Fort Valley State University, Fort Valley, Georgia, report on review of the financial statements for the fiscal year ended June 30, 2002

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FORT VALLEY STATE UNNERSITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

3

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

I3

D NOTES TO THE FINANCIAL STATEMENTS

14

SUPPLEMENTARY INFORMATION

SCHEDULES

SCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO

BUDGET - (NON-GAAP BASIS)

I

RESIDENT INSTRUCTION

31

2

LOTTERY FOR EDUCATION

32

3 RECONCILIATION OF SALARIES AND TRAVEL

33

4 RECONCILIATION OF PER DIEM AND FEES

34

SECTIONll AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS

FORT VALLEY STATE UNIVERSITY -TABLE OF CONTENTS-
SECTIONID CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECflONI FINANCIAL

R,,<sELL W. HII'm)~
STATE AUDITOR
/.(4) 656 2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Wa<hlnglOn Slreel S W. SUlle 214 Allanla GeorgIa 30314-R400
January 17, 2003

Honorable Sonny Perdue, Governor Members ofthe General Assembly of Georgia Members of the Board ofRegents of the Urnverslty System ofGeorgJa
and Honorable Kofi Lomotey, President Fort Valley State UniVersity
INDEPENDENT ACCOUNTANTS COMBINED REPORT ON REVIEW OF BASIC FINANCIAL STATEMENTS AND SupPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have reViewed the accompan}'lng basiC finanCial statements (Exlublts A through D) of Fort Valley State Urnverslty, an orgamzatlonal umt ofthe State ofGeorgJa, as ofand for the year ended June 30, 2002, in accordance With Statements on Standards for Accountlng and ReView SerVIces issued by the Amencan Institute ofCertified Public Accountants. All mformatlon mcluded in these finanCial statements IS the representatlon of the management of Fort Valley State Urnverslty.
A reView consists principally of inqUiries of Fort Valley State Urnversity personnel and analytlcal procedures applied to financial data It IS substantlally less m scope than an audit m accordance with auditlng standards generally accepted m the Urnted States of Amenca, the obJectlve ofwluch IS the expression of an 0plrnon regarding the finanCial statements taken as a whole. Accordmgly, we do not express such an 0plrnon
Based on our reView, With the exceptlons of the matters diSCussed m the followmg paragraphs, we are not aware of any material modificatlons that should be made to the accompan}'lng financial statements in order for them to be m confornuty With accountmg pnnclples generally accepted m the Urnted States of Amenca
As descnbed in Note I to the financial statements, the Urnverslty did not recogrnze June 30, 2001, encumbnmces as expenses m the June 30, 2002, basic financial statements To conform to generally accepted accountlng pnnclples, encumbnmces should be recognized as expenses and Iiabllitles m the penod that goods and Services are recCived. The effects on the basiC finanCial statements of t1us departure from generally accepted accountlng pnnclples were not reasonably determmable.
02ARL-67X
L

As dIscussed In Note I, the financial statements of Fort Valley State Umverslty Include eqUIpment Items valued below the capItalizatIon threshold adopted by the Umverslty In addItion, the financial statements do not reflect accumulated depreCiatIon or the effects of current deprecIatIOn for lIbrary collectlons, as reqUIred by generally accepted accountIng pnnclples We were unable to determIne the effects of these misstatements, but they are belIeved to be matenal to the financIal statements
As discussed In Note 1, the finanCIal statements ofFort Valley State Umverslty did not reflect contra revenue for scholarslup allowances, as required by generally accepted accountmg pnnclples The net effect of thiS departure could not be reasonably determmed, but IS belIeved to result m a matenal overstatement of both revenues and expenses reported m the Statement ofRevenues, Expenses and Changes m Net Assets
As descnbed m Note 1, Fort Valley State Umverslty adopted the proVISIons of Governmental Accountmg Standards Board (GASB) Statement No 35, BaSIC FinanCIal Statements - and Management's DISCUSSIOn and AnalysIS - for PublIc Colleges and UnlVerSllles, as amended by GASB Statement No 37, BasiC FinanCIal Stalements - and Management's DISCUSSIOn and AnalysISfor State and Local Governments, and GASB Statement No 38, Certain FinanCIal Statements Note DISclosures, as of July 1,2001, to Implement a new finanCIal reportmg model.
Management's DISCUSSion and AnalysIS IS not a reqUIred part ofthe basiC finanCial statements but IS supplementary mformatlon reqUIred by the GASB We have applIed certam lImited procedures, wluch consIsted pnnclpally of mqumes ofmanagement regardmg the methods ofmeasurement and presentation oftlus supplementary mformatlon, and we are not aware of any matenal modIficatIons that should be made thereto
Our review was made for the purpose of expressmg lImited assurance that there are no malenal modificatIOns that should be made to the finanCIal statements m order for them to be m conforrmty With accountmg pnncIples generally accepted m the Umted States of Amenca. The accompanymg supplementary mformatlOn (Schedules 1 through 4) IS presented for addltlonal analYSis purposes. Such mformatlon has been subjected to the mqumes and analytIcal procedures applIed m the reVIew of the finanCIal statements, and we are not aware of any matenal modIfications that should be made to such data
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RWHgp 02ARL-67X

R sell W Hmton State Auditor

REQUIRED SUPPLEMENTARY INFORMATION
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FORT VALLEY STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Fort Valley State Umverslty IS one of the 34 InStItutIOns of the Umverslty System of GeorgIa The Umverslty, located In Fort Valley, GeorgIa, was founded In 1895 and has become known for ItS agncultura1 research, technology and technology-related programs The Umversltyoffers associate, bacca1aureate and masters degrees In a WIde vanety of subjects. Tlus WIde range of educatIonal opportumtIes attracts a hIghly qualified faculty and a student body ofmore than 2,000 EFT students each year, as shown by the companson numbers that follow.

Facultv

Students

FY2002 FY2001 FY2000

170

2,054

182

2,049

180

2,093

Overview ofthe Financial Statements and Financial Analysis

Fort Valley State Umverslty IS proud to present Its finanCIal statements for fiscal year 2002 The emphasIS ofdiSCUSSIons about these statements WIll be on current year data. There are three financIal statements presented' the Statement of Net Assets, the Statement of Revenues, Expenses and Changes In Net Assets; and, the Statement of Cash Flows. Tlus diSCUSSIon and analYSis of the UmversIty's finanCIal statements proVIdes an OVerVIew of Its finanCIal actIVItIes for the year Fort Valley State Umverslty has elected to not restate pnor penods for purposes of proVIdIng the comparatIve data for tlns Management's DISCUSSion and AnalysIS However, In future years, when pnor penod InformatIon IS available, a comparatIve analYSiS WIll be presented.

Statement ofNet Assets

The Statement ofNet Assets presents the assets, habilItIes, and net assets ofthe Umverslty as ofthe end of the fiscal year The Statement of Net Assets IS a POInt of tIme finanCial statement The purpose of the Statement ofNet Assets IS to present to the readers ofthe finanCIal statements a fiscal snapshot of Fort Valley State Umverslty. The Statement of Net Assets presents end-of-year data concermng Assets (current and non-current), LIabilItIes (current and non-current), and Net Assets (assets mInUS lIabIlItIes) The difference between current and non-current assets WIll be chscussed In the notes to the finanCial statements

From the data presented, readers of the Statement of Net Assets are able to determme the assets aVaIlable to contInue the operatIons ofthe InstitutIon. They are also able to determIne how much the mstItutIon owes vendors, Investors and lenchng InstItutions.

-3-

FInally, the Statement ofNet Assets proVIdes a PICture ofthe net assets (assets mmus liabilities) and theIr avaIlabIlity for expendJture by the mstltutlon Net assets are dIvIded Into three major categones The first category, mvested In capItal assets, net ofdebt, provIdes the Institution's eqwty In property, plant and eqwpment owned by the instJtutlon The next asset category IS restncted net assets, whlch IS dIVIded mto two categones, nonexpendable and expendable The corpus of nonexpendable restncted resources IS only aVaJlable for Investment purposes Expendable restncted net assets are aVaJlable for expendIture by the Institution but must be spent for purposes as determmed by donors and/or extemal entities that have placed time orpurpose restnctJons on the use of the assets The final category IS WJrestncted net assets Unrestncted assets are aVailable to the Institution for any lawful purpose of the Jn5t1tutlon
Statement ofNet Assets, Condensed (thousands of dollars)

Assets Current Assets CapItal Assets, Net

$ 4,496 30,026

Total Assets

$ 34,522

LiablUtles Current LIabilities Non-Current LIabIlities

$ 3,791 3,007

Total L1ablUties

$ 6,798

Net Assets Invested In CapItal Assets, Net of Debt Restncted - Nonexpendable Restncted - Expendable Unrestncted

$ 26,473 1,481 2,292 -2,522

Total Net Assets

$ 27,724

Statement ofRevenues, Expenses and Changes in Net Assets

Changes m total net assets as presented on the Statement of Net Assets are based on the actiVity presented In the Statement ofRevenues, Expenses and Changes m Net Assets. The purpose of the statement IS to present the revenues receIved by the InstitutiOn, both operating and nonoperating, and the expenses paJd by the Institution, operating and nonoperating, and any other revenues, expenses, gains and losses receIved or spent by the mstItutJon Generally speakmg operatmg revenues are receIved for proVldJng goods and serVIces to the vanous customers and constituencies of the Institution. OperatIng expenses are those expenses paid to acqwre or produce the goods and serVIces proVIded In return for the operatIng revenues, and to carry out the mIssIon of the InstJtutlon. Nonoperatmg revenues are revenues receIved for which goods and ServICes are not proVIded. For example state appropnatlons are nonoperating because they are proVided by the Legislature to the Institution WIthOut the Legislature dIrectly recelVJDg commensurate goods and SerVIces for those revenues.

-4-

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

Operatmg Revenues Operatmg Expenses

$ 21,448 51,128

OperatIng Loss

$ -29,680

Nonoperatmg Revenues and Expenses

26,591

Decrease In Net Assets

$ -3,089

Net Assets at Beginning of Year, as OngInally Reported

$ 94,054

CumulatIve Effect of Changes m AccountIng Pnnclple

-63,241

Net Assets at BegInrung of Year Restated
Net Assets at End of Year

$ 30,813
$ 27 724

The Statement of Revenues, Expenses and Changes m Net Assets reflects a negative year WIth a decrease m the net assets at the end ofthe year. Some Iughhghts ofthe mformatlOn presented on the Statement of Revenues, Expenses and Changes m Net Assets are as follows

-5-

Revenue By Source (thousands of dollars) For The Year Ended June 30, 2002
Operating Revenue TUition and Fees Grants and Contracts Sales and ServIces of Educallonal Departments Auxlhary Other
Total Operallng Revenue
Nonoperating Revenue State AppropnatlOns Grants and Contracts Investment Income Other
Total Nonoperating Revenue
Total Revenues
Expenses (thousands of dollars) For The Year Ended June 30, 2002
Operallng Expenses Instruction Research Pubhc Sel"V1ce AcademIC Support Student Services Instltullonal Support Plant Operallons and Mamtenance Scholarslnps and Fellowslnps Auxlhary Enterpnses Depreciation
Total Operatmg Expenses
Nonoperating ExpertSes U S ~epartment of Education Settlement
Total ExpertSes
-6-

$ 6,066 10,244 87 4,447 604
$ 21.448
$ 22,363 6,450 -57 3
$ 28,759
$ 50.2.Q1
$ 14,038 3,854 2,603 5,241 3,732 6,190 3,798 5,157 4,765 1,750
$ 51,128
2,168
$ 53.296

Statement ofCash Flows

The final statement presented by Fort Valley State Umverslty is the Statement of Cash Flows. The Statement of Cash Flows presents dewled InformatIon about the cash actIVlty of the InStItutIOn during the year. The statement IS dIvIded Into five parts. The first part deals WIth operatIng cash flows and shows the net cash used by the operatIng actiVltles of the InstItutIon The second sectIOn reflects cash flows from non-capItal financIng actlVltles T1us sectIon reflects the cash receIved and spent for nonoperatIng, non-InvestIng, and non-capltal finanCIng purposes. The t1nrd sectIon reflects the cash flows from InvestIng actIVltIes and shows the purchases, proceeds, and Interest receIved from InvestIng actlVltIes The fourth section deals WIth cash flows from Capital and related finanCIng actiVItIes. ThIs sectIon deals WIth the cash used for the acqwsIUon and constructIon of capItal and related items. The fifth section reconciles the net cash used to the operatIng Income or loss reflected on the Statement of Revenues, Expenses and Changes In Net Assets.

