Georgia Institute of Technology, Atlanta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2009

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

GEORGIA INSTITUTE OF TECHNOLOGY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

3

C STATEMENT OF CASH FLOWS

4

D NOTES TO THE FINANCIAL STATEMENTS

7

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

34

2 SUMMARY BUDGET COMPARJSON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

35

3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING

SOURCE COMPARED TO BUDGET

(NON-GAAP BASIS) BUDGET FUND

36

4 RECONCILIATION OF SALARIES AND TRAVEL

39

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
December 3, 2009

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

09ARL-62X

Institute ofTechnology. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State of Georgia, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Georgia Institute of Technology as of June 30, 2009, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 1 to the Financial Statements, Georgia Institute of Technology changed the methodology used to account for capital asset cost and depreciation of non-research buildings.
Management's Discussion and Analysis is not a part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Georgia Institute of Technology taken as a whole. The accompanying supplementary information (Schedules 1 through 4) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Respectfully submitted,
~;;;;}- CQ ~-~~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 09ARL-62X

REQUIRED SUPPLEMENTARY INFORMATION

GEORGIA INSTITUTE OF TECHNOLOGY
Management's Discussion and Analysis

Introduction

The Georgia Institute of Technology, also known as Georgia Tech, is one ofthe 35 institutions of higher education of the University System of Georgia. Georgia Tech is one of the nation's top research universities, with over $500 million expended on sponsored research activities. The University is a national and international leader in scientific and technological research and education. Distinguished by its commitment to improving the human condition through advanced science and technology, Georgia Tech provides a focused, technology based education for nearly 19,000 undergraduate and graduate students. Georgia Tech has many nationally recognized programs and is the only technological university consistently ranked in U.S. News and World Report's listing of America's Top Ten public universities. The Institute's College of Engineering is consistently ranked in the nation's Top Five by U.S. News and World Report with six schools in this college listed among the country's Top Five in their respective disciplines. Georgia Tech's undergraduate engineering college and graduate engineering college are currently ranked in the country's Top Five by U.S. News and World Report. Georgia Tech is ranked in the Top Ten for universities awarding engineering degrees to minority students at the Bachelor's and Doctoral level by Diverse Issues in Higher Education. These impressive national rankings reflect the academic prestige long associated with the Georgia Tech curriculum. Georgia Tech offers degrees through the Colleges of Architecture, Computing, Engineering, Management, Sciences, and the Ivan Allen College of Liberal Arts. As a leading technological institute, Georgia Tech has over 100 interdisciplinary research centers that consistently contribute vital research and innovation to America's government, industry, and business.

Founded in 1885 to help move Georgia's economy into the industrial age, Georgia Tech exceeded the expectations of its founders by becoming a multi-faceted research institution that
serves as a source of new technologies and a driver of economic development. With a clear vision of technology and leadership, the Institute provides a cutting edge education for the 21 st
century. The Institute continues to grow as reflected by the faculty and student numbers below and other comparisons that follow.

Students Faculty (Headcount)

Students (FTE)

Fiscal Year 2009 Fiscal Year 2008 Fiscal Year 2007

967

19,424

970

18,747

940

17,936

18,330 17,836 17,027

Overview ofthe Financial Statements and Financial Analysis

The Georgia Institute of Technology is pleased to present its financial statements for fiscal year 2009, which began July 1, 2008 and ended June 30, 2009. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in

-i-

Net Assets; and the Statement of Cash Flows. This discussion and analysis of the Institute's financial statements provides an overview of its financial activities for the year. The statements focus on the financial condition, results of operations and cash flows of the Institute as a whole, with resources classified for accounting and reporting purposes into five net asset categories: invested in capital assets, net of related debt; restricted - nonexpendable; restricted - expendable; restricted - capital projects and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets. Comparative data is provided for fiscal year 2009 and fiscal year 2008.
Statement ofNet Assets
Using the accrual basis of accounting, the Statement of Net Assets presents the assets, liabilities, and net assets of the Institute as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to readers of the financial statements a fiscal snapshot of the Georgia Institute of Technology. The Statement of Net Assets presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the Notes to the Financial Statements.
From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the Institute. They are also able to determine how much the Institute owes vendors.
Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the Institute. Net assets are divided into three major categories. The first category, Invested in Capital Assets Net of Related Debt, identifies the Institute's equity in property, plant and equipment. The next asset category, Restricted Net Assets, is divided into three categories, nonexpendable, expendable and capital projects. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable and capital projects restricted net assets are available for expenditure by the Institute but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category, Unrestricted Net Assets, is available for any lawful purpose ofthe Institute.
Following is a comparative, condensed version ofthe Institute's Statement ofNet Assets as of June 30, 2009 and June 30, 2008:
-11-

Statement ofNet Assets, Condensed

June 30, 2009

June 30, 2008

Assets Current Assets Capital Assets, Net Other Assets

$ 161,709,166 1,522,343,569 61,073,533

$ 186,023,497 1,420,414,332 72,926,737

Total Assets

$ 1,745,126,268 $ 1,679,364,566

Liabilities Current Liabilities Noncurrent Liabilities

$ 121,907,458 538,766,435

$ 112,482,457 529,865,464

Total Liabilities

$ 660,673,893 $ 642,347,921

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

$ 985,906,294 44,328,287 29,850,926 5,248,672 19,118,196

$ 892,893,907 47,863,655 27,543,641 66,196,480 2,518,962

Total Net Assets

$ 1.084.452.375 $ 120371016.645

The total assets increased by $65,761,702 over the previous fiscal year, while total liabilities increased by $18,325,972. A review ofthe Statement ofNet Assets will reveal that the increase in total net assets of $47,435,730 was primarily due to a net increase of $93,012,387 in the category oflnvested in Capital Assets, Net of Related Debt.

