FORT VALLEY STATE UNIVERSITY FORT VALLEY)GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30,2010 Georgia Department of Audits and Accounts Russell W.Hinton Suw Auditor .. I l l I , , - 1 111 - 1) FORT VALLEY STATE UNIVERSITY - TABLE OF CONTENTS - SECTION I 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 B STATEMENT OF REVENUES, EXPENSESAND CHANGES IN NET ASSETS C STATEMENT OF CASH FLOWS D NOTES TO THE FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION SCHEDULES 1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND 3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND 4 RECONCILIATION OF SALARIES AND TRAVEL 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 Ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENOTF AUDITSAND ACCOUNTS 270 Washington Street, S.W., Suite 1- 156 Atlanta, Georgia 30334-8400 October 21,2010 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) of Fort Valley State University, a unit of the University System of Georgia, which is an organizational unit of the State of Georgia, as of and for the year ended June 30, 2010. These financial statements are the responsibility of the 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 of America. 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. 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 of only 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 of Fort Valley State University as of June 30, 2010, 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 Discussionand Analysis is not a part of the basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this 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 1through 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, Russell W. Hinton, CPA, CGFM State Auditor 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. The institution's enrollment data is shown by the comparison numbers that follow. Faculty Students (Headcount) Students (FTE) Fiscal Year 2010 Fiscal Year 2009 Fiscal Year 2008 Overview of the FinancialStatementsand FinancialAnalysis Fort Valley State University is proud to present its financial statements for fiscal year 2010. 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 2010 and fiscal year 2009. Statement of Net Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the Universityas 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 30,2010 June 30,2009 Assets Current Assets Capital Assets, Net Other Assets Total Assets Liabilities Current Liabilities Noncurrent Liabilities Total Liabilities Net Assets Invested in Capital Assets, Net of Debt $ 62,889,249 Restricted - Nonexpendable 68,099 Restricted - Expendable 1,549,400 Unrestricted 18,528 $ 49,738,689 68,099 2,030,823 -1,522,107 Total Net Assets The total assets of the institution increased by $15,360,775. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $13,181,847 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 $1,151,003. The combination of the increase in total assets of $15,360,775 and the increase in total liabilities of $1,151,003 yields an increase in total net assets of $14,209,772. The increase in total net assets is primarily in the category of lnvested in Capital Assets, Net of Debt, in the amount of $13,150,560. Statement of Revenues, 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 30,2010 June 30,2009 Operating Revenues Operating Expenses Operating Loss $ -34,460,326 $ -28,291,933 Nonoperating Revenues and Expenses 32,565,186 27,687,259 Income (Loss) Before Other Revenues, Expenses, Gains or Losses $ -1,895,140 $ -604,674 Other Revenues, Expenses, Gains or Losses 16,104,912 2,096,845 Increase in Net Assets $ 14,209,772 $ 1,492,171 Net Assets at Beginning of Year 50,315,504 48,823,333 Net Assets at End of Year 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: Revenue by Source For the Years Ended June 30,2010 and June 30,2009 June 30,2010 Operating Revenue Tuition and Fees $ Federal Appropriations Grants and Contracts Sales and Services of Educational Departments Auxiliary Other 6,488,217 5,857,889 11,173,626 549,526 17,855,531 173,568 Total Operating Revenue Nonoperating Revenue State Appropriations Federal Stimulus - Stabilization Funds Grants and Contracts Investment Income Other Total Nonoperating Revenue Capital Grants and Gifts State Other Total Capital Grants and Gifts Total Revenues June 30,2009 $ 5,840,807 3,158,424 12,118,137 291,861 14,705,489 702,628 Expenses (By Functional Classification) For the Years EndedJune 30,2010 and June 30,2009 June 30,2010 Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Total Operating Expenses $ 76,558,683 Nonoperating Expenses Interest Expense (Capital Assets) Total Expenses June 30,2009 $ 65,109,279 Operating revenues increased by $5,281,011 in fiscal year 2010. Although Tuition and Fees included an 11%increase, revenues decreased in Grants and Contracts and Other categories. The Auxiliary revenue increase of $3,150,042 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 $5,179,146 for the year primarily due to an increase of $5,289,268 in Grants and Contracts. The compensation and employee benefits category increased by $2,982,402 and primarily affected the Instruction and Research categories. The increase reflects the addition of 6 4 faculty members and an increased cost of health insurance for the employees of the institution. Utilities increased by $679,710 during the past year. The increase was primarily associated with the increased electrical costs that were experienced in the winter of fiscal year 2010 and affected the Plant Operations and Maintenance category. 