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

Cash Provided (Used) By: OperatIng ActIVltIes Non-Capital FinanCIng ActIVlties Investing ActlVltIes CapItal and Related FinanCIng ActIVltIes

$ -31,791 28,849 -63 -293

Net Change in Cash Cash, BegInnIng ofYear

$ -3,298 4,775

Cash, End ofYear

$ 1,477

Capital Assets

The Umversity had one SIgnificant capital asset additIon for facIlities In fiscal year 2002. The acqUISItIon of computers in fiscal year 2002.

For additional informatIon concernIng CapItal Assets, see Notes I and 6 in the notes to the finanCIal statements.

Economic Outlook

The Umverslty IS not aware of any currently known facts, deciSIOns, or condlUons that are expected to have a SIgnIficant effect on the finanCIal posItion or results of operations dunng thIS fiscal year beyond those unknown vanatIons haVlng a global effect on Virtually all types ofbUSIness operatIons. The Umverslty's overall finanCIal posItIon IS strong The Umverslty antIcipates the current fiscal year will be much like last and Will maIntaIn a close watch over resources to maIntaIn the Umverslty's abIlity to react to unknown Internal and external ISSUes.

Kofi Lomotey, PresIdent Fort Valley State Umverslty

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BASIC FINANCIAL STATEMENIS -9-

FORT VALLEY STATE UNNERSlry STATEM~NTOF NET ASSETS
JUNE 30 2002
ASSETS
Current Assets Cash and Cash EqUivalents Short-Term Investments Accounts ReceIVable, Net
Federal Flnanaal Ass,stance
Other Prepaid Items Inventones
Total Current Assets
Nono.ment Assets Cash end Cash EquIValents Investments Notes ReceMlble, Net CaprtaJ Assets, Net (See Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current lJab,hlJes Salaries Payable Payroll Wrthholdmgs Accounts Payable
Defemed Revenue Funds Held for Others Compensated Absences U S Department of Educabon settlement
Other l..Jabllllles
Total Current Uab,lrtJes
Noncurrenll..Jabllllles Compensated Absences U S Department of EducalJon Settlement
Total Noncument l..Jab,htJes
Tolal UablIIlIes
NET ASSETS
Invested In capltal Assets, Net of Related Debt
Restnded tor Nonexpendable Expendable
Unres1nded
Total Net Assets
see Independent Accountant's Combmed Report on ReVIeW of BasIc Finanaal Statements
and Supplementary IrrtormalJon
The notes to the financal statements are an ,ntegral part of this statement
- 11 -

EXHIBIT "A"

$ 1,469,03213 2,682 32
2,179,62513 537,54195 68,44200 238,164 79
$ 4,495,488 32

$

8,41508

1,472,31492

2.072.45917

26,473.174 10

$ 30,028,363 27

$ 34,521,851 59

$

112,38192

23,268 97

1,168,64355

1,423,342 13

8341389

760,92576

137,50000

81,4n 46

$ 3.790.933 68

$

988,85827

2.017,94100

$ 3,006,599 27

$ 6,797.532 95

$ 26,473,174 10
1,480,730 00 2,292,17411
-2.521 ,759 57
$ 27,724,31864

FORT VALLEY STATE UN!VERSITY
STATEMENT OF REVENUES EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30 2002

EXHIBIT "8"

OPERATING REVENUES
Student Tulbon and Fees Grants and Contracts
Fedaral Stale Nongovemmantal sales and saMCeS of Educabonal Depanmenls AwaIlary Enlerpnses BesIde""" Halls
Ilookatore
Food saIV.,.S Health 5eIV1C88 IntarcoDeglate Athlebcs Other Qrganlzabons
Other Qperabng Revenues
Total Operating Revenues
OpERATING EXPENSES
SalInes
FaaJlty
Staff Employee BenefiIlI
Other Personal Servlces Travel
SCholansh,ps and FeIIowoh,ps UWIbea Supplies and Other SeMces
Oepredabon
Total Operating Expenses
Operating Income (Loss)
NONOPERATING RE\lENUES (EXPENSES)
Stale Appropriabons
Grants and Contracts
Federal
S_
NongovenvnentaJ U S Department of EducatiOn Settlemant Interest and Other Inveslmant Incomo Other Nonoperabng Revenues
Not Nonoperabng Revenues
InaeaseJ(Deaease) In Net_lII
NetAosats
Not Assets - Beglnnmg of Vear, as Onglnally Reported
Cumulabve Effect of Changes on Accounting Pnnaple
Net AosalII- Beg,nnlng of Vear, Restated
Net Aosats - End of Vear
See Independent Accountanrs Comb,ned Report on BeVIOW of Basic F,nonasl Statements
end Supplementary Informabon
!he nolea to the finandsl etatemants ora on ,ntegral part of this eletemenl
- t2-

$ 6,066,351 40
9,699,76353 65,026 63
479,31109 87,34128
1,697,400 22 49,26788
1,515,322 06 288,0184Q 834,94246 63,555 37 603,83784
$ 21,448,13796
$ 7,927,943 59 16,752,831 14 7,048,535 52 21052 508,89955 6,610,45554 2,297,41950 8,331,31485 1,750,361 47
$ 51,127,97168
$ -29,679,83372
$ 22,363,01530
5,915,87307 387,34699 147,09769
2,167,941 00 -57,585 35 2,88880
$ 26,590,69570
$ -3,089,138 02
$ 94,054,177 32 -63,240,720 66
$ 30,813,45666
$ 27,724,31884

FORT yALLEy STATE UNrYERSITY STATEMENT OF CASH FLOWS yEAR ENDED JUNE 30 2002

CASH FLOWS FROM OPERATING ACTMT1ES
Tuition end Fees
Grants end Contracta Sales and Serval of EducatlOnlill Departments
Payments to Suppll8fS Payments to Employees
Payments for SchOla"hlpa end FellowahJps Losns Issued to Students and Employees
COllec:"OOn 01 loans to Students and Emp\~ees
AulClbllry EnterpnlHl Charges Residence Hals IlooJ<atore Food $erVlCes Health Servk:aa 1n1erooIIeg.... A1h1e1lcB Other Organtzabons
Other ReceiPtS (Payments)

Net COsh Provdod (U.ed) by Opera1lng AdJyIllo.

CASH FLOWS FROM NONCAPlTAl. FINANCING ACTMT1ES Sla1e AppropnabDns Agency Funds Tranaactlons GJfts and Grants R _ for Othar than Capl1lll Purposes U 5 Deplrtment 01' EducaUon SetUement Other Nonopemlng Rece0pt8

Ne' COsh Flows Provided (Used) by Noncapllal F"anoog ActIv_

CASH FLOWS FROM CAPITAl. AND RELATED FINANCING ACTMT1ES

_

01 COpltel Auets

CA_SH FLOoWn SInvFeRaOtmMenINtsVESTING ACTMT1ES PurcheH 0 I _ 1 s
Net COsh P",...led (Used) by _ling _ .

Net IncraueI(Decraase) .. COsh
CaSh .nd Cash Equlvalentl- June :SO, 2001 Leu ShortTerm tnveItmentI

Cash and CNh EqUvalenta End of V. .r

RECONCILIATION OF OPERATING LOSS TO NET CASH

PROVIDED (USED) BY OPERATING ACTMT1ES

Operating _

(Lou)

AdJustmen1S III R _ Net Income (Los') III Net COsh

_

(Used) by Oparabng AdrvtIies

DepraaetIon Change In Aueta and U.blllbea
Aa:oonts Rec:e/Val>Ios Net Inve_
Props" Items Notes Recetv.bIea, Ne1 Aa:oonts Payel>le
Salanes Payable
Payroll W'lthhokhngl
oeterreeIRevenue Other lJabllibes Compenaased AbSences

see Indep&l ident Accountant's Comblned Report on Revtew of Basic FNllCillI Statements .nd Supplementlry tn1ormatIon
The notes to the ftnancaalltltementa ere en Integ raJ pan of Ihll ltatement
.,3

EXHIBITOC"

S 5,3&01 740 14 10,304,155084 87,34128 -21 88274646 -24503,78380 -6,81045554 23591200 237 07i'5
1,697,400 22 4928788
1,515322 oe 286 018 40 834,94248 83,55537
1,011.58542
S 31 .790.9'94 58

S 22,383,01530 4575149
8450,31795 12 SOD 00 288880
S 26,849,4735ot

S

-2V3,3g1 .48

S

5.45825

-88,35732

S

..e2,889 07

S -3,2g7,811 59

S 8243.151732 -, .488,358 52

S 4,n5,25880

S '.4n .....721

S 2'a,&7i 83312
1750.36147
.1026,47910 1,87410
34 242 72 1 115715
.3,7855523'\ 112,3fI1 Q2 23 288 87 826,342 &0 33 1n 29 35.37099
S .31,790 9~ 58

