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, 2015 [June 30, 2015]

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
ATLANTA, GEORGIA
REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR FISCAL YEAR ENDED JUNE 30, 2015

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

SECTION I FINANCIAL INDEPENDENT AUDITOR'S REPORT REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS EXHIBITS A STATEMENT OF NET POSITION B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION C STATEMENT OF CASH FLOWS D STATEMENT OF FIDUCIARY NET POSITION E STATEMENT OF CHANGES IN FIDUCIARY NET POSITION F NOTES TO THE FINANCIAL STATEMENTS

Page
i
2 3 4 5 6 7

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY

TEACHERS' RETIREMENT SYSTEM OF GEORGIA

40

2 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

41

3 SCHEDULE OF CONTRIBUTIONS TEACHERS' RETIREMENT SYSTEM OF GEORGIA 42

4 SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA 44

5 SCHEDULE OF FUNDING PROGRESS

46

6 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION

47

SUPPLEMENTARY INFORMATION

7 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

50

8 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

51

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

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
9 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
10 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
11 RECONCILIATION OF BUDGET TO GAAP 12 SCHEDULE OF APPROVED BUDGET 13 SCHEDULE OF ALLOTMENTS TO UNITS OF THE UNIVERSITY SYSTEM OF GEORGIA 14 ANALYSIS OF PRIOR YEAR'S SURPLUS FUNDS COLLECTED FROM INSTITUTIONS 15 RECONCILIATION OF SALARIES AND TRAVEL

Page
52 54 56 57 58 60 61

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

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

SECTION IV FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

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SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 2, 2016

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Henry M. Huckaby, Chancellor

INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying basic financial statements (Exhibits A through F) of the University System Office (Oversight Unit) of the Board of Regents of the University System of Georgia, a unit of the University System of Georgia, which is an organizational unit of the State of Georgia, as of and for the year ended June 30, 2015.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the University System Office's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
15ARL-62

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expressing an opinion on the effectiveness of the University System Office's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of the business type activities and aggregate remaining fund information of the University System Office as of June 30, 2015, and the respective changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1, the financial statements of the University System Office are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of the University System Office. They do not purport to, and do not, present fairly the financial position of the State of Georgia as of June 30, 2015, the changes in its financial position or its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
As described in Note 1 to the financial statements, in 2015, the University System Office adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions - an amendment of GASB Statement No. 27, GASB Statement No. 69, Government Combinations and Disposals of Government Operations and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB Statement No. 68. The University System Office restated beginning Net Position for the cumulative effect of these accounting changes which had a significant impact on the University System Office's financial statements. Our opinion is not modified with respect to this matter.
As discussed in Note 1 to the financial statements, the prior period financial statements have been restated to properly reflect the University System Office 457 Deferred Compensation Plan as a Fiduciary Fund. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages i through viii and the Schedules of Proportionate Share of the Net Pension Liability, Schedules of Contributions to Retirement Systems, Schedule of Funding Progress and Notes to the Required Supplementary Information on pages 40 through 47 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited
15ARL-62

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procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquires of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of the University System Office. The accompanying supplementary information (Schedules 7 through 15) is presented for purposes of additional analysis and is not a required part of the basic financial statements.
The accompanying supplementary information (Schedules 7 through 15) is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting or other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated February 2, 2016, on our consideration of the University System Office's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the University System Office's internal control over financial reporting and compliance.
Respectfully,

GSG:er 15ARL-62

Greg S. Griffin State Auditor

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REQUIRED SUPPLEMENTARY INFORMATION

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
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 19 members, five of whom are appointed from the state-at-large, and one from each of the 14 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 30 institutions: four research institutions, four comprehensive universities, 10 state universities, and 12 state colleges. These institutions enroll more than 312,000 students and employ approximately 14,000 faculty and 30,000 staff to provide teaching and related services to students and the communities in which they are located. The Board has oversight of the Georgia Archives and the Georgia Public Library System.
The University System Office also serves as custodian of the 457(f) Deferred Compensation and the Board of Regents Retiree Health Benefit Fund for University System of Georgia retiree health and life insurance benefits.
Overview of the Financial Statements and Financial Analysis
The University System Office is pleased to present its financial statements for fiscal year 2015. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Position; the Statement of Revenues, Expenses and Changes in Net Position; and the Statement of Cash Flows. This discussion and analysis of the University System Office's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2015 and fiscal year 2014. Two additional statements are presented: the Statement of Fiduciary Net Position and the Statement of Changes in Fiduciary Net Position for the Pension Trust and Retirees Health Benefits Funds.
However, the comparative data for fiscal year 2014 does not reflect the effects of the restatement of July 1, 2014 net position. This restatement is related to the implementation of Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date which was adopted by the University System Office for fiscal year 2015. The provisions of these statements establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of these statements resulted in a restatement to beginning net position of $36,496,058. This restatement is based on actuarial estimates and information is not available for the fiscal year 2014 comparative balances. See Note 1 in the Notes to the Financial Statements for more information about the restatement of July 1, 2014 net position.
Statement of Net Position
The Statement of Net Position is a financial condition snapshot as of June 30, 2015 and includes all assets (both current and noncurrent) and deferred outflows of resources, liabilities and deferred inflows of resources (both current and noncurrent) and net position. The differences between current and noncurrent assets are discussed in the Notes to the Financial Statements. The Statement of Net Position is prepared under the accrual basis of accounting which requires revenue and asset
i

recognition when the service is provided, and expense and liability recognition when goods or services are received despite when cash is actually exchanged.
From the data presented, readers of the Statement of Net Position are able to determine the assets available to continue the operations of the University System Office and how much the University System Office owes vendors. The difference between assets, deferred outflows of resources, liabilities and deferred inflows of resources is reported as net position, and is one indicator of the University System Office's financial health. Increases or decreases in net position provide an indicator of the improvement or decline of the University System Office's financial health when considered in conjunction with other nonfinancial conditions. Net Position is divided into three major categories; Net Investment in Capital Assets, Restricted and Unrestricted. Net Investment in Capital Assets provides the University System Office's equity in property, plant and equipment owned by the University System Office. Restricted Net Position is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable, restricted resources is available only for investment purposes. Expendable restricted resources 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. Unrestricted Net Position consists of resources available to the University System Office for any lawful purpose.

Statement of Net Position, Condensed
Assets Current Assets Capital Assets, Net Other Assets
Total Assets
Deferred Outflows of Resources
Li a b i l i ti e s Current Liabilities Noncurrent Liabilities
Total Liabilities
Deferred Inflows of Resources
Net Position Net Investment in Capital Assets Restricted Nonexpendable Expendable Unrestricted
Total Net Position

June 30, 2015

$

788,074,122

346,190,139

11,208,425

1,145,472,686

7,090,723

658,056,398 77,706,118
735,762,516
324,163,539

300,071,175

4,388,201 99,390,713 -311,212,735

$

92,637,354

June 30, 2014 (1)

$

716,759,624

76,643,526

11,409,864

804,813,014

0

589,857,979 48,000,016
637,857,995
0

28,765,831

4,381,979 87,555,656 46,251,553

$

166,955,019

(1)


The

June

30,

2014

amounts

do

not

reflect

the

effects

of

the

restatement

of

July

1,

2014

net position. See Note 1 in the Notes to the Financial Statements for more information.

Total assets and deferred outflows of resources increased by $347,750,395 which was primarily due to an increase of $269,546,613 in the category of Capital Assets, Net. The balance of the increase is mainly in cash and receivable categories.

ii

Total liabilities and deferred inflows of resources increased for the year by $422,068,060. The increase is due to the recording of the Net Pension Liability of $32,054,434 and deferred inflows of resources on defined benefit pension plans of $10,889,730, which is related to the implementation of GASB 68. The remainder of the increase is a result of the deferred inflows of resources on deferred service concession arrangements, which totals $311,162,343 as reported in Note 9.

Statement of Revenues, Expenses and Changes in Net Position Changes in total net position as presented on the Statement of Net Position are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Position. The purpose of the statement is to present the revenues received by the 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, 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 Position, Condensed

June 30, 2015

June 30, 2014 (1)

Operating Revenues Operating Expenses

$ 460,315,729 599,043,977

$ 405,409,487 549,425,514

Operating Loss

-138,728,248

-144,016,027

Nonoperating Revenues and Expenses

143,505,082

140,514,816

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

4,776,834

-3,501,211

Other Revenues, Expenses, Gains or Losses

-42,598,441

4,481,398

Increase (Decrease) in Net Position

-37,821,607

980,187

Net Position at Beginning of Year, as Originally Reported

166,955,019

165,974,832

Prior Year Adjustments

-36,496,058

0

Net Position at Beginning of Year, Restated

130,458,961

165,974,832

Net Position at End of Year

$ 92,637,354

$ 166,955,019

(1)

The

June

30,

2014

amounts

do

not

reflect

the

effects

of

the

restatement

of

July

1,

2014

net position. See Note 1 in the Notes to the Financial Statements for more information.

iii

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

Revenue by Source For the Years Ended June 30, 2015 and June 30, 2014

June 30, 2015

June 30, 2014

Operating Revenue Grants and Contracts Sales and Services Auxiliary Other

$

8,922,706

50,484,284

12,720,688

388,188,051

$

7,740,909

47,234,549

350,434,029

Total Operating Revenue

460,315,729

405,409,487

Nonoperating Revenue State Appropriations Grants and Contracts Investment Income

157,565,896 2,120,351 254,753

150,052,543 3,776,846 1,331,333

Total Nonoperating Revenue

159,941,000

155,160,722

Capital Grants and Gifts State

855,929

4,198,984

Special Item Total Revenues

$ 621,112,658

282,414 $ 565,051,607

iv

Expenses (By Functional Classification) For the Years Ended June 30, 2015 and June 30, 2014

June 30, 2015

June 30, 2014

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

$

49,388

73,548,041

19,102,497

495,288,192

490,166

197,638

10,368,055

$

73,476,071

17,145,093

458,658,788

145,562

Total Operating Expenses

599,043,977

549,425,514

Nonoperating Expenses Interest Expense (Capital Assets) Other

1,884,851 14,551,067

1,943,489 12,702,417

Total Nonoperating Expenses

16,435,918

14,645,906

Special Items Capital Asset and Related Debt Loss of Debt Retirement

42,772,879 681,491

Total Special Items

43,454,370

Total Expenses and Special Items

$ 658,934,265

$ 564,071,420

Operating revenues increased by $54,906,242 in fiscal year 2015. The increase is due primarily to increases in Other Operating Revenues which consist mostly of Health Insurance Premiums.
The Auxiliary revenue increase of $12,720,688 is a result of the Service Concession Arrangement for campus housing at several institutions.
Nonoperating revenues increased by $4,780,278 for the year primarily due to an increase of in State Appropriations.
The compensation and employee benefits category increased by $2,113,602 and primarily affected the Institutional Support and Public Service categories. The increase reflects the addition of staff, merit increases and an increased cost of health insurance for the employees of the University System Office.
Supplies and Other Services increased by $48,159,440 during the past year. The increase was primarily associated with an increase in the health insurance expenses paid for the self-funded plans.
Statement of Cash Flows
The third 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 institution during the year. Cash flow information can be used to evaluate the financial viability of the University System Office's ability to meet financial obligations as they mature. The statement is divided into five parts.

v

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 Position.

