Fort Valley State University, Fort Valley, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2009

FORT VALLEY STATE UNIVERSITY
FORT VALLEY, GEORGIA
REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2009
Georgia Department of Audits and Accounts Russell W. Hinton State Auditor

FORT VALLEY STATE UNIVERSITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

3

C STATEMENT OF CASH FLOWS

4

D NOTES TO THE FINANCIAL STATEMENTS

5

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

24

2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

25

3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING

SOURCE COMPARED TO BUDGET

(NON-GAAP BASIS) BUDGET FUND

26

4 RECONCILIATION OF SALARIES AND TRAVEL

29

SECTION II 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 -
SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
January 14, 2010

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Larry E. Rivers, President Fort Valley State University
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying basic financial statements (Exhibits A through D) ofFort Valley State University, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2009. These financial statements are the responsibility ofthe Fort Valley State University's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of University's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

09ARL-62

As discussed in Note 1, the financial statements of Fort Valley State University are intended to present the financial position and changes in financial position and cash flows ofonly that portion of the business-type activities of the State of Georgia that is attributable to the transactions of Fort Valley State University. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position ofFort Valley State University as ofJune 30, 2009, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Management's Discussion and Analysis is not a part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries of management regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Fort Valley State University taken as a whole. The accompanying supplementary information (Schedules 1 through 4) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Respectfully submitted,
~~.m.w~~ Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 09ARL-62

REQUIRED SUPPLEMENTARY INFORMATION

FORT VALLEY STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Fort Valley State University is one of the 35 institutions of higher education of the University System of Georgia. The University, located in Fort Valley, Georgia, was founded in 1895.

Fort Valley State University is a land-grant university with state-wide commitments and responsibilities. It is the fifth oldest diversified institution of higher education. As a comprehensive land-grant institution, the University offers associate, baccalaureate and master degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,000 students each year. The institution's enrollment data is shown by the comparison numbers that follow.

Students Faculty (Headcount)

Students (FTE)

Fiscal Year 2009 Fiscal Year 2008 Fiscal Year 2007

129

3,106

122

2,562

125

2,176

2,984 2,433 2,043

Overview ofthe Financial Statements and Financial Analysis

Fort Valley State University is proud to present its financial statements for fiscal year 2009. The emphasis of discussions 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. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2009 and fiscal year 2008.

Statement ofNet Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Fort Valley State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the Notes to the Financial Statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

June 30, 2009

June 30, 2008

Assets Current Assets Capital Assets, Net Other Assets

$ 6,232,926 113,315,120 2,028,508

$ 5,097,422 92,439,163 2,076,736

Total Assets

$ 121,576,554

$ 99,613,321

Liabilities Current Liabilities Noncurrent Liabilities

$ 6,091,378 65,169,672

$ 5,687,692 45,102,296

Total Liabilities

$ 71,261,050

$ 50,789,988

Net Assets Invested in Capital Assets, Net of Debt Restricted - Nonexpendable Restricted - Expendable Unrestricted

$ 49,738,689 68,099
2,030,823 -1,522,107

$ 48,363,450 68,099
2,008,638 -1,616,854

Total Net Assets

$ 50~315~504

$ 48~823f333

The total assets of the institution increased by $21,963,233. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $20,875,957 in the category of Capital Assets, Net. The balance of the increase is mainly in receivable categories.

The total liabilities for the year increased by $20,471,062. The combination of the increase in total assets of $21,963,233 and the increase in total liabilities of $20,471,062 yields an increase in total net assets of $1,492, 171. The increase in total net assets is primarily in the category of Invested in Capital Assets, Net of Debt, in the amount of $1,375,239.

ii

Statement ofRevenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. For example state appropriations are nonoperating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2009

June 30, 2008

Operating Revenues Operating Expenses

$ 36,817,346 65,109,279

$ 37,660,673 61,247,532

Operating Loss

$ -28,291,933

$ -23,586,859

Nonoperating Revenues and Expenses

27,687,259

21,802,899

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

$ -604,674

$ -1,783,960

Other Revenues, Expenses, Gains or Losses

2,096,845

715,476

Increase (Decrease) in Net Assets

$ 1,492,171

$ -1,068,484

Net Assets at Beginning of Year

48,823,333

49,891,817

Net Assets at End of Year

$ 50.315.504

$ 48.823.333

The Statement of Revenues, Expenses and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows:

111

Revenue By Source For The Years Ended June 30, 2009 and June 30, 2008

June 30, 2009

June 30, 2008

Operating Revenue Tuition and Fees Federal Appropriations Grants and Contracts Sales and Services Auxiliary Other

$ 5,840,807 3,158,424 12,118,137 291,861 14,705,489 702,628

$ 3,754,304 5,376,065 16,542,809 173,910 11,640,541 173,044

Total Operating Revenue

$ 36,817,346

$ 37,660,673

Nonoperating Revenue State Appropriations Federal Stimulus - Stabilization Funds Grants and Contracts Gifts Investment Income Other

$ 21,469,244 203,549
8,263,851
37,576 -47 959

$ 22,799,393
591,375 73,924
-102,892

Total Nonoperating Revenue

$ 29,926,261

$ 23,361,800

Capital Grants and Gifts State Federal

$ 1,443,097 653,748

$ 715,476

Total Capital Grants and Gifts

$ 2,096,845

$ 715,476

Total Revenues

$ 68284QA52

$ 61!737!949

lV

Expenses (By Functional Classification) For The Years Ended June 30, 2009 and June 30, 2008

June 30, 2009

June 30, 2008

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises

$ 13,119,948 6,588,696 2,742,334 6,687,668 4,427,877 9,365,976 5,396,087 2,484,632 14,296,061

$ 12,915,764 7,120,713 2,854,168 7,156,913 4,220,704 8,304,741 7,236,129 1,299,697 10,138,703

Total Operating Expenses

$ 65,109,279

$ 61,247,532

Nonoperating Expenses Interest Expense (Capital Assets)

2,239,002

1,558,901

Total Expenses

$ 67!348!281

$ 62!806A33

Operating revenues decreased by $843,327 in fiscal year 2009. Although Tuition and Fees included an increase, revenues decreased in Grants and Contracts due to a reclassification of Federal sources to nonoperating.

The Auxiliary revenue increase of $3,064,948 is a result of the changing environment of residential life on the University's campus. During the year, residential life increased some food service stores and in-sourced institutionally owned and operated on-campus housing. However, at the same time, Fort Valley State University Foundation, a related party, constructed over 275 beds of new housing on the campus. The net effect to the campus is that the students actually have more on-campus residential life availability. The University is leasing these units through a ground lease and receives all revenues related to the assets.

Nonoperating revenues increased by $6,564,461 for the year primarily due to a reclassification of $8,263,851 in Grants and Contracts.

The compensation and employee benefits category increased by $4,237,925 and primarily affected the Auxiliary, Instruction and Institutional Support.

