Gordon State College, Barnesville, Georgia, management report for fiscal year ended June 30, 2015

GORDON STATE COLLEGE
BARNESVILLE, GEORGIA
MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2015
A Member Institution of the University System of Georgia

GORDON STATE COLLEGE - TABLE OF CONTENTS -

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

Page
2 3 4 7

SCHEDULES

SUPPLEMENTARY INFORMATION

1 BALANCE SHEET - (STATUTORY BASIS) BUDGET FUND

23

2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(STATUTORY BASIS) BUDGET FUND

24

3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET

BY PROGRAM AND FUNDING SOURCE

(STATUTORY BASIS) BUDGET FUND

25

4 STATEMENT OF CHANGES TO FUND BALANCE

BY PROGRAM AND FUNDING SOURCE

(STATUTORY BASIS) BUDGET FUND

27

5 RECONCILIATION OF BUDGET TO GAAP

29

6 RECONCILIATION OF SALARIES AND TRAVEL

31

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

SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

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SECTION I FINANCIAL

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Greg S. Griffin
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
February 8, 2016

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the State Board of Regents of the University System of Georgia
and Dr. Max Burns, President Gordon State College
Ladies and Gentlemen:
As part of our audits of the basic financial statements of the University System of Georgia presented in the Annual Financial Report for the University System of Georgia, the basic financial statements of the State of Georgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2015, we have performed certain audit procedures at Gordon State College. Accordingly, the financial statements and compliance activities of Gordon State College were examined to the extent considered necessary in order to express an opinion as to the fair presentation of the financial statements contained in the foregoing documents and to issue reports on compliance and internal control as required by the Single Audit Act Amendments of 1996.
In addition, we have audited compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on its Federal programs for the year ended June 30, 2015.
This Management Report contains information pertinent to the financial and compliance activities of Gordon State College as of and for the year ended June 30, 2015. Information contained in this report is a by-product of our audits of the basic financial statements of the University System of Georgia and the basic financial statements of the State of Georgia and is the representation of management. Accordingly, we do not express an opinion or any other form of assurance on it. The particular information provided which includes a section on findings and other items reported in accordance with Commission on Colleges regulation 2.11.1 is enumerated in the Table of Contents.
This report is intended solely for the information and use of the management of Gordon State College, members of the Board of Regents of the University System of Georgia and the Southern Association of Colleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully,

GSG:er

Greg S. Griffin State Auditor

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SELECTED FINANCIAL INFORMATION - 1 -

GORDON STATE COLLEGE STATEMENT OF NET POSITION - (GAAP BASIS)
JUNE 30, 2015
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Due from Affiliated Organizations Inventories Prepaid Items
Total Current Assets
Noncurrent Assets Due from USO - Capital Liability Reserve Fund Capital Assets, Net (Note 4)
Total Noncurrent Assets
Total Assets
Deferred Outflows of Resources Related to Defined Benefit Pension Plans
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Deposits Advances (Including Tuition and Fees) (Note 5) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Advances (Including Tuition and Fees) Compensated Absences Net Pension Liability
Total Noncurrent Liabilities
Total Liabilities
Deferred Inflows of Resources Related to Defined Benefit Pension Plans
NET POSITION
Net Investment in Capital Assets Unrestricted
Total Net Position
- 2 -

EXHIBIT "A"

$

10,504,911

380,594 943,481
43,595 448,356 113,037

12,433,974

355,149 85,461,461
85,816,610
98,250,584

1,299,004

1,034,575 75,814
226,625 543,697
38,730 557,752 914,582 501,354
3,893,129
42,696,603 1,050,000 205,319
11,942,023
55,893,945
59,787,074
4,743,614

41,850,276 -6,831,376

$

35,018,900

GORDON STATE COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - (GAAP BASIS)
YEAR ENDED JUNE 30, 2015
OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) Less: Scholarship Allowances
Grants and Contracts Federal State Other
Sales and Services Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Loss
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues
Net Nonoperating Revenues
Loss Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State Other
Total Other Revenues, Expenses, Gains or Losses
Decrease in Net Position
Net Position - Beginning of Year, Originally Reported
Prior Year Adjustments
Net Position - Beginning of Year, Restated
Net Position - End of Year
- 3 -

EXHIBIT "B"

$

12,920,935

-6,320,746

139,598 103,730
2,100 92,146 65,261

5,286,500 2,096,439 2,504,840
108,107 73,400
554,565 52,319 93,652

17,772,846

8,668,656 6,951,635 4,309,922
85,514 217,886 4,115,054 1,790,689 10,223,769 3,233,868
39,596,993
-21,824,147

11,902,426
10,093,051 131,429 55,569
-2,140,784 94,946
20,136,637
-1,687,510
544,055 412,390
956,445
-731,065
51,762,999
-16,013,034
35,749,965

$

35,018,900

GORDON STATE COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts (Exchange) Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts Other Payments
Net Cash Used by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts
Net Cash Flows Provided by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments
Net Increase in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year

EXHIBIT "C"

