Management report, Georgia Military College, Milledgeville, Georgia, an organizational unit of the state of Georgia year ended June 30, 2008

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
MANAGEMENT REPORT GEORGIA MILITARY COLLEGE
MILLEDGEVILLE, GEORGIA
AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 2008
Russell W. Hinton State Auditor

GEORGIA MILITARY COLLEGE - TABLE OF CONTENTS -

SECTION I

FINANCIAL

LETTER OF TRANSMITTAL

SELECTED FINANCIAL INFORMATION

EXHIBITS

A STATEMENT OF NET ASSETS

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

3

C STATEMENT OF CASH FLOWS

4

D SELECTED FINANCIAL NOTES

5

SUPPLEMENTARY INFORMATION

SCHEDULE

1 RECONCILIATION OF SALARIES AND TRAVEL

19

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

SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
December 10, 2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly of Georgia Members ofthe Board of Trustees of Georgia Military College
and Major General Peter J. Boylan, President
Ladies and Gentlemen:
As part ofour audit ofthe basic financial statements ofthe State ofGeorgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State ofGeorgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2008, we have performed certain audit procedures at Georgia Military College. Accordingly, the financial statements and compliance activities of Georgia Military College were examined to the extent considered necessary in order to express an opinion as to the fair presentation ofthe financial statements contained in the foregoing documents and to issue reports on compliance and internal control as required by the Single Audit Act Amendments of 1996.
This Management Report contains information pertinent to the financial and compliance activities of Georgia Military College as ofand for the year ended June 30, 2008. Information contained in this report is a by-product ofour audit ofthe basic financial statements ofthe State ofGeorgia and is the representation of management. Accordingly, we do not express an opinion or any other form of assurance on it. The particular information provided which includes a section on findings and other items reported in accordance with Commission on Colleges regulation 2.11.1 is enumerated in the Table of Contents.

This report is intended solely for the information and use of the management of Georgia Military College, members of the Board of Trustees of Georgia Military College and the appropriate accrediting regulatory agency and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
~I--LMd~ Rus 11 W. Hinton, CPA, CGFM State Auditor
RWH:gp

SELECTED FINANCIAL INFORMATION - 1-

GEORGIA MILITARY COLLEGE STATEMENT OF NET ASSETS
JUNE 30, 2008
ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Prepaid Items Inventories
Total Current Assets
Noncurrent Assets Investments Capital Assets, Net (Note 4)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Salaries Payable Accounts Payable Deferred Revenue (Note 5) Funds Held for Others Capital Leases Compensated Absences Notes Payable
Total Current Liabilities
Noncurrent Liabilities Capital Leases Notes Payable
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Non expendable Expendable Unrestricted
Total Net Assets
-2-

EXHIBIT"A"

$

2,375,652

1,204,696

493,139 1,242,741
3,779 784,350

$

6,104,357

$

837,927

41,390,232

$

42,228,159

$

48,332,516

$

573,772

1,412,401

1,243,685

71,090

65,696

361,854

170,633

$

3,899,131

$

146,401

6,552,759

$

6,699,160

$

10,598,291

$

34,454,744

951,794 122,594 2,205,093

$ ==3=7,=73=4==,2=25=

GEORGIA MILITARY COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2008

EXHIBIT"B"

OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal State Nongovernmental
Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Intercollegiate Athletics Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
Grants and Contracts State
Gifts Interest and Other Investment Income Interest Expense (Capital Assets) Other Nonoperating Revenues
Net Nonoperating Revenues
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

$

24,890,052

-8,322,494

8,727,086 4,574,487
220,208 32,700

658,932 2,894,416
788,569 24,513
306,975

$

34,795,444

$

8,637,186

7,692,469

3,064,902

290,400

5,740,764

1,119,933

9,640,794

1,728,139

$

37,914,587

$

-3119143

$

3,062,152

5,531

82,675

-311,029

379,943

$

3,219,272

$

100,129

37,634,096

$ ===3==7,=7=34=,2=2=5

-3 -

GEORGIA MILITARY COLLEGE STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Other Receipts (Payments)
Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES 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 Purchases of Capital Assets Principal Paid on Capital Debt and Lease Interest Paid on Capital Debt and Lease
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Purchase of Investments
Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash
Cash and Cash Equivalents Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Accounts Payable Salaries Payable Deferred Revenue Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations
-4-

EXHIBIT"C"

$

16,567,558

13,379,686

4,539,585

-14,029,205

-16,207,984

-5,740,764

377 814

$

-1,113,310

$

5,195

3,118,404

379,942

$

3,503,541

$

-1,229,367

-232,816

-311,029

$

-1,773,212

$

82,675

-967,600

$

-884,925

$

-267,906

2,643,558

$ ===2'=37=5=,6=52=

$

-3,119,143

1,728,139
178,915 -50,848
-372 141,476
34,477 -109,716
83762

$ ===1=11=3=3=1o..

