Georgia Southern University, Statesboro, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2002

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DEP~~TME~T OF A~DITS AND ACCOUNTS,

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GEORGIA

SO, UTHERN.

UNIVERSITY '

STATESBORO. GEORGIA

REPORT ON AUDIT

OF THE FINANCIAL STATEMENTS

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~Russell W. Hinton

State 'Auditor ' 'r

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GEORGIA SOUTHERN UNIVERSITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

2

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

11

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

12

C STATEMENT OF CASH FLOWS

13

D NOTES TO THE FINANCIAL STATEMENTS

15

SUPPLEMENTARY INFORMATION

SCHEDULES

SCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO

BUDGET - (NON-GAAP BASIS)

I

RESIDENT INSTRUCTION

33

2

LOTTERY FOR EDUCATION

34

3 RECONCILIATION OF SALARIES AND TRAVEL

35

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

GEORGIA SOUTHERN UNNERSTIY -TABLEOFCONfENTS-
SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECilON I FINANCW.,

RUSSEi.i, W. Hl1'TON
ST.a:TE AUDITOR
(O,tJ 6~217A

DEPARTMENT OF AUDITS AND ACCOUNTS
254 WJshmgton Street SW Suite 214 AIIJnlJ, Gcorg1J 30334-8400
January 31, 2003

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the Uruvers1ty System of Georgia
and Honorable Bruce F. Grube, President Georgia Southern Uruvers1ty
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen
We have audited the accompanying basic financial statements (Exlubi!s A through D) of Georgia Southern Uruvers1ty, an organlZlllional urut of the State of Georgia, as of and for the year ended June 30, 2002 These financial statements are the respons1b1hty of the Uruversi!y's management Our respons1bihty 1s to express an opinion on these fmanc1al statements based on our audit
We conducted our audit in accordance With auditing standards generally accepted in the Uruted States of Amenca Those standards reqmre that we plan and perform the audi! to obtain reasonable assurance about whether the financial statements are free of matenal misstatement An audit includes exarruning, on a test basis, evidence supporting tbe amounts and disclosures in the financial statements An audit also includes assessing the accounling pnnc1ples used and s1gruficant eslimates made by management, as well as evaluating the overall financial statement presentation We believe that our audit provides a reasonable basis for our op1ruon
As discussed in Note 1, the financial statements of Georgia Southern Uruvers1ty are intended to present the financial pos11Ion and changes in financial pos111on (including cash flows) of only that portion ofthe business-type actJVJlies ofthe State of Georgia that 1s attnbutable to the transaclions of Georgia Southern Uruvers1ty They do not purport to, and do not, present farrlythe financial pos1tJon and changes in financial pos11Ion (including cash flows) of the State of Georgia, in conformi!yw1th accounting pnnc1ples generally accepted in the Uruted States of Amenca
As descnbed in Note I to the financial statements, the Uruvers1tyd1d not recogruze June 30, 2001, encumbrances as expenses in the June 30, 2002, basic financial statements To conform to generally accepted accounting pnnc1ples, encumbrances should be recogruzed as expenses and hab1h11es in the
02ARL-62

penod that goods and services are received The effects on the basic financial statements of this departure from generally accepted accountmg pnnciples were not reasonably determmable
In our opimon, except for the effects on the basic financial statements of the matter discussed m the
fourth paragraph, the basic financial statements referred to above present fwrly, m all matenal respects, the financial position of Georgia Southern Uruvers1ty as ofJune 30, 2002, and its changes m financial position (mcluding cash flows) for the year then ended m conforrmty with accountmg pnnc1ples generally accepted m the Umted States ofAmenca
As described ID Note 1, Georgia Southern Umvers1ty adopted the provisions of Governmental Accounting Standards Board (GASB) Statements No. 35, Basic Fmanc,al Statements - and Management's Discussion and Analysis - for Publ,c Colleges and Universities, as amended by GASB Statement No. 37, Basic Fmanc,al Statements - and Management's Discussion and Analysis for State and Local Governments, and GASB Statement No. 38, Certain Financial Statements Note Disclosures, as of July 1, 2001, to implement a new financial reporting model.
Management's Discussion and Analysis 1s not a requrred part ofthe basic financial statements but 1s supplementary mformatlon reqwred by the GASB. We have applied certam llilllted procedures, wluch consisted prinCipally ofinquines ofmanagement regard1Dg the methods ofmeasurement and presentation of tlus supplementary information. However, we did not audit this mformatlon and express no opinion on it
Our audit was conducted for the purpose of forming an opmion on the basic financial statements taken as a whole. The accompanying supplementary mformat1on (Schedules 1 through 3) 1s presented for purposes of additional analysis and 1s not a required part of the basic financial statements of Georgia Southern University. Such information has been subjected to the aud1tmg procedures applied by us ID the audit ofthe basic financial statements and, m our op1mon, based on our audit, 1s fwrly stated in all material respects m relation to the basic financial statements taken as a whole.
Respectfully submitted,
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11 W. Hinton State Auditor
RWH:gp 02ARL-62

REQUIRED SUPPLEMENTARY INFORMATION
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GEORGIA SOUTHERN UNIVERSITY
Management's Discussion and Analysis

Introduction

Georgia Southern Uruvers1ty 1s one of the 34 mstJ.tutJ.ons of the Uruvers1ty System of Georgia Georgia Southern Uruversity 1s the largest and most comprehensive center oflugher education m the southern half of Georgia A residential campus ofmore than 15,000 students, Georgia Southern 1s one of the top two uruversitJ.es of choice m Georgia for mcommg freslunan. The Umvers1ty's hallmark 1s a supenor undergraduate experience emphas12mg academic programs from baccalaureates to doctorates m its six Colleges. Liberal Arts and Social Sciences, Busmess Adm1mstrat1on; Education; Health and Professional StudJ.es; The Jack N. Aventt College of Graduate StudJ.es, and the Allen E. Paulson College of Science and Technology. The Uruvers1tyhas earned national accredJ.tatJon in 29 program areas. Founded m 1906, the Umvers1ty 1s located m Statesboro The Umvers1ty's enrollment, which expenenced a one-year decrease when adrmss1on standards were raJsed m Fall 2000, will reach a record m Fall 2002 with more than 15,075 students

Faculty

Students

FY2003 FY2002 FY2001

593

15,075

610

14,371

629

14,184

Overview ofthe Financial Statements and Financial Analysis

Georgia Southern Uruvers1ty 1s proud to present its financial statements for fiscal year 2002. The emphasis ofdJ.scuss1ons about these statements will be on current year data. There are three financial statements presented the Statement of Net Assets; the Statement of Revenues, Expenses and Changes m Net Assets, and, the Statement of Cash Flows. This d1scuss1on and analysis of the Umvers1ty's financial statements proVldes an overVJew ofits financial actJVJ!Jes for the year Georgia Southern Umvers1ty has elected to not restate pnor penods for purposes of prov1dJ.ng the comparative data for tins Management's D1scuss1on and Analysis However, m future years, when pnor period mformation 1s available, a comparative analysis will be presented.

Statement ofNet Assets

The Statement ofNet Assets presents the assets, hab1ht1es, and net assets ofthe Umvers1ty as ofthe end of the fiscal year The Statement of Net Assets 1s a pomt of time financial statement. The purpose ofthe Statement ofNet Assets 1s to present to the readers ofthe financial statements a fiscal snapshot of Georgia Southern Umvers1ty. The Statement of Net Assets presents end-of-year data concerning Assets (current and non-current), L1ab1ht1es (current and non-current), and Net Assets (assets mmus hab1httes) The dJ.fference between current and non-current assets will be dJ.scussed m the notes to the financial statements

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From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations ofthe institution They are also able to determine how much the inst1tut10n owes vendors, mvestors and lending mslltullons

Finally, the Statement ofNet Assets proVJdes a picture of the net assets (assets minus hab1hhes) and their ava1labihty for expenditure by the inshtullon. Net assets are d1v1ded into three maJor categones. The first category, invested in capital assets, net ofdebt, provides the institution's eqwty m property, plant and eqwpment owned by the inslltullon The next asset category 1s restncted net assets, winch 1s d1v1ded mto two categones, nonexpendable and expendable The corpus of nonexpendable restricted resources 1s only available for mvestrnent purposes Expendable restricted net assets are available for expenditure by the msl!tullon but must be spent for purposes as determmed by donors and/or external enl!lles that have placed llme or purpose restnctions on the use of the assets The final category 1s unrestncted net assets Unrestncted assets are available to the mstJtuhon for any lawful purpose of the 1nst1tullon.