$

6,530,546

35,988

92,146

-17,205,923

-15,639,955

-4,115,054

5,295,332 1,847,050 2,408,840
107,140 70,664
558,261 54,286
156,150 3,532

-19,800,997

11,902,426 -130,422
9,926,804 94,945
21,793,753

544,055 -13,253 -342,900 -2,140,784
-1,952,882

55,569 95,443 10,409,468

$

10,504,911

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GORDON STATE COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2015
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES:
Operating Loss Adjustments to Reconcile Operating Loss to Net Cash
Used by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Inventories Prepaid Items Accounts Payable Salaries Payable Advances (Including Tuition and Fees) Other Liabilities Compensated Absences Net Pension Liability Change in Deferred Inflows/Outflows of Resources: Deferred Inflows of Resources Deferred Outflows of Resources
Net Cash Used by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts

EXHIBIT "C"

$

-21,824,147

3,233,868
6,328,093 -137,410 28,609 86,364 624
-6,903,441 -1,919 14,763
-5,255,974
4,743,614 -114,041

$

-19,800,997

$

12,102,035

$

412,390

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GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY Gordon State College is one of thirty (30) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Gordon State College 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. Gordon State College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Gordon State College 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.
FINANCIAL STATEMENT PREPARATION The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the College's assets, deferred outflows, liabilities, deferred inflows, net position, revenues, expenses, changes in net position and cash flows.
BASIS OF ACCOUNTING For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College'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-College transactions have been eliminated.
NEW ACCOUNTING PRONOUNCEMENTS In fiscal year 2015, the College adopted Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this statement requires a restatement to beginning net position. The adoption of this statement has a significant impact on the College's financial statements.
In fiscal year 2015, the College adopted Governmental Accounting Standards Board (GASB) Statement No. 69, Government Combinations and Disposals of Government Operations. This statement provides specific accounting and financial reporting guidance for combinations in the governmental environment. This statement also requires that disclosures be made by governments about combination arrangements in which they engage and for disposals of government operations. The adoption of this statement does not have a significant impact on the College's financial statements.
In fiscal year 2015, the College adopted Governmental Accounting Standards Board (GASB) Statement 71, Pension Transition for Contributions Made Subsequent to the Measurement Date an amendment of GASB No. 68. The objective of this statement is to improve accounting and financial reporting by
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GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

addressing an issue in Statement No. 68, Accounting and Financial Reporting for Pensions, concerning transition provisions related to certain pension contributions made to defined benefit pension plans prior to implementation of statement. This statement amends paragraph 137 of Statement No. 68 which limited recognition of pension-related deferred outflows of resources and deferred inflows of resources at the transition to circumstances in which it is practical to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions. Adoption of this statement in conjunction with GASB No. 68 had a significant impact on the College's financial statements.
PENSIONS For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teachers Retirement System of Georgia (TRS) and Employees' Retirement System (ERS), additions to/deductions for TRS's and ERS's fiduciary net position have been determined on the same basis as they are reported by TRS and ERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.
CAPITAL LIABILITY RESERVE FUND In fiscal year 2014, the Capital Liability Reserve Fund (Fund) was established by the Board of Regents to protect the fiscal integrity of the University System of Georgia (USG) to maintain the strongest possible credit ratings associated with Public Private Venture (PPV) projects and to ensure that the Board of Regents can effectively support its long-term capital lease obligations. The Fund is financed by all USG institutions participating in the PPV program. The Fund serves as a pooled reserve that is managed by the Board of Regents. The Fund shall only be used to address significant shortfalls and only insofar as a requesting USG institution is unable to make the required PPV capital lease payment to the designated cooperative organization. The Fund will continue as long as the Board of Regents has rental obligations under the PPV program and at the conclusion of the program, funds will be returned to the College. Gordon State College's contribution to the fund as of June 30, 2015 was $355,149.
NET POSITION The College's net position is classified as follows:
Net Investment in Capital Assets: This represents the College's total investment in capital assets, net of outstanding debt obligations and deferred inflows, or resources related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of the net investment in capital assets.
Restricted - nonexpendable: Nonexpendable restricted net position consists of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted - expendable: Restricted expendable net position includes resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

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GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

Unrestricted: Unrestricted net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the categories above. Included in the net deficit reported is the College's Net Pension liability of $11.9 million which is required for financial reporting and will not impact the economics of the plan or affect budgets or cash flows.
RESTATEMENT NOTE DISCLOSURE For fiscal year 2015, the College made prior period adjustments due to the adoption of GASB Statement No. 68, Accounting and Financial Reporting for Pensions and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, which require the restatement of the June 30, 2014, net position. The result is a decrease in Net Position at July 1, 2014 of $16,013,034, attributable to a net pension liability of $17,197,997 less plan contributions of $1,184,963 made during fiscal year 2014. This change is in accordance with generally accepted accounting principles.
NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
At June 30, 2015, the carrying value of deposits was $5,792,367 and the bank balance was $6,023,972. Of the College's deposits, $5,773,972 were uninsured. Of these uninsured deposits, $5,773,972 were collateralized with securities held by the financial institution's trust department or agent in the College's name.

