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the F i I Year baedjum 30, 2011

GEORGIA 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 STATEMENT OF NET ASSETS

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

C STATEMENT OF CASH FLOWS

D NOTES TO THE FINANCIAL STATEMENTS

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

2 6

2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

2 7

3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET

BY PROGRAM AND FUNDING SOURCE

(NON-GAAP BASIS) BUDGET FUND

28

4 STATEMENT OF CHANGES TO FUND BALANCE

BY PROGRAM AND FUNDING SOURCE

(NON-GAAP BASIS) BUDGET FUND

30

5 RECONCILIATIONOF SALARIES AND TRAVEL

32

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

SECTION I Fl NANClAL

Russell W. Hinton
STATE AUDITOR
(404) 868-2174

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-1 56 Atlanta, Georgia 30334-8400
December 16,2011

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Mark P. Becker, President Georgia 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 State 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, 2011. These financial statements are the responsibility of the Georgia State 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 of America. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of University's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 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 State University. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America.

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Georgia State University as of June 30, 2011, 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 part of the basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this required supplementary information. However, we did not audit this information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Georgia State University taken as a whole. The accompanying supplementary information (Schedules 1through 5 ) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the 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,
~ u s s 3Wl . Hinton, CPA. CGFM State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

GEORGIA STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Georgia State University is one of the 35 institutions of higher education of the University System of

Georgia. The University, located in Atlanta, Georgia, was founded in 1913. The University offers

baccalaureate, master and doctoral 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 31,000

students each year. The institution continues to grow as shown by the comparison numbers that

follow.

Students

Students

Faculty

(Headcount)

Fiscal Year 2011 Fiscal Year 2010 Fiscal Year 2009
Overviewof the Financial Statements and FinancialAnalysis
Georgia State University is proud to present its financial statements for fiscal year 2011. 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 2011and fiscal year 2010, as restated.
Statementof NetAssets
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 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 three categories, nonexpendable, expendable and capital projects. The 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 of Net Assets, Condensed
Assets Current Assets Capital Assets, Net Other Assets
Total Assets
Liabilities Current Liabilities Noncurrent Liabilities
Total Liabilities
Net Assets Invested in Capital Assets, Net of Debt Restricted - Nonexpendable Restricted - Expendable Restricted - Capital Projects Unrestricted
Total Net Assets

June 30,2011
$ 434,557,165 51,828
16,820,064 1,200,000
78,524,150

June 30,2010 (Restated)
$ 361,419,182 42,476
9,514.175 131,195,506

The total assets of the institution increased by $28,786,252. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $67,307,054 in the category of Capital Assets, Net that is offset by a decrease in cash of $44,199,957. The balance of the increase is mainly in the receivable categories.
The total liabilities for the year decreased by $195,616. The combination of the increase in total assets of $28,786,252 and the decrease in total liabilities of $195,616 yields an increase in total net assets of $28,981,868. The increase in total net assets is primarily in the category of lnvested in Capital Assets, Net of Debt of $73,137,983 and an increase of Restricted Expendable of $7,305,889 partially offset by a decrease in Unrestricted of $52,671,356 primarily due to the purchase of capital assets.
miwment of Revenues, Expensesand Changesin 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 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 30.2011

June 30,2010 (Restated)

Operating Revenues Operating Expenses

Operating Loss

$ -229,073,800

$ -220,130,227

Nonoperating Revenues and Expenses

232,100,135

243,258,050

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

$

3,026,335

$ 23,127,823

Other Revenues, Expenses, Gains or Losses

25,955,533

57,359,747

Increase in Net Assets

Net Assets at Beginning of Year, as Originally Reported

$ 504,479,206

$ 421,683,769

Prior Year Adjustments

Net Assets at Beginning of Year, Restated $ 502,171,339

$ 421,683,769

Net Assets at End of Year

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:

Revenue by Source Forthe Years Ended June 30,2011 and June 30,2010

June 3 0 . 2 0 1 1

Operating Revenue

Tuition and Fees

$

Grants and Contracts

Sales and Services of Educational Departments

Auxiliary

Other

189,341,319 65,789,517 16,961,989 58,559,096 3,053,785

Total Operating Revenue

$ 333,705,706

Nonoperating Revenue State Appropriations
Federal Stimulus - Sta bilization Funds
Grants and Contracts Gifts Investment Income Other

