Fort Valley State University, Fort Valley, Georgia, annual financial report for the fiscal year ended June 30, 2013 (including independent auditor's report)

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 POSITION
B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
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 FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET
BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
5 RECONCILIATION OF BUDGET TO GAAP 6 RECONCILIATION OF SALARIES AND TRAVEL

Page
i
2 3 4 6
26 27 28 30 32 33

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

FORT VALLEY STATE UNIVERSITY - TABLE OF CONTENTS -
SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION IV CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
November 25, 2013

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Ivelaw L. Griffith, President Fort Valley State University

INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on the Financial Statements
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, 2013.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to Fort Valley State University's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the
13ARL-62

purpose of expressing an opinion on the effectiveness of Fort Valley State University's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of Fort Valley State University as of June 30, 2013, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter
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 of the State of Georgia as of June 30, 2013, the changes in its financial position or its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
As described in Note 1 to the financial statements, in 2013, Fort Valley State University adopted new accounting guidance, GASB Statement No. 63, Reporting Deferred Outflows, Deferred Inflows, and Net Position. Our opinion is not modified with respect to this matter.
As discussed in Note 1 to the financial statements, the prior period financial statements have been restated to correct a misstatement. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages i through vi be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquires of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
13ARL-62

Other Information
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Fort Valley State University. The accompanying supplementary information (Schedules 1 through 6) is presented for purposes of additional analysis and is not a required part of the basic financial statements.
The accompanying supplementary information (Schedules 1 through 6) is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting or other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated November 25, 2013, on our consideration of Fort Valley State University's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Fort Valley State University's internal control over financial reporting and compliance.
Respectfully,

GSG:as 13ARL-62

Greg S. Griffin State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

FORT VALLEY STATE UNIVERSITY
Management's Discussion and Analysis

Introduction
Fort Valley State University is one of the 31 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 baccalaureate and master's degrees in a wide variety of subjects. This broad range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,500 students each year. The institution had a drop in enrollment in fiscal year 2013 as shown by the comparison numbers that follow.

Faculty

Students (Headcount)

Students (FTE)

Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011

166

3,568

3,378

175

3,896

3,719

163

3,728

3,473

Overview of the Financial Statements and Financial Analysis
Fort Valley State University is pleased to present its financial statements for fiscal year 2013. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Position; the Statement of Revenues, Expenses and Changes in Net Position; 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 2013 and fiscal year 2012.
Statement of Net Position The Statement of Net Position presents the assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position of the University as of the end of the fiscal year. The Statement of Net Position is a point-of-time financial statement. The Statement of Net Position presents a fiscal snapshot of Fort Valley State University. The Statement of Net Position presents end-of-year data concerning assets (current and noncurrent) plus deferred outflows, and liabilities (current and noncurrent) plus deferred inflows, and net position (assets plus deferred outflows minus liabilities plus deferred inflows). The differences between current and noncurrent assets are discussed in the Notes to the Financial Statements.
From the data presented, readers of the Statement of Net Position are able to determine the assets available to continue the operations of the institution and how much the institution owes vendors.
Finally, the Statement of Net Position provides a picture of the net position (assets plus deferred outflows of resources minus liabilities plus deferred inflows of resources) and their availability for expenditure by the institution. Net position is divided into three major categories. The first category, net investment in capital assets, provides the institution's equity in property, plant and equipment owned by the institution. The next category is restricted, which is divided into two categories, nonexpendable and expendable.

i

The corpus of nonexpendable, restricted resources is available only for investment purposes. Expendable, restricted resources 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. Unrestricted resources are available to the institution for any lawful purpose.
Statement of Net Position, Condensed

June 30, 2013

June 30, 2012

Assets Current Assets Capital Assets, Net Other Assets

$ 7,728,075 154,175,831 1,842,294

$ 6,479,351 153,334,122 1,516,667

Total Assets

$ 163,746,200

$ 161,330,140

Liabilities Current Liabilities Noncurrent Liabilities

$ 8,156,490 83,034,482

$ 6,077,952 83,211,913

Total Liabilities

$ 91,190,972

$ 89,289,865

Net Position Net Investment in Capital Assets Restricted Nonexpendable Expendable Unrestricted

$ 71,620,683
3,457,619 -2,523,074

$ 70,823,697
68,099 1,532,157
-383,678

Total Net Position

$ 72,555,228

$ 72,040,275

Total assets increased by $2,416,060, which was primarily due to an increase of $2,479,156 in the category of Cash and Cash Equivalents. The decrease in Other Assets and Receivables was essentially offset by the $841,709 increase in the category of Capital Assets, Net.
Total liabilities increased for the year by $1,901,107. The combination of the increase in total assets of $2,416,060 and the increase in total liabilities of $1,901,107 yields an increase in net position of $514,953. The increase in net position is primarily in the category of Net Investment in Capital Assets, in the amount of $796,986.

ii

Statement of Revenues, Expenses and Changes in Net Position
Changes in total net position as presented on the Statement of Net Position are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Position. 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, 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 Position, Condensed