Statement of Net Assets, Condensed (thousands of dollars)

Assets Current Assets Capital Assets, Net Other Assets

$ 28,994 134,685 5,304

Total Assets

$168,983

Liabilities Current L1ab1h11es Non-Current Liab1hties

$ 11,101 3,613

Total Liabilities

$ 14 714

Net Assets Invested m Capital Assets, Net of Debt Restncted - Nonexpendable Restncted - Expendable Unrestncted

$132,048 2,224 3,737 16,260

Total Net Assets

$154.z.6,2

Statement ofRevenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement ofRevenues, Expenses and Changes in Net Assets The purpose of the statement is to present the revenues received by the 1nslltut1on, both operatmg and nonoperatmg, and the expenses paid by the mslltullon, operatmg and nonoperatmg, and any other revenues, expenses, gains and losses received or spent by the 1nslltullon Generally spealang operating revenues are received for prov1dmg goods and services to the various customers and constituencies of the

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institution Operating expenses are those expenses paid to acqmre or produce the goods and services provided in return for the operating revenues, and to carry out the m1ss10n of the institution Nonoperating revenues are revenues received for wluch goods and services are not provided For example state appropnat1ons are nonoperaung because they are proVIded by the Legislature to the institution without the Legislature directly rece1V1ng commensurate goods and services for those revenues

Statement of Revenues, Expenses and Changes in Net Assets, Condensed (thousands of dollars)

Operating Revenues Operaung Expenses

$ 70,982 150,015

Operating Loss

$ -79,033

Nonoperating Revenues and Expenses

83,073

Increase m Net Assets

$ 4040

Net Assets at Begmrung of Year, as Onginally Reported

$273,743

Cumulative Effect of Changes in Accounting Pnnc1ple

-123,514

Net Assets at Beginrung of Year Restated

$150,229

NetAssetsatEndofYear

$ 154.269

The Statement of Revenues, Expenses and Changes in Net Assets reflects a positive year with an increase in the net assets at the end ofthe year Some h1ghhghts ofthe mformatlon presented on the Statement of Revenues, Expenses and Changes m Net Assets are as follows

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Revenue By Source (thousands of dollars) For The Year Ended June 30, 2002
Operating Revenue Tm!ion and Fees Grants and Contracts Rents and Royalties Sales and Services of Educational Departments Aux1hary Other
Total Operating Revenue
Nonoperatlng Revenue State Appropnat10ns Grants and Contracts Investment Income
Total Nonoperatlng Revenue
Total Revenues
Expenses (thousands of dollars) For The Year Ended June 30, 2002
Operating Expenses Instruction Research Public Service Acadermc Support Student Services Insutut1onal Support Plant Operations and Mamtenance Scholarslups and Fellowslups Aux1hary Enterpnses Deprec1at1on
Total Operating Expenses
Nonoperatmg Expenses Interest Expense (Capital Assets} Other
Total Nonoperatlng Expenses
Total Expenses
-5 -

$ 28,612 I 0,055 53 957 30,413 892
$ 70,982
$ 79,217 4, I00 673
$ 83,990
$154.972
$ 56,011 1,826 2,186 9,893 11,442 15,544 14,121 4,187
26,915 7,890
$150,015
$ 148 770
$ 918
$150.933

Statement of Cash Flows

The final statement presented by Georgia Southern Umvers1ty 1s the Statement of Cash Flows The Statement of Cash Flows presents detailed mformauon about the cash activity of the mslitutlon dunng the year The statement 1s d1V1ded mto five parts The first part deals with operatmg cash flows and shows the net cash used by the operatmg acliv111es of the mslitut1on The second section reflects cash flows from non-capital financmg act1v1t1es Tills section reflects the cash rece1Ved and spent for nonoperatmg, non-mvestlng, and non-capital financmg purposes The thud section reflects the cash flows from mvestmg acliV1tles and shows the purchases, proceeds, and mterest received from mvestlng actlV!lies The fourth section deals with cash flows from capital and related financmg acliV1tles. Tills section deals with the cash used for the acqu1s1t1on and construclion of capital and related items The fifth sectJon reconciles the net cash used to the operating mcome or loss reflected on the Statement of Revenues, Expenses and Changes m Net Assets

Cash Flows for the Year Ended June 30, 2002, Condensed (thousands of dollars)

Cash ProV1ded (Used) By OperatJng Acliv1tJes Non-Capital Fmancmg Activities Investing ActJV1lles Capital and Related Fmancmg Act1V1t1es

$ -72,102 80,798 816 -10,155

Net Change m Cash Cash, Beginnmg ofYear
Cash, End of Year
Capital Assets

$ -643 19,353
$ I 8.710

The Umvers1ty had one s1gmficant capital asset fac1hty adchtJon and renovation m fiscal year 2002 The Nessmith-Lane Contlnwng Educallon Bullchng 1s a state of the art conference and performmg arts facility. The proJect added I 05,030 square feet to the existing 28,713 square foot fac1hty The new section mcludes an 850-seat performmg arts center, a 600-seat mullipurpose room and add11ional meetmg rooms It 1s one of the largest fac1htles of its kmd m Southeast Georgia The fac1hty 1s used to mcrease learmng opportumtJes to all ages and bnng high-quality cultural programmmg to the region Construction ofthe $21,744,340 fac1hty was completed and placed mto service early m Fiscal Year 2002.

Georgia Southern Umvers1ty began construction of two maJor 1nstruclional fac1hlies dunng Fiscal Year 2002. The Science and Nursmg Bwldmg and the School oflnformat1on Technology Bmldmg are scheduled for completion dunng Fiscal Year 2003 Construction ofthese fac1ht1es 1s funded by the Georgia State Fmancmg and Investment Comrmss10n (GSFJC), m amounts of$24,921,720 and $33,000,000, respecllvely Major renovations are progressmg on the MarV!n Pittman Fme Arts building, winch 1s funded by the GSFIC with a proJect budget of$4,228,000

For add1tJonal mformalion concermng Capital Assets, see Notes I, 6, 8, and 9 m the notes to the financial statements.

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Economic Outlook The Umvers1ty hke all other uruts of the Uruvers1ty System of Georgia and other agencies of the State of Georgia 1s facmg reductions m state appropnated funds due to the national and state economic down turn Georgia Southern 1s m a good position to face the challenges of budget reductions due to record mcreases m enrollment Increased enrollment coupled with lugher retention rates provides potential for mcreased, sustamed mtemal revenue. The Umvers1ty's overall financial position 1s strong Even with a relallvely flat funded year, the Umvers1ty was able to generate a modest mcrease m Net Assets The Umvers1ty anticipates the current fiscal year WIii be much hke last and will mamtam a close watch over resources to mamtam the Umvers1ty's ab1hty to react to unknown mternal and external issues. Bruce F Grube, President Georgia Southern Umvers1ty
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BASIC FINANCIAL STATEMENTS -9-

GEORGIA SOUTHERN UNIVERSITY STATEMENT OF NET ASSETS JUNE 30 2002
ASSETS
Current Assets Cash and Cash Equivalents Short-Tenn Investments Accounts Recewable, Net Federal Financial Assistance Other Prepaid Items lnverrtones
Total Current Assets
Noncurrent Assets Cash and Cash Equwalents Investments Notes Receivable, Net Capital Assets, Net (See Noto 6)
Total Noncurrerrt Assets
Total Assets
LIABILITIES
Currerrt L1ab1lrties Contracts Payable Salanes Payable Payroll Wrthhold1ngs Accounts Payable Deferred Revenue Funds Held for Olhers Capital Leases Compensated Absences
Total Currerrt LJab1lrties
Noncurrent l.labllrties Caprtal Leases Compensated Absences
Total Noncurrent L1ab1hbes
Total l.Jabllrties
NET ASSETS
Invested m Caprtal Assets, Net of Related Debt Restncted for
Nonexpendable Expendable Unrestncted
Total Net Assets
The notes to the finanoal statements are an Irrtegrel part of 1h15 statement - 11 -