$ 188,655,253
62,186,377 250,644 507,477 144,457

Total Nonoperating Revenue

Capital Grants and Gifts State Other

Total Capital Grants and Gifts

$ 25,955,533

Total Revenues

June 30,2010

Expenses (By Functional Classification) For the Years Ended June 30, 2011and June 30,2010

June 30, 2011

June 30,2010

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

Total Operating Expenses

$ 562,779,506

$ 519,262,232

Nonoperating Expenses Interest Expense (Capital Assets)

Total Expenses

Operating revenues increased by $34,573,701 or 11.6% in fiscal year 2011. Tuition and Fees had a $19,340,424 or 11.4% increase, revenues also increased in Grants and Contracts by $4,382,496 or 7.1%, Auxiliary by $5,711,362 or 10.8% and Sales and Services by $5,290,793 or 45.3%.
The growth in Grants and Contracts resulted from expected growth in research, mostly attributed to additional research in the Petit Science Center. The growth in Sales and Services was attributed to a higher demand for Georgia State University public services.
The Auxiliary revenue increase of $5,711,362 is a result of an increase in residential life on the University's campus and an increase in the student population. During Fiscal Year 2 0 1 1 the University purchased two motels and converted them to student housing, now known as Piedmont North and also opened Greek Housing.
Nonoperating revenues decreased by $6,179,483 or -2.4% for the year primarily due to a decrease in Federal Stimulus - Stabilization Funds of $32,941,461 offset by increases in State Appropriations of $13,670,098 or 7.8%, and Grants and Contracts by $13,298,002 or 27.2%.
The compensation and employee benefits category increased by $24,523,651 and primarily affected the Instruction, Research and Public Service categories. The increase reflects the effect of furlough days taken in fiscal year 2010 and not in fiscal year 2 0 1 1 (approximately $6.5 million), the effect of an early retirement program, an addition of 5 1 faculty members, merit increases and an increased cost of health insurance for current and retired employees of the institution, and additional staff positions associated with the new Petit Science Center and Piedmont North and Greek Housing complexes.
Utilities increased by $5,377,319 during the past year. The increase was primarily attributed to increases in all utility categories as well as the addition of the Petit Science Center, Piedmont North and Greek Housingcomplexes.

Slalement of Cash Flows
The final statement presented by Georgia 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 30,2011 and 2010. Condensed

June 30,2011

June 30,2010

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

$ -192,864,166 250,264,812 -102,153,435 552,832

$ -197,527,840 257,018,284 -50,677,073 571,338

Net Change in Cash Cash, Beginning of Year

Cash, End of Year
Capital Assets
The University had six significant capital asset additions for facilities in fiscal year 2011. The completion and addition of Piedmont North Housing $19,100,000, Greek Housing $4,134,519, Classroom South $4,218,576, and land acquisition of property for the planned Humanities/Law Building $17,850,000. Additionally there was a major addition to the Petit Science Center $9,642,459.
Georgia State University also completed major renovations to the parking decks in the amount of $2,082,238.
Additionally, during this reporting period, the University has made significant progress in implementing capital projects intended to expand and upgrade the IT infrastructure of the campus in preparation for growth in student enrollment and research grants in the next 5-10 years. Major capital projects include: upgrade of the data center server and storage infrastructure that provide a virtual environment capable of rapid expansion in a smaller footprint and using less electricity and cooling, upgrade of the research computing environment with equipment that provide 1 0 times the computing and storage capability as the original equipment, upgrade of the campus data and voice network with a 1 0 fold increase in the capacity of the network, and the addition of video conference switching capability for the entire campus.

During fiscal year 2011, Georgia State University received approval for one capital project by the State. It is a $4.7 million project to design a Humanities/Law Building for Georgia State University. Additionally, in its 6 year capital funding plan the Board of Regents has included in its Major Capital Funding List funding for construction of the Humanities/Law Building and for another classroom building. For additional information concerning Capital Assets, see Notes 1,6, 8, and 1 0 in the Notes to the Financial Statements. Long-Tern Liabilities Georgia State University had Long-Term Liabilities of $327,963,739 of which $14,543,105 was reflected as current liability at June 30, 2011. For additional information concerning Long-Term Liabilities, see Notes 1and 8 in the Notes to the Financial Statements. Economic Ouifmk 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. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University'sability to react to unknown internal and external issues.
Mark P. Becker, President Georgia State University
vii