June 30, 2013

June 30, 2012

Operating Revenues Operating Expenses

$ 32,158,312 78,028,421

$ 47,718,759 81,712,833

Operating Loss

$ -45,870,109

$ -33,994,074

Nonoperating Revenues and Expenses

41,230,968

29,672,814

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

$ -4,639,141

$ -4,321,260

Other Revenues, Expenses, Gains or Losses

4,841,847

13,721,137

Increase (Decrease) in Net Position

$

202,706

$

9,399,877

Net Position at Beginning of Year, as Originally Reported

$ 72,040,275

$ 64,244,634

Prior Year Adjustments

312,247

-1,604,236

Net Position at Beginning of Year, Restated $ 72,352,522

$ 62,640,398

Net Position at End of Year

$ 72,555,228

$ 72,040,275

The Statement of Revenues, Expenses and Changes in Net Position reflects a positive year, which is represented by an increase in net position at the end of the year. Some highlights of the information presented on this statement are as follows:

iii

Revenue by Source For the Years Ended June 30, 2013 and June 30, 2012

June 30, 2013

June 30, 2012

Operating Revenue

Tuition and Fees

$

Federal Appropriations

Grants and Contracts

Sales and Services of Educational Departments

Auxiliary

Other

9,512,951 4,912,296 1,465,105
677,923 15,302,375
287,662

$ 11,445,798 4,922,812
11,625,702 528,952
18,443,591 751,904

Total Operating Revenue

$ 32,158,312

$ 47,718,759

Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other

$ 21,758,049 21,512,305 1,923,547 8,357 -1,418

$ 19,832,028 14,107,266
13,528 3,234

Total Nonoperating Revenue

$ 45,200,840

$ 33,956,056

Capital Grants and Gifts State Federal

$ 1,893,527 2,948,320

$ 13,608,096 113,041

Total Capital Grants and Gifts

$ 4,841,847

$ 13,721,137

Total Revenues

$ 82,200,999

$ 95,395,952

Expenses (By Functional Classification) For the Years Ended June 30, 2013 and June 30, 2012

June 30, 2013

June 30, 2012

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

$ 14,438,295 5,785,729 5,857,831 8,018,041 3,715,589
12,229,607 9,074,215 4,936,523
13,972,591

$ 16,938,790 6,555,764 4,199,194 8,169,277 4,142,188
13,370,029 6,916,521 4,939,980
16,481,090

Total Operating Expenses

$ 78,028,421

$ 81,712,833

Nonoperating Expenses Interest Expense (Capital Assets)

3,969,872

4,283,242

Total Expenses

$ 81,998,293

$ 85,996,075

iv

Operating revenues decreased by $15,560,447 in fiscal year 2013. Of this more than $9.0 million reflects a change in the categorization of Grants and Contracts revenue from operating to nonoperating. Decreased Student Tuition and Fees, net of Scholarship Allowances of $1,932,847 and decreased Auxiliary revenues of $3,141,216 primarily accounted for the remaining decrease.
The Auxiliary revenue decrease of $3,141,216 is a result of the changing environment of residential life on the University's campus. During the year, residential life eliminated some of the institutionally owned and operated on-campus housing as a result of decreased enrollment.
Nonoperating revenues increased by $11,244,784 for the year primarily due to the change in the categorization of Grants and Contract from operating to nonoperating. An increase in State Appropriations of $1,926,021 primarily made up the remainder.
The compensation and employee benefits category decreased by $3,495,301 and primarily affected the Instruction category by $1,539,088. The remaining decrease was spread among Research, Institutional Support, Plant and Auxiliaries, and to a lesser extent, Academic Support and Student Services. The decrease reflects a reduction in force taken to meet lower revenues.
Utilities increased by $190,417 during the past year. The increase was primarily associated with increased electricity costs 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 Position.
Cash Flows for the Years Ended June 30, 2013 and 2012, Condensed

June 30, 2013

June 30, 2012

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

$

-38,322,854

45,193,413

-4,396,972

5,569

$

-27,840,634

32,100,200

-3,032,809

14,516

Net Change in Cash Cash, Beginning of Year

$

2,479,156

1,241,273

$

1,241,273

Cash, End of Year

$

3,720,429

$

1,241,273

v

Capital Assets The University had two significant capital asset projects for facilities under construction in fiscal year 2013. The Stallworth Agriculture Building Biotechnology Addition was nearing completion at the end of fiscal year 2013 and is expected to be placed into service early in fiscal year 2014. Fort Valley State University continued the rehabilitation of Bishop Hall during fiscal year 2013. Phase I of this rehabilitation is also expected to be complete in early fiscal year 2014. For additional information concerning Capital Assets, see Notes 1, 5, 8, and 9 in the Notes to the Financial Statements. Long-Term Liabilities Fort Valley State University had Long-Term Liabilities of $85,191,040 of which $2,156,558 was reflected as current liability at June 30, 2013. For additional information concerning Long-Term Liabilities, see Notes 1 and 7 in the Notes to the Financial Statements. Economic Outlook The University recognizes that the coming year will continue to be a challenge and is committed to meeting that challenge head on. Continued decrease in enrollment is expected for fiscal year 2014 and a reduction in State Appropriation of 3% for fiscal year 2014 has been implemented. Management continues to be proactive in identifying revenue opportunities and cost savings, particularly in Auxiliaries, that will also result in a more focused and vibrant campus. Getting back to basics, the University will concentrate on recruitment in the coming year. Management is confident that the University can attract superior students who will be successful graduates. The University will continue to closely monitor our resources in a manner that allows us to readily respond to unanticipated internal and external issues as they arise.
Dr. Ivelaw Lloyd Griffith, President Fort Valley State University
vi

