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
B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
C STATEMENT OF CASH FLOWS
D NOTES TO THE FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION
SCHEDULES
1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT
(NON-GAAP BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET
BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
5 RECONCILIATION OF SALARIES AND TRAVEL

Page
32 33 34 36 39

SECTION II CURRENTYEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FI NANClAL

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
November 18,2011

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable G. P. "Bud" Peterson, President Georgia lnstitute 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 lnstitute of Technology, a unit of the University System of Georgia, which is an organizational unit of the State of Georgia, as of and for the year ended June 30, 2011. These financial statements are the responsibility of the Georgia lnstitute 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 of Institute's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As discussed in Note 1, the financial statements of Georgia lnstitute 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 lnstitute of Technology. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Georgia lnstitute of Technology as of June 30, 2011, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Management's Discussion and Analysis is not a part of the basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this required supplementary information. However, we did not audit this information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Georgia Institute of Technology taken as a whole. The accompanying supplementary information (Schedules 1through 5) 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,
~ u d e lWl . in ton, CPA, CGFM
State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

GEORGIA INSTITUTE OF TECHNOLOGY
Management's Discussion and Analysis

Introduction
The Georgia lnstitute of Technology (Georgia Tech) is one of the 35 institutions of higher education of the University System of Georgia. Georgia Tech is one of the nation's top research universities and an 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 more than 20,000 undergraduate and graduate students. Accredited by the Southern Association of Colleges and Schools (SACS), 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. Undergraduate and graduate programs in Georgia Tech's College of Engineeringare currently ranked in the country's Top Five by U. S. News and World RepoIt. Seven undergraduate engineering programs are ranked in the top five and ten graduate engineering programs are ranked in the top ten of their respective disciplines. Georgia Tech is ranked among the top ten universities for the number of engineering degrees awarded to minority students at the Bachelor's, Master'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 lnstitute provides a cutting edge education for the 21st century. Equipped with the extremely rich resources of an outstanding student body and faculty; strong partnerships with business, industry, and government; and support from alumni and friends, Georgia Tech is designing a future of global preeminence, leadership, and service.
The lnstitute continues to grow its student population as indicated by the comparison numbers that follow.

Faculty

Students (Headcount)

Students (FTE)

Fiscal Year 2011 FiscalYear 2010 Fiscal Year 2009
Overview of the Financial Statements and Financial Analysis
Georgia lnstitute of Technology is proud to present its financial statements for fiscal year 2011, which began July 1, 2010 and ended June 30, 2011. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. This discussion and analysis of the 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 lnstitute 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; restrictedexpendable; restricted-capital projects and unrestricted. The basis of accounting is full accrual, including capitalization and depreciation of equipment and fixed assets and capitalization and amortization of intangible assets. Comparative data is provided for fiscal year 2 0 1 1and fiscal year 2010.
Statement of Net Assets
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 the readers of the financial statements a fiscal snapshot of 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 institution. They are also able to determine how much the institution owes vendors.
Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into three categories, nonexpendable, expendable and capital projects. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed
Assets Current Assets Capital Assets, Net Other Assets
Total Assets
Liabilities Current Liabilities Noncurrent Liabilities
Total Liabilities
Net Assets Invested in Capital Assets, Net of Debt
Restricted- Nonexpendable Restricted- Expendable Restricted- Capital Projects
Unrestricted
Total Net Assets

June 3 0 , 2 0 1 1
$ 1,129,955,922 53,640,958 45,541.339 13,921,865 35,469,658

June 30,2010
$ 1,016,751,704 47,648,301 41,781,539 25,692,645 24,503,104

The total assets for fiscal year 2 0 1 1 increased by $110,742,638. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $101,671,369 in the category of Capital Assets, Net. The balance of the increase is mainly in receivable categories.
The total liabilities for fiscal year 2 0 1 1 decreased by $11,409,811. The combination of the increase in total assets of $110,742,638 and the decrease in total liabilities of $11,409,811 yields an increase in total net assets of $122,152,449. The increase in total net assets is primarily in the category of lnvested in Capital Assets, Net of Related Debt, in the amount of $113,204,218.
Statement of Revenues, Expenses and Changes in Net Assets
Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. For example state appropriations are nonoperating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

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

June 30,2011

June 30,2010

Operating Revenues Operating Expenses

Operating Loss

$ -181,265,252

$ -197,435,021

NonoperatingRevenuesand Expenses

229,237,255

243,583,503

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

$ 47,972,003

$ 46,148,482

Other Revenues, Expenses, Gains or Losses

74,146,969

18,468,836

Increase (Decrease) in Net Assets

$ 122,118,972

$ 64,617,318

Net Assets at Beginningof Year, as Originally Reported

$ 1,156,377,293

$ 1,084,452,375

Prior Year Adjustments

Net Assets at Beginningof Year, Restated

$ 1,156,410,770

$ 1,091,759,975

Net Assets at End of Year

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

Revenue by Source Forthe Years Ended June 3 0 , 2 0 1 1 and June 30,2010

June 30,2011

Operating Revenue

Tuition and Fees

$

199,963,731

$

Grants and Contracts

618,379,001

Sales and Services of Educational Departments

27,486,727

Auxiliary

86,470,988

Other

25,128,679

Total Operating Revenue

Nonoperating Revenue

State Appropriations

$

221,854,801

$

Federal Stimulus - Stabilization Funds

Grants and Contracts

12,575,185

Gifts

2,333,916

Investment Income

12,937,106

Other

5,998,490

Total NonoperatingRevenue

Capital Grants and Gifts State Other

Total Capital Grants and Gifts

Total Revenues
Expenses (By FunctionalClassification) For the Years Ended June 3 0 , 2 0 1 1 and June 30,2010
June 30,2011
Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operationsand Maintenance Scholarships and Fellowships Auxiliary Enterprises
Total Operating Expenses
NonoperatingExpenses Interest Expense (CapitalAssets)
Total Expenses