Utilities increased by $573,911 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2009 and affected the Plant Operations and Maintenance category.

V

Statement of Cash Flows

The final statement presented by the Fort Valley State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity 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 activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. 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 Years Ended June 30, 2009 and June 30, 2008, Condensed

June 30, 2009

June 30, 2008

Cash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities

$ -25,013,639 29,427,104 -5,037,869 39 989

$ -19,608,779 23,692,455 -2,698,690 88,094

Net Change in Cash Cash, Beginning of Year

$ -584,415 1,586,003

$ 1,473,080 112,923

Cash, End of Year

$ 1.001.588

$ 1,586.003

Capital Assets

The University had one significant capital asset addition and in-progress for facilities in fiscal year 2009. The addition and completion of Phase III to the Wildcat Commons residential life was completed and placed into service in fiscal year 2009.

For additional information concerning Capital Assets, see Notes 1, 5, 7, 8 and 9 in the Notes to the Financial Statements.

Long-Term Liabilities

Fort Valley State University had Long-Term Liabilities of $66,180,108 of which $1,010,436 was reflected as current liability at June 30, 2009.

For additional information concerning Long-Term Liabilities, see Notes 1 and 7 in the Notes to the Financial Statements.

VI

Economic Outlook The University faces immediate and long-term fiscal pressures exacerbated by the current recession that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a current year reduction in state funding of 6%, the University was able to generate a modest increase in Net Assets. Recent updates demonstrate that the mid-to-long-term fiscal challenges faced by the State will have a cascade effect on the University's financial resources. The magnitude of these challenges affects all levels of the University's operations. The University works in partnership with Federal government to implement numerous Federal programs and plan of work, many of which experience increased demand during a period of economic downturn. Since the University is required to balance the operating budget, the declining fiscal conditions shown in our simulations suggest that, without intervention, the University would need to make substantial policy changes to avoid growing fiscal imbalances. That is, absent any intervention or policy changes, the University would face an increasing gap between receipts and expenditures in the coming years. Any combination of University revenue increases or spending cuts to address the unrestricted deficit is complicated by the current recession. The recession contributes to reduction in State revenues in the midst of increased demand for University services, many of which are provided to disadvantaged populations. Recent financial market turmoil places additional limitations on attempts to address this imbalance as the University faces increased borrowing cost through public-private ventures and reduced access to capital. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues.
Larry E. Rivers, President Fort Valley State University
Vll

BASIC FINANCIAL STATEMENTS - 1-

FORT VALLEY STATE UNIVERSITY STATEMENT OF NET ASSETS JUNE 30, 2009
ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Prepaid Items Other Assets
Total Current Assets
Noncurrent Assets Investments Notes Receivable, Net (Note 4) Capital Assets, Net (Note 5)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries and Benefits Payable Contracts Payable Deferred Revenue (Note 6) Other Liabilities Funds Held for Others Compensated Absences U.S. Department of Education Settlement
Total Current Liabilities
Noncurrent Liabilities Capital Leases Compensated Absences U. S. Department of Education Settlement
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Expendable Unrestricted (Deficit)
Total Net Assets
The notes to the financial statements are an integral part of this statement. 2

EXHIBIT "A"

$

1,001,588

74,425

2,030,516 3,024,612
59,250 42 535

$

6,232,926

$

39,165

1,989,343

113,315,120

$

115,343,628

$

121,576,554

$

447,103

701,858

252,296

2,015,366

494,560

1,169,759

764,028

246,408

$

6,0911378

$

63,576,431

1,291,869

301,372

$

65,169,672

$

71,261,050

$

49,738,689

68,099 2,030,823 -1,522, 107

$ ===5=0,=3=15=,5=0=4

FORT VALLEY STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2009
OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Federal Appropriations Grants and Contracts
Federal State Other Sales and Services Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
State Appropriations Federal Stimulus - Stabilization Funds Grants and Contracts
Federal Interest and Other Investment Income Interest Expense (Capital Assets) Other Nonoperating Revenues
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts Federal State
Total Other Revenues, Expenses, Gains or Losses
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement.
-3-

EXHIBIT"B"

$

11,886,442

-6,045,635

3,158,424

10,025,522 315,010
1,777,605 291,861

6,819,547 834,678
4,386,148 217,661 439,961
1,258,608 748,886 7021628

$

3618171346

$

8,494,127

20,818,712

8,528,443

490,957

5,440,705

3,933,396

13,671,154

3,731,785

$

6511091279

$ -281291,933

$

21,469,244

203,549

8,263,851 37,576
-2,239,002 -47 959

$

27,687,259

$

-604 674

$

653,748

1443097

$

210961845

$

1,492,171

48,823,333

$ ==5=0=,3=1=5=15=04=

FORT VALLEY STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (Payments)
Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Federal Stimulus - Stabilization Funds Agency Funds Transactions Principal Paid on Installment Debt Other Nonoperating Receipts
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Gifts and Grants Received Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments
Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Prepaid Items Other Assets Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts
The notes to the financial statements are an integral part of this statement.

EXHIBIT ''C"

$

4,531,725

2,810,753

11,533,525

291,861

-18,287,920

-37,053,688

-5,440,705

-87,619

133,533

6,819,547 834,678
5,575,535 217,661 439,961
1,258,608 748,886 660 020

$

-25 013 639

$

21,469,244

203,549

9,387

-198,346

7 943 270

$

29,427,104

$

1,443,097

-4,139,612

-102,352

-2,239,002

$

-5 037 869

$

98

39 891

$

39 989

$

-584,415

1,586,003

$

1,001,588

$

-28,291,933

3,731,785
-1,309,082 -56,190
-312,210 45,914 138,142
841,716 -101,010 299 229

$

-25,013,639

$ ==1=9=,6=03;=:,0;:::::7~0 $ =======-2===3==1=:=5 $ ====65=3='=7=4=8

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Fort Valley State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
REPORTING ENTITY Fort Valley State University is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Fort Valley State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Fort Valley State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Fort Valley State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential component units of the State. See Note 15 for additional information.
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required.

- 5-

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominant activity takes place.
BASIS OF ACCOUNTING For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-University transactions have been eliminated.
The University has the option to apply all Financial 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 date.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of petty cash and demand deposits in authorized financial institutions.
SHORT-TERM INVESTMENTS Short-Term Investments consist of investments of 90 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
INVESTMENTS The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Assets. The Board of Regents Balanced Income Fund is included under Investments.
ACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
-6-

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NONCURRENTINVESTMENTS Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement 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 in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 5 to 25 years for infrastructure and land improvements, 10 years for library books, vehicles 4 to 10 years and 3 to 20 years for equipment. Vehicles are generally deprecated using the straight line method over the estimated useful lives of the assets 4 to 10 years. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2009, GSFIC did not transfer any capital additions to Fort Valley State University.
DEFERRED REVENUES Deferred revenues include amounts received from grant and contract sponsors that have not yet been earned.
COMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Assets. Fort Valley State University had accrued liability for compensated absences in the amount of $1,756,668 as of July 1, 2008. For fiscal year 2009, $1,418,405 was earned in compensated absences and employees were paid $1,119,176, for a net increase of $299,229. The ending balance as of June 30, 2009 in accrued liability for compensated absences was $2,055,897.
-7-

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.

