GEORGIA MILITARY COLLEGE
MILLEDGEVILLE, GEORGIA
MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2012
Georgia Department of Audits and Accounts 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 B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS C STATEMENT OF CASH FLOWS D SELECTED FINANCIAL NOTES SUPPLEMENTARY INFORMATION SCHEDULE 1 RECONCILIATION OF SALARIES AND TRAVEL
SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

Page
2 3 5 6
21

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 17, 2012

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Trustees of the Georgia Military College
and Major General Peter J. Boylan, President
Ladies and Gentlemen:
As part of our audit of the basic financial statements of the State of Georgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2012, 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 of the 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 of and for the year ended June 30, 2012. Information contained in this report is a by-product of our audit of the basic financial statements of the State of Georgia 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 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,

GSG:as

Greg S. Griffin State Auditor

SELECTED FINANCIAL INFORMATION - 1 -

GEORGIA MILITARY COLLEGE STATEMENT OF NET ASSETS
JUNE 30, 2012
ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Prepaid Items Inventories
Total Current Assets
Noncurrent Assets Cash and Cash Equivalents Investments Capital Assets, Net (Note 4)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Deferred Revenue (Note 5) Funds Held for Others Lease Purchase Obligations Compensated Absences Notes Payable
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Notes Payable
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Unrestricted
Total Net Assets
- 2 -

EXHIBIT "A"

$ 11,339,077.71 1,068,464.72
43,163.89 4,009,009.79
6,027.44 1,317,577.47
$ 17,783,321.02

$

36,064.54

776,989.22

60,416,197.79

$ 61,229,251.55

$ 79,012,572.57

$ 1,087,382.27 690,522.74
3,324,605.14 126,193.35 80,672.16 518,050.60 203,123.14
$ 6,030,549.40

$

167,992.80

5,792,538.06

$ 5,960,530.86

$ 11,991,080.26

$ 54,171,871.63
813,053.76 12,036,566.92

$ 67,021,492.31

GEORGIA MILITARY COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2012
OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal State Nongovernmental
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 Federal State
Gifts Investment Income (Endowments, Auxiliary and Other) 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

EXHIBIT "B"

$ 39,609,796.09 -16,506,746.27
3,974,531.60 6,283,072.16
321,635.03
755,163.16 3,672,200.64 1,456,013.28
77,603.12 446,038.96
$ 40,089,307.77

$ 10,913,315.10 11,116,306.57 4,600,062.79 375,074.28 11,342,156.17 1,511,264.18 14,469,202.67 2,399,448.72
$ 56,726,830.48
$ -16,637,522.71

$ 18,140,753.98

9,974.81 161,604.16 -283,811.26 365,747.13

$ 18,394,268.82

$

1,756,746.11

65,264,746.20

$ 67,021,492.31

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GEORGIA MILITARY COLLEGE STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2012
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 Interest Paid on Capital Debt
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales and maturities of investments Purchase of investments Interest on 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 Operating Income to Net Cash
Provided (Used) by Operating Activities Depreciation Expense Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Salaries Payable Accounts Payable Deferred Revenue Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations
- 5 -

EXHIBIT "C"

$ 22,007,839.19 10,944,813.99 5,960,980.20 -20,784,150.64 -21,997,973.76 -11,342,156.17 458,193.94
$ -14,752,453.25

$

33,779.67

18,150,728.79

254,537.61

$ 18,439,046.07

$ -2,836,743.66 -272,426.09 -283,811.26
$ -3,392,981.01

$

1,576,206.08

-1,615,645.69

161,604.16

$

122,164.55

$

415,776.36

10,959,365.89

$ 11,375,142.25

$ -16,637,522.71
2,399,448.72
-1,022,673.76 76,442.97 -246.57 9,731.58 67,450.43
305,193.31 49,722.78
$ -14,752,453.25

$

179,691.99

GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

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 for 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.
Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the 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 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:

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

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

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

3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.

4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.

5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.

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

The 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, 2012, the carrying value of deposits was $12,440,317.23 and the bank balance was $12,817,375.52. Of the College's deposits, $12,424,814.62 was uninsured. Of these uninsured deposits, $12,424,814.62 were collateralized with securities held by the pledging financial institution's trust department or agent in the College's name.

INVESTMENTS At June 30, 2012, the carrying value of the College's investment was $776,989.22, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Century Bank and Trust Trustee Endowment as follows:

Investment Type

Fair Value

Fixed Income Securities Equity Funds

$

462,563.14

314,426.08

Total Investments
CREDIT QUALITY RISK

$

776,989.22

Credit Quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. Georgia Military College does not have a formal policy for managing credit quality risk.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS
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 College will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The College does not have a formal policy for managing custodial credit risk for investments. At June 30, 2012, $776,989.22 of the College's applicable investments were uninsured and held by the investment's counterparty in the College's name.
NOTE 3: ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following at June 30, 2012.

