts Russell W. Hinton State Auditor EAST GEORGIA COLLEGE - TABLE OF CONTENTS - SECTION I FINANCIAL LETTER OF TRANSMITTAL SELECTED FINANCIAL INFORMATION EXHIBITS A STATEMENT OF NET ASSETS - (GAAP BASIS) 2 B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - (GAAP BASIS) 3 C STATEMENT OF CASH FLOWS - (GAAP BASIS) 4 D SELECTED FINANCIAL NOTES 5 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 PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (STATUTORY BASIS) BUDGET FUND 20 4 RECONCILIATION OF SALARIES AND TRAVEL 23 SECTION II 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 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 October 7, 2009 Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the State Board of Regents of the University System of Georgia and Honorable John Black, President East Georgia College Ladies and Gentlemen: As part ofour audit ofthe basic financial statements ofthe State of Georgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2009, we have performed certain audit procedures at East Georgia College. Accordingly, the financial statements and compliance activities ofEast Georgia 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 East Georgia College as of and for the year ended June 30, 2009. Information contained in this report is a by-product ofour audit ofthe basic financial statements ofthe State ofGeorgia 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 East Georgia College, members of the Board of Regents of the University System of Georgia and the Southern Association ofColleges 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, ~~-~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as SELECTED FINANCIAL INFORMATION EAST GEORGIA COLLEGE STATEMENT OF NET ASSETS (GAAP BASIS) JUNE 30, 2009 ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable (Note 3) Federal Financial Assistance Other Inventories Prepaid Items Total Current Assets Noncurrent Assets Capital Assets, Net (Note 4) Total Assets LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deferred Revenue (Note 5) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations Compensated Absences Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for: Nonexpendable Expendable Unrestricted Total Net Assets EXHIBIT "A" $ 2,810,438 359,494 530,478 2,435 235,274 $ 3,938,119 16,886,150 $ 20,824,269 $ 68,411 38,839 40,818 1,517,670 220,879 82,378 52,440 201,898 $ 2,223,333 $ 16,587 189,409 $ 205,996 $ 2,429,329 $ 16,817,123 37,100 125,638 1,415,079 $ 18,394,940 -2 - EAST GEORGIA COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - (GAAP BASIS) YEAR ENDED JUNE 30, 2009 EXHIBIT "B" OPERATING REVENUES Student Tuition and Fees Less: Scholarship Allowances Grants and Contracts Federal Sales and Services of Educational Departments Auxiliary Enterprises Bookstore Food Services Parking/Transportation Other Organizations Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Salaries Faculty Staff Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) State Appropriations Federal Stimulus - Stabilization Funds Grants and Contracts Federal State Other Gifts Interest and Other Investment Income Interest Expense Net Nonoperating Revenues Income (Loss) Before Other Revenues, Expenses, Gains, or Losses Capital Grants and Gifts State Increase (Decrease) in Net Assets Net Assets - Beginning of Year Net Assets - End of Year 3 - $ 4,930,884 -2,373,524 2,295 32,806 43,088 8,050 30,736 1,391 24 529 $ 2,7001255 $ 3,004,489 3,104,889 1,803,176 60,927 34,454 3,157,502 387,601 2,020,039 722,520 $ 141295,597 $ -11,595,342 $ 6,425,155 59,404 5,428,034 140,647 196,519 194,565 117,416 -10,838 $ 121550,902 $ 955,560 125,749 $ 1,081,309 17,313,631 $ ==1.8,=39=4=,9=4=0 EAST GEORGIA COLLEGE STATEMENT OF CASH FLOWS (GAAP BASIS) YEAR ENDED JUNE 30, 2009 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Auxiliary Enterprise Charges: Bookstore Food Services Parking/Transportation Other Organizations Other Receipts (Payments) Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Federal Stimulus Stabilization Funds Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Net Cash Flows Provided (Used) by Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Net Cash Provided (Used) by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Net Cash Provided (Used) by Investing Activities Net Increase (Decrease) in Cash Cash and Cash Equivalents - Beginning of Year Cash and Cash Equivalents - End of Year RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable Inventories Prepaid Items Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (Used) by Operating Activities NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income EXHIBIT "C" $ 2,719,019 -454,388 32,806 -4,272,154 -6,077,343 -3, 157,502 55,603 6,877 31,177 1,358 787 772 $ -10,326,775 $ 6,425,155 59,404 9,761 5,959,765 $ 12,454,085 $ 125,749 -770,741 -52, 150 -10 838 $ -707 980 $ 470,176 99,580 $ 569 756 $ 1,989,086 821,352 $ -11,595,342 722,520 -565,769 -1,033 -42,666 20,550 1,023,520 78,536 32,909 EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY East Georgia 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 accompanying financial statements reflect the operations of East Georgia 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. East Georgia College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, East Georgia 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 Reporting Standards. 