BASIC FINANCIAL STATEMENTS

GEORGIA STATE UNIVERSITY STATEMENT OF NET ASSETS
JUNE 30.2011
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3)
Receivables - Federal Financial Assistance
Receivables - Other
Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Noncurrent Cash Short-Term Investments Investments Notes Receivable. Net Capital Assets. Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue (Note 7) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease PurchaseObligations Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets. Net of Related Debt Restricted for:
Nonexpendable Expendable Capital Projects Unrestricted
Total Net Assets
The notes to the financial statements are an integral part of this statement.

EXHIBIT "A"

GEORGIA STATE UNIVERSITY STATEMENTOF REVENUES. EXPENSESAND CHANGES IN NET ASSETS
YE4R ENDED jUNE 30.2011
Student Tuition and Fees Less: ScholarshipAllowances
Grants and Contracts Federal Federal Stimulus State Other
Sales and Services Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Park~nflransportation Health Services Intercollegiate Athletics Other Organizations Other OperatingRevenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefm Other Personal Services Travel Scholarshipsand Fellowships Utilities Supplies and Other Services De~reciation
Total OperatingExpenses
Operating Income (Loss)
NONOPERATINGRRIFNIIFS IMPENSESI
State Appropriations Grants and Contracts
Federal FederalStimulus Other G~fts Investment Income(Endowments,Auxiliaryand Other) Interest Expense (CapitalAssets) Other NonoperatingRevenues
Net NonoperatingRevenues
lnwme (Loss) Before Other Revenues. Expenses. Galns, or Losses
Capital Grants and Gifts State Other
Total Other Revenues. Expenses. Gains or Losses
Increase (Decrease)in Net Assets
Net Assets - Beginning of Year. Restated
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement

GEORGIA STATE UNIVERSITY STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30,2011
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services Paymentsto Suppliers Paymentsto Employees Paymentsfor Scholarships and Fellowships Loans Issuedto Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parkingflransportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (Payments)
Net Cash Provided(Used) by OperatingActivities
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 Proceedsfrom Sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES lnterest on Investments
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents- End of Year

EXHIBIT "'2

GEORGIA STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30,2011
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to ReconcileOperatingIncome (Loss) to Net Cash
Provided(Used) by OperatingActivities Depreciation Change in Assets and Liabilities: Accounts Receivable. Net Inventories Prepaid Items Notes Receivable. Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by OperatingActivities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognizedas a Component of Interest Income Gift ReducingProceeds of Capital Gifts and Grants Reduction of Capital Lease Obligation

EXHIBIT "C"

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

GEORGIA STATE UNIVERSIlY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Note 1. Summary of Signifiwnt Accounting Policies
Nature of Operations Georgia 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 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 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 State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia 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 ReportingStandards.
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 16for additional information.
Financial Statement Presentation The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GAS0 and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets and cash flows.
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, Georgia State University reports summer revenues and expenses in the subsequent fiscal year.
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 intraUniversity 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.

GEORGIA STATE UNIVERSrrY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

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 State lnvestment Pool and the Board of Regents Short-Term lnvestment Pool.
Short-Term Investments Short-Term lnvestments consist of investments of 9 0 days - 1 3 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments lnvestments include financial instruments with terms in excess of 1 3 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 Assets. The Board of Regents Total Return Fund are included under Investments.
~ c c onuts Receivab ~ e
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 grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Consumable supplies and Resale Inventories are valued at cost using the average-cost basis.
Noncurrent Cash and Investments Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net 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/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 4 0 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 2 0 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 Financingand lnvestment Commission (GSFIC) - a n organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to

GEORGIA STATE UNIVERSrW NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT " D

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, 2011, GSFIC transferred capital additions valued at $9,157,637 to Georgia State University.
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.
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 Statement of Revenues, Expenses and Changes in Net Assets. Georgia State University had accrued liability for compensated absences in the amount of $12,971,137 as of July 1,2010. For fiscal year 2011, $9,347,311 was earned in compensated absences and employees were paid $9,715,365, for a net decrease of $368,054. The ending balance as of June 30, 2 0 1 1 in accrued liability for compensated absences was $12,603,083.
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.
Net Assets The University's net assets are classified as follows:
Invested in capital assets, net of related 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 - nonexpndable: 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 44-15-7 of Annotated Code of Georgia.
Restricted net assetrr - 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.