June 30,2010
177,483,251 564,747,448
23,542,501 86,485,013 15,888,634
207,583,762 36,834,145 10,929,167 2,975,439 12,163,449 1,433,906
June 30,2010

- On tRe Statement of Revenue, Expense and Chanma In Net Assets, OperaUng Revenues lncmsed
by $89,282,279 and Federal Sdmulus StaMlizatlon Funds decreased by $36,834,145. Overall,
revenueIn fiscal year 2015 Increased by $=a7 mllllan over the previousfi$cal yetar as Illustrated in
the graph below.
Georgla Institute of Technology
Revenue
(dollars in mtltions)

in the Opemtlng kpenaes by Object of hpenditure Class graph below, total operatlng expenses tor the fiscal year were appmximately $Li38.6million. SlgnMcant Increases In operatlng expenses from fiscal year 2010 to fiscal year 2011 include Salaries and Benefits and Travel, Supplies and
Other. Thew mtegories increased by $33.8 mllllon and $31.8 million, respectively, prfmarllydue to an increase In research operations. Overall operating expenses increased by $73 mlllion, or 8.8%
over the previous flml year. Georgia Institute of Technology
Operating Expenses by Object of Expenditure Class
(ddlanIn milllona) oFY201181,138.8 ~FY2010Sl1#6..8
vll

In the Opemtlng Expenses by Functional Cless graph below, Instruetlon, Research and Publlc Sewice
expenses Increased by $43.3 million and Plant Operations and Maintenance increased by $29,7 mllllon. Operating expenses for Auxiliary Enterprises decreased by $1.2 millton. The changm llsted
above resulted In a $73 million increase In operating expenses for the flscal year.
Georgia lnstltute of Technology
Operating Expenses by Functional Class
(doltan In milllona)

Shbment of m h flows

The flnerl statement presented by the Georgia Institute of Technolornfsthe Statement of Cash F l o w

The Statement of Cash Flows presents detailed information about the w h acbhrky of the instltutlon

durlng the year. The statement is divided into five parts. The first section focuses on operating cash

flows and shows the net caah used by the opemtlng actlvltie of the institution. The second section

reflects cash flow8 from noncapit;al financing activities. This section teflects the cash rewlved and

spent for nonogemtin$ noni-ng,

and noncapltal flnanclng purposes. The third section

addresses cash flows from crrpltal and relaw f l ~ n c l n gactlvitles, Thk m u o n reflects the cash

usedfor the acqulslton and mnstructlonof c a p b l and related items. The fourth section r e f i e the

cash flows from investing activities and shows the purchases, p m d s , and interest recelved from

Investing actrvities. The flfth d o n r-nciles the net cash used to the opemtlng Income or lo$$

reflected on the Statement of Revenues, Expenses and Changes in Net Assets.

Cash Flows for the Years Ended June 3 0 , 2 0 1 1 and 2010, Condensed

June 3 0 , 2 0 1 1

June 30,2010

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

$ -115,260,965 250,354,610 -147,037,465 6,237,818

$ -106,702,109 258,507.711 -109,563,694 8,235,653

Net Change in Cash Cash, Beginningof Year

Cash, End of Year
Capital Assets
The lnstitute had one significant capital addition in fiscal year 2011. The G. Wayne Clough Undergraduate Learning Commons was completed this year, resulting in an addition of $78.1 million.

For additional information concerning Capital Assets, see Notes 1,6, 8, and 1 0 in the Notes to the Financial Statements.
Long-Term Liabilities
Georgia lnstitute of Technology had Long-Term Liabilities of $549,060,249 of which $40,528,776 was reflected as current liability at June 30, 2011.
For additional information concerning Long-Term Liabilities, see Notes 1and 8 in the Notes to the Financial Statements.
Economic Outlook
Georgia Tech continues to respond to budget reductions mandated by the Governor's Office of Planning and Budget (OPB), the General Assembly and the University System of Georgia. In fiscal years 2009, 2010 and 2 0 1 1 the lnstitute experienced significant budget cuts to state appropriations, including cuts to "B" Units such as Georgia Tech Research lnstitute (GTRI) and Economic Innovation lnstitute (Ell). OPB has issued planning guidelines for additional 2% budget reductions to fiscal year 2012 and fiscal year 2013 state appropriations. From fiscal year 2009 through fiscal year 2012, the lnstitute has received budget reductions totaling $87.9 million, or 31% of the fiscal year 2009 base budget.
In fiscal year 2011, the lnstitute did not receive any Federal stimulus funds to help mitigate budget reductions. In fiscal year 2012, the lnstitute will not receive formula funding from the state to support enrollment growth or to support new facilities. Georgia Tech has initiated proactive planning efforts to address budget reductions and any implications that may arise from those reductions.
In spite of the budget reductions, the lnstitute continues to maintain a strong financial position, partially attributable to its portfolio of sponsored research awards. Sponsored awards received during fiscal year 2 0 1 1 amounted to $568 million, representing a 2% increase over the previous year. In fiscal year 2011, sponsored revenue increased by 11.6% to approximately $630 million. The lnstitute expects to maintain a similar level of sponsored revenue during fiscal year 2012.

Georgia Tech expects additional revenue generated from tuition increases as well as revenue increases from sales and services and gifts, grants and contracts to assist in maintaining the Institute's strong financial position.

