STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS I GEORGIA GWINNETT COLLEGE LAWRENCEVILLE, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008 Russell W. Hinton State Auditor GEORGIA GWINNETT COLLEGE - 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 2 B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS 3 C STATEMENT OF CASH FLOWS 4 D NOTES TO THE FINANCIAL STATEMENTS 5 SUPPLEMENTARY INFORMATION SCHEDULES 1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND 22 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND 23 3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND 24 4 RECONCILIATION OF SALARIES AND TRAVEL 27 SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS GEORGIA GWINNETT COLLEGE - TABLE OF CONTENTS - SECTION III MANAGEMENT'S RESPONSES SCHEDULE OF MANAGEMENT'S RESPONSES SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 January 23, 2009 Honorable Sonny Perdue, Governor Members ofthe General Assembly of Georgia Members of the Board of Regents of the University System of Georgia and Honorable Daniel J. Kaufman, President Georgia Gwinnett College 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 Gwinnett College, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2008. These financial statements are the responsibility ofthe Georgia Gwinnett College's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in Note 1, the financial statements ofGeorgia Gwinnett College 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 Gwinnett College. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State ofGeorgia, in conformity with accounting principles generally accepted in the United States of America. 0SARL-62 In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position ofGeorgia Gwinnett College as ofJune 30, 2008, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Management's Discussion and Analysis is not a required part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it. Our audit was conducted for the purpose offorming an opinion on the basic financial statements of Georgia Gwinnett College taken as a whole. The accompanying supplementary information (Schedules I through 4) 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, ~ Russell W. Hinton, CPA, CGFM State Auditor RWH:as 08ARL-62 REQUIRED SUPPLEMENTARY INFORMATION GEORGIA GWINNETT COLLEGE Management's Discussion and Analysis Introduction Georgia Gwinnett College is one of the 35 institutions of higher education of the University System of Georgia. The College, located in Lawrenceville, Georgia, was founded in 2006 and has become known as the "Campus of Tomorrow" because of its unique mission emanating from the Board of Regents. Georgia Gwinnett College uses state-of-the-art instructional technology, advanced learning methodology, and online courses to matriculate students. Georgia Gwinnett College currently offers baccalaureate degrees in business administration, biology, psychology, and has numerous programs currently in development. The opportunity to be part of the first new College in the 21st century with a focus on the use of technology attracts a highly qualified faculty and a growing student body as indicated below: Faculty Students (Headcount) Students (FTE) Fiscal Year 2008 Fiscal Year 2007 103 788 695 22 118 76 Overview ofthe Financial Statements and Financial Analysis Georgia Gwinnett College is proud to present its financial statements for fiscal year 2008. 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 College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2008 and fiscal year 2007. Statement ofNet Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College 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 Gwinnett College. 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. -I- 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 two 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 second 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 June 30, 2008 June 30, 2007 Assets Current Assets Capital Assets, Net $ 6,316,433 58,890,305 $ 3,251,859 44,060,961 Total Assets $ 65,206,738 $ 47,312,820 Liabilities Current Liabilities Noncurrent Liabilities $ 3,642,102 27,554,241 $ 2,134,579 14,367,398 Total Liabilities $ 31,196,343 $ 16,501,977 Net Assets Invested in Capital Assets, Net of Debt Unrestricted $ 30,951,807 3,058,588 $ 29,216,838 1,594,005 Total Net Assets $ 3410101395 $ 3018101843 The total assets of the institution increased by $17,893,918. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $3,033,991 in Cash and Cash Equivalents and $14,829,344 in the category of Capital Assets, Net. The total liabilities for the year increased by $14,694,366. The combination of the increase in total assets of $17,893,918 and the increase in total liabilities of $14,694,366 yields an increase in total net assets of $3,199,552. The increase in total net assets is in the categories oflnvested in Capital Assets, Net of Debt, in the amount of $1,734,969 and Unrestricted Net Assets in the amount of $1,464,583. Statement ofRevenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and - 11 - 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, 2008 June 30, 2007 Operating Revenues Operating Expenses $ 3,539,008 24,783,440 $ 2,376,587 11,262,658 Operating Loss $ -21,244,432 $ -8,886,071 Nonoperating Revenues and Expenses 22,067.191 10,554,018 Income (Loss) Before Other Revenues, Expenses, Gains or Losses $ 822,759 $ 1,667,947 Other Revenues, Expenses, Gains or Losses 2,376,793 2,939,953 Increase (Decrease) in Net Assets $ 3,199,552 $ 4,607,900 Net Assets at Beginning of Year 30,810.843 26,202.943 Net Assets at End of Year $ 34,010,325 $ 30,810,843 The Statement of Revenues, Expenses and Changes in Net Assets reflect 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: - 111 - Revenue By Source For The Years Ended June 30, 2008 and June 30, 2007 June 30. 