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Fort VaHey State Uruverslty serves the state, and national comrnurutIes byprovl(!Ing Its students With academic mstructlon that advances fundamental knowledge, and by dlssernmatlng knowledge to the people of Georgia and throughout the country
REPORTING ENTITY Fort Valley State University IS one of thirty-four (34) State supported member mstItutlons ofhigher education m GeorgIa wluch compnse the Uruverslty System ofGeorgia, an orgaruzatIonal urut ofthe State of Georgia. The accompanying finanCial statements reflect the operations ofFort Valley Stale Uruverslty as a separate reportmg entity
The Board of Regents has constItutIonal authonty to govern, control and manage the Umverslty System ofGeorgia. Tlus authonty mcludes but IS not lImited to the power to deSignate management, the abilIty to SIgnIficantly mfluence operations, the authonty to control InstitutiOns' budgets, the power to determme allotments of State funds to member Institutions and the authonty to prescnbe accountmg systems and adnumstrahve polICies for member IDSlItutIons. Fort Valley State UruversIty does not have authontyto retaIn unexpended State appropnatIons (surplus) for any given fiscal year. Accordmgly, Fort Valley State Umverslty IS considered an organIZational unit of the Board of Regents of the Umverslty System of Georgia reporhDg entIty for finanCial reporting purposes because of the slgmficance of ItS legal, operatIonal, and finanCial relationships With the Board of Regents as defined m Section 2100 of the Governmental AccountIng Standards Board (GASB) Codification ofGovemmental Accounting and Fmanclal Reporting Standards
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB ISSUed Statement No. 34, BasiC Fmanclal Statements and Management DISCUSSIOn and AnalysISfor State and Local Governments. Tlus was followed m November 1999 by GASB Statement No. 35, BasiC Fmanclal Statements and Management's DISCUSSion and AnalysIS for Pubilc Colleges and UniVerSities The State of GeorgIa IS reqUIred to Implement GASB Statement No. 34 as ofand for the year ended June 30, 2002 As an orgaruzatIonal urut ofthe State ofGeorgia, the Umverslty IS also required 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 proVides a comprehenSive, entIty-Wide perspectIve of the UruVerslty'S assets, lIabilIties, net assets, revenues, expenses, changes m net assets, cash flows, and replaces the fund group perspective preVIOusly reqUIred
The Umverslty has elected to not restate Its 2001 finanCial statements to conform With the new finanCial statement presentatIon, therefore comparative finanCial mformatlon Will not be presented for fiscal year 2002 Sigruficant accounting changes made m order to comply With the new requlTements mclude (I) adoptIon of depreciatIon on CapItal assets; and (2) recogmtlon of compensated absences GeneraHy Accepted AccountIng Prmclples (GAAP) requires that the
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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHffiIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION reportmg ofsummer school revenues and expenses be between fiscal years rather than m one fiscal year. Due to the lack ofmatenallty, institutiOns ofthe Uruverslty System ofGeorgia Will continue to report summer revenues and expenses m the year In wlnch the predommate activity takes place
At June 30,2001, encumbrances (contractual obligations for goods and ServIces not receiVed at fiscal
year end) were recorded as expenditures by the University mstead ofreservations of fund balance as
reqwred by generally accepted accounting pnnclples For fiscal year 2002, the Uruverslty changed Its method ofrecordmg encumbrances such that encumbrances at June 30,2002 were not recorded as expenses This change IS In accordance With generally accepted accountmg pnnclples.
No adjustments however, have been made on the financial statements to restate the fund balance at July I, 2001 for the June 30, 2001 encumbrances recorded as expendItures m fiscal year 2001 The net effect of the above accountIng 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 reportIng purposes, the UnIVersity IS cofiSldered a special-purpose government engaged only In busmess-type actiVIties. Accordmgly, the University's finanCial statements have been presented usmg the econonuc resources measurement focus and the accrual basiS of accounting, except as noted in the preceding paragraphs. Under the accrual basiS, revenues are recogruzed when earned, and expenses are recorded when an obhgatIon has been incurred. All SIgnIficant IntrauruversIty transactions have been ehnunated.
The UnIversity has the option to apply all Fmanclal Accounting Standards Board (FASB) pronouncements iSSUed after November 30, 1989, unless FASB COnfliCts With GASB. The UnIVersity has elected to not apply FASB pronouncements iSSUed after the applicable dIlte.
RESTATEMENT OF NET ASSETS - BEGINNING OF YEAR As a result of the adoption of GASB Statement No. 34, the UnIVersity was also reqUired to make certaIn changes In accounting prinCiples, specifically (I) adoptlon ofdepreciation on capital assets, and (2) recordIng of compensated absences. GASB Statement No. 34 requires certam summer semester revenues be recogruzed between fiscal years rather than the fiscal year In wlnch the semester was predommantly conducted. The UruVer8lty System ofGeorgia has chosen to continue to record summer revenue m the year m winch the semester was predommantly conducted Net assets at July 1,2001 were reduced by $63,240,720 66 for the cumulatlve effect of these changes.
CASH AND CASH EQUIVALENTSISHORT-TERM INVESTMENTS Cash and Cash Equivalents COnsiSt of petty cash, demand depoSits and time depoSits m authonzed fmanclal instltutlons, and cash management pools that have the general charactenstIcs of demand depOSit accounts.
- 15 -

FORT V ALLEY STATE UNIVERSITY NOTES TO mE FlNANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS The Umverslty accounts for Its mvestments at farr value iD accordance With GASS Statement No 31, Accounting and Financial Reponlngjor Certain Investments andjor Extemal Investment Pools Changes iD unrealized gam (loss) on the carrymg value ofmvestments are reported as a component ofmvestment mcome m the statements of revenues, expenses, and changes m net assets
ACCOUNTS RECEIVABLE Accounts receivable COnsiSts oftUItIon and fee charges to students and aUXIliary enterpnse ServIces proVided to students, faculty and staff, the rnaJonty of each resI<hng m the State of Georgia Accounts receivable also mclude amounts due from the Federal government, state and local governments, or pnvate sources, m connectIon With reimbursement of allowable expenditures made pursuant to the University'S grant and contracts Accounts receivable are recorded net ofestImated uncollectible amounts.
INVENTORIES Consumable supplies are earned at the lower of cost or market on the first-m, first-out ("FIFO") basiS
Resale Inventones are valued at cost usmg the first-in, first-out basis
NON-CURRENT CASH AND INVESTMENTS Cash and mvestments that are externally restricted and cannot be used to pay current liabilitIes are classified as non-current assets In the statements of net assets.
CAPITAL ASSETS Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation m the case ofgifts For eqwpment, the University'S capitalizatIon policy mcludes all Items With a urnt cost of $5,000 00 or more, and an eslimated useful life of greater than one year. Renovations to bwldmgs, mfrastructure, and land Improvements that exceed $100,000.00 and Slgruficantly mcrease the value or extend the useful life of the structure are capitalized Routme repaIrs and maIntenance are charged to operatIng expense In the year m winch the expense was iDcurred. DepreciatIOn IS computed usmg the straight-line method over the estImated useful lives of the assets, generally 40 to 60 years for bwldmgs, 20 to 25 years for mfrastructure and land Improvements, 10 years for library books, and 3 to 7 years for eqwpment. The UmversIty faIled to record accumulated depreciation and current depreciation on library collections as reqwred by generally accepted accounting pnnciples.
To obtaIn the total PiCture ofplant additions In the UniVersity System, It IS necessary to look at the actIVitIes ofthe Georgia State Financing and Investment Corrumsslon (GSFIC) - an orgarnzatIon that IS external to the System. GSFIC ISSUes bonds for and on behalfofthe State of Georgia, pursuant to powers granted to It m the ConstItutIon ofthe State ofGeorgia and the Act creatIng the GSFIC. The
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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHffiIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS bonds so ISSUed constitute direct and general obhgatlons of the State of Georgia, to the payment of wluch the full faith, credit and taxing power of the State are pledged.
Effective July 1,2001, the GSFIC retains construction In progress on their books throughout the construction penod and transfers the entire project to Fort Valley State Umverslty when complete. For the year ended June 30, 2002, GSFIC transferred no Capital addJtlons to Fort Valley State Uruverslty. The balance of construcllon In progress retalned by GSFIC totaled $15,000,000.00 at June 30, 2002
DEFERRED REVENUES Deferred revenues Include amounts receiVed from grant and contract sponsors that have not yet been earned pnor to the end of the fiscal year but related to the subsequent accounting period.
COMPENSATED ABSENCES Employee vacalion pay IS accrued at year-end for financial statement purposes The hablhty and experlSe inCurred are recorded at year-end as accrued vacation payable In the Statement of Net Assets, and as a component of compensation and benefit expense ID the Statements of Revenues, ExperlSes, and Changes m Net Assets Fort Valley State UniVersIty had accrued habIhty for comperlSated absences In the amount of$I,784,955 02 as ofJuly I, 2001. For Fiscal Year 2002, $725,554.77 was earned In compensated absences and employees were paid $760,925.76, for a net decrease of $35,370.99.
NON-CURRENT LIABILmES Non-eurrent habihtles Include (I) habIhtles that w111 not be paid Wlthln the next fiscal year; (2) capItal lease obhgalions With contractual matuntles greater than one year; and (3) other habihtles that, although payable witlun one year, are to be paid from funds that are clasSIfied as non-eurrent assets
NET ASSETS The UruVerslty'S net assets are clasSified as follows
Invested In capital assets. net afrelated debt Tills represents the Uruverslly'S totalmvestment In capital assets, net ofoutstanding debt obhgations related to those capital assets. To the extent debt has been inCurred but not yet expended for capital assets, such amounts are not Included as a component of Invested In capItal assets, net of related debt. (The term "debt obhgatJOns" as used In thiS defimtlOn does not Include debt of the GSFIC as discussed above)
Restncted net assets - nanexpendable. Nonexpendable restricted net assets consist of endowment and Similar type funds In wluch donors or other outside sources have slIpulated, as a condJtlon ofthe gift Instrument, that the pnnclpalls to be malntalned inVIOlate and In perpetUity, and invested for the
- 17 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHlBIT"D"

NOTE I' SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS purpose of prodUCing present and future Income, which may either be expended or added to principal. The Umversltymay accumulate as much ofthe annual net Income ofan inStitutIOnal fund as IS prudent under the standard estabhshed by Code Section 44-15-7 ofAnnotated Code ofGeorgia
Restncted net assets - expendable: Restncted expendable net assets Include resources In which the Umverslty IS legally or contractually obhgated to spend resources m accordance WIth restrictions unposed by external thud parties.
Unrestricted net assets Unrestricted net assets represent resources denved from student tuIllon and fees, state appropnatIons, and sales and Services of educational departments and auxihary enterpnses. These resources are used for transactions relallng to the educational and general operallons of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropnations (deficit) of $50,354.13. TIns deficit will be funded by the Board of Regents of the UniVersity System of Georgia - Adnumstrallve Central Office. These resources also Include auxlhary enterpnses, winch are substantially self-supporting acllVllles that provide ServJces for students, faculty and staff.
When an expense is mcurred that can be p81d usmg eJther restncted or unrestncted resources, the Umverslty's pohcy IS to first apply the expense towards unrestncted resources, and then towards restncted resources.
INCOME TAXES Fort Valley State Umverslty, as a political SUbdIVISion of the State ofGeorgJa, IS excluded from Federal mcome taxes under Section 115(1) of the Internal Revenue Code, as amended.
CLASSIFICATION OF REVENUES The Umverslty has clasSified its revenues as either operatIng or non-operallng revenues In the Statement of Revenues, Expenses, and Changes m Net Assets according to the followmg cntena
Operatzng revenues OperatIng revenues include activities that have the charactensllcs ofexchange transactions, such as (I) student tuIllon and fees, (2) sales and Services of auxlhary enterpnses, (3) most Federal, state and local grants and contracts and Federal appropnatlons, and (4) interest on institutIOnal student loans
Non-operatzng revenues Non-operatIng revenues Include acllVltles that have the characteristics of non-exchange transactions, such as gifts and contributIons, and other revenue sources that are defined as non-operatlng revenues by GASB No 9, Reportzng Cash Flows of Propnetary and Nonexpendable Trust Funds and Governmental Entitles That Use Proprzetary Fund Accountzng, and GASB No 34, such as state appropnatlons and Investment Income

