Georgia Southern University, Statesboro, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2015

GEORGIA SOUTHERN UNIVERSITY - TABLE OF CONTENTS -

SECTION I FINANCIAL INDEPENDENT AUDITOR'S REPORT REQUIRED SUPPLEMENTARY INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS BASIC FINANCIAL STATEMENTS EXHIBITS A STATEMENT OF NET POSITION B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION C STATEMENT OF CASH FLOWS D NOTES TO THE FINANCIAL STATEMENTS

Page
i
2 3 4 7

SCHEDULES

REQUIRED SUPPLEMENTARY INFORMATION

1 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS'

RETIREMENT SYSTEM OF GEORGIA

31

2 SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY EMPLOYEES'

RETIREMENT SYSTEM OF GEORGIA

32

3 SCHEDULE OF CONTRIBUTIONS TEACHERS' RETIREMENT SYSTEM OF GEORGIA

33

4 SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA 35

5 NOTES TO THE REQUIRED SUPPLEMENTARY INFORMATION

37

SUPPLEMENTARY INFORMATION

6 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

39

7 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

40

GEORGIA SOUTHERN UNIVERSITY - TABLE OF CONTENTS -

SECTION I
FINANCIAL
SCHEDULES
SUPPLEMENTARY INFORMATION
8 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
9 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
10 RECONCILIATION OF BUDGET TO GAAP 11 RECONCILIATION OF SALARIES AND TRAVEL

Page
41 43 45 47

SECTION II
COMPLIANCE AND INTERNAL CONTROL REPORTS
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

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

SECTION IV CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

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 19, 2016

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Dr. Jean E. Bartels, Interim President Georgia Southern University

INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying basic financial statements (Exhibits A through D) of Georgia Southern University, a unit of the University System of Georgia, which is an organizational unit of the State of Georgia, as of and for the year ended June 30, 2015.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to Georgia Southern University's preparation and fair presentation of the financial statements in order to design

15ARL-62

audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Georgia Southern University's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of Georgia Southern University as of June 30, 2015, and the respective changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1, the financial statements of Georgia Southern University are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of Georgia Southern University. They do not purport to, and do not, present fairly the financial position of the State of Georgia as of June 30, 2015, the changes in its financial position or its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.
As described in Note 1 to the financial statements, in 2015, Georgia Southern University adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions an amendment of GASB Statement No. 27, GASB Statement No. 69, Government Combinations and Disposals of Government Operations and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB Statement No. 68. Georgia Southern University restated beginning Net Position for the cumulative effect of these accounting changes which had a significant impact on Georgia Southern University's financial statements. Our opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages i through viii and the Schedules of Proportionate Share of the Net Pension Liability, Schedules of Contributions to Retirement Systems and the Notes to the Required Supplemental Information on pages 31 through 47 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the
15ARL-62

basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Georgia Southern University. The accompanying supplementary information (Schedules 6 through 11) is presented for purposes of additional analysis and is not a required part of the basic financial statements.
The accompanying supplementary information (Schedules 6 through 11) is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting or other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated January 19, 2016, on our consideration of Georgia Southern University's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Georgia Southern University's internal control over financial reporting and compliance.
Respectfully,

GSG:er 15ARL-62

Greg S. Griffin State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

GEORGIA SOUTHERN UNIVERSITY
Management's Discussion and Analysis

Introduction

Georgia Southern University is the state's largest and most comprehensive center of higher education south of Atlanta. With 124 degree programs at the baccalaureate, master's and doctoral levels, Georgia Southern has been designated a Carnegie Doctoral-Research university and provides the classic residential campus experience and online learning options to more than 20,500 students from 48 states and 88 nations. Georgia Southern's nationally accredited academic programs prepare diverse scholars for leadership and service as world citizens. Georgia Southern University is one of 30 University's of higher education of the University System of Georgia. The University boasts 200-plus student organizations, outstanding Division I athletics, and state-of-the art residence halls and campus facilities. Since 1906, the University's hallmark has been a culture of engagement that bridges theory with practice, extends the learning environment beyond the classroom, and promotes student growth and life success. Central to the University's mission is the faculty's dedication to excellence in teaching and the development of a fertile learning environment exemplified by a free exchange of ideas, high academic expectations, and individual responsibility for academic achievement. Faculty, staff, and students embrace core values expressed through integrity, civility, kindness, collaboration, and a commitment to lifelong learning, wellness, and social responsibility.

Faculty

Students (Headcount)

Students (FTE)

Fiscal Year 2015

899

Fiscal Year 2014

881

Fiscal Year 2013

844

20,542 20,516 20,574

18,821 18,685 18,706

Overview of the Financial Statements and Financial Analysis

Georgia Southern University is pleased to present its financial statements for fiscal year 2015. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Position; the Statement of Revenues, Expenses and Changes in Net Position; and the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2015 and fiscal year 2014. However, the comparative data for fiscal year 2014 does not reflect the effects of the restatement of July 1, 2014 net position. This restatement is related to the implementation of Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, which were adopted by the University for fiscal year 2015. The provisions of these Statements 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 these Statements resulted in a restatement to beginning net position of $94,155,812. This restatement is based on actuarial estimates and information is not available for the fiscal year 2014 comparative balances. See Note 1 in the Notes to the Financial Statements for more information about the restatement of July 1, 2014 net position.

i

Statement of Net Position The Statement of Net Position is a financial condition snapshot as of June 30, 2015 and includes all assets, deferred outflows of resources, liabilities, and deferred inflows of resources both current and noncurrent. The differences between current and noncurrent assets are discussed in the Notes to the Financial Statements. The Statement of Net Position is prepared under the accrual basis of accounting which requires revenue and asset recognition when the service is provided, and expense and liability recognition when goods or services are received despite when cash is actually exchanged. From the data presented, readers of the Statement of Net Position are able to determine the assets available to continue the operations of the University and how much the University owes vendors. The difference between assets, deferred outflows of resources, liabilities, and deferred inflows of resources (net position) is one indicator of the University's financial health. Increase or decreases in net position provide an indicator of the improvement or decline of the University's financial health when considered in conjunction with other nonfinancial conditions, such as facilities and enrollment. Net Position is divided into three major categories. The first category, net investment in capital assets, provides the University's equity in property, plant and equipment owned by the University. The next category is restricted, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable, restricted resources is available only for investment purposes. Expendable, restricted resources are available for expenditure by the University but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted. Unrestricted resources are available to the University for any lawful purpose.
ii

Statement of Net Position, Condensed

June 30, 2015 June 30, 2014 (1)

Assets Current Assets Capital Assets, Net Other Assets

$ 59,529,960 $ 546,081,786 13,787,940

49,784,531 536,509,911
14,219,387

Total Assets

619,399,686

600,513,829

Deferred Outflows of Resources

12,615,483

0

Liabilities Current Liabilities Noncurrent Liabilities

31,521,817 310,228,213

28,153,389 218,412,934

Total Liabilities

341,750,030

246,566,323

Deferred Inflows of Resources

26,983,742

0

Net Position Net Investment in Capital Assets Restricted Nonexpendable Expendable Unrestricted

308,053,863
2,465,814 8,553,930 -55,792,210

313,675,376
2,465,814 10,105,690 27,700,626

Total Net Position

$ 263,281,397 $ 353,947,506

(1) The June 30, 2014 amounts do not reflect the effects of the restatement of July 1, 2014 net position related to the implementation of GASB 68. See Note 1 in the Notes to the Financial Statements for more information.
Total assets and deferred outflows of resources increased by $31,501,340. Total assets increased due to an increase of $9,571,875 in the category of Capital Assets, Net primarily due to the new Athletic Football Operations Center and Football Stadium Expansion, and an increase of $9,745,429 in Current Assets. Deferred Outflows of Resources increased by $12,615,483 due to the adoption of GASB Statement No. 68, Accounting and Financial Reporting for Pensions.
Total liabilities and deferred inflows of resources increased for the year by $122,167,449. The combination of the increase in total assets and deferred outflows of resources of $31,501,340 and the increase in total liabilities and deferred inflows of resources of $122,167,449 yields a decrease in net position of $90,666,109. The decrease in net position is primarily in the category of Net Pension Liability, in the amount of $77,355,890.