Student Tuition and Fees Federal, State and Private Funds

$

3,655,773.69

573,888.83

Less Allowance for Doubtful Accounts

$

4,229,662.52

177,488.84

Net Accounts Receivable

$

4,052,173.68

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 4: CAPITAL ASSETS Following are the changes in the College's capital assets for the year ended June 30, 2012:

Beginning Balance July 1, 2011

Additions

Reductions

Ending Balance June 30, 2012

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

$

584,795.98 $

96,369.86 $

63,187.35

0.00

973,645.93

0.00 $

681,165.84 63,187.35
973,645.93

Total Capital Assets, Not Being Depreciated $

647,983.33 $ 1,070,015.79 $

0.00 $ 1,717,999.12

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections

$

278,690.00

67,639,019.21 $

3,028,206.77

3,019,341.37

3,034,910.60

763,874.00 44,000.00
887,920.62 $ 250,625.24

$
215,753.51 22,843.00

278,690.00 68,402,893.21
3,072,206.77 3,691,508.48 3,262,692.84

Total Assets Being Depreciated

$ 77,000,167.95 $ 1,946,419.86 $

238,596.51 $ 78,707,991.30

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

$

278,690.00

12,974,532.42 $

1,134,440.88

1,565,400.38

1,850,019.70

1,653,007.59 185,523.35 352,901.17 $ 208,016.61

$
169,896.47 22,843.00

278,690.00 14,627,540.01
1,319,964.23 1,748,405.08 2,035,193.31

Total Accumulated Depreciation

$ 17,803,083.38 $ 2,399,448.72 $

192,739.47 $ 20,009,792.63

Total Capital Assets, Being Depreciated, Net

$ 59,197,084.57 $

-453,028.86 $

45,857.04 $ 58,698,198.67

Capital Assets, Net

$ 59,845,067.90 $

616,986.93 $

NOTE 5: DEFERRED REVENUE

Deferred revenue consisted of the following at June 30, 2012.

45,857.04 $ 60,416,197.79

Prepaid Tuition and Fees Other Deferred Revenue

$ 3,124,083.00 200,522.14

Total Deferred Revenue

$ 3,324,605.14

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 6: LONG-TERM LIABILITIES The College's Long-Term liability activity for the year ended June 30, 2012 was as follows:

Beginning Balance July 1, 2011

Additions

Reductions

Ending Balance June 30, 2012

Current Portion

Leases Lease Obligations

$ 164,949.75 $ 179,691.99 $ 95,976.78 $ 248,664.96 $ 80,672.16

Other Liabilities Compensated Absences Notes and Loans

$ 468,327.82 $ 6,189,114.31

605,214.28 $

555,491.50 $ 518,050.60 $ 193,453.11 5,995,661.20

518,050.60 203,123.14

Total

$ 6,657,442.13 $ 605,214.28 $ 748,944.61 $ 6,513,711.80 $ 721,173.74

Total Long-Term Obligations

$ 6,822,391.88 $ 784,906.27 $ 844,921.39 $ 6,762,376.76 $ 801,845.90

NOTE 7: NET ASSETS

Changes in Net Asset activity for the year ended June 30, 2012 are as follows:

Beginning Balance July 1, 2011

Additions

Reductions

Ending Balance June 30, 2012

Invested in Capital Assets Net of Related Debt

$ 53,491,003.84 $ 906,416.82 $ 225,549.03 $

54,171,871.63

Restricted Net Assets

794,443.53

26,485,826.70

26,467,216.47

813,053.76

Unrestricted Net Assets

10,979,298.83

40,342,822.61

39,285,554.52

12,036,566.92

Total Net Assets

$ 65,264,746.20 $ 67,735,066.13 $ 65,978,320.02 $

67,021,492.31

NOTE 8: LEASE OBLIGATIONS

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 2012 and 2017. Expenses for fiscal year 2012 were $95,380.95 of which $16,407.97 represented interest. Total principal paid on capital leases was $78,972.98 for the fiscal year ended June 30, 2012. Interest rates range from 1.94 percent to 12.62 percent. Capital Lease obligations were also reduced $17,003.80 through the cancellation of leases and return of equipment.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 8: LEASE OBLIGATIONS
OPERATING LEASES Georgia Military College's noncancellable operating leases provide for renewal options for periods from one to ten 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 replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers, other business equipment and buildings.
Noncancellable operating lease rental expenses in 2012 were $2,392,357.06 for real property and $159.00 for office equipment.
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, 2012, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2013 2014 2015 2016 2017 2018 - 2022