Statement ofRevenues, Expenses and Changes in Net Assets

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

-111-

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

June 30, 2009

June 30, 2008

Operating Revenues Operating Expenses

$ 794,254,414 1,023,922,247

$ 721,356,596 980,433,038

Operating Loss

$ -229,667,833 $ -259,076,442

Nonoperating Revenues and Expenses

251,100,555

265,273,178

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

$ 21,432,722

$ 6,196,736

Other Revenues, Expenses, Gains or Losses

58,057,023

38,889,899

Increase in Net Assets

$ 79,489,745

$ 45,086,635

Net Assets at Beginning of Year, as Originally

Reported

$ 1,037,016,645

$ 983,377,609

Prior Year Adjustments

-32,054,015

8,552,401

Net Assets at Beginning ofYear, Restated

$ 1,004,962,630

$ 991,930.010

Net Assets at End ofYear

$ 11084A521375

$ 11037,0161645

The Statement of Revenues, Expenses and Changes in Net Assets reflects a positive year with an increase of $72,897,818 in Operating Revenues from the previous year. The increase in Net Assets at End of Year increased $47,435,730 from the previous year. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows:

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

June 30, 2009

June 30, 2008

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other

$ 151,714,908 517,828,642
15,584,108 99,065,680 10,061,076

$ 135,149,773 454,744,856
23,942,293 93,888,891 13,630,783

Total Operating Revenue

$ 794,254,414 $ 721,356,596

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

$ 254,937,700 2,280,374 6,732,250 18,321,576 13,064,514
-16,516,912

$ 275,144,403
5,323,093 14,551,850 -3,371,451

Total Nonoperating Revenue

$ 278,819,502

$ 291,647,895

Capital Grants and Gifts State Other Capital Grants and Gifts Special Item - Capital Asset Transfer

$ 56,790,760 1,266,263

$ 21,855,280 9,117,970 7,916,649

Total Capital Grants, Gifts and Special Item

$ 58,057,023

$ 38,889,899

Total Revenues

$ 1.131.130.939 $ 1,051,894,390

-v-

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

June 30, 2009

June 30, 2008

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

$ 222,446,019 452,655,513 48,569,256 44,367,496 26,636,734 60,428,991 74,415,281 12,353,479 82,049,478

$ 214,164,859 422,467,823 47,986,179 44,962,425 26,200,042 44,231,317 85,552,071 10,919,734 83,948,588

Total Operating Expenses

$ 1,023,922,247

$ 980,433,038

Nonoperating Expenses Interest Expense (Capital Assets)

27,718,947

26,374,717

Total Expenses

$ 1~051,641,194 $ 1!0061807!755

-Vl-

The Statement of Revenue, Expenses and Changes in Net Assets reflects an increase in operating revenues, a decrease in nonoperating revenues, and an increase in capital gifts and grants. Overall, revenue increased by $79.3 million as illustrated in the graph below.

Georgia Institute of Technology Revenue
(dollars in millions)

D Fiscal Year 2009 $1,131.1

Fiscal Year 2008 $1,051.8

$600

$550

$500

$450

$400

$350

$300

$250
$200 $150

1 ""'''~"~,.,,..

$100

$50

$0
Tuition and Fees

- - - - - - - - - - - , - - - - - - - - - - - - - - - - - - ...",....,....,,~,,........_,.,,.....,.,,..,.. ,.....,.

.... ....... ,

"'"'"""'"''''''"'""'"

I .\.

Gifts, Grants and Contracts

Capital Gifts and Sales, Services, and State Appropriations

Grants

Other

Stimulus Stabilization

-vii-

Total operating expenses for the year were approximately $1,023.9 million, an increase of$43.5 million, or 4. 7% over the previous year. Significant increases in operating expenses from fiscal year 2008 to fiscal year 2009 include Salaries and Benefits. The Salaries and Benefits category increased by $44.6 million primarily due to an increase in research operations.

Georgia Institute of Technology Operating Expenses by Object of Expenditure Class
(dollars in millions)
Fiscal Year 2009 $1,023.9 Fiscal Year 2008 $980.4

$700

$600

$500

$400

$300

$200

$100

$0
Salaries, Benefits and Travel, Supplies and Other Other Personnel Services

Depreciation

Utilities

Scholarships and Fellowships

In the Operating Expenses by Functional Class graph below, Instruction expenses increased by $8.3 million, Research expenses increased by $30.2 million, and Institutional Support increased by $16.2 million. Plant Operations and Maintenance expenses decreased by $11.1 million. These changes primarily resulted in a $43.5 million increase in operating expenses for the year.

-viii-

$800 $700

(o fl)"
~
6Sl

Georgia Institute of Technology Operating Expenses by Functional Class
(dollars in millions)
Fiscal Year 2009 $1,023.9 Fiscal Year 2008 $980.4

$600

$500

$400

$300

$200

$100

$0......___.___

Instruction, Research, Academic, Student, and Plant Operations and

and Public Service Institutional Support

Maintenance

Auxiliary Enterprises

Scholarships and Fellowships

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

-ix-

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

Statement of Cash Flows (thousands of dollars)

June 30, 2009

June 30, 2008

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

$ -133,004,982 278,134,846 -152, 716,740 25,579,897

$ -237,262,062 285,398,048 -109,360,010 12,292,080

Net Change in Cash Cash, Beginning of Year

$ 17,993,021 52,021,402

$ -48,931,944 100,953,346

Cash, End ofYear

$ 70.014.423

$ 52,021,402

Capital Assets

The Institute had one significant capital addition in fiscal year 2009. The Marcus Nanotechnology Building was completed this year, resulting in an addition of $105.8 million.

For additional information concerning Capital Assets, see Notes 1, 6, 8, 9 and 10 in the Notes to the Financial Statements.

Long-Term Liabilities

Georgia Institute of Technology had Long-Term Liabilities of $571,773,326 of which $38,238,141 was reflected as current liability at June 30, 2009.

For additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements.

Economic Outlook

The Institute is expecting significant economic challenges in the next fiscal year. Planning guidelines from the USG Chancellor have been received for a 4% to 8% budget cut from the fiscal year 2010 state appropriations which is approximately between $9.4 million and $18.8 million. These cuts are in addition to the $25.5 million, 10% permanent cut in fiscal year 2009. These cuts, coupled with rapidly rising energy costs and increased fixed debt service costs of $5.9 million in the next fiscal year will necessitate management examine all aspects of the Institute's operations, including the primary missions of instruction, research and public service. Enrollment is expected to be stable. While every effort has been made in the past to absorb the brunt of economic downturns in the support services area, this may not be possible given the magnitude ofthe downturn and the impact of the proposed budget cut.