iii

Statement of Revenues, Expenses and Changes in Net Position
Changes in total net position as presented on the Statement of Net Position are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Position. The purpose of the statement is to present the revenues received by the University, both operating and nonoperating, and the expenses paid by the University, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the University. Generally, operating revenues are received for providing goods and services to the various customers and constituencies of the University. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the University. Nonoperating revenues are revenues received for which goods and services are not provided. For example state appropriations are nonoperating because they are provided by the Legislature to the University without the Legislature directly receiving commensurate goods and services for those revenues.
Statement of Revenues, Expenses and Changes in Net Position, Condensed

June 30, 2015

June 30, 2014 (1)

Operating Revenues Operating Expenses

$ 221,466,308 327,870,789

$ 213,235,517 326,585,167

Operating Loss

-106,404,481

-113,349,650

Nonoperating Revenues and Expenses

108,955,031

106,433,641

Income (Loss) Before Other Revenues, Expenses, Gains or Losses

2,550,550

-6,916,009

Other Revenues, Expenses, Gains or Losses

939,153

4,722,432

Increase (Decrease) in Net Position

3,489,703

-2,193,577

Net Position at Beginning of Year, as Originally Reported
Prior Year Adjustments

353,947,506 -94,155,812

353,124,623 3,016,460

Net Position at Beginning of Year, Restated

259,791,694

356,141,083

Net Position at End of Year

$ 263,281,397

$ 353,947,506

(1) The June 30, 2014 amounts do not reflect the effects of the restatement of July 1, 2014 net position related to the implementation of GASB 68. See Note 1 in the Notes to the Financial Statements for more information.

The Statement of Revenues, Expenses and Changes in Net Position reflect a positive year from current year operations but an overall negative year due to the implementation of new accounting standards related to pension plans, which is represented by a decrease in net position at the end of the year. Some highlights of the information presented on this statement are as follows:

iv

Revenue by Source For the Years Ended June 30, 2015 and June 30, 2014
June 30, 2015

June 30, 2014 (1)

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services Auxiliary Other

$ 111,214,653 17,328,121 4,736,641 86,006,395 2,180,498

$ 107,971,597 16,084,037 4,536,869 82,600,488 2,042,526

Total Operating Revenue

221,466,308

213,235,517

Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other

85,834,001 31,737,747
4,216,706 246,650 -264,607

81,442,638 32,037,080
4,243,746 717,814 74,296

Total Nonoperating Revenue

121,770,497

118,515,574

Capital Grants and Gifts State Other Capital Gifts and Grants

939,153

4,613,832 108,600

Total Capital Gifts and Grants

939,153

4,722,432

Total Revenues

$ 344,175,958

$ 336,473,523

(1) The June 30, 2014 amounts do not reflect the effects of the restatement of July 1, 2014 net position related to the implementation of GASB 68. See Note 1 in the Notes to the Financial Statements for more information.

v

Expenses (By Functional Classification) For the Years Ended June 30, 2015 and June 30, 2014

June 30, 2015

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises

$ 100,489,820 16,921,157 1,590,018 31,983,196 24,224,085 34,295,983 33,771,818 9,668,280 74,926,432

Total Operating Expenses

327,870,789

Nonoperating Expenses Interest Expense (Capital Assets)

12,815,466

June 30, 2014 (1)

$

98,311,368

17,299,470

1,622,287

30,221,540

23,360,529

29,754,055

37,046,835

9,911,109

79,057,974

326,585,167

12,081,933

Total Expenses

$ 340,686,255

$ 338,667,100

(1) The June 30, 2014 amounts do not reflect the effects of the restatement of July 1, 2014 net position related to the implementation of GASB 68. See Note 1 in the Notes to the Financial Statements for more information.
Operating revenues increased by $8,230,791 in fiscal year 2015. Tuition and Fees were increased by 3.0%. Grants and Contracts increased by $1,244,084. Auxiliary revenue increased $3,405,907 of which $2,801,912 is a result of the increase in the category of Intercollegiate Athletics advertising, ticket sales and Sun Belt Conference guarantees.
Nonoperating revenues increased by $3,254,923 for the year primarily due to an increase in State Appropriations.
The compensation and employee benefits category increased by $3,786,277 and primarily affected the Instruction, Academic Support, and Student Services and Instructional Support categories. The increase reflects the addition of 18 faculty members, merit increases and an increased cost of health insurance for the employees of the University.
Statement of Cash Flows
The final statement presented by the Georgia Southern University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the University during the year. Cash flow information can be used to evaluate the financial viability of the University's ability to meet financial obligations as they mature. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the University. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing
vi

purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Position.
Cash Flows for the Years Ended June 30, 2015 and 2014, Condensed

June 30, 2015

June 30, 2014

Cash Provided (Used) By:

Operating Activities

$

Noncapital Financing Activities

Capital and Related Financing Activities

Investing Activities

-83,458,830 121,433,606 -31,808,382
213,700

$

-88,280,550

118,440,824

-36,945,013

215,359

Net Change in Cash Cash, Beginning of Year

6,380,094 36,509,477

-6,569,380 43,078,857

Cash, End of Year

$

42,889,571

$

36,509,477

Capital Assets

The University had several significant capital asset additions for facilities in fiscal year 2015. At the beginning of fiscal year 2015, the University opened the new Athletic Football Operations Center, as a public-private venture with GSU Athletic Foundation, in the amount of $10.8 million. In addition, the University expanded the football stadium seating, as a public-private venture with GSU Athletic Foundation, in the amount of $10.1 million.

During fiscal year 2015, the University also completed several renovation projects to existing facilities in the amount of $1.7 million. Among these renovations included a new parking lot for Facilities Services Shops building 448.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 12 in the Notes to the Financial Statements.

Long-Term Liabilities

Georgia Southern University had Long-Term Liabilities of $321,852,229 of which $77,355,890 was the new net pension liability based on implementation of GASB Statement No. 68 The current portion of long-term liabilities at June 30, 2015 was $11,624,016.

For additional information concerning Long-Term Liabilities, see Note 8 in the Notes to the Financial Statements.

Economic Outlook

Georgia Southern University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year. Georgia Southern continues to be financially stable as was reported by the 2015 SACS reaffirmation committee. Georgia Southern anticipates the current fiscal year will be much like last

vii

and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Student enrollment increased slightly compared to the previous year, indicating a slow but steady student enrollment growth. Enrollment management strategies include focusing on student transfers and retention of current students. Additionally, in accordance with the Complete College Georgia initiative which is part of Georgia's Higher Education Completion Plan to make college more accessible to everyone, Georgia Southern is exploring alternative enrollment and collaborative projects, including programs for the adult population. This initiative will continue until 2020 with the goal of 60 percent of young adults in the state of Georgia holding a certificate or degree. The State of Georgia and Georgia Southern's expectation is that this initiative and the resulting partnerships will provide economic sustainability to the people of Georgia by providing the educational tools necessary for employment success. Dr. Jean E. Bartels, Interim President Georgia Southern University
viii

BASIC FINANCIAL STATEMENTS - 1 -

GEORGIA SOUTHERN UNIVERSITY STATEMENT OF NET POSITION JUNE 30, 2015
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Due from Affiliated Organizations Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Investments Due from Affiliated Organizations Due from Institutions - Capital Liability Reserve Fund Notes Receivable, Net Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
Deferred Outflows of Resources Related to Defined Benefit pension Plans
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Advances (Including Tuition and Fees) (Note 7) Other Liabilities Deposits Held for Other Organizations Due to Affiliated Organizations Lease Purchase Obligations Compensated Absences Notes and Loans Payable
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences Net Pension Liability Notes and Loans Payable
Total Noncurrent Liabilities
Total Liabilities
Deferred Inflows of Resources Related to Defined Benefit Pension Plans
NET POSITION
Net Investment in Capital Assets Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Position
The notes to the financial statements are an integral part of this statement.
- 2 -

EXHIBIT "A"

$

42,889,571

4,688,185 5,479,270 3,289,359 3,082,254
101,321

59,529,960

5,481,689 4,059,400 1,778,721 2,468,130 546,081,786
559,869,726
619,399,686

12,615,483

7,643,615 768,810
1,164,776 578,723
8,000,518 1,348
1,726,867 13,144
6,895,842 4,603,864
124,310
31,521,817
229,628,522 1,864,552
77,355,890 1,379,249
310,228,213
341,750,030
26,983,742