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. Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. -5- EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NET ASSETS Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus) of $11,052.82. 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 Treasury and Fiscal Services. 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, ce1iificates 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 Horne Loan Mortgage Association and the Federal National Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. -6- EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT "D" NOTE 2: DEPOSITS AND INVESTMENTS DEPOSITS 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, 2009, the carrying value of deposits was $2,083,659 and the bank balance was $2,795,243. Of the College's deposits, $2,539,220 were uninsured. Of these uninsured deposits, $2,539,220 were collateralized with securities held by the pledging financial institution. INVESTMENTS At June 30, 2009, the carrying value of the College's investment was $725,784, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents: Investment Pool Board of Regents Short-Term Fund $===a=::7:=:::25::::.7==8==4 The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Short-Term Fund is reported as Cash and Cash Equivalents on Exhibit "A" of this report. NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2009. Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State and Private Funds Other $ 47,147 10,866 374,236 457,723 Total Accounts Receivable $====='=='88-9,-97===2 NOTE 4: CAPITAL ASSETS Following are the changes in the College's capital assets for the year ended June 30, 2009: -7- EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT "D" NOTE 4: CAPITAL ASSETS Beginning Balance Julx 1, 2008 Additions Reductions Ending Balance June 30, 2009 Capital Assets, Not Being Depreciated: Land $ 221,959 $ 221,959 Construction Work-In-Progress 142,223 $ 518,429 $ 114 501 546 151 Total Capital Assets Not Being Depreciated $ 364,182 $ 518 429 $ 114 501 $ 768,110 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections $ 1,316,826 $ 18,313,585 421,017 1,572,270 232,392 1,118,603 77,657 184,308 23,800 $ 16,708 7 366 222,102 4 682 $ 1,394,483 18,497,893 421,017 1,373,968 249,100 1,121,287 Total Assets Being Depreciated $ 22,974,693 $ 309,839 $ 226,784 $ 23,057 748 Less: Accumulated Depreciation: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections $ 20,352 $ 3,805,358 381,405 1,101,047 I 02,543 1,033,267 51,150 509,208 61,564 $ 76,864 23 734 $ 71,502 4,314,566 381,405 222,102 940,509 179,407 4 682 1,052,319 Total Accumulated Depreciation $ 6,443,972 $ 722,520 $ 226,784 $ 6,939,708 Total Capital Assets, Being Depreciated, Net $ 16,530.721 $ 0 $ 16,118,040 Capital Assets, Net $ 16,894.903 $ 105.748 $ 114.501 $ 16,886,150 NOTE 5: DEFERRED REVENUE Deferred revenue consisted of the following at June 30, 2009. Prepaid Tuition and Fees Other Deferred Revenue $ 607,684 909,986 Totals $ 1,517,670 NOTE 6: LONG-TERM LIABILITIES The College's Long-Term liability activity for the year ended June 30, 2009 was as follows: -8- EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT "D" NOTE 6: LONG-TERM LIABILITIES Leases Lease Obligations Other Liabilities Compensated Absences Total Long-Te1m Obligations Beginning Balance July 1, 2008 $ 104,469 358,398 $ 462 867 Additions $ 16,708 247 999 Reductions Ending Balance June 30, 2009 $ 52,150 $ 69,027 215,090 $ 391,307 460,334 Current Portion $ 52,440 201,898 NOTE 7: NET ASSETS Changes in Net Asset activity for the year ended June 30, 2009 are as follows: Invested in Capital Assets Net of Related Debt Restricted Net Assets Unrestricted Net Assets Total Net Assets NOTE 8: LEASE OBLIGATIONS Balance Julx 1, 2008 Additions Reductions Balance June 30, 2009 $ 16,790,434 130,793 392 404 $ 17 313 631 $ 89,040 5,655,005 9,606,990 $ 15.351.035 $ 62,351 5,623,060 8,584,315 $ 14 269 726 $ 16,817,123 162,738 1,415,079 $ 18,394,940 East Georgia College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2010 and 2013. Expenses for fiscal year 2009 were $62,988 of which $10,838 represented interest. Total principal paid on capital leases was $52,150 for the fiscal year ended June 30, 2009. Interest rates range from 8.55 percent to 15.43 percent. OPERATING LEASES East Georgia College's noncancellable operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers, other small business equipment, and buildings. -9- EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT ''D" NOTE 8: LEASE OBLIGATIONS OPERATING LEASES Noncancellable operating lease rental expenses in 2009 were $237,246 for real property and/or equipment. 