GEORGIA STATE UNIVERSrrY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Expendable Restricted Net Assets include the following:

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

10,122,256 6,580,569 117.239

Total Restricted Expendable

$

16,820,064

Restricted net asseb - expendable - i2pi.91 Pmj-:

This represents resources for which the

University is legally or contractually obligated to spend resources for capital projects in accordance

with restrictions imposed by external third parties.

Unrestricted net asse&: 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 $104,929.90. 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 the State Treasurer. 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 & R Reserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted

Total UnrestrictedNet Assets

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.
lnwme Taxes Georgia 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 and Expenses The Statement of Revenues, Expenses and Changes in Net Assets classify fiscal year activity as operating and nonoperating according to the following criteria:

Operating Revenues: 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 Revenues: 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, Repotting a s h Flows of Pmpriebry and

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Nonexpendabie TrustFunds and GovernmentalEntities ThatUse PmpN'etaryFund Accounting, and GASB No. 34, such as state appropriations and investment income.

Operating Expenses: Operatingexpense includes activities that have the characteristics of exchange transactions.

Nonoperating Expenses: Nonoperating expense includes activities that have the characteristics of nonexchange transactions, such as capital financing costs and costs related to investment activity.

Restatement of Prior Year Net Assets Georgia State University has a restatement of prior year net assets, decreasing net assets by $2,307,867. This is due to adjusting capital assets for prior year omissions and overstatements netting to an increase of $15,432,144. (Building and Building lmprovements increased $15,975,060; Facilities and Other lmprovements decreased $209,921 and Accumulated depreciation for Buildings and Other lmprovements increased $332,995). In addition, there was an increase to the offsetting lease liability by $17,964,110 and a related expense understatement of $224,099 (Supplies and Other Services). These prior year errors were discovered in fiscal year 2 0 1 1 and the University updated their financial statements accordingly. The University has implemented controls and procedures with related parties to reduce this risk in the future.

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.

GEORGIA STATE UNIVERSrrY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT " D

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 UniversitySystem of Georgia.

At June 30, 2011, the carrying value of deposits was $6,891,778 and the bank balance was $14,472,332. Of the University's deposits, $14,210,444 was uninsured. Of these uninsured deposits, $14,210,444 was collateralized with securities held by the financial institution, by its trust department or agency, but not in the University's name.

Investments
At June 30, 2011, the carrying value of the University's investments was $102,941,829, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and/or Office of the State Treasurer investment pools as follows:

lnvestment Pools Board of Regents Short-Term Fund Total Return Fund

Office of the State Treasurer Georgia Fund 1
Total Investments
The Board of Regents lnvestment 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 lnvestment Pool is voluntary. The Board of Regents lnvestment Pool is not rated. Additional information on the Board of Regents lnvestment 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 - Education Audit Division or on their web site at htt~://www.audits.aa.aov.
The Georgia Fund 1lnvestment Pool, managed by the Office of the State Treasurer, 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 lnvestment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1lnvestment Pool is an AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 5 9 days.

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "DM

lnterest Rate Risk lnterest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University's policy for managing interest rate risk is to comply with University policy an applicable Federal and State laws. The University's policy for managing interest rate risk for Endowment Funds is that the average maturity of the fixed income portfolio shall not exceed ten years and for Operating Funds the average maturity of the fixed income portfolio shall not exceed two years.

The Effective Duration of the Short-Term Fund is 1.03 years. Of the University's total investment of $50,054,641 in the Short-Term Fund, $43,666,383.17 is invested in debt securities.

The Effective Duration of the Total Return Fund is 2.06 years. Of the University's total investment of $53,741 in the Total Return Fund, $17,402 is invested in debt securities.

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's policy for managing credit quality risk is to comply with University policy and applicable Federal and State laws.

The University's policy for managing credit quality risk is that all debt issues must be investment grade with ratings of at least BBA by Moody's and Standard and Poor's at the time of purchase as defined by the University System of Georgia. The Georgia Fund 1investment is rated AAA by Standard and Poor's. As previously stated, the Board of Regents Total Return Fund lnvestment is not rated.