308,053,863
2,465,814 8,553,930 -55,792,210

$

263,281,397

GEORGIA SOUTHERN UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
YEAR ENDED JUNE 30, 2015
OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) Less: Scholarship Allowances
Grants and Contracts Federal Federal Stimulus State Other
Sales and Services Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Loss
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues (Expenses)
Net Nonoperating Revenues
Income Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State
Increase in Net Position
Net Position - Beginning of Year, Restated
Net Position - End of Year

EXHIBIT "B"

$

141,104,983

-29,890,330

8,527,430 263,169 211,281
8,326,241 4,736,641
427,647

30,683,330 11,165,371 20,041,879
4,401,633 4,217,851 15,401,930
94,401 1,752,851

221,466,308

62,202,436 90,076,024 45,417,194
679,652 3,192,413 15,419,884 12,265,800 72,251,476 26,365,910
327,870,789
-106,404,481

85,834,001
31,737,747 4,216,706 246,650
-12,815,466 -264,607
108,955,031
2,550,550
939,153
3,489,703
259,791,694

$

263,281,397

The notes to the financial statements are an integral part of this statement. - 3 -

GEORGIA SOUTHERN UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2015
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 Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts Other Payments
Net Cash Used by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts
Net Cash Flows Provided by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments
Net Increase in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year

EXHIBIT "C"

$

111,016,582

14,993,303

4,736,641

-135,309,690

-152,080,362

-15,419,884

-906,141

970,538

30,720,579 11,363,553 20,081,431
4,349,133 4,210,885 15,553,705
-49,323 2,335,112
-24,892

-83,458,830

85,834,001 -404,323
35,954,453 49,475
121,433,606

856,653 -13,906,491
-5,943,078 -12,815,466
-31,808,382

213,700 6,380,094 36,509,477

$

42,889,571

- 4 -

GEORGIA SOUTHERN UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2015
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 Notes Receivable, Net Accounts Payable Salaries Payable Advances (Including Tuition and Fees) Other Liabilities Compensated Absences Net Pension Liability Change in Deferred Inflows/Outflows of Resources: Deferred Inflows of Resources Deferred Outflows of Resources
Net Cash Used by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Gifts and Grants

EXHIBIT "C"

$ -106,404,481

26,365,910

-2,681,591 -186,465 9,127 64,397 208,392
1,210,202 315,447 -82,707 154,602
-24,474,005

26,983,742 -4,941,400

$

-83,458,830

$

21,136,466

$

32,950

$

82,500

The notes to the financial statements are an integral part of this statement. - 5 -

(This page left intentionally blank)

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Note 1. Summary of Significant Accounting Policies
Nature of Operations Georgia Southern University (the University) 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 Southern University is one of thirty (30) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Southern University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Georgia Southern University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Southern University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt Affiliated Organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential Component Units of the State. See Note 18 for additional information.
Financial Statement Presentation The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the University's assets, deferred outflow of resources, liabilities, deferred inflows of resources, net position, revenues, expenses, changes in net position and cash flows.
Basis of Accounting For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-University transactions have been eliminated.
New Accounting Pronouncements In fiscal year 2015, the University adopted 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 requires a restatement to beginning net position. The adoption of this statement has a significant impact on the University's financial statements.

- 7 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

In fiscal year 2015, the University adopted Governmental Accounting Standards Board (GASB) Statement No. 69, Government Combinations and Disposals of Government Operations. This statement provides specific accounting and financial reporting guidance for combinations in the governmental environment. This statement also requires that disclosures be made by governments about combination arrangements in which they engage and for disposals of government operations. The adoption of this statement does not have a significant impact on the University's financial statements.
In fiscal year 2015, the University adopted Governmental Accounting Standards Board (GASB) Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB No. 68. The objective of this statement is to improve accounting and financial reporting by addressing an issue in Statement No. 68, Accounting and Financial Reporting for Pensions, concerning transition provisions related to certain pension contributions made to defined benefit pension plans prior to implementation of statement. This statement amends paragraph 137 of Statement No. 68 which limited recognition of pension-related deferred outflows of resources and deferred inflows of resources at the transition to circumstances in which it is practical to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions. Adoption of this statement in conjunction with GASB No. 68 had a significant impact on the University's Financial Statements.
Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the Board of Regents Short-Term Investment Pool.
Accounts Receivable Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of whom reside in the State of Georgia. Accounts receivable also includes amounts due from the federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Investments Investments include financial instruments with terms in excess of 13 months, certain other securities for the production of revenue, land, and other real estate held as investments by endowments.
The University accounts for its investments at fair value. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Position. The Board of Regents Short-Term Fund and Diversified Fund are included under Investments.
Inventories Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis. Resale Inventories for Bookstore and other services are valued at cost using the "first in, first out" (FIFO) basis. Resale inventories for Food Services are valued at cost using the average cost basis.

- 8 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Prepaid Items Prepaid Items reflect payments of costs applicable to future accounting periods.
Noncurrent Investments Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Position.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation, which also includes amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, and copyrights, as well as software, is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values generally are 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To fully understand plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. These bonds constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Capital Liability Reserve Fund In fiscal year 2014, the Capital Liability Reserve Fund (Fund) was established by the Board of Regents to protect the fiscal integrity of the University System of Georgia (USG) to maintain the strongest possible credit ratings associated with Public Private Venture (PPV) projects and to ensure that the Board of Regents can effectively support its long-term capital lease obligations. The Fund is financed by all USG institutions participating in the PPV program. The Fund serves as a pooled reserve that is managed by the Board of Regents. The Fund shall only be used to address significant shortfalls and only insofar as a requesting USG institution is unable to make the required PPV capital lease payment to the designated cooperative organization. The Fund will continue as long as the Board of Regents has rental obligations under the PPV program and at the conclusion of the program, funds will be returned to the University. The University's contribution to the fund as of June 30, 2015 was $1,778,721.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
Advances Advances include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Advances also include amounts received from grant and contract sponsors that have not yet been earned.

- 9 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Deferred Outflows of Resources Deferred outflows of resources consists of the consumption of net assets by the University that are applicable to a future reporting period.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Position, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Position.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Pensions For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teachers Retirement System of Georgia (TRS) and Employees' Retirement System (ERS), additions to/deductions for TRS's and ERS's fiduciary net position have been determined on the same basis as they are reported by TRS and ERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
Deferred Inflows of Resources Deferred inflows of resources consists of the acquisition of net assets by the University that are applicable to a future reporting period.
Net Position The University's net position is classified as follows:
Net Investment in Capital Assets: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of the net investment in capital assets.
The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 Capital Assets section.
Restricted nonexpendable includes 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 be either expended or added to principal. The University 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 are restricted resources available for expenditure, but these restricted resources must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets.

- 10 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Unrestricted: Unrestricted net position is the net amount of assets, deferred outflows of resources, liabilities and deferred inflows of resources that are not included in the determination of the other net position categories. Included in the net deficit reported is noncurrent liabilities of $77,355,890 which is required for financial reporting and will not impact the economics of the plan or affect budgets or cash flows.
When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Georgia Southern University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues and Expenses The Statement of Revenues, Expenses and Changes in Net Position classify fiscal year activity as operating and nonoperating according to the following criteria:
Operating revenue includes activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) certain federal, state and local grants and contracts, and (3) sales and services.
Nonoperating revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenue by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Operating Expenses: Operating expense includes activities that have the characteristics of exchange transactions.
Nonoperating expense includes activities that have the characteristics of nonexchange transactions, such as capital financing costs and costs related to investment activity.
Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Position. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf.
Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances.
Restatement Note Disclosure For fiscal year 2015, the University made prior period adjustments due to the adoption of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, and (GASB) Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date which require the restatement of the June 30, 2014, net position. The result is a decrease in Net Position at

- 11 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

July 1, 2014 of $94,155,812 of which $101,829,895 is represented in Net Pension Liability and $7,674,083 is represented in deferred outflow. This change is in accordance with generally accepted accounting principles.
Note 2. Deposits and Investments
Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the University) 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 5017-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
At June 30, 2015, the carrying value of deposits was $37,254,812 and the bank balance was $39,950,512. Of the University's deposits, $39,700,512 was uninsured. Of these uninsured deposits, $39,700,512 was collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name.
Investments Georgia Southern University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws.
At June 30, 2015, the carrying value of the University's investments were $10,961,098, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pool as follows:
- 12 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Investment Pool

Board of Regents

Short-Term Fund

$

Diversified Fund

Total Investment Pool $

5,479,409 5,481,689
10,961,098

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits and Accounts Education Audit Division or on their web site at http://www.audits.ga.gov.
Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a formal policy for managing interest rate risk.
The Effective Duration of the Short-Term Fund is 0.33 years. Of the University's total investment of $5,479,409 in the Short-Term Fund, $5,479,409 is invested in debt securities.
The Effective Duration of the Diversified Fund is 4.79 years. Of the University's total investment of $5,481,689 in the Diversified Fund, $1,848,456 is invested in debt securities.
Note 3. Accounts Receivable
Accounts receivable consisted of the following at June 30, 2015:

Student Tuition and Fees

$

Auxiliary Enterprises and Other Operating Activities

Federal Financial Assistance

Georgia Student Finance Commission

Georgia State Financing and Investment Commission

Due from Affiliated Organizations

Other

383,949 1,699,915 4,688,185 2,732,749
604,487 3,289,359
367,732

Less Allowance for Doubtful Accounts

13,766,376 309,562

Net Accounts Receivable

$

13,456,814

- 13 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Note 4. Inventories Inventories consisted of the following at June 30, 2015:

Bookstore Food Services Other

$

2,476,362

517,750

88,142

Total Inventories $

3,082,254

Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2015. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U. S. Department of Education. At June 30, 2015, the University did not have an allowance for uncollectible loans.

