Georgia Southwestern State University, Americus, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
I
GEORGIA SOUTHWESTERN STATE UNIVERSITY AMERICUS, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2007
Russell W. Hinton State Auditor

GEORGIA SOUTHWESTERN STATE UNIVERSITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENTOFNETASSETS

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

3

C STATEMENTOFCASHFLOWS

4

D NOTES TO THE FINANCIAL STATEMENTS

5

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

22

2 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

23

3 RECONCILIATION OF SALARIES AND TRAVEL

25

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

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
November 19, 2007

Honorable Sonny Perdue, Governor Members ofthe General Assembly of Georgia Members ofthe Board of Regents of the University System of Georgia
and Honorable Kendall Blanchard, President Georgia Southwestern State University
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying basic financial statements (Exhibits A through D) of Georgia Southwestern State University, an organizational unit ofthe State ofGeorgia, as ofand for the year ended June 30, 2007. These financial statements are the responsibility of the University's management. 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 ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As discussed in Note 1, the financial statements of Georgia Southwestern State 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 Southwestern State University. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State ofGeorgia, in conformity with accounting principles generally accepted in the United States of America.

07ARL-62

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position ofGeorgia Southwestern State University as ofJune 30, 2007, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Management's Discussion and Analysis is not a required part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it.
Our audit was conducted for the purpose offorming an opinion on the basic financial statements of Georgia Southwestern State University taken as a whole. The accompanying supplementary information (Schedules 1 through 3) is presented for purposes of additional analysis and is not a required part ofthe basic financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Respectfully submitted,
~~....s& w.~,k Russell W. Hinton, CPA, CGFM State Auditor
RWH:gp 07ARL-62

REQUIRED SUPPLEMENTARY INFORMATION

GEORGIA SOUTHWESTERN STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Georgia Southwestern State University is one of the 35 institutions of higher education of the University System of Georgia. The University, located in Americus, Georgia, was founded in 1906. The University offers baccalaureate and masters degrees in a wide variety of subjects. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 2,400 students each year.

Faculty

Students (Headcount)

Students (FTE)

Fiscal Year 2007 Fiscal Year 2006 Fiscal Year 2005

101

2,457

2,161

103

2,427

2,123

97

2,323

2,016

Overview ofthe Financial Statements and Financial Analysis

Georgia Southwestern State University is proud to present its financial statements for fiscal year 2007. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; 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 2007 and fiscal year 2006.

Statement ofNet Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Georgia Southwestern State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the Notes to the Financial Statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The

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corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution 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 net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement ofNet Assets, Condensed

June 30, 2007

June 30, 2006

Assets Current Assets Capital Assets, Net Other Assets

$ 6,662,054 44,298,746 1,228,407

$ 6,679,961 41,811,361 1,192,884

Total Assets

$ 52,189,207

$ 49,684,206

Liabilities Current Liabilities Noncurrent Liabilities

4,116,865 329,713

$ 3,344,084 268,091

Total Liabilities

$ 4,446,578

$ 3,612,175

Net Assets Invested in Capital Assets, Net of Debt Restricted - Nonexpendable Restricted - Expendable Unrestricted

$ 44,298,746 398,221
1,252,025 1,793,637

$ 41,811,361 387,971
1,213,454 2,659,245

Total Net Assets

$ 47!742,629

$ 46,072,031

The total assets of the institution increased by $2,505,001. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $2,487,385 in the category of Capital Assets, Net. The balance of the increase is mainly in receivable categories.

The total liabilities for the year increased by $834,403. The combination of the increase in total assets of $2,505,001 and the increase in total liabilities of $834,403 yields an increase in total net assets of $1,670,598.

