Board of Regents of the University System of Georgia, University System Office (Oversight Unit), report on audit of the financial statements for the fiscal year ended June 30, 2009

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2009
Georgia Department of Audits and Accounts Russell W. Hinton State Auditor

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
- TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

3

C STATEMENT OF CASH FLOWS

4

D STATEMENT OF FIDUCIARY NET ASSETS

BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND

5

E STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS

BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND

6

F NOTES TO THE FINANCIAL STATEMENTS

7

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

38

2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

39

3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING

SOURCE COMPARED TO BUDGET

(NON-GAAP BASIS) BUDGET FUND

40

4 SCHEDULE OF APPROVED BUDGET

43

5 SCHEDULE OF ALLOTMENTS TO UNITS OF THE UNIVERSITY SYSTEM OF

GEORGIA

44

6 ANALYSIS OF PRIOR YEAR'S SURPLUS FUNDS COLLECTED FROM

INSTITUTIONS AND REDISTRIBUTED TO INSTITUTIONS WITH DEFICITS 46

7 RECONCILIATION OF SALARIES AND TRAVEL

47

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) w TABLE OF CONTENTS w
SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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

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

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

09ARL-62

As discussed in Note I, the financial statements of the University System Office are intended to present the financial position and changes in financial position, and where applicable, cash flows of only that portion ofthe activities ofthe State of Georgia that is attributable to the transactions ofthe University System Office. They do not purport to, and do not, present fairly the financial position and changes in financial position, and where applicable, cash flows of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and aggregate remaining fund information of the University System Office as of June 30, 2009, and the respective changes in financial position, and where applicable cash flows, thereof for the year ended in conformity with accounting principles generally accepted in the United States of America.
Management's Discussion and Analysis is not a part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries of management regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of the University System Office taken as a whole. The accompanying supplementary information (Schedules I through 7) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Respectfully submitted,
~:ti ~8i~1o~P:i~
State Auditor
RWH:as 09ARL-62

REQUIRED SUPPLEMENTARY INFORMATION

UNIVERSITY SYSTEM OFFICE
Management's Discussion and Analysis
Introduction
The University System Office of Georgia's Board of Regents was created in 1931 as part of a reorganization of Georgia's state government. With this act, public higher education in Georgia was unified for the first time under a single governing and management authority. The governor appoints members to the Board, who each serve seven years. Today, the Board of Regents is composed of 18 members, five of whom are appointed from the state-at-large, and one from each of the 13 congressional districts. The Board elects a chancellor who serves as the chief executive officer and the chief administrative officer of the University System.
The Board oversees 35 institutions: four research institutions, two regional universities, 13 state universities, eight state colleges, and eight two-year colleges. In addition, one marine research institute is governed by the Board. These institutions enroll more than 282,000 students and employ more than 11,600 faculty and 30,600 staff to provide teaching and related services to students and the communities in which they are located.
The University System Office also serves as custodian of the Board of Regents Retiree Health Benefit Fund, for University System of Georgia retiree health and life insurance benefits.
Overview ofthe Financial Statements and Financial Analysis
The University System Office is proud to present its financial statements for fiscal year 2009. The emphasis of discussions about these statements will be on current year data. There are three primary financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. This discussion and analysis of the University System Office's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2009 and fiscal year 2008. As custodian of the Board of Regents Retiree Health Benefit Fund, two additional statements are presented: the Statement of Fiduciary Net Assets and the Statement of Changes in Fiduciary Net Assets.
Statement ofNet Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the University System Office as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of the University System Office. The Statement of Net Assets presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and net assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the Notes to the Financial Statements.
From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the University System Office. They are also able to determine how much the University System Office owes vendors.

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

Statement of Net Assets, Condensed

June 30, 2009

June 30, 2008

Assets Current Assets Capital Assets, Net Other Assets

$ 208,812,406 53,876,010 9,238,196

$ 239,792,056 38,015,009 5,820,141

Total Assets

$ 271,926,612

$ 283,627,206

Liabilities Current Liabilities Noncurrent Liabilities

$ 194,652,539 19,335,197

$ 223,071,142 24,238,938

Total Liabilities

$ 213,987,736

$ 247,310,080

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

$ 29,769,741 3,612,043 12,363,257 12,193,835

$ 8,785,101 3,612,043 16,270,567 7,649,415

Total Net Assets

$ 57.938.876

$ 36,317,126

The total assets of the University System Office decreased by $11,700,594. A review of the Statement of Net Assets will reveal that the decrease was due to a combination of Cash, ShortTerm Investments and Investment decreases of $30,582,770 offset by an increase of $15,861,001 in the category of Capital Assets, net. The decrease in Cash and Investments was related to the external component of the Board of Regents investment pool.

The total liabilities for the year decreased by $33,322,344. The decrease is again, primarily related to the decrease in the external component of the Board of Regents investment pool. The combination of the decrease in total assets of $11,700,594 and the decrease in total liabilities of $33,322,344 yields an increase in total net assets of $21,621,750. The increase in total net assets is primarily in the category of invested in capital assets, net of debt, in the amount of $20,984,640.

ii

Statement ofRevenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the University System Office, both operating and nonoperating, and the expenses paid by the University System Office, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the University System Office. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the University System Office. 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 University System Office. 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 University System Office without the Legislature directly receiving commensurate goods and services for those revenues.

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

June 30, 2009

June 30, 2008

Operating Revenues Operating Expenses

$ 274,988,057 430,351,831

$ 266,014,185 432,031,929

Operating Gain/Loss

$ -155,363,774 $ -166,017,744

Nonoperating Revenues and Expenses

152,034,405

166,628,304

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

$ -3,329,369

$

610,560

Other Revenues, Expenses, Gains or Losses

18,903,431

4,401,922

Increase (Decrease) in Net Assets

$ 15,574,062

$ 5,012,482

Net Assets at Beginning of Year, as Originally

Reported

$ 36,317,126

$ 31,304,644

Prior Year Adjustments

6,047,688

Net Assets at Beginning of Year, Restated

$ 42,364,814

$ 31,304,644

Net Assets at End of Year

$ 571938!876 $ 36,317!126

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

iii

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

June 30, 2009

June 30, 2008

Operating Revenue Grants and Contracts Sales and Services of Educational Departments Other

$ 9,692,035
32,737,871 232,558,151

$ 11,899,973
27,336,275 226,777,937

Total Operating Revenue

$ 274,988,057

$ 266,014,185

Nonoperating Revenue State Appropriations Grants and Contracts Investment Income Other

$ 153,083,855 1,527,923 -503,156 -888,580

$ 165,172,381 2,466,332 345,412 -44 445

Total Nonoperating Revenue

$ 153,220,042

$ 167,939,680

Capital Grants and Gifts State Special Items

$ 18,903,431

$ 1,688,517 2,713,405

Total Capital Gifts and Grants and Special Items

$ 18,903,431

$ 4,401,922

Total Revenues

$ 447.111,530

$ 438.355.787

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

June 30, 2009

June 30, 2008

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Scholarships and Fellowships

$ 6,388,324 111,011
95,014,018 19,749,180
285,136 308,557,980
246,182

$ 3,071,652 229,322
99,688,676 23,839,064
281,848 304,669,679
251,688

Total Operating Expenses

$ 430,351,831

$ 432,031,929

Nonoperating Expenses Interest Expense (Capital Assets)

1,185,637

1,311,376

Total Expenses

$ 431,537,468

$ 433,343.305

iv

Operating revenues increased by $8,973,872 in fiscal year 2009. Sales and Services revenue increased by $5,401,596 primarily due to the transfer of the Software Resources and Services (SRS) unit from the University of Georgia. SRS procures hardware and software primarily for use by institutions within the University System of Georgia. Other Operating revenues also increased by $5,780,214 and are related to increased health premium and prescription rebate revenues.

Nonoperating revenues decreased by $14,719,638 for the year primarily due to the decrease of $12,088,526 in state appropriations and decreases in grants and contracts, investment income and other nonoperating revenues totaling $2,631,112. The University System Office served as a pass-through entity for the Federal Stimulus Stabilization funds. The funds were immediately disbursed to institutions within the University System of Georgia when received.

Statement of Cash Flows

The final statement presented by the University System Office is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the University System Office 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 University System Office. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets.