Note 3. AmunCs Receivable

Accounts receivable consisted of the following at June 30, 2011:

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

$ 7,332,166 1,306,759
36,593,277 1,665,197
20,641,500

Less Allowance for Doubtful Accounts Net Accounts Receivable
Note 4. Inventories
Inventories consisted of the following at June 30, 2011:
Physical Plant Other
Total Inventories
Note 5. Notes/Loans Receivable
The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2011. 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

GEORGIA STATE UNIVERSrrY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

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, 2011, the allowance for uncollectible loans was approximately $307,037.

Note 6. CapitalA m &

Followingare the changes in capital assets for the year ended June 30, 2011:

Beginning Balance July L 2OlO (Restated)

Additions

Reductions

Ending Balance June 30,2011

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

$

59,640,905$ 25,337,064

$

84,977,969

220,366

4,638 $

7.915

217,089

20,746,207

22,586,794

19,573,499

23,759,502

~ o t aCl apital Assets, Not Being Depreciated $

80,607,478 $ 47,928,496 $ 19,582414 $ 108,954,560

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

$

1322l.927 $ 2,574,165

$

15,796,092

704,665,477

46,585,779 $

8,580

751,242,676

1714,401

3,7ll, 198

5,425,599

74,801,418

13,468,811

3,901,192

84,369,037

1,874,713

258,093

32~,180

1,806,626

117,916,795

6,646,489

777,244

123,786,040

Total Assets Being Depreciated

$ 914,i94,731 $ 73,244,535 $ 5.013.196 $ 982,426,070

Less: Accumulated Depreciation: Infrasb-ucture Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections

$

2,727,952 $

665,816

$

3,393,768

170,207,514

18,698,178 $

340,716

188,564,976

957,697

42,141

999.838

51,952,746

8,563,043

3,747,072

56,768,717

759.170

436.898

298,101

897,967

85,586,363

6,028,425

777,245

90,837,543

Total Accumulated Depreciation

$ 312,191,442 $ 34,434,501 $ 5,163,134 $ 34l,462,809

Total Capital Assets, Being Depreciated, Net $ 602,003,289 $ 38,810,034 $

-149,938 $ 640,963,261

Capital Assets, Net

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011
No& 7. Deferred Revenue Deferred revenue consisted of the following at June 30, 2011:
Prepaid Tuition and Fees Research Other Deferred Revenue
Total Deferred Revenue
Note 8, Long- Term Liabilities Long-Term liability activity for the year ended June 30, 2 0 1 1 was as follows:

EXHIBIT "D"

Balance July 5 2010 (Restated)

Additions

Reductions

Ending Balance June 30,2011

Current
~otiion

Leases Lease Obligations

$ 32l.19l.585 $

258,093 $ 6,089,0228 315,360,656$ 7,311111

Other Liabilities Compensated Absences

12,971,137

9,347,311

9,715,365 12,603,083

7,231994

Total Long-Term Oblimtions $ 334,162,722 $ Note 9. Significant Commitments

9,605,404 $ 15,804,387 $ 327,963,739 $ 14,543,105
P

The University had significant unearned, outstanding, construction or renovation contracts executed in the amount of $19,560,393 as of June 30, 2011. This amount is not reflected in the accompanying basic financial statements.

Note 10. Lease Obligatiuns

Georgia State 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 2012 and 2044. Expenditures for fiscal year 2 0 1 1 were $25.4 million of which $19.6 million represented interest. Total principal paid on capital leases was $5.8 million for the fiscal year ended June 30, 2011. Interest rates range up to 10.5 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2011:

Infrastructure Buildings Equipment

Total Assets Held Under Capital Lease

$

314,314,736

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are not offered to Georgia State University at the expiration of the lease terms.
Georgia State University has seven capital leases associated with buildings. In July 2001, Georgia State University entered into a capital lease valued at $34,650,000 with an effective interest rate of 6.985 percent with the Georgia State University Foundation (Foundation), whereby the University leases the Student RecreationCenter for a twenty-year period that began July 2 0 0 1and expires June 2021. In March 2000, the University entered into a capital lease valued at $14,038,328 with an effective interest rate of 6.985 percent with the Foundation, whereby the University leases the Alpharetta Center for a twenty-year period that began March 2000 and expires February 2020. In January 2005, the University entered into a capital lease valued at $39,965,234 with an effective interest rate of 7.362 percent with the Foundation, whereby the university leases the Lofts for a twenty-seven year period that began January 2005 and expires August 2032. In August 2007, Georgia State University entered into a capital lease valued at $161,330,000 for a new dormitory complex with an effective interest rate of 5.50 percent with the Georgia State University Foundation. The University leases the University Commons for a 3 0 year period. In December 2009, the University entered into a capital lease valued at $1,041,645 with an effective interest rate of 6.937 percent with the Foundation, whereby the University leases the ground of the Rialto Center for a thirty-five year period that began December 2009 and expires November 2044. In May 2010, the University entered into a capital lease valued at $74,061,116 with an effective interest rate of 6.48 percent with the Georgia State University Research Foundation, whereby the University leases the Petit Science Center for a thirty-year period that began May 2010 and expires June 2039. In 2010, the University entered into a capital lease valued at $17,964,110 with an effective interest rate of 6.055 percent with the USG Real Estate Foundation for the Freshman Housing building for a thirtyyear period that began July 2010 and ends June 2040. The outstanding principal liability at June 30, 2 0 1 1 on these capital building leases is $23,125,609, $8,463,559, $38,002,946, $151,136,038, $1,029,891, $74,935,090, and $17,767,579, respectively. Each year the monthly payments for these leases will increase by the greater of 1.25 percent or the CPI.
Georgia State University also has various capital leases for equipment and software with an outstanding balance at June 30, 2 0 1 1 in the amount of $899,944.
Operating Leases Georgia State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2012 through 2019. 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 ifthe 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. In addition, the University is party to several real property operating leases for floor space in several buildings.

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Future Commitments Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30,2011, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2012 2013 2014 2015 2016 2017 - 2021 2022 - 2026 2027 - 2031 2032 - 2036 2037 - 2042 2043 - 2045

Total Minimum Lease Payments

Less: lnterest Principal Outstanding

$ 315,360,656

Georgia State University's fiscal year 2 0 1 1 expense for rental of real property and equipment under operating leases was $ 5,648,205.
Note 11. Retimment Plans
Georgia State University participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia. These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that Georgia State 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.
Employees' RetirementSystem of Georgia The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers Retirement System of Georgia. One of the ERS System plans, the Employees' Retirement System of Georgia (ERS), is a cost-sharing multiple-employer defined benefit pension plan that was established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBlT " D

retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract.
On November 20,1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1,1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415.
The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1,1982, is an "old plan" member subject to the plan provisions in effect prior to July 1,1982. Members hired on or after July 1,1982 but prior to January 1,2009 are "new plan" members subject to the modified plan provisions. Effective January 1,2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new"plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1,2009 also have the option to change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 1 0 years of creditable service and attainment of age 6 0 or 3 0 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 2 4 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to 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.
Member contribution rates are set by law. 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, Georgia State University pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Georgia State University 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. Georgia State University is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These Georgia State University contributions are not at any time refundable to the member or his/her beneficiary.

GEORGIA STATE UNIVERSlTY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT " D

Employer contributions required for fiscal year 2 0 1 1 were based on the June 30, 2008 actuarial valuation for the old and new plans and were set by the Board of Trustees on September 18, 2008 for GSEPS as follows:

Old Plan* New Plan GSEPS

10.41% 10.41% 6.54%

* 5.66% exclusive of contributions paid by the employer on behalf of old plan members

Members become vested after 10 years of service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions; the member forfeits all rights to retirement benefits.

Teachers Retirement System of Georgia The Teachers Retirement System of Georgia (TRS) is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-oflcio State employees is ultimately responsible for the administration of TRS.

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

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 2 5 years of creditable service.

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 4 0 years. Early retirement benefits are reduced by the lesser of onetwelfth of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lumpsum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as

GEORGIA STATE UNIVERSIlY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBrr "D"

adopted by the Board of Trustees for the fiscal year ended June 30, 2010 were 5.25% of annual salary. The member contribution rate will increase to 5.53% effective July 1, 2010. Employer contributions required for fiscal year 2010 were 9.74% of annual salary as required by the June 30, 2008 actuarial valuation. The employer contribution rate increased to 10.28% effective July 1,2010.