$===4=9=,2=5=3

GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Georgia Military College serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge and by disseminating knowledge to the people of Georgia and throughout the country.
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 College 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 of the State of Georgia reporting entity for financial reporting purposes because of the 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 (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
NET ASSETS The College's net assets are classified as follows:
Invested in capital assets, net of related debt: This represents the College'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.
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 College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, grants and contracts, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College and may be used at the discretion of the governing board to meet current expenses for those purposes. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.
NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

DEPOSITS The Georgia Military College Board of Trustees is responsible for all details relative to furnishing the required depository protection for Georgia Military College.

At June 30, 2008, the carrying value of deposits was $3,588,422.31 and the bank balance was $3,855,397.00. Of the College's deposits, $3,440,038.42 were uninsured. All of these uninsured deposits were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name.

INVESTMENTS At June 30, 2008, the carrying value of the College's investment was $827,927.28, which is materially the same as fair value.

The College's investments as of June 30, 2008 are presented below. These investments were entirely comprised of funds invested in the Century Bank and Trust Trustee Endowment.

Investment Type

Fair Value

Debt Securities Mutual Bond Funds

$ 276,974.27

Other Investments Equity Mutual Funds Common Stock

447,664.02 103,288.99

Total Investments

$ 827,927.28

NOTE 3: ACCOUNTS RECEIVABLE

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

Student Tuition and Fees Federal, State and Private Funds

$ 1,320,825 493,139

Less Allowance for Doubtful Accounts

$ 1,813,964 78 084

Net Accounts Receivable

$ 1,735.880

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT "D"

NOTE 4: CAPITAL ASSETS

Following are the changes in the College's capital assets for the year ended June 30, 2008:

Beginning Balance Julx 1, 2007

Additions

Reductions

Ending Balance June 30, 2008

Capital Assets, Not Being Depreciated:

Land

$

514,485 $

0 $

0 $

514,485

Capitalized Collections

63,187

63,187

Construction Work-In-Progress

143,126

143,126

Total Capital Assets Not Being

Depreciated

$

720,798 $

0 $

0 $

720,798

Capital Assets, Being Depreciated:

Infrastructure

$

Building and Building Improvements

Facilities and Other Improvements

Equipment

Library Collections

278,690 46,399,768 $
1,767,311 1,816,417 2,220,771

353,921 325,775 359,179 $ 239,744

$
77,139 39 604

278,690 46,753,689
2,093,086 2,098,457 2,420,911

Total Assets Being Depreciated

$ 52,482,957 $ 1,278,619 $

116 743 $ 53,644,833

Less: Accumulated Depreciation:

Infrastructure

$

Building and Building Improvements

Facilities and Other Improvements

Equipment

Library Collections

237,344 $ 8,162,590
572,021 959,413 1,432,635

18,812 1,223,021
118,131 237,591 $ 130,584

$
77,139 39 604

256,156 9,385,611
690,152 1,119,865 1,523,615

Total Accumulated Depreciation

$ 11,364,003 $ 1,728,139 $

116 743 $ 12,975,399

Total Capital Assets, Being Depreciated,

Net

$ 41,118,954 $

-449,520 $

0 $ 40,669,434

Capital Assets, Net

$ 41 839 752 $

-449.520 $

$ 41.390.232

NOTE 5: DEFERRED REVENUE

Deferred revenue consisted of the following at June 30, 2008.