Cash Flows for the Years Ended June 30, 2009 and June 30, 2008, Condensed

June 30, 2009

June 30, 2008

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

$ -144,444,625 122,497,660 -8,132,589 11,606,661

$ -167,177,903 234,393,786 -7,911,589 5,160,478

Net Change in Cash Cash, Beginning of Year

$ -18,472,893 130,683,396

$ 64,464,772 66,218,624

Cash, End of Year

$ 112!210,503

$ 130!683!396

V

Capital Assets
Since fiscal year 2006, the Georgia Public Telecommunications Commission ("the Commission") transfers property and equipment to the University System Office through an intergovernmental agreement. These assets are located at its tower sites throughout the State. In fiscal year 2009, additional equipment was transferred to the University System Office under this arrangement. The value of the equipment and building transferred in fiscal year 2009 was $18,903,431. In addition, $3,477,940 (net book value) in equipment disposals were recorded. The total value of the land, building and equipment transferred to date is $39,359,340, and the accumulated depreciation is $19,976,916, for a net value of$19,382,424.
The transfer was required for the Commission to obtain the use of five-year, general obligation bonds sold in the University System Office's name on behalf of the Commission. The Commission, an authority created after 1967, cannot have bonds sold on its behalf. An intergovernmental agreement has been executed between the Commission and the University System Office that allows the Commission to utilize these funds for the digital conversion of the towers and antennae. The bonds were sold September 7, 2005, and the agreement with the University System Office expires at the end of the five-year period when the bonds are paid in full. All equipment will be transferred back to the ownership of the Commission at the expiration of the intergovernmental agreement.
For additional information concerning Capital Assets, see Notes 1, 6, 8 and 10 in the Notes to the Financial Statements.
Long-Term Liabilities
The University System Office had Long-Term Liabilities of$27,133,383 of which $7,798,186 was reflected as current liability at June 30, 2009.
For additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements.
Health and Dental Insurance
The University System Office is the fiscal agent for health and dental insurance for all of the institutions in the University System of Georgia. The financial information for all related health and dental insurance transactions is included on the face of these financial statements, including the liability for claims incurred but not reported. The summary information regarding revenues, expenditures and the related liability for fiscal year 2009 is provided below:
vi

June 30, 2009 June 30, 2008

Employees: Unpaid Claims and Claim Adjustments (Prior Year IBNR)

$ 24,048,856 $ 27,147,291

Incurred Claims and Claim Adjustments Expenses Provisions for Insured Events of the Current Year

224,198,948

204,892,976

Payments - Claims and Claim Adjustments Attributable To Insured Events of the Current Year and Prior Years

226,420,237

207,991,411

Unpaid Claims and Claim Adjustments (Current Year IBNR) $ 21 827.567 $ 24,048,856

Retirees: Unpaid Claims and Claim Adjustments (Prior Year IBNR)
Incurred Claims and Claim Adjustments Expenses Provisions for Insured Events of the Current Year
Payments - Claims and Claim Adjustments Attributable To Insured Events of the Current Year and Prior Years

$ 6,702,660 $

0

71,406,830

90,144,273

71,482,573

83,441,613

Unpaid Claims and Claim Adjustments (Current Year IBNR) $ 6,626.917 $ 6.702.660
Retiree Health Benefit Fund
The University System Office is the custodian for the Board of Regents Retiree Health Benefit Fund. This fund was authorized pursuant to Official Code of Georgia Annotated Section 47-2121 for the purpose of accumulating funds necessary to meet employer costs of retiree postemployment health insurance benefits. Please see Note 14 for additional information.
Economic Outlook
Revenues for the State of Georgia for fiscal year 2009 were approximately I0.5% less than in fiscal year 2008. As a result, all agencies experienced budget reductions. Regents System Office had a total reduction of 13.9%. Reductions for Georgia Public Libraries and Office of Information and Instructional Technology were 12.1 % and 10.2% respectively. For fiscal year 2010, revenues continue to cause concern, which is why each agency has been requested to submit plans to the Governor's office for possible 4, 6 and 8% reductions. Due to these continuing state budget constraints, the University System Office will maintain an even closer watch over resources to ensure the University System Office's ability to react to unknown internal and external issues.

Usha Ramachandran, Vice Chancellor for Fiscal Affairs/Treasurer The Board of Regents University System Office
Vil

BASIC FINANCIAL STATEMENTS -I-

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) STATEMENT OF NET ASSETS JUNE 30, 2009
ASSETS
Current Assets Cash and Cash Equivalents ShortTerm Investments Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Investments Notes Receivable Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Benefits Payable Deferred Revenue (Note 7) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Assets

EXHIBIT "A"

$ 112,210,503 74,218,665
548,738 20,627,141
507,885 699 474
$ 208,812,406

$

7,115,126

2,123,070

53,876,010

$ 63,114,206

$ 271,926,612

$

17,288,386

130,694

21,827,567

300,697

147,307,009

5,824,874

1,973,312

$ 194,6521539

$

18,281,395

1,053,802

$

19,335,197

$ 213,987,736

$

29,769,741

3,612,043 12,363,257 121193,835

$ ====57=,9=3=8=,8==76=

The notes to the financial statements are an integral part of this statement.
2 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS YEAR ENDED JUNE 30, 2009

EXHIBIT "B"

OPERATING REVENUES
Grants and Contracts Federal Other
Sales and Services Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Staff
Employee Benefits 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 Other Interest and Other Investment Income Interest Expense Other Nonoperating Revenues/Expenses
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State
Increase (Decrease) in Net Assets
Net Assets Beginning of Year, Restated
Net Assets End of Year

$

9,501,026

191,009

32,737,871

23215581151

$ 27419881057

$

28,312,242

7,102,308

406,119

246,182

22,277,838

361,984,476

101022,666

$ 43013511831

$ -15513631774

$ 153,083,855

72,398 1,455,525 -503, 156 -1, 185,637 -8881580

$ 15210341405

$

-3,329,369

1819031431

$

15,574,062

4213641814

$ =====57='::::;:93=8::!:::8:,;:;:;:76:;:::

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

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES Grants and Contracts Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships 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 Note Receivable Collections
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES 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 Proceeds from Sales and Maturities of Investments Interest on Investments
Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts
The notes to the financial statements are an integral part of this statement.
-4 -

EXHIBIT"C"

$

10,252,194

32,737,871

-389,369,301

-28,214,616

-246,182

2301395 409

$ -144 444 625

$ 153,083,855 -32,201,390 1,530,167 85 028
$ 122,497,660

$

2,598,670

-2,430,532

-7,115,090

-1185637

$

-8, 132,589

$

11,401,611

205 050

$

11,606,661

$ -18,472,893

1301683,396

$ 112,210,503

$ -155,363,774
10,022,666
-1,903,280 -507,885 -695,038
5,965,807 300,697
-2,221,289 -42 529

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND STATEMENT OF FIDUCIARY NET ASSETS JUNE 30, 2009

EXHIBIT"D"

ASSETS Cash and Cash Equivalents Receivables
Total Assets LIABILITIES Benefits Payable NET ASSETS Net Assets Held in Trust for Other Post-employment Benefits

$

7,245,899

9,947 431

$

17,193,330

$

6,626,917

$

10!5661413

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

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND STATEMENT OF CHANGES IN FIDUCIARY NET ASSETS
YEAR ENDED JUNE 30, 2009

EXHIBIT"E"

ADDITIONS Contributions Employer Plan Member Total Contributions Investment Income Interest/Dividends Total Additions
DEDUCTIONS
Benefits Life Insurance Premium Expense Administrative Expense
Total Deductions Net Increase/Decrease Beginning Net Assets
Net Assets Held in Trust for Other Post-employment Benefits

$

68,115,966

2612131842

$

94,329,808

2521985

$

941582?93

$

77,081,618

4,224,627

310001389

$

8413061634

$

10,276,159

2901254

$ ==1=0,=56=6=,4=1=3

The notes to the financial statements are an integral part of this statement. -6-