The following table summarizes the Georgia State University contributions by defined benefit plan for the years ending June 30,2011, June 30, 2010, and June 30, 2009 (dollars in thousands):

Fiscal Year

ERS

Required

Percentage

Contribution

Contributed

TRS

Required

Percentage

Contribution Contributed

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a singleemployer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1et.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 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 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 year 2011, the employer contribution was 9.24% for 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 State University and the covered employees made the required contributions of $9,996,861 (9.24%) and $5,403,309 (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 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.

GEORGIA STATE UNIVERSrrY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "0"

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 2 0 1 1 amounted to $612,250 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12, Risk Management
The University System of Georgia offers its employees and retirees access to three different selfinsured healthcare plan options. A PPO/PPO Consumer healthcare plan was offered for the entire reporting period, and effective 01/01/2011, a HSA/High Deductible PPO and a HMO are also offered on a self-insured basis. The HSA/High Deductible PPO and HMO were previously insured through Blue Cross Blue Shield of Georgia. Georgia 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 plans are considered to be a self-sustaining risk fund. 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 self-insured healthcare plan products. 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.
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 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.

GEORGIA STATE UNIVERSrrY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBlT "D"

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 13. 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 State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia 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, 2011.
Note 14. 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 postemployment 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 College 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. For the 2010 and 2 0 1 1 plan years, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.
As of June 30, 2011, there were 1,128 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2011, Georgia State University recognized as incurred $5,096,095 of expenditures, which was net of $2,286.946 of participant contributions.

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMEMS
JUNE 30, 2011

EXHIBIT "D"

Note 15. Natural Classifi~tionswith FunctionaJ Classifiwtions The University's operating expenses by functional classification for fiscal year 2011are shown below:

Functional Classification

Natural Classification

Instruction

Research

Public Service

Academic Support

Student Services

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

$ 190,218,496 $

89,124,066 $ 28,525,608 $ 65.980.309 $ 31,546,869

Natural Classification

Institutional Support

Functional Classification

Plant Operations Scholarships

and

and

Maintenance

Fellowships

Auxiliary Enterprises

Total Operating Expenses

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

GEORGIA STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Note 16, Af/iiated OOrgakations
In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, Georgia State University Foundation and the Georgia State Research Foundation have been determined to be legally separate, tax exempt organizations whose activities primarily support Georgia State University, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office has determined Component Units of the state of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, Georgia State University has not included financial activity for Georgia State University Foundation and Georgia State Research Foundation in these financial statements.
The Georgia State University Foundation and Georgia State University Research Foundation have been determined significant to the State of Georgia for the year ended June 30, 2011, and as such, are reported as discretely presented component units in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). The significant discretely presented component units issue separate audited financial statements that can be obtained from the Board of Regents of the University System of Georgia.

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SUPPLEMENTARY INFORMATION

GEORGIA STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30,2011
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures lnventories
Total Assets
LIABILITIES AND FUND EOUlTY
Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Inventories Property Sale Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances
Actual amounts were prepared on a prescribed basis of accountingthat 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.
-26-

SCHEDULE "I"

GEORGIASTATE UNlVERSllY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NONGAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30,2011

State Appropriation State General Funds TobaccoFunds
Other Funds
Total Revenues
WUSTMFNTS AND PROGRAM TRANSFERS
CARRY-OVER FROM PRIOR YEARS
Transfers from Reserved Fund Balance
Total Funds Available
Payments to Georaa Cancer Coalttton Research Consortium Teaching
Total Expendttures
Excess of Funds Available over Expendttures
FUND BALANCE JULY 1
Resewed Unreserved
AOJUSTMFNTS
Prior Year Payables/Expendttures Prtor Year Recetvables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents- Untvers~tySystem Office
Year Ended June 30.2010 Early Return of Surplus In Ftscal Year 2 0 1 1 Prlor Year ReservedFund Balance included In Funds Available
FUND BALANCEJUNE 30
SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Capltal Outlay Restr~cted/SponsoredFunds Uncollectible Accounts Receivable Tuition Carry-Over Inventories Property Sale
Total Reserved
Unreserved Surplus
Total Fund Balance
Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Geor@a.which is a comprehensive basis of accounting other than generally accepted accounting principles.