EXHIBIT"A"

$ 18,564,942 13 78,472 55
1,171,98363 5,17046637 2,316,144 05 1692411 34
$ 28,994,420 07

$

145,416 51

2,086,202 10

3,072,402 69

134,684,587 63

$ 139,988,60B 93

$ 168,983,029 00

$

356,515 79

302,71076

539,651 76

728,12564

5,823,244 22

680,404 46

66,06410

2,604,372 47

$ 1110108920

$

2,570,439 96

1,042,722 51

$

3 613 162 47

$ 14,714,251 67

$ 132,048,083 57 2,224,296 69 3, 736,705 64 16,259,691 43
$ 154,268,7TT 33

GEORGIA SOUTHERN UNIVERSITY STATEMENT OF REVENUES EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30 2002

EXHIBIT"B"

OPERATING REVENUES
Student Tu1bon and Fees Less Scholarship Allowances
Gcants and Contracts Federal
Rents and Royallles Sales and Services of Educabonal Departments A"'ahary Enlerpnses
Residence Halls Bookstore Food Services Parlung/Transportabon Health Services lnteroolleglBta Athlebcs Other Organ,zallOns Other Operabng Revenues
Total Operabng Revenues
OPERATING EXPENSES
Salanes Faculty Staff
Employee Benefits Other Personal SelVIC88 Travel Scholarsh,ps and Fellowships Ubhbes Suppl1BS and Other Services Depreciation
Total Operabng Expenses
Operallng tnccme (Losa)
NONPPERATING REVENUES {EXPENSES)
State Appropnatlons Gcants and Contracts
Federal State Local Nongovernmental Gifts Interest and Other Investment lnccme lnteres1 Expense (Gaprtal Assets) Other Nonoperabng Expenses
Net Nonoperabng Revenues
lnaeasa/(Deaaasa) In Net Assets
Net Assets Net Assets - Beg1nn1ng of Year, as Ongmally Reported Cumulative Effecl of Changes In Acco\lnbng Pnnaple
Net Assets - Beg1nn1ng of Year Rastated

$ 34,361,869 73 -5,750,291 91
10,055,110 29 52 71315
957,032 10
7,014 492 87 7,753,849 80 6,102,082 80
938,120 85 2,114,034 56 5,799,813 27
691,19486 891 719 25
$ 70 981 741 62

$ 35,396,150 67 43,833,399 01 21,317,167 69 24,230 62 1,486,955 38 6,580,049 79 4,972,393 03 28,515,181 30 7,889,688 05
$ 150 015 215 54
$ -79,033,473 92

$ 79,217,423 78

2,483,444 96 684,209 31 43,005 00 889,588 97 400 18 672,692 32 -148,276 50 -769 626 55

$ 83 072 861 47

$

4 039 387 55

$ 273,743,524 70 -123,514, 134 92
$ 150,229,389 78

Net Assets - End of Year
The notes to the finanaal statements are an Integral part of ttus statement - 12 -

$ 154 268 777 33

GEORGIA SOUTHERN UNIV'ERSlJY STATEMENT OE CASH FLOWS YEAR ENPEP JUNE 30 2002

CASH FLOWS FROM OPERATING ACTIVITIES Tullron and Fees
Sa.,. Grants and Contracts and Services of Educebonal ~ I I Payments to SupplleB Payments to Employees Paymon1o for Scholor,h,ps and Followshrps
-Loans Issued to Students and Employeea
Collocbon of Loons to Studonts and Employees
Awolia,y Enle'l>'Ge Charges -Halls
FoodSe...Por1c,ng/Transportat,on HoellhSorvlces
lnten:ollogoata Athlotk;a Other D,vonWlbonl Other Rooo,p!I (Payments)

---Not Cash Pn>vldod (Used) by 0porat,ng Actlvltiol
CASH FLOWS FROM NONCAPTTAL FINANCING ACTIVITIES
...,.,..,, Funds TransacbOns Gifts and Granto ROOOM>d for Other than Cap,tal Purposes

Net Cash FlowS Ptovldod (UNd) by Nonclpltal F"'""""g Ac1Mbos

CASH FLOWS FROM CAPITAL AND RElATED FINANCING ACTIVITIES

Purchaaes of Cap,lal AsNta Pnnapol P1lld on Cap,tal Debt and , . _

-

Pmd on Cap,tal Debt and , . _

Not Cash Provided {UNd) by C.Opul and Roloted Fnrang Ac1Mbos

CASH FLOWS FROM INVESTING ACTMTIES

1 . - lntetNI on tnvellments

Purt:haaoslSaln of

(Net)

Not Cash Pn>v,dod (u.ed) by lnvostr,g AdM1la

Net -([lecruao) In Cash

Cash and Cash EquMllantS J\r,o 30 2001 LN8 Short-Tern, Investments

Cash and Cash EqUIVOlon1S - Boginrung of Year

Cash and Cash E ~ End of Year

RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTMTIES
Open,11ng lne0mo (Loss) Adjustmerm, to Roccnalo Net lnccme (Lou) to Nol Cash
Pn>v,dod (UIIOd) by Opermr,g ,.,,,._
--"""'"' Dep,&Cicibon
Chango ., Asoall and ~
Ao:oun1s - - Not
Notes Rec:ervablet, Net Accounta Payable Salaries Payable
~ - . . . . Dolol19dRavenuo

Not Cash Prowled (Uood) by Opomng AdMooo
The notes to the ftnanaal atatementa.,. n Integral pert of this statement
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EXHIBIT "C"

s 29 299 922 13
9,960 705 12 926 538 58
-57,553 605 23 -79 -467,441 85
-6 580,CM9 79 -76009312 617 369 64
1031885 n
7,923 234 53 6,137 553 27
938 120 155 2,126,022 29 5 665,036 '1
1182,769 37 ~ 432 .4Q
s -72 101 599 63

s 79,217-423 78
-1,332 654 39
2913 59079
s 80 798,360 18

s -9,931 an 43
-75 012 16 -US 276 50
s -10 155 166 09

s

838 seo ,49

-23 060 7,4

s

815 -499 75

s

-641280579

s 21 653,800 66
-2 300 536 23

s 19 353 264 -43

s HI 710 358 84

$ -79,033,-473 92
7 889 688 05
143 643 80 199 032 88 -236,888 68 -142 723 48 -1393168 41 -132 272 34 516 835 30
87 725 19
,o, s -12 599 e3