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GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

INVESTMENTS At June 30, 2015, the carrying value of Gordon State College's investment was $4,709,644, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pool as follows:

Investment Pool
Investment Pool Board of Regents Short-Term Fund

$

4,709,644

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits and Accounts Education Audit Division or on their web site at http://www.audits.ga.gov. The Board of Regents Short-Term Fund is reported as Cash and Cash Equivalents on Exhibit "A" of this report.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2015:

Student Tuition and Fees

$

Auxiliary Enterprises and Other Operating Activities

Federal, State and Private Funds

Georgia Student Finance Commission

Georgia State Financing and Investment Commission

Due from Affiliated Organizations

Other

274,552 414,346 380,594
82,871 297,676
43,595 87,741

Less Allowance for Doubtful Accounts

1,581,375 213,705

Net Accounts Receivable

$

1,367,670

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GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

NOTE 4: CAPITAL ASSETS Following are the changes in the College's capital assets for the year ended June 30, 2015:

Beginning Balance July 1, 2014

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

$

2,281,843

2,225,000 $

Total Capital Assets, Not Being Depreciated

4,506,843

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

58,270,212 1,256,008 6,466,970
35,277,503 2,621,985 0 1,400,297

Additions

Reductions

Ending Balance June 30, 2015

231,152 $ 231,152

$ 2,225,000
2,225,000

2,281,843 231,152
2,512,995

1,370,254 774,884
12,102,035 35,212
239,140

378,509 37,058

58,270,212 2,626,262 6,863,345
47,379,538 2,620,139 239,140 1,400,297

Total Assets Being Depreciated
Less: Accumulated Depreciation: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Infrastructure

105,292,975
15,859,855 668,956
4,515,002 9,461,127 2,299,649
0 827,577

14,521,525
1,143,537 190,231 400,559
1,386,013 62,621 498 50,409

415,567
378,509 37,058

119,398,933
17,003,392 859,187
4,537,052 10,847,140
2,325,212 498
877,986

Total Accumulated Depreciation

33,632,166

3,233,868

415,567

Total Capital Assets, Being Depreciated, Net

Capital Assets, Net

$

71,660,809 76,167,652 $

11,287,657 11,518,809 $

0 2,225,000 $

A comparison of depreciation expense for the last three fiscal years is as follows:

36,450,467 82,948,466 85,461,461

Fiscal Year

Depreciation Expense

2015 2014 2013

$

3,233,868

$

2,969,815

$

3,135,747

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GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

NOTE 5: ADVANCES Advances consisted of the following at June 30, 2015:

Prepaid Tuition and Fees Other Advances

$

372,332

1,221,365

Total Advances

$

1,593,697

NOTE 6: LONG-TERM LIABILITIES The College's Long-Term liability activity for the year ended June 30, 2015 was as follows:

Beginning Balance July 1, 2014 (Restated)

Additions

Reductions

Ending
Balance June 30, 2015

Current Portion

Leases Lease Obligations

$ 31,852,050 $ 12,102,035 $

342,900 $ 43,611,185 $

914,582

Other Liabilities Compensated Absences Net Pension Liability

691,911 17,197,997

516,678

501,916 5,255,974

706,673 11,942,023

501,354

Total

17,889,908

516,678

5,757,890

12,648,696

501,354

Total Long-Term Obligations

$ 49,741,958 $ 12,618,713 $ 6,100,790 $ 56,259,881 $

NOTE 7: NET POSITION

Changes in Net Position for the year ended June 30, 2015 are as follows:

1,415,936

Beginning Balance July 1, 2014 (Restated)

Additions

Reductions

Ending
Balance June 30, 2015

Net Investment in Capital Assets Restricted Net Position Unrestricted Net Position Total Net Position

$

44,315,602 $

12,527,678 $

14,993,004 $

41,850,276

15,054

10,600,434

10,615,488

0

-8,580,691

29,957,216

28,207,901

-6,831,376

$

35,749,965 $

53,085,328 $

53,816,393 $

35,018,900

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GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

The amounts within each category at June 30, 2015 were as follows:

Net Investments in Capital Assets

$

41,850,276

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

4,491,345 724,360
-12,402,230 355,149

Total Unrestricted

-6,831,376

Total Net Position
NOTE 8: LEASE OBLIGATIONS

$

35,018,900

Gordon State College is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment.

CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2015 and 2043. Payments for fiscal year 2015 were $2.4 million of which $2.1 million represented interest. Total principal paid on capital leases was $0.3M for the fiscal year ended June 30, 2015. Interest rates range from 4.71 percent to 5.18 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2015:

Description Buildings (PPV)

Outstanding

Net Assets Held

Balances

Under Capital

per Lease

Accumulated

Lease at

Schedules at

Gross Amount

Depreciation

June 30, 2015

June 30, 2015

(+)

(-)

(=)

$

47,379,538 $

10,847,140 $

36,532,398 $

43,611,185

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

The following capital lease schedule lists the pertinent information for each lease including the building name, lessor, total principal amount, lease term, lease begin date, lease end date, and remaining long-term debt as of June 30, 2015:

Outstanding

Original

Lease

Begin

End

Principal Balance

Description

Lessor

Principal

Term

Date

Date

at June 30, 2015

Gordon Commons Gordon Village Gordon SARC

Wells Fargo $ Wells Fargo Wells Fargo

16,387,313 18,890,190 12,102,035

1/25 1/30 1/30

9/2005 11/2008 7/2014

7/2030 $ 5/2038 6/2043

12,372,694 18,824,917 12,413,574

Total Leases

$

47,379,538

$

43,611,185

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GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

OPERATING LEASES Gordon State College had no expense for rental of real property and equipment under operating leases in fiscal year 2015.
FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Position includes other installment purchase agreements) having remaining terms in excess of one year as of June 30, 2015, were as follows:

Capital Leases

Year Ending June 30: 2016 2017 2018 2019 2020 2021 - 2025 2023 - 2030 2031 - 2035 2036 - 2040 2041 - 2045

$

3,023,142

3,055,793

3,066,400

3,098,699

3,135,452

16,223,220

17,245,719

12,683,339

9,876,348

2,542,356

Total Minimum Lease Payments

73,950,468

Less: Interest

30,339,283

Principal Outstanding

$ 43,611,185

NOTE 9: RETIREMENT PLANS
Gordon State College participates in various retirement plans administered by the State of Georgia under two major retirement systems: Teachers' Retirement System of Georgia (TRS) and Employees' Retirement System of Georgia (ERS). These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective administrative offices.
The significant retirement plans that Gordon State College participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.
Teachers' Retirement System of Georgia and Employees' Retirement System of Georgia
General Information about the Teachers' Retirement System
Plan description: All teachers of the College as defined in 47-3-60 of the Official Code of Georgia Annotated (O.C.G.A.) are provided a pension through the Teachers' Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend
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GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

the benefit provisions to the State Legislature. TRS issues a publicly available financial report that can be obtained at www.trsga.com/publications.
Benefits provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death.
Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6% of their annual pay during fiscal year 2015. The College's contractually required contribution rate for the year ended June 30, 2015 was 13.15% of annual College payroll. College contributions to TRS were $1,290,005 for the reporting period (fiscal year ended 2015) and $1,177,888 for the measurement period (fiscal year ended June 30, 2014). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.
General Information about the Employees' Retirement System
Plan description: ERS is a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs.
Benefits provided: The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan (GSEPS). Employees under the old plan started membership prior to July 1, 1982 and are subject to plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are new plan members subject to modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS.
Under the old plan, the new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, postretirement cost-of-living adjustments may also be made to members' benefits, provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's

- 15 -

GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Contributions: Member contributions under the old plan are 4% of annual compensation, up to $4,200, plus 6% of annual compensation in excess of $4,200. Under the old plan, the state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The College's contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2015 was 21.96% of annual covered payroll for old and new plan members and 18.87% for GSEPS members. The College's contributions to ERS totaled $8,999 for the reporting period (fiscal year ended June 30, 2015) and $7,075 for the measurement period (fiscal year ended June 30, 2014). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions
At June 30, 2015, the College reported a liability for its proportionate share of the net pension liability for TRS and ERS totaling $11,942,023. The net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2013. An expected total pension liability as of June 30, 2014 was determined using standard roll-forward techniques. The College's proportion of the net pension liability was based on contributions to TRS and ERS during the fiscal year ended June 30, 2014. At June 30 2014, the College's TRS proportion was .094020%, which was a decrease of 0.003921% from its proportion measured as of June 30, 2013. At June 30, 2014, the College's ERS proportion was 0.001702%, which was a decrease of 0.001016% from its proportion measured as of June 30, 2013.
For the year ended June 30, 2015, the College recognized pension expense of $687,667 for TRS and $-15,064 for ERS. At June 30, 2015, the College reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

TRS

Deferred

Deferred

Outflow of

Inflows of

Resources

Resources

ERS

Deferred

Deferred

Outflow of

Inflows of

Resources

Resources

Net difference between projected and actual earnings on pension plan investments

$

4,140,988

$

15,580

Changes in proportion and differences between College contributions and proportionate share of contributions

556,706

30,340

College contributions subsequent to the measurement date

$

1,290,005

$

8,999

Total

$

1,290,005 $

4,697,694 $

8,999 $

45,920

- 16 -

GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

College contributions subsequent to the measurement date of $1,290,005 for TRS and $8,999 for ERS are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows:

Year Ending June 30:

TRS

ERS

2016 2017 2018 2019 2020

$ -1,161,771 $

$ -1,161,771 $

$ -1,161,771 $

$ -1,161,772 $

$

-50,609 $

-22,858 -15,272
-3,895 -3,895
0

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

Teachers' Retirement System:

Inflation

3.00%

Salary increases

3.75% - 7.00% average, including inflation

Investment rate of return

7.50% net of pension plan investment expense including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females set back two years for males and set back three years for females.

The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.

Employees' Retirement System

Inflation

3.00%

Salary increases

5.45% - 9.25% average, including inflation

Investment rate of return

7.50% net of pension plan investment expense including inflation

Mortality rates were based on the RP-2000 Combined Mortality Table for the periods after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back eleven years for males for the period after disability retirement.

The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 June 30, 2009.