$ 95,583.01 $ 2,323,512.98 81,454.56 1,977,398.44 58,380.75 1,860,719.65 37,097.74 1,745,964.59 8,803.68 1,148,847.96 2,218,669.53

Total Minimum Lease Payments

$ 281,319.74 $ 11,275,113.15

Less: Interest

32,654.78

Principal Outstanding

$ 248,664.96

NOTE 9: NOTES PAYABLE

Notes payable consisted of the following at June 30, 2012:

College note payable secured by Baugh Barracks, dated July 2006, payable in monthly installments of $38,404.70, matures June 3, 2015, interest rate 4.310%.

Notes Payable Balance

$ 5,995,661.20

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 9: NOTES PAYABLE Maturity Information The scheduled maturities of Baugh Barracks notes payable are as follows:

Total Principal

Interest

Total Payments

2013 2014 2015

$

203,123.14 $ 257,733.26 $ 460,856.40

212,179.28

248,677.12

460,856.40

5,580,358.78

239,832.32 5,820,191.10

$

5,995,661.20 $ 746,242.70 $ 6,741,903.90

NOTE 10: RETIREMENT PLANS

Georgia Military College participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Gerogia (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 Military College 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 GEORIGA

The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers' Retirement System of Georgia. One of the ERS System plans, the Employee's Retirement System of Georgia (ERS), is 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 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

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORIGA
maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employee's Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009, also have the option to irrevocably change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of credible service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to member's 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.
Member contribution rates are set by law. Member contributions under the old plan are 4% of the annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, the College pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these College 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 1.50% of annual compensation. The College 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 College contributions are not at any time refundable to the member or his/her beneficiary.
Employer contributions required for fiscal year 2012 were based on the June 30, 2009 actuarial valuation as follows:

Old Plan* New Plan GSEPS

11.63% 11.63%
7.42%

* 6.88% exclusive of contributions paid by the employer on behalf of old plan members
Members become vested after 10 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 contribution, the member forfeits all rights to retirement benefits.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA
The Teachers' Retirement System of Georgia (TRS) is a cost-sharing multiple-employer defined benefit pension plan created in 1943 by an act of the General Assembly of Georgia to provide retirement benefits for qualifying employees in educational service. A Board of Trustee 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 provided 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 10 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 40 years. Early retirement benefits are reduced by the lesser of one-twelfth 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. 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 lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 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, 2012, were 5.53% of annual salary. Employer contributions required for fiscal year 2012 were 10.28% of annual salary as required by the June 30, 2009, actuarial valuation.
The following table summarizes Georgia Military College's contributions by defined benefit plan for the years ending June 30, 2012, June 30, 2011, and June 30, 2009:

Fiscal Year

TRS Required Contribution

Percentage Contributed

ERS Required Contribution

Percentage Contributed

2012 2011 2010

$ 1,648,500.13 $ 1,523,651.00 $ 1,309,083.00

100% $ 100% $ 100% $

11,318.27 7,731.95 8,538.65

100% 100% 100%

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 11: POST-EMPLOYMENT BENEFITS

The College participates in the following State of Georgia post-employment benefit plans: the Georgia Retiree Health Benefit Fund (administered by the Department of Community Health) and the State Employee's Assurance Department OPEB (administered by the ERS System). Separate financial reports that include the applicable financial statements and required supplementary information for these plans are publicly available and may be obtained from the respective system offices.
Georgia Retiree Health Benefit Fund The Georgia Retiree Health Benefit Fund (GRHBF) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers retired employees of the State including all departments, agencies and local school systems. GRHBF provides health insurance benefits to eligible retirees and their qualified beneficiaries through the health insurance plan for State employees. The Official Code of Georgia annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the employees' health insurance plan (including benefits for retirees) to the Board of Community Health (Board).