- 14 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2015:

Beginning Balance July 1, 2014

Additions

Reductions

Ending Balance June 30, 2015

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

$

18,875,157

490,880

422,010 $

7,972,168 $

$ 2,211,620

18,875,157 490,880
6,182,558

Total Capital Assets, Not Being Depreciated

19,788,047

7,972,168

2,211,620

25,548,595

Capital Assets, Not Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections

21,168,417 405,138,821
12,190,416 44,468,842 249,776,111 48,109,775

1,725,426 574,343
5,018,049 21,136,466
2,037,037

944,000
1,207,086 184,995 7,314

21,168,417 405,920,247
12,764,759 48,279,805 270,727,582 50,139,498

Total Assets Being Depreciated

780,852,382

30,491,321

2,343,395

809,000,308

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

16,137,759 125,772,617
1,950,073 28,308,993 53,078,546 38,882,530

188,942 8,850,776
500,296 5,260,860 9,943,702 1,621,334

803,121
1,057,417 161,459 7,314

16,326,701 133,820,272
2,450,369 32,512,436 62,860,789 40,496,550

Total Accumulated Depreciation

264,130,518

26,365,910

2,029,311

288,467,117

Total Capital Assets, Being Depreciated, Net

516,721,864

4,125,411

314,084

520,533,191

Capital Assets, Net

$

536,509,911 $

12,097,579 $

2,525,704 $

546,081,786

For projects managed by GSFIC, GSFIC retains construction-in-progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction-in-progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2015, GSFIC transferred capital additions valued at $82,500 to Georgia Southern University. In addition, at June 30, 2015, GSFIC had construction in progress of approximately $5,629,598 for incomplete projects for the University.

- 15 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Note 7. Advances (Including Tuition and Fees) Advances (Including Tuitions and Fees) consisted of the following at June 30, 2015:

Prepaid Tuition and Fees $ Other - Advances

6,051,392 1,949,126

Total Advances

$

8,000,518

Note 8. Long-Term Liabilities Long-Term liability activity for the year ended June 30, 2015 was as follows:

Leases Lease Obligations $
Other Liabilities Compensated Absences Notes and Loans Payable Net Pension Liability

Beginning Balance July 1, 2014
221,213,231 $
6,313,814 1,621,304 101,829,895

Additions

Reductions

Ending Balance June 30, 2015

21,136,466 $ 5,825,333 $ 236,524,364 $

5,122,280

4,967,678 117,745
24,474,005

6,468,416 1,503,559 77,355,890

Current Portion
6,895,842 4,603,864
124,310

Total

109,765,013

5,122,280

29,559,428

85,327,865

4,728,174

Total Long-Term Obligations $ 330,978,244 $ 26,258,746 $ 35,384,761 $ 321,852,229 $ 11,624,016

Notes and Loans Payable Included in Long-Term liabilities is a $3,000,000 note payable that was originally payable to Georgia Education Authority (University), (GEA(U)). In July 2007, GEA(U) met and resolved to no longer conduct business as a state authority and dispose of all its assets and liabilities. As a result of that decision, a Note Receivable that was payable from Georgia Southern University was transferred by Resolution from GEA(U) to the University System Office (USO) of the University System of Georgia. Georgia Southern University continues to render payments according to the original amortization schedule to the USO. The note carries an interest rate of 5.50% and is due semi-annually through the year 2025. The outstanding balance at June 30, 2015 is $1,503,559. Annual maturities are as follows:

Year Ending June 30

Principal

Interest

Total Payments

Curr Liab

L/T Liab

2016

$

2017

2018

2019

2020

2021 through 2025

124,310 $ 131,241 138,559 146,284 154,441 808,724

81,010 $ 74,079 66,761 59,036 50,879 115,216

205,320 $ 205,320 205,320 205,320 205,320 923,940

124,310 $

131,241 138,559 146,284 154,441 808,724

$ 1,503,559 $

446,981 $

1,950,540 $

124,310 $

1,379,249

- 16 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Note 9. Net Position
Net position is reported in the following three categories: Net Investment in Capital Assets, Restricted Nonexpendable, Restricted-Expendable, and Unrestricted.
The amounts within each category at June 30, 2015 were as follows:

Net Investments in Capital Assets $

308,053,863

Restricted for Nonexpendable Permanent Endowment

2,465,814

Expendable Organized Activities Federal Loans Institutional Loans

5,769,497 2,729,888
54,545

Total Expendable

8,553,930

Unrestricted R & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted USO Reserve Fund

13,920,763 17,925,211
64,000 -89,480,905
1,778,721

Total Unrestricted

-55,792,210

TOTAL NET POSITION

$

263,281,397

Note 10. Endowments
Investments of the University's endowment funds are pooled, unless required to be separately invested by the donor. For University controlled, donor-restricted endowments, where the donor has not provided specific instructions, the Board of Regents permits Georgia Southern University to develop policies for authorizing and spending realized and unrealized endowment income and appreciation as they determined to be prudent. Realized and unrealized appreciation in excess of the amount budgeted for current spending is retained by the endowments. Endowment net income of $55,444 and net appreciation of $14,995 are reflected as restricted expendable change in net position of $70,439.
The University uses a conservative approach for endowment management by using a hybrid combination of the total return concept for income and gains/losses, and the classical trust method that protects the corpus of the endowments. Annual payouts from the University's endowment funds are based on a spending policy which limits annual endowed scholarship spending as 4% of the 3 year moving average of the endowment fair market value. To the extent that the total return for the current year exceeds payout, the excess is added to restricted expendable net position. If total payouts exceed total return, prior years' net appreciation is reduced.

- 17 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Note 11. Significant Commitments
The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $9,612,431 as of June 30, 2015. This amount is not reflected in the accompanying basic financial statements.
Note 12. Lease Obligations
Georgia Southern University 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.
Capital Leases
Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2016 and 2043. Payments for fiscal year 2015 were $18,923,330 of which $12,727,891 represented interest and $370,106 executory costs. Total principal paid on capital leases was $5,825,333 for the fiscal year ended June 30, 2015. Interest rates range from 2.24% to 13.13%.