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATORE OF OPERATIONS Georgia Southern University serves the state, and natJonal commumlles by providing its students with acadermc instruction that advances fundamental knowledge, and by d!ssernmatmg knowledge to the people of Georgia and throughout the country
REPORTING ENTITY Georgia Southern Uruversity is one ofthrrty-four (34) State supported member mslitutlons oflugher educalion m Georgia which compnse the Uruvers1ty System ofGeorgia, an orgaruzalional urut ofthe State ofGeorgia The accompanymg financial statements reflect the operations ofGeorgia Southern Umvers1ty as a separate reportmg enlity
The Board of Regents has conslitulional authonty to govern, control and manage the Uruvers1ty System ofGeorgia This authonty mcludes but 1s not hm1ted to the power to deSJgnate management, the ab1hty to s1gruficantly mfluence operations, the authonty to control inst1tulions' budgets, the power to determme allotments of State funds to member mslitu!Jons and the authonty to prescnbe accounling systems and adnurustralive pohc1es for member mslitutlons. Georgia Southern Umvers1ty does not have authonty to retam unexpended State appropnations (surplus) for any given fiscal year Accordmgly, Georgia Southern University 1s considered an orgaruzalional urut of the Board of Regents of the University System of Georgia reportmg entity for financial reportmg purposes because of the s1gruficance of its legal, operatJonal, and financial relat10nslups with the Board of Regents as defined m Section 2100 of the Governmental Accountmg Standards Board (GASB) Codifica!Jon of Governmental Accountmg and Fmancial Reporting Standards.
F1NANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management D1scuss1on and Analysisfor State and Local Governments. This was followed m November 1999 by GASB Statement No 35, Basic Financial Statements and Management's Discussion and Analysis for Pubhc Colleges and Universities. The State of Georgia 1s reqmred to implement GASB
Statement No 34 as of and for the year ended June 30, 2002. As an orgaruzatJonal unit of the State
of Georgia, the Uruversity is also reqmred to adopt GASB Statements No. 34 and No 35 as amended by GASB Statements No 37 and No. 38. The financial statement presentation reqmred by GASB Statements No. 34 and No 35 as amended by GASB Statements No 37 and No. 38 proVIdes a comprehensive, entity-wide perspective of the Uruvers1ty's assets, hab1ht1es, net assets, revenues, expenses, changes m net assets, cash flows, and replaces the fund group perspective previously required
The Uruversity has elected to not restate its 2001 financial statements to conform with the new financial statement presentation, therefore comparative financial mfonnallon will not be presented for fiscal year 2002. S1gmficant accounting changes made m order to comply with the new reqwrements include (I) adopllon of deprec1alion on capital assets; and (2) recognition of compensated absences. Generally Accepted Accountmg Pnnc1ples (GAAP) requues that the
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GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION reportmg ofsummer school revenues and expenses be between fiscal years rather than m one fiscal year Due to the lack ofmatenahty, Institutions ofthe Uruvers1ty System ofGeorgia Will continue to report summer revenues and expenses m the year m which the predommate actlVlty takes place
At June 30, 2001, encumbrances (contractual obhgatlons for goods and semces not received at fiscal year end) were recorded as expenditures by the Uruvers1ty instead of reservations of fund balance as reqwred by generally accepted accounting pnnc1ples. For fiscal year 2002, the Uruvers1ty changed its method ofrecording encumbrances such that encumbrances at June 30, 2002 were not recorded as expenses. This change 1s m accordance With generally accepted accountmg pnnc1ples
No adJustments however, have been made on the financial statements to restate the fund balance at July 1, 2001 for the June 30, 2001 encumbrances recorded as expenditures in fiscal year 2001 The net effect of the above accountmg treatment resulted in an understatement of expenses on the accompanying financial statements for pnor year encumbrances which should have been reflected as expenses m the penod when goods and serVIccs were received.
BASIS OF ACCOUNTING For financial rcportmg purposes, the Uruvers1ty IS considered a special-purpose government engaged only m business-type actlV1tles Accordingly, the Uruvers1ty's financial statements have been presented usmg the econormc resources measurement focus and the accrual basis of accountmg, except as noted in the preceding paragraphs. Under the accrual basis, revenues are recogruzed when earned, and expenses are recorded when an obligation has been mcurred All s1gruficant intraun1vers1ty transactions have been eluninated.
The University has the option to apply all Fmanc1al Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts With GASB. The Umvers1ty has elected to not apply FASB pronouncements issued after the apphcable date.
RESTATEMENT OF NET ASSETS - BEGINNING OF YEAR As a result of the adoption of GASB Statement No. 34, the Umvers1ty was also required to make certain changes in accounting pnnc1ples, specifically (l) adoption ofdepreciation on capital assets, and (2) recording of compensated absences GASB Statement No 34 reqmres certam summer semester revenues be recogruzed between fiscal years rather than the fiscal year m which the semester was predominantly conducted The Uruvers1ty System ofGeorgia has chosen to contmue to record summer revenue in the year in which the semester was predommantly conducted Net assets at July 1, 2001 were reduced by $123,514,134.92 for the cumulattve effect of these changes

- 16 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS/SHORT-TERM INVESTMENTS Cash and Cash Equivalents consist ofpetty cash, demand deposits and ttme deposits m authonzed financial mslltullons, and cash management pools that have the general charactensllcs of demand deposit accounts.
INVESTMENTS The Uruvers1ty accounts for its mvestments at farr value m accordance with GASB Statement No 31, Accounting and Financial Reportingfor Certain Investments andfor External Investment Pools. Changes m unrealized gam (loss) on the carrymg value ofmvestments are reported as a component ofmvestment income m the statements of revenues, expenses, and changes m net assets.
ACCOUNTS RECEIVABLE Accounts receivable consists oftwllon and fee charges to students and aux1hary enterpnse services provided to students, faculty and staff, the maJonty of each res1dmg in the State of Georgia. Accounts receivable also mclude amounts due from the Federal government, state and local governments, orpnvate sources, m connection with rermbursement ofallowable expenditures made pursuant to the Uruvers1ty's grant and contracts Accounts receivable are recorded net of estimated uncollecllble amounts
INVENTORIES Consumable supphes are recorded on the consumpllon method and are valued at cost usmg the weighted average method
Resale Inventones are valued at cost usmg the first-m, first-out method
PREPAID ITEMS Prepaid items are payments made to vendors/employees m advance of the receipt of goods and services that will benefit penods subsequent to the balance sheet date.
NON-CURRENT CASH AND INVESTMENTS Cash and investments that are externally restncted and cannot be used to pay current hab1httes are classified as non-current assets m the statements ofnet assets
CAPITAL ASSETS Capital assets are recorded at cost at the date of acqws1tton, or fair market value at the date of donation in the case ofgifts For equipment, the Uruvers1ty's cap1tahzatton pohcy includes all items with a urut cost of $5,000.00 or more, and an estrmated useful hfe of greater than one year Renovations to bwldings and fac1h11es and other improvements that exceed $100,000 00 and s1gmficantly increase the value or extend the useful hfe of the structure are cap1tahzed Infrastructure that exceeds $1,000,000 00 and s1gruficantly mcreases the value or extends the useful hfe ofthe structure 1s cap1tal1zed Routine repairs and maintenance are charged to operating expense
- 17 -

GEORGIA SOUTHERN UNNERSm'
NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS in the year in winch the expense was incurred Deprec1at10n 1s computed using the straight-line method over the estimated useful hves of the assets, generally 40 to 60 years for buildings, 20 to 25 years for mfrastructure and facilities and other improvements, 10 years for library books, and 3 to 7 years for equipment.
To obtam the total picture of plant additions m the UruvCTS1ty System, 111s necessary to look at the
activities ofthe Georgia State Fmancing and Investment Comrruss1on (GSFIC)- an organization that 1s external to the System. GSFIC issues bonds for and on behalfofthe State of Georgia, pursuant to powers granted to it in the Constitution ofthe State ofGeorgia and the Act creating the GSFIC. The
bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of
winch the full fiuth, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the
construction penod and transfers the entire project to Georgia Southern Umvers1ty when complete The balance ofconstruction in progress reta.med by GSFIC totaJed $18,103,214.05 at June 30, 2002
DEFERRED REVENUES Deferred revenues mclude amounts received for tmt1on and fees and certam aux1hary actlVJbes pnor to the end of the fiscal year but related to the subsequent accounting penod
COMPENSATED ABSENCES Employee vacation pay 1s accrued at year-end for financial statement purposes The hab1lity and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense m the Statements of Revenues, Expenses, and Changes in Net Assets Georgia Southern Umvers1ty had accrued hab1hty for compensated absences m the amount of$3,559,369 79 as of July l, 2001 For Fiscal Year 2002, $2,692,097 66 was earned m compensated absences and employees were paid $2,604,372.47. for a net mcrease of$87,725.19
NON-CURRENT LIABILITIES Non-current hab1ht1es mclude (!) hab1ht1es that Will not be paid withm the next fiscal year; (2) capital lease obligations With contractual matuntles greater than one year; and (3) other liab1ht1es that, although payable Within one year, are to be paid from funds that are classified as non-current assets.
NET ASSETS The Uruvers1ty's net assets are classified as follows