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, 2009, were as follows: Capital Leases Operating Leases Year Ending June 30: 2010 2011 2012 2013 $ 60,588 $ 237,282 12,248 237,190 5,478 236,940 576 Total Minimum Lease Payments $ 78,890 $ 711,412 Less: Interest 9,863 Principal Outstanding $ 69,027 NOTE 9: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Plan Description East Georgia College participates in the Teachers Retirement System of Georgia (TRS), a costsharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or 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 earnings to TRS. East Georgia College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2009, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT "D" NOTE 9: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Funding Policy Fiscal Year Percentage Contributed Required Contribution 2009 2008 2007 100% 100% 100% $ 332,331 $ 302,395 $ 267,303 EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description East Georgia College participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. The ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP 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 SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are "new plan" members subject to the modified plan provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009 also have the option to change their membership to the GSEPS plan. Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60. - 11 - EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT "D" NOTE 9: RETIREMENT PLANS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2009, for employees covered by ERS was $61,495. The College's total payroll for all employees was $6,109,378. 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, the College pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these College contributions are included in the members' accounts for refund purposes and are used in the computation of the members' eamable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The 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 College contributions are not at any time refundable to the member or his/her beneficiary. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2009 2008 2007 100% 100% 100% $ 6,402 $ 4,396 $ 3,600 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2009 financial report, which may be obtained through ERS. - 12 - EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT "D" NOTE 9: RETIREMENT PLANS 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. 4721-1 et. seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy East Georgia 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 2009, the employer contribution was 8.15% for the first six months and 9.24% for the last six months of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. East Georgia College and the covered employees made the required contributions of $143,080 (8.15% or 9.24%) and $81,917 (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 East Georgia 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 1s 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 $3,500.00 credited to his/her account, the Board of - 13 - EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT "D" NOTE 9: RETIREMENT PLANS GEORGIA DEFINED CONTRIBUTION PLAN Benefits 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 and Vesting 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 2009 amounted to $18,106 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices. NOTE 10: CONTINGENCIES Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although East Georgia College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against East Georgia College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2009. NOTE 11: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, 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 - 14 - EAST GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2009 EXHIBIT "D" NOTE 11: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS 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 2008 and 2009 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, 2009, there were 27 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2009, East Georgia College recognized as incurred $150,555 of expenditures, which was net of $87,576 of participant contributions. NOTE 12: AFFILIATED ORGANIZATIONS The East Georgia College Foundation, Inc. is a legally separate, tax exempt organization whose activities primarily support East Georgia College. This affiliated organization is considered a potential component unit of the State of Georgia in accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of this affiliated organization are not included in these financial statements. Copies of the financial statements for the affiliated organization may be obtained from East Georgia College. - 15 - (This page left intentionally blank) SUPPLEMENTARY INFORMATION - 17 - EAST GEORGIA COLLEGE BALANCE SHEET (STATUTORY BASIS) BUDGET FUND JUNE 30, 2009 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories Total Assets LIABILITIES AND FUND EQUITY Liabilities Salaries Payable Accounts Payable Encumbrances Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Inventories Tuition Carry-Over Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances SCHEDULE "1" $ 2,292,912.19 359,494.35 371,423.84 235,273.77 2,435.13 $ ===3=,=26=1=,5=39=.2=8= $ 38,839.41 32,237.01 1,266,399.46 1,503,674.14 169,192.06 $ 3,010,342.08 $ 40,060.38 9,879.53 9,956.04 122,144.70 1,800.00 56,303.73 11,052.82 $ 251,197.20 $ ===3=,=26=1=,5=39=.2=8= Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. - 18 - EAST GEORGIA COLLEGE SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2009 SCHEDULE "2" REVENUES State Appropriation State General Funds Federal Funds Other Funds Total Revenues CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance Total Funds Available EXPENDITURES Special Funding Initiatives Teaching Total Expenditures Excess of Funds Available over Expenditures FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance {Surplus) Returned to Board of Regents - University System Office Year Ended June 30, 2008 Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30 BUDGET ACTUAL VARIANCEFAVORABLE {UNFAVORABLE} $ 6,443,141.00 $ 6,443,141.00 $ 59,404.00 59,404.00 10,521,289.00 11,066,167.49 $ 17,023,834.00 $ 17,568,712.49 $ 0.00 0.00 544 878.49 544,878.49 0.00 183,709.75 $ 17,023,834.00 $ 17/52,422.24 $ 183 709.75 728,588.24 $ 652,963.00 $ 645,463.00 $ 16 370 871.00 16,865,099.24 $ 17,023,834.00 $ 17,510,562.24 $ $ 0.00 $ 241,860.00 $ 7,500.00 .494 228.24 -486 728.24 241 860.00 186,064.09 17,986.17 7,613.66 -630.80 -17,986.17 -183,709.75 $ 251,197.20 SUMMARY OF FUND BALANCE Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Inventories Tuition Carry-Over Total Reserved Unreserved Surplus Total Fund Balance Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. $ 40,060.38 9,879.53 9,956.04 122,144.70 1,800.00 56,303.73 $ 240,144.38 11,052.82 EAST GEORGIA COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30. 2009 Special Funding Initiatives State Appropriation State General Funds Original Appropriation Final Budget Funds Available Comeared to Budget Current Year Revenues Prior Year Carry-Over Total Funds Available Variance Positive (Negative) 746,488.00 $ 652,963.00 $ 652,963.00 $ 0.00 $ 652,963.00 $ 0.00 Teaching State Appropriation State General Funds Federal Funds American Recovery and Reinvestment Act of 2009 Federal Stabilization Funds Other Funds Total Teaching $ 6,603,804.00 $ 5,790,178.00 $ 5,790,178.00 $ 0,00 $ 5,790,178.00 $ 0.00 0.00 9 515 836.00 $ 16119640.00 59,404.00 10,521,289.00 16 370 871.00 59,404.00 11 066167.49 0.00 183 709.75 16 915 749.49 $ 183 709.75 59,404.00 11 249 877.24 0.00 728,588.24 17 099 459.24 $ 728 588.24 Grand Totals - All Programs 16,866,128.00 $ 17,023,834 00 $ 17,568,712.49 $ 183,709.75 $ 17,752.422.24 $ 728,588.24 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. -20- SCHEDULE "3" Expenditures Compared to Budget Variance Positive Actual (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Program Fund Balances Transfers Pro9ram Fund Balances Reserve Surplus Total Fund Balance 645,463.00 $ 7,500.00 $ 7,500.00 $ 0.00 $ 0.00 $ 7,500.00 $ -7,500.00 $ 0.00 $ 0.00 $ 0.00 $ 5,797,678.00 $ -7,500.00 $ 59,404.00 11 008 017.24 16,865,099.24 0.00 -486 728.24 -494 228.24 $ -7,500.00 $ 7,780.41 $ 0.00 241 860.00 234 360.00 0.00 -797.55 6 982.86 0.00 $ 280.41 $ 7,500.00 $ 0.00 $ 7,780.41 $ 7,780.41 0.00 554.34 554.34 $ 0.00 241,616.79 241 897.20 0.00 0.00 7 500.00 0.00 238 344.38 238 344.38 0.00 3,272.41 11 052.82 000 241 616.79 249 397.20 17,510,562.24 $ -486,728.24 $ 241,860.00 $ 6,982.86 $ 554.34 $ 249,397.20 $ 0.00 $ 238,344.38 $ 11,052.82 $ 249,397.20 Unexpendable Reserves Inventories 1 800.00 251 197.20 (This page left intentionally blank) EAST GEORGIA COLLEGE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2009 SCHEDULE "4" Totals per Annual Supplement Accruals June 30, 2009 June 30, 2008 Compensated Absences June 30, 2009 June 30, 2008 Lag Salaries June 30, 2009 June 30, 2008 Adjustment Shared Services on Jointly Staffed Personnel Georgia Southern University Hamm, K. Joy Herrell, Dan Marsh, Robert Miller, Rex Song, Francois Unidentified Variance SALARIES $ 6,086,542.75 $ TRAVEL 34,454.05 38,839.00 -44,383.89 363,499.47 -332,929.24 -170,893.32 154,505.01 1,399.46 -2, 153.00 -1,500.00 5,200.00 12,957.36 -1,705.60 $ 6,109,378.00 $ ==3=4===,4=54::::::=05= - 23 - SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS EAST GEORGIA COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2009 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) BUDGETARY OVEREXPENDITURES The approved budget for East Georgia College provided for expenditures totaling $17,023,834.00. A comparison ofanticipated funds available and expenditures by budgetary line item indicated that the Teaching category was overspent by $494,228.24. The College should closely monitor their budget operations to prevent expenditures of funds in excess of budget approval. RECONCILIATION OF SUBSIDIARY LEDGERS East Georgia College did not have procedures in place to ensure that all subsidiary ledgers were properly reconciled. The College failed to identify and correct variances in the Cash and Financial Aid clearing accounts on the Banner/PeopleSoft Reconciliation. The College should establish procedures to ensure that reconciling items are identified and corrected in a timely manner to ensure materially correct financial reporting.