Statement ofRevenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and

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constituencies of the institution. 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 institution. 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 institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2007

June 30, 2006

Operating Revenues Operating Expenses

$ 19,489,130 33,735,259

$ 18,303,265 31,475,194

Operating Loss

$ -14,246,129

$ -13,171,929

Nonoperating Revenues and Expenses

12,630,439

12,003,449

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

$ -1,615,690

$ -1,168,480

Other Revenues, Expenses, Gains or Losses

3,286.288

24,827,604

Increase (Decrease) in Net Assets

$ 1,670,598

$ 23,659,124

Net Assets at Beginning of Year

46,072.031

22,412.907

Net Assets at End ofYear

$ 47,742.629

$ 46,072.031

The Statement of Revenues, Expenses and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows:

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Revenue By Source For The Years Ended June 30, 2007 and June 30, 2006

June 30, 2007

June 30, 2006

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other

$ 5,540,292 6,522,603
2,098,894 5,079,978
247,363

$ 4,973,104 6,625,853
1,699,018 4,839,734
165,556

Total Operating Revenue

$ 19,489,130

$ 18,303,265

Nonoperating Revenue State Appropriations Gifts Investment Income Other

$ 12,227,642 76,178
336,269 -9 650

$ 12,158,474
237,772 -392,797

Total Nonoperating Revenue

$ 12,630,439

$ 12,003,449

Capital Grants and Gifts State

$ 3,286,288

$ 24,827,604

Total Revenues

$ 35,405.857

$ 55,134,318

Expenses (By Functional Classification) For The Years Ended June 30, 2007 and June 30, 2006

June 30, 2007

June 30, 2006

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

$ 11,893,985 191,746
1,030,849 2,144,253 2,118,258 4,181,968 5,505,887 1,903,507 4,764,806

$ 10,599,637 337,586
1,057,592 2,120,743 1,915,719 4,256,055 4,883,882 1,846,061 4,457,919

Total Operating Expenses

$ 33,735,259

$ 31,475,194

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Operating revenues increased by $1,185,865 in fiscal year 2007. Tuition and Fees included an 11 % increase, revenues slightly decreased in Grants and Contracts, and increased in both the Auxiliary and Other categories.

Nonoperating revenues increased by $626,990 for the year primarily due to an increase of $69,168 in State Appropriations.

The compensation and employee benefits category increased by $1,322,901 and primarily affected the Instruction and Public Service categories. The increase reflects the merit increases and an increased cost of health insurance for the employees of the institution.

Utilities decreased by $34,769 during the past year. The decrease was primarily associated with a moderate winter in fiscal year 2007 and affected the Plant Operations and Maintenance category.

Statement ofCash Flows

The final statement presented by the Georgia Southwestern State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. 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 institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing 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 Assets.

Cash Flows for the Years Ended June 30, 2007 and June 30, 2006, Condensed

June 30, 2007

June 30, 2006

Cash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities

$ -12,901,288 12,306,147 -28,648 274,787

$ -11,274,542 12,112,847 -407,293 247,528

Net Change in Cash Cash, Beginning of Year

$ -349,002 5,092,335

$

678,540

4,413,795

Cash, End of Year

$ 4/243,333

$ 510921335

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Capital Assets The University had one significant capital asset addition for facilities in fiscal year 2007. The Wheatley Hall renovation was completed in June of 2007. For additional information concerning Capital Assets, see Notes 1, 6, 8, and 9 in the Notes to the Financial Statements. Long-Term Liabilities Georgia Southwestern State University had Long-Term Liabilities of $749,642 of which $419,929 was reflected as current liability at June 30, 2007. For additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements. Economic Outlook The 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 beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Dr. Kendall A. Blanchard, President Georgia Southwestern State University
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BASIC FINANCIAL STATEMENTS - 1-

GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Investments Notes Receivable, Net Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Benefits Payable Contracts Payable Deposits Deferred Revenue (Note 7) Other Liabilities Deposits Held for Other Organizations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Compensated Absences
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Assets
The notes to the financial statements are an integral part of this statement. -2 -

EXHIBIT"A"