NET ASSETS The University's net assets are classified as follows:

Invested in capital assets, net ofrelated debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section.

Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.

Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

Expendable Restricted Net Assets include the following:

Federal Loans Quasi-Endowments

$ 1,989,343 41,480

Total Restricted Expendable

$ 2,030.823

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal

-8-

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NET ASSETS Services. At June 30, 2009, the University had an unrestricted deficit of $146,082.39 which will be funded by Board of Regents - University System Office. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & RReserve Reserve for Encumbrances Other Unrestricted

$ 2,387,769 1,873,540 -5,783,416

Total Unrestricted Net Assets

$ -1.522.107

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

INCOME TAXES Fort Valley State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

CLASSIFICATION OF REVENUES The University has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises, net of scholarship allowances, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

SCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge

-9-

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SCHOLARSHIP ALLOWANCES for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances.
NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
- 10 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

DEPOSITS At June 30, 2009, the carrying value of deposits was $1,075,113 and the bank balance was $2,152,949. Of the University's deposits, $1,652,949 were uninsured. Of these uninsured deposits, $1,578,524 were collateralized with securities held by the pledging financial institution's trust department or agent and $74,425 were uncollateralized.

INVESTMENTS At June 30, 2009, the carrying value of the University's investments was $39,165, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pool as follows:

Investment Pools Board of Regents Balanced Income Fund

$ = = ~ 39~,-16-5

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia University System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits - Education Audit Division or on their web site at http://www. audits .state.ga.us/internet/searchRpts.html.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University's policy for managing interest rate risk is to structure the portfolio so that securities mature to meet cash requirements for ongoing operations without needing to be sold prior to maturity and investing only in the allowed investments as set out in the investment policy statement.

The Effective Duration of the Balanced Income Fund is 6.76 years. Of the University's total investment of $39,165 in the Balanced Income Fund, $27,181 is invested in debt securities.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University's policy for managing credit quality risk is to limit investments to those securities with high credit ratings; analyze the financial institutions, investment companies and intermediaries with whom the Accounts will do business; and diversify the portfolio to the extent possible.

- 11 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2009.

Student Tuition and Fees Federal Financial Assistance Georgia State Financing and Investment Commission Other

$ 547,329 2,030,516 832,428 1,779,455

Less Allowance for Doubtful Accounts

$ 5,189,728 134,600

Net Accounts Receivable

$ 5,055.128

NOTE 4: NOTES/LOANS RECEIVABLE

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2009. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U. S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2009 the allowance for uncollectible loans was approximately $1,312,149.

NOTE 5: CAPITAL ASSETS

Following are the changes in capital assets for the year ended June 30, 2009:

- 12 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 5: CAPITAL ASSETS

Capital Assets, Not Being Depreciated: Land and Land Improvements Construction Work-In-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections
Total Assets Being Depreciated
Less: Accumulated Depreciation: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections
Total Accumulated Depreciation
Total Capital Assets, Being Depreciated, Net
Capital Assets, Net

Beginning Balance Julx 1, 2008
$ 3,762,548 1,316,861
$ 5,079,409
$ 64,143,468 1,506,124 8,472,672
43,361,898 6,545,323
$ 124,029,485
$ 22,664,316 1,352,496 5,907,169 993,091 5,752,659
$ 36,669,731
$ 87,359,754

Additions
$ 4,598,771
$ 4,598,771
$ 777,691 19,603,070 137,953
$ 20,518,714
$ 1,356,113 407
691,668 1,504,966
178,631 $ 3,731,785

Reductions

$ 468,759

$ 468,759

$

7,284

6,098

979,508

35 400

$ 1,028,290

$

7,282

2,879

941,745

35 400

$ 987,306

$

40 984

$ 509 743

Ending Balance June 30, 2009
$ 3,762,548 5,446,873
$ 9,209,421
$ 64,136,184 1,500,026 8,270,855
62,964,968 6,647,876
$ 143,519,909
$ 24,013,147 1,350,024 5,657,092 2,498,057 5,895,890
$ 39,414,210
$ I04, I05,699
$ I 13 315 120

NOTE 6: DEFERRED REVENUE

Deferred Revenue consisted of the following at June 30, 2009:

Other Deferred Revenue

$ 2 015.366

NOTE 7: LONG-TERM LIABILITIES

Long-term liability activity for the year ended June 30, 2009 was as follows:

Beginning Balance Jul): 1, 2008

Leases Lease Obligations

$ 44,075,713

Other Liabilities

Compensated Absences

$

U. S. Department of Education

Settlement

1,756,668 746,126

Total

$ 2,502,794

Total Long-Term Obligations $ 46 578.507

Additions $ 19,603,070 $ 1,418,405
$ 1,418,405 $ 21.021.475
- 13 -

Reductions $ 102,352 $ 1,119,176
$ 1,317,522 $ 1 419 874

Ending Balance June 30, 2009
$ 63,576,431
$ 2,055,897 547,780
$ 2,603,677 $ 66.180.108

Current Portion

$

0

$ 764,028 246,408
$ 1,010,436 $ 1010436

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 8: SIGNIFICANT COMMITMENTS

The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $282,066 as of June 30, 2009. This amount is not reflected in the accompanying basic financial statements.

NOTE 9: LEASE OBLIGATIONS

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

CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2010 and 203 8. Expenditures for fiscal year 2009 were $2.3 million of which $2 million represented interest. Total principal paid on capital leases was $102,352 for the fiscal year ended June 30, 2009. Interest rates range from 4.50 percent to 7.58 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2009:

Buildings Equipment

$ 60,466,911 23,971

Total Assets Held Under Capital Lease

$ 60,490.882

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.

Fort Valley State University had two capital leases with related entities in the current fiscal year. In August 2007, Fort Valley State University entered into a capital lease of $43,334,897 at 4.544 percent with the Fort Valley State University Foundation Properties, LLC, whereby the University leases buildings for a thirty-year period that began August 2007 and expires July 2037. In March 2008, Fort Valley State University entered into a capital lease of $19,603,070 at 4.850 percent with the Fort Valley State University Foundation Properties, LLC, whereby the University leases buildings for a thirty-year period that began March 2008 and expires April 2038. The outstanding principal balances of these leases at June 30, 2009, were $43,950.222 and $19,603,070, respectively.

Fort Valley State University also has various capital leases for equipment with an outstanding balance at June 30, 2009 in the amount of $23,139.