BASIC FINANCIAL STATEMENTS - 1 -

FORT VALLEY STATE UNIVERSITY STATEMENT OF NET POSITION JUNE 30, 2013
ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Due from Component Units Prepaid Items Other Assets
Total Current Assets
Noncurrent Assets Investments Notes Receivable, Net Capital Assets, Net (Note 5) Other Assets
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Unearned Revenue (Note 6) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET POSITION
Net Investment in Capital Assets Restricted for:
Expendable Unrestricted
Total Net Position
The notes to the financial statements are an integral part of this statement. - 2 -

EXHIBIT "A"

$

3,720,429

75,509

1,572,810 1,283,989 1,020,200
33,268 21,870

$

7,728,075

$

52,226

1,350,840

154,175,831

439,228

$ 156,018,125

$ 163,746,200

$

2,254,570

229,270

989,226

7,557

2,076,077

443,232

672,290

1,484,268

$

8,156,490

$

82,343,956

690,526

$

83,034,482

$

91,190,972

$

71,620,683

3,457,619 -2,523,074

$

72,555,228

FORT VALLEY STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
YEAR ENDED JUNE 30, 2013
OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) 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 Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal State Other Gifts Investment Income (Endowments, Auxiliary and Other) 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 Position
Net Position - Beginning of Year, as Originally Reported
Prior Year Adjustments
Net Position - Beginning of Year, Restated
Net Position - End of Year
The notes to the financial statements are an integral part of this statement.
- 3 -

EXHIBIT "B"

$

17,279,068

-7,766,117

4,912,296

1,215,321 74,740
175,044 677,923

6,952,848 75,991
5,009,331 248,152 492,024
1,619,564 904,465 287,662

$

32,158,312

$

11,108,753

20,021,666

10,067,569

260,781

596,930

6,639,939

4,667,158

18,837,896

5,827,729

$

78,028,421

$

-45,870,109

$

21,758,049

20,806,457 2,236
703,612 1,923,547
8,357 -3,969,872
-1,418

$

41,230,968

$

-4,639,141

$

2,948,320

1,893,527

$

4,841,847

$

202,706

$

72,040,275

312,247

$

72,352,522

$

72,555,228

FORT VALLEY STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts (Exchange) Sales and Services 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 Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from Sale of Capital Assets 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 Interest on Investments
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year

EXHIBIT "C"

$

10,539,549

4,912,296

1,781,168

677,923

-33,949,169

-31,172,132

-6,639,939

-56,963

173,238

7,051,129 121,087
4,558,937 243,676 520,188
1,692,401 901,873 321,884

$

-38,322,854

$

21,758,049

-13,035

23,448,399

$

45,193,413

$

4,425,807

2,665

-4,410,139

-494,614

-3,920,691

$

-4,396,972

$

5,569

$

2,479,156

1,241,273

$

3,720,429

- 4 -

FORT VALLEY STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2013
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income (loss) to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Prepaid Items Accounts Payable Unearned Revenue 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 Change in Accrued Interest Payable Affecting Interest Paid Amortization of Other Asset Reducing Interest Paid Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts

EXHIBIT "C"

$

-45,870,109

5,827,729
379,654 70,409
1,752,723 -336,465 -146,795

$

-38,322,854

$

533,046

$

2,788

$

42,921

$

6,260

$

416,040

The notes to the financial statements are an integral part of this statement. - 5 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

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-one (31) 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 Affiliated 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 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, deferred outflows of resources, liabilities, deferred inflows of resources, net position, revenues, expenses, changes in net position and cash flows.
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. 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.
New Accounting Pronouncements In fiscal year 2013, the University adopted the Governmental Accounting Standards Board (GASB) Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The provisions of this Statement establish accounting and financial reporting standards for governments who enter into Service Concession Arrangements (SCA) with other governmental or nongovernmental entities. As of June 30, 2013, the University has not entered into any arrangements that meet the qualifications to be reported as a SCA in accordance with this standard.