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS The University System Office of Georgia's Board of Regents was created in 1931 as part of a reorganization of Georgia's state government. With this act, public higher education in Georgia was unified for the first time under a single governing and management authority. The governor appoints members to the Board, who each serve seven years. Today, the Board of Regents is composed of 18 members, five of whom are appointed from the state-at-large, and one from each of the 13 congressional districts. The Board elects a Chancellor who serves as its chief executive officer and the chief administrative officer of the University System.
The Board oversees 35 institutions: four research institutions, two regional universities, 13 state universities, eight state colleges, and eight two-year colleges. In addition, one marine research institute is governed by the Board. These institutions enroll 282,000 students and employ more than 11,600 faculty and 30,600 staff to provide teaching and related services to students and the communities in which they are located.
The University System Office also serves as custodian of the Board of Regents Retiree Health Benefit Fund, for University System of Georgia retiree health and life insurance benefits.
REPORTING ENTITY The University System Office is the administrative central office for the thirty-five (35) Statesupported, member institutions of higher education in Georgia and one marine research institute, which comprise the University System of Georgia, an organizational unit of the State of Georgia. The University System Office also is the custodian of a Fiduciary Fund for retiree health and life insurance benefits. The accompanying financial statements reflect the operations of the University System Office as a separate reporting entity and as custodian of the Board of Regents Retiree Health Benefit Fund.
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. The University System Office does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, the University System Office is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential component units of the State. See Note 16 for additional information.
-7-

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University System Office was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the University System Office's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required.
As a result of creating the Board of Regents Retiree Health Benefit Fund, the Board of Regents implemented the provisions of GASB Statement Nos. 43 Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans and 45 Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions in fiscal 2008. The financial statements for the plan are presented directly after the University System Office Enterprise Fund financial statements and include a Statement of Fiduciary Net Assets and a Statement of Changes in Fiduciary Net Assets. See Note 14 - Post-Employment Retiree Health Benefit Plan for additional information regarding this fund.
BASIS OF ACCOUNTING For financial reporting purposes, the University System Office is considered a special-purpose government engaged in business-type and fiduciary activities. Accordingly, the University System Office'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-system transactions have been eliminated.
The University System Office has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University System Office has elected to not apply FASB pronouncements issued after the applicable date.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the Board of Regents Short-Term Investment Pool.

-8-

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SHORT-TERM INVESTMENTS Short-Term Investments consist of investments of 90 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
INVESTMENTS The University System Office accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Assets. The Board of Regents Legal Fund, the Board of Regents Balanced Income Fund, the Board of Regents Total Return Fund, and the Board of Regents Diversified Fund are included under Investments.
ACCOUNTS RECEIVABLE Accounts receivable consists of receivables from other institutions within the University System of Georgia, primarily for health insurance premiums. 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 System Office's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
INVENTORIES Resale Inventories are valued at cost using the "first in, first out" (FIFO) basis.
NONCURRENTINVESTMENTS Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
CAPITAL ASSETS Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University System Office's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, and 3 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.

-9-

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University System Office when complete. For projects managed by the University System Office, the University System Office retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2009, GSFIC transferred equipment for the Georgia Public Telecommunications Commission to the University System Office valued at $18,903,431.
DEPOSITS HELD FOR OTHER ORGANIZATIONS The University System Office had $147,307,009 in Deposits Held for Other Organizations as of June 30, 2009. Deposits held for others consist of the external portion of the University System of Georgia's Pooled Investment Fund program and other funds held by the University System Office as an agent for various governments or individuals.
DEFERRED REVENUE Deferred Revenue includes amounts received from grant and contract sponsors that have not yet been earned.
COMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. The University System Office had accrued liability for compensated absences in the amount of $3,069,644 as of July 1, 2008. For fiscal year 2009, $2,077,103 was earned in compensated absences and employees were paid $2,119,633, for a net decrease of $42,530. The ending balance as of June 30, 2009 in accrued liability for compensated absences was $3,027,114.
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.

- 10 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

Expendable Restricted Net Assets include the following:

Restricted - E&G and Other Organized Activities Health Insurance Reserve (USO only)

$ 11,372,086 991,171

Total Restricted Expendable

$ 12.363 257

Unrestricted net assets: Unrestricted net assets represent resources derived from state appropriations and sales and services of educational departments. These resources are used for transactions relating to the educational and general operations of the University System Office, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be remitted to the office of Treasury and Fiscal Services. At June 30, 2009, there was a surplus balance of $339,029.53 to be refunded.

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

Reserve for Encumbrances Other Unrestricted

$ 7,887,653 4,306,182

Total Unrestricted Net Assets

$ 12,193.835

- 11 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS When an expense is incurred that can be paid using either restricted or unrestricted resources, the University System Office's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
INCOME TAXES The University System Office, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
CLASSIFICATION OF REVENUES The University System Office has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) departmental sales and services, (2) Federal, state and local grants and contracts, and (3) health insurance premiums received from institutions within the University System of Georgia for self-insured health plans offered.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
RESTATEMENT OF PRIOR YEAR NET ASSETS The University System Office has a restatement of prior year net assets increasing beginning net assets by $6,047,688 due to various errors or omissions.
Expenses totaling $5,569,463 that were incurred during fiscal years 2007 and 2008 for the University System Office's upgrade of financial systems, met criteria for capitalization under the University System Office's capitalization policy and have been corrected through restatement of beginning net assets.
Accumulated Depreciation amounts totaling $478,225 were adjusted in fiscal year 2009 for equipment assets that had either been retired or sold in previous years.
These adjustments to beginning net assets are in accordance with generally accepted accounting principles.

- 12 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

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 System Office's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the University System Office) 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, 2009, the carrying value of deposits was $29,174,128 and the bank balance was $36,663,294. Of the University System Office's deposits, $36,608,174 were uninsured. Of these uninsured deposits, $36,608,174 were collateralized with securities held by the financial institution's trust department or agent in the University System Office's name.

- 13 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 2: DEPOSITS AND INVESTMENTS
INVESTMENTS The University System Office serves as fiscal agent for various units of the University System of Georgia and cooperative organizations. The University System Office pools the monies of these organizations with the University System Office's monies for investment purposes. The University System Office cannot allocate pool investments between the internal (University System) and external (cooperative organizations) investment pool portions. The investment pool is not registered with the SEC as an investment company. The fair value of the 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.
The University System Office maintains investment policy guidelines for each pooled investment fund that is offered to qualified University System participants. These policies are intended to foster sound and prudent responsibility each institution has to the citizens of Georgia and which conforms to the Board of Regents investment policy. All investments must be consistent with donor intent, Board of Regents policy, and applicable Federal and state laws.
Units of the University System of Georgia and their affiliated organizations may participate in the Pooled Investment Fund program. The overall character of the pooled fund portfolio should be one of above average quality, possessing at most an average degree of investment risk.
Short-Term Fund The Short-Term fund provides a current return and stability of principal while affording a means of overnight liquidity for projected cash needs. The investment maturities of the fund will range between daily and two years.
Legal Fund The Legal fund provides an opportunity for greater income and modest principal growth to the extent possible with the securities allowed under Georgia Code 50-17-59 and 50-17-63. The average maturity of this fund will typically range between five and 10 years, with a maximum of thirty years for any individual investment. The overall character of the portfolio should be one of treasury and agency quality, possessing virtually no degree of financial risk.
Balanced Income Fund The Balanced Income fund is designed to be a vehicle to invest funds that are not subject to the state regulations concerning investing in equities. This fund is comprised of fixed income, equity and cash equivalent instruments.
The equity allocation range shall be between 30% and 40%, with a target of 35% of the total portfolio. The fixed income (bond) portion of the portfolio shall be between 60% and 70%, with a target of 65% of the total portfolio. Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality, short-term instruments.
- 14 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS .TTJNE 30, 2009

EXHIBIT "F"

NOTE 2: DEPOSITS AND INVESTMENTS
INVESTMENTS Total Return Fund The Total Return fund is another pool designed to be a vehicle to invest funds that are not subject to state regulations concerning investing in equities. This pool offers the greatest percentage of overall equity exposure, with well over half of the funds typically invested in equities.
The equity allocation range shall be between 60% and 70%, with a target of 65% of the total portfolio. The fixed income (bond) portion of the portfolio shall be between 30% and 40%, with a target of 35% of the total portfolio. Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality institutional money market mutual funds or other high quality, short-term instruments.
Diversified Fund The Diversified fund is designed to gain further diversification and increase exposures to assets that have lower correlation to equity and bond markets by utilizing alternative asset classes. In addition, this fund is constructed to build an optimal portfolio where return is increased and risk is reduced.
The equity allocation range shall be between 50% and 75% of the portfolio. The fixed income (bond) portion of the portfolio shall be between 20% and 40%. The portfolio may also consist of Hedge Funds, Real Estate and Venture Capital/Private Equity/Post Venture Capital.
Hedge Funds - The investment approach to this asset class is to use a multi-strategy, multimanager fund of hedge funds. The Board of Regents believes that a fund of fund strategy will provide the best access to a highly diversified pool of hedge fund strategies and managers.
Real Estate - The Board of Regents' approach to investing in this asset class is to use real estate investment trusts (REITs). REITs are more liquid than owning commercial real estate and diversification can be achieved by purchasing a mutual fund.
Venture Capital/Private Equity/Post Venture Capital - This asset class is the riskiest and most volatile permitted investment opportunity. This asset should be considered as an additional diversification investment strategy due to the low correlation with stock and bonds.
Reserves for contingencies and stock and bond purchases are expected to comprise the balance of the fund. Reserves and excess income should be invested at all times in practical amounts. Reserves can be invested in high quality, institutional money market mutual funds or other high quality, short-term instruments.