June 30, 2015

June 30, 2014

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

$

-117,873,444

163,107,290

-15,225,648

27,763,958

$

-125,217,255

215,999,715

-6,634,908

-6,912,490

Net Change in Cash

57,772,156

77,235,062

Cash at Beginning of Year

503,334,219

426,099,157

Cash, End of Year

$

561,106,375

$

503,334,219

Capital Assets
The University System Office entered into a forty-year intergovernmental agreement with the Georgia Public Telecommunications Commission (Commission) effective July 1, 2012. The Commission transferred other property and equipment at its headquarters location to the University System Office. In fiscal year 2015, additional building transactions transferred to the University System Office totaled $374,686. The accumulated depreciation transferred totaled $831,841. The total value of the building and equipment transferred to date is $32,913,265, and the accumulated depreciation is $15,503,826, for a net book value of $17,409,439. This transfer is required to obtain the use of twenty-year and five-year general obligation bonds sold in the Board of Regents' name on behalf of the Commission. The Commission, an authority created after 1967, cannot have bonds sold on its behalf. The intergovernmental agreement allows the Commission to utilize these funds for the following bond projects:
Communication Systems and Information Systems upgrades, 5 year bonds, $1,780,000 Facility roof replacement and cooling system improvements, 20 year bonds, $1,265,000
The intergovernmental agreement is designed to accommodate future general obligation bond issues for the Commission. All equipment and property will be transferred back to the ownership of the Commission upon termination of this agreement with the Board of Regents. It is anticipated that any current and future bond issues will be paid for in full within twenty years.
During the fiscal year, various institutions transferred dormitory buildings to the University System Office. The net effect of this transfer of this asset is noted as a Special Item Transfer on the Statement of Revenue, Expenses and Changes in Net Position and Capital Asset Note Disclosure. These dormitories were included in Public-Private Partnership (P3) master agreement between the University System of Georgia and the vendor established during fiscal year 2015. Due to the complexity of the master agreement, the Service Concession arrangement including the capital assets are being reflected on the University System Office's accounting records. See Note 9 for additional information.
vi

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 10 in the Notes to the Financial Statements.
Long-Term Liabilities
University System Office had Long-Term Liabilities of $82,029,120 of which $4,323,002 was reflected as current liability at June 30, 2015.
For additional information concerning Long-Term Liabilities, see Note 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 the statement in the Annual Financial Report, including the liability for claims incurred but not reported. The summary information regarding revenues, expenditures and the related liability for fiscal year 2015 is provided below:

June 30, 2015

June 30, 2014

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

$ 39,089,023 379,213,694 381,805,717
$ 36,497,000

$ 32,737,154 360,327,990 353,976,121
$ 39,089,023

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

$ 12,119,357

$ 9,326,592

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

150,240,224

140,920,834

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

150,934,581

138,128,069

Unpaid Claims and Claim Adjustments (Current Year IBNR)

$ 11,425,000

$ 12,119,357

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 47-21-21 for the purpose of accumulating funds necessary to meet employer costs of retiree post-employment health insurance benefits. Please see Note 17 for additional information.

vii

Economic Outlook The University System Office is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University System Office's overall financial position is strong. The University System Office anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University System Office's ability to react to unknown internal and external issues. Shelley C. Nickel, Vice Chancellor for Fiscal Affairs/Treasurer Board of Regents University System Office
viii

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BASIC FINANCIAL STATEMENTS - 1 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) STATEMENT OF NET POSITION JUNE 30, 2015
ASSETS
Current Assets Cash and Cash Equivalents Investments Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Due from Affiliated Organizations Inventories (Note 4) Prepaid Items Funds Held by Others
Total Current Assets
Noncurrent Assets Investments (Externally Restricted) Investments Notes Receivable, Net Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
Deferred Outflows of Resources Related to Defined Benefit Pension Plans
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Benefits Payable Advances (Note 7) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences Net Pension Liability
Total Noncurrent Liabilities
Total Liabilities
Deferred Inflows of Resources Deferred Grants Received in Advance of Timing Requirements Deferred Service Concession Arrangements Related to Defined Benefit Pension Plans
Total Deferred Inflows of Resources
NET POSITION
Net Investment in Capital Assets Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Position
The notes to the financial statements are an integral part of this statement.
- 2 -

EXHIBIT "A"

$ 561,106,375 183,330,014
1,160,687 39,664,991
100,000 85,447
515,142 2,111,466
788,074,122
1,700,315 8,004,551 1,503,559 346,190,139
357,398,564
1,145,472,686
7,090,723

23,586,392 60,045
36,497,000 7,455,594
586,134,365 2,140,949 2,182,053
658,056,398
43,978,015 1,673,669
32,054,434
77,706,118
735,762,516
2,111,466 311,162,343
10,889,730
324,163,539

300,071,175
4,388,201 99,390,713 -311,212,735

$

92,637,354

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION YEAR ENDED JUNE 30, 2015
OPERATING REVENUES
Grants and Contracts Federal Other
Sales and Services Residence Halls Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Loss
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Federal Stimulus Other Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Expenses
Net Nonoperating Revenues
Income Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State
Special Items Capital Asset and Related Debt Loss on Debt Retirement
Total Other Revenues, Expenses, Gains or Losses
Decrease in Net Position
Net Position - Beginning of Year, as Originally Reported
Prior Year Adjustments
Net Position - Beginning of Year, Restated
Net Position - End of Year
The notes to the financial statements are an integral part of this statement. - 3 -

EXHIBIT "B"

$

8,878,637

44,069

50,484,284

12,720,688

388,188,051

460,315,729

35,411,353 9,767,440 9,332 910,132 197,638 3,216,741
541,319,618 8,211,723
599,043,977
-138,728,248
157,565,896
42,937 510,377 1,567,037 254,753 -1,884,851 -14,551,067
143,505,082
4,776,834
855,929
-42,772,879 -681,491
-42,598,441
-37,821,607
166,955,019
-36,496,058
130,458,961
$ 92,637,354

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES Grants and Contracts (Exchange) Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Auxiliary Enterprise Charges: Residence Halls Other Receipts Other Payments
Net Cash Used by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts (Expenses)
Net Cash Flows Provided by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from Sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash 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 by Investing Activities
Net Increase in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES:
Operating Loss Adjustments to Reconcile Operating Loss to Net Cash
Used by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Inventories Prepaid Items Accounts Payable Salaries Payable Advances (Including Tuition and Fees) Other Liabilities Compensated Absences Net Pension Liability Change in Deferred Inflows/Outflows of Resources Related to Pensions: Deferred Inflows of Resources Deferred Outflows of Resources
Net Cash Used by Operating Activities
NONCASH ACTIVITY Loss on Debt Retirement Special Item - Capital Asset Transfer Change in Accrued Interest Payable Affecting Interest Paid Correction of Capital Asset Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts Change in Fair Value of Investments Recognized as a Component of Interest Income
The notes to the financial statements are an integral part of this statement.
- 4 -

EXHIBIT "C"

$

8,893,062

50,484,283

-536,536,519

-35,237,259

-197,638

19,920,918 375,135,842
-336,133

-117,873,444

157,565,896 15,775,306 2,120,352 -12,354,264
163,107,290

303,055,071 -681,491
-11,763,692 -304,079,096
-1,756,440
-15,225,648

27,697,144 66,814
27,763,958 57,772,156 503,334,219

$ 561,106,375

$ -138,728,248
8,211,723
-10,961,970 99,111
-353,429 19,730,759
-10,854 6,864,097 -1,815,000
-267,015 -7,652,061
10,889,730 -3,880,287
$ -117,873,444

$

681,491

$ 42,772,879

$

128,411

$

57,841

$

374,686

$

187,939

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2015

EXHIBIT "D"

ASSETS Cash Investments Receivables
Employer Employee Other
Total Assets
LIABILITIES
Benefits Payable
Total Liabilities

457 Deferred Compensation
Plan Fund

Retiree Health Benefit Fund

Total

$

1,614,257 $ 1,614,257

$

5,644,975

5,644,975

3,227,062 6,857,180
7,097

3,227,062 6,857,180
7,097

5,644,975

11,705,596 17,350,571

11,425,000 11,425,000

11,425,000 11,425,000

NET POSITION
Held in Trust for: Other Post Employer Benefits Deferred Compensation Benefits
TOTAL NET POSITION

5,644,975

$

5,644,975 $

280,596

280,596 5,644,975

280,596 $ 5,925,571

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)
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION JUNE 30, 2015

EXHIBIT "E"

ADDITIONS
Contributions Employer Plan Member Other
Total Contributions
Investment Income Interest/ Dividends
Less: Investment expense
Net Investment Income
Total Additions
DEDUCTIONS
Benefits Premium Expense Withdrawal Administrative Expense
Total Deductions
Net Increase
NET POSITION RESTRICTED FOR OTHER Beginning Net Position
Beginning Net Position, Restated
End of Year

457 Deferred Compensation
Plan Fund

Retiree Health Benefit Fund

Total

$

1,212,086 $ 129,822,595 $ 131,034,681

37,770,393

37,770,393

25,163

25,163

1,212,086

167,618,151

168,830,237

194,666 -663
194,003 1,406,089

77,675
77,675 167,695,826

272,341 -663
271,678 169,101,915

40,427
40,427 1,365,662

150,240,223 3,863,810
13,392,716 167,496,749
199,077

150,240,223 3,863,810 40,427
13,392,716
167,537,176
1,564,739

4,279,313

81,519

81,519 4,279,313

$

5,644,975 $

280,596 $

5,925,571

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, 2015

EXHIBIT "F"