$

4,743,333

140,535 1,245,416
393,276 139,494

$

6,662,054

$

632,294

596,113

44,298,746

$ 45,527,153

$ 52,189,207

$

85,745

61,082

10,031

750,435

131,750

2,585,941

24,663

47,289

419,929

$

4,116,865

$

329,713

$

4 446,578

$ 44,298,746
398,221 1,252,025 1,793,637

$ 47,742,629

GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2007

EXHIBIT"B"

OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal State Other
Sales and Services of Educational Departments 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 Income (Loss)
NONOPERATING REVENUES (EXPENSES)
State Appropriations Gifts Interest and Other Investment Income Other Nonoperating Revenues
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement.
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$

7,495,062

-1,954,770

4,150,471 260,229
2,111,903 2,098,894
4,590

1,692,746 934,406
1,122,031 83,401
337,321 881,015
29,058 242,773

$ 19,489,130

$

5,729,117

8,231,073

4,281,674

111,454

301,514

2,392,412

1,552,934

9,582,402

1,552,679

$ 33,735,259

$ -14,246, 129

$ 12,227,642 76,178 336,269 -9650

$

12,630,439

$

-1,615,690

$

3,286,288

$

1,670,598

46,072,031

$ =====4=7,.,.74..,2=,6=2=9

GEORGIA SOUTHWESTERN STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2007
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (Payments)
Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments
Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Change in Fair Value of Investments Recognized as a Component of Interest Income
The notes to the financial statements are an integral part of this statement. -4 -

EXHIBIT"C"

$

5,590,300

6,310,816

2,098,894

-15,844,955

-13,961,274

-2,392,412

20,917

1,769,233 735,639
1,118,600 83,192 332,644 816,397 35,378 385,343

$ -12,901,288

$ 12,227,642 2,327 76178
$ 12,306,147

$

3,286,288

-3,314,936

$

-28 648

$

2,717

272,070

$

274 787

$

-349,002

5,092,335

$

4,743,333

$ -14,246, 129
1,552,679 -253,209 -52,261 -20,219
20,914 37,678 53,415 -7,318 13162
$ -12,901,288
$===64==1=9=9

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Georgia Southwestern State 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 Southwestern State University is one of thirty-five (35) 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 Southwestern State 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 Southwestern State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Southwestern State 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 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 15 for additional information.
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. 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, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required.

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GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominant activity takes place.
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, except as noted in the preceding paragraph. 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.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of petty cash and demand deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool.
INVESTMENTS The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. 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 Assets.
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 each residing 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 grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
INVENTORIES Consumable supplies are recorded on the consumption method and are valued at cost, using the weighted average method. Resale inventories are valued at costing using the weighted average method.
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GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NONCURRENTINVESTMENTS Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement ofNet Assets.
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 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 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 will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To obtain the total picture of 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. The bonds so issued 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.
For projects managed by GSFIC, the 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, 2007, GSFIC did not transfer any capital additions to Georgia Southwestern State University.
DEPOSITS Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.
DEFERRED REVENUES Deferred revenues 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. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.

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GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. Georgia Southwestern State University had accrued liability for compensated absences in the amount of $736,480 as of July 1, 2006. For fiscal year 2007, $507,356 was earned in compensated absences and employees were paid $494,194, for a net increase of $13,162. The ending balance as of June 30, 2007 in accrued liability for compensated absences was $749,642.

NONCURRENT LIABILITIES Noncurrent liabilities include liabilities that will not be paid within the next fiscal year.

NET ASSETS The University's net assets are classified as follows:

Invested in capital assets, net ofrelated debt: 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 invested in capital assets, net of related debt. 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 net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 4415-7 of Annotated Code of Georgia.

Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

Expendable Restricted Net Assets include the following:

Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans

$ 196,404 795,353 260,268

Total Restricted Expendable

$ 1,252.025

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GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NET ASSETS Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus) of $1,813.39. Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R&RReserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted
Total Unrestricted Net Assets

$ 844,460 895,927 36,500 16 750
$ 1,793,637

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 Southwestern State 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 The University has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises, net of scholarship allowances, (3) most Federal, state and local grants and contracts, and (4) interest on institutional student loans.

Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues 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.

-9-

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 Assets. 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.
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 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
- 10 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"D"

NOTE 2: DEPOSITS AND INVESTMENTS

DEPOSITS 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, 2007, the carrying value of deposits was $1,598,072 and the bank balance was $2,128,609. Of the University's deposits, $1,910,858 were uninsured. Of these uninsured deposits, $1,910,858 were collateralized with securities held by the financial institution's trust department or agent in the University's name.

INVESTMENTS Georgia Southwestern State 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.

The University's investments as of June 30, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Investment Maturity 6-10 Years

Debt Securities Mutual Bond Funds

$ 260,886 $ 260.886

Other Investments Equity Mutual Funds

371,408

Investment Pools Office of Treasury and Fiscal Services Georgia Fund 1

3,140,111

Total Investments

$ 3,772.405

The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 15 days.

- 11 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS 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.

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

The investments subject to credit quality risk are reflected below:

Related Debt Securities Mutual Bond Funds
NOTE 3: ACCOUNTS RECEIVABLE

Fair Value $===26"='0="'.8'=='8==6

AA $====26"'='0'='=.8"='8==6

Accounts receivable consisted of the following at June 30, 2007:

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Georgia State Financing and Investment Commission Other

$ 138,946 352,845 140,535 322,684 472,694

$ 1,427,704

Less: Allowance for Doubtful Accounts

41 753

Net Accounts Receivable

$ 1,385.951

NOTE 4: INVENTORIES

Inventories consisted of the following at June 30, 2007:

Bookstore Other

$ 360,868 32,408

Total

$=====3-93-,2===7==6

- 12 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 5: NOTES/LOANS RECEIVABLE

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2007. 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. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2007, the allowance for uncollectible loans was $26,932.

NOTE 6: CAPITAL ASSETS

Following are the changes in capital assets for the year ended June 30, 2007:

Beginning Balance July 1, 2006

Additions

Reductions

Ending Balance June 30, 2007

Capital Assets, Not Being Depreciated:

Land

$

Construction Work-In-Progress

529,207 2 994 197 $

981 648 $

$ 2,915,253

529,207 1,060,592

Total Capital Assets Not Being Depreciated

$ 3,523,404 $

981 648 $ 2,915,253 $ 1,589,799

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

51,579,083 $ 1,267,167 2,940,502 6,188,398

5,585,325
191,898 $ 201 137

$
159,779 4 938

57,164,408 1,267,167 2,972,621 6,384,597

Total Assets Being Depreciated

$ 61,975,150 $ 5,978,360 $

164 717 $ 67,788,793

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

15,113,404 $ 1,129,988 2,415,465 5,028,336

1,239,463
164,945 $ 148 271

$
155,088 4 938

16,352,867 1,129,988 2,425,322 5,171,669

Total Accumulated Depreciation

$ 23,687,193 $ 1,552,679 $

160 026 $ 25,079,846

Total Capital Assets, Being Depreciated,

Net

$ 38,287,957 $

4,425,681 $

4 691 $ 42,708,947

Capital Assets, Net

$ 41,811.361 $ 5,407.329 $ 2,919.944 $ 44 298 746

NOTE 7: DEFERRED REVENUE

Deferred revenue consisted of the following at June 30, 2007:

Prepaid Tuition and Fees Other Deferred Revenue
Total

$ 1,065,415 1,520,526
$ 2,585,941

- 13 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 8: LONG-TERM LIABILITIES

Long-term liability activity for the year ended June 30, 2007 was as follows:

Other Liabilities Compensated Absences

Beginning Balance Julx 1, 2006

Additions

Reductions

Ending Balance June 30, 2007

Current Portion

$

736 480 $

501356 $

424 124 $

742,642 $

412 222

NOTE 9: LEASE OBLIGATIONS

OPERATING LEASES Georgia Southwestern State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2007 through 2011. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

FUTURE COMMITMENTS Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows:

Year Ending June 30: 2008 2009 2010 2011
Total Minimum Lease Payments

Operating Leases

$

16,938

14,801

12,763

5 078

Georgia Southwestern State University's fiscal year 2007 expense for rental of real property and equipment under operating leases was $25,043.