-x-

At the same time the Institute anticipates a bright economic future with the continued growth of the sponsored research program. Sponsored awards grew to $483.2 million in fiscal year 2009 which is an 8.5% increase over the previous fiscal year. In the current fiscal year, sponsored revenue increased by $63.1 million or 13.9%. The Institute expects growth in sponsored research programs to continue in future fiscal years. These revenues should help to mitigate the stagnant or negative growth in other areas. Georgia Tech students on the Board of Regents' guaranteed fixed for four tuition plans will see no change in their per-credit-hour tuition rate. This plan has, however, been eliminated for incoming freshman as part of Board approval of an overall package of tuition and fees. The Board approved a major tuition increase of 25% for resident incoming freshman. These students will begin paying this new rate for Fall 2009. Nonresident incoming freshman will pay the same per-credit-hour rate charged for Fall 2008, however will effectively be assessed more under the new flat tuition model of7 or more credit hours. Georgia Tech is well positioned to receive significant Federal stimulus funds through sponsored awards in the upcoming fiscal year. These funds, in addition to revenue generated from the growth in sponsored awards and revenue generated from tuition increases should help to mitigate the stagnant or negative growth in other areas at the Institute.
Dr. G. P. "Bud" Peterson, President Georgia Institute ofTechnology
-Xl-

BASIC FINANCIAL STATEMENTS

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF NET ASSETS JUNE 30, 2009
ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Investments Notes Receivable, Net Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue (Note 7) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Deferred Revenue Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Expendable Capital Projects Unrestricted
Total Net Assets
The notes to the financial statements are an integral part of this statement.

EXHIBIT "A"

$

70,014,423

149,039

42,238,430 40,588,768
359,986 8,358,520

$

161 709 166

$

51,010,130

10,063,403

1,522,343,569

$

1,583,417,102

$

1,745,126,268

$

23,684,556

1,427,932

272,300

1,012,011

28,942,403

14,812,204

3,096,306

10,421,605

18,806,974

19 431,167

$

121,907,458

$

517,630,301

5,231,250

15 904 884

$

538,766,435

$

660,673,893

$

985,906,294

44,328,287 29,850,926
5,248,672 19 118,196

$ ===1:::;:::,0:;::;::8::;::::4:=,4::i:::52='-37_5=

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2009

EXHIBIT"B"

OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal Federal Stimulus State Other
Sales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Health Services Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
State Appropriations Federal Stimulus Stabilization Funds Grants and Contracts
Federal Gifts Interest and Other Investment Income Interest Expense Other Nonoperating Revenues/Expense
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State Other
Total Other Revenues, Expenses, Gains or Losses
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year, Restated
Net Assets End of Year
The notes to the financial statements are an integral part of this statement.
-3-

$

180,037,396

-28,322,488

318,127,195 86,954
12,999,159 186,615,334
15,584,108 1,066,289

52,300,671 1,935,758
18,184,952 13,173,276
6,219,014 7,252,009 8 994 787

$

794 254 414

$

261,660,462

286,540,591

110,167,036

688,094

15,746,039

12,353,479

39,050,662

228,130,476

69,585,408

$

1,023,922,247

$

-229,667,833

$

254,937,701

2,280,374

6,732,250 18,321,576 13,064,514 -27,718,947 -16 516 913

$

251,100,555

$

21,432,722

$

56,790,760

1266263

$

58,057,023

$

79,489,745

1,004,962,630

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Other Organizations Other Receipts (Payments)
Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Federal Stimulus - Stabilization Funds Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments
Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year

EXHIBIT"C"

$

152,775,488

511,184,892

15,328,864

-375,980, 100

-545,899,858

-12,353,479

-3,342,134

2,674,818

52,111,151 1,941,808
18,170,785 13,221,213
6,216,526 7,146,425 23,798,619

$

-133,004,982

$

254,937,701

2,280,374

-3,250,799

25,053,826

-886 256

$

278, 134,846

$

8,507,497

-115,972,801

-17,542,135

-27, 709,301

$

-152,716,740

$

5,000,000

21,906,530

-1,326,633

$

25,579,897

$

17,993,021

52 10 2 1 A o 2

$

70 014 423

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2009
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts

EXHIBIT"C"

$

-229, 667,833

69,585,408
8,268,265 -38,130
5,728,984 -667,316
4,178,156 -626,908
8,181,678
2,052,714

$ ===-=1=33=,0=0=4=,9=8=2

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

(This page left intentionally blank)

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Georgia Institute of Technology serves the state, national and international communities by providing its students with academic instruction that advances fundamental knowledge, conducting research to create a better world for mankind, and by disseminating knowledge to the people of Georgia, the nation, and throughout the country.
REPORTING ENTITY Georgia Institute of Technology is one of thirty-five (3 5) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Institute of Technology as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Institute of Technology does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Institute of Technology is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt, organizations whose act1v1t1es primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential component units of the State. See Note 16 for additional information.
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the Institute was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required.

-7-

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated.
The Institute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Institute has elected to not apply FASB pronouncements issued after the applicable date.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool and the Board of Regents Short-Term Investment Pool.
SHORT-TERM INVESTMENTS Short-Term Investments consist of investments of 90 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
INVESTMENTS The Institute accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Assets. The Board of Regents Diversified Fund, and the Georgia Extended Asset Pool are included under Investments.
ACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the Institute's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.

-8-

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES Consumable supplies are recorded on the consumption method and are valued at cost on the Statement of Net Assets using the average-cost basis. Resale inventories are valued at cost using the average-cost basis.
NONCURRENTINVESTMENTS Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
CAPITAL ASSETS Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000 or greater and the useful life meets or exceeds 5 years. Renovations to buildings, infrastructure, and facilities and other improvements are capitalized as betterments when the expenditure for the renovation meets or exceeds the capitalization threshold of $100,000. The Institute uses the parent/child methodology to track the costs of nonresearch buildings. In this instance, the original asset is considered the "parent" and any improvements that meet the capitalization criteria above are considered "children". The child asset normally takes on the remaining useful life of the parent asset unless it is determined that the child asset increases the useful life of the structure by 25 percent of the original life. In this case, the net book value of the original building is recapitalized along with the eligible improvements as a new asset and the original building asset is retired. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred.
Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 50 years for buildings, 25 to 75 years for infrastructure, 20 to 50 years for facilities and other improvements, 10 years for library books, and 5 to 10 years for equipment. The Institute depreciates research buildings differently than non-research buildings. Nonresearch buildings are generally depreciated over 40 to 50 years as indicated above. Research buildings are depreciated by building component such as elevators, general structure, HVAC, roof, etc. The Institute defines building components and the useful lives of those components based on an independent building valuation study. The useful life of these components is generally between 20 and 50 years. Residual values will generally be 10 percent of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
-9-