Note 1. Summary of Significant Accounting Policies
Nature of Operations The University System Office serves the state and national communities by providing students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country. 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 19 members, five of whom are appointed from the stateat-large, and one from each of the 14 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 30 institutions: four research institutions, four comprehensive universities, 10 state universities, and 12 state colleges. These institutions enroll more than 312,000 students and employ approximately 14,000 faculty and 30,000 staff to provide teaching and related services to students and the communities in which they are located. The Board has oversight of the Georgia Archives and the Georgia Public Library System.
The University System Office also serves as custodian of the 457(f) Deferred Compensation Plan and 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 (30) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The 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 and the 457(f) Deferred Compensation Plan.
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 Affiliated Organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential Component Units of the State. See Note 19 for additional information.
Financial Statement Presentation The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the University System Office's assets, liabilities, net position, revenues, expenses, changes in net position and cash flows.
- 7 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Basis of Accounting For financial reporting purposes, the University System Office is considered a special-purpose government engaged in business-type activities 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 Pension Trust Fund is used to account for the 457(f) plans administered by the University System Office on behalf of employees of the Board of Regents of the University System of Georgia. The Retiree Health Benefit Fund is used to report the accumulation of resources for, and payment of retiree postemployment benefits.
New Accounting Pronouncements In fiscal year 2015, the University System Office adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this Statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this statement requires a restatement to beginning net position. The adoption of this statement has a significant impact on the University System Office's financial statements.
In fiscal year 2015, the University System Office adopted Governmental Accounting Standards Board (GASB) Statement No. 69, Government Combinations and Disposals of Government Operations. This statement provides specific accounting and financial reporting guidance for combinations in the governmental environment. This statement also requires that disclosures be made by governments about combination arrangements in which they engage and for disposals of government operations. The adoption of this statement does not have a significant impact on the University System Office's financial statements.
In fiscal year 2015, the University System Office adopted Governmental Accounting Standards Board (GASB) Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB No. 68. The objective of this statement is to improve accounting and financial reporting by addressing an issue in Statement No. 68, Accounting and Financial Reporting for Pensions, concerning transition provisions related to certain pension contributions made to defined benefit pension plans prior to implementation of statement. This statement amends paragraph 137 of Statement No. 68 which limited recognition of pension-related deferred outflows of resources and deferred inflows of resources at the transition to circumstances in which it is practical to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions. Adoption of this statement in conjunction with GASB No. 68 had a significant impact on the University System Office's financial statements.
Cash and Cash Equivalents Cash and Cash Equivalents consist of 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 State Investment Pool and 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, 2015

EXHIBIT "F"

Investments Investments include financial instruments, certain other securities for the production of revenue, land, and other real estate held as investments by endowments. The University System Office accounts for its investments as fair value. Changes in unrealized gain (loss) on the carrying value of investments are reported as a components of investment income in the Statement of Revenues, Expenses and Changes in Net Position.
Accounts Receivable Accounts receivable consists of amounts due 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.
Prepaid Items Prepaid Items reflect payments of costs applicable to future accounting periods.
Noncurrent Investments Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Position.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University 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, which also includes amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, and copyrights, as well as software, is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values generally are 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To fully understand plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. These bonds constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Deposits Held for Other Organizations The University System Office had $586,134,365 in Deposits Held for Other Organizations as of June 30, 2015. 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.

- 9 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

In fiscal year 2014, the Capital Liability Reserve Fund (Fund) was established by the Board of Regents to protect the fiscal integrity of the University System of Georgia (USG) to maintain the strongest possible credit ratings associated with Public Private Venture (PPV) projects and to ensure that the Board of Regents can effectively support its long-term capital lease obligations. The Fund is financed by all USG institutions participating in the PPV program. The Fund serves as a pooled reserve that is managed by the Board of Regents. The Fund shall only be used to address significant shortfalls and only insofar as a requesting USG institution is unable to make the required PPV capital lease payment to the designated cooperative organization. The Fund will continue as long as the Board of Regents has rental obligations under the PPV program and at the conclusion of the program, funds will be returned to the institutions. The balance in the reserve included in Deposits Held for Other Organizations as of June 30, 2015 was $21,319,085.
Advances Advances include amounts received from grant and contract sponsors that have not yet been earned.
Deferred Outflows of Resources Deferred outflows of resources consists of the consumption of net assets by the University System Office that are applicable to a future reporting period.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Position, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Position.
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.
Deferred Inflows of Resources Deferred inflows of resources consists of the acquisition of net assets by the University System Office that are applicable to a future reporting period.
Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teachers' Retirement System of Georgia (TRS) and Employees' Retirement System (ERS), additions to/deductions for TRS's and ERS's fiduciary net position have been determined on the same basis as they are reported by TRS and ERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Net Position The University System Office's net position is classified as follows:
Net Investment in Capital Assets: 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 the net investment in capital assets.
The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section.
- 10 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Restricted - nonexpendable: includes endowment and similar type funds, in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may be either expended or added to principal. The University 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 - expendable: are restricted resources available for expenditure, but these restricted resources 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.
Unrestricted: Unrestricted net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of Investment in Capital Assets. Included in the net deficit reported is the University System Office's Net Pension liability of $32,054,434 million which will be funded by appropriating resources each year as payments come due, rather than accumulating resources in advance.
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 and Expenses The Statement of Revenues, Expenses and Changes in Net Position classify fiscal year activity as operating and nonoperating according to the following criteria:
Operating revenue includes activities that have the characteristics of exchange transactions, such as (1) health insurance premiums received from institutions within the University System of Georgia for self-insured health plans offered, (2) certain federal, state and local grants and contracts, and (3) sales and services.
Nonoperating revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenue by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Operating Expenses: Operating expense includes activities that have the characteristics of exchange transactions.
Nonoperating expense includes activities that have the characteristics of nonexchange transactions, such as capital financing costs and costs related to investment activity.
Special Item Transfer During the fiscal year, various institutions transferred dormitory buildings to the University System Office. The net effect of this transfer of this asset is noted as a Special Item Transfer on the Statement of Revenue, Expenses and Changes in Net Position. These dormitories were included in
- 11 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Public-Private Partnership (P3) master agreements between the University System of Georgia and the vendor established during fiscal year 2015. Due to the complexity of the master agreement, the Service Concession arrangement including the capital assets are being reflected on the University System Office's accounting records. The capital asset transfers of $268,107,411, net of accumulated depreciation, are reported in Note 6, while capital lease obligation transfers of $302,191,954 are included in Note 8. The net of these transfers is reported as a Special Item Transfer of $42,772,879 on the Statement of Revenues, Expenses and Changes in Net Position.
During the fiscal year, Corvias Campus Living-USG, LLC, provided $311,561,781 to the Board of Regents to retire the capital lease obligations transferred to the University System Office. These lease obligations with outstanding principal balances of $302,191,954, were subsequently retired using funds provided, a gain was also recognized through the transfer of Commons dormitory at Georgia State University that was refinanced 2 years ago for $8,688,336, with the University System Office recording the difference of 681,491 as a Special Item Extinguishment of Capital Lease Obligations on the Statement of Revenues, Expenses and Changes in Net Position. See Note 9 for additional information.
Restatement Note Disclosure During the fiscal year, the University System Office began actively managing the Section 457 deferred compensation plan. In doing so, management determined that the University System Office has fiduciary accountability for the plan and the University System Office holds the assets in a trustee capacity. The University System Office has restated the June 30, 2014 Fiduciary Net Position. The result is an increase in beginning net position of $4,279,313 for the Pension Trust Fund. These changes are in accordance with generally accepted accounting principles.
For fiscal year 2015, the University made prior period adjustments due to the adoption of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71 Pension Transition for Contributions Made Subsequent to the Measurement Date which require the restatement of the June 30, 2014, net position. The result is a decrease in Net Position at July 1, 2014 of $36,496,058. This change is 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, 2015

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, 2015, the carrying value of deposits was $107,677,022 and the bank balance was $108,588,143. Of the University System Office's deposits, $107,536,869 were uninsured. Of these uninsured deposits, $107,536,869 were collateralized with securities held by the financial institution, by its trust department or agency in the University System Office's name.
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.

- 13 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

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 ten 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.
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.

- 14 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

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, multi-manager 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, shortterm instruments.
The University System Office's investments, including those held by Fiduciary Funds, as of June 30, 2015 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Less Than 3 Months

4 - 12 Months

Investment Maturity 1 - 5 Years

6 - 10 Years

More than 10 Years

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

$

15,994,862

55,395,317 316,178,393 $
50,758,779 2,338,732 7,699,466
27,807,558

$ 13,308,053 $ 2,686,809

559,181 $ 8,439,791 2,338,732 27,807,558

28,339,626 68,560,806
9,120,808
7,699,466

24,075,388 $ 49,879,254 36,781,781

2,980,303 188,739,361
4,856,190

Other Investments Bond/Equity Mutual Funds Equity Mutual Funds - Domestic Equity Mutual Funds - International Equity Securities - Domestic Real Estate Fund
Investment Pools Office of the State Treasurer Georgia Fund 1

476,173,107 $
818,006 36,923,260 12,709,598 64,023,857
5,964,947

30,705,471 $ 8,439,791 $ 127,028,759 $ 113,423,232 $ 196,575,854

57,110,690

Total Investments

$ 653,723,465

- 15 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

The Georgia Fund 1 Investment Pool, managed by the Office of the State Treasurer, is not registered with the Securities and Exchange Commission as an investment company, and the State does not consider Georgia Fund 1 to be a 2a7-like pool. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAf rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 56 days.
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University System Office's 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.
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 entity 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, 2015, $476,173,107 of the University System Office's applicable investments were uninsured and held by the investment's counterparty in the University System Office's name.

- 16 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

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

Credit Quality Risk

Fair Value

AAA

AAAm

Unrated

Related Debt Investments U. S. Agency Securities Bond Securities Money Market Mutual Fund Mutual Funds - Bond Repurchase Agreements

$

316,178,393

50,758,779

2,338,732

7,699,466

27,807,558 $

$ 27,807,558

$ 2,338,732

316,178,393 50,758,779
7,699,466

$

404,782,928 $

27,807,558 $

2,338,732 $ 374,636,638

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 investments exceeded 5% of the total reported investment amount as of June 30, 2015:

Investment:

Federal National Mortgage Association

$

Federal National Mortgage Association Pool $

Federal Home Loan Mortgage Corporate Pool $

NCUA Guaranteed Notes

$

IShares Core Total U. S. Aggregate

$

Amount:
92,019,951 95,670,967 97,078,100 52,081,506 36,781,781

% of Total
14.1% 14.6% 14.9%
8.0% 5.6%

- 17 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Condensed financial information for the investment pool is as follows:

Statement of Net Position - June 30, 2015

Assets Cash and Cash Equivalents* Investments* Receivables

$

29,703,668

560,821,511

442,621

$

590,967,800

Net Position Held in Trust for Pool Participants Internal Portion External Portion

$

26,735,187

564,232,613

$

590,967,800

Cash and Cash Equivalents and Investments in Short Term Investment Pool of $397,932,919 are reported as Cash and Cash Equivalents on the Statement of Net Position.