NOTE 10: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Georgia Southwestern State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the

- 14 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"D"

NOTE 10: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Georgia Southwestern State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Southwestern State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 701,424 $ 672,470 $ 686,260

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. 4721-1 et.seq. and is 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 a principal administrator, 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 (AIG-VALIC, American Century, 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 Southwestern State 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

- 15 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Funding Policy year 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Georgia Southwestern State University and the covered employees made the required contributions of$431,091 (9.66% or 8.13%) and $241,658 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Georgia Southwestern State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2007 amounted to $24,996 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
- 16 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Contributions The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
NOTE 11: RISK MANAGEMENT
The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Southwestern State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare 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 these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees.
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 Southwestern State 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.
- 17 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 12: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Southwestern State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia Southwestern State 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, 2007.
NOTE 13: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, 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.
As of June 30, 2007, there were 164 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2007, Georgia Southwestern State University recognized as incurred $645,981 of expenditures, which was net of $249,146 of participant contributions.

- 18 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 14: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The University's operating expenses by functional classification for fiscal year 2007 are shown below:

Natural Classification
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and
Fellowships Utilities Supplies and Other
Services Depreciation
Total Operating Expenses

Instruction

Functional Classification

Research

Public Service

Academic Sui;mort

Student Services

$ 5,656,824 $ 1,738,067 1,826,911
90,471
21,684 63,497
2,496,531
$ I I 893 985 $

24,951 $ 86,160 39,811
4,350
789
31,522 4163
191746 $

3,892 $ 517,265 123,412
30,526
108,419 8,360
236,545 2430
1030849 $

2,500 $ 1,368,760
365,675
25,855
6,555
202,112 172,796
2 144 253 $

2,700 1,173,197
319,453
75,228
22,370 23,006
500,651 1 653
2118 258

Natural Classification
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and
Fellowships Utilities Supplies and Other
Services Depreciation
Total Operating Expenses

Institutional Sum2ort

Functional Classification

Plant

Operations and Scholarships

Auxiliary

Maintenance and Fellowshi12s Entemrises

Total Operating Ex12enses

$ 2,075,503 $ 1,201,649 99,857 53,205

713,488 208,520 $ -202,842
2,436

$ 59,885

38,250 $ 558,633 136,358 214,439
19,443

5,729,117 8,231,073 4,281,674
111,454 301,514

755 27,218

1,321,188

1,843,445

395,739 102,321

2,392,412 1,552,934

663,155 60,626

2,217,281 1,245,816

177

3,234,428

9,582,402

65 195

1,552,679

$ 4l8]968 $ 5 505 887 $ 1903507 $ 4.764 806 $ 33 735 259

NOTE 15: AFFILIATED ORGANIZATIONS

The Georgia Southwestern State University Foundation is a legally separate, tax exempt organization whose activities primarily supports Georgia Southwestern State University. These affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of these affiliated organizations are not included in these financial statements. Copies of the financial statements for the affiliated organizations may be obtained from Georgia Southwestern State University.

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SUPPLEMENTARY INFORMATION - 21 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND JUNE 30, 2007

SCHEDULE "1"

ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Benefits Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Regular
Total Fund Balances
Total Liabilities and Fund Balances

$

2,033,758.76

233,713.70

38,196.07 138,335.81
32,407.61

$ ====2'=47=6=,4=1=1.=95=

$

61,081.87

910,830.42

10,030.55

1,091,734.67

10,775.00

$

2,084,452.51

$

503.64

106,079.30

17,004.57

196,043.56

34,014.98

36,500.00

1,813.39

$

391,959.44

$ =====2,=47=6=,4=1=1..9..5=

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 comprehensive basis of accounting other than generally accepted accounting principles.
- 22 -