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the Institute when complete. For projects managed by the Institute, the Institute retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2009, GSFIC transferred capital additions valued at $96,856,274 ($48,283,263 GSFIC State funded and $48,573,01 I Institutional funded) primarily for the Marcus Nanotechnology Building to Georgia Institute of Technology.
DEPOSITS Deposits represent good faith deposits from students to reserve housing assignments m an Institute residence hall.
DEFERRED REVENUES Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
COMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. Georgia Institute of Technology had accrued liability for compensated absences in the amount of $33,283,337 as of July 1, 2008. For fiscal year 2009, $23,326,379 was earned in compensated absences and employees were paid $21,273,665, for a net increase of $2,052,714. The ending balance as of June 30, 2009 in accrued liability for compensated absences was $35,336,051.
NONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
NET ASSETS The lnstitute's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the Institute's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section.
- 10 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

Expendable Restricted Net Assets include the following:

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

$ 574,275 6,610,662 5,644,938 17,021,051

Total Restricted Expendable

$ 29.850.926

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

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. At June 30, 2009, there was a surplus balance of $47,719.59 to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

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

- 11 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NET ASSETS R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted

$ 13,307,288 12,474,723 359,985 -7,023,800

Total Unrestricted Net Assets

$ 19,118,196

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

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

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

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

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

SCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the Institute, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the Institute's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Institute has recorded contra revenue for scholarship allowances. Auxiliary Intercollegiate Athletics revenue of $1,715,892 is reported net of discounts and allowances of $124,500.

- 12 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RESTATEMENT OF ACCUMULATED DEPRECIATION AND NET ASSETS During fiscal year 2009, the Institute initiated a project to manage cost and depreciation for Buildings, Facilities and Other Improvements (FOi) and Infrastructure using PeopleSoft Financials. This change was facilitated by the Institute receiving an audit misstatement in fiscal year 2007 for "Understatement of Depreciation Expense and Accumulated Depreciation" for Buildings from the Georgia Department of Audits and Accounts (DOAA) and the Institute receiving an audit recommendation in fiscal year 2008 to "Ensure Capital Assets are Properly Depreciated" by the Board of Regents (BOR). In its internal audit, the BOR recommended that Georgia Institute of Technology utilize PeopleSoft Financials to manage cost and depreciation of buildings.
During the review of cost and depreciation for these assets, the Institute recognized that the methodology being used to calculate asset cost and depreciation for non-research buildings did not follow BOR policy. Thus, during this project, the Institute changed the methodology used to account for cost and depreciation of non-research buildings to the parent/child relationship.
As a result of this review, it was determined that Capital Assets had been overstated by $28,791,989. Capital Assets, being depreciated had been overstated in prior years by an amount of $21,059,336, with Building assets bearing the entire burden for this overstatement. Building depreciation expense had been understated by $6,595,239, Infrastructure depreciation expense being understated by $1,050,001 and Facilities and Other Improvement depreciation expense being understated by $87,413. To correctly reflect carrying values:
1. The beginning balance for Capital Assets, Being Depreciated for Buildings and Building Improvements was restated and reduced by $21,059,336.
2. The beginning balance for Accumulated Depreciation for Buildings and Building Improvements was restated and increased by $6,595,239.
3. The beginning balance for Accumulated Depreciation for Infrastructure was restated and increased by $1,050,001.
4. The beginning balance for Accumulated Depreciation for Facilities and Other Improvement was restated and increased by $87,413.
5. Net Assets - Invested in Capital Assets, Net of Related Debt will be $28,791,989.
In addition, Capital Assets Building and Building Improvements and Lease Purchase Obligations were understated due to an omission of capital leases in the amount of $12, 121,223 and $15,383,249, respectively. The Institute restated Beginning Net Assets for this omission. The net effect on Beginning Net Assets is $3,262,026.

- 13 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RESTATEMENT OF ACCUMULATED DEPRECIATION AND NET ASSETS Note 6 and Note 8 reflects these changes in the Restated Beginning Balance column. These changes are in accordance with generally accepted accounting principles.
NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the Institute's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Institute) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
At June 30, 2009, the carrying value of deposits was $15,762,489 and the bank balance was $26,657,057. Of the Institute's deposits, $26,596,275 was uninsured. Of these uninsured deposits, $23,007,775 was collateralized with securities held by the pledging financial institution's trust department or agent, and $3,588,500 were uncollateralized.
- 14 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS Georgia Institute of Technology maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws.

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

Investment Tyge

Fair Value

Debt Securities U. S. Treasuries U.S. Agencies Explicitly Guaranteed Implicitly Guaranteed Corporate Debt

$ 5,790,894
8,336 4,174,765 2,186,983

$ 12,160,978

Other Investments Bond/Equity Mutual Funds Equity Mutual Funds Equity Securities - Domestic Real Estate Held for Investment Purposes

649,985 291,202 800,484
341,996

Investment Pools Board of Regents Short-Term Fund Diversified Fund Office of Treasury and Fiscal Services Georgia Fund 1 Georgia Extended Asset
Pool

26,437,285 36,765,485
27,763,031 149 039

Less Than 1 Year

$

92,338

108,478 $ 2QQ,816

Investment Maturity

I 5

6 - 10

Years

$ 2,781,192
297 2,687,945 1,114,603
$ 6 584 037

$ 2,825,385
383,192 960,746 $ 4 162,323

More than 10 Years

$

91,979

8,039 I, 103,628
3 156

$ 1,206 802

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia - University System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits - Education Audit Division or on their web site at http://www.audits.state.ga.us/internet/searchRpts.html.
- 15 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS
INVESTMENTS The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 41 days.
The Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price, which was $2.04 at June 30, 2009. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is .97 years.
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 Institute's policy for managing interest rate risk is to comply with Regents policy and applicable Federal and state laws.
The Effective Duration of the Short-Term Fund is .72 years. Of the Institute's total investment of $26,437,285 in the Short-Term Fund, $26,437,285 is invested in debt securities.
The Effective Duration of the Diversified Fund is 6.26 years. Of the Institute's total investment of $36,765,485 in the Diversified Fund, $14,595,898 is invested in debt securities.
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 Institute will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The Institute's policy for managing custodial credit risk for investments is an integral part of its current investment policies dated May 16, 2005, which specifies how counterparties are selected and how investments are to be held on behalf of the Institute.
At June 30, 2009, $13,827,332 was uninsured and held by the investment's counterparty's trust department or agent, but not in the Institute's name.
Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The Institute's policy for managing credit quality risk is for investments is an integral part of it's current investment policies dated May 16, 2005, which identifies approved investment products, and specifies the required credit quality, as applicable, for each investment based upon approved credit rating agencies.
- 16 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