Statement of Changes in Net Position - June 30, 2015

Market Value Plus Accrued Income on July 1, 2014

$

546,512,361

Receipts

78,966,390

Disbursements Administrative Expenses Distributions

-753,580 -42,108,050

Investment Results Income Collected and Accrued Realized Gain/Loss on Assets Sold Change in Unrealized Gain/Loss Amortization (Short-Term Fund)

9,057,214 3,054,828 -2,683,385 -1,077,978

Market Value Plus Accrued Income on June 30, 2015

$

590,967,800

- 18 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Note 3. Accounts Receivable Accounts receivable for business type activities consisted of the following at June 30, 2015:

Federal Financial Assistance

$

Georgia State Financing and Investment Commission

Due from Affiliated Organizations

Other

1,160,687 295,017 100,000
39,409,691

Less Allowance for Doubtful Accounts

40,965,395 39,717

Net Accounts Receivable

$

40,925,678

Note 4. Inventories

Inventories consisted of the following at June 30, 2015:

Resale
Note 5. Notes/Loans Receivable

$

85,447

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 2008. GSOU has an obligation to send the USO annual payments of $205,320 through the year 2025. In fiscal year 2015, the University System Office collected $205,320, $87,575 of which represented interest. Total principal collected on the Note Receivable was $117,745. At June 30, 2015, the Notes Receivable balance was $ 1,503,560. There is no allowance for doubtful collection.

- 19 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2015:

Beginning Balance July 1, 2014

Special Item
Transfer

Additions

Reductions

Ending Balance June 30, 2015

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

$

1,891,415 $

10,000

0

0

$

$ 1,054,121

0$

1,891,415

10,000

1,054,121

Total Capital Assets, Not Being Depreciated

1,901,415

0 1,054,121

0

2,955,536

Capital Assets, Being Depreciated/Amortized: Infrastructure Building and Building Improvements Equipment Capital Leases Software

0 27,259,962 53,722,143 61,171,092 18,830,316

340,115,381

3,116,494 374,686
6,120,991 186,252
1,097,400

6,621,126

3,116,494 367,750,029
53,222,008 61,357,344 19,927,716

Total Assets Being Depreciated/Amortized

160,983,513 340,115,381 10,895,823

6,621,126

505,373,591

Less: Accumulated Depreciation: Infrastructure Building and Building Improvements Equipment Capital Leases Software

0 9,956,093 45,678,640 15,651,484 14,955,185

72,007,970

142,003 689,230 3,219,918 3,317,743 842,829

4,322,107

142,003 82,653,293 44,576,451 18,969,227 15,798,014

Total Accumulated Depreciation

86,241,402 72,007,970 8,211,723

4,322,107

162,138,988

Total Capital Assets, Being Depreciated, Net

Capital Assets, Net

$

74,742,111 268,107,411 2,684,100 76,643,526 $ 268,107,411 $ 3,738,221 $

2,299,019

343,234,603

2,299,019 $ 346,190,139

A special item transfer was made to move assets related to the transfer of dormitory buildings to the University System Office - See Note 1.
For projects managed by GSFIC, GSFIC retains construction-in-progress on its books throughout the construction period and transfers the entire project to the University 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, 2015, GSFIC did not transfer any capital additions to the University System Office.

- 20 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Note 7. Advances Advances consisted of the following at June 30, 2015:

Other - Advances

$

7,455,594

Note 8. Long-Term Liabilities

Long-Term liability activity for the year ended June 30, 2015 was as follows:

Beginning Balance July 1, 2014 (Restated)

Special Item Transfers

Additions

Reductions

Ending Balance June 30, 2015

Current Portion

Leases Lease Purchase Obligations $

47,877,695 $ 302,191,954 $

128,411 $ 304,079,096 $ 46,118,964 $ 2,140,949

Other Liabilities Compensated Absences Net Pension Liability

4,122,738 39,706,495

0

2,602,301

2,869,317

3,855,722

7,652,061

32,054,434

2,182,053

Total

43,829,233

0

2,602,301

10,521,378

35,910,156

2,182,053

Total Long-Term Obligations $

91,706,928 $ 302,191,954 $ 2,730,712 $ 314,600,474 $ 82,029,120 $ 4,323,002

Note 9. Service Concession Arrangements

During fiscal year ended June 30, 2015, the Board of Regents of the University System of Georgia (BOR) entered into a Service Concession Arrangement (SCA) with Corvias Campus Living-USG,LLC, whereby Corvias Campus Living-USG,LLC, will manage, maintain and operate certain student housing resources on the campuses of the following nine institutions: Abraham Baldwin Agricultural College; Armstrong State University; College of Coastal Georgia; Columbus State University; Dalton State College; East Georgia State College; Georgia Regents University; Georgia State University; and the University of North Georgia.

Pursuant to the contractual stipulations of this SCA, whereby the BOR and Corvias Campus LivingUSG,LLC, are the "parties" participating in this agreement, as of May 14, 2015, the institutions noted above transferred the housing resources covered by this SCA, along with associated capital lease obligations to the University System Office. The capital asset transfers of $268,107,411, net of accumulated depreciation, are reported in Note 6, while capital lease obligation transfers of $302,191,954 are included in Note 8. The net of these transfers is reported as a Special Item Transfer of $42,772,879 on the Statement of Revenues, Expenses and Changes in Net Position.

In accordance with the SCA, in May 2015, Corvias Campus Living-USG, LLC, provided $311,561,781 to the BOR to retire the capital lease obligations transferred to the University System Office. These lease obligations with outstanding principal balances of $302,191,954, were subsequently retired using funds provided, a gain was also recognized through the transfer from refinancing the Commons dormitory 2 years ago for $8,688,336, with the University System Office recording the difference of $681,491 as a Special Item - Extinguishment of Capital Lease Obligations on the Statement of Revenues, Expenses and Changes in Net Position.

- 21 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

The $311,561,781 received from Corvias Campus Living-USG, LLC, was reported as a Deferred Inflow of Resources. The SCA is for 65 years (780 months) to end in June 2080. The University System Office amortized $399,438 of this Deferred Inflow in June 2015, leaving a remaining Deferred Inflow of Resources balance of $311,162,343 at June 30, 2015.
As part of this SCA, beginning in fiscal year 2016, the University System Office will also receive $8,000,000 in Ground Rent and $500,000 in Supplemental Capital Repair and Replacement funds each year for the next ten years, with each amount escalating by 3% annually. The University System Office will also receive Retained Services funds each year as a percentage of gross revenues for that year. At June 30, 2015, the University System Office had received advances of $4,000,000 of ground rent and $3,300,230 in retained services funds. This total of $7,300,230 is reflected as Advances on the Statement of Net Position.
Note 10. Net Position
Net position is reported in the following three categories: Net Investment in Capital Assets, Restricted Nonexpendable, Restricted-Expendable, and Unrestricted.
The amounts within each category at June 30, 2015 were as follows:

June 30, 2015

Net Investments in Capital Assets

$

300,071,175

Restricted for Nonexpendable Permanent Endowment

4,388,201

Expendable Restricted E&G and Other Organized Activities Health Insurance Reserve

10,535,455 88,855,258

Total Expendable

99,390,713

Unrestricted Reserve for Encumbrances Other Unrestricted

26,726,941 -337,939,676

Total Unrestricted

-311,212,735

TOTAL NET POSITION

$

92,637,354

Note 11. Endowments

Donor Restricted Endowments: Investments of the University's endowment funds are pooled, unless required to be separately invested by the donor. For institution controlled, donor-restricted endowments, where the donor has not provided specific instructions, the Board of Regents permits the University System Office to develop policies for authorizing and spending realized and unrealized endowment income and

- 22 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

appreciation as they determined to be prudent. Realized and unrealized appreciation in excess of the amount budgeted for current spending is retained by the endowments. Current year net appreciation for the endowment accounts was $6,223 and is reflected as restricted net position.
For endowment funds where the donor has not provided specific instructions, investment return of the University System Office's endowment funds is predicated under classical trust doctrines. Unless the donor has stipulated otherwise, capital gains and losses are accounted for as part of the endowment principal and are not available for expenditure.

Note 12. Significant Commitments
The University System Office had no significant unearned, outstanding, construction or renovation contracts executed as of June 30, 2015.

Note 13. Lease Obligations
The University System Office is obligated under various operating leases for the use of real property (land, buildings, and office facilities), and also is obligated under capital leases and installment purchase agreements for the acquisition of real property.

Capital Leases
Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2015 and 2052. Payments for fiscal year 2015 were $3.6 million of which $1.7 million represented interest. Total principal paid on capital leases was $1.9 million for the fiscal year ended June 30, 2015. Interest rates are 4 percent.

Description

Lessor

Original Principal

Lease Term

Begin

Outstanding

Principal Balance

End

at June 30, 2015

Shared Services Center
ITS Building Archives Building

Washington County Public Facilities Authority $
SunTrust TUFF

3,578,343 13,627,541 44,484,230

20 years 11 years 50 years

April 2010

January 2030 $

July 2014

June 2025

February 2003 June 2052

4,312,796 8,494,999 33,311,169

Total Leases

$ 61,690,114

$

46,118,964

Operating Leases

The University System Office's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2015 through 2020. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis.