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FORT VALLEY STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SCHOLARSHIP ALLOWANCES Student tullton and fee revenues, and certam other revenues from students, are reported at gross In the Statement of Revenues, Expenses and Changes In Net Assets The Uruverslty faded to record contra revenue for scholarslup allowances as reqUIred by generally accepted accoUJIltng prmclples. The net effect of the above accoUJIltng treatment resulted In an overstatement of revenues and expenses on the accompanYJng finanCial statements.
NOTE 2 CASH AND CASH EOUNALENTS; OTHER DEPOSITS: AND INVESTMENTS
STATE OF GEORGIA COLLATERALlZATION STATUTES AND POLICIES FUJlds belonging to the State ofGeorgia (and thus Fort Valley State UniVersity) cannot be placed in a depoSitory paYJng Interest longer than ten days WIthout the depository proVIding a surety bond to the State. In heu of a surety bond, the depoSitory may pledge as collateral anyone or more of the follOWIng secunltes as enumerated In the Official Code of Georgia Annotated Section 50-17-59
I. Bonds, bill, certtficates ofindebtedness, notes, or other direct obhgalJons ofthe Uruted States or of the State of Georgia
2 Bonds, bills, certificates of indebtedness, notes, or other obligaltons of the COUJItles or mUJIIClpallltes of the State of Georgia.
3 Bonds of any pubhc authonty created by the laws ofthe State ofGeorgJa, proVIding that the statute that created the authonty authorized the use of the bonds for t1us purpose.
4 Industnal revenue bonds and bonds of development authonties created by the laws of the State of Georgia
5 Bonds, bJlls, certificates of Indebtedness, notes, or other obhgaltons of a subsidiary corporalton ofthe United States government, which are fully guaranteed by the Umted Stales government both as to pnnclpal and interest, or debt obhgatlons ISSUed by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperaltves, the Farm Credit Banks, the Federal Home Loan Mortgage AssoclalJOn, and the Federal Naltonal Mortgage Assoclalton.
6 Guarantee or Insurance of acCOUJIts 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 pohcles which allow agencies ofthe State ofGeorgJa (and thus Fort Valley State Uruverslty), the option of exempltng demand depoSits from the collateral reqmrements.
The Treasurer ofthe Board ofRegents IS responsible for all detaIls relalJve to furrushmg the reqUIred depoSitory proteclJon for all uruts of the UruVerslty System of Georgia
- 19 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHffiIT"D"

NOTE 2: CASH AND CASH EOUIVALENTS, OTHER DEPOSITS, AND INVESTMENTS

CATEGORIZATION OF DEPOSITS The UnIversity's cash depoSits are categonzed by nsk as follows

Category 1 - Amounts covered by depoSitory Insurance or collateralIzed With secuntIes (at flllr value) held by the Umverslty or by Its agent In the UnIVefSlty's name

Category 2 - Amounts collateralIzed With secuntIes (at flllr value) held by the pledgmg financial InStitutIon's trust department or agent In the Umverslty's name.

Category 3 - Amounts collateralIzed WIth secunhes (at flllr value) held by the pledgmg financIal mstltuhon, or by Its trust department or agent but not In the UnIVersity'S name, and amounts uncollaterahzed.

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

Cash DepoSIts

CarryIng
Amount

Bank Balances

Risk CBtegOOes

2

3

$ I 545 JZ4 53 $ 967 22643 $ 267 QQQ 09 $,_ _..:01lol00"ll $ 729 226 43

CATEGORIZATION OF INVESTMENTS The UnIversity'S Investments are categonzed as to credIt nsk WIthIn the three categones descnbed below

Category 1 - Insured or regIstered, or secunt:les held by the Umverslty or ItS agent In the UnIVersity'S name.

Category 2 - Uninsured and unregIstered, with secunt:les held by the counter party's trust department or agent In the UnIversity'S name.

Category 3 - Umnsured and unregIstered, WIth secunhes held by the counter party, or by Its trust department or agent, but not In the UnIVersity'S name.

At June 30,2002, the UnIversity'S Investments consisted of the follOWIng'

Type of Investments

U S Government Secunncs

s

Investments Not Subject to CategOnzahons Board of Regents
Balanced Income Fund

Total Investments

Risk Categones 2

J 32500 S

900 S

CaJT)'Jng

3

Amoynt

000 S

1,325 90

1,405314,92 S I 40663922

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FORT V ALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "0"

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

CATEGORIZATION OF INVESTMENTS Funds Invested In an Investment pool managed by another governmental entity are not required to be categonzed SInce the Uruverslty did not own any specific, Identifiable Investment secuntles of the pool.

NOTE 3' ACCOUNTS RECEIVABLE

Accounts receivable COnsiSted of the follOWIng at June 30, 2002

Student TUItion and Fees AWClhary Enterpnses and Other OperatIng ActIVIties Federal, State, and Pnvate Funds Other

$ 361,771.73 318,932.52
2,456,480.89 52,899.27

$ 3,190,084 41

Less Allowance for Doubtful Accounts

-472,917.33

Net Accounts Receivable

S 2,717 167.08

NOTE 4' INVENTORIES

Inventones COnsiSted of the follOWIng at June 30, 2002:

Bookstore PhYSical Plant

$ 215,22289 22,941 90

Total

$ 238.164 79

NOTE 5: NOTESILOANS RECEIVABLE

NoteslLoans receivable at June 30, 2002, pnmanlycon51st ofstudent loans made through the Federal Perlans Loan Program (the Program) The Program proVides for cancellation of a loan at rates of 10% to 30% per year Up to a maxunum of I 00% Ifthe participant comphes With certaIn prOVISIOns The Federal government reimburses the Uruverslty for amounts cancelled under these proVlSlOns As the UniVersity detemunes that loans are uncollectible and not ehglble for reimbursement by the Federal government, the loans are wntten off and asSigned to the U S Department of EducatIOn The Uruverslty has proVided an allowance for uncollectIble loans, whiCh, In management's oplllion, IS suffiCient to absorb loans that wIll ultimately be wntten off At June 30, 2002 the allowance for uncollectible loans was approximately $1,066,254.56

21 -

FORT VALLEY STATE UNNERSITY
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "0"

NOTE 6. CAPITAL ASSETS

The balance at July 1, 2001 was adjusted for accountmg changes reqUired m Implementmg GASB Statements 34 and 35 as disclosed m Note I. Followmg are the changes m capital assets for the year ended June 30, 2002:

Adjusted Balance July 1.2001

Addthons

ReductiOns

Balance June 30 2002

CapItal Assets. Not Being Deprec1ated

Land and Land Improvements

$ J.262.548 17

$ 1262.548,17

Capital Assets, Being DeprecIated BuIlding and BuIldlOg Improvements Facl!lhes and Other Improvements EqUipment Library Collechons

$ 37,418,87966 1,500,026 00 $ 7,349,60544 5 474.612,55

$ 6,09800 109,97055 177,322,93

000 $ 37,418,87966 J,506,124 00 7,459,57599 5651.93548

$ 51.743123,65 $ 293.39148 $_ _----'0"'00'" $ 5203651513

Less Accumulated Depreclatlon

BuIldings and BuIlding Improvements $ 19,542,654 36 $

Fsclhhes and Other Improvements

1,077,184 79

Eqwpment

4.455 688 58

956,546 51 $ 118,03607 675.m 89

000 $ 20,499,200 87 1,195.22086 5.131 46747

$ 25.075527,73 $ 1.750,361.47 $_ _----'0""00'" $ 26.825889,20

Total Capltal Assets, Being Depreaated,

Net

$ 26 667595,92 $ 1 456 969 99 $_ _----'0'-'00'" $ 25 210.625 93

CapItal Assets, Net

$ 27939144 09 $ .145696999 S_ _.....l0lo,\QlQlI S 26473174 10

NOTE 7' DEFERRED REVENUE

Deferred revenue COnsisted of the followmg at June 30, 2002' Federal and State Grants

$ 1.423342 13

NOTE 8 LONG-TERM LIABILITIES

Long-term hablhty actIVIty for the year ended June 30, 2002, was as follows

Balance July I 2001

AddltlQns

Reductions

Balance June 30, 2002

Current POOlon

Other LJablhbes Compensated Absences U S Department of EduCatlon Settlement

$ 1,784,95502 $ 725,554 77 $

000

2167 24100

760,925 76 $ 1,749,584 03 $

12.50000

2,15544\ 00

760,925 76 137.50000

Total Long-Term Obhgatlons $ I 784 9SS 92 $ 2893495 V $ TIJ 425 76 $ ;} 995 92tt QJ $ 89842576

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE 9 RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Fort Valley State Umverslty partIcipates m the Teachers RetIrement System of Georgia (TRS), a cost-shanng multiple-employer defined benefit pension plan estabhshed by the General Assembly of Georgia for the purpose ofproVIdmg rellrement allowances and other benefits for teachers of the State of Georgia. TRS proVIdes SerVIce retIrement, dIsablhty rellrement, and SurviVOr'S benefits for Its members m 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 Georgia Department of Audits and Accounts.

Funding Policy Employees of Fort Valley State Umverslty who are covered by TRS are required by State statute to contrIbute 5% oftheir gross earnmgs to TRS Fort Valley State Umversltymakes monthly employer contrIbullons to TRS at rates adopted by the TRS Board ofTrustees m accordance WIth State statute and as adVISed by their independent actuary. For fiscal year 2002, the employer contrIbution rate was 9.24% for covered employees. Employer contributIons for the current fiscal year and the precedmg two fiscal years are as follows:

Fiscal Year

Percentage ContrIbuted

ReqUired ContrIbution

2002 2001 2000

10oolo 100% !Ooolo

$ 1,647,366.55 $ 1,967,01967 $ 2,013,918 77

REGENTS RETIREMENT PLAN

Plan Description The Regents RetIrement Plan, a smgle-employer defined contribution plan, IS an opllonal retIrement plan established and adrrumstered by the Board of Regents of the Umverslty System of Georgia, under winch It may purchase annUity contracts for the purpose of proVIdmg retIrement and death benefits for ehgIble faculty and pnnclpal adrrumstrators. Benefits depend solely on amounts contrIbuted to the plan plus mvestment earmngs Benefits are payable to partlclpatmg employees or their beneficlanes m accordance WIth the terms of the annUity contracts

Fondlng Policy Member contrIbution requirements are estabhshed by the Board of Trustees of the Teachers Rellrement System. Employer contrIbullons are estabhshed by statute and may be amended only by the General Assembly of the State ofGeorgia The employer contrIbutes 9 62% ofthe partIClpallng employee's earnable compensallon Employees contrIbute 5% of their earnable compensallon Amounts attrIbutable to all plan contrIbutions are fully vested and non-forfeitable at all times

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FORT VALLEY STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHlBIT"Dn

