Audit report, state of Georgia, Georgia Military College, Milledgeville, Georgia, year ended June 30, 1997

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AUDIT REPORT STATEOF GEORGIA GEORGIA MILITARY COLLEGE MILLEDGEVILLE, GEORGIA YEARENDED JUNE 30, 1997

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASHINGTON STREET
ATLANTA, GEORGIA 30334-8400

GEORGIA MILITARY COLLEGE - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXlllBITS

FINANCIAL STATEMENTS

A COMBINED BALANCE SHEET

ALL FUND GROUPS

2

B COMBINED STATEMENT OF CHANGES IN FUND BALANCES

ALL FUND GROUPS

4

C STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES,

AND OTHER CHANGES

6

D NOTES TO THE FINANCIAL STATEMENTS

7

SUPPLEMENTARY INFORMATION

E COMBINING BALANCE SHEET

CURRENT FUNDS - UNRESTRICTED

18

F COMBINING STATEMENT OF CHANGES IN FUND BALANCES

CURRENT FUNDS - UNRESTRICTED

19

G COMBINING STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES,

AND OTHER CHANGES

UNRESTRICTED

20

SCHEDULES

1 CHANGES IN INVESTMENT IN PLANT

21

2 SCHEDULE OF FUND BALANCES

CURRENT FUNDS AND PLANT FUNDS

22

3 RECONCILIATION OF SALARIES AND TRAVEL

24

4 RECONCILIATION OF PER DIEM AND FEES

25

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

GEORGIA MILITARY COLLEGE - TABLE OF CONTENTS -
SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

CLAUDE L. VICKERS
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
December 12, 1997

Honorable Zell Miller, Governor Members of the General Assembly of Georgia Members of the Board of Trustees of Georgia Military College
and Major General Peter J. Boylan, President
INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying financial statements (Exhibits A through D) of Georgia Military College as of and for the year ended June 30, 1997. These financial statements are the responsibility of the College's management. Our responsibility is to express an opinion on these financial statements based on our audit.
Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards. 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 examining, on a test basis, evidence supporting the amounts and disclosures in the fmancial statements. An audit also includes 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.
The College could not provide adequate subsidiary fixed asset records or other evidence supporting the Plant Fund Investment in Plant of$8,434,131.43 as shown on the Combined Balance Sheet. Accordingly, we were unable to satisfy ourselves as to the accuracy of this amount as reflected on the financial statements as of June 30, 1997.
In our opinion, except for the effects on the fmancial statements of adjustments, if any, as might have been determined to be necessary had we been able to satisfy ourselves as to the accuracy ofthe Investment in Plant as discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Georgia Military College as of June 30, 1997, and the changes in fund balances and the current operating funds revenues, expenditures, and other changes for the year then ended in conformity with generally accepted accounting principles.
97ARL-63X

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplementary information (Exhibits E through G and Schedules 1 through 4) is presented for purposes of additional analysis and is not a required part of the fmancial statements of Georgia Military College. Such information has been subjected to the auditing procedures applied in the audit of the fmancial statements and, in our opinion, except for the effects of the matter discussed in the third paragraph, such information is fairly presented in all material respects in relation to the financial statements taken as a whole.
Respectfully submitted,
~~
Claude L. Vickers State Auditor
CLV:gp 97ARL-63X

FINANCIAL STATEMENTS - 1-

GEORGIA MILITARY COLLEGE COMBINED BALANCE SHEET
ALL FUND GROUPS JUNE 30,1997

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable (Net of Allowances
for Doubtful Accounts) Inventories Prepaid Items Due from Other Fund Groups Investment in Plant
Total Assets
LIABILITIES AND FUND BALANCES
Liabilities Accounts Payable Salaries Payable Student Deposits Deferred Revenue Tuition and Fees Other Bonds Payable Deposits Held in Custody for Others Due to Other Fund Groups Compensated Absences Capital Lease Obligations
Total Liabilities
Fund Balances Endowment Net Investment in Plant Restricted Unrestricted
Total Fund Balances
Total Liabilities and Fund Balances

CURRENT FUNDS UNRESTRICTED RESTRICTED

ENDOWMENT FUNDS

$

865,464.45 $ 754,904,07

$ 473,235.44

602,227.44 344,977.76
2,032.63 720,789.85

1,185,802,95

$ 2,535,492.13 $ 1,940,707.02 $ 473,235.44

$

553,126.10

396,136.49

19,026.00

375,717.17 3,300.00

$ 112,654.16

723,961.18

$ 1,459,959.92 $ 723,961.18

$ 473,235.44
$ 1,216,745,84 $ 1,075,532.21
$ 1,075,532,21 $ 1,216,745.84 $ 473,235.44