Facilities rented through operating leases are not recorded as assets on the balance sheet. Operating lease expenditures totaled $189,055 for the fiscal year ended June 30, 2015.
The University System Office has one operating lease for office space used by the Georgia Public Library System. The lease term began in fiscal 2010 and is annually renewable through fiscal year 2020.
- 23 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Future Commitments
Future commitments for capital leases (which here and on the Statement of Net Position) include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2015, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2016 2017 2018 2019 2020 2021 - 2025 2026 - 2030 2031 - 2035 2036 - 2040 2041 - 2045 2046 - 2050 2051 - 2055

$

3,948,756 $

3,970,656

3,976,706

4,001,656

4,020,056

20,218,300

14,749,663

7,816,467

179,918

179,918

179,918

71,967

194,798 200,653 206,734 212,927 219,345

Total Minimum Lease Payments Less: Interest

63,313,981 $ 17,195,017

1,034,457

Principal Outstanding

$

46,118,964

The following is a summary of the carrying values of assets held under capital lease at June 30, 2015:

Net Capital Assets

Outstanding

Held Under

Balances per

Accumulated

Capital Lease Lease Schedules

Description

Gross Amount

Depreciation

at June 30, 2015 at June 30, 2015

(+)

(-)

(=)

Land - (PPV) Buildings - (PPV)

$

50,600

$

50,600 $

44,500

61,357,344 $ 18,969,228

42,388,116

46,074,464

Total Assets Held Under Capital Lease

at June 30, 2015

$

61,407,944 $ 18,969,228 $ 42,438,716 $ 46,118,964

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's fiscal year 2015 expense for rental of real property and equipment under operating leases was $1,837,145.
- 24 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Note 14. Retirement Plans
The University System Office participates in various retirement plans administered by the State of Georgia under two major retirement systems: Teachers' Retirement System of Georgia (TRS) and Employees' Retirement System of Georgia (ERS). These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective administrative offices.
The significant retirement plans that the University System Office participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.
Teachers' Retirement System of Georgia and Employees' Retirement System of Georgia
General Information about the Teachers' Retirement System
P lan description: All employees of the University System Office as defined in 47-3-60 of the Official Code of Georgia Annotated (O.C.G.A.) are provided a pension through the Teachers' Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. TRS issues a publicly available financial report that can be obtained at www.trsga.com/publications.
Benefits provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death.
Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6.00% of their annual pay during fiscal year 2015. The University System Office's contractually required contribution rate for the year ended June 30, 2015 was 13.15% of annual University System Office payroll. The University System Office contributions to TRS were $3,367,743 for the reporting period (fiscal year ended June 30, 2015) and $2,908,206 for the measurement period (fiscal year ended June 30, 2014). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.
General Information about the Employees' Retirement System
P lan description: ERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.
- 25 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Benefits provided: The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan (GSEPS). Employees under the old plan started membership prior to July 1, 1982 and are subject to 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 modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS.
Under the old plan, the 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 the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, postretirement cost-of-living adjustments may also 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.
Contributions: 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 state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The University System Office's contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2015 was 21.96% of annual covered payroll for old and new plan members and 18.87% for GSEPS members. The University System Office's contributions to ERS were $451,830 for the reporting period (fiscal year ended June 30, 2015) and $302,231 for the measurement period (fiscal year ended June 30, 2014). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2015, the University System Office reported a liability for its proportionate share of the net pension liability for TRS and ERS, totaling $32,054,434 The net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2013. An expected total pension liability as of June 30, 2014 was determined using standard roll-forward techniques. The University System Office's proportion of the net pension liability was based on contributions to TRS and ERS during the fiscal year ended June 30, 2014. At June 30, 2014, the University System Office's TRS proportion was 0.232136%, which was an increase of 0.018493% from its proportion measured as of June 30, 2013. At June 30, 2014, the University System Office's ERS proportion was 0.072711%, which was an increase of 0.021616% from its proportion measured as of June 30, 2013.

- 26 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

For the year ended June 30, 2015, the University System Office recognized pension expense of $2,606,973 for TRS and $569,982 for ERS. At June 30, 2015, the University System Office reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

TRS

ERS

Deferred

Deferred

Deferred

Deferred

Outflow of

Inflows of

Outflow of

Inflows of

Resources

Resources

Resources

Resources

Net difference between projected and actual earnings on pension plan investments

$

10,224,126

$

665,604

Changes in proportion and differences

between University System Office contributions

and proportionate share of contributions

$

2,625,645

$

645,505

University System Office contributions subsequent to the measurement date

3,367,743

451,830

Total

$

5,993,388 $

10,224,126 $

1,097,335 $

665,604

The University System Office contributions subsequent to the measurement date of $3,367,743 for TRS and $451,830 for ERS are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ending June 30:

TRS

ERS

2016 2017 2018 2019 2020 Thereafter

$ -1,959,293 $

$ -1,959,293 $

$ -1,959,293 $

$ -1,959,296 $

$

238,694 $

$

0$

237,040 75,663
-166,401 -166,401
0 0

Actuarial assum ptions: The total pension liability as of June 30, 2014 was determined by an actuarial valuation as of June 30, 2013 using the following actuarial assumptions, applied to all periods included in the measurement:

Teachers' Retirement System:

Inflation Salary increases Investment rate of return

3.00% 3.75% - 7.00%
7.50%

average, including inflation net of pension plan investment expense
including inflation

- 27 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females set back two years for males and set back three years for females.
The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 - June 30, 2009.

Employees' Retirement System:

Inflation Salary increases Investment rate of return

3.00% 5.45% - 9.25%
7.50%

average, including inflation net of pension plan investment expense
including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table for the periods after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back eleven years for males for the period after disability retirement.

The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 - June 30, 2009.

The long-term expected rate of return on TRS and ERS pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best

estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Target

Long-Term Expected

Asset Class

Allocation Real Rate of Return *

Fixed Income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities

30.00% 39.70%
3.70% 1.60% 18.90% 6.10%

3.00% 6.50% 10.00% 13.00% 6.50% 11.00%

100.00%
* Rates shown are net of the 3.00% assumed rate of inflation
Discount rate: The discount rate used to measure the total TRS and ERS pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the TRS and ERS pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

- 28 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Sensitivity of the University System Office's proportionate share of the net pension liability to changes in the discount rate: The following presents the University System Office's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the University System Office's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate:

Teachers' Retirement System:

University System Office's proportionate share

of the net pension liability

$

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

54,046,319 $ 29,327,322 $

1% Increase (8.50%)
8,971,741

Employees' Retirement System:

University System Office's proportionate share

of the net pension liability

$

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

3,976,670 $ 2,727,112 $

1% Increase (8.50%)
1,663,447

P ension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS and ERS financial reports which are publically available at www.trsga.com/publications and www.ers.ga.gov/formspubs/formspubs, respectively.

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and 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 all exempt full and partial benefit eligible employees, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from three approved vendors (VALIC, 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 2015, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 6% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.

The University System Office and the covered employees made the required contributions of $515,140 (9.24%) and $334,507 (6%), respectively.

- 29 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

VALIC, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
Note 15. Risk Management
The University System of Georgia offers its employees and retirees access to four different healthcare plan options. For the University System of Georgia's Plan Year 2015, the following healthcare plan options were available:
BlueChoice HMO Comprehensive Care Plan Consumer Choice HSA Plan Kaiser Permanente HMO
The University System Office and participating employees and retirees pay premiums to the healthcare plan options to access benefits coverage. All units of the University System of Georgia share the risk of loss for claims associated with the self-insured plans; including the BlueChoice HMO, Comprehensive Care Plan and Consumer Choice HSA Plan.
The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to serve as the claims administrator for the self-insured healthcare plans. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser Permanente.
The prescription drug plan was administered through Express Scripts through December 31, 2014 and CVS/Caremark effective January 1, 2015. Pharmacy drug claims are processed in accordance with guidelines established for the Board of Regents' Prescription Drug Benefit Program. Generally, claims are submitted to the plan administrator for verification, processing and payment. The plan administrator 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. The dental plan was administered through Delta Dental.

- 30 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

A reconciliation of total estimated claims liabilities for employees and retirees for the fiscal years ended June 30, 2014, and June 30, 2015 is shown below:

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

June 30, 2015

June 30, 2014

$ 39,089,023 $ 32,737,154

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

379,213,694

360,327,990

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

381,805,717

353,976,121

Unpaid Claims and Claim Adjustments (Current Year IBNR) $ 36,497,000 $ 39,089,023

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

$ 12,119,357 $

9,326,592

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

150,240,224

140,920,834

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

150,934,581

138,128,069

Unpaid Claims and Claim Adjustments (Current Year IBNR) $ 11,425,000 $ 12,119,357

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 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.

- 31 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Note 16. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although 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, 2015.

Note 17. Post-Employment Benefits Other Than Pension Benefits
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 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.

The Board of Regents Retiree Health Benefit Plan is a single-employer, defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia.
Membership of the plan consisted of the following at June 30, 2015:

Retirees and Beneficiaries Receiving Benefits Active Plan Members'

$

21,530

38,763

Total

$

60,293

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.

- 32 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

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 2015 plan year, the employer rate was approximately 77% of the total health insurance cost for eligible retirees and the retiree rate was approximately 23%. 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 2015, the University System of Georgia contributed $129,822,595 to the plan, for current premiums or claims. Plan members receiving benefits contributed $37,770,393 for current premiums or claims.
As of June 30, 2015, there were 111 University System Office employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2015, the University System Office recognized as incurred $555,863 of expenditures, which was net of $264,278 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 fiscal year 2015, 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):

June 30, 2015

Annual Required Contribution Interest on Net OPEB Obligation Adjustment to Annual Required Contribution
Annual OPEB Cost (Expense) Less: Contributions Made
Increase in Net OPEB Obligation Net OPEB Obligation - Beginning of Year

$

442.4

82.9

-75.2

450.1

-129.8

320.3

1,843.1

Net OPEB Obligation - End of Year

$

2,163.4

- 33 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

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 the current and past two fiscal years were as follows (dollar amounts in millions):

Annual OPEB Cost and Net OPEB Obligation

Fiscal Year Ended

Annual OPEB Cost

Contribution

Percentage of Annual OPEB Cost Contributed

Net OPEB Obligation

2013 2014 2015

$ 367.8 $ 409.8 $ 450.1

91.8 120.9 129.8

Funded Status and Funding Progress

25.0%

$

29.5%

$

28.8%

$

Actuarial Valuation
Date

Actuarial Value of Assets
(a)

Actuarial Accrued Liability
(b)

Unfunded AAL (UAAL) (b-a)

Funded Ratio (a/b)

1,562.6 1,843.1 2,163.4
Annual Covered Payroll
(c)

UAAL as a Percentage of Covered
Payroll ((b-a)/c)

7/1/2012 $ 7/1/2013 $ 7/1/2014 $

165,684 $ 3,758,969,936 $ 216,775 $ 4,095,304,172 $
81,519 $ 4,278,445,406 $

3,758,804,252 4,095,087,397 4,278,363,887

0.0% $ 2,466,313,700 0.0% $ 2,594,800,486 0.0% $ 2,608,756,645

152.4% 157.8% 164.0%

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.