The contribution requirements of the plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 37 percent of the cost of health insurance coverage.
Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The 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 rates for the active and retiree plans for the fiscal year ended June 30, 2012, were as follows:

Certificated Employees:

July 2011 August 2011 - March 2012 April 2012 - May 2012 June 2012

18.534% of covered payroll for August coverage 24.000% of covered payroll for September - April coverage
3.958% of covered payroll for May - June coverage $912.34 per covered employee/per month for July coverage

Non-certificated Employees:

July 2011 - August 2011 September 2011 - May 2012 June 2012

$246.20 per covered employee/per month for August - September coverage $296.20 per covered employee/per month for October - June coverage $592.20 per covered employee/per month for July coverage

No additional contribution was required by the Board for fiscal year 2012 nor contributed to GRHBF to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other post-employment benefits and are subject to appropriation.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 11: POST-EMPLOYMENT BENEFITS
Georgia Retiree Health Benefit Fund The following table summarized Georgia Military College's combined active and retiree contributions to the health insurance plans for the years ending June 30, 2012, June 30, 2011, and June 30, 2010.

Fiscal Year

Percentage Contributed

Required Contribution

2012 2011 2010

100%

$

100%

$

100%

$

1,376,640.23 1,049,681.20
785,872.96

State Employees' Assurance Department OPEB State Employees' Assurance Department - OPEB (SEAD-OPEB) is a cost-sharing multiple-employer defined benefit post-employment plan that was created in fiscal year 2007 by the Georgia General Assembly to provide term life insurance to retired and vested inactive members of Employees' (ERS), Judicial (JRS), and Legislative (LRS) Retirement Systems. Eligibility was amended to exclude GSEPS members of ERS effective January 1, 2009, and to exclude members of JRS and LRS hired on or after July 1, 2009. Pursuant to Title 47 of the OCGA, benefit provisions of the plan were established and can be amended by State statute.

Contributions by plan members are established by the ERS Board of Trustees, up to the maximum allowed by statute (not to exceed 0.5% of earnable compensation). The ERS Board of Trustees establishes employer contribution rates, such rates which, when added to members' contributions, shall not exceed 1% of earnable compensation. For the fiscal year ended June 30, 2012, contributions of ERS "old plan" members were 0.45% of earnable compensation, 0.22% of which was paid by the employer. Contributions of ERS "new plan" members and of members of the Judicial and Legislative Retirement Systems were 0.23% of earnable compensation.

The SEAD-OPEB annual required contribution was 0.61% of payroll for fiscal year 2012 based on the actuarial valuation as of June 30, 2009. The ERS Board of Trustees voted and approved that the contribution would be paid from existing assets of the Survivors Benefit Fund (SBF) instead of requiring payment by the employers. The contribution by SBF made on-behalf of Georgia Military College for fiscal year 2012 was estimated to be $569.13. There were no required employer contributions for the fiscal years ended June 30, 2011, and 2010.

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, 2012.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2012

EXHIBIT "D"

NOTE 12: CONTINGENCIES
During fiscal year 2002, upon advice of the Attorney General's Office, Georgia Military College required that full-time employees participate in Teachers' Retirement System of Georgia. Previously, participation was elective by full-time employees. As a result of that change, a number of former fulltime 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 2012, Georgia Military College's potential liability for its share of the purchase has been estimated at $590,083.37.
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 - 19 -

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Totals per Annual Supplement
Accruals June 30, 2012 June 30, 2011
Compensated Absences June 30, 2012 June 30, 2011
Adjustments College Work Study Unidentified Variance

GEORGIA MILITARY COLLEGE RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2012

SCHEDULE "1"

SALARIES $ 22,211,997.72 $

TRAVEL 374,997.28

690,522.74 -680,791.16

481,236.03 -435,046.74

-231,123.84 -7,173.08

77.00

$ 22,029,621.67 $

375,074.28

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SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

GEORGIA MILITARY COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2012
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)
Failure to Reconcile Salaries to the General Ledger Georgia Military College failed to reconcile the detailed listing of salaries and travel submitted to the Georgia Department of Audits and Accounts to the amounts reported on the general ledger. The Official Code of Georgia Annotated (O.C.G.A.) 50-6-27 states in part: "Each...college...is required and directed to submit to the state auditor, in a format prescribed by the state auditor, a listing of all personnel of such...college showing name, title or functional area, salary and travel expense for each individual". Salaries and Travel reported to the Department of Audits were not reconciled with amounts recorded in the financial statements. Variances of $7,173.08 in Salaries and $77.00 in Travel were noted. The College should ensure that all salaries and travel reported to the Georgia Department of Audits and Accounts are reconciled to the amounts reported on the general ledger.
Failure to Properly Reconcile Bank Statements We observed several areas where deficiencies existed related to the bank reconciliation process. The College did not properly indicate administrative review of reconciliations for several bank accounts. It was also noted that several of the accounts were not reconciled in a timely manner nor reconciled correctly. The College should implement procedures to ensure that all bank reconciliations are properly reviewed and documented, are performed in a timely manner, and properly reconciled to the financial statements.