$ 2,535,492.13 $ 1,940,707.02 $ 473,235.44

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

EXHIBIT "A"

PLANT FUNDS

INVESTMENT

UNEXPENDED

IN PLANT

AGENCY FUNDS

TOTAL (Memorandum
Only)

$

$

5,209.96

_ _ _ _.... $ 8,434,131.43

26,437.82 $ 1,646,806.34 473,235.44
1,788,030.39 344,977.76 2,032.63 725,999.81
8,434,131.43

$

5,209.96 $ 8,434,131.43 $

26,437.82 $ 13,415,213.80

$ 553,126.10 396,136.49 19,026.00

$

14,000.00

$

24,399.19

2,038.63

$ 224,138.59

375,717.17 3,300.00 14,000.00
24,399.19 725,999.81 112,654.16 224.138.59

$

14,000.00 $ 224.138.59 $

26,437.82 $ 2,448,497.51

$ 8,209.992.84

$

-8,790.04

$

-8,790.04 $ 8,209,992.84

$ 473,235.44 8,209,992.84 1,216,745.84 1.066,742.17
$ 10.966.716.29

$

5,209.96 $ 8,434,131.43 $

26,437.82 $ 13,415.213.80

-3-

GEORGIA MILITARY COLLEGE COMBINED STATEMENT OF CHANGES IN FUND BALANCES
ALL FUND GROUPS YEAR ENDED JUNE 30. 1997

REVENUES AND OTHER ADDITIONS
Unrestricted Current Fund Revenues Federal Grants and Contracts State Grants and Contracts Private Gifts, Grants, and Contracts Investment Income
Endowment Realized Gains on Investments Unrealized Gains on Investments Adjustments
Prior Years' Expenditures/Accounts Payable Expended for Plant Facilities
Current Funds
Total Revenues and Other Additions
EXPENDITURES AND OTHER DEDUCTIONS
Educational and General Expenditures Auxiliary Enterprises Expenditures Adjustments
Prior Years' Revenues/Accounts Receivable Administrative and Collection Costs Expended for Plant Facilities
Noncapitalized
Total Expenditures and Other Deductions
TRANSFERS BETWEEN FUNDS
Nonmandatory Gains on Investment for Object of Trust
Net Increase/(Decrease) for the Year
FUND BALANCES JULY 1.1996 (Restated - See Note 1)
FUND BALANCES JUNE 30. 1997

CURRENT FUNDS UNRESTRICTED RESTRICTED

$ 13,576,547.94 $ 2,537,581.05 5,119,874.56 397,863.13
16,303.76

9,832.75

$ 13,586,380.69 $ 8,071,622.50

$ 12,474,914.38 $ 7,866,764.21 1,311,295.85

60,274.12

2,406.88

$ 13,846,484.35 $ 7,869,171.09

$

4,300.17

$

-260,103.66 $ 206,751.58

1,335,635.87

1,009,994.26

$ 1,075,532.21 $ 1,216,745.84

The notes to the financial statements are an integral part of this statement. -4-

EXHIBIT"B"

ENDOWMENT FUNDS

PLANT FUNDS

INVESTMENT

UNEXPENDED

IN PLANT

TOTAL (Memorandum
Only)

$

$

92,146.40

18,830.21 20,577.18

s 131,553.79 s

0.00
$ 0.00 $

s 13,576,547.94
2,537,581.05
5,119,874.56
490,009.53

16,303.76 18,830.21 20,577.18

9,832.75

507,673.70

507,673.70

507,673.70 $ 22,297,230.68

$

0.00

$

0.00 $ 20,341,678.59

1,311,295.85

60,274.12 2,406.88

$

525.00

525.00

$

0.00 $

525.00 $

0.00 $ 21,716,180.44

$ _ _-.4.,.3.0;0..L1;7=~ $ 127,253.62 $
345,981.82

-525.00 $

$---~=0.0-0
507,673.70 $ 581,050.24

-8,265.04 7,702,319.14 10,385,666.05

s 473,235.44 $

-8,790.04 $ 8,209,992.84 $ 10,966,716.29

- 5-

GEORGIA MILITARY COLLEGE STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES,
AND OTHER CHANGES YEAR ENDED JUNE 30, 1997

EXHIBIT"C"

REVENUES
Local Appropriations Tuition and Fees Federal Grants and Contracts State Grants and Contracts Private Gifts, Grants, and Contracts Endowment Income Sales and Services of Auxiliary Enterprises Other Sources
Total Revenues
EXPENDITURES
Educational and General Instruction Academic Support Student Services Institutional Support Operation and Maintenance of Plant Scholarships and Fellowships
Auxiliary Enterprises Student Housing Food Services Stores and Shops Intercollegiate Athletics Other Service Units
Total Expenditures
OTHER TRANSFERS AND ADDITIONS/{DEDUCTIONS)
Excess of Restricted Receipts over Transfers to Revenues Transfers of Gains on Investment for Object of Trust Prior Period Adjustments (Net)
Total Other Transfers and Additions/(Deductions)