- 34 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

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:

(1) Valuation Date (2) Cost Method (3) Asset Method (4) Amortization Method (5) Amortization Period (6) Interest Rate (7) Inflation (8) Salary Growth (9) Salary Scale (10) Initial Health Care Trend
(11) Ultimate Trend* (12) Year Ultimate Trend is reached

July 1, 2014 Projected Unit Credit Market Value Level Percent of Payroll, Closed 30 Years 4.50% 2.50% 3.00% 4.00% 7.8.% Pre-Medicare 10.1% Medicare 4.50% 2030

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

- 35 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Note 18. Natural Classifications with Functional Classifications
The University System Office's operating expenses by functional classification for fiscal year 2015 are shown below:
Functional Classification

Natural Classification

Research

Public Service

Academic Support

Institutional Support

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

$

42,778 $ 3,520,765 $

682,816 $ 31,085,699

6,610

1,055,133

188,969

8,500,360

3,000

4,994

103,440

31,278

771,214

1,553,044 65,507,294
1,805,365

318 18,175,809
23,307

1,662,583 448,674,373
4,588,969

Total Operating Expenses

$

49,388 $ 73,548,041 $ 19,102,497 $ 495,288,192

Natural Classification

Plant Operations and
Maintenance

Functional Classification

Scholarships

and

Auxiliary

Fellowships

Enterprises

Total Operating Expenses

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

$

79,295 $ 35,411,353

16,368

9,767,440

1,338

9,332

4,200

910,132

$

197,638

197,638

796

3,216,741

$

490,166

8,471,976 541,319,618

1,794,082

8,211,723

Total Operating Expenses

$

490,166 $

197,638 $ 10,368,055 $ 599,043,977

Note 19. Affiliated Organizations
The University System of Georgia Foundation is a legally separate, tax-exempt organization whose activities primarily support the University System Office, a unit of the University System of Georgia. Because the University System of Georgia is an organizational unit of the State of Georgia these affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statements No. 14, No. 39 and No. 61. Therefore, the financial statements of these affiliated organizations are not included in these financial statements. Copies of the financial statements may be obtained from the University System Office.
The University System of Georgia Foundation has been determined significant to the State of Georgia for the year ended June 30, 2015, and as such, is reported as a component unit in the Comprehensive Annual Financial Report of the State of Georgia (CAFR).

- 36 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2015

EXHIBIT "F"

Note 20. Subsequent Event
The Board of Regents of the University System of Georgia approved a change to the retiree healthcare benefit plan that will significantly reduce the annual OPEB cost (AOC) and the net OPEB obligation (NOO) in fiscal year 2016. The NOO is equal to a running total of the AOC less employer contributions. Effective January 1, 2016, the University System of Georgia (USG) will provide supplemental healthcare coverage for Medicare-eligible retirees through a private retiree healthcare exchange instead of through the USG healthcare plan. On August 12, 2015, the Board of Regents approved the funding level for the 2016 USG retiree supplemental plan and kept the funding amount the same as 2015 at $43.3 million. For Medicare-eligible retirees, the USG will provide a subsidy not to exceed $2,736 per retiree toward healthcare costs for 2016. For fiscal years 2016 and 2017, this change in the supplemental healthcare coverage for Medicare-eligible retirees is forecasted to reduce the NOO by $42.1 and $43.9 million, respectively, from what the obligation would have been under the old plan.

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REQUIRED SUPPLEMENTARY INFORMATION

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS' RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30, 2015
University System Office's proportion of the net pension liability University System Office's proportionate share of the net pension liability University System Office's covered-employee payroll University System Office's proportionate share of the net pension liability
as a percentage of its covered employee payroll Plan fiduciary net position as a percentage of the total pension liability

SCHEDULE "1"
2015 0.232136% $ 29,327,322.00 $ 23,724,791.53
123.62% 84.03%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 40 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30, 2015
University System Office's proportion of the net pension liability University System Office's proportionate share of the net pension liability University System Office's covered-employee payroll University System Office's proportionate share of the net pension liability
as a percentage of its covered employee payroll Plan fiduciary net position as a percentage of the total pension liability

SCHEDULE "2"
2015 0.072711% $ 2,727,112.00 $ 1,688,599.35
161.51% 77.99%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 41 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA SYSTEM OFFICE (OVERSIGHT UNIT)
REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS
TEACHERS' RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30, 2015

Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) University System Office's covered-employee payroll Contributions as a percentage of covered-employee payroll

2015

2014

2013

2012

$ 3,367,743.00 $ 2,908,206.00 $ 2,454,079.66 $ 2,057,251.00

$ 3,367,743.00 $ 2,908,206.00 $ 2,454,079.66 $ 2,057,251.00

$

0.00 $

0.00 $

0.00 $

0.00

$ 25,611,344.00 $ 23,724,791.53 $ 21,538,491.70 $ 20,012,169.26

13.15%

12.26%

11.40%

10.28%

- 42 -

SCHEDULE "3"

2011

2010

2009

2008

2007

2006

$ 2,083,786.00 $

2,235,964.00 $ 2,085,313.00 $ 1,952,167.00 $ 1,787,733.00 $ 1,657,223.00

$ 2,083,786.00 $

2,235,964.00 $ 2,085,313.00 $ 1,952,167.00 $ 1,787,733.00 $ 1,657,223.00

$

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

$ 20,270,291.83 $ 22,956,509.24 $ 22,471,045.26 $ 21,036,282.33 $ 19,264,364.22 $ 17,935,313.85

10.28%

9.74%

9.28%

9.28%

9.28%

9.24%

- 43 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA FOR THE YEAR ENDED JUNE 30, 2015

Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) University System Office's covered-employee payroll Contributions as a percentage of covered-employee payroll

2015

2014

2013

2012

$ 451,830.00 $ 302,231.00 $ 178,569.15 $ 112,663.00

$ 451,830.00 $ 302,231.00 $ 178,569.15 $ 112,663.00

$

0.00 $

0.00 $

0.00 $

0.00

$ 2,202,271.00 $ 1,688,599.35 $ 1,300,762.12 $ 968,727.43

20.52%

17.90%

13.73%

11.63%

- 44 -

SCHEDULE "4"

2011

2010

2009

2008

2007

2006

$ 72,484.00 $ 55,733.00 $ 62,341.00 $ 61,924.00 $ 40,840.00 $ 45,379.00

$ 72,484.00 $ 55,733.00 $ 62,341.00 $ 61,924.00 $ 40,840.00 $ 45,379.00

$

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

$ 696,292.03 $ 535,379.44 $ 597,001.00 $ 593,025.00 $ 390,602.00 $ 435,917.39

10.41%

10.41%

10.44%

10.44%

10.46%

10.41%

- 45 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) SCHEDULE OF FUNDING PROGRESS JUNE 30, 2015

SCHEDULE "5"

Actuarial Valuation
Date

Actuarial Value of Assets
(a)

7/1/2012 $ 7/1/2013 $ 7/1/2014 $

165,684 $ 216,775 $
81,519 $

Actuarial Accrued Liability (AAL) Projected Unit Credit
(b)

Unfunded AAL (UAAL) (b-a)

3,758,969,936 $ 4,095,304,172 $ 4,278,445,406 $

3,758,804,252 4,095,087,397 4,278,363,887

Funded Ratio (a/b)

Covered Payroll (c)

0.0% $ 0.0% $ 0.0% $

2,466,313,700 2,594,800,486 2,608,756,645

UAAL as a Percentage of Covered
Payroll ((b-a)/c)
152.4% 157.8% 164.0%

BOARD OF REGENTS RETIREE HEALTH BENEFIT FUND SCHEDULE OF EMPLOYER CONTRIBUTIONS

Fiscal Year

Required Contribution

Percentage Contributed

2013 2014 2015

$ 362,426,199 $ 403,314,315 $ 442,358,794

23.0% 30.0% 29.5%

- 46 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2015

SCHEDULE "6"

Teachers' Retirement System
Changes of assumptions : In 2010 and later, the expectation of retired life mortality was changed to the RP2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. In 2010, assumed rates of salary increase were adjusted to more closely reflect actual and anticipated experience.

Method and assumptions used in calculations of actuarially determined contributions : The actuarially determined contribution rates in the schedule of contributions are calculated as of June 30, three years prior to the end of the fiscal year in which contributions are reported. The following actuarial methods and assumptions were used to determine the contractually required contributions for year ended June 30, 2015 reported in that schedule:

Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation rate Salary increases Investment rate of return

June 30, 2012 Entry age Level percentage of payroll, open 30 years Seven-year smoothed market 3.00% 3.75 7.00%, including inflation 7.50%, net of pension plan investment
expense, including inflation

Employees' Retirement System
Changes of assumptions : There were no changes in assumptions or benefits that affect the measurement of the total pension liability since the prior measurement date.
Method and assumptions used in calculations of actuarially determined contributions : The actuarially determined contribution rates in the schedule of contributions are calculated as of June 30, three years prior to the end of the fiscal year in which contributions are reported. The following actuarial methods and assumptions were used to determine the contractually required contributions for year ended June 30, 2015 reported in that schedule:

Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation rate Salary increases
Investment rate of return

June 30, 2012 Entry age Level dollar, open 30 years Seven-year smoothed market 3.00% 2.725% 4.625% for FY 2012-2013, 5.45% - 9.25% for FY2014+ 7.50%, net of pension plan investment
expense, including inflation

- 47 -

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SUPPLEMENTARY INFORMATION - 49 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND JUNE 30, 2015
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue Funds Held for Others
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office" Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "7"

$ 53,072,521.35 3,597,992.86
1,160,686.55 4,464,814.62
513,981.71 85,447.19
$ 62,895,444.28

$

60,044.79

26,726,126.70

449,572.53

255,363.96

13,506.62

27,504,614.60

22,064,793.89 370,745.99
6,482,887.95 39,716.59 85,447.19
6,079,509.53
267,728.54
35,390,829.68

$ 62,895,444.28

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 50 -

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, 2015

SCHEDULE "8"

REVENUES
State Appropriation State General Funds
Other Funds
Total Revenues
ADJUSTMENTS AND PROGRAM TRANSFERS
CARRY-OVER FROM PRIOR YEARS
Transfers from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Archives Public Libraries Regents Central Office Medical College of Georgia Hospital and Clinics Georgia Public Telecommunications Commission Georgia Radiation Therapy Center Georgia Military College Special Funding Initiatives Teaching
Total Expenditures
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Office of the State Treasurer Year Ended June 30, 2014
Unreserved Fund Balance (Surplus) Returned to Board of Regents - University System Office Year Ended June 30, 2014
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 157,628,017.00 $ 157,628,017.00 $

0.00

79,902,516.00

63,147,790.47

-16,754,725.53

237,530,533.00

220,775,807.47

-16,754,725.53

0.00

0.00

0.00

0.00 237,530,533.00

34,875,404.55 255,651,212.02

34,875,404.55 18,120,679.02

5,656,682.00 38,121,320.00 11,549,268.00 28,569,119.00 14,690,162.00
4,837,326.00 2,329,780.00 6,847,402.00 124,929,474.00

237,530,533.00

$

0.00

5,431,070.89 36,838,823.14 11,535,775.88 28,569,119.00 14,690,162.00
0.00 2,329,780.00 6,842,121.12 115,760,062.32

225,611.11 1,282,496.86
13,492.12 0.00 0.00
4,837,326.00 0.00
5,280.88 9,169,411.68