- 15 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS The University System Office's investments as of June 30, 2009 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Debt Securities U. S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Mutual Bond Fund Repurchase Agreements

$ 2,750,086
268,997 93,628,312 27,293,736
7,627.008

$ 131,568,139

Other Investments Bond/Equity Mutual Funds Equity Mutual Funds Real Estate Investment Fund

2,768,382 35,889,758
1.389.786

Total Investments

$ 171 616 065

Less Than 1 Year
$ 1,442,854 7.627,008
$ 2!0621862

Investment Maturi:!):'.

l -5 Years

6 - 10 Years

$ 788,574 $ 1,961,512

16,596,268 22,818,301

5,010,029 4,475,435

$ 4Q 203 143 $ 11 446,216

More than 10 Years
$ 268,997 70,579,161
$ 1Q 848 158

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 Board of Regents policy for managing interest rate risk is contained in the investment policy guidelines for the various pooled funds:

1. In the Short-Term fund, the average maturity of the fixed income portfolio shall not exceed three years.

2. In all the other pooled funds, the average maturity of the fixed income portfolio shall not exceed ten years.

3. Fixed income investments, except in the Diversified Fund, shall be limited to U. S. government agency and corporate debt instruments that meet investment eligibility under Georgia Code 50-17-63.

4. The fixed income target allocation is defined in the investment policy guidelines for each pooled investment fund. These targets may be modified upon recommendation of the fund's investment manager and approval by the Board of Regents.

- 16 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 2: DEPOSITS AND INVESTMENTS
INVESTMENTS Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the college/university will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University System Office's policy for managing custodial credit risk for investments is:
1. The University System Office has appointed a Federally regulated banking institution as custodian. The custodian performs its duties to the standards of a professional custodian and is liable to the University System Office for claims, losses, liabilities and expenses arising from its failure to exercise ordinary care, its willful misconduct, or its failure to otherwise act in accordance with the contract.
2. All securities transactions are to be settled on a delivery vs. payment basis through an approved depository institution such as the Depository Trust Company or the Federal Reserve.
3. Repurchase agreements are to be collateralized by United States Treasury securities at 102% of the market value of the investment at all times.
At June 30, 2009, $104,274,403 of the University System Office's applicable investments was uninsured and held by the investment's counterparty in the University System Office's name.
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 System Office's policy for managing credit quality risk is contained in the investment policy guidelines for the various pooled investment funds:
1. In all pooled funds except the Diversified Fund, all debt issues must be eligible investments under Georgia Code 50-17-63. Portfolios of debt security funds also must meet the eligible investment criteria under the same code section.
2. The Diversified Fund is permitted to invest in noninvestment grade debt issues up to a limit of 15% of the entire portfolio.
3. The portfolio shall be well diversified as to issuer and maturity.

- 17 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS The investments subject to credit quality risk are reflected below:

Fair Value

Unrated

Related Debt Investments U. S. Agencies Mutual Bond Fund Repurchase Agreements - Underlying U. S. Agency Securities

$ 93,628,312 $ 93,628,312

27,293,736

27,293,736

7,627,008

7,627,008

$ 128,549.056 $ 128,549,056

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The University System Office's policy for managing concentration of credit risk is to diversify investments to the extent that any single issuer shall be limited to 5% of the market value in a particular investment fund. The following U. S. Agency investments exceeded 5% of the total reported investment amount as of June 30, 2009:

Investment

Amount

% of Total

Federal National Mortgage Association Federal Home Loan Mortgage Corporation

$ 70,260,731 $ 21,963,960

41% 13%

Condensed financial information for the investment pool is as follows:

Statement ofNet Assets - June 30, 2009

Investments Accrued Interest and Other Receivables
Net Assets Held in Trust for Pool Participants Internal Portion External Portion
- 18 -

$ 168,644,824 509,161
$ 169,153,985
$ 22,262,322 146,891,663
$ 169,153.985

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS Revenues

Statement of Changes in Net Assets - June 30, 2009

Interest Income Net Increase (Decrease) in Fair Value oflnvestments
Total Revenues
Expenses
Operating Expenses Administrative Expenses
Net Increase (Decrease) in Assets Resulting from Operations
Distribution to Participants Capital Transactions
Total Increase (Decrease) in Assets Resulting from Operations
Net Assets July 1, 2008
Net Assets June 30, 2009

$ 6,835,725 -12,916,445
$ -6,080,720
-393,363 $ -6,474,083
-84, 188,444 60,895,765 $ -29,766,762 198,920,747 $ 162~153!985

NOTE 3: ACCOUNTS RECEIVABLE

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

Business-type Activities: Federal Financial Assistance Other

$ 548,738 20,666,858

$ 21,215,596

Less: Allowance for Doubtful Accounts

39 717

Net Accounts Receivable

$ 21,175,879

Fiduciary Fund: Contributions to Board of Regents Retiree Health Benefit Fund

$ 22947A31

- 19 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 4: INVENTORIES

Inventories consisted of the following at June 30, 2009:

Other NOTE 5: NOTES RECEIVABLE

$==5====0-7!=c=88===5

The Georgia Education Authority (University), (GEA (U)), was authorized to acquire, construct and operate housing accommodations for students of any institution under the control of the Board of Regents of the University System of Georgia. The GEA (U) constructed a dormitory on the campus of Georgia Southern University (GSOU) and financed the construction by obtaining a loan in 1994 from the U. S. Department of Education in the amount of $3,000,000 at an interest rate of 5.5% for a term of thirty years. In July 2007, GEA (U) met and resolved to no longer conduct business as a state authority and dispose of all its assets and liabilities. As a result of that decision, a Note Receivable that is payable from GSOU was transferred by Resolution from GEA (U) to the University System Office (USO) in fiscal year 2008. GSOU has an obligation to send the USO annual payments of $205,320 through the year 2025. In fiscal year 2009, the USO collected $205,320, $120,292 of which represented interest. Total principal collected on the Note Receivables was $85,028. At June 30, 2009, the Notes Receivable balance was $2,123,070.

- 20 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 6: CAPITAL ASSETS

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

Beginning Balance July 1, 2008 (Restated)

Additions

Reductions

Ending Balance June 30, 2009

Capital Assets, Not Being Depreciated: Land Capitalized Collections Construction Work-in-Progress

$ 2,476,877

$

10,000

0 $ 1,532,950

100,053

$ 2,376,824 10,000
1,532,950

Total Capital Assets Not Being Depreciated

$ 2,486 877 $ 1,532,950 $ 100,053 $ 3,919,774

Capital Assets, Being Depreciated:

Buildings and Building Improvements $

0 $ 217,978

$ 217,978

Equipment

49,276,587

19,583,035 $ 6,095,045

62,764,577

Capital Leases

49,215 422

1,991,451

4 029

51,202,844

Total Assets Being Depreciated

$ 98,492,009 $ 21,792,464 $ 6,099,074 $ 114,185,399

Less: Accumulated Depreciation: Equipment Capital Leases

$ 35,946,011 $ 3,176,144 $ 2,709,692 $ 36,412,463

20,970,178

6,846,522

27,816,700

Total Accumulated Depreciation

$ 56,916,189 $ 10,022,666 $ 2,709,692 $ 64,229,163

Total Capital Assets, Being Depreciated,

Net

$ 41,575,820 $ 11,769,798

$ 49,956,236

Capital Assets, Net

$ 44,062,621 $ 13,302 748 $ 3 482 435 $ 53 8161010

Since fiscal year 2006, the Georgia Public Telecommunications Commission ("the Commission") transfers property and equipment to the University System Office through an intergovernmental agreement. These assets are located at its tower sites throughout the state. In fiscal year 2009, additional equipment was transferred to the University System Office under this arrangement. The value of the equipment transferred in fiscal year 2009 was $18,903,431. In addition, $3,477,940 (net book value) in equipment disposals were recorded. The total value of the land, building and equipment transferred to date is $39,359,340, and the accumulated depreciation is $19,976,916, for a net value of $19,382,424. All equipment will be transferred back to the ownership of the Commission at the expiration of the intergovernmental agreement.