NOTE9' RETrnEMENTPLANS
REGENTS RETIREMENT PLAN
Funding Policy Fort Valley State UnIversIty and the covered employees made the reqwred contributIOns of $396,556.65 (9.62%) and $206,111 64 (5%), respeclIvely.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Fort Valley State UnIversIty partICIpates m the GeorgIa Defined ContributIon Plan (GDCP) wluch IS a smgle-employer defmed contributIon plan estabhshed by the General Assembly ofGeorgIa for the purpose ofproVldmg retIrement coverage for State employees who are temporary, seasonal, and parttime and are not members of a pubhc retIrement or pensIon system GDCP IS admInIStered by the Board of Trustees of the Employees' Retirement System of Georgia
Benefits A member may retire and elect to receIve penodIc payments after attamrnent ofage 65. The payment wIll be based upon mortalIty tables and mterest assumptIons to be adopted by the Board ofTrustees. If a member has less than $ 3,500 00 credIted to Ius/her account, the Board ofTrustees has the optIon ofrequmng a lump sum distributIon to the member m heu ofmakIng penodIc payments. Upon the death of a member, a lump sum dlstrlbuuon equahng the amount credIted to hls/her account wIll be paId to the member's desIgnated benefiCIary. Benefit proVISIOns are estabhshed by State statute.
Contributions and Vesting Member contributIOns are seven and one-halfpercent (7.5%) ofgross salary. There are no employer contributIOns. Contribution rates are establIshed by State statute. EarnIngs are Credited to each member's account m a maImer establIshed by the Board of Trustees Upon termmatlon of employment, the amount of the member's account IS refundable upon request by the member
Total contributIOns made by employees durIng fiscal year 2002 amounted to $48,494 73 which represents 7.5% of covered payroll These contributions met the requIrelT1ents of the plan.
NOTE 10 RISK MANAGEMENT
Fort VaHey State Uruverslly IS a partIcIpant m the Board of Regents of the Umverslty System of GeorgIa Health Benefits Plan, wluch IS a self-Insurance program of health and dental benefits for employees and retirees of the Umverslty System of GeorgIa Fort Valley State UnIversIty and partlclpatmg employees and relIrees pay premIums to the Health Benefits Plan for t1us health msurance coverage The Health Benefits Plan IS mcluded m the financIal statements ofthe Board of Regents of the Umverslty System of GeorgIa - AdmmIstratlve Central Office. All umts of the UnIversity System of GeorgIa share the nsk of loss for claIms of the Health Benefits Plan. The
- 24-

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE IO' RISK MANAGEMENT
Health Benefits Plan IS conSIdered a self-sustaInIng nsk fund that prOVIdes health coverage for ItS members up to a maxImum lIfetime benefit of$2,OOO,ooo.00 per person and dental coverage up to an annual maximum of$I,OOO.OO per person The Board of Regents has contracted With Blue Cross Blue Shield ofGeorgIa to process claIms In accordance with the Health Benefits Plan as establIshed by the Board of Regents
The Department of Adnurustratlve ServiCes (DOAS) has the responsIbilIty for the State of Georgia ofmalang and carryIng out deciSIOns that Will mlrumlze the adverse effects of accIdental losses that Involve State government assets. The State belIeves It IS more economical to manage Its nsks Internally and set aside assets for claIm settlement Accordmgly, DOAS processes clanns for nsk of loss to winch the State IS exposed, mcludIng general lIabilIty, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' Indemruficatlon LImited amounts of commercial msurance are purchased applIcable to property, employee and automobIle lIabIlIty, fidelIty and certaIn other nsks Fort Valley State Uruverslty, as an organizational urnt of the Board ofRegents ofthe UnIversity System of GeorgIa, IS part ofthe State of GeorgIa reporting entity, and as such, IS covered by the State of GeorgIa nsk management program adnunlstered by DOAS. Premiums for the nsk management program are charged to the vanous state organIzations by DOAS to proVide claIms servlcmg and claIms payment
A self-Insured program of professional lIabIlity for Its employees was establIshed by the Board of Regents of the UruVerslty System of GeorgIa under powers authonzed by the OffiCial Code of GeorgIa Annotated Section 45-9-1 The program msures the employees to the extent that they are not Immune from lIabilIty against personal liabilIty for damages anSIng out of the performance of their duties or m any way connccted therewith. The program IS adminIStered by DOAS as a SelfInsurance Fund
NOTE II' 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 winch are dIsallowed under grant terms. The amount ofexpenditures winch may be disallowed by the grantor cannot be determmed at thiS time although Fort Valley State UruVerslty expects such amounts, Ifany, to be Immatenal to Its overall finanCial posItion
LItigatiOn, claIms and assessments filed agaInst Fort Valley State UnIversIty (an organIZatIOnal urnt of the Board of Regents of the UnIVersity System ofGcorgla), If any, are generally considered to be actions agaInst the State of GeorgIa Accordmgly, slgruficant lItigation, claImS and assessments pendIng agaInst the State of GeorgIa are disclosed m the State of Georgia Comprehensive Annual Fmanclal Report for the fiscal year ended June 30, 2002

- 25-

FORT VALLEY STATE UNNERSITY
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 Uruverslty System ofGeorgIa has establIshed group health and lIfe msurance programs for regular employees ofthe UruVerslty System ofGeorgIa It IS the polIcy ofthe Board ofRegents to permIt employees ofthe Uruversity System ofGeorgIa elIgIble for retirement or that become permanently and totally dIsabled to contInue as members of the group health and lIfe msurance programs Employees who are elIgible for retirement or disabIlIty under the cntena establIshed by the Teachers RetIrement System ofGeorgIa and who have at least ten years ofServIce WIth the Uruverslty System of GeorgIa are elIgible for these post-employment health and lIfe Insurance benefits. Qrgaruzational units of the Board of Regents of the UruVerslty System of GeorgIa pay the employer portion for group Insurance for affected indIVIduals.
As ofJune 30, 2002, there were 159 employees who had retired or were dIsabled that were receiVIng these post-employment health and lIfe insurance benefits. For the year ended June 30, 2002, Fort Valley State UniversIty recogruzed as InCurred $461,503.52 of expenses, wluch was net of $169,08244 ofparuclpant contributions.

- 26-

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 13 NATURAL CLASSIFICAnONS WITH FUNCTIONAL CLASSIFICAnONS

The UmversIty's operatmg expenses b)' functional classIfication are shown below'

Statement of Operatmg Expenses - NatuDl vs FuncbOnal Classllicanons For the FIscal Year Ended June 30. 2002

FuocboDa1 qwJfjcatlon

Natlm!! CbMlficabon
Sa1anes Faculty SlafT
Employee Benefits Other Pc:rwnaI Stt'VICCS Travel Scholmh'P' and
Fellowsh!Jl' UllhlleS Supplies and Other
ScM..,
Dep=l8blJll
TotIl OpeTabng Expenses

InstructIOn

Rrymrb

Public $ern"

Acadermc
Sypnort

Student $m1rn

S 7.827.94359

1.767,24258 S 2.068.72877 S 1.633,31249 S 3,239.62682 S 2.176,263 76

2,300.70142

648,377 08

419,.117 94

810.434 73

508,450 80

158.07402

58,034 3\

104.70276

44,24854

47,430 74

208.98749 152,22610

m.98810 30.980 29

39.30891

11.330 90 137,33847

203,31933 50.050 82

1.622.673 89

770,32105

405.792 85

997.621 52

746,466 19

$ 14QJ7M902 S :I '5142260 S ? 69' 6Ycn s 5249 600 98 s J 7l' 28' 64

NabJraJ CilssJficanon
Soland Faculty SlafT
Employee Benefits Other Penonal Serv1.., Travel Scholmh'P' and
Fellowships Ull.ht1cS Supplies and Other
ServIces Deprec1anon
Tola! OpeTatmg Expenses

lnsbrunooal
Suppgrt

Plant OpeTabons and
Mamte1lBDCe

functKmaJ Cla.i'i1fghon

Seholanh'P'
BDd FeDpwsbrps

AUXIliary
Enlmmses

Unalkx:2ted
l>erm:lJbon

ToUl
OpeTabng
Emt:osg

S 3.017.196 00 S 1.849.681 67

1,505,.197 05

33.45328

21052

84.764 26

1,23200

S 1.000.77905 822.003.22
10.41292

S 7,827.94359 16.752.831 14 7.048,.13552 210 52 508.899 55

409.62468 100,23262

S 5.054,362 71 1.619.99946

444.84233 167,28283

6,610.455 54 2,297.419,50

1.072.906 26

293,82963

102,36396

2,319,33950 S 135036147

8,331.31485 \ 75036\ 47

S 6 t99 51l 39 S J 728 196 Q4 S 51S672667 S 4 764 MQ s:; S I 759 36147 S " 177 971 68

- 27-

SUPPLEMENTARY INFORMATION - 29-

FORT VALLEY STATE UN!llERSIIY SCHEPULE OF REVENUES ANP EXpENDITURES COMpARED TO
BUDGET - (NON-GAAP BASIS) RESIDENT INSmUCTION
YEAR ENDED JUNE 30 2002

SCHEDULE "1"

REVENUES
State Appropnabons Other Revenues Retained

BUDGET

ACTUAL (1)

VARIANCE FAVORABLE (UNFAVORABLE)

$ 22,138,37900 $ 22,138,37900 $

46,856,098 00

33,714,228 4B

000 -13,141,66952

$ 68,994,477 00 $ 55,852,6074B $ -13,141,86952

EXPENPITURES
Personal Services Education, General and Departmental SeMCeS Sponsored Operabons
Operabng Expenses
Educabon, General and Departmental 8eMces
Sponsored Operabons Capital Outiay Special FundIng Inlbabve

$ 20,340,942 00 $ 20,470,16940 $

9,876,530 00

7,542,251 12

4,176,24900 28,783,53200
2,298,337 00 3,518,88700

4,443,395 52 19,872,381 66
290,49214 3,377,88305

-129,22740 2,334,278 88
-267,146 52 8,911,150 34 2,007,844 86
141,00395

Excess of Revenues over Expendlbures

$ 68,994,477 00 $ 55,996,572 89 $ _ _1:..::2::.::,99::::7:..:;,904=..:.1.:..1

$

-143,96541 $ _ _.;-.:;14;::;3:':196::;:;;:5.;:4~1

(1) Actual amounts were prepared on a prescnbed baSIS of accounbng that demonstrates compliance with budgetary staMes and regulations of the State of Georgia, which IS a comprehensrve basiS of accounbng other than generally accepted accounbng pnnClples

See accompanymg notes and Independent Accountanfs CombIned Report on ReView of BaSIC FmanClal Statements and Supplementary Infannation
- 31 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUDGET - (NON-GAAP BASIS) LOmRY FOR EDUCATION
YEAR ENDER JUNE 30, 2002

SCHEDULE "2"

REVENUES Slate AppropnallOns

BUDGET

ACTUAL(1)

VARIANCE FAVORABLE (UNFAVORABLE)

$ 247,88000 $ 247,88000 $

----"O..=OO=..

EXPENDITURES
EqUipment, Technology and ConstruclJon Trust Fund
Special Funding InltJalJves

$ 108,848 00 $ 48,098 63 $

139,032 00

138,658 25

60,74937 37375

$ 247,880 00 $ 186,756 88 $ _ _---:6~1"_1,:,:2:::;3...:.1=.2

Excess of Revenues over Expendrtures

$ 61,123 12 $

6..1.,.1;,;;2.3..1..2..