UNRESTRICTED RESTRICTED

TOTAL (Memorandum
Only)

$

181,406,84

$ 181,406,84

10,948,263,51

10,948,263,51

49,418,99 $ 2,537,581,05

2,587,000,04

1,122,866,00

5,119,874,56

6,242,740,56

204,898,21

204,89821

6,817,27

6,817,27

985,140.68

985,140,68

289,451,92

289,451,92

$ 13,576,547,94 $ 7,869,171,09 $ 21,445,719,03

$ 5,723,121.50

$ 5,723,121,50

655,305,11

655,305.11

1,896,199.83

1,896,199.83

2,525,288.64 $

2,406.88

2,527,695.52

1,211,762.49

1,211,762.49

463,236.81

7,866,764.21

8,330,001.02

13,074.45 314,430.94
72,293,76 673,507,15 237,989.55

13,074.45 314,430.94
72,293.76 673,507.15 237,989.55

$ 13,786,210.23 $ 7,869,171.09 $ 21,655,381.32

$ 202,451.41 $ 202,451.41

4,300.17

4,300.17

$

-50,441.37

-50,441.37

$

-50,441,37 $ 206,751.58 $ 156,310.21

Net Increase/(Decrease) in Fund Balances

$

-260,103.66 $ 206,751.58 $

-53,352.08

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

GEORGIA MILITARY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY Georgia Military College was created as a public authority and is an instrumentality of the State of Georgia and a public corporation. The Board of Trustees is composed of the mayor of the City of Milledgeville and six additional members, one of which shall be elected from each of the six municipal voting districts of the City of Milledgeville. The government, control and management of Georgia Military College shall be vested in the Board of Trustees. Georgia Military shall receive any designated funds appropriated by the General Assembly through the State Board of Regents. In order to incur debt, the Board of Trustees must first receive permission from the Georgia State Financing and Investment Commission, as required for all state authorities. Accordingly, Georgia Military College is considered a component unit ofthe State of Georgia reporting entity for financial reporting purposes because ofthe significance of its legal, operational and financial relationships with the State of Georgia. These reporting entity relationships are defined in Section 2100 of the Governmental Accounting Standards Board CodifIcation of Governmental Accounting and Financial Reporting Standards.
FUND ACCOUNTING In order to ensure observance of limitations and restrictions placed on the use of the resources available to the College, the accounts ofthe College are maintained in accordance with the principles of fund accounting. This is the procedure by which resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with activities or objectives specified, Separate accounts are maintained for each fund; however, in the accompanying financial statements, funds that have similar characteristics have been combined into fund groups. Accordingly, all financial transactions have been recorded and reported by fund group.
Within each fund group, the College's fund balance allocations and designations represent those portions of the fund balances that are reserved, restricted and/or designated for specific future use by legal covenants, or College policies.
Fund groups and funds presented in the accompanying financial statements are as follows:
CURRENT FUNDS
UNRESTRICTED - The fund used to account for those economic resources over which the College retains full control to use for purposes of performing the primary functions of the College, e.g., instruction, auxiliary enterprises, student activities, etc.
RESTRICTED - The fund used to record externally restricted funds which may only be utilized in accordance with the purposes established by their source. Restricted current funds are recorded as revenues and expenditures when expended for current operating purposes.

-7-

GEORGIA MILITARY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ACCOUNTING
ENDOWMENT FUNDS
The fund used to account for gifts made to the GMC Trustees Endowment Fund and The Sibley Librarian Chair Endowment Fund. These endowment funds are subject to the restrictions of the gift instruments requiring that the principal be invested in perpetuity and income only may be utilized. Endowment funds are stated at market value.
PLANT FUNDS
UNEXPENDED - The fund used to account for financial resources utilized to acquire or to construct physical properties for institutional purposes.
INVESTMENT IN PLANT - The fund which shows the total amounts representing the book value of all physical properties owned by the College. Net Investment in Plant is an equity account showing the total book value ofphysical properties belonging to the College less the amount of any indebtedness to others.
AGENCY FUNDS
The fund used to account for resources held by the College as custodian or fiscal agent for individual students, faculty, staff members, and organizations.
BASIS OF ACCOUNTING The financial statements of Georgia Military College have been prepared on the accrual basis of accounting. No depreciation on capital assets has been provided which is allowable under generally accepted accounting principles applicable to public colleges and universities. The Statement of Current Funds Revenues, Expenditures and Other Changes is a statement of fmancial activities of current funds related to the current reporting period. It does not purport to present the results of operations or the net income or loss for the period as would a statement income or a statement of revenues and expenses.
RESTATEMENT OF PRIOR YEAR FUND BALANCE In prior years, the activity for the Georgia Military College Bulldog Club and Georgia Military Alumni Association were not reported in Georgia Military College's fmancial statements. The Georgia Military College Bulldog Club had a fund balance of $4,331.56 and the Georgia Military Alumni Association had a fund balance of$119.43 at June 30, 1996. For fiscal year 1997, these funds have been reported as a part of the Unrestricted Current Fund. The fund balance at July 1, 1996 has been restated as appropriate.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of petty cash, demand deposits and temporary investments in authorized financial institutions.
-8-