Dr. G. P "Bud" Peterson, President Georgia lnstitute of Technology

Mr. Steven G. Swant, Executive Vice President Georgia lnstitute of Technology

BASIC FINANCIALSTATEMENTS

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF NET ASSETS JUNE 30,2011
ASSETS
Current Assets Cash and Cash Equivalents Short-Term lnvestments Accounts Receivable. Net (Note 3)
Receivables - Federal Financial Assistance Receivables - 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 L~abil~ties
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. -2-

EXHIBIT "A"

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF REVENUES. EXPENSESAND CHANGES IN NET ASSETS
YEAR ENDEDJUNE 30.2011
QPERATING REYENUES
Student Tultlon and Fees Less: Scholarship Allowances
Grants and Contracts Federal Federal St~mulus State Other
Sales and Sewlces Rents and Royalties Auxlllaly Enterprises
Residence Halls Bookstore Food S e ~ ~ c e s Park~ngtTransportat~on Health Sewlces Other Organlzauons Other Operating Revenues
Total Operating Revenues
QPERATING EXPENSES
Salar~es Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other S e ~ l c e s Deprec~ation
Total Operating Expenses
Operating Income (Loss)
NOWPERATING RFVFNUFS (EXPENSFS
State Appropriat~ons Grants and Contracts
Federal Glfts Investment Income Interest Expense Other Nonoperatlng Revenues
Net Nonoperatrng Revenues
Income (Loss) Before Other Revenues. Expenses. Galns. or Losses
Capital Grants and Gifts State Other
Total Other Revenues. Expenses. Galns or Losses
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year (As Originally Reported)
Prtor Year Adjustments
Net Assets - Beg~nningof Year. Restated
Net Assets - End of Year
The notes to the financial statements are an Integral part of thls statement.

EXHIBIT "B"

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDEDJUNE 3 0 , 2 0 1 1
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services Paymentsto Suppliers Paymentsto Employees Paymentsfor 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 OperatingActivities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations 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 Purchasesof Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginningof Year
Cash and Cash Equivalents- End of Year

EXHIBIT "C"

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CASH FLOWS YEAR ENDEDJUNE 30,2011
RECONCILIATIONOF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating lncome (Loss) Adjustments to ReconcileOperatinglncome (Loss)to Net Cash
Provided(Used) by OperatingActivities 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 OperatingActivities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Componentof Interest lncome Gift of Capital Assets ReducingProceeds of Capital Grants and Gifts

EXHIBIT "C"

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

(This page left intentionally blank)

GEORGIA IN!XllUTEOF TECHNOLOGY NOTES TO THE FINANCIAL gATEMENTS
JUNE 30,2011

EXHIBIT "D"

Note 1: Summary of Significant Accounting Policies
Nature of Operations Georgia lnstitute 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 lnstitute of Technology is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the UniversitySystem of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia lnstitute 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 institutions1 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 lnstitute of Technology does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia lnstitute 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 Re~ortinRStandards.
Legally separate, tax exempt organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential component units of the State. See Note 16 for additional information.
Financial Statement Presentation The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the Institute's assets, liabilities, net assets, revenues, expenses, changes in net assets and cash flows.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year.
Basis of Accounting For financial reporting purposes, the lnstitute is considered a special-purpose government engaged only in business-typeactivities. 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 lnstitute has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The lnstitute has elected to not apply FASB pronouncements issued after the applicable date.

GEORGIA IN!STITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

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 lnvestment Pool and the Board of Regents Short-Term lnvestment Pool.
Short-Term lnvestments Short-Term lnvestments consist of investments of 9 0 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.
lnvestments The Institute accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reportng for Certain Investment3 and for Extenal 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 lnvestments for the Institute.
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.
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 lnventories are valued at cost using the average-cost basis.
Noncurrent lnvestments lnvestments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the Institute's capitalization policy includes all items with a unit cost of $5,000 or more, and a useful life that 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 non-research 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 the child asset increases the useful life of the structure by 25 percent of the original life. If the child asset increases the useful life, the net book value of the original building asset is recapitalized along with 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.

GEORGIA I N S T M E OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 4 0 to 5 0 years for buildings, 25 to 75 years for infrastructure, 20 to 5 0 years for facilities and other improvements, 1 0 years for library books and 5 to 1 0 years for equipment. Nonresearch buildings are generally depreciated over 4 0 to 5 0 years as indicated above. Research buildings are depreciated by building component such as elevators, general structure, HVAC, roof, etc. The useful life of these components is generally between 2 0 and 5 0 years. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
Amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, copyrights and internally generated software is computed using the straight-line method over the estimated useful lives of the assets, generally 1 0 to 20 years.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financingand Investment Commission (GSFIC)- a n organization that is external t o the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the lnstitute when complete. For projects managed by the Institute, the lnstitute retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2011, GSFIC transferred capital additions valued at $78,102,106 to Georgia lnstitute of Technology. Of this amount, $60,467,553 was GSFIC State funded and $17,634,553 was institutionally funded.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in an lnstitute residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Assets. Georgia lnstitute of Technology had accrued liability for compensated absences in the amount of $37,516,702 as of July 1,2010 (restated). For fiscal year 2011, $26,536,756 was earned in compensated absences and employees were paid $25,189,261, for a net increase of $1,347,495. The ending balance as of June 30, 2 0 1 1 in accrued liability for compensated absences was $38,864,197.
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.

GEORGIA INSlTllJTEOF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

Net Assets The Institute's net assets are classified as follows:

Investedin capitalassetr; 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.
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 lnstitute may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7of Annotated Code of Georgia.