(1) Actual amounts were prepared on a prescrlbad baSIS of accounting that demonstrates compliance wtth
budgatary statutes and regulations of the State of Georgia, which IS a comprehensIVe basis of accounting other than generelly accepted eccountlng pnnaples

See accompanYIng notes and Independent Accountant's Combined Report on R8VIBW of BaSIC FinanCIal Statements end Supplementary Information
- 32-

FORT VALLEY STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30 2002

SCHEDULE "3"

Totals per Annual Supplement

Accruals June 30, 2002

Compensated Absences June 30, 2002 June 30, 2001

Adjustments

Shared Services on JOintly Staffed Personnel

Darton Collage

Krtamura, Nattsu

Georg,a Instrtute of Technology

Wilson,

Deborah

Unrden1Jfied Vanance

SALARIES $ 24,493,136 61 $

TRAVEL 509,872 30

112,361 92

1,625,252 23 -1,658,109 63

7,433 60 70000

-972 75

$ 24,580,n4 73 $_....:508=~,8::;99::.5~5~

See accompanYln9 notes and Independent Accountanfs Combined Report on R8Vlew of BaSIC F,nancaal Statements and Supplementary InfonnalJon
- 33-

FORT VALLEY STATE UNIVERSITY RECONCILIATION OF PER DIEM AND FEES
YEAR ENDED JUNE 30 2002

SCHEDULE "4"

Totals per Annual Supplement Unodentlfied Venance

FEE AMOUNT

EXPENSE AMOUNT

$ 487,77075 $

20,52033 S

68440

TOTAL
508,29t OS 68440

s 488,45515 S

20,520 33 S~...;;;508=19_75_4,;,;8_

See accompeny'ng notes end Independent Accountant's Combined Report on ReVIew of BaSIC F,nanCIal Statements and Supplementary InformatIOn
- 34

SECTIONn AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

FORT VALLEY STATE UNIVERSITY AUDITE'E'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30, 2002

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-533-98-03 FS-533-99-02 FS-533-00-0I FS-533-00-02 FS-533-00-03 FS-533-00-04 FS-533-0I-OI FS-533-01-02 FS-533-o1-03 FS-533-01-04 FS-533-o1-05 FS-533-o1-06 FS-533-01-07 FS-533-01-08 FS-533-01-09 FS-533-01-10

Unresolved - See Corrective Actlon/Responses Unresolved - See Corrective Actlon/Responses Further Action Not Warranted PartIally Resolved - See Corrective Actlon/Responses Unresolved - See Corrective Actlon/Responses Further ActIOn Not Warranted PartIally Resolved - See Corrective Actlon/Responses Unresolved - See Corrective Actlon/Responses Unresolved - See Corrective Actlon/Responses Unresolved - See Corrective ActionIResponses Unresolved - See Corrective Actlon/Responses Unresolved - See Corrective Actlon/Responses Unresolved - See Corrective Actlon/Responses Unresolved - See Corrective ActlOn/Responses Unresolved - See Corrective ActlOnlResponses Further Action Not Warranted

CORRECTIVE ACflONIRESPONSES

EXPENDITURESILIABll.JTIESfDISBURSEMENTS H.O.P.E Disbursements Made to Inehgible Students QuestIOned Costs: $743.00 Finding Control Number: FS-533-98-03

The institution dId not concur WIth findIng, and the mfonnatJon was submitted to GeorgIa Student Finance CommissIOn to detcnnme ehgibihty The institution has not received a response from the agency The finding IS five years old and should be closed With no further action necessary

EXPENDITIJRESILIABll.JTIESfDISBURSEMENTS H O.P.E Disbursements Made to Inehglble Students Questioned Costs: $5,265.00 Finding Control Number' FS-533-99-02

The InstItution has subrmtted the finding to the Georgia Student Finance ComrmsslOn and has not received their final determination The finding IS four years old and should be closed WIth no further action necessary.

-I -

FORT VALLEY STATE UNNERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30. 2002
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
CORRECTIVE ACTIONIRESPONSES
REVENUESIRECEIVABLESIRECEIPTS Student Accounts ReceIvable Not Supported by FmancIaI Aid Fmdmg Control Number' FS-533-0Q-02
EffectIve Summer Semester 2002, the InstItutIon put m place the Board ofRegents' Pohcy that no student fees Will be deferred unless the student has approved documentation of financIal aId at the tIme of regIstratIOn
EXPENDITURESILIABll.ITIESIDISBURSEMENTS H O.P.E. DIsbursements Made to InelIgIble Students Questioned Cost: $1,422 00 Fmdmg Control Number: FS-533-00-03
Procedures have been implemented whIch mclude the hInng of a H O.P.E. coordmator to ensure that all H O.P.E. recIpIents are checked at each 30th hour benchmark to determme contInued academIc eligIblhty AddItionally, students who are m Jeopardy of losmg H O.P.E. Scholarships (less than 3.0 GPA) are sent warmng letters when approachmg a checkpomt. The one student, who was dIsbursed $150 viewed as $75 in excess of the allowable amount, dropped a class and the drop/delete was used by the RegIstrar's Office and did not capture the number ofcredIt hours the student was enrolled for when the InItIal disbursement was made Tne Fmanclal AId Director has met WIth the RegIstrar and others regardmg the negatIve Impact of the use of the drop/delete code.
INVENTORIES REVENUESIRECElVABLESIRECEIPTS Inadequate Resale Inventory Procedures Fmdmg Control Number: FS-533-01-01
The DIrector of Auxlhary ServICes compIled an ItemIzed lIsting of the resale mventory held by the Umverslty on June 30, 200 I, and reconCiled the mventory lIstIng to the general ledger A copy of the mventory IIstmg IS aVllllable for reVIew The Umverslty has outsourced the bookstore operatIon to Follett Higher EducatIon Group
In May 2002, the Umverslty received a final payment from Follett for the mventory they purchased and that wholesalers purchased. The remaInIng textbook Inventory of $93,896 05 appears to have no value. Steps will be taken to establIsh If the remaInIng textbook mventory should be wntten off Also steps Will be taken to determme Ifthe other mIscellaneous Items mventory of $13.854.60, winch Follett would not purchase has any value. The mventory WIll be properly secured untIl It IS lIqUidated
-2-

FORT VALLEY STATE UNNERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30, 2002
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
CORRECTIVE ACflONIRESPONSES
REVENUESIRECEIVABLESIRECEIPTS invalId Accounts Receivable Fmdmg Control Number. FS-533-01-02
Part ofthe student accountsTecelvable resulted m a turung difference between the Banner System and CUPA records at year-end close. Part of the credit balances were created
because of the method used to record pre-paid fees The Intemal Auditor has been
assigned the lead responsibility for reconciling pnor year accounts receivable dunng Fiscal Year 2003
Reconcilmg the student accounts receivable set up m the Banner System to the PeopleSoft System is a close out reqwrement for Fiscal Year 2002; therefore, the accounts receivable total reflected m the Banner system should be the same m the PeopleSoft System.
REVENUESIRECEIVABLESIRECEIPTS Student Accounts Receivable Not Supported by FinanCial AId Fmdmg Control Number. FS-533-01-03
EffectJve Summer Semester 2002, the Umverslty put mto place the Board of Regents' policy that no student fees wIll be deferred unless the student has approved documentation of finanCial aid at the tJme of regls!ratJon In addltJon, If finanCial aid IS recalled on a student, the student wIll be given the opportumty to pay Ins or her fees from other sources However, If the fees are not paid by other sources therr registratIOn Will be cancelled
Also, the Umverslty put in operatJon, effective Summer Semester 2002, a policy and procedure for canceling student registrations for non-payment of fees Dates were established for the cancellation process to be performed Should a student's registration be cancelled for non-payment offees the student would have to pre-pay the fees before bemg allowed to re-reglster for classes.
RegistratJon holds are placed on students' accounts for outstandmg balances and where appropnate accounts are turned over to a third party for collection
-3-

FORT VALLEY STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30, 2002
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
CORRECTIVE ACflONIRESPONSES
EXPENDITURESILIABlllTIESIDISBURSEMENTS ExcessIve Fee Waivers Fmdmg Control Number FS-S33-Q1-Q4
The Umverslty put mto operation, effective Summer Semester 2002, the pohcy to grant out-of-state fee Waivers to students based on the Imnts set forth In the Board of Regents' Pohcy Manual, Section 704.0302. The policy will allow Waivers of up to two percent of the eqwvalent full-l1me enrollment for the prevIOus Fall Semester.
INVESTMENT IN PLANT (EQUIPMENT) Inadequate Equipment Inventory Records Finding Control Number: FS-S33-QI-QS
The Office ofAuxihary Services has worked WIth Amencan AppTaJsaIs AsSOCIates In the process of completing the current physIcal mventory of eqwpment for the conversIOn to PeopleSoft Fmanclal. The campUS Inventory staff has completed another physIcal eqwpment mventory, makmg adjustments to the mventory and addmg missing decals
Followmg are control measures Implemented by the Umverslty to ensure accountablhty and the use of proper procedures m transfernng or dispoSing of Inventory Items'
Perform random monthly mspections of inventory Reqwre mstJtutlonal forms to be completed and approved pnor to Inventory
transfers or msposals Designate an indIVIdual In each department to maJntam the Inventory In Ins or her
area Ensure all surplus eqwpment IS properly stored until It is msposed
FUND EQUITIES DefiCIt to Be Funded from Subsequent Year's Operations Flndmg Control Number' FS-S33-01-06
The Umverslty WIll Impose budget measures to ensure that Intercollegiate AthletICS does not expend more than the aVailable funds In future fiscal years. The available funds would be pnor year reserve funds and current year revenue. In addItion, the Umverslty WIll attempt to Talse addItional funds from outsIde sources to fund some of the deficit
-4-

FORT VALLEY STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 2002
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
CORRECTIVE ACfIONfRESPONSES
FUND EQUITIES DonnantlDeficlt Restncted Funds FmdIng Control Number: FS-533-01-07
UruVerslty personnel have InItiated contact With the granting agencies to resolve donnant accounts. At the present tIme, three ofthe twelve accounts have been resolved; three have been billed, and the UruVerslty IS aWllltlng instructions from the rem=g agencies. UniVersity grants and contracts accounts will be billed based on contractual gwdelmes estabhshed m funding proposals, and new project directors wIll be selected to complete the projects when ongmal directors termmate from the University. When UruVerslty grants and contracts are completed and funds remll1n on hand, the funding agencies wIll be contacted for instructions on handhng the balances. Should funds be due the Uruverslty, steps will be taken to collect the balance due.
GENERAL LEDGER FinanCial Statements Not Supported by SubSidiary Records Findmg Control Number. FS-533-01-08
The PerkIns Loan FlUId current records are reconciled With the UruVerslty'S bIlhng agency's statement. However, records for past penods of tIme reflect a difference between the UniVersity and the bIlhng agency, wluch Will need to be adjusted on the UruVerslty books dunng Fiscal Year 2003
GENERAL LEDGER Reports Not Reconciled to Accounting Records Fmdmg Control Number: FS-533-0I-09
The University has set up procedures for reconcllmg all financialllld programs, for Fiscal Year 2002, Wlthm the three systems. Banner Fmanclal Aid, Banner Student Accounts and the Accounting System Representatives from all three areas are workIng together on the reconcihng process. After the University's reconcilement process IS completed, the Office of Financial Aid Will make any necessary adjustments WIth the fundmg agencies
The reconcl1mg process for Fiscal Year 2001 will take place dunng Fiscal Year 2003
-5-

FORT VALLEY STATE UNNERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30, 2002

PRIOR YEAR FEDERAL AWARD FINDINGS AND OUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