GEORGIA MILITARY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVESTMENTS Investments are recorded at market or in the case of gifts at fair market value on the date of the gift. Funds received by the College as endowments or for restricted purposes are invested according to conditions stipulated by the donor, grantor, or in accordance with the Board of Regents authorizing resolutions. Gains and losses on investment transactions are accounted for in the funds where such assets are recorded.

ACCOUNTSRECENABLE Accounts receivable consist of reimbursements due from Federal, State, local, and private grants and contracts, and other receivables disclosed from information available. The College has recorded its accounts receivable for Student Accounts net of allowance for doubtful accounts as follows:

Gross Receivables Allowance for Doubtful Accounts

$ 739,748.73 -213,300.00

Net Receivables

$ 526.448.73

INVENTORIES Inventories of consumable supplies are recorded on the consumption method and are valued at cost on the Combined Balance Sheet using the first-in, first-out method.

Inventories of goods for resale are valued at cost using the first-in, first-out method.

MEMORANDUM ONLY - TOTAL COLUMNS The total columns on the fmancial statements are captioned "Memorandum Only" because they do not represent consolidated fmancial information and are presented only to facilitate financial analysis. The columns do not present information that reflects fmancial position or changes in financial position in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to the State of Georgia 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 anyone or more ofthe following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:

(1) Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.

(2) Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.

-9-

GEORGIA MILITARY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT"D"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (3) Bonds of any public authority created by the laws ofthe 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, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

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

CATEGORIZATION OF DEPOSITS AND INVESTMENTS For purposes of analysis of custodial credit risk, cash deposits consist of all bank balances which include demand deposits and/or interest bearing accounts. The bank balances as of June 30, 1997, are categorized below in order to provide information about the extent to which such deposits are exposed to custodial credit risk:

Category 1 - Amounts covered by depository insurance or collateralized with securities (at market value) held by the College or by its agent in the College's name.

Category 2 - Amounts collateralized with securities (at market value) held by the pledging financial institution's trust department or agent in the College's name.

Category 3 - Amounts collateralized with securities (at market value) held by the pledging financial institution, or by its trust department or agent but not in the College's name, and amounts uncollateralized.

Cash Deposits Investment Portfolio Accounts
Total Cash Deposits

Carrying Amount

Bank Balances

Risk Categories

2

3

$ 1,642,581.34 $ 1,770,593.99 $ 349,857.69 $

29.604.93

29.604.93

29.604.93

0.00 $ 1,420,736.30

0.00

0.00

$ 1672,18627 $ 1 80019892 $ 37946262 $

000 $ 1,42073630

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GEORGIA MILITARY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT "D"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

CATEGORIZATION OF DEPOSITS AND INVESTMENTS
Investments are summarized and classified as to custodial credit risk within the three categories described below:

Category 1 - Insured or registered, or securities held by the College or its agent in the College's name.

Category 2 - Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the College's name.

Category 3 - Uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent but not in the College's name.

The carrying amounts of investment balances as of June 30, 1997, are categorized below:

Type of Investment

Risk Categories

2

3

Carrying

Amount

(Marketl

Cost

u. S. Government Securities $ 23862415 $

0.00 $,==~0!.!.l!.0~0 $ 238,624.15 $ 235,981.01

Investments Not Subjectto Categorizations:

Investment PortfolioAccounts Mutual Funds

205.006.36

164,906.50

Total Investments

$ 44363051 $ 40088751

NOTE 3: INVESTMENT IN PLANT

Land, buildings and equipment are stated at cost as of the date of acquisition, insurance valuations, if applicable, or fair market value at date of the gift. Depreciation on physical plant and equipment is not recorded.

The following is a summary of Investment in Plant fixed assets as of June 30, 1997:

Land Buildings Equipment

$ 318,842.39 3,354,307.24 4,760,981.80

Total Investment in Plant

$ 8.434.131.43

- 11 -

GEORGIA MILITARY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT"D"

NOTE 4: DEFICIT FUND BALANCE

The Student Activities Fund and Prep School Fund, which are parts of Unrestricted Current Funds, have deficit fund balances of$991,569.62 and $425,152.65 respectively, which are not readily apparent from the financial statements.