OPERATING LEASES Fort Valley State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 20 IO through 2014. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the

- 14 ~

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 9: LEASE OBLIGATIONS

OPERATING LEASES time of renewal. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

In 2009, Fort Valley State University entered into a real property operating lease with the Fort Valley University Foundation, Inc., a related party, for office space from 2009 through 2014 for annual rentals of $30,000.

FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2009, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2010 2011 2012 2013 2014 2015 - 2019 2020 - 2024 2025 - 2029 2030 - 2034 2035 - 2039

$ 2,940,514 $ 3,223,331 3,314,609 3,353,963 3,392,378 18,397,081
20,753,559 23,030,275 25,932,905 18,843,251

61,997 59,053 43,515 30,000 20,000

Total Minimum Lease Payments

$ 123,181,866 $ 214.565

Less: Interest

59,605,435

Principal Outstanding

$ 63,576,431

Fort Valley State University's fiscal year 2009 expense for rental ofreal property and equipment under operating leases was $138,216.

- 15 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Fort Valley State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Fort Valley State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Fort Valley State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2009, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2009 2008 2007

100% 100% 100%

$ 1,775,668 $ 1,622,581 $ 1,597,028

REGENTS RETIREMENT PLAN

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

- 16 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Funding Policy Fort Valley State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2009, the employer contribution was 8.15% for the first six months and 9.24% for the last six months of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Fort Valley State University and the covered employees made the required contributions of $437,038 (8.15% or 9.24%) and $250,987 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Fort Valley State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
- 17 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Contributions Total contributions made by employees during fiscal year 2009 amounted to $140,019 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
NOTE 11: RISK MANAGEMENT
The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Fort Valley State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Fort Valley State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.

- 18 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 11: RISK MANAGEMENT
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
NOTE 12: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Fort Valley State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Fort Valley State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2009.
NOTE 13: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2008 and 2009 plan years, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.
- 19 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 13: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS

As of June 30, 2009, there were 201 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2009, Fort Valley State University recognized as incurred $940,536 of expenditures, which was net of $563,924 of participant contributions.

NOTE 14: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The University's operating expenses by functional classification for fiscal year 2009 are shown below:

Natural Classification
Salaries Faculty Staff
Employee Benefits Travel Scholarships and
Fellowships Utilities Supplies and Other
Services Depreciation
Total Operating Expenses

Instruction

Functional Classification

Research

Public Service

Academic Sui:rnort

Student Services

$ 8,464,542 1,411,672 2,195,474 74,298
290,984 88,362
501,682 92 934
$ 13 119 948

$

12,540

3,375,294

1,038,163

111,982

354,014 52,943

1,338,868 304 892

$ 6,588,696

$ 1,617,198 307,024 129,037
8,036 23,182
582,428 75 429
$ .... 2.142.114

$ 4,122,346 1,182,191 48,729
2,614 114,510
954,825 262,453
$ 6,687,668

$

17,045

2,807,228

712,138

44,784

128,050 41,432

664,152 13 048
$ ~ _ J. ~n

Natl1ral Classification
Salaries Faculty Staff
Employee Benefits Travel Scholarships and
Fellowships Utilities Supplies and Other
Services Depreciation
Total Operating Expenses

Institutional Su1mort

Functional Classification

Plant

Operations and Scholarships

Auxiliary

Maintenance and Fellowshigs

Entergrises

Total Operating Exgenses

$ 4,575,923 2,358,232 73,197
1,224,696 134,414

$ 1,427,935 448,088
2,966,337
553 727 $ - _.5.12fi.Q.81

$ 2,484,632
$ .4l4.~t.63_2

$ 1,481,116 287,133 8,930
947,679 512,216
9,412,599 I 646 388
$ 14 296 061

$ 8,494,127 20,818,712 8,528,443 490,957
5,440,705 3,933,396
13,671,154 3,731,785
$. 65,109,2.7~

NOTE 15: AFFILIATED ORGANIZATION

In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of GASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, the Fort Valley State University Foundation, Inc., has been determined to be a legally separate, tax exempt organization whose activities primarily support Fort Valley State University, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office has determined

- 20 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 15: AFFILIATED ORGANIZATION
Component Units of the State of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, Fort Valley State University has not included financial activity for Fort Valley State University Foundation, Inc., in these financial statements.

- 21 -

(This page left intentionally blank)

SUPPLEMENTARY INFORMATION - 23 -

FORT VALLEY STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2009
ASSETS
Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Cash Overdraft Accounts Payable Encumbrances Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Restricted/Sponsored Funds (Deficit) Unreserved Deficit
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

2,340.25

2,050,716.14 2,956,869.57
59,249.92

$ ==5=,0=69='=17=5=.8=8

$

1,650,825.82

893,622.19

1,873,540.63

825,979.15

351,577.70

$

5,595,545.49

$

-380,287.22

-146,082.39

$

-526,369.61

$ ===5,0=69=,17=5.8=8

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 24 -

FORT VALLEY STATE UNIVERSITY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2009

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Federal Funds Other Funds
Total Revenues
CARRY-OVER FROM PRIOR YEAR
Transfer from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Special Funding Initiative Teaching
Total Expenditures
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2008
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCEFAVORABLE {UNFAVORABLE}

$ 21,480,016.00 $ 21,480,016.00 $

203,549.00

203,549.00

4813171694.00

3911041779.39

$ 70,001,259.00 $ 60,788,344.39 $

0.00 0.00 -912121914.61
-9,212,914.61

0.00

143 565.07

$ 7010011259.00 $ 6019311909.46 $

143 565.07 -91069,349.54

$

1,626,528.00 $

1,626,528.00 $

681374i731.00

591886,127.38

$ 7010011259.00 $ 61,512,655.38 $

$

0.00 $

-580,745.92

0.00 8,488,603.62
814881603.62

143,565.07 10,772.07

54,376.31

-10,772.07 -143 565.07

$

-5261369.61

SUMMARY OF FUND BALANCE
Reserved Restricted/Sponsored Funds (Deficit)
Unreserved Deficit

$

-380,287.22

-1461082.39

Total Fund Balance

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 25 -

FORT VALLEY STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2009

Special Funding Initiatives State Appropriation State General Funds

Original Appropriation

Final Budget

Current Year Revenues

Funds Avai_lable Comeared to Budget

Prior Year Carry-Over

Total Funds Available

Variance Positive (Negative)

1,905 865.00 $ 1,626,528.00 $ 1,626,528.00 $

0.00 $ 1,626,528.00 $

0.00

Teaching State Appropriation State General Funds Federal Funds American Recovery and Reinvestment Act of 2009 Federal Stabilization Funds Other Funds
Total Teaching

22,628,089.00 $ 19,853.488 00 $ 19,853,488.00 $

0.00 $ 19,853,488.00 $

0.00

0.00 36 039 016.00
58,667 105.00

203,549.00 48 317 694.00

203,549.00 39 104 779.39

68374731.00 $ 59 161 816.39 $

0.00 143 565.07

203,549.00 39 248 344.46

143 565.07 $ 59 305 381 .46

0.00 -9 069 349.54
-9,069 349,54

Grand Totals - All Programs

60,572,970.00 $ 70,001,259.00 $ 60,788,344.39 $ 143,565.07 $ 60,931,909.46 $ -9,069,349.54

