GEORGIA MILITARY COLLEGE
MILLEDGEVILLE, GEORGIA
MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2014
Georgia Department of Audits and Accounts Greg S. Griffin State Auditor

GEORGIA MILITARY COLLEGE - TABLE OF CONTENTS -

SECTION I FINANCIAL LETTER OF TRANSMITTAL SELECTED FINANCIAL INFORMATION EXHIBITS A STATEMENT OF NET POSITION - (GAAP BASIS) B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (GAAP BASIS) C STATEMENT OF CASH FLOWS - (GAAP BASIS) D SELECTED FINANCIAL NOTES SUPPLEMENTARY INFORMATION SCHEDULE 1 RECONCILIATION OF SALARIES AND TRAVEL

Page
2 3 4 5 21

SECTION II ENTITY'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

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
January 8, 2015

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Trustees of the Georgia Military College
and Lieutenant General William B. Caldwell, IV, 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, 2014, 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, 2014. 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 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,

GSG:as

Greg S. Griffin State Auditor

SELECTED FINANCIAL INFORMATION - 1 -

GEORGIA MILITARY COLLEGE STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2014
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories Prepaid Items (Note 5)
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 Advances (Including Tuition and Fees) (Note 6) Deposits Held for Other Organizations Lease Purchase Obligations (Notes 7, 9 and 10) Compensated Absences Notes Payable (Notes 7 and 11)
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations (Notes 7, 9 and 10)
Total Liabilities
NET POSITION
Net Investment in Capital Assets Restricted for:
Nonexpendable Unrestricted
Total Net Position

EXHIBIT "A"
$ 7,546,848.66 368,478.21
4,434,758.89 1,289,926.04 8,578,781.48 22,218,793.28
66,914.65 1,386,165.26 58,328,777.27 59,781,857.18 82,000,650.46
1,592,997.32 824,697.41
3,294,435.69 148,337.06 72,581.86 462,968.99
3,510,723.94 9,906,742.27
98,787.13 10,005,529.40
54,646,684.34 1,453,079.91
15,895,356.81
$ 71,995,121.06

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GEORGIA MILITARY COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - (GAAP BASIS)
YEAR ENDED JUNE 30, 2014

EXHIBIT "B"

OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) 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 Loss
NONOPERATING REVENUES (EXPENSES)
Grants and Contracts Federal
Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues
Net Nonoperating Revenues
Increase in Net Position
Net Position - Beginning of Year

$ 45,508,210.21 -18,305,188.12
4,447,176.45 6,627,181.78
366,618.97
761,280.36 3,529,758.17 1,779,044.54
193,437.38 415,807.31
45,323,327.05
12,289,807.10 12,691,921.72
6,473,610.18 263,661.47
12,304,398.88 1,741,873.05
17,025,671.78 2,544,988.48
65,335,932.66
-20,012,605.61
19,599,114.02 764,516.32 229,558.06 -171,708.36 430,837.36
20,852,317.40
839,711.79
71,155,409.27

Net Position - End of Year

$ 71,995,121.06

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GEORGIA MILITARY COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts (Exchange) Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Other Receipts, Net
Net Cash 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
Net Cash Flows Provided by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from Sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases Prepayment of Construction Costs paid to Georgia State Financing and Investment Commission
Net Cash Used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments
Net Cash Provided by Investing Activities
Net Increase in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES:
Operating Loss Adjustments to Reconcile Operating Loss to Net Cash
Used by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Inventories Prepaid Items Accounts Payable Salaries Payable Advances (Including Tuition and Fees) Compensated Absences
Net Cash Used by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations
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EXHIBIT "C"

$ 26,476,277.94 11,391,525.02 6,263,520.45 -25,273,685.43 -24,865,264.43 -12,304,398.88 415,807.31
-17,896,218.02
8,243.35 20,363,630.34
426,124.20
20,797,997.89
13,632.86 -1,311,679.14
-387,521.22 -171,708.36 -200,000.00
-2,057,275.86
1,575,062.80 115,315.47 -908,247.39
782,130.88
1,626,634.89
5,987,128.42