- 17 -

GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

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

Asset Class
Fixed income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities
Total
* Rates shown are net of the 3.00% assumed rate of inflation

Target Allocation
30.00% 39.70%
3.70% 1.60% 18.90% 6.10%
100.00%

Long-Term Expected Real Rate of Return*
3.00% 6.50% 10.00% 13.00% 6.50% 11.00%

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

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

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

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

$ 21,889,905 $ 11,878,187 $

1% Decrease (6.50%)

Current Discount Rate
(7.50%)

$

93,085 $

63,836 $

1% Increase (8.50%)
3,633,745
1% Increase (8.50%)
38,938

- 18 -

GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

Pension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS and ERS financial reports which are publically available at www.trsga.com/publications and www.ers.ga.gov/formspubs/formspubs, respectively.
Regents Retirement Plan
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or all exempt full and partial benefit eligible employees, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from three approved vendors (VALIC, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Gordon State College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers' Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2015, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 6% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Gordon State College and the covered employees made the required contributions of $380,238 (9.24%) and $246,908 (6%), respectively.
VALIC, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
NOTE 10: RISK MANAGEMENT
The University System of Georgia offers its employees and retirees access to four different healthcare plan options. For the University System of Georgia's Plan Year 2015, the following healthcare plan options were available:
BlueChoice HMO Comprehensive Care Plan Consumer Choice HSA Plan Kaiser Permanente HMO
Gordon State College and participating employees and retirees pay premiums to the healthcare plan options to access benefits coverage. The respective health plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with the selfinsured plans; including the BlueChoice HMO, Comprehensive Care Plan and Consumer Choice HSA Plan.
The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to serve as the claims administrator for the self-
- 19 -

GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

insured healthcare plans. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser Permanente.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Gordon State College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1.
The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
NOTE 11: 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 Gordon State College expects such amounts, if any, to be immaterial to its overall financial positions.
Litigation, claims and assessments filed against Gordon State College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2015.
NOTE 12: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
- 20 -

GORDON STATE COLLEGE SELECTED FINANCIAL NOTES
JUNE 30, 2015

EXHIBIT "D"

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 2015 plan year, 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, 2015, there were 80 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2015, Gordon State College recognized as incurred $297,269 of expenditures, which was net of $150,226 of participant contributions.
NOTE 13: AFFILIATED ORGANIZATIONS
The Gordon State College Foundation, the Gordon State College Properties Foundation, LLC, the Gordon State College Properties Foundation II, LLC and the Gordon State College Properties Foundation III, LLC are legally separate, tax exempt organizations whose activities primarily support Gordon State College. These affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statement No. 61, The Financial Reporting Entity: Omnibus an amendment of GASB Statements, No. 14 and No. 34. 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 Gordon State College.

- 21 -

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SUPPLEMENTARY INFORMATION - 22 -

GORDON STATE COLLEGE BALANCE SHEET (STATUTORY BASIS)
BUDGET FUND JUNE 30, 2015
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
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 Uncollectible Accounts Receivable Tuition Carry-Over Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

827,160.66

268,817.67 578,631.77 109,867.50
43,594.69

$

1,828,072.29

$

56,168.48

678,168.23

76,364.00

328,155.03

43,775.09

1,182,630.83

184,604.05 61,583.96
122,718.98 74,258.72
129,043.09
73,232.66
645,441.46

$

1,828,072.29

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 23 -

GORDON STATE COLLEGE SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2015

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Other Funds
Total Revenues
ADJUSTMENTS AND PROGRAM TRANSFERS
CARRY-OVER FROM PRIOR YEARS
Transfers from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Special Funding Initiative Teaching
Total Expenditures Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2014
Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30
SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Uncollectible Accounts Receivable Tuition Carry-Over
Total Reserved
Unreserved Surplus
Total Fund Balance

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$

12,019,257.00 $

12,019,257.00 $

23,491,086.00

22,993,121.69

35,510,343.00

35,012,378.69

0.00

-6,316.68

0.00 -497,964.31
-497,964.31
-6,316.68

0.00 35,510,343.00

558,280.75 35,564,342.76

558,280.75 53,999.76

70,000.00 35,440,343.00

35,510,343.00

$

0.00

70,000.00 34,932,108.69
35,002,108.69
562,234.07 $

0.00 508,234.31
508,234.31
562,234.07

615,409.82 116,830.73

26,078.32

-116,830.73 -558,280.75

$

645,441.46

$

184,604.05

61,583.96

122,718.98

74,258.72

129,043.09

572,208.80

73,232.66

$

645,441.46

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 24 -

GORDON STATE COLLEGE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015

Research Consortium State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

0.00 $

0.00 $

70,000.00 $

70,000.00

11,749,257.00 22,366,569.00
34,115,826.00

11,749,257.00 22,366,569.00
34,115,826.00

11,949,257.00 23,491,086.00
35,440,343.00

11,949,257.00 22,993,121.69
34,942,378.69

$

34,115,826.00 $

34,115,826.00 $

35,510,343.00 $ 35,012,378.69

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 25 -

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Positive

Expenditures Compared to Budget

Variance

Actual

Positive

Excess of Funds Available
Over Expenditures

$

0.00 $

0.00 $

70,000.00 $

0.00 $

70,000.00 $

0.00 $

0.00

0.00 558,280.75
558,280.75

0.00 -6,316.68
-6,316.68

11,949,257.00 23,545,085.76
35,494,342.76

0.00 53,999.76
53,999.76

11,908,491.21 23,023,617.48
34,932,108.69

40,765.79 467,468.52
508,234.31

40,765.79 521,468.28
562,234.07

$ 558,280.75 $

-6,316.68 $ 35,564,342.76 $

53,999.76 $ 35,002,108.69 $

508,234.31 $

562,234.07

- 26 -

GORDON STATE COLLEGE STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015

Research Consortium State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity
Prior Year Reserves Not Available for Expenditure Uncollectible Accounts Receivable

Beginning Fund Balance July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2014
Surplus