NOTE 5: CAPITAL LEASES

Georgia Military College acquires certain land and equipment through multi-year capital leases with varying terms and options.

As of June 30, 1997, future minimum lease payments under capital leases are as follows:

Fiscal Year Ending June 30

1998 1999 2000 2001

$ 151,164.96 62,203.74 30,156.16 4,239.00

Total Future Minimum Lease Payments

$ 247,763.86

Less: Amounts Representing Interest

23,625.27

Present Value of Future Minimum Lease Payments

$ 224,138.59

NOTE 6: RISK MANAGEMENT

The Department ofAdministrative Services (DOAS) has the responsibility for the State of Georgia ofmaking and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The College, as part of the State of Georgia reporting entity, 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.

- 12-

GEORGIA MILITARY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT "D"

NOTE 7: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA
Plan Description
Georgia Military College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer public employee retirement system (PERS) established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia.
TRS provides service retirement, disability retirement, and survivor's benefits for its members. A member is eligible for service retirement after the member (1) has attained the age of 60 years and has at least ten years of creditable service, or (2) has at least 25 years of creditable service. For those members with 30 years of service or those age 60 with at least ten years of service, normal retirement benefits are equal to 2% of the average ofthe member's two consecutive highest paid years of service multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of 1/12 of 7% for each month the member is below age 60, or by 7% for each year or fraction thereof by which the member has less than 30 years of service. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at a reduced rate to a designated beneficiary on the member's death.
Retirement benefits also include death and disability benefits whereby the disabled member or surviving spouse is entitled to receive annually an amount equal to the member's service retirement benefit or disability retirement, whichever is greater. The benefit is based on member's creditable service (minimum of 10 years of service) and compensation up to the date of death or up to the time of disability.
Members become fully vested after ten years of service. If a member terminates with less than ten years of service, no vesting of employer contributions occurs, but the member's contributions are refunded with interest.
Funding Policy
Employees of the College who are covered by TRS are required to pay 5% of their gross earnings to TRS. The College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees as advised by their independent actuary. For fiscal year 1997, the employer contribution rate was 11.81% for covered employees. The interest rate assumption (rate of return on investments) was 7.50%. The College's payroll for the year ended June 30, 1997, for employees covered by TRS was $3,015,198.70. The College's total payroll for all employees was $7,877,917.30.
Total contributions to the plan made during fiscal year 1997 amounted to $506,855.26, of which $356,094.90 was made by the College and $150,760.36 was made by employees. These contributions represented 11.81% (College) and 5% (employees) of covered payroll.

- 13 -

GEORGIA MILITARY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT "D"

NOTE 7: RETIREMENTPLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA
Funding Policy Total contributions from all employers to TRS for the year ended June 30, 1997, were $652,928,555.00. The College's contribution for the year ended June 30, 1997, of $356,094.90 was actuarially determined and represented .0559% of total contributions made by all participating employers.
Actuarial and Trend Information Actuarial and historical trend information is presented in the TRS June 30, 1997, financial report which can be obtained through TRS.
NOTE 8: LEAVE POLICIES
Employees earn annual leave ranging from ten days to twenty days per year depending upon the employees' length of continuous service with maximum accumulation of twenty days. Employees are paid for unused accumulated annual leave upon retirement or termination of employment.
Employees earn one and one-quarter days of sick leave each month with a maximum accumulation of fortyfive days. Unused accumulated sick leave does not vest with the employee and is forfeited upon retirement or termination of employment.
NOTE 9: 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 which are disallowed under grant terms. The amount ofexpenditures which may be disallowed by the grantor cannot be determined at this time although the College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia Military College 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, 1997.
NOTE 10: SIGNIFICANT TRANSACTIONS
During fiscal year 1997, Georgia Military College management undertook an intensive review of former student accounts receivable to determine which accounts could be collected. This review caused student accounts receivable to be reduced by $551,377.00 and resulted in a more accurate presentation of those accounts. This write-off included $381,976.00 related to student receivables occurring prior to fiscal year 1997 and $169,401.00 related to fiscal year 1997. Because the allowance for doubtful accounts at June 30, 1996 was only $280,000.00, the write-off in excess of the allowance account of$271,377.00 was recorded
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GEORGIA MILITARY COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1997

EXHIBIT "D"

NOTE 10: SIGNIFICANT TRANSACTIONS

as a reduction of revenue in fiscal year 1997. This adjustment resulted in expenditures exceeding revenues for unrestricted current funds for the year ended June 30, 1997.