GEORGIA SOUTHWESTERN STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2007

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Federal Funds Other Funds
Total Revenues
EXPENDITURES
Special Funding Initiatives 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 Office of Treasury and Fiscal Services Year Ended June 30, 2006
FUND BALANCE JUNE 30
SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus
Total Fund Balance

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 12,227,880.00 $ 12,227,880.00 $

4,064,378.00

6,183,617.47

13,595,630.00

13,725,291.09

$ 29,887,888.00 $ 32,136,788.56 $

0.00 2,119,239.47
129,661.09
2,248,900.56

$

139,675.00 $

139,675.00 $

29,748,213.00

31,997,066.35

$ 29,887,888.00 $ 32,136,741.35 $

$

0.00 $

47.21 $

0.00 -2,248,853.35
-2,248,853.35
47.21

376,088.39 237.57

9,040.45 6,783.39

-237.57

$

391,959.44

$

503.64

106,079.30

17,004.57

196,043.56

34,014.98

36,500.00

$

390,146.05

1 813.39

$ =====3=91=,9=5=9.=44=

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 comprehensive basis of accounting other than generally accepted accounting principles.
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GEORGIA SOUTHWESTERN STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2007

SCHEDULE "3"

Totals per Annual Supplement

Accruals June 30, 2007 June 30, 2006

Prepaid Items June 30, 2007 June 30, 2006

Compensated Absences June 30, 2007 June 30, 2006

Adjustments

Shared Services on Jointly Staffed Personnel

Abraham Baldwin Agricultural College

Miller,

Paul

Coastal Georgia Community College

Szmedra, Phillip

Fort Valley State University

Miller,

Juandolyn

Middle Georgia College

Logan,

William

Sullivan,

Troy

SALARIES

$

13,966,109 $

TRAVEL 301,514

61,082 -83,945

-103,350 76,356

696,370 -684,143

10,765
-585 1,615 10,227 9,689

$

13,960,190 $ =======30..1.=,5=1=4

-25-

SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA SOUTHWESTERN STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use of Purchase Cards Significant Deficiency Finding Control Number: FS-542-07-01

Condition:

The University did not have adequate procedures in place to ensure purchasing card expenditures were properly documented and allowable.

Criteria:

Purchasing card transactions must comply with purchasing guidelines established in the University's (1) Purchasing Card Manual and (2) within prescribed transaction limits.

Questioned Cost: NIA

Information:

The University did not follow the guidelines as prescribed in the University's Purchasing Card Manual. A review ofone hundred and four purchasing card expenditures revealed the following:

1.) According to the University's policy, certain purchases are not allowable purchases with the purchase card. Our review revealed twenty-four instances in which purchases were made for unallowable items. No reimbursement was sought by the University from employees who purchased these items.

2.) The University's policy states, "A receipt must be kept for every purchase made using the Purchasing Card". No documentation could be provided for five transactions that were selected for testing.

3.) The University's policy states, "Splitting purchases will result in revocation of your card". Two transactions appear to have been for purchases greater than the cardholders' single purchase limit. These transactions appear to have been improperly divided into multiple transactions in order to avoid exceeding the approved single transaction limit.

Cause:

University management failed to adhere to transaction limits and guidelines established in the Purchasing Card Manual.

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GEORGIA SOUTHWESTERN STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Use of Purchase Cards Significant Deficiency Finding Control Number: FS-542-07-01

Effect:

The purchasing card program was designed to simplify and streamline the purchasing process and lower overall transaction costs for smaller supplies and materials purchases. However, the University has placed itself in a position in which the benefits of using the purchasing cards could be diminished because of misuse and failure to follow purchasing card guidelines.

Recommendation:

The University should establish and implement appropriate procedures to ensure that purchasing card guidelines are followed for all purchasing card transactions.

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No findings were reported.

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