533-96-14 533-96-15 533-96-16 533-96-18 533-96-19 FA-533-98-02 FA-533-98-03 FA-533-98-04 FA-533-98-05 FA-533-98-06 FA-533-98-07 FA-533-98-08 FA-533-98-09 FA-533-99-01 FA-533-99-02 FA-533-99-03 FA-533-99-04 FA-533-99-05 FA-533-99-06 FA-533-99-07 FA-533-99-08 FA-533-00-01 FA-533-00-02 FA-533-0o-03 FA-533-00-04 FA-533-00-05 FA-533-0I-01 FA-533-01-02 FA-533-01-03 FA-533-01-04 FA-533-01-05 FA-533-01-06

Further Action Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Action Not Warranted Further Achon Not Warranted Further Action Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Action Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Action Not Warranted Further Achon Not Warranted Further Achon Not Warranted Further Action Not Warranted Further Action Not Warranted Further Achon Not Warranted Further Achon Not Warranted Unresolved- See Corrective ActlOnlResponses PreVIously Reported Correchve Action Implemented PreVIously Reported Corrective ActIOn Implemented PrevIOusly Reported Corrective Achon Implemented Unresolved- See Corrective ActlonIResponses Unresolved- See Corrective ActlonlResponses

- 6-

FORT V ALLEY STAIE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30, 2002
PRIOR YEAR FEDERAL AWARD FINDINGS AND OUESTIONED COSTS
CORRECTIVE ACfIONIRESPONSES
CASH MANAGEMENT Excessive Cash Balances Fmdmg Control Number: FA-S33-01-01
When takIng mto account all Federal Programs that owe funds to the UruVerslty a defiCit balance of Federal funds should eXIst.
REPORTING ExpendItures m Excess of AuthonzatIon Fmdmg Control Number- FA-S33-OI-05
The Pell Grant Program expenditures are bemg reconciled to IdentIfY the student awards that must be mcreased to JustIfY the expenditure of$9,976.75 over the total Pell Grant for Fiscal Year 2001.
The Uruverslty has responded to the U. S Department of EducatIon on the audit findmg (see letter to the U. S. Department of EducatIon, dated September 25,2002) and Will take actIon based on final determinatIon ofthe findIng
REPORTING Reports Not Reconciled Fmdmg Control Number- FA-533-01-06
The Uruverslty has set up procedures for reconcIlmg all financlal3.1d programs, for Fiscal Year 2002, withm the three systems: Banner FinanCial, Banner Student Accounts and the Accountmg System. RepresentatIves from all three areas are worklng together on the reconcilIng process
The reconcllmg process for Fiscal Year 2001 will take place dunng Fiscal Year 2003
The Umverslty has responded to the U. S. Department of EducatIon on the audit findmg (see letter to the U. S Department ofEducatIon, dated September 25, 2002) and WIll take actIon based on final detenmnatIon of the findIng
-7-

SECI10Nill CURRENT YEAR FINDINGS AND QUESTIONED COSTS

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 2002
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
ACCOUNTING CONTROLS (OVERALL) Inadequate ClOSing Procedures FmdIng Control Number: FS-533-02-01
Dunng Fiscal Year 2002, the Board ofRegents ofthe Urnverslty System ofGeorgia converted Units ofthe UniVersity System from the College University Fmancial Accountmg (CUFA) legacy system to the new GeorgIaFIRSTSystem (Financial, Informalion and ReportIng Systems for Tomorrow) In Apnl of2002, Fort Valley State Umverslty placed this accountmg system Into produclion.
The management of Fort Valley State Umversity IS responsible for Implemenling procedures to establish and mamtam adequate control over the operation, ulilizaliOn, and mtegnty of their data processed With the GeorgIaFIRST System. We encountered problems With the financial data presented by the University. The University's failure to establish and adhere to a final c10smg for the year ended June 30, 2002, created a sltualion where data presented for revIew was Incomplete. ExterlSlve reView procedures were necessary to determme the valllhty ofthe informatIon proVided.
To reduce the nsk ofreportIng Incomplete informatIon, the UniVersity should work With the Board of Regents Central Office to develop procedures that Will result m complete reportIng of all finanCial data In a more effiCient and timely manner.
CASH AND CASH EQUIVALENTS Failure to Reconcile Cash FIndmg Control Number. FS-533-02-02
An examination of the operatmg account's bank reconCIliation revealed that the cash balances recorded m the general ledger were not reconciled With the Umverslty's bank statements A vanancc of$19,342 63 was noted between the Umverslty's bank reconCIliation and the Umverslty's finanCial statements for cash. Further revIew revealed that the UniVersity'S cash balance had not been reconCiled smce the UmversItyconverted from the College Umverslty Fmancial Accounting (CUFA) system to the GeorgIaFIRST System (FInanCial, information and ReportIng Systems for Tomorrow) on Apnl 1,2002.
These defiCienCies are a result of management's faIlure to have adequate poliCies and procedures to ensure that cash IS reconciled on a monthly basiS The University should establish appropnate procedures to strengthen mternal accountmg controls and erlSure the cash balances on the bank statements are reconciled to the general ledger.
-I-

FORT VALLEY STATE UNNERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 2002

FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

INVENTORIES REVENUESIRECEIVABLESIRECEIPTS Inadequate Resale inventory Procedures FIndIng Control Number FS-533-02-03

For the year under reVIew, the procedures for resale Inventones utIlIzed by Fort Valley State Umverslty were found to be Inadequate. Dunng FIscal Year 200 I, the Umverslty transferred the bookstore operations to a pnvate vendor WIth an agreement for the vendor to purchase certaIn stock on hand. DurIng the year under reVIew, the Umverslty sold part of the remaImng bookstore Inventory to vanous vendors; however, tins actiVIty was Incorrectly posted to the Umverslty's accountIng records. At June 30, 2002, the Umverslty reported resale inventory on the finanCIal statements of$215,222.89 It was detenmned that the actual amount ofresale Inventory on hand at year-end was $107,750.65 winch results In the resale Inventory reported on the accountIng records beIng overstated by $107,472.24.

TIns defiCIency IS a result of management's faIlure to have adequate polICIes and procedures to ensure all sales are recorded on the accounting records The Umverslty should develop and Implement procedures to ensure sales are reported appropnately.

EXPENDITURESILIABILITIESIDISBURSEMENTS ExcesSIve Fee WaIvers FIndIng Control Number' FS-533-Q2-04

For the year under reView, fee waivers by Fort Valley State Umverslty for out-of-state students exceeded hmlts estabhshed by the Board of Regents' PolIcy Manual. Gwdelmes as set forth In
Section 704.0302 state that an mstItution may WaIve out-of-state tuItion for up to two percent of
the mstltutlon's full-time enrollment for supenor out-of-state students In selected programs and/or international students, as selected by the President. The number of fee WaIvers for these students granted by the Umverslty that exceeded the allowable lImIt for each semester IS as follows:

Semester

Allowable Fee Waiver Amounts

Actual Fee WaIver Amounts

Fee WaIvers mExcess of LImIt

Fall Semester

42

Spnng Semester

41

105

63

159

118

TIns condItion occurred because management dIsregarded the pohcles of the Board of Regents The Umverslty should Implement procedures to ensure that student fee WaIvers for out-of-state tuition of students do not exceed hmlts establIshed by the Board ofRegents' PolIcy Manual.

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FORT VALLEY STATE UNNERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 2002
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
GENERAL LEDGER inadequacies In Control Over SUbSlliJary Ledgers FmdIng Control Number: FS-S33-DZ-OS
Our examInallon Included a review of the procedures ullhzed by Fort Valley State Umverslty In recording transacllons to the vanous modules comprising the GeorgIaFIRSTaccounting system Our tesllng revealed that, at June 30, 2002, the University's general ledger module did not balance With the subslliJary modules nus condlUon was pnmanly due to errors In postmg subSIdIary records dunng the conversIOn from the old College Umverslty Fmancial AccountIng (CUFA) legacy accounllng system to the new GeorgIaFIRST accounllng system and due to transactIons beIng posted to the general ledger module rather than the appropnate subsllhary modules. The Umverslty did not proVide a reconclhation of the general ledger balances to the subSIdIary records wluch resulted In extensive work by the auditors to Identlfyreconcihng items atJune 30, 2002 Management's fallure to ensure that SUbSidIary records are reconciled WIth the general ledger causes Internal reports to management, generated from the subSidiary modules, to be Inaccurate and misleading This condlUon can lead to erroneous deciSIOns by the UniVersity'S management and result In maccurate reporting of finanCial mformation
To ensure accurate and timely reporting of finanCial mformauon from subSIdiary records, the Umverslty should post transactions correctly to the subSIdiary ledgers rather than as JOurnal entnes In the general ledger. The Umverslty should develop Internal accounting controls and procedures to ensure that reconclhatIons of subSidiary ledgers and the general ledger are performed on a regular basiS.
GENERAL LEDGER Failure to Comply with Board of Regents' ReqUIrements Finding Control Number: FS-S33-02-D6
Dunng Fiscal Year 2002, the Board ofRegents ofthe Umvel"S1ty System ofGeorgia converted units of the Umversity System from the College Umversity FinanCial Accountmg (CUFA) legacy system to the new GeoTgIaFIRST System. The conversIOn process prescnbed by the Board of Regents Included thirty-twO journal entnes that were reqUired to be made by Umversltypersonnel, depending upon theIr apphcabihty, to the Umverslty's Actuals, GAAP and Capitals Ledgers The Umverslty attempted to make only one of the journal entnes as reqUIred by the Board of Regents
Management's fallure to follow Board of Regents' requirements results In matenal misstatements WithIn the University's finanCial statements. nus condmon causes maccurate reporting of finanCial information and could lead to erroneous deciSIOns to be made by those revlewmg the Umverslty's finanCial statements To ensure accurate reporting of finanCial informatIon, the Umverslty should follow Board of Regents' guldelmes as reqUired
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FORT VALLEY STATE UNNERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
GENERAL LEDGER Banner System Not ReconcIled to Fmanclal Accountmg System Fmdmg Control Number: FS-533-02-07
For the year under reView, the Umverslty failed to reconcIle the Banner System to the general ledger and could not proVide adequate supportmg documentation for balance sheet cleanng accounts at June 30, 2002. These cleanng accounts consIsted of an unapplIed cash balance of$314,418.34, a cash m bank balance of$221 ,849.67, an applIed pay balance of$131 ,219.56, an unapplIed finanCIal aid balance of $112,863.67, a purchase card balance of $49,876.41, a returned check balance of $11,675.00 and a contract cleanng balance of$1,535.43.
These account balances resulted pnmanly from mterfaces between the Umverslty's Banner Student Registration System and the Umverslty's accounting system Management was unable to produce subsllhary records from the Banner Student Registration System to support the balances recorded on the accounting system's general ledger.
The Umver8lty should mvestigate the balances m the Balance Sheet clearmg accounts, determine the cause and make appropriate adjustments to the accountmg records to ensure that assets and lIabilIties are accurately represented on the accounting records. Procedures should be Implemented to ensure that detailed subSldJary records are generated from the Banner Student Registration System that support the balances on the general ledger.
GENERAL LEDGER DefiCIt to Be Funded from Subsequent Year's Operations Findmg Control Number: FS-533-02-08
On June 30, 2002, the Umversity's Intercollegiate Athletics, a sub fimd ofawnlIary enterprises, had a deficit of$283,164.50. Tlus defiCIt IS a result of the Umverslty's lack ofsufliclent funds to meet oblIgations on a current basIS. The Board of Regents' PolIcy Manual Section 702.02 states that awnlIary enterpnses "WIll be placed on a self-supporting basiS and the State WIll not make an appropnation to finance Its operations".
The Umvemty should take appropnate action to fund tins defiCIt.
GENERAL LEDGER Dormant/Deficlt Agency Funds FmdJng Control Number: FS-533-02-09
At June 30, 2002, Agency Funds had ten fimds which were m a deficit and no documentation was provided that funds had been requested or were aVailable Also, three of these ten funds had no
actIVity occur durmg the year under reView
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FORT V ALLEY, STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 2002

FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

GENERAL LEDGER DormantlDeficlt Agency Funds Finding Control Number: FS-533-02-09

These defiCienCies are a result ofmanagement's faIlure to estabhsh controls to ensure that funds are aVaIlable and that reunbursement requests are made In a timely manner. The Umverslty should estabhsh appropnate procedures to strengthen Internal accountIng controls In morutonng these accounts and determme If all aVaIlable funding was requested or If any other source of funding can be used to fund the defiCIts

GENERAL LEDGER Fmanclal Statements Not Supported by Subsidtary Records Finding Control Number. FS-533-Q2-10

An exarrunatIon of the subSidiary records of the loans made to students from the Perktns Loan Program revealed that the amounts recorded in the general ledger were not reconcIled WIth the UruVerslty'S bllltng agency's statements. At June 30, 2002, a vartance of $81,620 44 was noted between the UniversIty'S finanCIal statements and theIr bllltng agency for notes receIvable. Durmg the reVIew, extensIve procedures were performed that located $25,282.28 of errors made on the general ledger, whtch were corrected by the audttor. The remammg $56,338.16 continues to be umdentIfied.