NOTE 11: ENROLLMENT

The equivalent full-time student enrollment for the junior college division of Georgia Military College was as follows:

Regular Term Fall Quarter, 1996 Winter Quarter I, 1997 Winter Quarter II, 1997 Spring Quarter, 1997

3,393 1,964 3,359 3,005

Average

Summer School, 1996

The enrollment by grade for the prep school division of Georgia Military College for the 1996-1997 academic year was as follows:

Sixth Grade Seventh Grade Eighth Grade Ninth Grade Tenth Grade Eleventh Grade Twelfth Grade

69
83
78 74 51 50 ~

Total Enrollment

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SUPPLEMENTARY INFORMAnON - 17 -

GEORGIA MILITARY COLLEGE COMBINING BALANCE SHEET CURRENT FUNDS - UNRESTRICTED
JUNE 30,1997

EXHIBIT"E"

ASSETS
Cash and Cash Equivalents AccountsReceivable (Net of Allowance
for DoubtfulAccounts) Inventories Prepaid Items Due from Other Fund Groups

COLLEGE

AUXILIARY PREP SCHOOL ENTERPRISES

STUDENT ACTIVITIES

TOTAL

$ 839.279,55 $
602.120,26 8,233,51
2,150,904,18

0,00 $

650,00 $
107,18 336,744,25
2.032,63 12,142,84

25.534,90 $ 865.464,45
602,227,44 344.977.76
2.032,63 2,163.047,02

Total Assets

$ 3.600,537,50 $

0.00 $ 351.676,90 $ 25,534,90 $ 3.977.749,30

LIABILITIES AND FUNDBALANCES
Liabilities Accounts Payable SalariesPayable Student Deposits Deferred Revenue Tuition and Fees Other Compensated Absences Due to Other Fund Groups
Total Liabilities
Fund Balances Unrestricted

$ 553,099,70 396,136,49 2.541,00
375,717,17 3.300,00
112.654,16 $
$ 1,443.448,52 $

$
425,152,65 425,152,65 $

26,40 16,485,00

$ 553.126,10 396,136,49 19,026,00

$ 1,017,104,52

375.717,17 3.300,00
112,654,16 1,442,257,17

16.511,40 $ 1,017.104,52 $ 2.902.217,09

2,157 ,088,98

-425,152,65

335,165,50 -991.569,62 1,075,532,21

Total Liabilitiesand Fund Balances

$ 3,600.537,50 $

0,00 $ 351,676.90 $ 25.534,90 $ 3,977.749.30

See notes to the financial statements.

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GEORGIA MILITARY COLLEGE COMBINING STATEMENT OF CHANGES IN FUND BALANCES
CURRENT FUNDS - UNRESTRICTED
YEAR ENDED JUNE 30,1997

EXHIBIT"F"

REVENUES AND OTHER ADDITIONS
Unrestricted Current Fund Revenues Adjustments
Prior Years' Expenditures/Accounts Payable
Total Revenues and Other Additions
EXPENDITURES AND OTHER DEDUCTIONS
Educational and General Expenditures AUxiliary Enterprises Expenditures Adjustments
Prior Years' Revenues/Accounts Receivable
Total Expenditures and Other Deductions
TRANSFERS BETWEEN FUNDS
Nonmandatory Income for Overhead
Net Increase/(Decrease) for the Year
FUND BALANCES JULY 1, 1996 (Restated)

COLLEGE

AUXILIARY PREP SCHOOL ENTERPRISES

STUDENT ACTIVITIES

TOTAL

$ 10.088.453.44 $ 2,377.199,64 $ $ 10.088.453,44 $ 2,377.199,64 $

985,636.86 $ 125.258,00 $ 13.576,547,94

9.832,75

9.832.75

995.469.61 $ 125,258.00 $ 13,586.380.69

$ 10,534.897,13 $ 1,844,379.93

$

$ 1,311.295.85

60.274.12

95.637,32 $ 12,474.914.38 1.311,295,85
60.274.12

$ 10.595.171,25 $ 1,844,379.93 $ 1,311.295,85 $ 95.637.32 $ 13,846.484,35

$ 885.474,66 $ $ 378,756,85 $
1.778.332,13

-885.474,66 -352,654,95 $
-72.497,70

$

0.00

-315,826,24 $ 29,620,68 $ -260,103,66

650.991,74 -1.021.190,30

1.335.635.87

FUND BALANCES JUNE 30,1997

$ 2.157.088,98 $ -425.152,65 $ 335.165.50 $ -991,569,62 $ 1.075,532,21

See notes to the financial statements.