221,996,914.35

15,533,618.65

33,654,297.67 $ 33,654,297.67

35,099,679.46 88,084.25

1,512,257.10
-1,957,190.27
1,869,106.02 -34,875,404.55 $ 35,390,829.68

SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office"
Total Reserved
Unreserved Surplus
Total Fund Balance

$ 22,064,793.89 370,745.99
6,482,887.95 39,716.59 85,447.19
6,079,509.53
35,123,101.14
267,728.54
$ 35,390,829.68

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 51 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015

Archives State Appropriation State General Funds Other Funds
Total Archives
Public Libraries State Appropriation State General Funds Other Funds
Total Public Libraries
Regents Central Office State Appropriation State General Funds
Medical College of Georgia Hospital and Clinics State Appropriation State General Funds
Georgia Public Telecommunications Commission State Appropriation State General Funds
Georgia Radiation Therapy Center Other Funds
Georgia Military College State Appropriation State General Funds
Special Funding Initiatives State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

4,627,469.00 689,281.00
5,316,750.00

4,627,469.00 689,281.00
5,316,750.00

4,627,469.00 1,029,213.00
5,656,682.00

4,627,469.00 925,365.19
5,552,834.19

32,310,084.00 5,222,400.00
37,532,484.00

32,310,084.00 5,222,400.00
37,532,484.00

32,310,084.00 5,811,236.00
38,121,320.00

32,310,084.00 4,529,297.47
36,839,381.47

11,549,268.00

11,549,268.00

11,549,268.00

11,549,268.00

28,569,119.00

28,569,119.00

28,569,119.00

28,569,119.00

14,690,162.00

14,690,162.00

14,690,162.00

14,690,162.00

3,779,621.00

3,779,621.00

4,837,326.00

0.00

2,329,780.00

2,329,780.00

2,329,780.00

2,329,780.00

8,468,158.00

8,468,158.00

6,847,402.00

6,847,402.00

23,826,410.00 5,498,678.00
29,325,088.00

23,826,410.00 5,498,678.00
29,325,088.00

56,704,733.00 68,224,741.00
124,929,474.00

56,704,733.00 57,693,127.81
114,397,860.81

141,560,430.00

141,560,430.00

237,530,533.00

220,775,807.47

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 52 -

SCHEDULE "9"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Positive

Expenditures Compared to Budget

Variance

Actual

Positive

Excess of Funds Available Over Expenditures

0.00 876,100.57
876,100.57

0.00 0.00
0.00

4,627,469.00 1,801,465.76
6,428,934.76

0.00 772,252.76
772,252.76

4,625,758.51 805,312.38
5,431,070.89

1,710.49 223,900.62
225,611.11

1,710.49 996,153.38
997,863.87

0.00 0.00
0.00

0.00 0.00
0.00

32,310,084.00 4,529,297.47
36,839,381.47

0.00 -1,281,938.53
-1,281,938.53

32,309,525.67 4,529,297.47
36,838,823.14

558.33 1,281,938.53
1,282,496.86

558.33 0.00
558.33

0.00

0.00

11,549,268.00

0.00

11,535,775.88

13,492.12

13,492.12

0.00

0.00

28,569,119.00

0.00

28,569,119.00

0.00

0.00

0.00 0.00

0.00

14,690,162.00

0.00

0.00

0.00

14,690,162.00

-4,837,326.00

0.00

0.00 4,837,326.00

0.00 0.00

0.00

0.00

2,329,780.00

0.00

2,329,780.00

0.00

0.00

0.00

0.00

6,847,402.00

0.00

6,842,121.12

5,280.88

5,280.88

0.00 33,999,303.98
33,999,303.98

0.00 0.00
0.00

56,704,733.00 91,692,431.79
148,397,164.79

0.00 23,467,690.79
23,467,690.79

56,702,313.22 59,057,749.10
115,760,062.32

2,419.78 9,166,991.90
9,169,411.68

2,419.78 32,634,682.69
32,637,102.47

34,875,404.55

0.00

255,651,212.02

18,120,679.02

221,996,914.35

15,533,618.65

33,654,297.67

- 53 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015

Archives State Appropriation State General Funds Other Funds
Total Archives
Public Libraries State Appropriation State General Funds Other Funds
Total Public Libraries
Regents Central Office State Appropriation State General Funds
Medical College of Georgia Hospital and Clinics State Appropriation State General Funds
Georgia Public Telecommunications Commission State Appropriation State General Funds
Georgia Radiation Therapy Center Other Funds
Georgia Military College State Appropriation State General Funds
Special Funding Initiatives State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity
Prior Year Reserves Not Available for Expenditure Inventories Uncollectible Accounts Receivable

Beginning Fund Balance July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2014
Surplus

Prior Period Adjustments

$

2.02 $

876,100.57

876,102.59

0.00 $ -876,100.57
-876,100.57

-2.02 $ 0.00
-2.02

0.00 450.00
450.00

571.05 305.25
876.30

0.00 0.00
0.00

-571.05 -305.25
-876.30

9,845.79 0.00
9,845.79

194.67

0.00

-194.67

102.60

0.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00

0.00

0.00

0.00

252.70

0.00

-252.70

0.00

61,100.99 34,024,961.55
34,086,062.54
34,963,488.80

0.00 -33,999,303.98
-33,999,303.98
-34,875,404.55

-61,100.99 -25,657.57
-86,758.56
-88,084.25

158,676.05 1,343,182.66
1,501,858.71
1,512,257.10

184,558.32 39,716.59

0.00 0.00

0.00 0.00

0.00 0.00

Budget Unit Totals

$ 35,187,763.71 $ -34,875,404.55 $

-88,084.25 $ 1,512,257.10

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 54 -

SCHEDULE "10"

Other Adjustments

Early Return Fiscal Year 2015
Surplus

Excess of Funds Available Over Expenditures

Ending Fund Balance June 30

Analysis of Ending Fund Balance

Reserved

Surplus

Total

$

0.00 $

0.00

0.00

0.00 $ 0.00
0.00

1,710.49 $ 996,153.38
997,863.87

1,710.49 $ 996,603.38
998,313.87

0.00 $ 996,603.38
996,603.38

1,710.49 $ 0.00
1,710.49

1,710.49 996,603.38
998,313.87

0.00 0.00
0.00

0.00 0.00
0.00

558.33 0.00
558.33

10,404.12 0.00
10,404.12

0.00 0.00
0.00

10,404.12 0.00
10,404.12

10,404.12 0.00
10,404.12

0.00

0.00

13,492.12

13,594.72

0.00

13,594.72

13,594.72

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00 0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

5,280.88

5,280.88

0.00

5,280.88

5,280.88

0.00 99,111.13
99,111.13
99,111.13

0.00 0.00
0.00
0.00

2,419.78 32,634,682.69
32,637,102.47
33,654,297.67

161,095.83 34,076,976.48
34,238,072.31
35,265,665.90

0.00 34,001,333.98
34,001,333.98
34,997,937.36

161,095.83 75,642.50
236,738.33
267,728.54

161,095.83 34,076,976.48
34,238,072.31
35,265,665.90

-99,111.13 0.00

0.00 0.00

0.00 0.00

85,447.19 39,716.59

85,447.19 39,716.59

0.00 0.00

85,447.19 39,716.59

$

0.00 $

0.00 $

33,654,297.67 $ 35,390,829.68 $ 35,123,101.14 $

Summary of Ending Fund Balance Reserved
Department Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Carry-Over "Per State Accounting Office" Unreserved Surplus

22,064,793.89 370,745.99
6,482,887.95 39,716.59 85,447.19
6,079,509.53
$

$ 35,123,101.14 $

- 55 -

267,728.54 $ 35,390,829.68

$ 22,064,793.89 370,745.99
6,482,887.95 39,716.59 85,447.19
6,079,509.53

267,728.54

267,728.54

267,728.54 $ 35,390,829.68

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OF GEORGIA (OVERSIGHT UNIT) RECONCILIATION OF BUDGET TO GAAP YEAR ENDED JUNE 30, 2015

SCHEDULE "11"

Presented below is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 6, to Net Position of business-type activities, as reported on Exhibit A.
Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "6")
Amounts reported for Business-Type Activities in the Statement of Net Position are different because:
Capital Assets used in Business-Type Activities are not reported in the Budget Fund.
Uncollectible accounts receivable are reported as an asset and reserved fund balance in the Budget Fund and as a contra-asset account on the Statement of Net Assets.
Notes Receivable reported on the Statement of Net Position is not reported in the Budget Fund.
Changes in the Fair Market Value of Investments are recognized on the Statement of Net Position, but are not reported in the Budget Fund.
Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity
Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity
Endowment Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Endowment Fund Activity
Health Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Health Fund Activity
The budgetary basis of accounting implemented by the State of Georgia recognizes expenditures when encumbered. The following adjustments were made to eliminate this activity for reporting on the Statement of Net Position. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Payables for goods and services provided in the current fiscal year reported in the Budget Fund as encumbrances payable are reported as accounts payable for GAAP reporting. Total Net Effect of Encumbrance Activity
Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Capital Leases Payable Compensated Absences Payable Pension Liability and Deferred Inflow on Pension Plan Total Liabilities
Deferred inflows of resources are not reported as a component unit of the Budget Fund.
Unidentified Variance
Net Position of Business-Type Activities (Exhibit "A")

$

35,390,830.00

346,190,139.00

$ 586,131,662.00 -586,131,662.00

$ 11,563,765.00 -7,417,051.00

$

4,388,201.00

0.00

$ 125,970,611.00 -54,360,136.00

-39,717.00 1,503,559.00 -2,494,830.00
0.00 4,146,714.00 4,388,201.00 71,610,475.00

$ 26,726,127.00 3,426,907.00

30,153,034.00

-46,118,964.00 -3,855,722.00
-35,853,441.00

-85,828,127.00 -313,273,809.00
890,885.00

$

92,637,354.00

The supplementary information presented on Schedules 7,8, 9, and 10 was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. The information was derived from, and relates directly to, the same information used to prepare the financial statements. However, the budgetary statutes and regulations of the State of Georgia require reporting of certain information that is not in accordance with generally accepted accounting principles. Presented on this schedule is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 7, to Net Position of business-type activities, as reported on Exhibit A.
- 56 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) SCHEDULE OF APPROVED BUDGET YEAR ENDED JUNE 30, 2015

SCHEDULE "12"