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GEORGIA SOUTHERN UNNERsm NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE l SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS Invested in capital assets, net ofrelated debt This represents the Umvers1ty's total mvestment m capital assets, net of outstandmg debt obligations related to those capital assets To the extent debt has been mcurred but not yet expended for capital assets, such amounts are not mcluded as a component ofmvested m capital assets, net ofrelated debt. (The term "debt obligations" as used m tins defimtlon does not mclude debt of the GSFIC as discussed above )
Restncted net assets - nonexpendable Nonexpendable restncted net assets consist of endowment and s1m1lar type funds m winch donors or other outside sources have stipulated, as a condition ofthe gift mstrument, that the pnncipal 1s to be mamtamed mV1olate and m perpetuity, and mvested for the purpose of producmg present and future mcome, winch may either be expended or added to pnnc1pal The Umvers1ty may accumulate as much ofthe annual net mcome of an mstltuUonal fund as 1s prudent under the standard established by Code Section 44-I 5-7 ofAnnotated Code ofGeorgia.
Restncted net assets - expendable Restncted expendable net assets mclude resources m wluch the Umvers1ty 1s legally or contractually obligated to spend resources m accordance with restnctlons imposed by external tlurd parties.
Unrestncted net assets Unrestncted net assets represent resources denved from student tuition and fees, state appropnatlons, and sales and services of educational departments and auxiliary enterpnses. These resources are used for transactions relatmg to the educational and general operations of the Umvers1ty, and may be used at the discretion of the governmg board to meet current expenses for those purposes, except for unexpended state appropnatlons (surplus) of $13,309.60 Unexpended state appropnatlons must be refunded to the Board of Regents of the Umvers1ty System of Georgia - AdrmmstraUve Central Office for rermttance to the Office of Treasury and Fiscal S=ces. These resources also mclude auxiliary enterpnses, which are substantially self-supporting activities that proV1de services for students, faculty and staff
When an expense 1s mcurred that can be paid usmg either restncted or unrestncted resources, the Umvers1ty's policy 1s to first apply the expense towards unrestncted resources, and then towards restncted resources.
INCOME TAXES Georgia Southern Umvers1ty, as a poliucal subd1v1s1on of the State of Georgia, 1s excluded from Federal mcome taxes under Section 115(1) of the Internal Revenue Code, as amended
CLASSIFICATION OF REVENUES The Umvers1ty has classified its revenues as either operatmg or non-operatmg revenues m the Statement of Revenues, Expenses, and Changes m Net Assets according to the followmg cntena

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GEORGIA SOUTHERN UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE I: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CLASSIFICATION OF REVENUES Operating revenues Operatmg revenues mclude act1v1t1es that have the charactens!Jcs ofexchange transactions, such as (I) student tuition and fees, net ofscholarslup allowances, (2) sales and services of aux1hary enterprises, (3) most Federal, state and local grants and contracts and Federal appropnations, and (4) mterest on mstltutJonal student loans
Non-operating revenues Non-operating revenues mclude actlVItles that have the charactenSl!cs of non-exchange t:ransacllons, such as gifts and contnbut1ons, and other revenue sources that are defined as non-operatmg revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entitles That Use Propnetary Fund Accounting, and GASB No 34, such as state appropnatJons and mvestment mcome
SCHOLARSHIP ALLOWANCES Student twtlon and fee revenues, and certam other revenues from students, are reported at gross with a contra revenue account of scholarslup allowances m the Statement of Revenues, Expenses and Changes m Net Assets. Scholarslup allowances are the difference between the stated charge for goods and services proVIded by the Umvers1ty, and the amount that 1s paid by students and/or third parties makmg payments on the students' behalf. Certam governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operallng or nonoperallng revenues m the Umvers1ty"s financial statements To the extent that revenues from such programs are used to satJ.sfy twllon and fees and other student charges, the Umvers1ty has recorded contra revenue for scholarship allowances.
NOTE 2: CASH AND CASH EOUNALENTS: OTIIBR DEPOSITS: AND INVESTMENTS
STATE OF GEORGIACOLLATERALIZATION STATUTES AND POLICIES Funds belonging to the State ofGeorgia (and thus Georgia Southern Umvers1ty) cannot be placed m a depository pa)'lng mterest longer than ten days without the depository providing a surety bond to the State In heu of a surety bond, the depository may pledge as collateral any one or more of the following secuntles as enumerated m the Official Code of Georgia Annotated Section 50-17-59
I. Bonds, bill, certificates ofmdebtedness, notes, or other direct obhgatlons ofthe Umted States or of the State of Georgia.
2 Bonds, bills, certificates of mdebtedness, notes, or other obligations of the coun!Jes or mumc1pal11Ies of the State of Georgia
3. Bonds ofany pubhc authonty created by the laws ofthe State ofGeorgia, prov1dmg that the statute that created the authonty authonzed the use of the bonds for tlus purpose

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GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE 2 CASH AND CASH EOUNALENTS. OTHER DEPOSITS. AND Il\'VESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES 4 Industrial revenue bonds and bonds of development authont1es created by the laws of the State of Georgia

5. Bonds, bills, certificates of indebtedness, notes, or other obhgat1ons of a subs1d1ary corporation ofthe Umted States government, winch are fully guaranteed by the Umted States government both as to pnnc1pal and interest, or debt obhgattons issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperattves, the Farm Credit Banks, the Federal Home Loan Mortgage Associatton, and the Federal Nattonal Mortgage Assoc1atton.

6 Guarantee or insurance ofaccounts provided by the Federal Deposit Insurance Corporation

As authonzed in the Official Code of Georgia Annotated Sectton 50-17-53, the State Depository Board has adopted pohc1cs winch allow agencies ofthe State ofGeorgia (and thus Georgia Southern Umvers1ty), the optton of exempttng demand deposits from the collateral requtrements

The Treasurer ofthe Board ofRegents 1s responsible for all details relattve to furmshmg the reqmred depository protectton for all units of the Umvers1ty System of Georgia.

CATEGORIZATION OF DEPOSITS The Umvers1ty's cash deposits are categonzed by nsk as follows

Category I - Amounts covered by deposllory insurance or collaterahzed with secunttes (at fatr value) held by the Umvers1ty or by its agent in the Umvers1ty's name.

Category 2 - Amounts collaterahzed with secunttes (at fau value) held by the pledging financial tnslltutton's trust department or agent in the Umvers1ty's name

Category 3 - Amounts collaterahzed with secunt1es (at fwr value) held by the pledging fmanc1al instttutton, or by its trust department or agent but not in the Umvers1ty's name, and amounts uncollateral1zed

Cash Deposits as of June 30, 2002 are as follows.

CashDepos,ts

Carrying
Amount

Bank
Balances

Risk Catesoaes

Sl859561874 S1692629204 S 40000000 S 40000000S)612629704

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GEORGIA SOUTHERN UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 2: CASH AND CASH EQUIVALENTS. OTHER DEPOSITS. AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS The carrymg amounts of mvestment balances as of June 30, 2002, are as follows

Type of Investment

Board ofRegents Short-Term Investment Fund Total Return Fund
Life Insurance Pohcy (Cash S111Tender Value)
Total Investments

$ 41,017 71 2, I I 6,335 02 7,321 92
$ 2,164,674,65

Funds invested m an mvestment pool managed by another governmental entity are not reqwred to be categonzed smce the Umvers1ty dtd not own any specific, 1dent:1fiable investment secunttes of the pool.