- 6 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

In fiscal year 2013, the University adopted the Governmental Accounting Standards Board (GASB) Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in PreNovember 30, 1989 FASB and AICPA Pronouncements. The provisions of this Statement incorporate certain accounting and financial reporting guidance into authoritative GASB literature.
In fiscal year 2013, the University adopted the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position. The provisions of this Statement establish financial reporting standards for the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government's net position. The University changed its presentation of net assets to net position for fiscal year 2013. There were no other applicable reporting changes for the University.
Fort Valley State University did not have any have any transactions to report under the new accounting pronouncements for fiscal year 2013.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts.
Short-Term Investments Short-Term Investments consist of investments of 90 days - 13 months, which includes 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 Investments include financial instruments with terms in excess of 13 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 Position. 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 whom reside 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 Investments Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Position.
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

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

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 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values generally are 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To fully understand 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. These bonds 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, 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, 2013, GSFIC transferred capital additions valued at $122,042 to Fort Valley State University.
Other Assets Other assets includes assets that are not categorized elsewhere.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University Residence Hall.
Unearned Revenues Unearned 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. Unearned 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 Position, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Position. Fort Valley State University had accrued liability for compensated absences in the amount of $2,321,588 as of July 1, 2012. For fiscal year 2013, $1,418,442 was earned in compensated absences and employees were paid $1,565,236 , for a net decrease of $146,794. The ending balance as of June 30, 2013 in accrued liability for compensated absences was $2,174,794.
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.

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Net Position The University's net position is classified as follows:
Net Investment in Capital Assets: 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 the net investment in capital assets. 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 - Nonexpendable: includes 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 be either 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 - Expendable: includes resources in which the University is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties.

Expendable Restricted include the following at June 30, 2013:

Restricted - E&G and Other Organized Activities Federal Loans Quasi-Endowments

$

293,426

1,587,345

1,576,848

Total Restricted Expendable

$

3,457,619

Restricted - Expendable - Capital Projects: This represents resources for which the University is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.

Unrestricted: Unrestricted represents 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 $45.60. 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 the State Treasurer. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

Unrestricted resources include the following items which are quasi-restricted by management at June 30, 2013:

R & R Reserve Reserve for Encumbrances Other Unrestricted

$

4,604,363

3,747,850

-10,875,287

Total Unrestricted Net Position

$

-2,523,074

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

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 Position classify fiscal year activity as operating and nonoperating according to the following criteria:
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 (3) sales and services.
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 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.
Operating Expenses: Operating expense includes activities that have the characteristics of exchange transactions.
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 Position. 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.

Restatement of Prior Year Net Position For fiscal year 2013, the University made a variety of prior period adjustments due to various errors or omissions, which require restatement of net position. The result is an increase in Net Position at July 1, 2012, of $312,247. These changes are in accordance with generally accepted accounting principles.

Net Position, July 1, 2012, as Previously Reported

$

Adjustments to Capital Assets

Prior Year Accrued Interest Expensed in Fiscal Year 2013

Prior Year Receivable Still Outstanding

Related to completed GSFIC Projects

72,040,275 1,153,977 -544,844
-296,886

Net Position, July 1, 2012, as Restated

$

72,352,522

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

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.

At June 30, 2013, the carrying value of deposits was $3,795,013 and the bank balance was $4,506,312. Of the University's deposits, $4,256,312 was uninsured. Of these uninsured deposits, $4,180,803 were collateralized with securities held by the financial institution's trust department or agent in the University's name, $75,509 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name and $0 were uncollateralized.

Investments At June 30, 2013, the carrying value of the University's investments were $52,226, 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

$

52,226

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

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 - System Office (Oversight Unit). This audit can be obtained from the Georgia Department of Audits and Accounts - Education Audit Division or on their web site at http://www.audits.ga.gov.
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 does not have a formal policy for managing interest rate risk.
The Effective Duration of the Balanced Income Fund is 5.10 years. Of the University total investment of $52,226 in the Balanced Income Fund, $32,473 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 does not have a formal policy for managing credit quality risk.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2013:

Student Tuition and Fees

$

Auxiliary Enterprises and Other Operating Activities

Federal Financial Assistance

Georgia State Financing and Investment Commission

Due from Affiliated Organizations

Other

1,425,440 313,889
1,572,810 398,073
1,020,200 473,354

Less Allowance for Doubtful Accounts

$

5,203,766

1,326,767

Net Accounts Receivable

$

3,876,999

Note 4. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2013. 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, 2013, the allowance for uncollectible loans was approximately $0.

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Note 5. Capital Assets Following are the changes in capital assets for the year ended June 30, 2013:

Beginning Balance July 1, 2012 (Restated)

Additions

Reductions

Ending Balance June 30, 2013

Capital Assets, Not Being Depreciated: Land Construction Work-In-Progress

$

3,762,548

886,416 $

4,993,245 $

$ 422,443

3,762,548 5,457,218

Total Capital Assets, Not Being Depreciated $

4,648,964 $

4,993,245 $

422,443 $

9,219,766

Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections

$

99,678,325 $

2,728,820

11,137,605

82,415,989

5,390,681

122,042
302,326 $ 533,046

$
483,099 27,000

99,800,367 2,728,820
10,956,832 82,922,035
5,390,681

Total Assets Being Depreciated

$ 201,351,420 $

957,414 $

510,099 $ 201,798,735

Less: Accumulated Depreciation: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections

$

28,833,111 $

1,392,638

7,426,959

9,433,140

4,426,437

2,093,752 49,253
890,718 $ 2,650,007
143,999

$
470,344 27,000

30,926,863 1,441,891 7,847,333
12,056,147 4,570,436

Total Accumulated Depreciation

$

51,512,285 $

5,827,729 $

497,344 $

56,842,670

Total Capital Assets, Being Depreciated, Net $ 149,839,135 $

-4,870,315 $

12,755 $ 144,956,065

Capital Assets, Net

$ 154,488,099 $

122,930 $

435,198 $ 154,175,831

Note 6. Unearned Revenue Unearned revenue consisted of the following at June 30, 2013:

Prepaid Tuition and Fees Other Unearned Revenue

$

527,028

1,549,049

Total Unearned Revenue

$

2,076,077

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Note 7. Long-Term Liabilities Long-Term liability activity for the year ended June 30, 2013 was as follows:

Beginning Balance July 1, 2012

Additions

Reductions

Ending Balance June 30, 2013

Current Portion

Leases Lease Obligations

$ 82,510,425 $ 1,000,435 $

494,614 $ 83,016,246 $

672,290

Other Liabilities Compensated Absences

2,321,588

1,418,442

1,565,236

2,174,794

1,484,268

Total Long-Term Obligations $ 84,832,013 $ 2,418,877 $ 2,059,850 $ 85,191,040 $ 2,156,558

Note 8. Significant Commitments

The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $1,313,659 as of June 30, 2013. 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 2017 and 2040. Expenditures for fiscal year 2013 were $4.7 million of which $3.9 million represented interest and $0.3 million represented executory costs.

Total principal paid on capital leases was $0.5 million for the fiscal year ended June 30, 2013.

Interest rates range from 4.2 percent to 16.7 percent. The following is a summary of the carrying

values of assets held under capital lease at June 30, 2013:

Net Position

Outstanding

Held Under

Balances per

Accumulated

Capital Lease Lease Schedules

Description

Gross Amount

Depreciation at June 30, 2013 at June 30, 2013

(+)

(-)

(=)

Equipment Buildings - (PPV Only)

$

533,047 $

106,609 $

426,438 $

442,697

82,388,988

11,949,538

70,439,450

82,573,549

$

82,922,035 $ 12,056,147 $ 70,865,888 $ 83,016,246

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.

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Fort Valley State University had three capital leases with related entities in the current fiscal year. In June 2008, Fort Valley State University entered into a capital lease of $19,603,070 at 4.85 percent with the Fort Valley State University Foundation Properties, LLC whereby the University leases building for a thirty year period that began August 2009 and expires June 2038. In May 2013, Fort Valley State University Foundation Properties refunded the bonds on this property and passed the benefit to the University through a lease renewal that reduced future lease payments. Lease Purchase Obligations were increased by $467,388, as a result of a lower effective interest rate of 4.2 percent. This amount which is reflected in other assets was deferred and will be amortized over the remaining life of the lease as a reduction of interest expense.
In June 2006, Fort Valley State University entered into a capital lease for $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 May 2008 and expires in May 2037.
In November 2008, Fort Valley State University entered into a capital lease of $19,451,021 at 6.139 percent with Georgia Higher Education Facilities Authority GHEFA whereby the University leases a stadium and student activity center for a thirty year period that began July 2010 and expires June 2040.
The outstanding balances of these leases at June 30, 2013 were $42,936,690, $20,085,668 and $19,551,191, respectively.
Fort Valley State University also has various capital leases for equipment with an outstanding balance at June 30, 2013 in the amount of $442,697.
OPERATING LEASES
Fort Valley State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2014 through 2017. Certain operating leases provide for renewal options for periods from one to five 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 real property, copiers and student transportation.

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

FUTURE COMMITMENTS
Future commitments for capital leases (which here and on the Statement of Net Position) include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2013, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2014 2015 2016 2017 2018 2019 - 2023 2024 - 2028 2029 - 2033 2034 - 2038 2039 - 2040

$

5,015,128 $

83,101

5,158,540

71,773

5,301,340

55,073

5,438,965

55,073

5,458,315

29,609,402

32,586,062

35,823,733

34,114,081

3,389,766

Total Minimum Lease Payments

$

161,895,332 $

265,020

Less: Interest Less: Executory Costs (if paid)

67,642,858 11,236,228

Principal Outstanding

$

83,016,246

Fort Valley State University's fiscal year 2013 expense for rental of real property and equipment under operating leases was $82,664.
Note 10. Retirement Plans

Fort Valley State University participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia. These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that Fort Valley State University participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.

Employees' Retirement System of Georgia

The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers Retirement System of Georgia. One of the ERS System plans, the Employees' Retirement System of Georgia (ERS), is a cost-sharing multiple-employer defined benefit pension plan that was established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract.
On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1, 1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415.
The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are "new plan" members subject to the modified plan provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009 also have the option to change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, Fort Valley State University pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Fort Valley State University contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. Fort Valley State University is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These Fort Valley State University contributions are not at any time refundable to the member or his/her beneficiary.