BUDGET

ACTUAL

SCHEDULE "2"
VARIANCE -
FAVORABLE (UNFAVORABLE)

GEORGIA STATE UNIVERSITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(NON-GMP BASIS) BUDGET FUND YEAR ENDED JUNE 30.2011

Payments to Georgia Cancer Coalition State Appropriation Tobacco Funds
Research Consortium State Appropr~ation State General Funds
Teaching State Appropriation State General Funds Federal Funds American Recoveryand ReinvestmentAct Federal Stabilization Funds Other Funds
Total Teachlng
Total Operating Activity

Original Appropriatton

Amended Apprapr~at~on

Final Budget

Current Year Revenues

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetarystatutes and regulations of the State of GeorBa, which is a comprehensive basis of accounting other than generally accepted accounting principles.

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Var~ance Pos~tive(Negaove)

Expenditures Compared to Budget

Actual

Variance Posltlve (Negative)

Excess (Defic~ency) of Funds Available
Over/(Under) Expenditures

GEORGIA STATE UNlVERSlN STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(NONGAAP BASIS) BUDGEI FUND YEAR ENDEDJUNE 30.2011

Payments to Georgia Cancer CoallUon State Appropriation Tobacco Funds
Research Consortium State Appropriation State General Funds
Teacnlng State Appropriation State General Funds Federal Funds American Recoveryand Relnvestrnent~ c t Federal Stabilization Funds Otner Funas
Total Teaching
Total OperatingActivity
Prior Year Reserves Not Available for Expenditure Inventories Uncollectible Accounts Receivable

Begrnning Fund Balance/(Deficit)
July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2010
Surplus

prior PetlOd Adjustments

Budget Unit Totals

Actual amounts were preparedon a prescribed basis of accounting that demonstrates compliance with budgetacystatutes and regulabonsof the State of Georgla, which is a comprehensive basls of accounting other than generally accepted accounting principles.

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2 0 1 1
Surplus

Excess [Deficiency) of FundsAvailable
Over/(Under) Expenditures

End~ngFund Balance/(Deficlt)
lune 30

Analysis of Endlng Fund Balance

Resewed

Surplus/(Deficit)

Total

Summary of Ending Fund Balance Reserved
Department Sales and Services Indirect Cost Recoveries Technology Fees Cap~taOl utlay Restncted/Sponsored Funds UncollecbbleAccounts Receivable TuitlOn Carry-Over lmentorles Property Sale Unreserved Surplus
Total EndlngFund Balance - June 3 0

GEORGIA STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDEDJUNE 30,2011

SCHEDULE "5'

Totals per Annual Supplement
Accruals June 30,2011 June 30.2010
Prepaid Items June 3 0 , 2 0 1 1 June 30.2010
Compensated Absences June 30,2011 June 30,2010
Other Personnel Services Shared Services on Jointly Staffed Personnel Albany State University Bruce Spratt Arrnstrong Atlantic State University Maragrete Froelicher-Grundman Atlanta Metropolitan College Tuwaner Lamar Clayton State University Victoria Foster Akinyele Umoja Gainesville State College Daphne Greenberg Anthony Vines Georgia College & State University Harry Dangel Georgia Gwinnett College Josephone Dawuni Georgia Institute of Technology Meltem Alemdar Roberta Berry Roger Jianxin Jiao Kyriaki Kalaitzidou Grace Kelly Daphne Greenberg Georgia Perimeter College Stephen Hudson Robert Jenkins Sarah Paschal Sarah Spencer Georgia Southern University Russel B. Toal Kennesaw State University Michael Dias Phillip Webb

SALARIES

TRAVEL

$ 275,602,959.48 $ 4,189,368.82

GEORGIA STATE UNIVERSI'IY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDEDJUNE 30,2011

SCHEDULE "5"

University of Georgia Charles Bullock Jonathan Mark Campbell James C. Cobb Dorothy M. Fragaszy Carrie Furman Daphne Greenberg John lnscoe Gregory Jones Christina Joseph Michelle Lease Amy Reschly Ralph Tripp
University of West Georgia Minna Halonen-Rolling Charges W. Hodger, Jr. Debra Schober-Peterson William J. Smith
University System of Georgia Central Office Layli Maparyan Paul Voss
Unidentified Variance

SALARIES

TRAVEL

SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS

GEORGIA STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30.2011
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND OUESTIONED COSTS No matters were reported.