NOTE 7: DEFERRED REVENUE

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

Other Deferred Revenue

$==3aaaa;00=.6=9==7

- 21 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 8: LONG-TERM LIABILITIES

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

Leases Lease Obligations
Other Liabilities Compensated Absences
Total Long-Term Obligations

Beginning Balance
July 1. 2008
$ 29,229,908
3,069,644 $ 32,299.552

Additions $ 1,991,451
2,077,103
$ 4.068 554

Reductions $ 7,115,090
2,119,633

Ending Balance June 30, 2009
$ 24,106,269
$ 27.133.383

Current Portion
$ 5,824,874
1,973,312

NOTE 9: SIGNIFICANT COMMITMENTS

The University System Office had no significant unearned, outstanding construction or renovation contracts executed as of June 30, 2009.

NOTE 10: LEASE OBLIGATIONS

The University System Office is obligated under various capital leases and installment purchase agreements for the acquisition of real property and equipment.
CAPITAL LEASES The University System Office has 24 capital leases payable in monthly installments with terms expiring in various years between 2010 and 2024. Expenditures for fiscal year 2009 were $8,300,727, of which $1,185,637 represented interest. Total principal paid on capital leases was $7,115,090 for the fiscal year ended June 30, 2009. Interest rates range from 2.62 percent to 9. 71 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2009:

Buildings Equipment

$ 10,765,757 12,620,387

Total Assets Held Under Capital Lease

$ 23,386.144

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.

The University System Office entered into five new capital lease obligations in the current year.

In July 2008, The University System Office entered into capital leases for two copiers. The first lease was for $15,726 at 7.05%, with a lease term of three years. The second lease was for $22,530 at 7.05%, also with a term of three years. The outstanding principal balances on these leases at June 30, 2009 were $10,848 and $15,541, respectively.

- 22 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 10: LEASE OBLIGATIONS

CAPITAL LEASES In September 2008, the University System Office entered into two equipment capital leases for servers. The first was for $1,231,698 at 3.49% with a five year lease term. The second lease was for $699,488 at 3.49%, also with a five year lease term. The outstanding principal balances on these leases at June 30, 2009 were $1,041,026 and $591,204, respectively.

In October 2008, the University System Office entered into a capital lease for copier equipment. The lease was for $22,009 at 9.71 % with a five year lease term. The outstanding principal balance on this lease as of June 30, 2009 was $19,346.

The University System Office also has various capital leases for equipment and a capital lease for one building with outstanding balances at June 30, 2009 in the amount of $10,485,890 and $11,942,414, respectively.

OPERATING LEASES The University System Office has one operating lease for office space used by the Georgia Public Library System. The lease is annually renewable through fiscal year 2010.

FUTURE COMMITMENTS Future commitments for capital leases and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2009, were as follows

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2010 2011 2012 2013 2014 2015 - 2019 2020 - 2024

$ 6,751,856 $ 4,924,001 3,205,513 1,963,577 5,604,173 5,960,110 1,562,414

187,155

Total Minimum Lease Payments

$ 29,971,644 $ 187,155

Less: Interest

5,865,375

Principal Outstanding

$ 24,106,269

The University System Office's expense for rental of real property and/or equipment under operating leases in fiscal year 2009 was $1,708,481.

- 23 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 11: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2009 2008 2007

100% 100% 100%

$ 2,085,313 $ 1,952,167 $ 1,787,733

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Plan Description The University System Office participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia.

The ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January I, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.

The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member

- 24 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 11: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description 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.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University System Office's payroll for the year ended June 30, 2009, for employees covered by ERS was $597,001. The University System Office's total payroll for all employees was $28,312,242.
Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, the University System Office pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these University System Office contributions are included in the members' accounts for refund purposes and are used in the computation of the members' eamable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The University System Office 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 University System Office contributions are not at any time refundable to the member or his/her beneficiary.
- 25 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 11: RETIREMENT PLANS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Funding Policy Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2009 2008 2007

100% 100% 100%

$ 62,341 $ 61,924 $ 40,840

Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2009 financial report, which may be obtained through ERS.

REGENTS RETIREMENT PLAN

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

Funding Policy The University System Office makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2009, the employer contribution was 8.15% for the first six months and 9.24% for the last six months of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.

The University System Office and the covered employees made the required contributions of $326,444 (8.15% or 9.24%) and $186,308 (5%), respectively.

- 26 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 11: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Funding Policy 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 The University System Office participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2009 amounted to $27,538 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.

- 27 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 12: RISK MANAGEMENT
The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. The University System Office and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person.
The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different, self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees.
Express Scripts was the administrator of the Board of Regents' prescription drug plan through December 31, 2008. Effective January 1, 2009, the prescription drug plan is administered through Medco Health Solutions. Pharmacy drug claims are processed in accordance with guidelines established for the Board of Regents' Prescription Drug Benefit Program. Generally, claims are submitted by participating pharmacies directly to Medco Health Solutions for verification, processing and payment. Medco Health Solutions maintains an eligibility file based on information furnished by Blue Cross - Blue Shield on behalf of the various organizational units of the University System of Georgia.

- 28 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 12: RISK MANAGEMENT

A reconciliation of total estimated claims liabilities for employees and retirees for the fiscal years ended June 30, 2009 and June 30, 2008 is shown below:

Employees:
Unpaid Claims and Claim Adjustments (Prior Year IBNR)
Incurred Claims and Claim Adjustments Expenses - Provisions for Insured Events of the Current Year
Payments - Claims and Claim Adjustments Attributable to Insured Events of the Current Year and Prior Years
Unpaid Claims and Claim Adjustments (Current Year IBNR)
Retirees:

June 30, 2009 $ 24,048,856
224,198,948 226,420,237 $ 21,827,567

June 30, 2008 $ 27,147,291
204,892,976 207,991,411 $ 24 048.856

Unpaid Claims and Claim Adjustments (Prior Year IBNR)
Incurred Claims and Claim Adjustments Expenses - Provisions for Insured Events of the Current Year

$ 6,702,660 71,406,830

$

0

90,144,273

Payments - Claims and Claim Adjustments Attributable to Insured Events of the Current Year and Prior Years

71,482,573

83,441,613

Unpaid Claims and Claim Adjustments (Current Year IBNR)

$ 6.626.917

$ 6JQ2~66Q

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. The University System Office, as an organizational unit of the Board of Regents of the University System of

- 29 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 12: RISK MANAGEMENT
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 13: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures that may be disallowed by the granter cannot be determined at this time, although the University System Office expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against the University System Office (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2009.
NOTE 14: POST-EMPLOYMENT RETIREE HEALTH BENEFIT PLAN
Plan Description The Board of Regents Retiree Health Benefit Fund (the "Plan") is a single-employer, defined benefit, healthcare plan administered by the University System Office. The plan was authorized pursuant to Official Code of Georgia Annotated Section 47-21-21 for the purpose of accumulating funds necessary to meet employer costs of retiree post-employment health insurance benefits.
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or who 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.
- 30

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 14: POST-EMPLOYMENT RETIREE HEALTH BENEFIT PLAN

Plan Description The Board of Regents of the University System of Georgia issues a publicly available financial report that includes financial statements and required supplementary information for the Plan within its Consolidated Annual Financial Report. This report may be obtained at the following website address:

http://www.usg.edu/usg stats/annual fin rep/

Membership of the plan consisted of the following at June 30, 2009:

Retirees and Beneficiaries Receiving Benefits Terminated Plan Members Entitled to But Not
Yet Receiving Benefits Active Plan Members

18,433
0 34,973

Total

53,406

Summary of Significant Accounting Policies The financial statements of the Plan are prepared using the accrual basis of accounting. Employer contributions are recognized in the period in which they are due. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan.

Funding Policy The contribution requirements of plan members and the University System of Georgia, as employer, are established and may be amended by the Board of Regents. The Plan is substantially funded on a "pay-as-you-go" basis; however, amounts above the pay-as-you-go basis may be contributed annually, either by specific appropriation or by Board designation.

Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for eligible retirees. The employer portion of health insurance for its eligible retirees is based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2009 plan year, the employer rate was approximately 70-75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25-30%. 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 retiree.