NOTE 3 ACCOUNTS RECEIVABLE

Accounts receivable consisted ofthe following at June 30, 2002

Student Twt1on and Fees Aux1hary Enterprises and Other Operating Acttvittes Federal, State, and Pnvate Funds Other

$ 249,940.28 917,205 86
3,888,267.42 1,338,152 86

$ 6,393,566.42

Less Allowance for Doubtful Accounts

51,116 42

Net Accounts Receivable

$ 6.342 450.00

NOTE 4 INVENTORIES

lnventones consisted of the followmg at June 30, 2002
Bookstore Food Services Physical Plant Other
Total

S 1,204,938 68
232,953 37 212,719.52
41 799 77
S 1,692,411,34

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GEORGIA SOUTHERN UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 5 NOTES/LOANS RECEIVABLE

Notes/Loans receivable at June 30, 2002, pnmanly consist ofstudent loans made through the Federal Perkms Loan Program (the Program) The Program proVJdes for cancellation of a loan at rates of I0% to 30% per year up to a max1mum of I 00% if the part1c1pant comphes with certam prov1swns The Federal government reimburses the Umvers1ty for amounts cancelled under these prov1swns As the Umvers1ty determines that loans are uncollect1ble and not ehgible for reimbursement by the Federal government, the loans are wntten offand assigned to the U S. Department ofEducanon At June 30, 2002 the Umvers1ty has no allowance for uncollecnble loans

NOTE 6 CAPITAL ASSETS

The balance at July I, 2001 was adJusted for accountmg changes required m 1mplementmg GASB Statements 34 and 35 as disclosed m Note I. Following are the changes m capital assets for the year ended June 30, 2002

AdJustcd
Balance
Julr 1, ioo1

Add1mms

B~1ui:nans

Balance
Jyn~ JQ, 222i

Cap1Ial Assets, Not Bemg Depreciated

Land and Land Improvements

s I 862,841,20

$ I 862,841 20

Capital Assets, Bemg Depreciated Infrastructure Butldmg and Bu1ldmg Improvements Fac1httcs and Other Improvements Equipment
Capital Leases
Library Collecnons Cap1Ial1zcd Collections

S 13,311,925 00 I84.494, I73 00 173,756 20
16,882,672 51 s
33.543 00 28, I20,289 25
0,00

s
1,656,2 I 8 23 21,851 76
1,340,353 32
I QQQ ll!!

S 13,311,925 00 22,.50200 184,471,671 00
173,756 20 1,268,505 23 17,270,385 51
55,394 76 17,519 00 29,443,123 57
I QQQ ll!!

si4J 216.J~S 26 s J,QIHiJ JI $ I JQ8,~i6 ZJ S244,7n J~6 Q,!

Less Accumulated Dcprectatton

Infrastructure

S 10,570,72704 S

Bu1ld1ngs and Building Improvements 59,900,659 50

Fac1httes and Other Improvements

8,323 11

Equipment

11,748,983 79

Cap1Ial Leases

21,311 99

Library Collect1ons

22,304,715 81

Cap1tahzed Collecnons

Qll!!

304,638 62
4,739,980 45 s 3,220 11 1,625,522 83
23,852 04 1,192,474 00

SJ!!,! SH,721.24 s 1652.~65 os S

S I0,875,365 66 17,259 72 64,623,380 23
I 1,543 22 504,120 96 12,870,385 66
45,164 03 17..519 00 23,479,670 81
Ql!Q
SJU226~ s111 2os.~02 6J

Total Cap1Ial Assets, Bemg Depreciated,

Net

S\38 46) 631 ]2 S -4 810 26414 S

Capital Assets, Net

$)40 324 478 92 s 870 264 74 S

s, 762,626 SD2,82J,746 43
769 626 55 s134 684 587 63

NOTE7 DEFERRED REVENUE

Deferred revenue consisted of the followmg at June 30, 2002:

- 23 -

GEORGIA SOUTHERN UNNERSITY
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 7 DEFERRED REVENUE

Prepaid Twt1on and Fees Other Deferred Revenue

S 5,803,270 66 19 973 56

Totals NOTE 8 LONG-TERM LIABILITIES

$ 5.823 24422

Long-term hab1hty actIVJty for the year ended June 30, 2002, was as follows

Leases Lease Obhg11t1ons
Other Llabnhbes Compensated Absences
Total Long-Term Obhgatrons

Balance
July I, 200!
s 21,515 71
J.:i~2 l~212
s J~i! 88~ ~g

AckhtlODS
s 2,690,000 51
2~2i,!12M~
s ~ l82 i!28 IZ

Rcducuons
s 75,012 16
H!M Hi41
s 2~z~ l~ 6J

Balance
June 30 2002
s 2,636,504 06
J ~1094 2S
s 6 2J ~22 UJ

Current
Pomon
s 66,064 10
2 ~!M Hi ~7
s 2 ~zu ~J~ ~z

Georgia Southern Uruvers1ty had s1gmficant unearned, outstandmg, construction or renovation contracts executed m the amount of$3, 144,223 86 as ofJune 30, 2002 Tlus amount 1s not reflected m the accompanymg basic financial statements

NOTE 9: LEASE OBLIGATIONS

CAPITAL LEASES Capital leases are generally payable m mstallments ranging from monthly to annually and have terms expmng m vanous years between 2003 and 2005. Expenses for fiscal year 2002 were $223,288 66 ofwh1ch $148,276.50 represented mterest Total pnnc1pal paid on capital leases was $75,012 16 for the fiscal year ended June 30, 2002 Interest rates range from 5.5 percent to 9 87 percent The followmg 1s a summary of the carrymg values of assets held under capital lease at June 30, 2002

Bu1ldmgs

$ 4,547,708.32

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain pnces of one dollar are exercisable at the exprratlon of the lease terms

Georgia Southern Uruvers1ty had one capital lease with related entitles m the current fiscal year In March 1995, Georgia Southern Uruvers1ty entered mto a capital lease of$3,000,000 00 at 5 5 percent with the Georgia Education Authonty, a party external to the system, whereby the Umvers1ty leases a bmldmg for a tlurty-year penod that began March 1995 and explfes February 2025 The outstandmg hab1hty at June 30, 2002, on the capital lease 1s $2,63 I ,84 I 60

- 24 -

GEORGIA SOUTHERN UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 9 LEASE OBLIGATIONS

CAPITAL LEASES Georgia Southern Umvers1ty also has vanous capital leases for eqmpment with an outstandmg balance at June 30, 2002 m the amount of$4,662 46

SUMMARY OF LEASE OBLIGATION Future commitments for capital leases (wluch here and on the Statement ofNet Assets mclude other mstallment purchase agreements) havmg remammg terms m excess ofone year as ofJune 30, 2002, were as follows.

Capital Leases

Year Ending June 30: 2003 2004 2005 2006 2007 2008 through 2012 2013 through 2017 2018 through 2022 2023 through 2027

$ 210,144.32 205,320.10 205,320.10 205,320.10 205,320 10
1,026,600.50 1,026,600.50 1,026,600 50
513.300 61

Total Mm1mum Lease Payments

$ 4,624,526.83

Less Interest

1.988.022. 77

Prmc1pal Outstandmg NOTE 10 RETIREMENT PLANS

$ 2.636.504.06

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Georgia Southern Uruvers1ty part1c1pates m the Teachers Retrrement System of Georgia (TRS), a cost-shanng multtple-employer defined benefit pension plan estabhshed by the General Assembly of Georgia for the purpose of prov1dmg rellrement allowances and other benefits for teachers of the State of Georgia TRS provides service retirement, d1sab1hty rellrement, and survivor's benefits for its members m accordance With State statute The Teachers Rellrement System of Georgia issues a separate stand alone financial audit report and a copy can be obtamed from the Georgia Department of Audits and Accounts .

- 25 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 10 RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Funding Policy Employees of Georgia Southern Uruvers1ty who are covered by TRS are reqwred by State statute to contnbute 5% ofthe1r gross earrungs to TRS Georgia Southern University makes monthly employer contnbutlons to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by the1r independent actuary For fiscal year 2002, the employer contnbutlon rate was 9 24% for covered employees Employer contnbutlons for the current fiscal year and the precedmg two fiscal years are as follows

Fiscal Year

Percentage Contnbuted

Required Contnbutlon

2002 2001 2000

I 00/o 100% 100/o

$ 3,880,813 49 $ 5,068,260 20 $ 5,345,231.90

REGENTS RETIREMENT PLAN

Plan Description The Regents Retirement Plan, a smgle-employer defined contnbutlon plan, 1s an optional retJrernent plan estabhshed ancl admim<:tered by the Board of Regents of the Uruvers1ty System of Georgia, under winch 1t may purchase annuity contracts for the purpose of proVIdmg retirement and death benefits for ehgible faculty and pnnc1pal adrrurustrators. Benefits depend solely on amounts contnbuted to the plan plus investment earnings Benefits are payable to partlc1psung employees or their benefic1anes in accordance with the terms of the annwty contracts.