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GEORGIA MILITARY COLLEGE COMBINING STATEMENT OF CURRENT FUNDREVENUES, EXPENDITURES,
AND OTHER CHANGES UNRESTRICTED
YEARENDED JUNE30,1997

EXHIBIT"G"

REVENUES
Local Appropriations Tuition and Fees FederalGrants and Contracts State Grants and Contracts Sales and Services of AuxiliaryEnterprises Other Sources
Total Revenues
EXPENDITURES
Educational and General Instruction AcademicSupport Student Services Institutional Support Operation and Maintenance of Plant Scholarships and Fellowships
AuxiliaryEnterprises StudentHousing Food Services Stores and Shops Intercollegiate Athletics Other service Units
Total Expenditures
OTHERTRANSFERS AND ADDITIONS/ (DEDUCTIONS)
Transfersof Incomefor Overhead Prior PeriodAdjustments(Net)
Total Other Transfersand Additions/(Deductions)

COLLEGE

AUXILIARY

STUDENT

PREPSCHOOL ENTERPRISES ACTIVITIES

TOTAL

$ $ 9.898,701.87
189.751.57

181,406,84 996.491.64
49.418.99 1.122,866.00
$ 27.016.17

$ 10,088,453.44 $ 2,377 .199.64 $

$
985,140.68 496.18

$ 181,406.84

53.070.00 10,948,263.51

49.418.99

1.122,866.00

985,140.68

72,188.00

289,451.92

985.636.86 $ 125,258.00 $ 13,576,547.94

$ 4,348.253,45 $ 440,372.27
1.685.579.36 2,525.288.64 1.165,422.88
369.980.53

1,374,868.05 214.932.84 114.983.15
46.339.61 93,256.28

$ 5.723,121.50 655.305.11
$ 95,637.32 1.896.199.83 2.525.288.64 1.211,762.49 463,236.81

$

13.074.45

314.430.94

72.293.76

673.507.15

237.989.55

13.074.45 314.430.94 72,293.76 673.507.15 237,989.55

$ 10,534,897.13 $ 1,844,379.93 $ 1.311,295.85 $ 95,637.32 $ 13,786,210.23

$ 885,474.66 $ -885.474.66

-60,274,12

$

$ 825,200.54 $ -885.474.66 $

9.832.75 9,832,75

$

0.00

-50,441.37

$ -50,441.37

Net Increase/(Decrease) in Fund Balances

$ 378,756.85 $ -352,654.95 $ -315.826.24 $ 29,620,68 $ -260,103.66

See notes to the financialstatements,

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GEORGIA MILITARY COLLEGE CHANGES IN INVESTMENT IN PLANT
YEAR ENDED JUNE 30. 1997

SCHEDULE "1"

Land Buildings Equipment

BALANCE JULY 1,1996

ADDITIONS

CURRENT FUNDS

CAPITAL

UNRESTRICTED

LEASES

DEDUCTIONS DISPOSALS! DELETIONS! ADJUSTMENTS

BALANCE JUNE 30,1997

$ 318,842.39

$ 318,842.39

3,324,413.24 $

29,894.00

3,354,307.24

4,337,172.21

477,779.70 $

44,693.89 $

98,664.00

4,760,981.80

$ 7,980A27.84 $

507,673.70 $

44,693.89 $

98,664.00 $ 8A34,131.43

SUMMARY OF INVESTMENT

College Capital Leases

$ 7,702,319.14 $ 278,108.70

507,673.70
$

44,693.89 $

$ 8,209,992.84

98,664.00

224,138.59

$ 7,980A27.84 $

44,693.89 $

98,664.00 $ 8A34,131.43

See notes to the financial statements.

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GEORGIA MILITARY COLLEGE SCHEDULE OF FUND BALANCES CURRENT FUNDS AND PLANT FUNDS
JUNE 30,1997

NET INVESTMENT IN PLANT Investment in Plant Facilities
RESTRICTED Designated for Subsequent Years' Expenditures
UNRESTRICTED Designated For Bulldog Club For Alumni Fund For Subsequent Years' Expenditures Undesignated Regular

COLLEGE

CURRENT FUNDS UNRESTRICTED
AUXILIARY PREP SCHOOL ENTERPRISES

STUDENT ACTIVITIES

$

3,470,66

33,00

$ 335,165,50 $ -991,569,62

2,153,585,32 $ $ 2,157,088,98 $

-425,152,65
-425,152,65 $

335,165,50 $ -991,569,62

$ 2,157,088,98 $

-425,152,65 $

335,165,50 $ -991,569,62

See notesto the financial statements,

- 22-

SCHEDULE"2"

RESTRICTED

PLANT FUNDS

INVESTMENT

UNEXPENDED

IN PLANT

TOTAL

$ 8.209,992.84 $ 8,209,992.84

$ 1.216,745.84

$ 1,216,745.84

$

3,470.66

33.00

-656,404.12

$ _ _-.8:,.7.9J.0:..0.:4=~ $ _ _-.8:..7.9J.0:..0.:4=~

1,719.642.63 $ 1,066.742.17

$ 1,216,745.84 $

-8,790.04 $ 8,209,992.84 $ 10,493.480.85

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GEORGIA MILITARY COLLEGE RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 1997