2008 June 30. 2007 Operating Revenue Tuition and Fees Sales and Services of Educational Departments Auxiliary Other $ 2,112,665 74,039 987,274 365.030 $ 739,822 2,936 1,229,000 404.829 Total Operating Revenue $ 3.539.008 $ 2,376.587 Nonoperating Revenue State Appropriations Gifts Investment Income Other $ 23,007,927 12,449 100,151 17.387 $ 10,943,548 71,873 319.631 Total Nonoperating Revenue $ 23.137.914 $ 11,335.052 Capital Grants and Gifts State $ 2,376.793 $ 2,939.953 Total Revenues $ 29,053,715 $ 16,651.592 Expenses (By Functional Classification) For The Years Ended June 30, 2008 and June 30, 2007 June 30. 2008 June 30, 2007 Operating Expenses Instruction Academic Support Student Services Institutional Support Plant Operations and Maintenance Auxiliary Enterprises Unallocated Expenses $ 9,813,577 3,143,845 1,508,238 8,138,105 1,629,343 550,332 $ 2,606,689 2,090,785 609,100 4,443,240 1,511,235 1,307 302 Total Operating Expenses $ 24,783,440 $ 11,262,658 Nonoperating Expenses Interest Expense (Capital Assets) 1.070.723 781.034 Total Expenses $ 25,854,163 $ 12,043.692 - IV - Operating revenues increased by $1,162,421 in fiscal 2008. During fiscal year 2008, Georgia Gwinnett College increased its student count to nearly 800 students, which significantly increased operating revenues for both tuition and fee revenue. The Auxiliary revenue is a result of the parking fee charged to all students attending classes on campus. This fee will pay for a new parking deck that opened in fiscal year 2008. Other Auxiliary revenue includes Dining Dollars. In addition, the College receives income from the Bookstore that is currently outsourced. Nonoperating revenues increased by $11,802,862 for the year primarily due to an increase of $12,064,379 in State Appropriations. The compensation and employee benefits category increased by $10,494,815 and primarily affected the Instruction, Academic Support, and Institutional Support categories. The increase reflects the addition of staff and faculty members hired by Georgia Gwinnett College and the corresponding increase to benefits. Utilities increased by $327,059 during the past year. The increase was primarily associated with the addition of new buildings and a Parking Deck and a general increase in utility costs that affected the Plant Operations and Maintenance category. Statement ofCash Flows The final statement presented by Georgia Gwinnett College 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, 2008 and June 30, 2007, Condensed June 30, 2008 June 30, 2007 Cash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities $ -17,323,547 23,191,743 -2,934,356 100,151 $ -7,416,483 11,169,190 -2,462,467 71.873 Net Change in Cash Cash, Beginning of Year $ 3,033,991 2,801.004 $ 1,362,113 1,438,891 Cash, End of Year $ 5,834.995 $ 2,801.004 - V- Capital Assets The College had two significant capital asset additions in fiscal year 2008. Phase II to Academic Building C was completed. The Academic building will provide much needed classroom and office space for the campus. This addition was funded by the Georgia State Financing and Investment Commission (GSFIC). The second significant capital addition was a Parking Deck that was funded by GGC Real Estate Parking I, LLC, a related party. For additional information concerning Capital Assets, see Notes 1 and 4 in the Notes to the Financial Statements. Long-Term Liabilities Georgia Gwinnett College had Long-Term Liabilities of $28,543,895 of which $989,654 was reflected as current liability at June 30, 2008. For additional information concerning Long-Term Liabilities, see Notes 1 and 6 in the Notes to the Financial Statements. Economic Outlook Georgia Gwinnett College (GGC) recently received its Candidacy for the Southern Association of Colleges and Schools (SACS). GGC will continue working with the (SACS) on the accreditation process. This will consist of a thorough review of academic, administrative, and financial components of the College. Accreditation standards for a new institution are particularly stringent. The requirements can be seen by the progressive steps of candidacy, initial accreditation, five year reaccreditation and accreditation of each substantive change. Only after this time period does an institution go on the standard ten year cycle. The standards involve maintaining sufficient funding for academic programs, faculty, library resources and technology. It is essential that GGC demonstrate solid on-going financial footing to support its needs and growth as we are completing the accreditation process. College administrators recognize this process to be vital to future enrollment and success; therefore, substantial resources and efforts will be dedicated toward achievement of the various milestones of accreditation. As Georgia Gwinnett College continues to grow, it will be engaged in a number of activities that will have substantial impact on both its short