Restricted net assets - expendable: Restricted expendable net assets include resources in which the lnstitute 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

4,208,237
6,804,681 6,377,365 28,151,056

Total Restricted Expendable

Restricted net assets - expendable - &pita1 Proj&: 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 assetr, 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 also include auxiliary enterprises, which are substantially selfsupporting activities that provide services for students, faculty and staff. 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 the State Treasurer. At June 30, 2011, the lnstitute had a surplus balance in state appropriations of $89,419.16 to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

GEORGIA IN!XIlUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011
Unrestricted Net Assets includes the following items which are quasi-restricted by management.
R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted
Total Unrestricted Net Assets
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.
lncome 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 and Expenses The Statement of Revenues, Expenses and Changes in Net Assets classify fiscal year activity as operating and nonoperating according to the following criteria:
Operating Revenues: Operating revenue includes activities that have the characteristics of exchange transactions, such as (1)student tuition and fees, net of scholarship allowances, (2) certain Federal, state and local grants and contracts, and (3)sales and services.
Nonoperating Revenues: Nonoperating revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenue by GASB No. 9, Reporting a s h Flows of Proprietary and Nonexpendable Trust Funds and GovernmentalEntities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Operating Expenses: Operating expense includes activities that have the characteristics of exchange transactions.
Nonoperating Expenses: Nonoperating expense includes activities that have the characteristics of nonexchangetransactions, such as capital financing costs and costs related to investment activity.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the 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 lnstitute has recorded contra revenue for scholarship allowances.

GEORGIA IN!TITUTEOF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Restatement of Prior Year NetAssets Georgia lnstitute of Technology has a restatement of prior year net assets increasing Prior Year Adjustments by $33,477. This is due to inconsistencies noted on the Compensated Absences Report including: (a) biweekly employees who accrued more than the maximum number of vacation hours for the year; (b) retired employees, terminated employees, employees on leave and employees who changed benefit eligibility who had current year activity but were not included on the report; and (c) incorrect hourly rates used to calculate leave balances on the report. The Institute thoroughly reviewed the criteria used to create the Compensated Absences Report, created a modified report with more accurate data and updated the financial statements accordingly.

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 MortgageAssociation.

6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.

The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.

At June 30, 2011, the carrying value of deposits was $4,243,904 and the bank balance was $12,726,373. Of the Institute's deposits, $12,618,483 was uninsured. Of these uninsured deposits, $138,972 were collateralized with securities held by the financial institution's trust department or agent in the Institute's name and $12,479,511 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the Institute's name.

GEORGIA I N S m U T E OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

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, 2011 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

lnvestment Type

Fair Value

Less Than 1 Year

lnvestment Maturity

1 - 5 Years

6 - 10years

More than 10 Years

Debt Securities

U. S. Treasuries

$

6,504,982 $ 494,389 $ 2,759,208 $ 3.156.458 $

94,927

U. S. Agencies

Explicitly Guaranteed

5,820

5,820

Implicitly Guaranteed

3,359,844

205,361

2.573.603

159.014

42l.866

Corporate Debt

2,726,698

227,103

1,479.452

1017,545

2,598

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

452,541 819,396 190,408
351,230 89,280

lnvestment Pools Board of Regents Short-Term Fund Diversified Fund Office of the State Treasurer Georaa Fund 1 Georgla Extended Asset Pool

24,400,290 152,910

Total Investments

$ 172,291,432

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

GEORGIA INSiTRJTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "Dm

The Georgia Fund 1lnvestment Pool, managed by the Office of the State Treasurer, 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 lnvestment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1lnvestment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 5 9 days.
The Georgia Extended Asset Pool, managed by the Office of the State Treasurer, 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 $2.00 at June 30. 2011. The Georgia Extended Asset Pool is an AAA rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is -63 years.
lnterest Rate Risk lnterest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The Institute's policy for managing interest rate risk is to comply with Regent's policy and applicable Federal and State laws.
The Effective Duration of the Short-Term Fund is 1.03 years. Of the Institute's total investment of $86,423,582 in the Short-Term Fund, $75,393,714 is invested in debt securities.
The Effective Duration of the Diversified Fund is 4.31 years. Of the Institute's total investment of $46,814,451 in the Diversified Fund, $15,020,484 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, 2011, $12,255,547 of the Institute's applicable investments were uninsured and held by the investment's counterparty in the Institute's name and $1,831,851 were 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 for investments is an integral part of its 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.

GEORGIA IN!TlTUTE OF TECHNOLOGY NOTESTO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

The investments subject to credit quality risk are reflected below:

Credit Quality Risk

Fair Value

AAA

AA

A

BBB

Unrated

Related Debt Investments

U. S. Agencies

$

Corporate Debt

3.359.547 $ 2,726,696

3,359,547 6,644 $

531274 $ 1,784,108 $

402.072 $

2.598

Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The Institute's policy for managing concentration credit risk for investments is an integral part of its 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 30,2011:

Student Tuition and Fees Auxiliary Enterprisesand Other OperatingActivities Federal Financial Assistance Georgia State Financingand Investment Commission Other

$ 3,563,450 2,110,833
54,017,508 2,468,542
33.390.926

Less Allowance for Doubtful Accounts
Net Accounts Receivable
Note 4: Inventories lnventories consisted of the following at June 30, 2011:
Physical Plant Other
Total lnventories
Note 5: NotesILoans Receivable The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2011. 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 lnstitute for amounts cancelled under these provisions. As the lnstitute

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

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, 2011, the allowance for uncollectible loans was approximately $138,367.