Description

CAPITAL LEASE SCHEDULE

Lessor

Original Principal

Lease Term

Begin End

Outstanding Principal
Balance at 6/30/15 (1)

PPV3901001 - Southern Courtyard (1)

HF

$

PPV3901002 - Southern Pines (1)

HF

PPV3902000 - Eagle Village (1)

HF

PPV3903001 - J.I. Clements Baseball (1)

HF

PPV3903002 - Ath Trng Ctr (Ironworks (1)

HF

PPV3903003 - Soccer & Track St (1)

HF

PPV3904001 - Rec Act Ctr (RAC) (1)

HF

PPV3905000 - Centennial Place (1)

HF

PPV3906000 - Campus Courtyard Univ V (1) HF

PPV3907000 - Freedom's Landing (1)

HF

PPV3908000 - Dining Commons Lakeside (1) HF

PPV3909000 - Dining Comm Landrum (1) HF

PPV391000 - Football Stadium Expansion (1) Athletic F

PPV3911000 - Football Oper Ctr (1)

Athletic F

Equipment

Various

18,296,060

28 yrs

24,371,991

28 yrs

30,179,998

25 yrs

2,230,350

24 yrs

694,056

24 yrs

1,677,441

24 yrs

40,264,057

25 yrs

56,096,073

30 yrs

13,360,301

30 yrs

34,599,940

29 yrs

7,851,917

29 yrs

18,321,140

29 yrs

10,168,728

29 yrs

10,830,102

29 yrs

1,785,428 36 to 60 mths

09/03 09/03 08/05 08/05 08/05 08/05 08/06 08/09 08/08 07/12 08/13 08/13 08/14 08/14 Various

10/2031 $ 10/2031 07/2030 07/2029 07/2029 07/2029 07/2031 07/2039 07/2038 06/2041 06/2042 06/2042 06/2043 06/2043 Various

Total Leases

$ 270,727,582

$

13,013,952 17,335,749 22,043,804
1,610,131 500,852
1,209,813 32,459,255 52,940,871 12,923,622 34,436,378
7,815,675 18,150,893 10,406,612 10,962,323
714,434
236,524,364

(1) These capital leases are considered related party transactions with affiliated organizations.
Operating Leases
Georgia Southern University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2016 through 2027. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the

- 18 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis.
Facilities and equipment rented through operating leases are not recorded as assets on the balance sheet. Operating lease expenditures totaled $222,086 for the fiscal year ended June 30, 2015.
In 2014, Georgia Southern University entered into a real property operating lease with The Odd Lot, Inc., an unrelated party, for office space at College Plaza from July 2014 through June 2015. The monthly rent of $10,400 increased in January 2015 to $10,833 per the renewal option. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $127,400 in the current year.
In 2014, Georgia Southern University entered into a real property operating lease with S & F Partnership and FFF Properties LLC., an unrelated party, for Costume Shop storage space for monthly rental payments of $3,500. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $42,000 in the current year.
In 2014, Georgia Southern University entered into a real property operating lease with Market District Center MSB, LLC, an unrelated party, for office space for six monthly rental payments of $1,323. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $7,938 in the current year. In 2014, Georgia Southern University entered into a real property operating lease with Southern Trailers, an unrelated party, for storage space for monthly rental payments of $4,415. There was an additional agreement for in which remodeling costs would be deducted from monthly rent owed. The agreement contains a renewal option on a year-to-year basis. Under this agreement, the University paid $43,552 in the current year.
In 2007, Georgia Southern University Herty Advanced Materials Development Center entered into a real property operating lease with the Georgia Ports Authority for land, at the site of the Herty Facility, located at 110 Brampton Road, Savannah, Georgia. The lease has a 20 year term and terminates July 27, 2027. The rental payment for the current year was $1,196. Subsequent years rent increase 5% annually, through the term of the lease.
Future Commitments
Future commitments for capital leases (which here and on the Statement of Net Position) include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2015, were as follows:

- 19 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Capital Leases

Operating Leases

Year Ending June 30: 2016 2017 2018 2019 2020 2021 - 2025 2026 - 2030 2031 - 2035 2036 - 2040 2041 - 2043

$ 19,483,132 $ 19,247,006 19,127,769 19,099,868 19,103,614 95,660,111 95,630,589 59,801,388 50,740,573 11,260,015

Total Minimum Lease Payments 409,154,065 $

221,039 1,256 1,319 1,385 1,454 8,434 3,994
238,881

Less: Interest

172,629,701

Principal Outstanding

$ 236,524,364

The following is a summary of the carrying values of assets held under capital lease at June 30, 2015:

Description

Gross Amount (+)

Accumulated Depreciation
(-)

Net Capital Assets Held Under Capital Lease
at June 30, 2015 (=)

Outstanding Balances per Lease Schedules at June 30, 2015

Land - (PPV)

$

Equipment

Buildings - (PPV)

$

12,024,271 1,785,428
256,917,883

$ 784,462 62,076,327

12,024,271 1,000,966 $
194,841,556

714,434 235,809,930

270,727,582 $ 62,860,789 $ 207,866,793 $ 236,524,364

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.
Note 13. Retirement Plans
Georgia Southern University participates in various retirement plans administered by the State of Georgia under two major retirement systems: Teachers Retirement System of Georgia (TRS) and Employees' Retirement System of Georgia (ERS). 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 administrative offices.
The significant retirement plans that Georgia Southern University 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.

- 20 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Teachers' Retirement System of Georgia and Employees' Retirement System of Georgia
General Information about the Teachers' Retirement System
Plan description: All teachers of the University as defined in 47-3-60 of the Official Code of Georgia Annotated (O.C.G.A.) are provided a pension through the Teachers' Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. TRS issues a publicly available financial report that can be obtained at www.trsga.com/publications.
Benefits provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee 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. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death.
Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6% of their annual pay during fiscal year 2015. The University's contractually required contribution rate for the year ended June 30, 2015 was 13.15 % of annual University payroll. University contributions to TRS were $8,583,283 for the reporting period (fiscal year ended June 30, 2015) and $7,643,896 for the measurement period (fiscal year ended June 30,2014).
General Information about the Employees' Retirement System
Plan description: ERS is a cost-sharing multiple-employer defined benefit pension plan 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. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.
Benefits provided: The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan (GSEPS). Employees under the old plan started membership prior to July 1, 1982 and are subject to 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 modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS.
Under the old plan, the new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable 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.

- 21 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Retirement benefits paid to members are based upon the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, postretirement cost-of-living adjustments may also be made to members' 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.
Contributions: Member contributions under the old plan are 4% of annual compensation, up to $4,200, plus 6% of annual compensation in excess of $4,200. Under the old plan, the state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state 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 University's contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2015 was 21.96% of annual covered payroll for old and new plan members and 18.87% for GSEPS members. The University's contributions to ERS were $30,479 for the reporting period (fiscal year ended June 30, 2015) and $30,187 for the measurement period (fiscal year ended June 30, 2014). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2015, the University reported a liability for its proportionate share of the net pension liability for TRS and ERS totaling $77,355,890. The net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2013. An expected total pension liability as of June 30, 2014 was determined using standard roll-forward techniques. The University's proportion of the net pension liability was based on contributions to TRS and ERS during the fiscal year ended June 30, 2014. At June 30 2014, the University's TRS proportion was 0.610143%, which was an increase of 0.028185% from its proportion measured as of June 30, 2013. At June 30, 2014, the University's ERS proportion was 0.007262%, which was a decrease of 0.001484% from its proportion measured as of June 30, 2013.
For the year ended June 30, 2015, the University recognized pension expense of $6,193,161 for TRS and $-11,062 for ERS. At June 30, 2015, the University reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

- 22 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

TRS Deferred Outflow of Resources

Deferred Inflows of Resources

ERS

Deferred

Deferred

Outflow of

Inflows of

Resources

Resources

Net difference between projected and actual earnings on pension plan investments

$ 26,872,949

$

66,477

Changes in proportion and differences between University contributions and proportionate share of contributions $

4,001,721

44,316

University contributions subsequent to the measurement date

8,583,283

$

30,479

Total

$

12,585,004 $ 26,872,949 $

30,479 $

110,793

The University contributions subsequent to the measurement date of $8,583,283 for TRS and $30,479 for ERS are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ending June 30:

TRS

ERS

2016 2017 2018 2019 2020

$ -5,808,754 $

$ -5,808,754 $

$ -5,808,754 $

$ -5,808,760 $

$

363,794

-44,317 -33,238 -16,619 -16,619

Actuarial assumptions: The total pension liability as of June 30, 2014 was determined by an actuarial valuation as of June 30, 2013 using the following actuarial assumptions, applied to all periods included in the measurement:
Teachers' Retirement System:

Inflation Salary increases Investment rate of return

3.00% 3.75% - 7.00%
7.50%

average, including inflation net of pension plan investment expense
including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females set back two years for males and set back three years for females.
The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.

- 23 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Employees' Retirement System

Inflation Salary increases Investment rate of return

3.00% 5.45% - 9.25%
7.50%

average, including inflation net of pension plan investment expense
including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table for the periods after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP2000 Disabled Mortality Table set back eleven years for males for the period after disability retirement.
The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.