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

Credit Quality Risk
Related Debt Investments U. S. Agencies Corporate Debt

Fair Value

AAA

AA

A

BAA

Unrated

$ 4,174,765 $ 4,174,765

2,186,983

74,295 $

$ 6 361 248 $ 4 242 Q6Q $

536,652 $ 1,177 473 $ 536 652 $ 1111413 $

395 407 $ 325 4Q2 $

3 156 3 156

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of the Institute's investment in a single issuer. The Institute's policy for managing concentration of credit risk is an integral part of it's current investment policies dated May 16, 2005, which overviews concentration guidelines not allowing more than 20% of the total investment portfolio to be concentrated in anyone other than the U.S. Treasury or other Federal Government agencies.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2008:

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Georgia State Financing and Investment Commission Other

$ 2,503,704 1,559,401
42,238,430 1,009,754
37,816,346

Less Allowance for Doubtful Accounts

$ 85,127,635 2,300,437

Net Accounts Receivable

$ 8228271198

NOTE 4: INVENTORIES

Inventories consisted of the following at June 30, 2009:

Physical Plant Other

$ 288,130 71,856

Total

$=====3===5-9,-98==6

- 17 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 5: NOTES/LOANS RECEIVABLE

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2009. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the Institute for amounts cancelled under these provisions. As the Institute determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U.S. Department of Education. The Institute has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2009 the allowance for uncollectible loans was approximately $72,158.

NOTE 6: CAPITAL ASSETS

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

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

Beginning Balance July 1, 2008 (Restated)
$ 53,136,446 17,703,927 50,476,943
$ I00,562,400 1,302,468,280 19,133,500 358,928,865 94,693,201
$1,875,786,246
$ 15,068,829 283,264,600 7,880,425 222,668,732 64,477,410
$ 593,359,996
$1,282,426,250
$1 4Q3 743 566

Additions

Reductions

$ 506,555 33,508
16,909,959

$ 44,177,821

$ 17,450,022 $ 44,177,821

$ 5,572,410 171,971,981 7,360,550 40,241,851 4,855,932
$ 230,002,724

$ 24,036,275
30,386,472 14 946

$ 3,057,377 31,680,246 661,201 29,480,378 4,706,206
$ 69,585,408

$ 15,507,656
23,825,577 14 946
$ 39,348,179

$ 160,417,316

$ 15,089,514 $ 52,267,335

Ending Balance June 30, 2009
$ 53,643,001 17,737,435 23,209,081
$ 94,589,517
$ 106,134,810 1,450,403,986 26,494,050 368,784,244 99,534,187
$2,051,351,277
$ 18,126,206 299,437,190 8,541,626 228,323,533 69,168,670
$ 623,597,225
$1,427,754,052
$1,522,343,562

- 18 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 7: DEFERRED REVENUE

Current deferred revenue consisted of the following at June 30, 2009:

Prepaid Tuition and Fees Research Other Deferred Revenue

$ 12,367,500 1,416,730 1,027,974

Totals

$ 14.812.204

Long-Term deferred revenue totaled $5,231,250.

NOTE 8: LONG-TERM LIABILITIES

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

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

Beginning Balance July I, 2008 (Restated)
$ 543,120,674
33.283,337
$ 576 404011

Additions

Reductions

$ 10,858,736 $ 17,542, I 35

23,326,379
$ 34185.115

21.273.665
$ 38.815 800

Ending Balance June 30, 2009
$ 536,437,275
$ 571 773.326

Current Portion $ 18,806,974
$ 38 238.141

NOTE9: SIGNIFICANT COMMITMENTS

The Institute had significant unearned, outstanding, construction or renovation contracts executed in the amount of $11,404,697 as of June 30, 2009. This amount is not reflected in the accompanying basic financial statements.

NOTE 10: LEASE OBLIGATIONS

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

CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2009 and 2038. Expenditures for fiscal year 2009 were $45,261,082 of which $27,718,947 represented interest. Total principal paid on capital leases was $17,542,135 for the fiscal year ended June 30, 2009. Interest rates range from 3.36 percent to 11.0 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2009:

- 19 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 10: LEASE OBLIGATIONS

CAPITAL LEASES Facilities and Other Improvements Infrastructure Land Buildings Equipment

$ 338,383 37,560,930 11,457,418
463,493,599 18,148,104

Total Assets Held Under Capital Lease

$ 530!298~434

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.

Georgia Institute of Technology had thirteen capital leases with related parties in fiscal year 2009. In November 1997, Georgia Institute of Technology entered into a capital lease of $21,560,000 for the Parker H. Petit Institute of Bioengineering and Biosciences Building with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc., both affiliated organizations. The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $17,480,000 and the amount due (principal and interest) in the next fiscal year is $1,424,310.

In August 2001, Georgia Institute of Technology entered into a capital lease of $34,335,000 with the Georgia Tech Foundation, Inc. for the "Technology Square - Global Leaming Center". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $30,605,000 and the amount due (principal and interest) in the next fiscal year is $2,263,494.

In August 2001, Georgia Institute of Technology entered into a capital lease of $56,800,000 with the Georgia Tech Foundation, Inc. for the "Technology Square - College of Management". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $50,670,000 and the amount due (principal and interest) in the next fiscal year is $3,769,688.

In August 2001, Georgia Institute of Technology entered into a capital lease of $12,298,200 with the Georgia Tech Foundation, Inc. for the "Technology Square - Enterprise Innovation Institute". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $10,959,200 and the amount due (principal and interest) in the next fiscal year is $811,128.