SCHEDULE "3"

Totals per Annual Supplement
Accruals June 30, 1997 June 30, 1996
Other Fabry, John Unidentified Variance
Totals per Report
DISTRIBUTION BY FUND
CURRENT FUNDS Unrestricted College Prep School Auxiliary Enterprises Student Activities

SALARIES
$ 7,866,757.95 $

TRAVEL 95,173.10

396,136.49 -383,020.51

-1,956.63

-533.21

$ 7,877,917.30 $ ====9=4=,6=3=9,~89=

$ 6,190,132,62 $ 1,250,203.04 435,611.64 1,970.00

92,226.65 2,413.24

$ 7,877,917,30 $ ====9=4=,6=3=9.~89=

See notes to the financial statements.

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GEORGIA MILITARY COLLEGE RECONCILIATION OF PER DIEM AND FEES
YEAR ENDED JUNE 30,1997

SCHEDULE "4"

Totals per Annual Supplement Adjustments Fabry, John Department of Law
Totals per Report

TYPE PAYMENT

AMOUNT

$

35,979.70

Consultant Consultant

533,21 1,070.00

37,582,91

DISTRIBUTION BY FUND
CURRENT FUNDS Unrestricted College

37,582.91

See notes to the financial statements.

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

GEORGIA MILITARY COLLEGE AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1997

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

590-96-02 590-96-03 590-96-04 590-96-05

Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Further Action Not Warranted/Finding Deleted - See
Corrective Action/Responses

CORRECTIVE ACTIONIRESPONSES

GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: 590-96-02

New inventory system is being prepared and will be in place during FY 98. Funds will not be available during FY 98 to obtain outside professional assistance to properly assess valuation of the older buildings owned by Georgia Military College. This initiative must be delayed until at least FY99.

REVENUES/RECEIVABLES/RECEIPTS Deficiencies in Collection of Tuition and Fees Finding Control Number: 590-96-05

Georgia Military College does not have to follow the University System of Georgia guidelines concerning collection oftuition and fees. The College has made a management decision to extend limited credit terms on a case-by-case basis.

PRIOR YEAR FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

590-96-01 590-96-06

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

- 1-

GEORGIA MILITARY COLLEGE AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30, 1997
PRIOR YEAR FEDERAL AWARDS FINDINGS AND OUESTIONED COSTS CORRECTIVE ACTIONIRESPONSES FEDERAL FINANCIAL REPORTS Incorrect Student Payment Summary Reports Federal Pell Grant Program (CFDA 84.063) Audit Control Number: 590-96-06 A review of the $41,013.00 of 1996 Pell Grant Program expenditures spent in excess of the authorized amount revealed that $38,754.00 of the expenditures were valid.
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SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA MILITARY COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 1997
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Finding Control Number: FS-590-97-01
The College was unable to provide subsidiary fixed asset records or other historical cost evidence supporting the balances reported for general fixed assets.
The College should take appropriate action to provide for an adequate property management system for general fixed assets which would include subsidiary records that adequately reflect an inventory of land, buildings and equipment owned by the College. Such records should include but not be limited to (1) date acquired, (2) acquisition cost, (3) estimated replacement cost, (4) location and description. Detailed records should be maintained for all deletions and additions to the Plant Fund.
GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-590-97-02
Our examination included a review ofthe internal accounting controls utilized by the College in maintaining their accounting records. The following conditions relating to inadequate accounting procedures were found to exist:
(1) The accounting records for fiscal year 1997 were not closed until November 10, 1997.
(2) Activity for Restricted Funds for approximately the last three and one-half months of the fiscal year was not recorded on the accounting records. In addition, the general ledger cash balance for Restricted Funds was incorrect.
Proper internal accounting controls necessitate that all accounting activity is posted to the accounting records and that the accounting records are closed in a timely manner. Inadequate accounting procedures create an environment which does not provide reasonable assurance that accounting data and financial statements are accurate and complete.
The conditions identified above resulted from poor accounting practices and because ofmanagement's failure to adequately monitor and implement procedures to ensure that all activity is posted to the accounting records and that the accounting records are closed in a timely manner.
Extensive audit procedures and numerous journal entries were necessary to correct the financial statements utilizing source documentation.
- 1-

GEORGIA MILITARY COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 1997 FINANCIAL STATEMENT FINDINGS AND QUESTIQNED CQSTS GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-590-97-02 The accounting personnel of the College were given instructions in the recommended accounting procedures for recording Restricted Fund activity and were made aware of the need to close their fiscal year accounting records in a timely manner. The College should review the accounting procedures in place, design procedures to correct deficiencies noted, and implement those procedures to strengthen the internal controls over the accounting function.
- 2-