Note 6: Capital Assets

Following are the changes in capital assets for the year ended June 30, 2011:

Beginning Balance
July 1,2010

Additions

Reductions

Ending Balance
June 30, 2011

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

$

53,643,001

$

53,643,001

17,752,417 $

8,000

17,760,417

26,385,728

30,247,524$

23,456,677

33,176,575

Total Capital Assets, Not Being Depreciated $

97,781146 $

30,255,524 $

23,456,677 $

104,579,993

Capital Assets, Being Depreciated: l nfrastructure Buildingand Building Improvements Facilities and Other Improvements Equipment Library Collections Software

$

105,645,228$

1,490,677.774

29,854,504

1,744,664 126,113,463 $
4,000.874

$
5,132,212

107,389,892 1,611659,025
33,855,378

Total Assets Being Depreciated

$ 2,125,373,686$

173,070,631 $

16,529,413$ 2,281914,904

Less: Accumulated Depreciation: Infrastructure Buildingand Building Improvements Facilities and Other Improvements Equipment Library Collections Software

$

21105.356 $

333,152,169

9,478,722

3,044,884 34,769,173 $
1,089,828

$
1,286.821

24,150,240 366,634,521
10,568,550

Total Accumulated Depreciation

$

684,674,227 $

Total Capital Assets, Being Depreciated, Net $ 1,440,699,459$

75,310,1985 97,760,433 $

13,641,502 $

746,342,923

2,887,911$ 1,535,571,981

Capital Assets, Net

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Note 7: Deferred Revenue Deferred revenue consisted of the following at June 30, 2011:

Prepaid Tuition and Fees Research Other Deferred Revenue

Total Deferred Revenue
Long-Term deferred revenue totaled $4,843,750, which consisted of deferred rental payments.

Note 8: Long-Term Liabilities Long-Term liability activity for the year ended June 30, 2 0 1 1 was as follows:

Beginning Balance July 1,2010 (Restated)

Additions

Reductions

Ending Balance June 30,2011

Current Portion

Leases Lease Obligations

$ 521,728,901 $ 8250,000 $ 19,782,849 $ 510,196,052 $ 17,415,569

Other Liabilities Compensated Absences

37.516.702 26,536,756 25,189,261 38864,197 23,113,207

Total Long-TermObligations $ 559,245,603$ 34,786,756$ 44,972,110$ 549,060,249$ 40.528.776

Note 9: Significant Commitments
The Institute had significant unearned, outstanding, construction or renovation contracts executed in the amount of $32,699,598 as of June 30, 2011. 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 2 0 1 1 and 2041. Expenditures for fiscal year 2 0 1 1 were $46,245,092 of which $26,462,243 represented interest. Total reduction to capital leases was $19,782,849 for the fiscal year ended June 30, 2011. 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, 2011:

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Land Buildings Facilities and Other Improvements Infrastructure Equipment Less: Accumulated Depreciation
Total Assets Held Under Capital Lease

$

520,764,626

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 lnstitute of Technology had thirteen capital leases with related parties in fiscal year 2011. In November 1997, Georgia lnstitute of Technology entered into a capital lease of $21,560,000 with the Georgia Tech Research Corporation and Georgia Tech Facilities, Inc., both affiliated organizations, for the "Parker H. Petit lnstitute of Bioengineering and Biosciences Building". The lease term is for a 30-year period that began November 1997 and expires May 2028. At June 30, 2 0 1 1 the remaining long-term debt obligation (principal) under the lease was $16,320,000 and the amount due (principal and interest) in the next fiscal year is $1,425,375.
In August 2001, Georgia lnstitute of Technology entered into a capital lease of $34,335,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the "Technology Square - Global Learning Center". The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2 0 1 1 the remaining long-term debt obligation (principal) under the lease was $29,130,000 and the amount due (principal and interest) in the next fiscal year is $2,261,783.
In August 2001, Georgia lnstitute of Technology entered into a capital lease of $56,800,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the "Technology Square - College of Management". The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2 0 1 1 the remaining long-term debt obligation (principal) under the lease was $48,235,000 and the amount due (principal and interest) in the next fiscal year is $3,764,138.
In August 2001, Georgia lnstitute of Technology entered into a capital lease of $12,298,200 with the Georgia Tech Foundation, Inc., an affiliated organization, for the "Technology Square - Enterprise Innovation Institute". The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2 0 1 1 the remaining long-term debt obligation (principal) under the lease was $10,431,840 and the amount due (principal and interest) in the next fiscal year is $810,391.
In August 2001, Georgia lnstitute of Technology entered into a capital lease of $21,365,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the "Technology Square - Parking Complex". The lease term is for a 29-year period that began August 2003 and expires July 2032. At June 30, 2 0 1 1 the remaining long-term debt obligation (principal) under the lease was $18,305,000 and the amount due (principal and interest) in the next fiscal year is $1,484,323.
In August 2001, Georgia lnstitute of Technology entered into a capital lease of $13,010,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the "Technology Square - Bookstore". The lease term is for a 19-year period that began August 2003 and expires July 2022. At June 30, 2 0 1 1 the remaining long-term debt obligation (principal) under the lease was $9,270,000 and the amount due (principal and interest) in the next fiscal year is $1,185,987.