- 20 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 10: LEASE OBLIGATIONS
CAPITAL LEASES In August 2001, Georgia Institute of Technology entered into a capital lease of $21,365,000 with the Georgia Tech Foundation, Inc. for the "Technology Square - Parking Complex". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining longterm debt obligation (principal) under the lease was $19,185,000 and the amount due (principal and interest) in the next fiscal year is $1,490,401.
In August 2001, Georgia Institute of Technology entered into a capital lease of $13,010,000 with the Georgia Tech Foundation, Inc., for the "Technology Square - Bookstore". Georgia Tech Foundation, Inc. is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $10,365,000 and the amount due (principal and interest) in the next fiscal year is $1,184,121.
In August 2001, Georgia Institute of Technology entered into a capital lease of $4,490,000 with the Georgia Tech Foundation, Inc. for the "Technology Square - Retail Complex". Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $3,685,000 and the amount due (principal and interest) in the next fiscal year is $422,497.
In February 2001, Georgia Institute of Technology entered into a capital lease of $44,980,000 with the Georgia Tech Foundation, Inc., for the Institute's Campus Recreation Center. As noted previously, Georgia Tech Foundation, Inc., is an affiliated organization of the Institute. The lease term is for a 30-year period that began February 2001 and expires February 2031. At June 30, 2009 the remaining long-term debt obligation (principal) under the lease was $39,910,000, and the amount due (principal and interest) in the next fiscal year is $3,067,213.
In May 2004, Georgia Institute of Technology entered into a capital lease of $75,205,000 with Georgia Tech Facilities, Inc., an affiliated organization, for a Molecular Sciences and Engineering Building. The lease term is for 29 years and expires in June, 2036. At June 30, 2009 the remaining long-term debt obligation under the lease was $72,585,000 and the amount due (principal and interest) in the next fiscal year is $4,982,625.
In July 2003, Georgia Institute of Technology entered into a capital lease of $60,485,000 with Georgia Tech Facilities, Inc., an affiliated organization, for the Married Family Housing building, including an adjoining parking deck. The lease term is for a 25-year period that began October 2005 and expires on June 2030. At June 30, 2009 the remaining long-term debt obligation under the lease was $54,555,000 and the amount due (principal and interest) in the next fiscal year is $4,277,935.

- 21 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 10: LEASE OBLIGATIONS
CAPITAL LEASES In July 2003, Georgia Institute of Technology entered into a capital lease of $9,835,000 with Georgia Tech Facilities, Inc., an affiliated organization, for the Klaus Advanced Computing Center. The lease term is for a 20-year period that began October 2006 and expires on June 2025. At June 30, 2009 the remaining long-term debt obligation under the lease was $8,790,000 and the amount due (principal and interest) in the next fiscal year is $807,863.
In July 2007, Georgia Institute of Technology entered into a capital lease of $74,455,494 with Georgia Tech Facilities, Inc., an affiliated organization, for a complex of buildings collectively named "North Avenue Apartments", including an adjoining parking deck. The lease term is for 25 years and expires in June, 2032. At June 30, 2009 the remaining long-term debt obligation under the lease was $74,924,652 and the amount due (principal and interest) in the next fiscal year is $5,280,000.
In January 2008, Georgia Institute of Technology entered into a capital lease of $39,705,000 with Georgia Tech Facilities, Inc., an affiliated organization, for an Electrical Sub Station. The lease term is for 30 years and expires in December 2038. At June 30, 2009 the remaining longterm debt obligation under the lease was $39,023,600 and the amount due (principal and interest) in the next fiscal year is $3,000,000.
Georgia Institute of Technology also has one real property capital lease with an unrelated party. In June 2003, the Institute entered into a capital lease of $76,150,584 with the University Financing Foundation for the Technology Square Research Building. The lease term is for a 29year period that began June 2003 and expires June 2032. At June 30, 2009 the remaining longterm debt obligation (principal) under the lease was $76,435,730 and the amount due (principal and interest) in the next fiscal year is $4,502,947. The Institute may cancel the lease agreement under prescribed terms if sufficient appropriations, revenues, income, grants or other funding sources are not available. The Institute is responsible for most operating costs such as repairs, utilities and insurance for this lease.
The Institute is obligated to various parties for the lease purchase of furniture, fixtures, equipment, and plant infrastructure improvements. These leases have various end dates through June 30, 2018. At June 30, 2009, the remaining long-term debt obligation under these agreements was $27,264,093. The amount due (principal and interest) in the next fiscal year is $8,914,812.
OPERATING LEASES Georgia Institute of Technology's noncancellable operating leases with remaining terms of more than one year expire in various fiscal years from 2009 through 2010. Certain operating leases provide for renewal options for periods from one to 25 years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate

- 22 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 10: LEASE OBLIGATIONS

OPERATING LEASES funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

DESCRIPTION OF RELATED PARTY LEASES In 1994, Georgia Institute of Technology entered into various real property operating leases with related parties including Georgia Tech Research Corporation, (GTRC) Georgia Advanced Technology Ventures (GATV), Inc., and various subsidiaries of GATV. The current agreements are for July 1, 2009 through June 30, 2010 with most of the agreements containing a renewal option. Under these agreements, the Institute is obligated to pay these related parties a total of $7,027,593 in the next fiscal year.

Georgia Institute of Technology's fiscal year 2009 expense for rental of real property and equipment under operating leases was $9,607,995.

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

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2010 2011 2012 2013 2014 2015 - 2019 2020 - 2024 2025 - 2029 2030 - 2034 2035 - 2038
Total Minimum Lease Payments
Less: Interest
Principal Outstanding

$ 46,199,034 $ 44,913,323 41,584,863 41,817,995 40,194,421 194,152,074 192,968,227 190,121,268 109,782,404 20,460,246

9,452,734

$ 922,193,855 $ 9,452.734

385,756,580

$ 536,437.275

- 23 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

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

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

Fiscal Year

Percentage Contributed

Required Contribution

2009 2008 2007

100% 100% 100%

$ 19,485,389 $ 18,963,675 $ 18,025,456

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

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

The ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.