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Employer contributions required for fiscal year 2013 were based on the June 30, 2010 actuarial valuation as follows:

Old Plan* New Plan GSEPS

14.90% 14.90% 11.54%

*10.15% exclusive of contributions paid by the employer on behalf of old plan members

Members become vested after 10 years of service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions; the member forfeits all rights to retirement benefits.

Teachers Retirement System of Georgia

The Teachers Retirement System of Georgia (TRS) is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS.

On October 25, 1996, the Board created the Supplemental Retirement Benefit Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Options are available for distribution of the member's monthly pension, at a reduced rate, to a designated beneficiary on the member's death. Death, disability and spousal benefits are also available.

TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as

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FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

adopted by the Board of Trustees for the fiscal year ended June 30, 2013 were 6.00% of annual salary. Employer contributions required for fiscal year 2013 were 11.41% of annual salary as required by the June 30, 2010 actuarial valuation.

The following table summarizes the Fort Valley State University contributions by defined benefit plan for the years ending June 30, 2013, June 30, 2012, and June 30, 2011 (dollars in thousands):

Fiscal Year

ERS

Required

Percentage

Contribution

Contributed

TRS

Required

Percentage

Contribution

Contributed

2013

$

2012

$

2011

$

Regents Retirement Plan

0 2,093
0

100% 100% 100%

$ 2,264,447 $ 2,198,303 $ 2,141,857

100% 100% 100%

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 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 2013, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 6% of their earnable 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 $527,970 (9.24%) and $314,423 (6%), 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.

- 19 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

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.
Total contributions made by employees during fiscal year 2013 amounted to $136,364 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 four different selfinsured healthcare plan options. For the University System of Georgia's Plan Year 2013, the following health care options were available:
Blue Choice HMO plan (Blue Cross Blue Shield) HSA Open Access POS plan (Blue Cross Blue Shield) Open Access POS plan Kaiser Permanente HMO 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 plans are considered to be a self-sustaining risk fund. 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 self-insured healthcare plan products. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser.
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

- 20 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

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 expenditure 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, 2013.
Note 13. 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.
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 2013 plan year, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.

- 21 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

As of June 30, 2013, 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, 2013, Fort Valley State University recognized as incurred $1,053,614 of expenditures, which was net of $396,034 of participant contributions.
Note 14. Natural Classifications with Functional Classifications
The University's operating expenses by functional classification for fiscal year 2013 are shown below:

Functional Classification

Natural Classification

Instruction

Research

Public Service

Academic Support

Student Services

Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation

$

9,066,475 $

1,839,446

2,671,042

23,382 28,617 90,980 490,462 227,891

987,990 $ 1,836,748
773,807

254,696 $ 2,586,328
724,710

99,493 70,241 109,340 1,465,711 442,399

253,805 185,058
21,073 1,673,623
158,538

700,577 $ 3,569,212 1,302,705

4,366 2,027,717
576,195

112,896 160,855 113,361 1,679,223 379,212

46,244 161,440
46,131 840,744
12,752

Total Operating Expenses

$ 14,438,295 $

5,785,729 $ 5,857,831 $

8,018,041 $ 3,715,589

Natural Classification

Institutional Support

Functional Classification

Plant Operations Scholarships

and

and

Maintenance

Fellowships

Auxiliary Enterprises

Total Operating Expenses

Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation

$

82,649

5,351,631 $

3,133,317

260,781

44,052

230,601

143,880

2,861,248

121,448

$ 947,493 397,789

150 $
3,528,877 2,549,196 1,650,710

4,936,523

12,000 $ 1,863,091
488,004
16,908 866,604 613,516 7,277,689 2,834,779

11,108,753 20,021,666 10,067,569
260,781 596,930 6,639,939 4,667,158 18,837,896 5,827,729

Total Operating Expenses

$ 12,229,607 $

9,074,215 $ 4,936,523 $ 13,972,591 $ 78,028,421

- 22 -

FORT VALLEY STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Note 15. Affiliated Organizations
The Fort Valley State University Foundation, Inc. is a legally separate, tax exempt organization whose activities primarily support Fort Valley State University. This affiliated organization is considered a potential component unit of the State of Georgia in accordance with GASB Statement No. 61, The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of the affiliated organization are not included in these financial statements. Copies of the financial statements for the affiliated organization may be obtained from Fort Valley State University.