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

SCHEDULE "3"

Exeenditures Comeared to Budget

variance

Positive

Actual

(Negative)

Actual Funds Available
Over/(Under) Expenditures

Prior Period Adjustments

Other Adjustments

Program Fund
Balances

Transfers

F>rogram Fund Balances

Reserve

Deficit

Total Fund Balance

1 626,528.00 $

0.00 $

0.00 $

0.00 $

000 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

19,853,488.00 $

0.00 $

0.00 $

0.00 $

203,549.00 39 829 090.38

0.00 8 488 603.62

59 886 127.38 $ 8 488,603.62

0.00 -580 745.92
-580 745.92

o.oo
54 376.31
54 376.31

0.00 $

0.00 $

0.00

0.00

0.00

-526 369.61

0.00 $ -526 369.61

0.00 $

0.00 $

0.00 $

0.00

0.00

0.00

0.00

0.00

0.00

-380 287.22

-146 082.39 -526 369.61

0.00

380 287.22 $ -146,082.39 -526 369.61

61 512,655.38 $ 8,488,603.62 $

-580,745.92 $ 54,376.31 $

0.00 $ -526,369.61 $

0.00 $ -380,287.22 $ -146,082.39 $ -526,369.61

(This page left intentionally blank)

FORT VALLEY STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2009

SCHEDULE "4"

Totals per Annual Supplement
Accruals June 30, 2009 June 30, 2008
Compensated Absences June 30, 2009 June 30, 2008
Adjustments: Shared Services on Jointly Staffed Personnel: Albany State University
Rollins, c.
Georgia State University Yasin, Jehad
Unidentified Variance

SALARIES

TRAVEL

$

29,191,337 $

472,435

307,499 -185,467

1,909,797 -1,772,482

3,000 -2,799
-731

18,522

$

29,450, 154 $ =====4=9=0,9=5=7

- 29 -

SECTION II AUDITEE'S RESPONSE TO PRJOR YEAR FINDINGS AND QUESTIONED COSTS

FORT VALLEY STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2009

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-533-07-01 FS-533-08-01 FS-533-08-02 FS-533-08-03 FS-533-08-04

Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

REVENUES/RECEIVABLES/RECEIPTS Inadequate Internal Controls Finding Control Number: FS-533-08-02

We will ask the readers of the financial statements to refer to the respective current year findings.

EMPLOYEE COMPENSATION Inadequate Internal Controls Finding Control Number: FS-533-08-04

We will ask the readers of the financial statements to refer to the respective current year findings.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-533-08-01 FS-533-08-02 FS-533-08-03 FS-533-08-04 FS-533-08-05 FS-533-08-06

Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Unresolved - See Corrective Action/Responses

- 1-

FORT VALLEY STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2009
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
CORRECTIVE ACTION/RESPONSES
ELIGIBILITY Overpayment of Student Financial Aid Finding Control Number: FA-533-08-01
We will ask the readers of the financial statements to refer to the respective current year findings.
REPORTING Reports Not Reconciled Finding Control Number: FA-533-08-02
We will ask the readers of the financial statements to refer to the respective current year findings.
SPECIAL TESTS AND PROVISIONS Deficiencies in Student Financial Aid Refund Process Finding Control Number: FA-533-08-03
We will ask the readers of the financial statements to refer to the respective current year findings.
SPECIAL TESTS AND PROVISIONS Inadequate Control Procedures over Unofficial Withdrawals Finding Control Number: FA-533-08-04
We will ask the readers of the financial statements to refer to the respective current year findings.
SPECIAL TESTS AND PROVISIONS Deficiencies over the Verification Process Finding Control Number: FA-533-08-06
We will ask the readers of the financial statements to refer to the respective current year findings.
-2 -

SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES

The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weakness.

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Fort Valley State University's ability to initiate, authorize, record, process, or report financial data reliability in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Fort Valley State University's financial statements that is more than inconsequential will not be prevented or detected by the Fort Valley State University's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Fort Valley State University's internal control.

Any identified deficiencies in internal controls that we did not consider to be significant deficiencies and/or material weaknesses have been communicated to management and those charged with governance within a separate management letter dated January 14, 2010. Internal control deficiencies identified during the course of this engagement that were considered to be significant deficiencies and/or material weaknesses are presented below:

FINANCIAL REPORTING Inadequate Controls over the Financial Reporting Process Material Weakness Finding Control Number: FS-533-09-01

Condition:

The University's accounting procedures were insufficient to provide for adequate controls over the financial statements preparation process.

Criteria:

A system of internal control over financial reporting does not stop at the general ledger. Management is responsible for implementing a system of internal control over the preparation of financial statements prepared in accordance with generally accepted accounting principles (GAAP). Additionally, the University is required to annually submit GAAP basis financial statements for inclusion in the State of Georgia's Comprehensive Annual Financial Report (CAFR) and the State of Georgia's Single Audit Report.

- 1-

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Inadequate Controls over the Financial Reporting Process Material Weakness Finding Control Number: FS-533-09-01

Questioned Cost: NIA

Information:

The following deficiencies were noted in the University's GAAP basis financial statements:

1. The University failed to submit its Annual Financial Report by the established deadlines. The report was submitted after the extension date of August 24, 2009.

2. Numerous misstatements and misclassifications were noted on both the Statement of Net Assets and the Statement of Revenues, Expenses and Changes in Net Assets.

3. Proceeds of $1,189,387 from a contractual agreement with Sodexho Food Service Company were improperly recorded as revenue in the current year. An audit adjustment was proposed and made by auditors to defer these proceeds over the life of the agreement.

4. Other Liabilities were overstated by $713,824 as a result of an attempt to correct a prior year misstatement in Lease Purchase Obligations. The University made the adjustment twice in error. An audit adjustment was proposed and posted to correct this error.

5. The activity reported on the Statement of Cash Flows could not be reconciled to the Statement of Net Assets, Statement of Revenues, Expenses and Changes in Net Assets, Note Disclosures and the General Ledger.

6. Several errors were noted in the Notes to the Financial Statements requiring adjustment.

7. The Management's Discussion and Analysis required adjustment to agree to the Financial Statements.

8. Material adjustments were required to properly report Federal expenditures on the Schedule of Expenditures of Federal Awards.

-2-

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Inadequate Controls over the Financial Reporting Process Material Weakness Finding Control Number: FS-533-09-01

Cause:

The University's management failed to adequately review the year-end financial statements to ensure that the statements as presented for audit were accurate and properly supported by underlying accounting records.

Effect:

Significant misstatements and misclassifications were included in the financial statements presented for audit. In addition, the lack of controls and monitoring could impact the reporting of the University's financial position and results of operations.