The long-term expected rate of return on TRS and ERS pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class

Target Allocation

Long-Term Expected Real Rate of Return *

Fixed Income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities

30.00% 39.70%
3.70% 1.60% 18.90% 6.10%

3.00% 6.50% 10.00% 13.00% 6.50% 11.00%

100.00% * Rates shown are net of the 3.00% assumed rate of inflation

Discount rate: The discount rate used to measure the total TRS and ERS pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the TRS and ERS pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

- 24 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Sensitivity of the University's proportionate share of the net pension liability to changes in the discount rate: The following presents the University's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the University's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate:

Teachers' Retirement System:
University's proportionate share of the net pension liability

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

1% Increase (8.50%)

$ 142,054,585 $ 77,083,520 $ 23,581,197

Employees' Retirement System:

1%

Current

1%

Decrease

Discount Rate

Increase

(6.50%)

(7.50%)

(8.50%)

University's proportionate share

of the net pension liability

$

397,169 $

272,370 $

166,136

Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS and ERS financial reports which are publically available at www.trsga.com/publications and www.ers.ga.gov/formspubs/formspubs, respectively.

Regents Retirement Plan

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or all exempt full and partial benefit eligible employees, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (VALIC, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Georgia Southern University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2015, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 6% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.

Georgia Southern University and the covered employees made the required contributions of $6,207,725 (9.24%) and $4,030,991 (6%), respectively.

VALIC, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.

- 25 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Note 14. Risk Management
The University System of Georgia offers its employees and retirees access to four different healthcare plan options. For the University System of Georgia's Plan Year 2015, the following healthcare plan options were available:
BlueChoice HMO Comprehensive Care Plan Consumer Choice HSA Plan Kaiser Permanente HMO
Georgia Southern University and participating employees and retirees pay premiums to the healthcare plan options to access benefits coverage. The respective health plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with the self-insured plans; including the BlueChoice HMO, Comprehensive Care Plan and Consumer Choice HSA Plan.
The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to serve as the claims administrator for the selfinsured healthcare plans. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser Permanente.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Georgia Southern University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1.
The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 15. 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 Southern University expects such amounts, if any, to be immaterial to its overall financial position.
- 26 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Litigation, claims and assessments filed against Georgia Southern University (an organizational unit of the Board of Regents of the University System of Georgia), 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, 2015.
Note 16. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
The Board of Regents Retiree Health Benefit Plan is a single-employer, defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year.
As of June 30, 2015, there were 842 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2015, Georgia Southern University recognized as incurred $3,900,193 of expenditures, which was net of $1,900,588 of participant contributions.

- 27 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Note 17. Natural Classifications with Functional Classifications
The University's operating expenses by functional classification for fiscal year 2015 are shown below:
Functional Classification

Natural Classification

Instruction

Research

Public Service

Academic Support

Student Services

Salaries

Faculty

$

Staff

Employee Benefits

Personal Services

Travel

Scholarships and Fellowships

Utilities

Supplies and Other Services

Depreciation

58,318,864 $ 12,086,721 19,491,317
90,154 1,098,418
244,992 45,695
6,747,465 2,366,194

2,403,429 $ 5,490,895 1,780,054
3,073 490,025 130,553 1,047,725 4,295,761 1,279,642

22,463 $ 730,918 227,692
1,165 31,700 111,436
2,431 451,131
11,082

1,351,650 $ 14,476,152
4,428,255 21,577
382,478 89,483 83,195
9,080,713 2,069,693

20,006 14,092,371
3,649,861 6,578
231507 371,048 597,366 4,850,566 404,782

Total Operating Expenses

$ 100,489,820 $ 16,921,157 $ 1,590,018 $ 31,983,196 $ 24,224,085

Natural Classification

Institutional Support

Functional Classification

Plant Operations Scholarships

and

and

Auxiliary

Maintenance

Fellowships Enterprises

Total Operating Expenses

Salaries

Faculty

$

Staff

Employee Benefits

Personal Services

Travel

Scholarships and Fellowships

Utilities

Supplies and Other Services

Depreciation

86,024 12,869,715 $
6,746,253 481,476 297,816
57,893 13,522,780
234,026

11,333,652 4,160,776 -383,476 32,066 $ 6,397,505 2,260,456 9,970,839

$ 9,668,280

$ 18,995,600
4,932,986 459,105 628,403
4,804,092 4,033,990 31,042,604 10,029,652

62,202,436 90,076,024 45,417,194
679,652 3,192,413 15,419,884 12,265,800 72,251,476 26,365,910

Total Operating Expenses

$ 34,295,983 $

Note 18. Affiliated Organizations

33,771,818 $ 9,668,280 $ 74,926,432 $ 327,870,789

The Georgia Southern University Foundation, Inc., Georgia Southern University Housing Foundation, Inc., Georgia Southern University Athletics Foundation, Inc., and Georgia Southern University Research and Service Foundation, Inc. are legally separate, tax exempt organizations whose activities primarily support Georgia Southern University. These affiliated organizations are considered potential component units 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 organizations may be obtained from Georgia Southern University.
- 28 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2015

EXHIBIT "D"

Georgia Southern University Housing Foundation, Inc., has been determined significant to the State of Georgia for the year ended June 30, 2015, and as such, is reported as a component unit in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). This affiliated organization issues separate audited financial statements that can be obtained from Georgia Southern University.

- 29 -

REQUIRED SUPPLEMENTARY INFORMATION

GEORGIA SOUTHERN UNIVERSITY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY TEACHERS' RETIREMENT SYSTEM OF GEORGIA
FOR THE YEAR ENDED JUNE 30, 2015

SCHEDULE "1"

University's proportion of the net pension liability University's proportionate share of the net pension liability University's covered-employee payroll University's proportionate share of the net pension liability
as a percentage of its covered employee payroll Plan fiduciary net position as a percentage of the total pension liability

2015 0.610%
$ 77,083,520.00 $ 61,951,356.00
124.43% 84.03%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 31 -

GEORGIA SOUTHERN UNIVERSITY REQUIRED SUPPLEMENTARY INFORMATION SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
FOR THE YEAR ENDED JUNE 30, 2015

SCHEDULE "2"

University's proportion of the net pension liability University's proportionate share of the net pension liability University's covered-employee payroll University's proportionate share of the net pension liability
as a percentage of its covered employee payroll Plan fiduciary net position as a percentage of the total pension liability

2015 0.007%
$ 272,370.00 $ 163,525.00
166.56% 77.99%

This schedule is intended to show information for 10 years. Additional years will be displayed as they become available. - 32 -

GEORGIA SOUTHERN UNIVERSITY REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF CONTRIBUTIONS TEACHERS' RETIREMENT SYSTEM OF GEORGIA
FOR THE YEAR ENDED JUNE 30

Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) University's covered-employee payroll Contributions as a percentage of covered-employee payroll

2015

2014

2013

2012

$ 8,583,283.00 $ 7,643,896.00 $ 6,685,303.00 $ 5,748,680.00

$ 8,583,283.00 $ 7,643,896.00 $ 6,685,303.00 $ 5,748,680.00

$

0.00 $

0.00 $

0.00 $

0.00

$ 64,900,115.00 $ 61,951,356.00 $ 58,603,283.00 $ 55,921,011.67

13.23%

12.34%

11.41%

10.28%

- 33 -

SCHEDULE "3"

2011

2010

2009

2008

2007

2006

$ 5,470,825.00 $ 5,078,763.00 $ 4,658,740.00 $ 4,403,648.00 $ 4,074,725.00 $ 3,867,088.00

$ 5,470,825.00 $ 5,078,763.00 $ 4,658,740.00 $ 4,403,648.00 $ 4,074,725.00 $ 3,867,088.00

$

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

$ 53,218,142.00 $ 52,143,357.00 $ 50,201,940.00 $ 47,453,103.00 $ 43,908,675.00 $ 41,851,602.00

10.28%

9.74%

9.28%

9.28%

9.28%

9.24%

- 34 -

GEORGIA SOUTHERN UNIVERSITY REQUIRED SUPPLEMENTARY INFORMATION
SCHEDULE OF CONTRIBUTIONS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
FOR YEAR ENDED JUNE 30

Contractually required contribution Contributions in relation to the contractually required contribution Contribution deficiency (excess) University's covered-employee payroll Contributions as a percentage of covered-employee payroll

2015

2014

2013

2012

$

30,479.00 $ 30,187.00 $ 30,247.00 $ 26,844.00

$

30,479.00 $ 30,187.00 $ 30,247.00 $ 26,844.00

$

0.00 $

0.00 $

0.00 $

0.00

$

138,794.00 $ 163,525.00 $ 202,999.00 $ 230,815.00

21.96%

18.46%

14.90%

11.63%

- 35 -

SCHEDULE "4"