Funding Policy Member contnbutJon requirements are estabhsbed by the Board of Trustees of the Teachers Retirement System Employer contnbuuons are estabhshed by statute and may be amended only by the General Assembly ofthe State of Georgia. The employer contnbutes 9.62% ofthe part1c1pating employee's eamsble compensation Employees contnbute 5% of theJT eamable compensation. Amounts attnbutable to all plan contnbutlons are fully vested and non-forfe1table at all times

Georgia Southern Uruvers1ty and the covered employees made the required contnbutlons of $2,733,558.71 (9.62%) and $1,420,910.55 (5%), respectively.

-- 26 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE IO RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Georgia Southern Uruvers1ty participates m the Georgia Defined Contnbutlon Plan (GDCP) wluch 1s a single-employer defined contnbutlon plan estabhshed by the General Assembly ofGeorgia for the purpose ofproVIdmg retirement coverage for State employees who are temporary, seasonal, and parttune and are not members of a pubhc retirement or pension system. GDCP 1s admm1stered by the Board of Trustees of the Employees' Retirement System of Georgia
Benefits A member may retire and elect to receive penod1c payments after attamment ofage 65 The payment will be based upon mortahty tables and interest assumptions to be adopted by tbe Board ofTrustees Ifa member has less than$ 3,500.00 crechted to his/her account, the Board ofTrustees has the option of requmng a lump sum d1stnbut1on to the member m heu ofmalang penodlc payments Upon the death of a member, a lump sum distribuuon equalmg the amount credited to his/her account will be pwd to the member's designated beneficiary. Benefit proV1s10ns are estabhshed by State statute
Contributions aud Vesting Member contnbutlons are seven and one-halfpercent (7 5%) ofgross salary. There are no employer contnbuUons Contnbutlon rates are estabhshed by State statute Earnings are credited to each member's account m a manner estabhshed by tbe Board of Trustees. Upon termmauon of employment, the amount of the member's account 1s refundable upon request by the member.
Total contnbuuons made by employees dunng fiscal year 2002 amounted to $167,346 67 which represents 7.5% of covered payroll. These contnbutions met the reqwrements of the plan
NOTE 11 RISK MANAGEMENT
Georgia Southern Uruvers1ty 1s a participant m the Board of Regents of the Uruvers1ty System of Georgia Health Benefits Plan, which 1s a self-insurance program of health and dental benefits for employees and retirees of the Uruvers1ty System of Georgia Georgia Southern Uruversily and partJc1patmg employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage The Health Benefits Plan 1s mcluded m the financial statements ofthe Board of Regents of the Uruvers1ty System of Georgia - Adn11rustrat1ve Central Office All Wilts of the Uruvers1ty System of Georgia share the nsk of loss for clwms of the Health Benefits Plan The Health Benefits Plan 1s considered a self-sustaJnmg nsk fund that proVIdes health coverage for its members up to a maximum hfetlme benefit of$2,000,000.00 per person and dental coverage up to an annual maximum of$1,000.00 per person The Board ofRegents has contracted with Blue Cross Blue Slueld ofGeorgia to process clwms m accordance With the Health Benefits Plan as estabhshed by the Board of Regents

- 27 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 11 RISK MANAGEMENT
The Department of Admm1strat1ve Services (DOAS) has the respons1b1lity for the State of Georgia ofmakmg and carrymg out dec1s1ons that will mm1m1ze the adverse effects of accidental losses that mvolve State government assets The State believes 1t 1s more economical to manage its nsks mtemally and set aside assets for claim settlement Accordmgly, DOAS processes claims fornsk of loss to whlch the State 1s exposed, mcludmg general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' mdemruficatlon Lumted amounts of commercial msurance are purchased applicable to property, employee and automobile liability, fidelity and certam other nsks. Georgia Southern Uruvers1ty, as an orgaruzahonal unit ofthe Board of Regents of the Umvers1ty System of Georgia, 1s part ofthe State of Georgia reporhng entity, and as such, 1s covered by the State of Georgia nsk management program admm1stered by DOAS Premiums for the nsk management program are charged to the vanous state organ1zat1ons by DOAS to provide claims serv1cmg and claims payment
A self-insured program of professional liability for its employees was established by the Board of Regents of the Uruvers1ty System of Georgia under powers authonzed by the Official Code of
Georgia Annotated Sechon 45-9-1 The program msures the employees to the extent that they are
not immune from liability against personal hab1lity for damages ansmg out of the performance of the1r duhes or m any way coMected therewith. The program 1s admm1stered by DOAS as a SelfInsurance Fund
NOTE 12 CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result m refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount ofexpenditures which may be disallowed by the grantor carmot be determmed at this lime although Georgia Southern Uruvers1ty expects such amounts, 1f any, to be immaterial to its overall financial pos1t1on.
L1hgat10n, claims and assessments filed against Georgia Southern Umvers1ty(an organizational umt
of the Board of Regents of the Uruvers1ty System of Georgia), 1f any, are generally considered to be
actions against the State of Georgia. Accordmgly, s1gruficant litigation, claims and assessments
pendmg against the State of Georgia are disclosed m the State of Georgia Comprehensive Annual
Fmanc1al Report for the fiscal year ended June 30, 2002
NOTE 13 POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code ofGeorgia Annotated Section 20-331, the Board of Regents of the Uruvers1ty System of Georgia has established group health and life
insurance programs for reg11Jar employees ofthe Uruvers1ty System ofGeorgia It 1s the policy ofthe
Board ofRegents to pcrnut employees ofthe Umvers1ty System ofGeorgia eligible for retirement or that become permanently and totally disabled to contmue as members of the group health and life
- 28 -

GEORGIA SOUTHERN UNNERSITY NOTES TO THE FINANCIAL STATEMEJ,ffS
JUNE 30. 2002

EXHIBIT "D"

NOTE 13 POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS

insurance programs Employees who are ehg1ble for retirement or d1sab1hty under the cntena estabhshed by the Teachers Retirement System of Georgia and who have at least ten years ofservice with the Uruvers1ty System of Georgia are ehgible for these post-employment health and hfe insurance benefits Orgaruzallonal units of the Board of Regents of the Uruvers1ty System of Georgia pay the employer portion for group insurance for affected md1v1duals

As ofJune 30, 2002, there were 471 employees who had retired or were disabled that were rece1vmg these post-employment health and hfe insurance benefits For the yeat ended June 30, 2002, Georgia Southern Uruvers1ty recogruzed as incurred $1,349,086 00 of expenditures, which was net of $430,563 00 of part1c1pant contnbutJons

NOTE 14 NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The Uruvers1ty's operating expenses by functJonal class1ficat1on are shown below:

Statement of()peratmg Expenses-Natural YI Funcbonal Clasl1ficabon.s
For me FISCal Year l:nded June 30, 2002

Nam Qvs1fu:abon
Salanes Faculty SialT
Employee Benefits Oth<r Personal Scmccs Travel Scholanhps and
Feilowstups Ut1hbes Supphcs and Other
S<mces
Depm:,aba,
Total Opcnt,ng Expenses

lmttucbm

Rarvrh

Funet11m1J Cw.s1fiiatwo

Publ1<
Serncc

Academic
Support

Student f>m:Icc,

lnstirubonal Support

S 34,568,992 73 s 6,875,084 I 0 9,834,08163 614,648 01 129,467 72 580,543 81 3,407,946 88