Recommendation:

The University should review the accounting controls and procedures currently in place, identify weaknesses, and design and implement procedures necessary to strengthen controls over the preparation of the financial statements.

BUDGET PREPARATION/EXECUTION GENERAL LEDGER Inadequate Accounting Procedures Significant Deficiency Finding Control Number: FS-533-09-02

Condition:

Through our examination, it was determined that the University failed to properly monitor budgetary financial activity during the year. At June 30, 2009, the University was in an overall deficit situation.

Criteria:

Management is responsible for establishing, maintaining and monitoring internal controls, the purpose of which is to ensure the fair presentation of the budget basis financial statements provided for inclusion of the State of Georgia Budgetary Compliance Report.

Questioned Cost: NIA

-3-

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATION/EXECUTION GENERAL LEDGER Inadequate Accounting Procedures Significant Deficiency Finding Control Number: FS-533-09-02

Information:

The University did not submit the Budget Basis Financial Statements until September 18, 2009. The Board of Regents had set a due date of August 31, 2009 for the statements to be completed. The original budget basis statements were adjusted and resubmitted more than once during the course of the audit. Additionally, the University was in a net unreserved deficit position of $146,082.39, at June 30, 2009. The original reported deficit was substantially more, but the University unencumbered all possible activity and utilized all fund balance reserves to reduce the deficit.

Cause:

These deficiencies were the result of a lack of internal controls over the preparation of budget basis financial statements. The University also failed to implement adequate controls over its expenditures to ensure that they did not exceed the budget or funds available.

Effect:

Failure to prepare and submit accurate budget basis statements in a timely manner prohibits users from having access to pertinent financial information needed for decision making. Budgetary overexpenditures require the Board of Regents to fund the University's deficit.

Recommendation:

The University should design and implement controls over its expenditures process to ensure that expenditures do not exceed the budget or funds available.

ACCOUNTING CONTROLS (OVERALL) Inadequate Controls over Financial System Access Significant Deficiency Finding Control Number: FS-533-09-03

Condition:

The internal control procedures of the University were insufficient to provide for adequate control over user access rights within PeopleSoft Financials.

-4 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

ACCOUNTING CONTROLS (OVERALL) Inadequate Controls over Financial System Access Significant Deficiency Finding Control Number: FS-533-09-03

Criteria:

The University's management is responsible for maintaining internal controls that provide for the removal of access rights within PeopleSoft Financials upon employee termination.

Questioned Cost: NIA

Information:

Our testing revealed the University did not have adequate internal controls in place to ensure that access rights for terminated employees have been removed within PeopleSoft Financials. Numerous accounts were noted which remained active in the system even though the users were terminated. A minimum of three roles were assigned to each of the individuals noted.

Cause:

The University failed to implement satisfactory internal control procedures to ensure that terminated employees' access rights within PeopleSoft Financials were removed. Additionally, the University failed to communicate notice of employees' termination to the personnel responsible for updating this significant system.

Effect:

Without proper controls in place, loss, manipulation, or corruption of financial data within this significant system could occur.

Recommendation:

Management should enhance policies and procedures to ensure that individuals who are no longer employed by the University have all roles associated with their account removed and their status in PeopleSoft Financials changed to inactive. Strengthening controls along with continuous monitoring will assist in mitigating threats that could cause loss, manipulation, or corruption of data maintained in the financial system.

-5-

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Inadequate Internal Controls Significant Deficiency Finding Control Number: FS-533-09-04

Condition:

This is a repeat finding (FS-533-08-02) from year ended June 30, 2008. The accounting procedures of the University were insufficient to provide for adequate controls over revenues and receivables associated with auxiliary services activity.

Criteria:

The University's management is responsible for designing and maintaining internal controls that provide reasonable assurance that revenue activity is properly documented, processed and reported.

Questioned Cost: NIA

Information:

The University did not have appropriate policies and procedures in place to ensure that auxiliary revenues associated with student housing and cafeteria sales were valid. Though the University performed a review of the charges placed on student accounts, testing of auxiliary revenues revealed numerous instances in which housing and cafeteria charges were made to students that either were not registered for classes or did not receive services. It was also noted that reviews of student accounts were not made on a timely basis. Many student account balances in the BANNER system were not updated for charges until the year subsequent to when the charges originated. Entity personnel also made adjustments in the PeopleSoft system to correct student accounts, which caused variances between the BANNER and PeopleSoft systems. Furthermore, upon testing a sample of students who were charged for housing and/or cafeteria plans during the fiscal year under review, the auditor found that University athletes did not submit housing applications, which are used to place housing and cafeteria charges on student accounts, and many athletes did not pay the required housing deposit fee.

Cause:

The University failed to implement satisfactory accounting procedures to ensure that cafeteria and/or housing charges were valid and properly recorded on the accounting records.

-6-

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Inadequate Internal Controls Significant Deficiency Finding Control Number: FS-533-09-04

Effect:

Without proper accounting controls and procedures in place, the University could place itself in a position where auxiliary revenue could be improperly reported. In addition, lack of controls and reconciling procedures could lead to situations where individuals remained in residency status after dropping out of enrollment status.

Recommendation:

Although the University made improvements during the fiscal year in this area, the University should continue to reduce the risk of reporting incomplete and/or inaccurate information. The University should implement policies and procedures to ensure that auxiliary revenues are valid and recorded correctly. The University should also establish reconciliation procedures for student housing and cafeteria charges to ensure that charges are appropriate, services are only provided for students on active enrollment status and adjustments to student accounts are made in a timely manner.

EMPLOYEE COMPENSATION Inadequate Internal Controls Significant Deficiency Finding Control Number: FS-533-09-05

Condition:

This is a repeat finding (FS-533-08-04) from year ended June 30, 2008. The accounting procedures of the University were insufficient to provide for adequate controls over Compensated Absences.

Criteria:

The University's management is responsible for maintaining internal controls that provide reasonable assurance that the Compensated Absences balance reflected on the financial statements is properly documented, processed and reported.

Questioned Cost: NIA

Information:

Our testing revealed that the University did not have adequate internal controls in place to ensure that earned and used portions of Compensated Absences activity were properly recorded during the year. Upon testing ten employees from the University's Compensated Absences Report, the following deficiencies were noted:

-7-

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inadequate Internal Controls Significant Deficiency Finding Control Number: FS-533-09-05

1. For one employee, the leave taken amounts reflected on the report did not agree to timesheets or leave request forms.

2. One employee earned an incorrect amount of leave based upon hire date. The same employee's pay rate reflected on the report could not be substantiated with an approved Personnel Action Notice.

3. Two employees' ending leave balances were incorrect based upon a review of beginning balances and current year activity.

Cause:

The University failed to implement satisfactory accounting procedures to ensure that all leave amounts were entered into PeopleSoft, and that the Compensated Absences Report was accurate prior to the posting of yearend Compensated Absences journal entries.