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "Dl1

In August 2001, Georgia lnstitute of Technology entered into a capital lease of $4,490,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the "Technology Square - Retail Complex". The lease term is for a 19-year period that began August 2003 and expires July 2022. At June 30, 2 0 1 1 the remaining long-term debt obligation (principal) under the lease was $3,295,000 and the amount due (principal and interest) in the next fiscal year is $423,228.
In February 2001, Georgia lnstitute of Technology entered into a capital lease of $44,980,000 with the Georgia Tech Foundation, Inc., an affiliated organization, for the "Campus Recreation Center". The lease term is for a 30-year period that began February 2 0 0 1 and expires February 2031. At June 30, 2 0 1 1 the remaining long-term debt obligation (principal) under the lease was $37,915,000, and the amount due (principal and interest) in the next fiscal year is $3,068,957.
In July 2003, Georgia lnstitute 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 June 2030. At June 30, 2 0 1 1 the remaining long-term debt obligation under the lease was $51,340,000 and the amount due (principal and interest) in the next fiscal year is $4,275,848.
In July 2003, Georgia lnstitute 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 June 2025. At June 30, 2 0 1 1 the remaining long-term debt obligation under the lease was $8,035,000 and the amount due (principal and interest) in the next fiscal year is $803,063.
In May 2004, Georgia lnstitute of Technology entered into a capital lease of $75,205,000 with Georgia Tech Facilities, Inc.. an affiliated organization, for the "Molecular Sciences and Engineering Building". The lease term is for a 29-year period that began September 2006 and expires June 2036. At June 30,2011 the remaining long-term debt obligation under the lease was $69,790,000 and the amount due (principal and interest) in the next fiscal year is $4,981,250.
In July 2007, Georgia lnstitute 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. In June 2010, the capital lease was amended to add an additional $8,250,000 for the "North Avenue Dining Hall". The amended lease term is for a 25-year period that will begin July 2 0 1 1 and expires June 2036. At June 30, 2 0 1 1the remaining long-term debt obligation under the amended lease was $79,326,551 and the amount due (principal and interest) in the next fiscal year is $5,868,000.
In August 2005, Georgia lnstitute of Technology entered into a capital lease of $39,705,000 with Georgia Tech Facilities, Inc., an affiliated organization, for the "Electrical Sub Station". The lease term is for a 34-year period that began October 2007 and expires in December 2041. At June 30, 2 0 1 1 the remaining long-term debt obligation under the lease was $38,048,815 and the amount due (principal and interest) in the next fiscal year is $3,000,000.
Georgia lnstitute of Technology also has one real property capital lease with an unrelated party. In June 2003, the lnstitute entered into a capital lease of $76,150,584 with the University Financing Foundation, Inc., for the "Technology Square Research Buildingt1.The lease term is for a 29-year period that began June 2003 and expires June 2032. At June 30, 2 0 1 1 the remaining long-term debt obligation (principal) under the lease was $75,413.269 and the amount due (principal and

GEORGIA I N S r r W E OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

interest) in the next fiscal year is $4,777,177. The lnstitute may cancel the lease agreement under prescribed terms if sufficient appropriations, revenues, income, grants or other funding sources are not available. The lnstitute is responsible for most operating costs such as repairs, utilities and insurance for this lease.
The lnstitute 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, 2011, the remaining long term debt obligation under these agreements was $15,340,578. The amount due (principal and interest) in the next fiscal year is $5,526,382.
OPERATING LEASES
Georgia lnstitute of Technology's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years through 2012. 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 cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.
DESCRIPTION OF RELATED PARTY LEASES
Georgia lnstitute 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 VLP 1,VLP 2 and VLP 3, subsidiaries of GATV. The current agreements are for July 1, 2 0 1 1 through June 30, 2012 with most of the agreements containing a renewal option. Under these agreements, the lnstitute is obligated to pay these related parties a total of $9,550,605 in the next fiscal year.

GEORGIA I N ! 3 l l U T E OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBlT "D"

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 30,2011, were as follows:

Real Pro~ertyand Eauipment

Capital

Operating

Leases

Leases

Year EndingJune 30: 2012 2013 2014 2015 2016
2017 - 2021
2022 - 2026 2027 - 2031 2032 - 2036 2037 - 2041

Total Minimum Lease Payments

$

856,295,768 $ 12,430,870

Less: Interest

346,099,716

Principal Outstanding
Georgia lnstitute of Technology's fiscal year 2 0 1 1 expense for rental of real property and equipment under operating leases was $11,568,184.
Note 11: Retirement Plans
Georgia lnstitute of Technology participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia. These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that Georgia lnstitute of Technology participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.
Employees' Retirement System of Georgia
Plan Description Georgia lnstitute of Technology participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-employer defined benefit pension plan that was established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a

GEORGIA INSmLlTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract.
On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1,1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415.
The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1,1982, is an "old plan" member subject to the plan provisions in effect prior to July 1,1982. Members hired on or after July 1,1982 but prior to January 1,2009 are "new plan" members subject to the modified plan provisions. Effective January 1,2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1,2009 also have the option to change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 1 0 years of creditable service and attainment of age 6 0 or 3 0 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 2 5 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July 1,2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Funding Policy Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up t o $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, Georgia lnstitute of Technology pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Georgia lnstitute of Technology contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. Georgia lnstitute of Technology 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 Georgia lnstitute of Technology contributions are not at any time refundable to the member or his/her beneficiary.

GEORGIA INSrrnrrE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Employer contributions required for fiscal year 2 0 1 1 were based on the June 30, 2008 actuarial valuation for the old and new plans and were set by the Board of Trustees on September 18, 2008 for GSEPS as follows:

Old Plan* New Plan GSEPS

10.41% 10.41%
6.54%

* 5.66% exclusive of contributions paid by the employer on behalf of old plan members

Members become vested after 1 0 years of service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions; the member forfeits all rights to retirement benefits.

Teachers Retirement System of Georgia

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

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

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 4 0 years. Early retirement benefits are reduced by the lesser of one-twelfth
of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by
which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lumpsum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

GEORGIA I N S r m r r E OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "DM

Funding Policy TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2010 were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1, 2010. Employer contributions required for fiscal year 2010 were 9.74% of annual salary as required by the June 30, 2007 actuarial valuation. The employer contribution rate increased to 10.28% effective July 1,2010.