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 30,2010 and June 30,2009, Condensed June 30,2010 June 30,2009 Cash Provided (Used) By: Operating Activities Noncapital FinancingActivities Capital and Related Financing Activities Investing Activities $ -29,725,136 35,002,401 -4,038,938 29,279 $ -25,013,639 29,427,104 -5,037,869 39,989 Net Change in Cash Cash, Beginning of Year Cash, End of Year Capital Assets The University had one significant capital asset addition for facilities in fiscal year 2010. Construction of the Academic Classroom and Laboratory Building was completed and placed into service late in fiscal year 2010. The $15.4 million for this project was funded by the Georgia State Financing and Investment Commission (GSFIC). Project funding by GSFIC for fiscal year 2011 will be substantially less in fiscal year 2011. For additional information concerning Capital Assets, see Notes 1,5, 7, and 9 in the Notes to the Financial Statements. Long-Term Liabilities Fort Valley State University had Long-Term Liabilities of $66,164,981 of which $1,838,157 was reflected as current liability at June 30, 2010. For additional information concerning Long-Term Liabilities, see Notes 1and 7 in the Notes to the Financial Statements. Economic Outlook Recently, the Governor's Office has asked for additional spending plan reductions, which is very troubling. As Georgia's economy has reeled, the University has endured several years of budget cuts from the state, most recently a 21% reduction in fiscal year 2010. Management has taken action to reduce costs in its support functions as much as possible, attempting to preserve funding for its core academic missions and growing student body. Steps taken have been successful in that there has been modest growth in Net Assets even as faculty numbers have grown. However, further cuts could force the elimination of some academic programs and impair the effectiveness of many others. In addition, the University works in partnership with several Federal agencies to deliver social and enrichment programs to the surrounding community as a part of its public service mission. These programs, many of which have increased demand in time of economic recession, are also at risk if budgets are slashed further. In essence the University is a financial victim of its mission initiative and success. While serving more, much less has been available from the state level. Mission impact notwithstanding, the University's management will continue to be vigilant in monitoring it financial resources. As circumstances dictate, action will be taken to balance the budget as required by state law and sound fiscal management, but, because of the commitment and concern of the University's leadership and faculty, every effort will be made to maximize the educational opportunities provided to the student body. Larry E. Rivers, President Fort Valley State University BASIC FINANCIAL STATEMENTS FORT VALLEY STATE UNIVERSITY STATEMENT OF NET ASSETS JUNE 30,2010 ASSETS Current Assets Cash and Cash Equivalents Short-Term lnvestments Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Prepaid Items Total Current Assets Noncurrent Assets Investments Notes Receivable, Net Capita Assets, Net (Note 5) Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue (Note 6) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences U. S. Department of EducationSettlement Total Current Liabil~ties Noncurrent Liabilities Lease Purchase Obl~gations Compensated Absences U. S. Department of Education Settlement Total Noncurrent Liab~lities Total Liabilities NET ASSETS Investedin Capital Assets, Net of Related Debt Restricted for: Nonexpendable Expendable Unrestricted Total Net Assets The notes to the financial statements are an integral part of this statement. - 2- EXHIBIT "A" FORT VALLEY STATE UNlVERSlN STATEMENT OF REVENUES. EXPENSES AND CHANGES IN NET ASSETS YEAR ENDEDJUNE 30.2010 OPERATING REVENUES Student Tuition and Fees Less: Scholarship Allowances Federal Appropr~ations Grants and Contracts Federal Federal Stimulus State Other Sales and Services of Educational Departments Auxilialy Enterprises Res~denceHalls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues Total Operating Revenues OPERATING EXPENSES salaries Faculty Staff Employee Benefits Other Personal Services Travel Scholarshipsand Fellowships Utilities Supplies and Other Services Depreciation Total Operating Expenses Operating lncome (Loss) NONOPERATING REVENUES (EXPENSES) State Appropriations - Federal Stimulus Stabilization Funds Grants and Contracts Federal lnterest and Other Investment lncome lnterest Expense (Capital Assets) Other Nonoperating Revenues Net Nonoperating Revenues lncome 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 - Beginningof Year Net Assets - End of Year The notes to the