For fiscal year 2009, the University System of Georgia contributed $68,115,966 to the plan, including $63,678,100 for current premiums or claims and an additional $4,437,866 to pre-fund benefits. Plan members receiving benefits contributed $26,213,842 for current premiums or claims.

- 31 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 14: POST-EMPLOYMENT RETIREE HEALTH BENEFIT PLAN

Funding Policy The University System Office had 72 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits as of June 30, 2009. For the year ended June 30, 2009, the University System Office recognized as incurred $358,747 of expenditures, which was net of $140,490 of participant contributions.

Annual OPEB Cost and Net OPEB Obligation The University System of Georgia's annual other post-employment benefit (OPEB) cost (expense) is calculated based on the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities over a period not to exceed thirty years.

The following table shows the components of the University System's annual OPEB cost for the year, the amount actually contributed to the plan, and changes in the University System's net OPEB obligation to the Retiree Health Benefit Fund (dollar amounts in millions):

Annual Required Contribution Interest on Net OPEB Obligation Adjustment to Annual Required Contribution

$ 349.5 7.1 -9.5

Annual OPEB Cost (Expense) Less: Contributions Made
Increase in Net OPEB Obligation

$ 347.l 68.1
$ 279.0

Net OPEB Obligation - Beginning of Year

158.2

Net OPEB Obligation - End of Year

$ 437.2

Since the net OPEB obligation to the Retiree Health Benefit Fund is a liability of the entire University System and not only the University System Office, the annual OPEB cost and net OPEB obligation are reported in the Consolidated Annual Financial Report of the University System of Georgia.

The University System's annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for the Retiree Health Benefit Plan for fiscal years 2008 and 2009 were as follows (dollar amounts in millions):

- 32 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 14: POST-EMPLOYMENT RETIREE HEALTH BENEFIT PLAN

Annual OPEB Cost and Net OPEB Obligation

Percentage of

Fiscal

Annual

Annual OPEB

Year

OPEB

Cost

Ended

Cost

Contributed

Net OPEB Obligation

2008 2009

$224.9 $347.1

29.7% 19.6%

$158.2 $437.2

Funded Status and Funding Progress

Actuarial Valuation
Date

Actuarial Value of Assets

Actuarial Accrued Liability (AAL)Projected Unit Credit

7/1/2008 7/1/2009

$

0 $1,985,200,000

$ 290,000 $3,258,200,000

Unfunded AAL
(UAAL) {b-a)
$1,985,200,000 $3,257,910,000

Funded Ratio {alb)
0.0% 0.0%

Covered Payroll
{c)
$2,201,804,465 $2,372,385,000

UAAL as a
Percentage of
Covered Payroll ((b-a}/c}
90.2% 137.3%

Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. The schedule of funding progress, presented as required supplementary information following the notes to the financial statements, presents multiyear trend information about whether the actuarial value of plan assets is increasing or decreasing over time relative to the actuarial accrued liabilities for benefits.

Actuarial Methods and Assumptions Projections of benefits for financial reporting purposes are based on the substantive plan (the plan as understood by the employer and the plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefit costs between the employer and plan members to that point. The actuarial methods and assumptions used include techniques that are designed to reduce the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets, consistent with the long-term perspective of the calculations. Additional information as of the latest actuarial valuation follows:

- 33 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 14: POST-EMPLOYMENT RETIREE HEALTH BENEFIT PLAN

Actuarial Methods and Assumptions Valuation Date Actuarial Cost Method Amortization Method Asset Valuation Method Remaining Amortization Period Actuarial Assumptions: Investment Rate of Return* Healthcare Cost Trend Rate* Ultimate Trend Rate Year of Ultimate Trend Rate

July 1, 2008 Projected Unit Credit Level Dollar, Closed, 30-year Market Value of Assets
29 years
4.50% 9.00% 5.50%
2014

*Includes an inflation assumption of 2.5% Please note that the Investment Rate ofReturn percentage can change.

NOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

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

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

Instruction

Functional Classification

Research

Public Service

Academic Surmort

$ 1,372,069 $ 272,881 38,034

13,154 4,620

$ 2,356,275 575,913 40,001

$ 1,103,039 293,461 19,346

3,030
4,701,253 I 057
$ 6 388 324 $

93,237 11 I OJ I

17,625,670
74,211,082 205 077
$ 95 014 018

66,398
17,541,660 725,276
$ 19 749 180

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

Student Services

Functional Classification

Institutional SU[![!Ort

Scholarships and Fellowshi12s

Total Operating Ex12enses

$ 241,649 $ 23,226,056

43,470

5,911,963

17

308,721

$ 28,312,242 7,102,308 406,119

$ 4,582,740

246,182

246,182 22,277,838

265,437,244 9,091,256

361,984,476 10 022 666

$ 2~6 182 $....43Q 351 831

- 34 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2009

EXHIBIT "F"

NOTE 16: AFFILIATED ORGANIZATIONS
In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of GASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, the University System of Georgia Foundation, Inc. has been determined to be a legally separate, tax exempt organization whose activities primarily support the University System Office of the Board of Regents of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office has determined Component Units of the State of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, the University System Office has not included financial activity for the University System of Georgia Foundation, Inc., in these financial statements.
The University System of Georgia Foundation, Inc. has been determined significant to the State of Georgia for the year ended June 30, 2009, and as such, is reported as a discretely presented component unit in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). The significant discretely presented component units issue separate audited financial statements that can be obtained from the Board of Regents of the University System of Georgia.

- 35 -

(This page left intentionally blank)

SUPPLEMENTARY INFORMATION - 37 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND JUNE 30, 2009

SCHEDULE "1"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accounts Payable Accrued Payroll Encumbrances Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Departmental Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Property Sale Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

$ 23,957,427.28 4,894,618.11
548,738.01 2,121,397.92
21,357.32 507,885.00
$ 32,051,423.64

$

1,598,342.68

130,693.66

8,751,760.96

300,697.19

$ 10,781,494.49

$

4,315,881.42

955,776.91

9,049,226.13

39,716.59

507,885.00

6,062,413.57

339,029.53

$ 21,2691929.15

$ 32,051,423.64

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 38 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND
YEAR ENDED JUNE 30, 2009

SCHEDULE ''2"

REVENUES
State Appropriation State General Funds Tobacco Funds
Federal Funds Other Funds
Total Revenues
CARRY-OVER FROM PRIOR YEAR
Transfer from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Georgia Military College Georgia Public Telecommunications MCG Hospital and Clinics Public Libraries Regents Central Office Research Consortium 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 Increase (Decrease) in Inventories Unreserved Fund Balance (Surplus) Returned
to Office of Treasury and Fiscal Services Year Ended June 30, 2008
Unreserved Fund Balance (Surplus) Returned to Board of Regents - University System Office Year Ended June 30, 2008
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

ORIGINAL BUDGET

FINAL BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 176,576,576.00 $ 190,634,298.00 $ 152,980,775.00 $

750,000.00

750,000.00

750,000.00

0.00

0.00

0.00

34 849,543.00

49,075 524.00

46 897,085.05

$ 212,176,119.00 $ 240,459,822.00 $ 200,627,860.05 $

-37,653,523.00 0.00 0.00
-2 178,438.95
-39,831,961.95

0.00

0.00

17,593,952.36

$ 212,176,119.00 $ 240 459,822.00 $ 218 221,812.41 $

17 593,952.36 -22 238,009.59

$ 3,062,916.00 $ 2,636,371.00 $ 2,592,868.00 $

18,191,543.00

16,163,816.00

15,863,299.00

33,921,721.00

33,921,721.00

33,229,115.00

46,271,055.00

42,035,700.00

41,077,995.10

7,981,264.00

7,066,498.00

6,790,177.00

4,414,470.00

1,230,558.00

750,000.00

10,127,753.00

8,061,211.00

7,281,334.05

88,205,397.00

129,343 947.00

90,074,549.68

$ 212 176119.00 $ 240,459 822.00 $ 197 659 337.83 $

$

0.00 $

0.00 $ 20,562,474.58

43,503.00 300,517.00 692,606.00 957,704.90 276,321.00 480,558.00 779,876.95 39,269,397.32
42 800 484.17

17,633,668.95 646,920.30

143,038.39 16,814.59 507,885.00
-2,576,218.86
1,929,298.56 -17,593,952.36 $ 21269929.15

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Property Sale
Total Reserved
Unreserved Surplus