Effect:

Without proper accounting controls and procedures in place, annual leave abuse could occur and the Compensated Absences balance could be misstated on the financial statements.

Recommendation:

To reduce the risk of reporting incomplete and/or inaccurate information, the University should implement policies and procedures to ensure that all annual leave taken is properly documented in PeopleSoft. The University should also review compensated absences reports periodically for accuracy, especially at year-end, prior to completing year-end journal entries associated with compensated absences.

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Overpayment of Student Financial Aid Material Weakness U. S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-01

Condition:

This is a repeat finding (FA-533-08-01) from year ended June 30, 2008. The University's Student Financial Aid Office improperly determined the financial need and cost of attendance of eligible students.

-8-

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Overpayment of Student Financial Aid Material Weakness U.S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-01

Criteria:

Provisions included in 34 CFR 668 provide general prov1s10ns for administering Student Financial Aid (SPA) programs and 34 CPR 674, 675, 676, 682, 690, and 691 provide eligibility and other related program requirements that are specific to the Federal Perkins Loan Program, Federal Work-Study Program, Federal Supplemental Educational Opportunity Grant (SEOG), Federal Family Educational Loan Program (FFEL), Federal Pell Grant Program, and the Federal ACG/SMART Programs, respectively.

Questioned Cost:

Questioned Costs of $34,584.00 were identified for students who received student financial aid in excess of their eligible need, which when projected over the entire population, resulted in a projected misstatement of $1,740,120.93.

Information:

A sample of fifty financial aid files was selected to determine if financial aid was properly calculated and disbursed to eligible students. The items sampled contained financial aid disbursements of $496,647.00 out of a population of $31,372,205.88. The University failed to consistently apply reasonable cost of attendance budgets to determine a student's need and failed to document the criteria used for determining these costs in the budget. The following deficiencies were noted:

1. Thirteen students in the sample were awarded based upon the incorrect Cost of Attendance (COA) budget. COA budget errors arose from the use of incorrect terms attended, tuition rate the student was charged and on-campus or off-campus housing arrangements. One of these students received need-based aid in excess of his need due to the use of an incorrect COA budget.

2. One student in the sample was disbursed $832.00 more than the COA budget.

3. Several students in the sample received additional funds that were not included in other resources available to the student in the calculation of need:

-9-

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ELIGIBILITY Overpayment of Student Financial Aid Material Weakness U. S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-01
a. Two students received loans from the Fort Valley State University Foundation.
b. Two students received stipends for housing and meals. c. Two students received scholarships from outside
organizations.
4. Additional testing of all housing and Student Government Association (SGA) officer meal stipends given to students revealed that none of the housing and SGA officer meal stipends disbursed during fiscal year 2009 were included in the calculation of need when necessary.
5. Testing of the Scholarships and Fellowships account balance revealed that a significant amount of scholarships were not processed through Banner but were instead processed through the entity's accounts payable system, which could have resulted in the omission of these scholarships from the calculation of student's financial need.
6. Four students in the sample were not in compliance with the University's published satisfactory academic progress policies. Federal regulations (34 CFR 668.32 and 668.34) state that a student must maintain satisfactory academic progress to be eligible to receive financial assistance under the Title IV programs. The four students failed to meet the quantitative requirements of satisfactory academic progress and this noncompliance resulted in SFA over disbursements totaling $33,752.00.
7. Several students in the sample were awarded and/or disbursed the incorrect amount based upon their credit hours earned: a. Four students received Direct Unsubsidized Student Loans before the Subsidized need-based loan limit was reached.
- 10 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Overpayment of Student Financial Aid Material Weakness U.S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-01

b. Five students were awarded Direct Subsidized Student Loans for amounts greater than their annual limit based upon the credit hours earned. Because all of these students only received Direct Loan disbursements for one semester or obtained the correct number of credit hours at the end of Fall 2008, none of the students were disbursed amounts in excess of their annual limit.
c. One student who should not have received financial aid during the year was awarded and disbursed Direct Unsubsidized Student Loans before the Subsidized loan limit was reached.

8. Six students in the sample who received all F's or WF's during a semester were never reviewed for unofficial withdrawals, and could have been ineligible for aid due to the possibility of owing a refund on a Title IV grant when their aid was disbursed.

9. Three students in the sample were awarded and disbursed the incorrect Pell Grant amount based upon expected family contribution and enrollment status.

10. Several problems were found with Academic Competitiveness Grant (ACG) awards: a. Eight students were qualified to receive ACG and did not receive the grant at all during the academic year. b. One student was eligible for both fall and spring semesters, but only received the ACG for the fall semester.

Cause:

The University's Student Financial Aid Office had not performed a risk assessment of its procedures to identify areas subject to nonconformity with eligibility requirements, and thus there were insufficient controls in place to assure that SFA funds were awarded and disbursed correctly.

- 11 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Overpayment of Student Financial Aid Material Weakness U.S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-01

Effect:

The University was not in compliance with Federal regulations concerning the awarding of SFA funds to students. A total of $34,584.00 was disbursed in excess of eligibility. Additionally, $7,036.50 in eligible aid was not disbursed.

Recommendation:

The University should perform a risk assessment of its processes and procedures for determining each student's financial aid eligibility. Where vulnerable, the University should develop and/or modify its policies and procedures to ensure that correct amounts will be awarded to students in conformity with financial need requirements. Additionally, the University should develop and implement a monitoring process to ensure that controls are properly implemented. The University should also contact the U. S. Department of Education regarding the resolution of this finding.

ELIGIBILITY Undocumented Cost of Attendance Budgets Material Weakness U.S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-02

Condition:

The University's Student Financial Aid Office significantly increased the Cost of Attendance used for determining financial aid eligibility without documenting the procedures used for establishing these costs.

Criteria:

Provisions included in 34 CFR 668 provide general provisions for administering Student Financial Aid (SFA) programs.

Questioned Cost: NIA

- 12 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Undocumented Cost of Attendance Budgets Material Weakness U. S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-02

Information:

We found significant undocumented increases in the components used in the Cost of Attendance budgets. The auditor compared current year Cost of Attendance (COA) components to the same prior year COA components. We noticed that most of the off-campus budgets increased by over 70% and some of the on-campus budgets increased by over 30%. Some budget lines items such as Personal Expenses, Room/Board, and Transportation, increased by over 167% compared to the prior year's budgets. No documentation or explanations for the large increases or the basis for determining the amounts used in the Cost of Attendance budgets were provided.

Cause:

The University's Student Financial Aid Office failed to document the basis used for establishing the significant increases to the Cost of Attendance budgets.

Effect:

The University was not in compliance with Federal regulations concerning the Cost of Attendance budgets used as the basis for determining SFA eligibility. The Cost of Attendance is the cornerstone of establishing a student's financial need and sets a limit on the total aid a student may receive. If the estimated costs used for components in the COA budget are unreasonable and do not represent average costs for students at the Institution, a majority of the student population may have been significantly overawarded.