financial statements are an integral part of this statement. EXHIBIT "6" FORT VALLEY STATE UNlVERSllY STATEMENTOF CASH FLOWS YEAR ENDEDJUNE 30.2010 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts Sales and Services of Educational Departments Paymentsto Suppliers Paymentsto Employees Paymentsfor Scholarships and Fellowships Loans Issuedto Students and Employees Collection of Loans to Students and Employees Auxiliary EnterpriseCharges: Residence Halls Bookstore Food Services ParkingITransportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (Payments) Net Cash Provided (Used)by OperatingActivities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Federal Stimulus - Stabilization Funds Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Principal Paid on Installment Debt Other Nonoperating Receipts Net Cash Flows Provided (Used) by Noncapital FinancingActivities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets lnterest Paid on C a ~ i t aDl ebt and Leases Net Cash Provided (Used) by Capital and Related FinancingActivities CASH FLOWS FROM INVESTING ACTIVITIES Proceedsfrom Sales and Maturities of lnvestments lnterest on lnvestments Purchase of lnvestments Net Cash Provided (Used) by Investing Activities Net Increase (Decrease) in Cash Cash and Cash Equivalents- Beginningof Year Cash and Cash Equivalents- End of Year EXHIBIT "C" FORT VALLEY STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30.2010 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (Loss) Adjustments to Reconcile Operating Incometo Net Cash Provided (Used) by Operating Activities Depreciation Change in Assets and Liab~lit~es: Accounts Receivable, Net Prepaid Items 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 Recognizedas a Component of Interest Income Gift of Capital Assets ReducingProceeds of Capital Grants and Gifts EXHIBIT "C" The notes to the financial statements are an integral part of this statement. -5- FORT VALLEY STATE UNIVERSrrY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2010 EXHIBIT "DM Note 1. Summary of SignificantAccounting Po/iaes 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 Re~ortinSgtandards. 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 1 6 for additional information. Financial Statement Presentation 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, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets and cash flows. 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. New Accounting Pronouncements In fiscal year 2010, Fort Valley State University adopted the Governmental Accounting and Standards Board (GASB) Statement No. 51, Accounting and Reporfing for Intangible Assets. The provisions of this Statement generally required retroactive reporting for intangible assets acquired after June 30, 1980, with the exception of those intangible assets that have indefinite useful lives and those that are considered internally generated. In addition, Fort Valley State University adopted GASB Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The provisions of this Statement impacts disclosure regarding derivative instruments entered into by the state and local governments. Derivative disclosures, if any, will be identified in Note 2. FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "D" 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 intraUniversity 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, demand deposits and time deposits in authorized financial institutions. Short-Term lnvestments Short-Term lnvestments consist of investments of 9 0 days - 1 3 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. lnvestments lnvestments include financial instruments with terms in excess of 1 3 months, certain other securities for the production of revenue, land, and other real estate held as investments by endowments. The University accounts for its investments at fair value. 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. Noncurrent lnvestments lnvestments 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, which also includes amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, and copyrights, as well as software is computed using the straight-line method over the estimated useful lives of the assets, generally 4 0 to 60 years for buildings, 5 to 25 years for infrastructure and land improvements, 1 0 years for library books, and 3 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements. FORT VALLEY STATE UNIVERSrrY NOTES TO M E FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "D" To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financingand Investment Commission (GSFIC)- an organization that is external to the University System of Georgia. 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, 2010, GSFIC transferred capital additions valued at $17,694,780 t o Fort Valley State University. Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall. Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also 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 $2,055,897 as of July 1,2009. For fiscal year 2010, $964,022 was earned in compensated absences and employees were paid $764,028, for a net increase of $199,994. The ending balance as of June 30, 2010, in accrued liability for compensated absences was $2,255,891. 