Prior Period Adjustments

$

79,898.41 $

0.00 $

-79,898.41 $

0.00

31,108.56 564,104.51
595,213.07
675,111.48

0.00 -558,280.75
-558,280.75
-558,280.75

-31,108.56 -5,823.76
-36,932.32
-116,830.73

23,049.59 3,028.73
26,078.32
26,078.32

57,129.07

0.00

0.00

0.00

Budget Unit Totals

$

732,240.55 $

-558,280.75 $

-116,830.73 $

26,078.32

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 27 -

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2015
Surplus

Excess of Funds Available
Over Expenditures

Ending Fund Balance June 30

Analysis of Ending Fund Balance

Reserved

Surplus

Total

$

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

0.00 -17,129.65
-17,129.65
-17,129.65

0.00 0.00
0.00
0.00

40,765.79 521,468.28
562,234.07
562,234.07

63,815.38 507,367.36
571,182.74
571,182.74

0.00 497,950.08
497,950.08
497,950.08

63,815.38 9,417.28
73,232.66
73,232.66

63,815.38 507,367.36
571,182.74
571,182.74

17,129.65

0.00

0.00

74,258.72

74,258.72

0.00

74,258.72

$

0.00 $

0.00 $

562,234.07 $

645,441.46 $ 572,208.80 $

73,232.66 $

645,441.46

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

$ 184,604.05 61,583.96
122,718.98 74,258.72
129,043.09
$
$ 572,208.80 $

$
73,232.66 73,232.66 $

184,604.05 61,583.96
122,718.98 74,258.72
129,043.09
73,232.66
645,441.46

- 28 -

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GORDON STATE COLLEGE RECONCILIATION OF BUDGET TO GAAP
YEAR ENDED JUNE 30, 2015
Presented below is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A.
Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "1")
Amounts reported for Business-Type Activities in the Statement of Net Position are different because:
Capital Assets used in Business-Type Activities are not reported in the Budget Fund.
Prepaid student tuition and fees for services provided in the subsequent period are reported as revenues in the Budget Fund but are deferred for reporting on the Statement of Net Position.
Uncollectible accounts receivable are reported as an asset and reserved fund balance in the Budget Fund and as a contra-asset account on the Statement of Net Position.
Funds placed on deposit with the Georgia State Financing and Investment Commission for use in capital outlay projects are reported as an outlay in the Budget Fund, but are included as a prepaid item on the Statement of Net Position.
Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity
Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity
Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activity Fund Activity
The budgetary basis of accounting implemented by the State of Georgia recognizes expenditures when encumbered. The following adjustments were made to eliminate this activity for reporting on the Statement of Net Position. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Payables for goods and services provided in the current fiscal year reported in the Budget Fund as encumbrances payable are reported as accounts payable for GAAP reporting. Reimbursement from grantors reported as revenues in the Budget Fund that are for expenditures based on encumbrances are deferred for GAAP reporting. Total Net Effect of Encumbrance Activity
Certain assets, deferred outflows of resources, liabilities and deferred inflows of resources are not due and payable in the current period and are therefore not reported as liabilities in the Budget Fund. Capital Leases Payable Compensated Absences Payable Net Pension Liability Deferred Outflows related to Defined Benefit Pension Plans Deferred Inflows related to Defined Benefit Pension Plans Funds Held for Others Total Liabilities
Rounding Variance
Net Position of Business-Type Activities (Exhibit "A")

SCHEDULE "5"

$

645,441.46

85,461,461.00

$

964,892.00

-964,892.00

$

7,685,603.00

-351,242.00

$

2,220,184.00

-139,313.00

-74,259.00 14,936.00
0.00 7,334,361.00 2,080,871.00

$

678,168.23

-164,594.00 -150,000.00

363,574.23

$

-43,611,185.00

-706,673.00

-11,942,023.00

1,299,004.00

-4,743,614.00

-1,102,995.00

-60,807,486.00 0.31

$

35,018,900.00

The supplementary information presented on Schedules 1, 2, 3 and 4 was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. The information was derived from, and relates directly to, the same information used to prepare the financial statements. However, the budgetary statutes and regulations of the State of Georgia require reporting of certain information that is not in accordance with generally accepted accounting principles. Presented on this schedule is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A.
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GORDON STATE COLLEGE RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2015

SCHEDULE "6"

Totals per Annual Supplement
Accruals June 30, 2015 June 30, 2014
Compensated Absences June 30, 2015 June 30, 2014
Adjustments Shared Services on Jointly Staffed Personnel Dalton State College Venable, Margaret Georgia College and State University Green, Walter Georgia Perimeter College Broome ,Darren Grubbs, Cortney Johnson, Erica Wheeler, Eddy Kennesaw State University Bobo, Charles Mannion, Richard Middle Georgia State College Sisson, James University of Georgia Calhoun, Rictor
Unidentified Variance

SALARIES

$

15,769,161 $

TRAVEL 217,886

75,814 -75,841

656,455 -642,741

-95,000
-24,918
-15,350 -7,200 -3,600 -8,400
-9,975 2,130
4,844
-5,000
-88

$

15,620,291 $

217,886

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

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GORDON STATE COLLEGE ENTITY'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2015
PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
No matters were reported.
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No matters were reported.