- 23 -

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SUPPLEMENTARY INFORMATION - 25 -

FORT VALLEY STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2013
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Unearned Revenue
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

1,673,635.87

2,252,744.75 4,098,987.54
22,747.93

$

8,048,116.09

$

224,366.00

3,436,262.51

744,846.87

1,464,789.97

$

5,870,265.35

$

1,978.72

297,508.48

450,722.10

1,042,958.19

384,637.65

45.60

$

2,177,850.74

$

8,048,116.09

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 special purpose framework.
- 26 -

FORT VALLEY STATE UNIVERSITY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2013

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Other Funds
Total Revenues
ADJUSTMENTS AND PROGRAM TRANSFERS
CARRY-OVER FROM PRIOR YEARS
Transfers 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 Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2012
Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30
SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over
Total Reserved
Unreserved Surplus
Total Fund Balance

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 21,800,724.00 $ 21,800,724.00 $

0.00

70,166,817.00

53,387,042.66

-16,779,774.34

$ 91,967,541.00 $ 75,187,766.66 $ -16,779,774.34

0.00

0.00

0.00

0.00

553,575.59

553,575.59

$ 91,967,541.00 $ 75,741,342.25 $ -16,226,198.75

$ 3,664,741.00 $ 3,664,741.00 $

88,302,800.00

70,077,920.18

0.00 18,224,879.82

$ 91,967,541.00 $ 73,742,661.18 $ 18,224,879.82

$

0.00 $ 1,998,681.07 $

1,998,681.07

737,179.22 42,674.57

346,208.56 -350,642.52
-42,674.57 -553,575.59 $ 2,177,850.74

$

1,978.72

297,508.48

450,722.10

1,042,958.19

384,637.65

$ 2,177,805.14

45.60

$ 2,177,850.74

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 special purpose framework.
- 27 -

FORT VALLEY STATE UNIVERSITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2013

Special Funding Initiative State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$ 3,664,741.00 $ 3,664,741.00 $ 3,664,741.00 $ 3,664,741.00

$ 18,742,906.00 $ 18,742,906.00 $ 18,135,983.00 $ 18,135,983.00

55,639,685.00

55,639,685.00

70,166,817.00

53,387,042.66

$ 74,382,591.00 $ 74,382,591.00 $ 88,302,800.00 $ 71,523,025.66

$ 78,047,332.00 $ 78,047,332.00 $ 91,967,541.00 $ 75,187,766.66

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 special purpose framework.
- 28 -

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Positive (Negative)

Expenditures Compared to Budget

Variance

Actual

Positive (Negative)

Excess (Deficiency) of Funds Available
Over/(Under) Expenditures

$

0.00 $

0.00 $

3,664,741.00 $

0.00 $ 3,664,741.00 $

0.00 $

0.00

$

0.00 $

553,575.59

$ 553,575.59 $

0.00 $ 0.00

18,135,983.00 $ 53,940,618.25

0.00 $ 72,076,601.25 $

0.00 $ 18,135,982.74 $ -16,226,198.75 51,941,937.44
-16,226,198.75 $ 70,077,920.18 $

0.26 $ 18,224,879.56
18,224,879.82 $

0.26 1,998,680.81
1,998,681.07

$ 553,575.59 $

0.00 $ 75,741,342.25 $ -16,226,198.75 $ 73,742,661.18 $

18,224,879.82 $

1,998,681.07

- 29 -

FORT VALLEY STATE UNIVERSITY STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2013

Special Funding Initiative State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity
Prior Year Reserves Not Available for Expenditure Uncollectible Accounts Receivable

Beginning Fund Balance/(Deficit)
July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2012
Surplus

Prior Period Adjustments

$

0.00 $

0.00 $

0.00 $

0.00

$

0.00 $

596,250.16

$

596,250.16 $

$

596,250.16 $

0.00 $ -553,575.59
-553,575.59 $
-553,575.59 $

0.00 $ -42,674.57

45.34 -4,479.30

-42,674.57 $ -4,433.96

-42,674.57 $ -4,433.96

183,603.63

0.00

0.00

0.00

Budget Unit Totals

$

779,853.79 $

-553,575.59 $

-42,674.57 $ -4,433.96

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 special purpose framework.
- 30 -

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2013
Surplus

Excess (Deficiency) of Funds Available
Over/(Under) Expenditures

Ending Fund Balance/(Deficit)
June 30

Analysis of Ending Fund Balance

Reserved

Surplus/(Deficit)

Total

$

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

$

0.00 $

-859,354.56

$

-859,354.56 $

$

-859,354.56 $

0.00 $ 0.00
0.00 $
0.00 $

0.26 $ 1,998,680.81
1,998,681.07 $
1,998,681.07 $

45.60 $

0.00 $

1,134,846.95

1,134,846.95

1,134,892.55 $ 1,134,846.95 $

1,134,892.55 $ 1,134,846.95 $

45.60 $

45.60

0.00

1,134,846.95

45.60 $ 1,134,892.55

45.60 $ 1,134,892.55

859,354.56

0.00

0.00

1,042,958.19

1,042,958.19

0.00

1,042,958.19

$

0.00 $

0.00 $

1,998,681.07 $ 2,177,850.74 $ 2,177,805.14 $

45.60 $ 2,177,850.74

Summary of Ending Fund Balance Reserved
Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over Unreserved Surplus
Total Ending Fund Balance - June 30

$

1,978.72

297,508.48

450,722.10

1,042,958.19

384,637.65

$

$ 2,177,805.14 $

$

1,978.72

297,508.48

450,722.10

1,042,958.19

384,637.65

45.60

45.60

45.60 $ 2,177,850.74

- 31 -

FORT VALLEY STATE UNIVERSITY RECONCILIATION OF BUDGET TO GAAP
YEAR ENDED JUNE 30, 2013

SCHEDULE "5"