2011

2010

2009

2008

2007

2006

$ 26,056.00 $ 30,300.00 $ 39,842.00 $ 31,755.00 $ 25,615.00 $ 18,074.00

$ 26,056.00 $ 30,300.00 $ 39,842.00 $ 31,755.00 $ 25,615.00 $ 18,074.00

$

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

$ 250,294.00 $ 291,066.00 $ 334,252.00 $ 304,514.00 $ 245,721.00 $ 173,622.00

10.41%

10.41%

11.92%

10.43%

10.42%

10.41%

- 36 -

GEORGIA SOUTHERN UNIVERSITY NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
FOR THE YEAR ENDED JUNE 30, 2015

SCHEDULE "5"

Teachers' Retirement System
Changes of assumptions : In 2010 and later, the expectation of retired life mortality was changed to the RP2000 Mortality Tables rather than the 1994 Group Annuity Mortality Table, which was used prior to 2010. In 2010, rates of withdrawal, retirement, disability and mortality were adjusted to more closely reflect actual experience. In 2010, assumed rates of salary increase were adjusted to more closely reflect actual and anticipated experience.
Method and assumptions used in calculations of actuarially determined contributions : The actuarially determined contribution rates in the schedule of contributions are calculated as of June 30, three years prior to the end of the fiscal year in which contributions are reported. The following actuarial methods and assumptions were used to determine the contractually required contributions for year ended June 30, 2015 reported in that schedule:

Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation rate Salary increases Investment rate of return

June 30, 2012 Entry age Level percentage of payroll, open 30 years Seven-year smoothed market 3.00% 3.75 7.00%, including inflation 7.50%, net of pension plan investment
expense, including inflation

Employees' Retirement System

Changes of assumptions : There were no changes in assumptions or benefits that affect the measurement of the total pension liability since the prior measurement date.

Method and assumptions used in calculations of actuarially determined contributions : The actuarially determined contribution rates in the schedule of contributions are calculated as of June 30, three years prior to the end of the fiscal year in which contributions are reported. The following actuarial methods and assumptions were used to determine the contractually required contributions for year ended June 30, 2015 reported in that schedule:

Valuation date Actuarial cost method Amortization method Remaining amortization period Asset valuation method Inflation rate Salary increases
Investment rate of return

June 30, 2012 Entry age Level dollar, open 30 years Seven-year smoothed market 3.00% 2.725% 4.625% for FY 2012-2013, 5.45% - 9.25% for FY2014+ 7.50%, net of pension plan investment
expense, including inflation

- 37 -

SUPPLEMENTARY INFORMATION -38 -

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

GEORGIA SOUTHERN UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2015

SCHEDULE "6"

$

31,030,394.86

2,611,429.82

3,577,093.41 3,185,920.03
99,924.25 46,689.75

40,551,452.12

462,570.29 16,735,133.21
266,892.63 6,317,270.59
23,781,866.72

5,594,232.07 2,517,807.60
392,339.27 5,365,051.81
132,811.35 2,606,130.29
64,000.00
97,213.01
16,769,585.40

$

40,551,452.12

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 39 -

GEORGIA SOUTHERN UNIVERSITY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2015

SCHEDULE "7"

REVENUES
State Appropriation State General Funds
Other Funds
Total Revenues
CARRY-OVER FROM PRIOR YEARS
Transfers from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Special Funding Initiative Teaching
Total Expenditures
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2015
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$

85,934,264.00 $

205,937,991.00

291,872,255.00

85,934,264.00 $ 183,801,465.60
269,735,729.60

0.00 -22,136,525.40
-22,136,525.40

0.00 291,872,255.00

16,577,037.57 286,312,767.17

16,577,037.57 -5,559,487.83

208,159.00 291,664,096.00
291,872,255.00

$

0.00

199,964.51 269,589,117.62 269,789,082.13
16,523,685.04 $

8,194.49 22,074,978.38 22,083,172.87
16,523,685.04

16,744,470.85 100,262.70

88,013.43 -9,546.35

-100,262.70 -16,577,037.57

$

16,769,585.40

SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Inventories
Total Reserved
Unreserved Surplus
Total Fund Balance

$

5,594,232.07

2,517,807.60

392,339.27

5,365,051.81

132,811.35

2,606,130.29

64,000.00

16,672,372.39

97,213.01

$

16,769,585.40

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 40 -

GEORGIA SOUTHERN UNIVERSITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015

Special Funding Initiatives State Appropriation
State General Funds
Teaching State Appropriation
State General Funds
Other Funds
Total Teaching
Total Operating Activity

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

0.00 $

0.00 $

208,159.00 $

208,159.00

85,726,105.00 186,561,855.00
272,287,960.00

85,726,105.00 186,561,855.00
272,287,960.00

85,726,105.00 205,937,991.00
291,664,096.00

85,726,105.00 183,801,465.60
269,527,570.60

$

272,287,960.00 $

272,287,960.00 $

291,872,255.00 $

269,735,729.60

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 41 -

SCHEDULE "8"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Negative

Expenditures Compared to Budget

Variance

Actual

Positive

Excess of Funds Available Over Expenditures

$

0.00 $

0.00 $

208,159.00 $

0.00 $

199,964.51 $

8,194.49 $

8,194.49

0.00 16,577,037.57
16,577,037.57

$

16,577,037.57 $

0.00 0.00
0.00

85,726,105.00 200,378,503.17
286,104,608.17

0.00 -5,559,487.83
-5,559,487.83

85,715,105.00 183,874,012.62
269,589,117.62

11,000.00 22,063,978.38
22,074,978.38

11,000.00 16,504,490.55
16,515,490.55

0.00 $

286,312,767.17 $

-5,559,487.83 $

269,789,082.13 $

22,083,172.87 $

16,523,685.04

- 42 -

Special Funding Initiatives State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity
Prior Year Reserves Not Available for Expenditure Inventories Uncollectible Accounts Receivable
Budget Unit Totals

GEORGIA SOUTHERN UNIVERSITY STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015

Beginning Fund Balance July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2014
Surplus

Prior Period Adjustments

$

0.00 $

0.00 $

0.00 $

0.00

73,096.21 16,604,204.06 16,677,300.27
16,677,300.27

0.00 -16,577,037.57 -16,577,037.57
-16,577,037.57

-73,096.21 -27,166.49 -100,262.70
-100,262.70

53,000.00 114,433.28

0.00 0.00

0.00 0.00

$

16,844,733.55 $

-16,577,037.57 $

-100,262.70 $

23,420.96 55,046.12 78,467.08
78,467.08
0.00 0.00
78,467.08

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 43 -

SCHEDULE "9"

Other Adjustments

Early Return Fiscal Year 2015
Surplus

Excess of Funds Available
Over Expenditures

Ending Fund Balance June 30

Analysis of Ending Fund Balance

Reserved

Surplus

Total

$

0.00 $

0.00 $

8,194.49 $

8,194.49 $

0.00 $

8,194.49 $

8,194.49

-11,000.00 -18,378.07 -29,378.07
-29,378.07

11,000.00 18,378.07

$

0.00 $

0.00 0.00 0.00
0.00

11,000.00 16,504,490.55 16,515,490.55
16,523,685.04

23,420.96 16,541,158.60 16,564,579.56
16,572,774.05

0.00 16,475,561.04 16,475,561.04
16,475,561.04

0.00 0.00

0.00 0.00

64,000.00 132,811.35

64,000.00 132,811.35

0.00 $

16,523,685.04 $

16,769,585.40 $

16,672,372.39 $

Summary of Ending Fund Balance Reserved
Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Inventories Unreserved Surplus
Total Ending Fund Balance - June 30

$

5,594,232.07

2,517,807.60

392,339.27

5,365,051.81

132,811.35

2,606,130.29

64,000.00

$

16,672,372.39 $

23,420.96 65,597.56
89,018.52

23,420.96 16,541,158.60
16,564,579.56

97,213.01 16,572,774.05

0.00 0.00

64,000.00 132,811.35

97,213.01 $ 16,769,585.40

$ 5,594,232.07 2,517,807.60 392,339.27 5,365,051.81 132,811.35 2,606,130.29 64,000.00