The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with

- 24 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are "new plan" members subject to the modified plan provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January I, 2009 also have the option to change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July I, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Institute's payroll for the year ended June 30, 2009, for employees covered by ERS was $568,957. The lnstitute's total payroll for all employees was $548,201,053.
Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, the Institute pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Institute contributions are included in the members' accounts for refund purposes and are used in the computation of the members' eamable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The Institute is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These Institute contributions are not at any time refundable to the member or his/her beneficiary.
- 25 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

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

Fiscal Year

Percentage Contributed

Required Contribution

2009 2008 2007

100% 100% 100%

$

59,534

$

59,300

$

57,305

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

REGENTS RETIREMENT PLAN

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

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

- 26 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Funding Policy Georgia Institute of Technology and the covered employees made the required contributions of $19,731,472 (8.15% or 9.24%) and $11,309,687 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Georgia Institute of Technology participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2009 amounted to $731,526 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.

- 27 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 12: RISK MANAGEMENT
The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Institute of Technology and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person.
The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Institute of Technology, 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.
Georgia Institute of Technology is responsible for pollution remediation, including asbestos abatement, for all Institute facilities. Asbestos abatement is performed during renovation/construction projects when deemed necessary by Institute management. As of June 30, 2009, the Institute recorded a liability and expense in the amount of $21,507 for asbestos
- 28 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 12: RISK MANAGEMENT

abatement projects in the Boggs Chemistry Building and Weber Space Science and Technology Building. The liability is reflected on the Statement of Net Assets in Accounts Payable and on the Statement of Revenues, Expenses and Changes in Net Assets in Supplies and Other Services. The liability was determined using the Expected Cash Flow Measurement Technique, which measures the liability as the sum of probability-weighted amounts in a range of possible estimated amounts. The Institute does not anticipate any significant changes to the expected remediation outlay. There are no expected recoveries that have reduced the liability. Pollution remediation liability activity in fiscal year 2009 was as follows:

Pollution Remediation Obligations

Beginning Balance July 1, 2008
$====0

NOTE 13: CONTINGENCIES

Additions
$ 21507

Reductions
$====0

Ending Balance June 30, 2009

$

21 507

Current Portion

Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Institute of Technology expects such amounts, if any, to be immaterial to its overall financial position.

Litigation, claims and assessments filed against Georgia Institute of Technology (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 (CAFR) for the fiscal year ended June 30, 2009.

NOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS

Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.

- 29 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

NOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS

The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The Institute pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2008 and 2009 plan years, the employer rate was approximately 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.

As of June 30, 2009, there were 1,275 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2009, Georgia Institute of Technology recognized as incurred $6,314,554 of expenditures, which was net of $2,748,805 of participant contributions.

NOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

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

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

Instruction

Functional Classification

Research

Public Service

Academic Sui:mort

Student Services

$ 103,237,995 51,117,124 32,983,058 50,729 3,115,908

$ 144,419,871 I 08,095,273 45,739,306 33,726 10,677,019

$ 6,275,218 19,877,443 5,861,203 537,237 883,439

$ 5,894,041 19,399,794 5,933,432 9,998 528,780

$ 242,780 11,741,454 2,476,031 35,751 150,385

2,001,690 20,409,778 9 529 737 $ 222 446 0)9
Institutional su,mort

2,182,105

312,473

527,708

113,336,438 28,171,775

13,127,508 1,694,735

5,159,725 6,914,018

$ 48 562 256 $ 44 361426

Functional Classification

Plant

Operations and Scholarships

Auxiliary

Maintenance and Fellowships

Entemrises

204,619
10,813,947 971 767
$ 26,636,134
Total Operating Exgenses

$ 1,485,148 34,679,302 6,809,509 13,899 207,485
562,241
9,136,730 7,534,677
$ 6Q 428 221

$ 105,409 23,923,678 6,238,847 2,095 72,579
22,175,074
16,129,541 5,768,058
$ 14 415 281

$ 12,353,479 $ 12 353412

$ 17,706,523 4,125,650 4,659 110,444
11,084,752
40,016,809 9,000,641
$ 82 Q42 418

$ 261,660,462 286,540,591 110,167,036 688,094 15,746,039
12,353,479 39,050,662
228,130,476 69,585,408
$1 Q23 222 24:Z

- 30 -

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2009

EXHIBIT "D"

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

- 31 -

(This page left intentionally blank)

SUPPLEMENTARY INFORMATION - 33 -

GEORGIA INSTITUTE OF TECHNOLOGY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND JUNE 30, 2009
ASSETS
Accounts Receivable Federal Financial Assistance Other
Prepaid Expenditures Inventories Other Assets
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Cash Overdraft Accounts Payable Encumbrance Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

42,238,430.44

26,037,671.38

8,004,136.12

288,129.91

8,408,343.40

$ ====8=4,=97=6=,7=11=.2=5=

$

10,149,125.28

30,292,005.40

17,242,867.34

16,666,184.47

8,886,410.88

$

83,236,593.37

$

116,724.55

231,765.41

1,060,756.60

283,151.73

47,719.59

$

1,740,117.88

$ ==8=4=,9=7=6'=7=11=.2=5=

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 34-

GEORGIA INSTITUTE OF TECHNOLOGY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2009

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Federal Funds Other Funds
Total Revenues
CARRY-OVER FROM PRIOR YEAR
Transfer from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Special Funding Initiative Research Consortium Advanced Technology Development Center Georgia Tech Research Institute Teaching
Total Expenditures
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Prior Year Receivables/Revenues Increase (Decrease) in Inventories Non-Mandatory Transfer Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2008
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE}

$

255,703,486.00 $

255,317,024.00 $

2,280,374.00

2,280,374.00

840,715,640.00

762?90,400.51

$ 1,098,699,500.00 $ 1,020,387,798.51 $

-386,462.00 0.00
-77,925,239.49
-78,311,701.49

0.00

2,086,730.58

$ 1,098,699,500.00 $ 1,022,474,529.09 $

2,086,730.58 -76,224,970.91

$

1,595,892.00 $

1,595,892.00 $

13,764,992.00

13,764,992.00

24,624,536.00

18,171,307.87

180,131,628.00

179,150, 116.67

878,582,452.00

818,087,154.51

$ 1,098,699,500.00 $ 1,030,769 463.05 $

$

-8,294,933.96 $

0.00 0.00 6,453,228.13 981,511.33 60 495 297.49
67,930,036.95
-8,294,933.96

3,387,245.25 379,323.32

94,308.12 -46,588.53
-3,067.35 8,689,884.93

-379,323.32 -2,086,730.58

$

1 740 117.88

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

116,724.55

231,765.41

1,060,756.60

283,151.73

$

1,692,398.29

47 719.59

Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 35

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2009

Special Funding Initiatives
State Appropriation State General Funds

Original Ai:mro~riation

Final Budget

Current Year Revenues

Funds Available Com eared to BudQet

Prior Year CarQ'.Over

Total Funds Available

Variance Positive (Negative)