Recommendation:

The Institution should reevaluate the components used in the COA budgets and document that these costs represent average costs for students enrolled at the Institution. The University should modify its procedures to ensure that any future changes to the Cost of Attendance budgets are reasonable and based on documented average costs for students. The University should contact the U.S. Department of Education regarding the resolution of this finding.

- 13 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

REPORTING Reports Not Reconciled Significant Deficiency U. S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-03

Condition:

This is a repeat finding (FA-533-08-02) from year ended June 30, 2008. Amounts reported on the Fiscal Operations and Application to Participate (FISAP) report submitted by the University to the U. S. Department of Education were not properly reconciled because of weaknesses in the University's process for completing the FISAP.

Criteria:

Federal regulations (34 CFR 674.19, 675.19, 690.81 and 690.83) require the University to ensure that reported information is accurate and reconciled as necessary.

Questioned Cost: NIA

Information:

The FISAP report included amounts reported for Tuition and Fees for Undergraduates, State Grant and Scholarships Made to Undergraduates, the Federal Work-Study Program, and the Perkins Loan Program that did not reconcile to the accounting records.

Cause:

The deficiencies identified were a result of management's failure to adequately reconcile information submitted on the FISAP with activity recorded in the accounting records and to assign responsibility for the FISAP report.

Effect:

Information submitted to the U. S. Department of Education was not accurate and was not supported by the accounting records.

Recommendation:

The University 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. The University should also assign clear lines of responsibility for the FISAP report and keep all supporting documentation on file.

- 14 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Failure to Reconcile the Federal Direct Loan Program Significant Deficiency U.S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-04

Condition:

The University failed to perform the required monthly reconciliations for the Federal Direct Loan Program.

Criteria:

Provisions included in 34 CPR sections 685.102(b), 685.301, and 685.303 provide program requirements for the Federal Direct Loan program.

Questioned Cost: NIA

Information:

The University failed to perform the monthly reconciliations for the Direct Loan Program. The auditor identified a total unreconciled variance of $307,515 between the total drawdowns from the Direct Loan Common Origination and Disbursement (COD) system and the total Banner awards.

Cause:

The University failed to follow the required monthly reconciliation procedures when it began participation in the Direct Loan program during the fiscal year. Responsibility was not assigned and procedures were not established to ensure that the Direct Loan program was properly reconciled each month.

Effect:

The University was not in compliance with Federal regulations concerning the program requirements of the Federal Direct Loan program.

Recommendation:

The University should establish procedures and assign responsibility for the monthly and yearly reconciliation of the Federal Direct Loan program. The University's financial aid and business offices should maintain their internal records in such a way that they can prepare for the monthly reconciliation. The University should ensure it follows guidelines detailed in the Federal Direct Loan School Guide to ensure compliance with Federal Direct Loan program requirements.

- 15 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Inadequate Control Procedures over Unofficial Withdrawals Significant Deficiency U.S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-05

Condition:

This is a repeat finding (FA-533-08-04) from year ended June 30, 2008. The University did not have adequate internal control procedures in place to identify students who unofficially withdrew during an academic semester.

Criteria:

Provisions included in 34 CFR 668 provide general provisions for administering Student Financial Aid (SFA) programs.

Questioned Cost: NIA

Information:

The University failed to perform refund calculations for students who unofficially withdrew in accordance with the University's grading policy. Based on the grading policy, a student with all Withdrawn Failing (WF) or Incomplete (IC) grades denotes an unofficial withdrawal. For the year under review, the Bursar's office did not calculate a refund for students with all WF and/or IC grades.

Cause:

These conditions occurred because the University did not follow its established procedures for unofficial withdrawals.

Effect:

The University did not properly calculate a refund for students who unofficially withdrew. Unearned Title IV funds are not being returned as required.

Recommendation:

The University should establish appropriate procedures to verify whether SFA recipients beginning attendance during a semester complete the academic period or unofficially withdraw. The University should also contact the U. S. Department of Education regarding the resolution of this finding.

- 16 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Deficiencies in Student Financial Aid Refund Process Significant Deficiency U.S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-06

Condition:

This is a repeat finding (FA-533-08-03) from year ended June 30, 2008. The Student Financial Aid Office failed to properly perform the refund process and to ensure that unearned Title IV funds were returned in a timely manner.

Criteria:

Provisions included in 34 CFR 668 provide general provisions for administering Student Financial Aid (SFA) programs.

Questioned Cost: $5,775.92

Information:

Thirteen students that received Federal financial aid for the Spring semester and officially withdrew from the University were selected to determine if refunds were calculated and returned in the correct amount to the proper funding agency and/or student. Our examination revealed the following deficiencies:

1. For one student, there was a withdrawal slip attached to the refund worksheet, but the withdrawal information was not entered into Banner and the student actually earned a grade for one class for the term. A refund calculation should not have been performed for this student.

2. The University failed to calculate withdrawal refunds for five students who received SPA funds. None of the Title IV funds, totaling $5,775.92, were returned.

Cause:

These deficiencies were the result of management's failure to properly process student financial aid refunds in accordance with Federal regulations.

Effect:

The SFA Office refunded SFA funds to students incorrectly and unearned funds were not returned in a timely manner.

- 17 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Deficiencies in Student Financial Aid Refund Process Significant Deficiency U.S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-06

Recommendation:

The University should develop and implement procedures to ensure that student financial aid refunds are properly calculated and that unearned funds are correctly returned to the appropriate accounts in a timely manner in accordance with the Higher Education Amendments 1998, Public Law 105-244. The University should also contact the U. S. Department of Education regarding resolution of this finding.

SPECIAL TESTS AND PROVISIONS Deficiencies over the Verification Process Significant Deficiency U.S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-07

Condition:

This is a repeat finding (FA-533-08-06) from year ended June 30, 2008. The Student Financial Aid Office failed to meet student verification and documentation requirements.

Criteria:

Provisions included in 34 CPR 668 provide the compliance requirements for the verification process that the University should follow for students who receive financial aid and identifies what documentation is acceptable.

Questioned Cost: NIA

Information:

Our testing of 24 students selected for verification revealed the following deficiencies:
1. Two students' tax returns were not signed by either the filer or tax preparer.
2. Two students' tax returns did not agree to their most recent Institutional Student Information Report (ISIR).
3. There was no evidence that the verification process was completed for two students who were selected for verification.

Cause:

The Student Financial Aid Office did not adequately follow the Federal requirements for verification.

- 18 -

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Deficiencies over the Verification Process Significant Deficiency U. S. Department of Education Student Financial Aid Cluster Program Finding Control Number: FA-533-09-07

Effect:

Without properly verifying the information in the selected student files, the University is in non-compliance with program provisions and places itself in a position to award students incorrectly.

Recommendation: The Student Financial Aid Office must ensure that verification and documentation requirements are met.

- 19 -