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 asseb, net of related 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. Restricled net assets - nonexpendabie: 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. FORT VALLEY STATE UNIVERSrPl NOTES TO THE FINANCIAL STATEMENTS JUNE 30,2010 EXHIBrr "D" 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: Restricted - E&G and Other Organized Activities $ Federal Loans Quasi-Endowments -380,287 1,876,289 53,398 Total Restricted Expendable $ 1,549,400 Unrestrictednet 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) of $66.64. Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. R & R Reserve Reserve for Encumbrances Other Unrestricted Total Unrestricted Net Assets 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 and Expenses The Statement of Revenues, Expenses and Changes in Net Assets classify fiscal year activity as operating and nonoperating according to the following criteria: Operating Revenues Operating revenue includes activities that have the characteristics of exchange transactions, such as (1)student tuition and fees, net of scholarship allowances, (2) certain Federal, state and local grants and contracts and Federal appropriations, and (3)sales and services. Nonoperating Revenues Nonoperating revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenue by GAS0 No. 9, Reporting Osh Flows of Proprietaty and Nonexpendable Trust Funds and Governmental Entities That Use Proprietaty Fund Accounting, and GASB No. 34, such as state appropriations and investment income. Operating Expenses Operating expense includes activities that have the characteristics of exchange transactions. - 9- FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "D" Nonoperating Expenses: Nonoperating expense includes activities that have the characteristics of nonexchange transactions, such as capital financing costs and costs related to investment activity. 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 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. Depositsand I nvestments 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 MortgageAssociation. 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 UniversitySystem of Georgia. At June 30, 2010, the carrying value of deposits was $2,341,367 and the bank balance was $4,641,628. Of the University's deposits, $1,166,783 were uninsured. Of these uninsured deposits, $1,091,763 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $75,020 were uncollateralized. FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "D" Investments At June 30, 2010, the carrying value of the University's investments was $42,950, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and/or Office of Treasury and Fiscal Services investment pools as follows: lnvestment Pools Board of Regents Balanced Income Fund The Board of Regents lnvestment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents lnvestment Pool is voluntary. The Board of Regents lnvestment Pool is not rated. Additional information on the Board of Regents lnvestment 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 htt~://www.audits.state,~a.us/internet/searchR~ts.html. lnterest Rate Risk lnterest 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 structure the portfolio so that securities mature to meet cash requirements for ongoing operations without needing to be sold prior to maturity and invested only in the allowed investments as set out in the investment policy statement. The Effective Duration of the Balanced Income Fund is 2.6 years. Of the University'stotal investment of $42,950 in the Balanced Income Fund, $27,076 is invested in debt securities. Credit Oualitv 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 by limiting investments to those securities with high credit ratings; analysis of financial institutions, investment companies, intermediaries with who the Accounts will do business, and diversify the portfolio to the extent possible. Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2010: Student Tuition and Fees $ Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Georgia State Financing and Investment Commission Other 244,449 315,441 2,263,636 31,753 3,683,235 Less Allowance for Doubtful Accounts Net Accounts Receivable $ 6,538,514 318,413 FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "D" Note 4. Notes/Loans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2010. 