$

7,613,763.31

$ -20,012,605.61
2,544,988.48
-676,810.85 161,591.59
230.09 69,707.98 91,773.02 -99,385.48 24,292.76
$ -17,896,218.02

$

14,482.93

GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Georgia Military College (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.
NEW ACCOUNTING PRONOUNCEMENTS In fiscal year 2014, the College adopted the Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. The provisions of this Statement clarify the use of deferred inflows of resources and deferred outflows of resources. Certain items, including those items which were previously reported as assets and liabilities, will now be reported as outflows of resources or inflows of resources. As of June 30, 2014, the College did not have any deferred outflows of resources or deferred inflows of resources.
In fiscal year 2014, the College adopted Governmental Accounting Standards Board (GASB) Statement No. 66, Technical Corrections - 2012, an amendment to GASB Statements No. 10 and No. 62. The objective of this Statement is to resolve conflicting guidance by amending GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues and GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB Statement No. 10 was amended by removing the provision that limited fund based reporting of an entity's risk and financing activities to certain funds. GASB Statement No. 62 was amended by modifying guidance on (1) operating lease payments that vary from a straight-line basis, (2) purchases of a loan or a group of loans, and (3) recognition of servicing fees on mortgage loans that are sold when the stated service fee rate differs from a current (normal) servicing fee rate. The adoption of this statement does not have a significant impact on the College's financial statements.
In fiscal year 2014, the College adopted Governmental Accounting Standards Board (GASB) Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. This Statement establishes accounting and reporting requirements for state and local governments that extend or receive financial guarantees that are nonexchange transactions. The adoption of this statement does not have a significant impact on the College's financial statements.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

FUTURE ACCOUNTING PRONOUNCEMENTS In fiscal year 2015, the College will adopt Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this Statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this Statement will require the College to record a liability for its proportionate share of the Net Pension Liability of pension plans in which it participates. Actuarial estimates are currently being made to determine the College's liability, the effects of which are believed to be material.
NET POSITION The College's net position is classified as follows:
Net Investment in Capital Assets: This represents the College's total investment in capital assets, net of outstanding debt obligations and deferred inflows, or resources 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 the net investment in capital assets.
Restricted - nonexpendable: Nonexpendable restricted net position 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 - expendable: Restricted expendable net position includes resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
Unrestricted: Unrestricted net position represents 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 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.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

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, 2014, the carrying value of deposits was $7,611,115.82 and the bank balance was $8,094,575.62. Of the College's deposits, $7,658,975.75 was uninsured. Of these uninsured deposits, $7,658,975.75 was collateralized with securities held by the pledging financial institution's trust department or agent in the College's name.
INVESTMENTS At June 30, 2014, the carrying value of the College's investment was $1,386,165.26, 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

$

797,141.06

589,024.20

Total Investments

$

1,386,165.26

CREDIT QUALITY RISK
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.
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, 2014, $1,386,165.26 of the College's applicable investments was uninsured and held by the investment's counterparty in the College's name.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2014.

Student Tuition and Fees Federal, State and Private Funds

$

4,139,901.75

829,209.53

Less Allowance for Doubtful Accounts

4,969,111.28 165,874.18

Net Accounts Receivable
NOTE 4: CAPITAL ASSETS

$

4,803,237.10

Following are the changes in the College's capital assets for the year ended June 30, 2014:

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

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

$

681,165.84

$

63,187.35

1,232,669.30 $

211,624.31

0.00 $

681,165.84 63,187.35
1,444,293.61

Total Capital Assets, Not Being Depreciated

1,977,022.49

211,624.31

0.00

2,188,646.80

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

278,690.00 68,722,457.20
3,196,380.14 4,271,050.88 3,499,103.37

340,101.91 38,519.15
482,152.16 253,764.54

131,720.72 17,983.20

278,690.00 69,062,559.11
3,234,899.29 4,621,482.32 3,734,884.71

Total Assets Being Depreciated

79,967,681.59

1,114,537.76

149,703.92

80,932,515.43

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

278,690.00 16,303,120.87
1,511,687.36 2,047,355.54 2,242,613.77

1,687,336.78 197,406.27 420,898.29 239,347.14

118,087.86 17,983.20

278,690.00 17,990,457.65
1,709,093.63 2,350,165.97 2,463,977.71

Total Accumulated Depreciation

22,383,467.54

2,544,988.48

136,071.06

24,792,384.96

Total Capital Assets, Being Depreciated, Net

57,584,214.05

-1,430,450.72

13,632.86

56,140,130.47

Capital Assets, Net

$ 59,561,236.54 $ -1,218,826.41 $

13,632.86 $ 58,328,777.27

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

NOTE 5: PREPAID ITEMS
For the year ending June 30, 2014, the College paid an additional $200,000.00 to Georgia State Financing and Investment Commission for use in the construction of the Health and Wellness Center.

Georgia State Financing and Investment Commission Other

$ 8,572,974.00 5,807.48

Total Prepaid Items

$ 8,578,781.48

NOTE 6: ADVANCES

Advances consisted of the following at June 30, 2014

Tuition and Fees Other Advances

$ 3,110,488.25 183,947.44

Total Advances

$ 3,294,435.69

NOTE 7: LONG-TERM LIABILITIES

The College's Long-Term liability activity for the year ended June 30, 2014 was as follows:

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

Current Portion

Leases Lease Obligations

$ 240,585.45 $ 16,171.71 $ 85,388.17 $ 171,368.99 $ 72,581.86

Other Liabilities Compensated Absences Notes Payable

438,676.23 3,812,856.99

672,266.02

647,973.26 302,133.05

462,968.99 3,510,723.94

462,968.99 3,510,723.94

Total

4,251,533.22

672,266.02

950,106.31 3,973,692.93 3,973,692.93

Total Long-Term Obligations $ 4,492,118.67 $ 688,437.73 $ 1,035,494.48 $ 4,145,061.92 $ 4,046,274.79

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

NOTE 8: NET POSITION Changes in Net Position activity for the year ended June 30, 2014 are as follows:

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

Net Investments in Capital Assets

$ 55,507,794.10 $ 1,411,550.24 $ 2,272,660.00 $

54,646,684.34

Restricted Net Position

880,899.96 29,410,718.21 28,838,538.26

1,453,079.91

Unrestricted Net Position

14,766,715.21 46,576,530.43 45,447,888.83

15,895,356.81

Total Net Position

$ 71,155,409.27 $ 77,398,798.88 $ 76,559,087.09 $

71,995,121.06

NOTE 9: 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 2014 and 2019. Expenses for fiscal year 2014 were $98,373.18 of which $12,985.01 represented interest. Total principal paid on capital leases was $85,388.17 for the fiscal year ended June 30, 2014. Interest rates range from 1.94 percent to 22.49 percent.
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 and office facilities.

Noncancellable operating lease rental expenses in 2014 were $2,783,122.68 for real property and $4,362.91 for office equipment.
NOTE 10: LEASE OBLIGATIONS
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, 2014, were as follows:

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

Capital Leases

Operating Leases

Year Ending June 30: 2015 2016 2017 2018 2019 2020 - 2023

$

82,746.23 $ 2,714,089.98

59,509.54

2,564,902.14

31,330.71

1,965,837.36

13,028.86

1,905,625.04

1,980.00

1,585,235.85

2,848,725.34

Total Minimum Lease Payments

188,595.34 $ 13,584,415.71

Less: Interest

17,226.35

Principal Outstanding

$

171,368.99

NOTE 11: NOTES PAYABLE

Notes payable consisted of the following at June 30, 2014:

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%.

Note Payable Balance

$ 3,510,723.94

Maturity Information

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

Total Principal

Interest

Total Payments

2015

$ 3,510,723.94 $

145,109.66 $ 3,655,833.60

NOTE 12: 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 Georgia (ERS System) and Teachers Retirement System of Georgia. These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that Georgia 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

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

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 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 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 1.25% 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.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

Employer contributions required for fiscal year 2014 were based on the June 30, 2011 actuarial valuation as follows:

Old Plan* New Plan GSEPS

18.46% 18.46% 15.18%

*13.71% 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.