$ 4,315,881.42 955,776.91
9,049,226.13 39,716.59
507,885.00 6 062 413.57
$ 20,930,899.62
339 029.53

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
39-

$ 21 269,929.15

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OFFICE UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30. 2009

Georgia Military College State Appropriation State General Funds

Original Appropriation

Final Budget

Current Year Revenues

Funds Available Comeared to Budget

Prior Year Carry-Over

Total Funds Available

Variance Positive (Negative)

3 062 916.00 $

2 636 371 00 $

2 592 868.00 $

0.00 $

2 592 868.00 $

-43 503.00

Georgia Public Telecommunicatlona State Appropriation State General Funds

18 191 543.00 $ 16 163 816.00 $ 15 863 299.00 $

0.00 $

15 863 299.00 $

-300 517.00

MCG Hospital and Clinics State Appropriation State General Funds

33 921 721.00 $ 33 921 721.00 $ 33 229 115.00 $

0.00 $

33 229 115.00 $

-692 606.00

Public Libraries State Appropriation State General Funds Other Funds
Total Public Libraries

41,748,655.00 4 522 400.00
46,271,055.00

37,513,300.00 4 522 400.00
42,035,700.00

36,701,461.00 4 323 619.18
41,025.080.18

0.00 58 750.00
58,750.00

36,701,461.00 4 382 369.18
41,083 830.18

-811,839.00 -140 030.82
-951,869.82

Regents Central Office State Appropriation State General Funds Other Funds
Total Regents Central Office

7,981,264.00 0.00
7 981 264.00

7,066,498.00 0.00
7 066 498.00

6,922,215.00 0.00
6 922 215.00

0.00 5 710 067 OB
5 710 067.08

6,922,215.00 5 710 067.08
12 632 282.08

-144,283.00 5 710 067.08
5 565 784.08

Research Consortium State Appropriation State General Funds Tobacco Funds
Total Research Consortium

3,664,470.00 750 000.00
4 414 470.00

480,558.00 750 000.00
1230558.00

0.00 750 000.00
750 000.00

0.00 0.00
0.00

0.00 750 000.00
750 00000

-480,558.00 0.00
-480 558.00

Special Funding Initiative State Appropriation State General Funds

10 127 753.00 $

8 061 211.00 $

7 290 787.00 $

0.00 $

7 290 787.00 $

-770 424.00

Teaching State Appropriation State General Funds Other Funds
Total Teaching

57,878,254.00 30 327 143.00
88 205 397.00

84,790,823.00 44 553 124.00
129 343 947.00

50,381,030.00 42 573 465.87
92 954 495.87

0.00 11825135.28
11 825 135.28

50,381,030.00 54 398 601.15
104 779631.15

-34,409, 793.00 9 845 477.15
-24 564 315.85

Grand Totals - All Programs

212,176,119.00 $ 240,459,822.00 $ 200,627,860.05 $ 17,593,952.36 $

218,221,812.41 $ -22,238,009.59

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

-40-

SCHEDULE "3"

Expenditures Compared to Budget

Variance

Positive

Actual

(Negative)

Actual Funds Available
Overl(Under) Expenditures

Prior Period Adjustments

Other Adjustments

Program Fund
Balances

Transfers

Program Fund Balances

Reserve

Surplus

Total Fund Balance

2 592 868.00 $

43 503.00 $

000 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

15863299.00 $

300517.00 $

0.00 $

0.00 $ _ _ _ _0._00..,$

0.00 $

0.00 $

0.00 $

000 $

0.00

3322911500 $

692606.oo $

o.oo $

o.oo $ _ _...;;.o.;;.:oo;;..$

o.oo $

o.oo $

o.oo $

o.oo $

o.oo

36,695,625.92

817,674.08

5,835.08

105,619.90

0.00

111,454.98

0.00

4382369.18

14003082

000

o.oo ---=0-.::.:00:...

0.00

0.00

41,077,995.10

957,704.90

5,835.08

105,619.90 _ _....o...,;;;oo_

111,454.98

o.oo

0.00

111,454.98

0 DO

0.00

o.oo

111,454.98

111,454.98 0.00
111,454.98

6,790,177.00 ----~0.0~0~
6 790 177.00

276,321.00 0.00
276 321.00

132,038.00 5,710 067.08
5 842 105.08

0.00 $

0.00

---""0"'-'00:...

0.00 $ _ _ _ _o._oo_

132,038.00 5 710 067 08
5 842 105.08

0 00 -5 710 067.08
-5 710 067.08

0.00

132,038 00

0.00

0.00

0.00

132 038.00

132,038.00 0.00
132 038.00

0.00

480,558.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

750 ODO.OD

O00

0 00

0.00 ----"'o.""oo._

o.oo

o.oo

o.oo

o.oo

o.oo

750 ODO.DO

480 558.00

0.00

0.00 _ _ _o.,_oo=

o.oo

o.oo

o.oo

o.oo

o.oo

7 281 334.05 $

779 876.95 $

9 452.95 $ 20 302 98 $ _ _ _ _o._oo;;.. $

29 755.93 $

0.00 $

0.00 $ 29 755.93 $

29 755 93

50,349,287.36 39 725 262.32
90 074 549.68

34,441,535.64 4 827 861 68
39 269 397.32

31,742.64 14 673 338.83
14 705 081.47

33,930.10

0.00

0.00 -----""0.=00'-

33 930.10 _____o._oo...

65,672.74 14 673 338.83
14 139 011.57

000 5 710 067.08
s 110 oe7.D8

000 20 383 298.03
20 383 298.03

65,672.74 107.88
65 780.62

65,672.74 20 383 405.91
20 449 078.65

197,659,337.83 $ 42,800,484.17 $ 20,562 474.58 $ 159,852.98 _ _....0...0...0_ $ 20,722,327.56 $

0.00 $ 20,383,298.03 $ 339,029.53 $ 20,722,327.56

Unexpendable Reserves Uncollectible Accounts Receivable Inventories

39,716.59 507 885 00
21 269 929.15

-41-

(This page left intentionally blank)

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) SCHEDULE OF APPROVED BUDGET YEAR ENDED JUNE 30, 2009

SCHEDULE "4"

REVENUES
State Appropriation Federal Funds Other Revenues Retained

ORIGINAL APPROPRIATION

FINAL APPROVED
BUDGET

LESS: BUDGET TRANSFERS TO OTHER UNITS

TOTAL

$ 2,299,017,851.00 $ 0.00
3,117,016, 138.00

2,062,511,673.00 $ 17,189,581.00
3,753,945,079.00

1,871,127,375.00 $
17,189,581.00 3,704,869,555.00

191,384,298.00 0.00
49,075,524.00

$ 5,416,033,989.00 $ 5,833,646,333.00 $ 5,593,186,511.00

EXPENDITURES
Advanced Technology Development Center/Economic Development Institute
Agricultural Experiment Station Athen and Tifton Veterinary Laboratories Cooperative Extension Service Forestry Cooperative Extension Forestry Research Georgia Eminent Scholar Endowment
Trust Fund Georgia Military College Georgia Public Telecommunications Georgia Radiation Therapy Center Georgia Tech Research Institute MCG Hospitals and Clinics Marine Institute Marine Resources Extension Center Office of Minority Business Enterprise Payments to Georgia Cancer Coalition Public Libraries Regents Central Office Research Consortium Skidaway Institute of Oceanography Special Funding Initiative Student Education Enrichment Program Teaching Veterinary Medicine Experiment Station Veterinary Medicine Teaching Hospital

$

30,766,736.00 $

24,624,536.00 $

24,624,536.00 $

82,798,877.00

88,786,136.00

88,786, 136.00

4,976,845.00

6,070,426.00

6,070,426.00

62,919,325.00

69,386,471.00

69,386,471.00

1,040,307.00

1,048,437.00

1,048,437.00

6,361,406.00

8,527,495.00

8,527,495.00

0.00 0.00 0.00 0.00 0.00 0.00

1,500,000.00 3,062,916.00 18,191,543.00 3,625,810.00 141,970,860.00 33,921,721.00 1,429,882.00 2,973,878.00
906,390.00 16,087,799.00 46,271,055.00
7,981,264.00 32,183,995.00
6,514,972.00 52,665,927.00
322,377.00 4,843,865,550.00
3,504,264.00 10,190,290.00