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SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

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GORDON STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015

COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES

The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weaknesses.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Internal control deficiencies identified during the course of this engagement that were considered to be significant deficiencies and/or material weaknesses are presented below:

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FS-2015-001

Inadequate Internal Controls over Capital Assets

Control Category: Internal Control Impact:

Capital Assets Significant Deficiency

Description: The College did not have adequate procedures in place to ensure that Capital Assets were properly reported.

Criteria: According to the Board of Regents' Business Procedures Manual Section 10.6.2, subsidiary reconciliations are required to be performed quarterly. Additionally, the College's management is responsible for designing and maintaining internal controls to provide assurance that Capital Assets are recorded in the correct amount and the correct period.

Condition: Deficiencies noted during our engagement were as follows:

1. The Asset Management Module and the Capitals Ledger did not agree and the College was unable to reconcile the two.

2. Documentation was not adequate to ensure the accuracy of all capital asset additions. Amounts added related to the Student Activity and Recreation Center appeared to be overstated by $67,763. Additionally, $245,974 in items appeared to be misclassified between Buildings and Equipment.

3. The Military Monument was not added at the correct amount. The costs related to the planning and design phase in the amount of $23,250 were not included in the capitalizable cost.

4. A reconciliation between the Capital Grants and Gifts and the additions to Capital Assets disclosed likely understatements of Capital Assets in the amount of $312,902.

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GORDON STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

5. Several errors were noted with the College's calculation of Library Collections Depreciation.

Cause: In discussing these issues with management, they believe that these deficiencies were the result of changes in management during the year under review.

Effect or Potential Effect: These deficiencies lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.

Recommendation: The College should implement controls over Capital Assets to ensure (1) the Asset Management Module is reconciled to the Capitals Ledger at least quarterly and (2) asset additions are added at the correct amount, in the correct period and are properly documented.

Views of Responsible Officials and Corrective Action Plans: Management concurs with the deficiency noted as inadequate controls over capital assets. The College will ensure that the assets management module will be reconciled to the capitals ledger on a monthly basis. Additionally, the asset management module and the capitals ledger will be reconciled to the annual financial report (AFR) annually. The Student Activity and Recreation Center and Military Monument Additions will be reviewed and adjusted as needed in order to correct the Misstatements/Misclassifications. Library depreciation schedule will be reviewed and adjusted in order to correct the errors noted. All items will be reviewed and corrected by June 30, 2016.

Contact Person: Walter Green, AVP/Controller

Telephone:

(678) 359-5733

Email:

walterg@gordonstate.edu

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GORDON STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA-2015-001

Inadequate Control Procedures over Withdrawals

Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: CFDA Number and Title:

Special Tests and Provisions Significant Deficiency Nonmaterial Noncompliance U. S. Department of Education 84.SFA Student Financial Assistance Cluster

Description: The Student Financial Assistance Office did not properly perform the refund process and ensure unearned Title IV funds were accurately calculated and returned in a timely manner.

Criteria: 34 CFR 668 provides general provisions for administering Student Financial Assistance (SFA) programs. 34 CFR 668.22 provides requirements over the treatment of the Title IV funds when a student withdraws. The College is required to determine the amount of Title IV grant that the student earned as of the student's withdrawal date when a recipient of a Title IV grant withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance. A refund must be returned to Title IV programs when the total amount of Title IV grant that the student earned is less than the amount of Title IV grant that was disbursed to the student as of the withdrawal date. 34 CFR 668.22(j)(1) states than "An institution must return the amount of Title IV funds...as soon as possible but no later than 45 days after the date of the institution's determination that the student withdrew."

Condition: The College did not properly perform the refund process for official and unofficial student withdrawals.

A sample of 51 students who received Federal financial assistance and withdrew, officially or unofficially, from the College were selected to determine whether refunds were calculated in conformity with Title IV requirements and returned in a timely manner in accordance with Federal regulations. Our examination revealed the following:

1. The refund calculation for 12 students was calculated incorrectly due to the improper number of scheduled break days being used in the calculation. Eleven of these students were requested to return $576.12 more than the required amount to various SFA programs, and 11 of these students were requested to return $82.71 less than the required amount to various SFA programs.

2. The proration between the school and student portion of the refund was incorrect for 12 students who withdrew.

3. One refund was not processed within the required timeframe of 45 days after the date of the student's official withdrawal, and seven refunds were not processed within the required timeframe of 30 days after the final class date for the period of enrollment in which students unofficially withdrew.

4. The amount of refunds calculated for five students were returned to the U.S. Department of Education in a different amount.

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GORDON STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

In addition, auditor sampled 26 students who received all failing and/or incomplete grades for which no return of Title IV funds were made to ascertain whether the students sufficiently completed the enrollment period. A refund was not calculated for three students with all failing and/or incomplete grades and did not complete 60% of the enrollment period. This resulted in an underpayment of Title IV funds to the U.S. Department of Education in the amount of $13,518.52.

Questioned Cost: Questioned costs of $13,601.23, with likely questioned costs of $153,537.33 were identified for unearned Title IV funds not returned to the U.S. Department of Education.

Cause: In discussing these deficiencies with the College, management stated that the cause was directly related to relying on professors to report students' attendance. However, there was not a mandated attendance policy in place.

Effect or Potential Effect: The College was not in compliance with Federal regulations concerning the return of unearned Title IV Federal funds to the U.S. Department of Education.