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 Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS.

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

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 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, 2014 were 6.00% of annual salary. Employer contributions required for fiscal year 2013 were 12.28% of annual salary as required and were based on the June 30, 2011 actuarial valuation.

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

The following table summarizes Georgia Military College's contributions by defined benefit plan for the years ending June 30, 2014, June 30, 2013, and June 30, 2012:

Fiscal Year

ERS Required Contribution

Percentage Contributed

TRS Required Contribution

Percentage Contributed

2014 2013 2012

$

19,974.82

$

15,262.70

$

11,318.27

NOTE 13: POST-EMPLOYMENT BENEFITS

100% $ 2,238,131.14 100% $ 1,959,579.56 100% $ 1,648,500.13

100% 100% 100%

The College participates in the following State of Georgia other post-employment benefit (OPEB) plans:

Administered by Department of Community Health (DCH) Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund)
Administered by the ERS System State Employee's Assurance Department (SEAD) -For retired and vested inactive (SEAD-OPEB) -For active employees (SEAD-Active)

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 offices that administer the plans.
Georgia School Personnel Post-employment Health Benefit Fund
Plan Description. The Georgia School Personnel Post-employment Health Benefit Fund (School OPEB Fund) is a cost-sharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of public school systems, libraries and regional educational service agencies. The School OPEB Fund provided health insurance benefits to eligible former employees and their qualified beneficiaries through the State Employees Health Benefit Plan administered by the Department of Community Health. The Official Code of Georgia Annotated (O.C.G.A.) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board). The Department of Community Health, which includes the School OPEB Fund, issues a separate stand-alone financial audit report and a copy can be obtained from the Georgia Department of Audits and Accounts.
Funding Policy. The contribution requirements of 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 receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. For members with fewer than five years of service as of January 1, 2012, contributions also vary based on years of service. On average, members with five years or more of service as of January 1, 2012, pay approximately

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

25 percent of the cost of health insurance coverage. In accordance with the Board resolution dated December 8, 2011, for members with fewer than five years of service as of January 1, 2012, the State provides a premium subsidy in retirement that ranges from 0% for fewer than 10 years of service to 75% (but no greater than the subsidy percentage offered to active employees) for 30 or more years of service. The subsidy for eligible dependents ranges from 0% to 55% (but no greater than the subsidy percentage offered to dependents of active employees minus 20%). No subsidy is available to Medicare eligible members not enrolled in a Medicare Advantage Option. The Board of Community Health sets all member premiums by resolution and in accordance with the law and applicable revenue and expense projections. Any subsidy policy adopted by the Board may be changed at any time by Board resolution and does not constitute a contract or promise of any amount of subsidy.

Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "payas-you-go" financing requirements. Contributions are not based on the actuarial liabilities (or funding excess) over a period not to exceed thirty years.

The combined active and retiree contribution rates established by the Board for employers participating in the School OPEB Funds were as follows for the fiscal year ended June 30, 2014:

For certificated teachers, librarians and regional educational service agencies and certain other eligible participants:

July 2013 - June 2014

$945.00 per member per month

For noncertificated school personnel:

July 2013 - June 2014

$596.20 per member per month

No additional contribution was required by the College for fiscal year 2014 nor contributed to the School OPEB fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the board in accordance with the School plan for other post-employment benefits and are subject to appropriation.
The following table summarizes Georgia Military College's combined active and retiree contributions for the health insurance plans for the years ending June 30, 2014, June 30, 2013, and June 30, 2012:

Fiscal Year

Percentage Contributed

Required Contribution

2014 2013 2012

100% 100% 100%

$

2,399,543.40

$

1,844,149.72

$

1,376,640.23

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

State Employees' Assurance Department
SEAD-OPEB and SEAD-Active are cost-sharing multiple-employer defined benefit postemployment plans that were created in fiscal year 2007 by the Georgia General Assembly to provide term life insurance to eligible members of the ERS, Georgia Judicial Retirement System (JRS), and Legislative Retirement System (LRS). SEAD-OPEB provides benefits for retired and vested inactive members, and SEAD-Active provides benefits for active members. Effective July 1, 2009, no newly hired members of any State public retirement system are eligible for term line insurance under SEAD. Pursuant to Title 47 of the OCGA, benefit provisions of the plans 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. Contributions for fiscal year 2014 were based on June 30, 2011 actuarial valuations as follows:

Member Rates ERS Old Plan Less: Offset Paid by Employer Net ERS Old Plan ERS New Plan, JRS, and LRS

SEADOPEB
0.45% -0.22% 0.23% 0.23%

SEADOPEB
0.05% -0.03% 0.02% 0.02%

Total SEAD
0.50% -0.25% 0.25% 0.25%

Employer Rates

0.00%

0.00%

0.00%

The ERS Board of Trustees voted and approved that the SEAD-OPEB contribution would be paid from existing assets of the Survivors Benefit Fund (SBF) instead of requiring payment by the employers. The contributions by SBF made on-behalf of the College for fiscal years 2013 and 2012 were estimated to be $272.27 and $569.13, respectively. There were no required employer contributions for the fiscal year ended June 30, 2014.
NOTE 14: 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 expenditure 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, 2014
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

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GEORGIA MILITARY COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2014

EXHIBIT "D"

Georgia, and Georgia Military College became responsible for its share of the purchase. For fiscal year 2014, Georgia Military College's potential liability for its share of the purchase has been estimated at $431,071.36.
NOTE 15: 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. 61, The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of the 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, 2014 June 30, 2013
Compensated Absences June 30, 2014 June 30, 2013
Adjustments College Work Study Unidentified Variance

GEORGIA MILITARY COLLEGE RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2014

SCHEDULE "1"

SALARIES $ 25,053,244.23 $

TRAVEL 263,661.47

824,697.41 -732,924.39

430,068.73 -396,097.08

-197,258.83 -1.25

$ 24,981,728.82 $

263,661.47

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

GEORGIA MILITARY COLLEGE ENTITY'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2014

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

No matters were reported.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-968-13-01 FA-968-13-02

Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

SPECIAL TESTS AND PROVISIONS Return of Title IV Funds U.S. Department of Education 84.SFA Student Financial Aid Cluster Program Finding Control Number: FA-968-13-01

The College has reviewed procedures and implemented new processes to ensure that the calculations of refunds for the Title IV Federal program are correct. Management will monitor and review these processes to ensure compliance with federal regulations.

The above corrective plan was implemented during the fiscal year 2014 audit. The auditors did not find any problems with refund calculations being calculated improperly, so no new audit finding was issued in fiscal year 2014's engagement. The auditors did ask that we follow up with U.S. Department of Education and obtain clearance that the fiscal year 2013 audit finding was resolved.

SPECIAL TESTS AND PROVISIONS Failure to Return Funds to a Lender U.S. Department of Education 84.032 Federal Family Education Loans Program (FFEL) Finding Control Number: FA-968-13-02

The College has reviewed procedures and implemented new processes to ensure that the FFEL program funds that are not disbursed are properly returned to lenders as required. Management will monitor and review these processes to ensure compliance with federal regulations.

The above corrective plan was implemented during the fiscal year 2014 audit. The auditors did not find any problems with FFEL program funds, so no new audit finding was issued in fiscal year 2014's engagement. The auditors did ask that we follow up with U.S. Department of Education and obtain clearance that the fiscal year 2013 audit finding was resolved.

SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

GEORGIA MILITARY COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2014
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)
We observed several areas where deficiencies existed related to the bank reconciliation process. The College did not document the administrative review of reconciliations for several bank accounts. Several reconciliations did not contain preparation or approval dates. It was also noted that several of the accounts were not reconciled in a timely manner. The College should implement procedures to ensure that all bank reconciliations are reviewed and documented and are done in a timely manner.