Presented below is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A.
Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "1")
Amounts reported for Business-Type Activities in the Statement of Net Position are different because:
Capital Assets used in Business-Type Activities are not reported in the Budget Fund.
Uncollectible accounts receivable are reported as an asset and reserved fund balance in the Budget Fund and as a contra-asset account on the Statement of Net Position.
Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity
Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity
Endowment Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Endowment Fund Activity
Loan Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Loan Fund Activity
Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activity Fund Activity
The budgetary basis of accounting implemented by the State of Georgia recognizes expenditures when encumbered. The following adjustments were made to eliminate this activity for reporting on the Statement of Net Position. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Payables for goods and services provided in the current fiscal year reported in the Budget Fund as encumbrances payable are reported as accounts payable for GAAP reporting. Reimbursement from grantors reported as revenues in the Budget Fund that are for expenditures based on encumbrances are deferred for GAAP reporting. Total Net Effect of Encumbrance Activity
Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Capital Leases Payable Compensated Absences Payable Contracts Payable Total Liabilities

$

2,177,850.74

154,175,831.00

$

1,419,684.00

-1,419,684.00

$ -3,052,126.27 -1,281,772.98

$

1,576,848.29

0.00

$

1,554,777.80

0.00

$

393,565.04

-42,122.11

-1,042,958.19 0.00
-4,333,899.25 1,576,848.29 1,554,777.80
351,442.93

$

3,436,262.51

166,874.21 672,463.36

4,275,600.08

$ -83,016,245.92 -2,174,793.61 -989,225.87

-86,180,265.40

Net Position of Business-Type Activities (Exhibit "A")

$ 72,555,228.00

The supplementary information presented on Schedules 1, 2, 3 and 4 was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. The information was derived from, and relates directly to, the same information used to prepare the financial statements. However, the budgetary statutes and regulations of the State of Georgia require reporting of certain information that is not in accordance with generally accepted accounting principles. Presented on this schedule is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A.
- 32 -

FORT VALLEY STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2013

SCHEDULE "6"

Totals per Annual Supplement
Accruals June 30, 2013 June 30, 2012
Compensated Absences June 30, 2013 June 30, 2012
Adjustments Shared Services on Jointly Staffed Personnel Albany State University Noel, V. Columbus State University Anderson, S. Georgia State University Horton, D. Gordon State College Moore, T.
Reclassification Errors Harris, S.
Unidentified Variance

SALARIES

$

31,155,286 $

TRAVEL 596,930

229,270 -104,477

2,020,244 -2,156,607

7,240 -6,925 -12,600 4,306
865 -6,183

$

31,130,419 $

596,930

- 33 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
November 25, 2013

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Ivelaw L. Griffith President Fort Valley State University
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of Fort Valley State University as of and for the year ended June 30, 2013, and have issued our report thereon dated November 25, 2013.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Fort Valley State University's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Fort Valley State University's internal control. Accordingly, we do not express an opinion on the effectiveness of Fort Valley State University's internal control.
A deficiency in internal control 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 and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

2013YB-10

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Fort Valley State University's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Fort Valley State University in a separate letter dated November 25, 2013.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2013YB-10

Greg S. Griffin State Auditor

SECTION III AUDITEE'S RESPONSE TO PRIOR 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, 2013

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-533-11-01 FS-533-11-03 FS-533-11-04 FS-533-12-01 FS-533-12-02 FS-533-12-03 FS-533-12-04

Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented

CORRECTIVE ACTION/RESPONSES

ACCOUNTING CONTROLS (OVERALL) Inadequate Separation of Duties Finding Control Number: FS-533-12-01

The following actions were taken to partially resolve this finding:

TGRRCN duties were transferred to another staffer who has no responsibility for creating Banner Detail Codes. Additionally, the staff member assigned to maintain Banner Detail Codes was not permitted to perform cash receipting duties.

All data entry and other system maintenance duties associated with granting/activating access to university administrative systems were moved to IT.

While staff members in the Payroll Office conduct a weekly review of all pay and employment changes entered by the Office of Human Resources, an additional control was added in the Controller's Office such that a staff member cross checks a payroll audit report of pay changes to an existing database of approved Personnel Action Notices (PAN) that have been approved by the Budget Office.

The University uses a clearance form that must be completed by all terminating employees prior to receiving a final pay check. This includes a sign off/acknowledgement by the Office of Information Technology (IT) that access to campus information systems has been eliminated. In addition, the University conducted a review of system access to ensure that only active employees or other authorized individuals have access.

Further action to correct the current year issues in the subsequent period will be as follows:

The University will conduct a review of all roles and the access they provide for each user on a quarterly basis. Any inappropriate access will be removed as needed.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.

SECTION IV CURRENT YEAR FINDINGS AND QUESTIONED COSTS

FORT VALLEY STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2013
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.