The following table summarizes the Georgia lnstitute of Technology contributions by defined benefit plan for the years ending June 30,2011, June 30,2010, and June 30,2009 (dollars in thousands):

Fiscal Year

E RS

Required

Percentage

Contribution

Contributed

TRS

Required

Percentage

Contribution

Contributed

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a singleemployer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Georgia lnstitute 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 2011, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Georgia lnstitute of Technology and the covered employees made the required contributions of $23,932,786 (9.24%) and $12,948,319 (5%)r,espectively.
AIG-VALIC, American Century, Fidelity, and TIAACREF have separately issued financial reports which may be obtained through their respective corporate offices.

GEORGIA IN!XHUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Georgia Defined Contribution Plan
Plan Description Georgia lnstitute 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 2 0 1 1 amounted to $773,037 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12: Risk Management
The University System of Georgia offers its employees and retirees access to three different selfinsured healthcare plan options. A PPO/PPO Consumer healthcare plan was offered for the entire reporting period, and effective 01/01/2011, a HSA/High Deductible PPO and a HMO are also offered on a self-insured basis. The HSA/High Deductible PPO and HMO were previously insured through Blue Cross Blue Shield of Georgia. Georgia lnstitute 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 plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of Wellpoint, to serve as the claims administrator for the self-insured healthcare plan products. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser.

GEORGIA INSITIUTEOF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011
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 lnstitute 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 lnstitute of Technology is responsible for pollution remediation, including asbestos abatement, for all lnstitute facilities. Asbestos abatement is performed during renovation/construction projects when deemed necessary by lnstitute management. As of June 30, 2011, the lnstitute recorded a liability and expense in the amount of $195,387 for asbestos abatement projects in various lnstitute structures. 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 lnstitute does not anticipate any significant changes to the expected remediation outlay. There are no expected recoveries that have reduced the liability.
Note 13: Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia lnstitute of Technology expects such amounts, if any, to be immaterial to its overall financial position.
On August 1,2010, the Board of Regents (BOR) and the lnstitute entered into an agreement with Georgia Tech Facilities. Inc. ("Facilities"), which was a 19-year land lease from the BOR to Facilities for the use of the new Academy of Medicine. At the end of the 19-year period, any leasehold improvements will revert to the BOR/lnstitute. The second agreement was a rental agreement between BOR/lnstitute and Facilities for the new Academy of Medicine facility. The rental agreement is an annual agreement with options to renew on a year-to-year basis. The lease amount will approximate $430,000 annually. Given that the intent of the lnstitute is to lease the facility for the entire 19-year period, it will be treated as a capital lease once the facility is completed and occupied, which is expected to occur in fiscal year 2012.

GEORGIA I N S i T M E OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "DM

On June 23, 2010, the Board of Regents (BOR) and the lnstitute entered into an agreement with Facilities which was a 30-year land lease from the BOR to Facilities for the use of the new Carbon Neutral Energy Solutions Lab. At the end of the 30-year period, any leasehold improvements will revert to the BOR/lnstitute. The second agreement was a rental agreement between BOR/lnstitute and Facilities for the new Carbon Neutral Energy Solutions Lab facility. The rental agreement is an annual agreement with options to renew on a year-to-year basis. The lease amount will approximate $1.0 million annually. Given that the intent of the lnstitute is to lease the facility for the entire 30year period, it will be treated as a capital lease once the facility is completed and occupied, which is expected to occur in fiscal year 2012.
Litigation, claims and assessments filed against Georgia lnstitute 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 for the fiscal year ended June 30, 2011.
The lnstitute has a potential legal settlement related to unfair employment practices and treatment. The amount of the potential settlement cannot be determined at this time although Georgia lnstitute of Technology expects such amounts, if any, to be immaterial to its overall financial position.
Note 14: Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
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 UniversitySystem of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2010 and 2 0 1 1 plan years, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.
As of June 30, 2011, there were 1,369 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2011, Georgia lnstitute of Technology recognized as incurred $6,886,271 of expenditures, which was net of $2,762,823 of participant contributions.

GEORGIA INSTITUTE OF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Note 15: Natural Classificationswith FunctionalClassifications The Institute's operating expenses by functional classification for fiscal year 2011are shown below:

Functional Classification

Natural Classification

Instruction

Research

Public Service

Academic Support

Student Services

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

- $ 224,900,349 $ 527,762,510 $ 45,288,518 $ .p

43,253,548 $ 29,183,834

Institutional Support

Functional Classification

Plant Operations Scholarships

and

and

Auxiliary

Maintenance

Fellowships

Enterprises

Total Operating Expenses

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

Total Operating Expenses

$ 68,060,992$ 113,353,120$ 15,894,136$ 70.997.371 $ 1,138,694,378

GEORGIA IN!3llUTEOF TECHNOLOGY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "Dl1

Note 16: Affiliated Organizations
In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Unils, an amendment of GASB Statement No. 14, The Reporting Entity which became effective for the year ended June 30,2004, Georgia Tech Foundation, Georgia Advanced Technology Ventures, Georgia Tech Facilities, Inc., Georgia Tech Athletic Association, Georgia Tech Alumni Association and Georgia Tech Research Corporation are legally separate tax exempt organizations whose activities primarily support Georgia lnstitute of Technology, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office determined Component Units of the State of Georgia, as required by GASB Statement No. 3 9 should not be assessed in relation to their significance to Georgia lnstitute of Technology, but instead based on their significance to the State of Georgia. Accordingly, Georgia lnstitute of Technology has included for information only condensed schedules of the Statement of Net Assets and Statement of Revenue, Expenses and Changes in Net Assets for these affiliated organizations in the 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, 2011, and as such, are reported as discretely presented component units in the ComprehensiveAnnual 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.