Prepaid Tuition and Fees Other Deferred Revenue

$

690,449

553,236

Totals

$ 1,243,685

NOTE 6: LONG-TERM LIABILITIES

The College's Long-Tenn liability activity for the year ended June 30, 2008 was as follows:

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT "D"

NOTE 6: LONG-TERM LIABILITIES

Beginning Balance July 1, 2007

Additions

Reductions

Ending Balance June 30, 2008

Current Portion

Leases Lease Obligations

$

221,615 $

49,253 $

58 771 $

212,097 $

65,696

Other Liabilities Compensated Absences Notes Payable

$

278,091 $

6,897,437

442,003 $

358,240 $ 174 045

361,854 $ 6,723,392

361,854 170,633

Total

$ 7,175,528 $

442,003 $

532,285 $ 7,085,246 $

532,487

Total Long-Term Obligations $ 7 397 ]43 $

491.256 $

591.056 $ 7.297.343 $

598.183

NOTE 7: NET ASSETS

Changes in Net Asset activity for the year ended June 30, 2008 are as follows:

Invested in Capital Assets Net of Related Debt
Restricted Net Assets Unrestricted Net Assets Total Net Assets
NOTE 8: LEASE OBLIGATIONS

Balance July 1, 2007

Additions

Reductions

Balance June 30, 2008

$ 34,720,700 $ -498,772 $ -232,816 $ 34,454,744

1,101,246

13,437,654

13,464,512

1,074,388

1,812,150

24,888,090

24,495,147

2,205,093

$ 37 634 096 $ 37 826 972 $ 37 726 843 $ 37 734 225

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

CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2009 and 2013. Expenses for fiscal year 2008 were $71,183 of which $12,412 represented interest. Total principal paid on capital leases was $58,771 for the fiscal year ended June 30, 2008.

OPERATING LEASES Georgia Military College's cancellable operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable 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

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT "D"

NOTE 8: LEASE OBLIGATIONS

OPERATING LEASES replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and office facilities.

Noncancellable operating lease rental expenses in 2008 were $1,283,444 for real property.

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, 2008, were as follows:

Capital Leases

Operating Leases

Year Ending June 30: 2009 2010 2011 2012 2013 2014 - 2018

$

75,597 $ 1,255,079

63,371

571,113

55,721

445,796

29,456

427,161

7,919

407,814

1.378,341

Total Minimum Lease Payments

$ 232,064 $ 4,485.304

Less: Interest

19,967

Principal Outstanding

$ 212,097

NOTE9: NOTESPAYABLE

Notes payable consisted of the following at June 30, 2008:

College note payable secured by Baugh Barracks, dated July 2006, payable in monthly installments of$38,405, matures July 2015, interest rate 4.31 %.

$ 6,723.392

MATURITY INFORMATION The scheduled maturities of Baugh Barracks notes payable are as follows:

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT"D"

NOTE9: NOTESPAYABLE

MATURITY INFORMATION

Total Principal

Interest

Total Payments

2009 2010 2011 2012 2013 2014 2015 2016

$ 170,633 $ 178,238 186,185 193,738 203,123 212,179 221,024
5,358.272

290,223 282,619 274,672 267,118 257,733 248,677 239,832

$ 460,856 460,857 460,857 460,856 460,856 460,856 460,856
5,358.272

$ 6,723.392 $ 1,860.874 $ 8,584,266

NOTE 10: 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 defined benefit pension plan 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 in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or the Georgia Department of Audits and Accounts.

Funding Policy Employees of Georgia Military College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Military College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2008

100%

$ 1,101,777

2007

100%

$ 1,026,236

2006

100%

$ 935,827

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description Georgia Military College participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia.
The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected 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. All other members are "new plan" members subject to the modified plan provisions.
Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.
Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. 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.
In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion ofERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.
The ERS issues a financial report each fiscal year, which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2008, for employees covered by ERS was $62,394. The College's total payroll for all employees was $16,329,655.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT"D"

NOTE 10: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Funding Policy For the year ended June 30, 2008 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee.
Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation for both old and new plans. For the year ended June 30, 2008, the ERS employer contribution rate for the College amounted to 10.41 % of covered payroll and included the amounts contributed on behalf of the employees under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees.
Total contributions to the plan made during fiscal year 2008 amounted to $7,431, of which $6,495 was made by the College and $936 was made by employees. These contributions met the requirements of the plan.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 financial report, which may be obtained through ERS.
NOTE 11: POSTEMPLOYMENT BENEFITS
The College participates in the Georgia Retiree Health Benefit Fund ("GRHBF") which is a costsharing multiple-employer defined benefit postemployment healthcare plan that covers retired employees of the State of Georgia. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries.
Pursuant to Title 45, Chapter 18 of O.C.G.A., the authority to establish and amend the benefit provisions of the plan is assigned to the Board of Community Health ("Board"). Financial statements and required supplementary information for GRHBF are included in the publicly available financial report of the Department of Community Health.
The College contributes to the fund based upon amounts recommended by the Board and set forth in the Appropriations Act. This contribution rate is established to fund both the active and retired employee health insurance plans based on projected pay-as-you-go financing requirements. The combined rate for the active and retiree plans (pay-as-you-go basis) for the fiscal year ended June 30, 2008, was 18.534% of covered payroll. An additional contribution of 4.309% of covered payroll was required by the Board for fiscal year 2008; eleven months of this