These defiCIenCIes are a result of management's faIlure to have adequate POltCles and procedures to ensure the subSidiary records reconCIled to the general ledger The UniVersIty should estabhsh appropnate procedures to strengthen tnternal accounting controls and ensure the subSIdIary records are reconcIled to the general ledger

GENERAL LEDGER Reports Not Reconciled to Accounting Records Finding Control Number: FS-533-02-11

The UniversIty'S H.O.P.E Scholarshtp Program reconclhatIon reports for FIscal Year 2002, whtch were proVlded to the Georgia Student Fmance CommIssion, dId not reconCIle WIth the accounting records as indIcated below:

Report Item

Per H.OP.E ReconcIlIation

Per Accounting
Records

Unreconclled DIfference

Cash DIsbursed to School

$1,355,955.00 $1,344,96100

$10,99400

Amount Awarded to Students $1,404,763.00 $1,384,91600

$19,847.00

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FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
GENERAL LEDGER Reports Not Reconciled to Accounting Records Finding Control Number: FS-533-Q2-ll
The unreconclled differences IdentIfied above occurred because management failed to reconcile accountIng records to the H O.P E Scholarship Program reconclhatIon reports at year-end Procedures should be estabhshed to ensure that all H.O.P.E Scholarship Program reconcillal1on reports are reconciled to the Uruverslty's formal accounting records.
CAPITAL ASSETSIPROPERTY MANAGEMENT inadequacies In OperatIon of Property Management System and Eqwpment Inventory Records Finding Control Number: FS-533-02-12
Our exammatIon Included a review of the procedures utilized by Fort Valley State UruVerslty In malntalrung their property management system and SUbSllhary equipment Inventory records. T1us review also Included testing the system for comphance WIth State laws and regulatIons and testIng of one hundred equipment Items The follOWIng comhtIons relating to Inappropnate accounting practiCes and procedures were found to eXist
I) The subSidiary equipment Inventory records, as presented for reVIew, did not reconcile to the general ledger Extensive work was performed by the auditors to reconcile SUbSllhary records to the general ledger and IdentIfy reconciling items.
2) EqUIpment purchased by the Uruverslty from July through March 2002, In the CUFA system, was not posted to the Capital Assets detalled records. In addition, total amounts posted to the Capital Assets ledger from the CUFA system Included Items below the capltahzatlOn threshold of $5,000.00.
3) The Umverslty did not complete calculatIons necessary to properly record hbrary collectlons In accordance WIth gwdehnes ISSUed by the Board of Regents As a result, accumulated depreCiatIon and current depreclatlon expense have not been reflected for hbrary collecl1ons
4) Tlurty-elght of the Items selected for testing could not be located.
5) Twenty of the Items located were not In them proper local1on as shown on the Inventory hstlng.
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FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
CAPITAL ASSETSIPROPERTY MANAGEMENT InadequacIes m OperatIon of Property Management System and EquIpment Inventory Records Fmdmg Control Number FS-533-02-12
The matters above mdlcate matenal defiCienCies relatIve to the Umverslty's management of therr capital assets records and equIpment mventory These defiCiencies were due to management's faIlure to Implement controls adequate to ensure capital assets were properly reported m the general ledger. reconciled to detaIled capital assets records and eqUIpment mventones are properly mamtamed. The Umverslty should establIsh appropnate procedures to strengthen mternal accountIng controls to ensure capital assets are properly recorded m the gencralledger and that assets are safeguarded agaInSt loss from unauthonzed use or dispoSItIon.
FEDERAL AWARD FINDINGS AND OUESTIONED COSTS
ELIGmILITY Overpayment of Student Fmancial AId Student Fmanclal AId Cluster Program QuestIoned Costs: $24,489.00 Fmdmg Control Number FA-533-Q2-QI
A sample of fifty-eight finanCial aId files was selected to deterrmne If finanCial aId was properly calculated and disbursed to eligible students. The items sampled contamed financial aId
disbursements of$543,705.87 out ofa populatIon of$ I4,323,008.67. Our exanunatIon revealed that seven students received fimds in excess of theIr eligIble need totalmg $24,489.00 as shown below:
I) Three students were not m comphance WIth the University'S publIshed satisfactory Acadenuc progress pohcles. Federal regulatIons (34 CFR 668.32 and 668 34) state that a student must maIntaIn satIsfactory academiC progress to be ehglble to receIve financial assistance under the Title IV programs. The UmvCfSIty's policy states that the maximum tIme frame a graduate student IS allowed to successfully complete Ius course of study IS 72 semester hours. The three students m questIon had not successfully completed therr course of study WIthm the requIred tune frame. Tlus noncomphance resulted m questioned costs of$19,220 00.
2) Two students exceeded the aggregate hrmt of$23,ooO 00 m Dlrect Loans for a dependent undergraduate. Federal regulatIons (34 CFR 685.203) state that the aggregate hmlt ofall Direct SubSidized and Unsubslwzed Loans for dependent undergraduate students IS $23,000.00. Tlus noncomphance resulted m questIoned costs of$3,473 00
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FORT VALLEY STATE QNNERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FEDERAL AWARD FINDINGS AND OUESTIONED COSTS
ELIGffiILITY Overpayment of Student Fmanclal Aid Student Fmanclal AId Cluster Program Questioned Costs. $24,489 00 Fmdmg Control Number. FA-533-02-01
3) Two students received DIreCt SUbSidized Loans m excess of their financial need. Federal regulalions (34 CFR 685.200) state that Direct Subsidized Loan borrowers must demonstrate finanCial need m order to meet borrower eligibility reqwrements This noncompliance resulted m queslioned costs of $1,796.00.
The weaknesses Idenlified m the Federal Student Fmanclal Aid Cluster Program were a result of management's failure to perform a nsk assessment ofthe critIcal areas ofthe program and llDplement appropnate controls m the Fmancial Aid Office. The UruVerslty should develop and Implement poliCies and procedures to ensure adequate controls over the eligibility process. AdditIonally, the UruVerslty should develop and llDplement a morutonng process to ensure that controls are bemg followed The University should contact the Uruted States Department ofEducation regardmg the resolulion of these queSlioned costs
Federal Programs/Awards Affected Student Fmanclal Aid Cluster Program
U.S. Department of Educalion Federal Pell Grant Program (CFDA 84.063) Federal Direct Student Loan Program (CFDA 84.268)
REPORTING Expenditures m Excess of Authonzalion Student Fmanclal Aid Cluster Program Fmdmg Control Number FA-533-02-02
The Statement of Account report from the U. S. Department of Education mdIcated that the Uruverslty was authonzcd to expend $4,357,017.51 m Federal Pell Grant Program funds m state Fiscal Year 2002 The UruVerslty'S accounling records, however, reflected $4,433,125 00 for Fiscal Year 2002 Pell Grant expenditures As a result, the Uruverslty expended $76,107.49 m excess ofthe authonzed amount. In order to be reimbursed for the excess Pell Grant program expenditures, the Uruverslty, m conformity With Federal Statutes, must certIfy the validity of these payments to the U S Department ofEducatIon. The Federal agency can then proVide appropnate adjustments ofthe FIScal Year 2002 authonzed amount m order to make the funds available to the UnIversity.
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FORT V ALLEY STATE UNNERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FEDERAL AWARD FINDINGS AND OUESTIONED COSTS
REPORTING ExpendItures In Excess of Authorization Student FInanCial AId Cluster Program FIndIng Control Number FA-533-02-02
Federal Programs/Awards Affected Student FInanCIal AId Cluster Program
U. S Department of Education Federal Pell Grant Program (CFDA 84.063)
REPORTING Reports Not ReconcIled Student FInancial AId Cluster Program FIndmg Control Number: FA-533-Q2-03
For the year under reVIew, amounts reported on several ofthe reqUIred reports for Federal FInanCIal Assistance programs subnutted by the Uruverslty to the U. S. Department of Education were not reconcIled as follows
1) The Pell Year to Date Report and the Statement of Account, wluch reports Federal Pell
Grant Program expendItures for the year, was not reconciled to the accountmg records.
2) The FIscal Operations and Apphcatlon to PartIcIpate (FlSAP) report had amounts reported for State Grants and Scholarslups Made to Undergraduates, TUItion and Fees, the Pell Grant Program, the Federal Work-Study Program and the PerkIns Loan Program that dId not reconcIle to the accountmg records.
3) The UmversIty dId not reconcIle monthly the Federal DIrect Loan Program to the accounting records In accordance WIth Section 2 of The Blue Book.
Federal regulations (34 CFR 674.19, 675.19, 685.309, 690 81 and 690.83) reqUire the UruVerslty ensure that reported informatIon IS accurate and reconcIled as necessary The defiCIenCies IdentIfied were a result of management's failure to adequately reconcIle reports submItted to the accounnng records.
The Uruverslty should Implement adequate controls to ensure that all reports submItted to the U S Department of EducatIon are accurately completed and supported by the accountIng records DetaIled reconciliatIons should be prepared for any vanances and maIntained as part of the supporting documentation.
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FORTVALLEYSTATEUNNARSITY SCHEDULE OF FINDINGS ANDOUESTIONED COSTS
YEAR ENDED JUNE 30. 2002 FEDERAL AWARD FINDINGS AND OUESTIONED COSTS REPORTING Reports Not Reconciled Student Financial Aid Cluster Program Finding Control Number. FA-533-02-03 Federal Programs/Awards Affected' Student Fmanclal AId Cluster Program
U S. Department ofEducatJon Federal Work-Study Program (CFDA 84.033) Federal Perkins Loan Program (CFDA 84.038) Federal Pell Grant Program (CFDA 84 063) Federal Direct Student Loan Program (CFDA 84.268)
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