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SUPPLEMENTARY INFORMATION

GEORGIA INSTITUTE OF TECHNOLOGY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 3 0 , 2 0 1 1
ASSETS
Accounts Receivable Federal Financial Assistance Other
Prepaid Expenditures Inventories Other Assets
Total Assets
LIABILITIESAND FUND EOUITY
L~abilltles Cash Overdraft Encumbrances Payable Accounts Payable Deferred Revenue Other Liabilit~es
Total Liabilities
Fund Balances Rese~ed Department Sales and Services Indirect Cost Recoveries Restricted/Sponsored Funds UncollectibleAccounts Receivable Tuition Carry-Over Inventories Unrese~ed Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

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

GEORGIA INSTITUTE OF TECHNOLOGY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NONGAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30,2011

State Appropriation State General Funds
Other Funds
Total Revenues
ADJUSTMENTS AND PROGRAM TRANSFERS
CARRY-OVER FROM PRIOR YEARS
Transfers from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Research Consortium Advanced Technology Development Center Georsa Tech Research lnst~tute Teach~ng
Total Erpendrtures
Excess of Funds Available over Expenditures
FUND BALANCF JULY 1
Reserved Unreserved
ADJUSTMENTS
Prlor Year Payables/Expend~tures Prlor Year Recelvables/Revenues UnreservedFund Balance (Surplus)Returned
to Board of Regents - Unlverslry System Off~ce
Year Ended June 30.2010 Early Return of Surplus In Current F~scaYl ear Prlor Year Reserved Fund Balance Included In Funds Ava~lable

BUDGET

ACTUAL

SCHEDULE "2"
VARIANCE -
FAVORABLE (UNFAVORABLE)

SUMMARY OF FUND W N C F
Reserved Department Sales and Servlces Ind~recCt ost Recoveries Restr~cted/SponsoredFunds UncollemibleAccounts Receivable Tuitlon Carry-Over ~nventor~es
Total Resewed
Unreserved Surplus
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compltancewith budgetarystatutes and regulatronsof the State of Geargla, which is a comprehensivebasis of accounting other than generally accepted accounting principles.

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF FUNDSAVAILABLE AND EXPENDITURESCOMPARED TO BUDGEl BY PROGRAMAND FUNDINGSOURCE
(NONGAAP BASIS) BUDGET FUND YEAR ENDEDJUNE30.2011

Research Consortium State Appropriation State General Funds
Mvanced Technology Development Center State Appropriation State General Funds Other Funds
Total Advanced Technology Development Center
Georgla Tech Research lnstnute State Appropr~ation State General Funds Other Funds
Total Georgia Tech Research Institute
Teachlng State Appropr~ation State General Funds Federal Funds Amerlcan Recovery and Reinvestment Act FederalStabilization Funds Other Funds
Total Teaching
Total OperatingActivity

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

Actual amounts were preparedon a prescribed basis of accountingthat demonstrates compliancewith budgetarystatutes and regulationsof the State of Georgia, which is a comprehensivebasis of accountingother than generally acceptedaccounting principles.
- 34

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carryover

Program Transfers

Funds Available

Variance Positive (Negative)

ExpendituresCompared to Budget

Variance

Actual

Positwe (Negat~vel

Excess (Deficiency) of Funds Available
Over/(Under) Expend~tures

GEORGIA INSTITUTE OF TECHNOLOGY STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDEDJUNE 30.2011

Research Consortium State Appropriation State General Funds
Advanced Technolow Development Centel State Appropnatlon State General Funds Other Funds
Total Advanced Technology Development Center
Georaa Tech Research Institute State Appropriation State General Funds Other Funds
Total Georgla Tech Research Institute
Teaching State Approprlat~on State General Funds Federal Funds American Recovery and Reinvestment Act Federal Stabillzatlon Funds Other Funds
Total Teaching
Total OperatingActivity
Prior Year Reserves Not Available for Expenditure Inventories Uncollectible Accounts Receivable

Beginning Fund Balance/(Deficit)
July 1

Fund Balance Carrled Over from
Prior Period as FundsAvailable

Return of Fiscal Year 2010
Surplus

Prior Period Adjustments

Budget Unit Totals

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

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2011
Surplus

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

Ending Fund Balance/(Deficit)
June 30

Analysis of End~ngFund Balance

Resewed

Surplus/(Defic~t)

Total

Summary of Ending Fund Balance Resewed
Department Sales and Sewices Indirect Cost Recover~es Restricted/Sponsored Funds UncollecObleAccounts Receivable Tuition Carry-Over Inventories Unre~ewed Surplus
Total EndingFund Balance -June 3 0

$ 1,978,358.65 8.609.185.59 514,567.35 1.086.958.98 132.500.55 267.098.90
$
$ 12.588.670.02 $ -,

$ 1.978.358.65 8.609.185.59 514.567.35 1.086.958.98 132.500.55 267.098.90

89,419.16

89,419.16

89.419.16 $ 12,678.089.18

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GEORGIA INSTITUTE OF TECHNOLOGY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30,2011

rotals per Annual Supplement

Accruals June 30,2011 June 30,2010

Compensated Absences June 3 0 , 2 0 1 1 June 30,2010

Adjustments

Shared Serviceson Jointly Staffed Personnel

Georgia Health Sciences University

Berthold, Kristin

Georgia State University

West,

Benjamin

Universityof West Georgia

Hild,

Matthew

University System of Georgia, Board of Regents

King,

Greg

Unidentified Variance

SALARIES

SCHEDULE "5" TRAVEL

SECTION II CURRENTYEAR FINDINGS AND QUESTIONED COSTS

GEORGIA INSTITUTE OF TECHNOLOGY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2011
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND OUESTIONED COSTS No matters were reported.