and long term financial outlook. Included in these activities will be the hiring of additional faculty to teach students at all levels, integration of technology-related functions for enrollment, admission, and matriculation, and other routine components of administering an educational institution. Additionally, College administrators will continue development of the GGC Foundation that has already had two extremely successful years of fundraising and operation. Also critical to the future of the institution is the construction of facilities to meet the needs of students, faculty, staff, and the community. This is also an important part of the SACS accreditation process. During the next year the College will begin construction of a state of the art $28.SM Learning Resource Center, funded by the Georgia Legislature, and overseen by the Georgia State Financing and Investment Commission. This new library learning resource center - VI - is vital both for SACS accreditation and as a critical resource for Georgia Gwinnett College's student body. Additionally, the Georgia State Financing and Investment Commission (GSFIC), with the approval of the Georgia Legislature, financed the second phase of the academic building C. The funding was provided by General Obligation bonds issued by the State of Georgia. Phase II was completed in fall 2007 and provided 24,000 additional square feet of space for classrooms and faculty offices. At the end of fiscal year 2008, construction costs financed by GSFIC totaled slightly over $5 million. In addition, the College completed construction of a parking deck financed through private funding and paid for by a new student parking fee. Additionally, the Board of Regents approved a $100 Student Center facility fee and increased the student recreation fee from $20 to $40 for fiscal year 2008. These new fees will be used to build a new Student Center and to provide approximately 30-50,000 square feet of student recreation space. As a new and rapidly growing institution, GGC is at a different stage of life than is any other University System of Georgia institution, and has unique budget considerations, constraints and requirements. Operating new facilities, educating thousands of additional students and supporting corresponding increases in faculty requires sizable incremental budgets. This funding will come from several sources including the budget of the Board of Regents, special initiative funds from the General Assembly, or a combination of public and private dollars. Without adequate funding from these sources, Georgia Gwinnett College will not be able to acquire the personnel and administrative resources necessary to meet the anticipated demand for student enrollment from the community. 2008-2009 will be an exciting time for Georgia Gwinnett College. While there are many pressing needs for the College, the Gwinnett community, the General Assembly, and the Board of Regents have consistently supported the institution through its transition. We look forward to this continued support in meeting the objectives of the newest publicly funded state institution in the Nation. Dr. Daniel J. Kaufman, President Georgia Gwinnett College - Vll - BASIC FINANCIAL STATEMENTS - 1- GEORGIA GWINNETT COLLEGE STATEMENT OF NET ASSETS JUNE 30, 2008 ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable (Note 3) Other Prepaid Items Total Current Assets Noncurrent Assets Capital Assets, Net (Note 4) Total Assets LIABILITIES Current Liabilities Accounts Payable Salaries Payable Deferred Revenue (Note 5) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations Compensated Absences Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets EXHIBIT "A" $ 5,834,995 479,448 1,990 $ 6,316,433 58,890,305 $ 65,206,738 $ 1,349,565 7,858 1,124,766 26,877 143,382 657,902 331,752 $ 3,642,102 $ 27,280,596 273,645 $ 27,554,241 $ 31,196,343 $ 30,951,807 3,058,588 $ 34,010,395 The notes to the financial statements are an integral part of this statement. -2- GEORGIA GWINNETT COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS YEAR ENDED JUNE 30, 2008 EXHIBIT"B" OPERATING REVENUES Student Tuition and Fees Less: Scholarship Allowances Sales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises Bookstore Parking/Transportation Other Organizations Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Salaries Faculty Staff Employee Benefits Other Personal Services Travel Utilities Supplies and Other Services Depreciation Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES} State Appropriations Gifts Interest and Other Investment Income Interest Expense Other Nonoperating Revenues Net Nonoperating Revenues Income (Loss) Before Other Revenues, Expenses, Gains, or Losses Capital Grants and Gifts State Increase (Decrease) in Net Assets Net Assets - Beginning of Year Net Assets - End of Year $ 2,136,338 -23,673 74,039 258,376 133,839 777,950 75,485 106,654 $ _ _~3,_53_9~,0_0_8 $ 6,348,618 7,153,276 3,024,920 112 206,196 884,300 5,289,580 1 876,438 $ _ _24~,_78_3~,4_4_0 $ -21,244,432 $ 23,007,927 12,449 100,151 -1,070,723 17,387 $ _ _22~,0_6_7~1,_9_1 $ 822,759 2,376,793 $ 3,199,552 30,810,843 $ =====34=,0=1=0=,3==95= The notes to the financial statements are an integral part of this statement. -3- GEORGIA GWINNETT COLLEGE STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2008 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Auxiliary