97,213.01

97,213.01

97,213.01 $ 16,769,585.40

- 44 -

GEORGIA SOUTHERN UNIVERSITY RECONCILIATION OF BUDGET TO GAAP
YEAR ENDED JUNE 30, 2015
Presented below is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A.
Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "1")
Amounts reported for Business-Type Activities in the Statement of Net Position are different because:
Capital Assets used in Business-Type Activities are not reported in the Budget Fund.
Uncollectible accounts receivable are reported as an asset and reserved fund balance in the Budget Fund and as a contra-asset account on the Statement of Net Position.
Collection of AR amounts that were Reserved as Uncollectible in Prior Years
Changes in the Fair Market Value of Investments are recognized on the Statement of Net Position, but are not reported in the Budget Fund.
Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity
Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity
Endowment Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Endowment Fund Activity
Loan Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Loan Fund Activity
Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activity Fund Activity
The budgetary basis of accounting implemented by the State of Georgia recognizes expenditures when encumbered. The following adjustments were made to eliminate this activity for reporting on the Statement of Net Position. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Payables for goods and services provided in the current fiscal year reported in the Budget Fund as encumbrances payable are reported as accounts payable for GAAP reporting. Reimbursement from grantors reported as revenues in the Budget Fund that are for expenditures based on encumbrances are deferred for GAAP reporting. Total Net Effect of Encumbrance Activity
Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Accounts Payable Capital Leases Payable Compensated Absences Payable Contracts Payable Deferred Outflows on Defined Benefit Pension Plan Deferred Defined Benefit Pension Plan Due From Component Units Due To Component Units Deferred Inflows on Defined Benefit Pension Plan Notes and Loans Payable Total Liabilities
Net Position of Business-Type Activities (Exhibit "A")
The supplementary information presented on Schedules 6, 7, 8, and 9 was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. The information was derived from, and relates directly to, the same information used to prepare the financial statements. However, the budgetary statutes and regulations of the State of Georgia require reporting of certain information that is not in accordance with generally accepted accounting principles. Presented on this schedule is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A.
- 45 -

SCHEDULE "10"

$

16,769,585.40

$

6,723,014.11

-6,723,014.11

$

6,603,811.26

-2,106,291.86

$

2,465,814.07

0.00

$

2,784,432.63

0.00

$

8,139,788.18

-155,677.55

546,081,785.84 -132,811.35 -3,322.52 54,651.36
0.00 4,497,519.40 2,465,814.07 2,784,432.63 7,984,110.63

$

16,735,133.21

-1,814,014.18 -2,996,409.69

11,924,709.34

$

-874,150.13

-236,524,363.10

-6,468,416.33

-1,164,775.68

12,615,483.00

-77,355,890.00

9,127,479.82

-13,143.98

-26,983,742.00

-1,503,559.46

-329,145,077.86

$

263,281,396.94

(This page left intentionally blank)

GEORGIA SOUTHERN UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2014

SCHEDULE "11"

Totals per Annual Supplement
Accruals June 30, 2015 June 30, 2014
Compensated Absences June 30, 2015 June 30, 2014
Adjustments Shared Services on Jointly Staffed Personnel Armstrong Atlantic State University Lewis, Geoj Lubecki, Jacek Marshall, Nandi Sturz, Bradley Columbus State University Keeley, Howard Levernier, Edna East Georgia College Aceto, Jonathan Fort Valley State University Moore, Teah Georgia Southwestern State University Patternson, Charles Georgia State University Szymanski, Robert Skidaway Institute of Oceanography Clark, Alexander University of Georgia Smith, Ralphel University of West Georgia Chibbaro, Julia Defoor, Leanne Prince, Bradley
Immaterial Variance

SALARIES

$

152,141,714 $

TRAVEL 3,163,359

768,810 -674,002

75,356 -39,580

6,008,747 -5,865,131

3,229 -100 269
-3,500
-1,077 -27,451
355
3,000
-146,557
-7,535
30,000
14,533
4,501 17,890 10,765

$

152,278,460 $

-12,402
5,680 3,192,413

- 47 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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 19, 2016

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Dr. Jean E. Bartels, Interim President Georgia Southern University
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of Georgia Southern University as of and for the year ended June 30, 2015, and have issued our report thereon dated January 19, 2016.
Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered Georgia Southern University's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Georgia Southern University's internal control. Accordingly, we do not express an opinion on the effectiveness of Georgia Southern University's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

2015YB-30

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify a certain deficiency in internal control, described in the accompanying Schedule of Findings and Questioned Costs as item FS 2015-001 that we consider to be a significant deficiency.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Georgia Southern University's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
We noted certain matters that we have reported to management of Georgia Southern University in a separate letter dated January 19, 2016.
Georgia Southern University's Response to Findings
Georgia Southern University's response to the findings identified in our audit is described in the accompanying Schedule of Findings and Questioned Costs. Georgia Southern University's response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:er 2015YB-30

Greg S. Griffin State Auditor

SECTION III AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA SOUTHERN UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2015

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-539-14-01

Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES
SPECIAL TESTS AND PROVISIONS Calculation of Title IV Refunds U.S. Department of Education 84.SFA Student Financial Aid Cluster Finding Control Number: FA-539-14-01
The corrective action plan for this finding has been fully implemented. The auditors nor Federal Program Reviewers found any problems with refund calculations in fiscal year 2015. We are awaiting confirmation from the U.S. Department of Education that this finding has been resolved.

- 1 -

SECTION IV CURRENT YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA SOUTHERN UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2015

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS-2015-001 Inadequate Controls over the Information Technology Store

Control Category:

Expenditures/Liabilities/Disbursements

Inventories

Internal Control Impact: Significant Deficiency

Compliance Impact: N/A

Description:

The University's Information Technology Store did not have adequate separation of duties and internal controls in place over the expenditure and inventory processes to ensure that all inventory for resale were run through the Point-of-Sale inventory system as required.

Criteria:

Management is responsible for designing and maintaining internal controls that provide reasonable assurance that all transactions are processed according to established procedures. All inventory for resale should be entered into the Point-of-Sale inventory system when received. In addition, all sales should be recorded in the Point-of-Sale inventory system.

Condition:

Our test of seven Technology Store orders revealed that four orders (457 items with a total value of $10,039.00) were not entered into the Point-of-Sale inventory system when received. Included in these items was a computer that was sold and delivered to a customer without being entered into the Point-ofSale inventory system or receipt of payment from the customer. After this issue was brought to the attention of management by the auditors, the computer was entered into the inventory system and payment was processed. The ordering/purchasing, receiving, inventory control and record keeping functions were not properly separated.

Cause:

In discussing the deficiency with management, they stated that the employees did not properly enter the items into the point-of-sale inventory system and track payments. In addition, there was not appropriate staffing to adequately separate all duties.

Effect or Potential Effect: Inventory for resale items were purchased and sold without being properly accounted for and recorded. Failure to implement and maintain adequate internal controls over inventory for resale increases the risk that misappropriation of assets, fraud, errors, and irregularities could occur and not be detected by the University.

Recommendation:

Management should investigate any inventory items not entered into the Pointof-Sale inventory system and take appropriate action. The University should implement controls to ensure that all merchandise items purchased for retail are properly accounted for in the Point-of-Sale inventory system. Management should also monitor controls to provide reasonable assurance that transactions are processed according to established procedures and payment is received for all transactions. In addition, the University should implement procedures to ensure the key accounting functions of ordering/purchasing, receiving, inventory control and record keeping are properly separated.

- 1 -

GEORGIA SOUTHERN UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2015
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS Views of Responsible Officials and Corrective Action Plans: We concur with this finding. Tech Corner current procedures for ordering, receiving, recording in point of sale inventory and subsequent recording of sales, will be reviewed by a team comprised of store management, Auxiliary Division accounting management and University financial management. Processes will be flowcharted and examined for weaknesses in separation of duties and generally accepted accounting internal controls. This task will be finalized by development of written procedures approved by Auxiliary AVP, AVP-Finance and Vice President for Business and Finance. In July 2015, The Tech Corner store purchased and implemented a new inventory point of sale system specifically designed for operations of this business type. The implementation of this system coupled with implementation of revised procedures will further enhance the security and controls over Tech Corner inventory and sales operations. In addition to development of written procedures, Tech Corner staff, Auxiliary accounting staff and Financial Account staff will be trained on approved procedures. The addition of an assistant manager in Tech Corner has allowed implementation of more separation of duties, by implementation of separate job duties for ordering resale product and receiving of products for resale Estimated Corrective Action Date: Contact Person: Eddie Mills Title: Director of Auxiliary Operations Telephone: 912-478-1302 E-mail: emills@georgiasouthern.edu FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.
- 2 -