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT "D"

NOTE 11: POSTEMPLOYMENT BENEFITS
additional contribution will be deposited into the OPEB fund to prefund retiree benefits (such additional contribution amounts are determined annually). The College's contribution to the health insurance plan for the fiscal year ended June 30, 2008, was $322,298.09, which equaled the required contribution.
The College also participates in a program of group term life insurance for retired and vested inactive eligible members of various retirement systems. The State Employees' Assurance Department ("SEAD-OPEB") is a single-employer defined benefit postemployment plan.
Pursuant to Title 47 of the Official Code of Georgia Annotated, the authority to establish and amend the benefit provisions of the plan is assigned to the Boards of Trustees of the Employees' and Judicial Retirement Systems. Financial statements and required supplementary information for SEAD-OPEB are included in the publicly available financial report of the Employees' Retirement System.
The College is required to contribute the annual required contribution of the employer (ARC), an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC for the year ended June 30, 2008, was zero (0).
NOTE 12: 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 of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Military College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia Military College, 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, 2008.
During fiscal year 2002, upon advice of the Attorney General's Office, Georgia Military College required that full-time employees participate in the Teachers Retirement System of Georgia. Previously, participation was elective by full-time employees. As a result of that change, a number of former full-time employees and "constructively qualified" faculty members were eligible to "purchase" prior service credit (based on employment at Georgia Military College) in Teachers Retirement System of Georgia, and Georgia Military College became responsible for its share of the purchase. For fiscal year 2008, Georgia Military College's potential liability for its share of the purchase has been estimated at $739,429.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2008

EXHIBIT "D"

NOTE 13: AFFILIATED ORGANIZATIONS
The Georgia Military College Foundation, Inc., is a legally separate, tax exempt organization whose activities primarily support Georgia Military College. This affiliated organization is considered a potential component unit of the State of Georgia in accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of this affiliated organization are not included in these financial statements. Copies of the financial statements for the affiliated organization may be obtained from Georgia Military College.

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SUPPLEMENTARY INFORMATION - 17 -

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GEORGIA MILITARY COLLEGE RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2008

SCHEDULE "1"

Totals per Annual Supplement
Accruals June 30, 2008 June 30, 2007
Compensated Absences June 30, 2008 June 30, 2007
Adjustments: College Work Study Unidentified Variance

SALARIES

$

16,312,798 $

TRAVEL 290,400

573,772 -539,296

336,139 -258,329

-95,600 171

$

16,329,655 $===2=9=0,=4=00=

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SECTION II AUDITEE'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, 2008

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-590-07-01

Previously Reported Corrective Action Implemented

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

GEORGIA MILITARY COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2008
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
No matters were reported.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.
OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION)
GEORGIA MILITARY COLLEGE TRAVEL CARDS Georgia Military College does not have adequate procedures in place to ensure that the policies related to the VISA travel credit cards are followed. The College's policy for the travel credit cards states that they are "to be utilized for travel and entertainment related expenses" and "use is limited to official GMC business travel and entertainment". The policy also states that "each corporate credit card has a pre-set maximum monthly spending limit, which may not be exceeded under any circumstances". An examination ofcredit card transactions revealed five transactions that were for purchases unrelated to travel or entertainment, and one of the five transactions was also over the single purchase limit for the card user. Management should strengthen procedures to ensure that all policies related to the Georgia Military College travel credit cards are followed.
INVESTMENTS Georgia Military College did not correctly report the Endowment Investment Portfolio on the Financial Statements. It was noted that the entire Investment Portfolio was reported as cash, when, in actuality, the majority of this account consisted of investments in certificates of deposit and securities, which should have been reported as Investments. An adjustment was made to the Financial Statements to reclassify $80,000.00 from Cash to Short-Term Investments and $837,927.28 from Cash to Long-Term Investments. In the future, management should ensure that the investments of this Endowment Portfolio are correctly classified for reporting purposes.