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, 2010, the allowance for uncollectible loans was approximately $1,313,276. Note 5. CapitalAssefs Followingare the changes in capital assets for the year ended June 30,2010: Beginning Balance July 1,2009 Additions Reductions Ending Balance June 30,2010 Capital Assets. Not Being Depreciated: Land Construction Work-In-Progress $ 3,762,548 $ 3,762,548 5,446,873 $ 2,395,261 $ 3,483,097 4,359,037 Total Capital Assets. Not Being Depreciated $ 9,209,421 $ 2,395,261 $ 3,483,097 $ 8,121,585 Capital Assets, Being Depreciated: Buildingand Building Improvements Facilitiesand Other Improvements Equipment Capital Leases Libraly Collections $ 64,136,184 $ 16,700,193 1,500,026 8.270.855 1,559.537 $ 62,964,968 6,647,876 355,788 $ 468,284 198,350 80,836,377 1,500,026 9,362,108 62,964,968 6,805,314 Total Assets Being Depreciated $ 143,519.909 $ 18,615.518 $ 666,634 $ 161,468,793 Less: Accumulated Depreciation: Buildingand Building Improvements Facilitiesand Other Improvements Equipment Capital Leases Library Collections $ 24,013,147 $ 1,350,024 5,657.092 2,498,057 5,895,890 1,324,903 655,231 $ 1,676,865 178,743 $ 106,996 49,545 25,338,050 1,350,024 6,205,327 4,174,922 6,025.088 Total Accumulated Depreciation $ 39,414.210 $ 3,835,742 $ 156,541 $ 43,093,411 Total Capital Assets, Being Depreciated, Net $ 104,105,699 $ 14,779,776 $ 510,093 $ 118,375,382 Capital Assets, Net FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30,2010 Note 6. Deferred Revenue Deferred revenue consisted of the following at June 30, 2010: Other Deferred Revenue $ 1,793,753 Note 7. Long-TermLiabilities Long-Term liability activity for the year ended June 30, 2010 was as follows: Beginning Balance July 1,2009 Additions Reductions Ending Balance June 30,2010 Current Portion Lease Lease Obligations $ 63,576,431 $ 31,287 Other Liabilities Compensated Absences USDOE Settlement 2,055,897 547.780 964,022 $ 764,028 246,408 2,255,891 301,372 1,327,773 239,585 Total Long-Term Obligations $ 66,180,108$ 995,309 $ 2010,436 $ 66,164,981 $ 1,838,157 Note 8. Significant Commitments The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,020,231 as of June 30, 2010. 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 2038. Expenditures for fiscal year 2010 were $2,540,221 which entirely represented interest. Total principal paid on capital leases was $0 for the fiscal year ended June 30, 2010. 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, 2010: Buildings 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 FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "D" leases buildings for a thirty year period that began August 2007 and expires July 2037. In March 2007, 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, 2010, were $43,788,896 and $19,818,822, respectively. OPERATING LEASES Fort Valley State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2010 through 2014. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are 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 instruction space from 2009 through 2014 for annual rentals of $30,000. In 2010, Fort Valley State University entered into a real property operating lease with the Fort Valley University Foundation, Inc. a related party, for instruction space from 2010 through 2012 for annual rentals of $69,600. Fort Valley State University also entered into a 24 passenger bus lease with Auto Max for the use of four buses from 2010 through 2012 for annual rentals of $75,600. 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, 2010, were as follows: Real Property and Equipment Capital Operating Leases Leases Year EndingJune 30: 2011 2012 2013 2014 2015 2016 - 2020 2021- 2025 2026 - 2030 2031- 2035 2036 - 2040 Total Minimum Lease Payments $ 120,227,425 $ 322,468 Less: Interest 56.619.707 Principal Outstanding $ 63,607,718 FORT VALLEY STATE UNIVERSIlT NOTES TO THE FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "D" Fort Valley State University's fiscal year 2010 expense for rental of real property and equipment under operating leases was $207,197. 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 costsharing 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 5.25% 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 2010, the employer contribution rate was 9.74% 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 Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy 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 2010, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "D" Fort Valley State University and the covered employees made the required contributions of $528,243 (9.24%) and $285,846 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIM-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 t o each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member. Total contributions made by employees during fiscal year 2010 amounted to $172,340 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 selfinsured 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 self-insured 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. FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30,2010 EXHIBIT "D" 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 t o 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. 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 Universityexpects 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, 2010. Note 13. Subsequent Events A Settlement Agreement, Mutual Release and Covenant Not to Sue was proposed between Thompson Hospitality Services, LLC and Fort Valley State University. The agreement states that Fort Valley State University will pay Thompson Hospitality $875,000 to be made in two installments, pending Board of Regents' approval of this agreement. Note 14. Post-Employment Benefits Other Than Pension Benefits Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.