649 361,00 $

1 595 892,00 $

1 595 892.00 $

0.00 $

1595892.00 $

0,00

Research Consortium State Appropriation State General Funds

9,209.835,00

13 764 992.00 $

13 764 992.00 $

0,00 $

13. 764,992.00

0.00

Advanced Technology Development Center

State Appropriation

State General Funds

$

Other Funds

Total Advanced Technology Development Center

17,891,736.00 12 875 000,00
30,766,736.00

11,649,536.00 12 975 000.00
24,624,536.00

11,411,678.00 6,714 535,94
18, 126,213,94 $

0,00 0.00
0.00 $

11,411,678.00 6 714 535,94
18,126,213.94

-237,858,00 -6 260 464,06
-6,498,322,06

Georgia Tech Research Institute State Appropriation State General Funds Other Funds
Total Georgia Tech Research Institute

8,052,902.00 133 917 958,00
141,970.860,00

7,278,208.00 172 853 420,00
180 131 628,00

7,129,604.00 172 020 512,67
179150116,67

0.00 $ 0,00
0.00

7,129,604.00 $ 172,020 512.67
179150 116.67 $

-148,604.00 -832 907,33
-981 511.33

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

253,504,540.00 $ 221,414,858.00 $ 221,414,858,00 $

0.00 $

221,414,858,00 $

0,00

0.00 624 362 220,00
877 866 760.00

2,280,374.00 654,887,220.00
87B 582 452.00

2,280,374.00 584,055,351.90
807 750 583,90

0.00 2 086 730,58
2 086,730.58

2,280,374.00 586 142 082.48

0.00 -68 745 137.52

809,837:314.48 $ -68 745 137,52

Grand Totals - All Programs

1,060,463,552.00 $ 1,09B,699,500.00 $ 1,020,387,798,51 $ 2,086,730.58 $ 1,022,474,529.09 $ -76,224,970,91

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles,
-36-

SCHEDULE "3"

Expenditures Compared to Budget

Variance

Positive

Actual

(Negative)

Actual Funds Available
Over/(Under) Expenditures

Prior Period Adjustments

Other Adjustments

Program Fund
Balances

Transfers

Program Fund Balances

Reserve

Surplus

Total Fund Balance

1 595 892.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

13 764 992.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

o.oo $ ----=o._oo= $ o.oo $--~=o!=.o.,,o=

11,411,678.00 6,759 629.87
18,171,307.87

237,858,00 6215 370.13
6,453,228.13

0.00 -45 093.93
-45,093.93

0.00

0.00

0.00

45 093.93

0.00

45,093.93

0.00

0.00

0.00

0.00

0.00 ___o"".""oo=-

o.oo $ ~=-o....o..o. _ _ _ _0...,..,00...

0.00

0.00

o.oo

0.00

o.oo $--~-o.,.o.,.o_

7,129,604.00 172,020 512.67
179 150 116.67

148,604.00 832 907.33
981 511.33

0.00

1,256.02

0.00

1.B9

0.00

1 257.91

0.00

1,256.02

0.00

1.89

0.00

1,257,91

0.00

0.00

0.00 ___o""'."'oo"--

0.00 ~ - - 0...,..00..,

1,256.02 1.89
1 257.91

1,256.02 1.89
1 257.91

221,035,534.68 $

379,323.32 $

379,323.32 $

0,00 $

0.00 $ 379,323.32 $ -379,323.32 $

0,00 $

0.00 $

0.00

2,280,374.00 594 771 245.63
818,087 154.51

0.00 60 115 974,17
60.495 297.49

0.00 .0 629 163.35
-8 249 840.03

0.00 48461.68
46 461.68

0.00 8 598,329.99
8 598 329.99

0.00 15 628.32
394,951.64

0.00 379 323.32
0.00

0.00 348 48996
348 489.96

0.00 46 461.68
46,461.68

0.00 394,951.64
394 951.64

1.030,769,463.05 $ 67,930,036.95 $ -8,294,933.96 $ 47,719.59 $ 8,643,423.92 $ 396,209.55 $

0.00 $ 348,489.96 $ 47,719.59 $ 396,209.55

Unexpendable Reserves Uncollectible Accounts Receivable Inventories

1,060,756.60 283 151. 73
$ 1740117.B8

(This page left intentionally blank)

GEORGIA INSTITUTE OF TECHNOLOGY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2009

SCHEDULE "4"

Totals per Annual Supplement

Accruals - Payroll June 30, 2009 June 30, 2008

Compensated Absences June 30, 2009 June 30, 2008

Adjustments

Shared Services on Jointly Staffed Personnel

Atlanta Metropolitan College

James,

Laura

Board of Regents of the University System of Georgia

Barnes,

Rosalind

Bearden,

Alison

Bradley,

Allison

Brown,

JoAnn

Engelhard,

David

Ervin,

Juanita

Hughes,

Michael

Jean-Baptiste, Jimmy

Jean-Baptiste, Rebecca

Johnson,

Joy

Jones,

Shelia

Kilpatrick,

Toyna

Mogusa,

Janet

Ngari,

Maryclaire

Paterson,

Patricia

Pevey,

Mark

Reaves,

Jonathan

Sommer,

Candice

Stewart,

Janet

Thomas,

Cheryl

White,

Jehmia

Wolf-Ward,

Tina

North Georgia College and State University

Monsaas,

Judith

Deferred Compensation Plan Dr. Schuster

Unidentified Variance

SALARIES

TRAVEL

$

545,321,527 $

15,746,039

1,427,932 -1,179,452

32,824,943 -30,918, 102

63,750
81,515 2,585 5,639
41,675 1,540 6,250
22,458 10,834 20,359 22,795 92,482 2,335 12,420 14,575 25,211 11,308
1,400 9,243 5,961 30,021
998 16,180
3,983
180,000
38,688

$

548,201,053 $ ==1=5,==74=6==,0=3=9

SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2009
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.