1,500,000.00 2,636,371.00 16,163,816.00 3,625,810.00 180,131,628.00 33,921,721.00 1,429,300.00 3,629,027.00
822,287.00 10,455,466.00 42,035,700.00
7,066,498.00 27,465,596.00
6,194,443.00 47,126,383.00
0.00 5,236,153,461.00
3,128,143.00 11,717,182.00

1,500,000.00 0.00 0.00
3,625,810.00 180,131,628.00
0.00 1,429,300.00 3,629,027.00
822,287.00 10,455,466.00
0.00 0.00 26,235,038.00 6,194,443.00 39,065,172.00 0.00 5,106,809,514.00 3,128, 143.00 11,717,182.00

0.00 2,636,371.00 16,163,816.00
0.00 0.00 33,921,721.00 0.00 0.00 0.00 0.00 42,035,700.00 7,066,498.00 1,230,558.00 0.00 8,061,211.00 0.00 129,343,947.00 0.00 0.00

$ 5,416,033,989.00 $ 5,833,646,333.00 $ 5,593,186,511.00 $ 240,459,822.00

See notes to the financial statements

- 43 -

RESEARCH INSTITUTIONS
Georgia Institute ot Technology Georgia State University Medical College of Georgia Univer$ity of Georgia
REGIONAL UNIVERSITIES
Georgia Southern University Valdosta State Uni1Jetsity
STATE IJNJYEBSITIES
Albany State Universify Armstrong Atlantic State University Augusta state University ClaytonStateUnivetsity Columbus State University Fort Valley State University Georgia College aod State University Georgia Soulhwestern State University Kennesaw State University North Georgia College and State University Savannah State University Southern Polytechnic Stale Univarsity Univur$lty of Wesl Georgia
STATE COLLEGES
Abraham Baldwin Agricuttural College College of Coastal Georgia Dallon Slate College Gainesville Shlte College Georgia Gwinnett Collage Gordon College Macon St.ate College Middle Georgia College
JWO-YEAR COLLEGES
Atlanta Motropolitao College Bainblidge College Darton College EaI Goorg;a College Georgia Highland College Georgia Perimeter College South Georgia College Waycross College
QIW
Skidaway Institute of Oceanography

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
SCHEDULE OF ALLOTMENTS TO UNITS OF THE UNIVERSITY SYSTEM OF GEORGIA YEAR ENDED JUNE 30 2009

ADVANCED TECHNOLOGY DEVELOPMENT
CENTER/ ECONOMIC DEVELOPMENT INSTITUTE

AGRICULTURAL EXPERIMENT STATION

ATHENS AND TIFTON
VETERINARY LABORATORIES

COOPERATIVE EXTENSION SERVICE

FORESTRY COOPERATIVE
EXT~NSION

FORESTRY ~

GEORGIA EMINENT SCHOLAR ENDOWMENT TRUST FUND

GEORGIA TECH
RESEARCH INSTITUTE

MARINE ...lli.!llill_

11,411,678.00

40,164,835.00 $

31,663.00 $ 33,859,014,00 $

621,062.00 $ 3,015,316.00

$ 7,129,604.00 $ 883.417,00

1,000,000.00

500,000.00

11411578.00 $

40 164 835.00 $

31 663.00 $ 33 859 014,00 $

621 062,00 $ 3 015 318.00 $ 1 500 000.00 $ 7129 604,00 $ 883 417.00

See notes to the financial statements

.44.

SCHEDULE "5"

MARINE RESOURCES EXTENSION
CENTER

OFFICE OF MINORITY BUSINESS ENTERPRISE

PAYMENTS TO
GEORGIA CANCER COALITION

RESEARCH CONSORTIUM

SKIOAWAY INSTITUTE OF OCEANOGRAPHY

SPECIAL FUNDING INITIATIVE

TEACHING

VETERINARY MEDICINE
EXPERIMENT STATION

VETERINARY MEDICINE TEACHING HOSPITAL

TOTAL

1,430,635.00 $

443,314.00

10.455,466.00

13,764,992.00 7,131,180.00
359,137.00 3,664,993.00

402,914.00

82,024.00 136,707.00

552,058.00

250,105.00 109,659.00

s 1,595,892.00
204,522.00 12,461,471.00 1,500,903.00

221,414,858.00 197,643,607.00 136,047,536.00 356,163,121.00 $

3,004,274.00 $

476,678.00

255.317,02400 215,434,775.00 148,868,144.00 445,319,227.00

570,372.00 303,423.00

85,665,029.00 50,072,518.00

87,638,315.00 50,375,941.00

394,035.00 204,886.00
11,831.00 359,042.00
67,597.00 1,626,528.00 1,234,675.00
16,037.00 51,338.00 586,880.00 412,025.00 56,393.00 59,177.00

21,300,973.00 30,680,667.00 27,353,518.00 24,415,893.00 35,396,008.00 19,853,488.00 30,854,071,00 12,324,288.00 79,872,475.00 24,310,689.00 18,570,993.00 21,442,178.00 46,435,918.00

21,777,032.00 31,437,611.00 27,502,056.00 24,774,935.00 35,463,605.00 21,480,016.00 32,088,746.00 12,340,325.00 80,673,918.00 24,897,569.00 18,983,018.00 21,608,230.00 46,495,095.00

15,058.00 12,177.00 4,967.00 42,550.00 15,550,772.00 12,642.00 534,086.00 455,351.00

13,826,764.00 11,193,553.00 13,794,728.00 19,190,793.00 10.885,650.00 11,860,950.00 26,282,033.00 16,551,678.00

13,841,822.00 11,205,730.00 13,799,695.00 19,233,343.00 26,436,422.00 11,873,592.00 26,816,119.00 17,007,029.00

143,452.00

4,466.00 2,513.00 20,433.00 652,003.00 17,146.00 15,045.00 2,774.00 5,202.00

7,964,026.00 9,184,280.00 15,241,179.00 5,790,176.00 14, 127,5::12.00 59,001,665.00 7,542,018.00 4,059,663.00

8,111,944.00 9,186,793.00 15,261,612.00 6,443,141.00 14,144,668.00 59,016,730.00 7,544,792.00 4,064,865.00

1517806.00

969 404,00

2487 210.00

1430635.00 $

805 497,00 $ 10 455 466.00 $ 26 235 038.00 $

1517806.00 $ 39 065172.00 $ 1 687 283 932.00 $

3 004 274.00 $

476 678,00 $ 1 868 951 089.QO

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA

SCHEDULE "6"

UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)

ANALYSIS OF PRIOR YEAR'S SURPLUS FUNDS COLLECTED FROM INSTITUTIONS

AND REDISTRIBUTED TO INSTITUTIONS WITH DEFICITS

YEAR ENDED JUNE 30, 2009

RESEARCH INSTITUTIONS
Georgia Institute of Technology Georgia State University University of Georgia
REGIONAL UNIVERSITIES
Georgia Southern University Valdosta State University
STATE UNIVERSITIES
Albany State University Augusta State University Clayton State University Columbus State University Fort Valley State University Georgia College and State University Georgia Southwestern State University Kennesaw State University North Georgia College and State University Savannah State University Southern Polytechnic State University University of West Georgia
STATE COLLEGES
Abraham Baldwin Agricultural College College of Coastal Georgia Dalton State College Gainesville State College Georgia Gwinnett College Gordon College Macon State College Middle Georgia College
TWO-YEAR COLLEGES
Atlanta Metropolitan College Bainbridge College East Georgia College Georgia Highlands College South Georgia College Waycross College

COLLECTED

REDISTRIBUTED

$

379,323.32 $

428,894.67

234,482.78

0.00

104,366.33 72,742.44

28,582.30 21.87
3,900.86 20,816.83 10,772.07 10,014.17
4,120.67 52.86
4,069.67 88,778.05 41,446.06 41,061.81

329.66 1,882.32 18,929.55
22.91 115,167.40
4,143.06 3,907.66 89,134.14

41,363.03 134,404.21
17,986.17 4,268.21 23,885.78
427.70

$ 1,929,298.56 $ ======o=.o=o

See notes to the financial statements

- 46 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2009

SCHEDULE 711 11

Totals per Annual Supplement
Accruals - Payroll June 30, 2009
Compensated Absences June 30, 2009 June 30, 2008
Adjustments Shared Services on Jointly Staffed Personnel

SALARIES

$

28,318,881 $

TRAVEL 406,119

130,694

2,811,997 -2,851,503

-97,827

$

28,312,242 $ ====4=06=,11=9

- 47 -

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

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2009

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-472-08-0 I

Previously Reported Corrective Action Implemented

SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2009
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.