Recommendation: The College should implement policies and procedures to ensure that unofficial withdrawals that received Title IV funds are identified, that the required refund calculation is performed, that refund calculations are reviewed for accuracy, and that refunds are sent back to the various SFA programs in a timely manner. The College should also contact the U. S. Department of Education regarding the resolution of this finding.

Views of Responsible Officials and Corrective Action Plans: Management concurs with the finding noted as inadequate control procedures over withdrawals. The College will ensure that any breaks over 5 days are calculated as scheduled breaks starting Spring 2016. The College will review the official withdrawals on a weekly basis, to ensure all returns to Title IV are completed within the 45 days. The College will also verify that the amount of awards sent back to the Department of Education matches the College's calculated amount of return. Additionally, all faculty members will be required to enter a date of last attendance for all "F" grades beginning Spring 2016. This will allow the College to calculate the unofficial withdrawals with the correct last date of attendance.

Contact Person: Walter Green, AVP/Controller

Telephone:

(678) 359-5733

Email:

walterg@gordonstate.edu

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GORDON STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FA-2015-002

Failure to Comply with Federal Work-Study Earmarking Requirements

Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: CFDA Number and Title:

Matching, Level of Effort, and Earmarking Significant Deficiency Nonmaterial Noncompliance U. S. Department of Education 84.SFA Student Financial Assistance Cluster

Description: The College did not use at least seven percent of the sum of its initial and supplemental Federal WorkStudy (FWS) allocations for an award year to compensate students employed in community service activities.

Criteria: Provisions included in 34 CFR 675.18 provide requirements for the use of FWS Program funds.

Condition: Upon review of expenditures related to the FWS Program, it was noted that the proper amount was not expended for community service activities. The FWS amount authorized and expended for the College was $103,828.00. Seven percent of the authorization is $7,267.96. The College expended $4,203.21 for community service activities. The College should have expended an additional $3,064.75 for community service activities to be in compliance with Federal regulations.

Questioned Cost: $3,064.75

Cause: In discussing these deficiencies with the College, they stated that the cause was due to the lack of community service opportunities in the surrounding area.

Effect or Potential Effect: The College was not in compliance with Federal regulations concerning the use of FWS Program funds.

Recommendation: The College should establish procedures to ensure that the proper amount of FWS Program funds is expended for community service activities. Additionally, the College should develop and implement a monitoring process to ensure that controls are properly implemented. The College should also contact
the U. S. Department of Education regarding the resolution of this finding.

Views of Responsible Officials and Corrective Action Plans: Management concurs with the deficiency noted with Federal Work-Study Earmarking Requirements. The College will increase the number of Federal Work study students working off campus for the 2016-2017 aid year to ensure compliance with the seven percent requirement.

Contact Person: Walter Green, AVP/Controller

Telephone:

(678) 359-5733

Email:

walterg@gordonstate.edu

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GORDON STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015
OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION)
Failure to Reconcile Subsidiary Modules Observation: According to the Board of Regents' Business Procedures Manual, subsidiary reconciliations are required to be performed quarterly. Our review revealed a lack of documentation of quarterly reconciliations of the activity recorded in the Payroll (ADP) subsidiary module of the financial accounting system to the General Ledger.
Recommendation: The College should review procedures in place and implement changes necessary to ensure that subsidiary reconciliations are completed in accordance with the Business Procedures Manual Section 10.6.2.
Invalid Encumbrances Observation: A review of encumbrances payable at June 30, 2015 revealed invalid encumbrances in the amount of $10,651.24. An adjustment was proposed and accepted to increase current year surplus by that amount.
Recommendation: Management should review procedures in place and implement changes necessary to ensure that all outstanding purchase orders are reviewed for validity.
Inadequate Controls over Year End Journal Entries Observation: A review of the entity's Year-End Journal Entries revealed several errors. The Scholarship Allowance was calculated incorrectly, resulting in an understatement of $169,680. Errors noted with the yearend entry related to gift revenue and GSFIC, resulted in an overstatement of $46,477. It was also noted that the entity did not adequately identify entries as year-end entries within PeopleSoft, and documentation of several entries was difficult to follow.
Recommendation: Management should review procedures in place and implement changes necessary to ensure that all journal entries are adequately identified, documented and reviewed for validity.
Accounting Controls Overall Observation: Our review of the established internal control structure associated with significant financial applications at the College revealed design deficiencies in logical access, change management and IT operations controls intended to protect information from unauthorized access, manipulation, corruption, inaccurate processing and loss. The details related to these deficiencies have been provided to management of the College in accordance with Official Code of Georgia Annotated 50-6-9.
Recommendation: Management should review and enhance their policies and procedures to ensure the integrity and accuracy of the information used within the financial statements and as part of awarding financial assistance to students. Additionally, management should ensure proper separation of duties as it relates to financial and student financial assistance processes.
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GORDON STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2015 OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) Untimely Enrollment Reporting Observation: Our testing of 26 students who withdrew during the Fall 2014 and Spring 2015 semesters revealed that 20 students' withdrawn enrollment statuses were reported to the National Student Loan Data System (NSLDS) in an untimely manner. Additionally, five students' withdrawn enrollment statuses were never reported to NSLDS. Recommendation: The College should implement policies and procedures to ensure that all changes in student enrollment statuses are reported in a timely manner.
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