REVENUES
State Appropriation Other Funds
Total Revenues
CARRY-OVER FROM PRIOR YEARS
Transfers from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Agricultural Experiment Station Archives Athens and Tifton Veterinary Laboratories Cooperative Extension Service Enterprise Innovation Institute Forestry Cooperative Extension Forestry Research Georgia Military College Georgia Public Telecommunications Georgia Radiation Therapy Center Georgia Tech Research Institute Marine Institute Marine Resources Extension Center Medical College of Georgia Hospital and Clinics Public Libraries Regents Central Office Skidaway Institute of Oceanography Special Funding Initiatives Teaching Veterinary Medicine Experiment Station Veterinary Medicine Teaching Hospital
Total Expenditures

ORIGINAL APPROPRIATION

FINAL APPROVED
BUDGET

BUDGET TRANSFERS TO OTHER UNITS

TOTAL

$ 1,939,087,764.00 $ 1,944,621,492.00 $ 1,786,993,475.00 $ 157,628,017.00

4,672,727,417.00

5,457,799,888.00

5,377,897,372.00

79,902,516.00

6,611,815,181.00

7,402,421,380.00

7,164,890,847.00

237,530,533.00

0.00

0.00

0.00

0.00

$ 6,611,815,181.00 $ 7,402,421,380.00 $ 7,164,890,847.00 $ 237,530,533.00

$

74,411,855.00 $

94,541,060.00 $

94,541,060.00 $

0.00

5,316,750.00

5,656,682.00

5,656,682.00

5,258,000.00

6,700,014.00

6,700,014.00

0.00

55,549,017.00

68,975,093.00

68,975,093.00

0.00

17,749,703.00

18,574,703.00

18,574,703.00

0.00

1,078,929.00

1,190,339.00

1,190,339.00

0.00

12,902,173.00

14,787,557.00

14,787,557.00

0.00

2,329,780.00

2,329,780.00

2,329,780.00

14,690,162.00

14,690,162.00

14,690,162.00

3,779,621.00

4,837,326.00

4,837,326.00

319,641,909.00

362,600,492.00

362,600,492.00

0.00

1,214,913.00

1,342,492.00

1,342,492.00

0.00

2,560,040.00

3,000,040.00

3,000,040.00

0.00

28,569,119.00

28,569,119.00

28,569,119.00

37,532,484.00

38,121,320.00

38,121,320.00

11,549,268.00

11,549,268.00

11,549,268.00

5,190,787.00

5,805,254.00

5,805,254.00

0.00

25,526,120.00

31,059,848.00

24,212,446.00

6,847,402.00

5,973,865,136.00

6,667,302,417.00

6,542,372,943.00

124,929,474.00

2,618,043.00

2,618,043.00

2,618,043.00

0.00

10,481,372.00

18,170,371.00

18,170,371.00

0.00

$ 6,611,815,181.00 $ 7,402,421,380.00 $ 7,164,890,847.00 $ 237,530,533.00

See notes to the financial statements.

- 57 -

RESEARCH UNIVERSITIES
Georgia Institute of Technology Georgia Regents University Georgia State University University of Georgia
COMPREHENSIVE UNIVERSITIES
Georgia Southern University Kennesaw State University University of West Georgia Valdosta State University
STATE UNIVERSITIES
Albany State University Armstrong Atlantic State University Clayton State University Columbus State University Fort Valley State University Georgia College and State University Georgia Southwestern State University Savannah State University Southern Polytechnic State University University of North Georgia
STATE COLLEGES
Abraham Baldwin Agricultural College Atlanta Metropolitan State College Bainbridge State College College of Coastal Georgia Dalton State College Darton State College East Georgia State College Georgia Gwinnett College Georgia Highlands College Georgia Perimeter College Gordon State College Middle Georgia State College South Georgia State College
OTHER
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, 2015

AGRICULTURAL EXPERIMENT
STATION

COOPERATIVE EXTENSION SERVICE

ENTERPRISE INNOVATION INSTITUTE

FORESTRY COOPERATIVE
EXTENSION

FORESTRY RESEARCH

GEORGIA TECH
RESEARCH INSTITUTE

$ 7,274,703.00

$ 5,629,947.00

$ 36,858,936.00 $ 30,465,088.00

$ 502,941.00 $ 2,651,747.00

$ 36,858,936.00 $ 30,465,088.00 $ 7,274,703.00 $ 502,941.00 $ 2,651,747.00 $ 5,629,947.00

See notes to the financial statements.

- 58 -

SCHEDULE "13"

MARINE INSTITUTE

MARINE RESOURCES EXTENSION
CENTER

RESEARCH CONSORTIUM

SKIDAWAY INSTITUTE OF OCEANOGRAPHY

SPECIAL FUNDING INITIATIVE

TEACHING

VETERINARY MEDICINE EXPERIMENT STATION

VETERINARY MEDICINE TEACHING HOSPITAL

TOTAL

$ 728,632.00 $ 1,214,511.00
$ $ 728,632.00 $ 1,214,511.00 $

$ $ 18,798,582.00
175,000.00

214,351,028.00 168,987,280.00 187,664,221.00 323,484,500.00 $

2,618,043.00 $

$ 393,117.00

227,255,678.00 187,785,862.00 187,839,221.00 398,917,515.00

208,159.00 200,000.00 604,878.00

85,726,105.00 84,102,621.00 47,651,910.00 49,492,789.00

85,934,264.00 84,302,621.00 48,256,788.00 49,492,789.00

125,662.00 150,000.00 3,695,233.00
25,000.00 159,932.00

19,482,197.00 29,628,154.00 24,067,121.00 33,203,910.00 19,733,755.00 29,627,653.00 11,929,243.00 19,467,891.00 23,520,748.00 49,381,387.00

19,482,197.00 29,628,154.00 24,192,783.00 33,353,910.00 23,428,988.00 29,652,653.00 12,089,175.00 19,467,891.00 23,520,748.00 49,381,387.00

70,000.00

13,884,816.00 9,642,996.00 8,146,353.00
13,935,828.00 14,345,612.00 17,023,516.00
7,095,912.00 44,877,063.00 14,754,501.00 52,238,491.00 11,949,257.00 32,814,498.00 10,991,841.00

13,884,816.00 9,642,996.00 8,146,353.00
13,935,828.00 14,345,612.00 17,023,516.00
7,095,912.00 44,877,063.00 14,754,501.00 52,238,491.00 12,019,257.00 32,814,498.00 10,991,841.00

0.00 $

1,240,167.00

1,240,167.00

0.00 $

1,240,167.00 $ 24,212,446.00 $ 1,673,203,197.00 $ 2,618,043.00 $ 393,117.00 $ 1,786,993,475.00

- 59 -

BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
ANALYSIS OF PRIOR YEAR'S SURPLUS FUNDS COLLECTED FROM INSTITUTIONS YEAR ENDED JUNE 30, 2015

SCHEDULE "14"

RESEARCH INSTITUTIONS
Georgia Institute of Technology Georgia Regents University Georgia State University University of Georgia
REGIONAL UNIVERSITIES
Georgia Southern University Kennesaw State University University of West Georgia Valdosta State University
STATE UNIVERSITIES
Albany State University Armstrong Atlantic State University Columbus State University Fort Valley State University Georgia College and State University Georgia Southwestern State University Savannah State University University of North Georgia
STATE COLLEGES
Atlanta Metropolitan College Bainbridge College Dalton State College Darton State College East Georgia State College Georgia Gwinnett College Georgia Highlands College Georgia Perimeter College Gordon State College Middle Georgia College South Georgia College

COLLECTED

$

39,669.95

333,056.41

90,631.13

74,193.63

100,262.70 41,179.77 89,695.39
144,973.68

156,154.06 5,465.57
53,606.04 119,644.25
16,464.13 8,668.87 9,036.84
18,301.26

74,176.26 52,535.95 21,765.63 10,809.93
7,161.90 61,736.13
3,656.61 9,901.69 116,830.73 178,879.76 30,647.75

$ 1,869,106.02

See notes to the financial statements

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BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT) RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2015

SCHEDULE "15"

Totals per Annual Supplement
Accruals June 30, 2015 June 30, 2014
Compensated Absences June 30, 2015 June 30, 2014
Salaries due to Capital Asset Expenses Salaries for PeopleSoft Upgrade Salaries for HCMS Software
Adjustments Shared Services on Jointly Staffed Personnel Mast Amy Bradley Annette Bradley Annette Stopher Brenda Kline Brian Carver Curt Carver Curtis Blackmon Daphne Stickel George GRA King Greg Gallant Jeff Shaw Jennifer Millsaps John Sizemore, Jon Monsaas Judy Moolenaar Keysha Noble Linda Baldwin Lisa Walker Maurice Malid Mazhar Malik Mazhar Baker Paul Overcash Penny Bhatt Rachana Bhatt Rachana Pearman Randy Snowden Ray-Lynne Roy Rob Todd Robert Joyce Teresa Watson W Todd Watson William
Reimbursements Beck Foxman Michael Joint Staffing from GA College
Vacation Payouts
Unidentified Variance

- 61 -

SALARIES

$

35,116,128 $

TRAVEL 910,132

60,045 -70,899

3,581,721 -3,829,761

-616,168 -107,516

-56,903 30,724 18,102 92,520
9,000 14,000 -14,000 77,980 21,409
8,763 60,616 58,144 -1,876
5,000 30,636 142,014
1,938 304,500
99,851 3,398 -2,740 2,000 6,403
10,871 -4,000 -6,000 71,879 9,000 28,076 127,116 251,629 3,600 -3,600
-17,500 -91,000
-3,400
-587
-9,760

$

35,411,353 $

910,132

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SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 2, 2016

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Henry M. Huckaby, Chancellor
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of the University System Office as of and for the year ended June 30, 2015, and have issued our report thereon dated February 2, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the University System Office's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the University System Office's internal control. Accordingly, we do not express an opinion on the effectiveness of the University System Office's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

2015YB-10

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Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the University System Office's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted a certain matter that we have reported to management of the University System Office in a separate letter dated February 2, 2016.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:er 2015YB-10

Greg S. Griffin State Auditor

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

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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, 2015

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

FS-472-14-01 FS-472-14-02

Partially Resolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented

CORRECTIVE ACTION /RESPONSES

The University system Office performed a complete physical inventory of equipment as of fiscal year 2015. To further assist with equipment inventory efforts, the USO is in the process of implementing an RFID-based asset tracking system which should be fully implemented in fiscal year 2017. The University System Office will continue to evaluate controls and procedures to ensure that activity reflected on the annual financial statements is properly calculated, recorded and reviewed.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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SECTION IV CURRENT YEAR FINDINGS AND QUESTIONED COSTS

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BOARD OF REGENTS OF THE UNIVERSITY SYSTEM OF GEORGIA UNIVERSITY SYSTEM OFFICE (OVERSIGHT UNIT)
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2015
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.