572,744 16 s 594,874 06 158,15679 103,479 92
8,498 00 9.263 79 379,152 08

215,688 78 799,108 90 179,97907 78,367 27 191,292 40 17,883 72 703,676 22

s 36.000 00 s 2,000 00

6,518.270 37 7,295.214 85

1,593,949 36 1,746.469 89

14 86

193,198 21

152,670 I I

4,954 53
141,822 29

2,500 00 154.462 59

1,404,485 I 7 2,088,794 S4

s

725 00 8,546,444 74

4,408.831 59

60945

148,069 56

573,420 95 208,223 69

1,657,859 76

s 5691076488 $ I 26 168 80 s 2 185 996 J6 s 2 92 679 93 s II 442 126 84 s 15S441R474

Natural Ous,ficahon
Salanes Faculty Staff
Employee Benefits Other Prnonal Scrv>ccs Travel Scholanhips and
Fcllowshrp, Unhacs Su;rphcs and Other
Scmccs Dcprcc1abon
Total Opcranng Expenses

Plant Operat,oosand
Mamtmancc

Ewf.llonlll CIM'i1fis::11lQIJ

Scholarshrp,
and FellP't'5blPS

Auxiliary F,nterpnsg

Um>llocated
Qem:ccJanon

Total
Opcranng
Expenses

s 5,944,820 01 I .349,702 65 20315 18.633 65

s 7.259,581 98 2,045,996 71 23,403 16 177,888 65

S 35.396, 150 67 43,833,399 01 21,317,167 69 24.230 62 1,486,955 38

s 4, I 34,459 09 1,535,457 I 0

2,494.659 48

1,365,533 66

6,580,049 79 4,972.393 OJ

4,313,192 25

52,631 51

14,507,442 89
s 1.ssQ 688 o~

28,515,181 30
7 889,688 OS

s l~l~l 21112 s ~l[Z~~ s ~~21~ ~ l~ s ZB2 ~5 Q~ s1~a1~ ~I~~

- 29-

SUPPLEMENTARY INFORMATION
- 31 -

GEORGIA SOUTHERN UNIVERSITY SCHEDULE OF REVENUES AND EXPEND)TURES COMPARED TO
BUDGET tNON-GAAP BASIS! RESIDENT INSTRUCTION
YEAR ENDED JUNE 30 2002

SCHEDULE "1"

REVENUES
State Appmpnabons Other Revenues Retained

BUDGET

ACTUAL (1)

VARIANCEFAVORABLE (UNFAVORABLE)

$ 78,682,049 00 $ 117,098,285 00

78,682,049 00 $ 49,674,051 59

000 -67 424 233 41

$ 195,7801334 00 $ 126,356100 59 $ -67,424,233 41

EXPENDITURES
Per&0nal SeMces Educabon, General and Departmental SeMces Sponsored Operabons
Operabng Expenses Education, General and Departmental SeMces Sponsored Operallon
Csp1tal Outlay Speaal Funding ln1babve Research Consortium

$ 86,997,589 00 $ 86,632,696 30 S

3,897,051 00

1,844,274 66

21,g19,644 00 74,102,94900
5,280,TT7 00 2,936,752 00
583,572 00

20,823,087 81 11,676,345 21
3,219 015 39 2,938,752 00
576 916 97

364 B9070
2,052,TT6 34
1,156,556 19 62,226,603 79
2,061,761 61 000
665503

$ 1951780133400 $ 127,911,09034 $

67,869,243 66

Excess of Revenues over Expendrtures

$

445 010 25 S_ _....,44,_5.,;0;.;1,;;,0,;;,25.

( 1) Actual amounts were prepared on a p,escnbed basls of accounbng that demonstrales complJance with
budgetary statutes and regulabons of the State of Georgia wl11ch 1s a comprehens,ve bas,s of accounbng
other than generally accepted accounbng pnnaples

see notes to the finanaal statements

-33-

GEORGIA SOUTHERN UNIVERSITY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUDGET - INON-GAAP BASIS} LOTTERY FOR EDUCATION YEAR ENDED JUNE 30. 2002

SCHEDULE "2"

REVENUES State Appropnabons
EXPENDITURES Equipment. Technology and Construction
Trust Fund Speaal Funding lmbabves
Excess of Revenues over Expendotures

BUDGET

ACTUAL (1)

VARIANCEFAVORABLE (UNFAVORABLE)

- - - - - - $

616 512 00 $ 616.512 00 $

0 00

$

452.964 00 $ 452.964 00 $

163,548 00

163,450 00

000 9800

$

616,512 00 $ 616,414 00 $ _ _ _ _9_8_0_0

s

98 oo s_____98.._.oo...,

(1) Actual amounts were prepared on a prescnbed basrs of eccountrng that demonstrates comphance wrth budgetary staMes and regulations of the State of Georgia, which Is a comprehensive basis of accounting other than generally accepted accountng pnndples

See notes to the financial statements

- 34-

GEORGIA SOUTHERN UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30. 2002

SCHEDULE "3"

Totals per Annual Supplement

Prepa1ds June 30, 2002 June 30, 2001

Accruals June 30, 2002 June 30, 2001

Compensated Absences June 30, 2002 June 30, 2001

AdJustments

Shared Services on Jointly Staffed Personnel

Coastal Georgia Community College

Barber,

Hen,y

Doster,

Janet

Howe,

Stacy

Matthews, Don

Student Assistants

Toler,

Cynthia

East Georgia College

Barrs,

Kerth

Downs,

Alan

Georgia Southwestern State University

R1ttschof, Kent

Kennesaw State University

Chan,

Tak

Savannah State Umversrty

DSVles,

David

Wolff,

Roland

Unlocated Vanance

SALARIES $ 79,385,485 00 $

TRAVEL 1,486,997 38

-1,793,847 77 1,611,472 09

302,710 76 -434,983 10

3,387,919 16 -3,306,428 04

29,56500 10,341 00 12,525 00 2,000 00 14,000 00
9,427 00
3,000 00 -3,00000
-1,500 00
-4,00000
48044 28500
4 09814

-42 00

$ 7912291549 68 $ ~-1_._4.8..6.._955_,38....,

See notes to the financial statements

- 35 -

SECTIONil AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA SOUTHERN UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIOJ\'ED COSTS YEAR ENDED JUNE 30, 2002

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

539-96-01 FS-539-00-01 FS-539-01-01

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

CORRECTIVE ACTION/RESPONSES

REVENUES/RECEJV ABLES/RECEIPTS Student Accounts Receivable Not Supported by Fmanc1al Aid Fmdmg Control Number 539-96-01

Georgia Southern Uruvers1ty 1s followmg the Board of Regents' Pohcy, Sectwn 704, on collectmg fees at student registration and ensunng that allowable exceptions to the Board of Regents' Pohcy have supportmg documentation. Student fee deferments are only granted to students whose fees are guaranteed by an agreement with an outside agency and whose student fees will be paid from approved financial aid

Procedures to collect outstandmg accounts receivable balances have been implemented Georgia Southern Umvers1ty will contmue its collect1on efforts on the outstand.mg student
accounts receivable balances In add1t1on, to assist m the collectlon of the accounts,
Georgia Southern has placed a financial record hold on the acaderruc records of students who have outstandmg acccunts receivable balances

SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA SOUTHERN UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Inadequacies m Control Over Subsidiary Ledgers Fmdmg Control Number FS-539-02-01
The Uruvers1ty could not proVJde adequate documentation to support accounts receivable and accounts payable balances reported on the general ledger. This condition occurred because of d1flicult1es encountered With conversion to the new GeorgiaF1rst financial accountmg system which
units of the Uruvers1ty system were reqwred to implement m fiscal year 2002. The GeorgiaF1rst
financial accounting system as dehvered for use did not mclude reports that would produce aggregate deta.Jled information from the vanous modules, external feeds and onhne processes necessary to support balance sheet accounts as reported on the University's general ledger Extensive audit procedures were necessary to determme the validity of accounts receivable and accounts payable balances reported on the general ledger.
The Uruvers1ty should contact the Board of Regents Central Office and request that assistance be
proVJded m developmg appropnate financial reports that Will produce aggregate detaJled information needed to support general ledger accounts.