Enterprise Charges: Bookstore Food Services Parking/Transportation Other Organizations Other Receipts (Payments) Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts Net Cash Flows Provided (Used) by Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets 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 Interest on Investments Net Increase (Decrease) in Cash Cash and Cash Equivalents - Beginning of Year Cash and Cash Equivalents - End of Year RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Prepaid Items Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (Used) by Operating Activities NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Interest on Capital Lease Obligations Paid by State Agency on Behalf of College The notes to the financial statements are an integral part of this statement. -4 - EXHIBIT"C" $ 2,243,549 116,020 74,039 -8,854,426 -13, 199,783 133,839 1,078,821 793,169 92,270 198 955 $ -17 323 547 $ 23,007,927 142,566 41,087 163 $ 23,191,743 $ 2,376,793 -3,936,346 -624,945 -749 858 $ -2,934,356 $ 100 151 $ 3,033,991 2,801,004 $ 5,834,995 $ -21,244,432 1,876,438 -70,193 610 802,618 1,111,024 -132,041 332,429 $ -17,323,547 $-=====1,..3,.,,71~9,..,3...,2~0 $ ====32=0=,8=6=5 GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS Georgia Gwinnett College 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 Gwinnett College 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 Gwinnett 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. Georgia Gwinnett College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Gwinnett 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. 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 14 for additional information. FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the College was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required. 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. -5- GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date. 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. ACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. 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 College'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 is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act -6- GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CAPITAL ASSETS 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 College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. COMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. Georgia Gwinnett College had accrued liability for compensated absences in the amount of $272,969 as of July 1, 2007. For fiscal year 2008, $491,526 was earned in compensated absences and employees were paid $159,098, for a net increase of $332,428. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $605,397. NONCURRENT LIABILITIES Noncurrent liabilities include liabilities that will not be paid within the next fiscal year and capital lease obligations with contractual maturities greater than one year. NET ASSETS The College's net assets are classified as follows: Invested in capital assets, net of related debt: This represents the College'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. Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, 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 $115,167.40. Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. -7- GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NET ASSETS Unrestricted Net Assets includes the following items which are quasi-restricted by management. Reserve for Encumbrances Other Unrestricted $ 1,781,497 1,277,091 Total Unrestricted Net Assets $ 3,058,588 When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. INCOME TAXES Georgia Gwinnett College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. CLASSIFICATION OF REVENUES The College has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances and (2) sales and services of auxiliary enterprises, net of scholarship allowances. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. 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 College's 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances. The College currently does not receive any Government grants, such as Pell grants or other Federal grants. -8- GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "D" NOTE 2: DEPOSITS 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, 2008, the carrying value of deposits was $5,834,995 and the bank balance was $6,259,324. Of the College's deposits, $6,259,324 were uninsured and were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. -9- GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "D" NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2008: Student Tuition and Fees Other $ 6,784 472,664 $ 479.448 NOTE4: CAPITALASSETS Following are the changes in capital assets for the year ended June 30, 2008: Capital Assets, Not Being Depreciated: Construction Work-In-Progress Capital Assets, Being Depreciated: Building and Building Improvements Equipment Capital Leases Library Collections Total Assets Being Depreciated Less: Accumulated Depreciation: Building and Building Improvements Equipment Capital Leases Library Collections Total Accumulated Depreciation Total Capital Assets, Being Depreciated, Net Capital Assets, Net Beginning Balance Julx 1, 2007 $ 3,793,448 $ 25,197,506 1,456,545 17,279,804 l,164,077 $ 45,097,932 $ 1,926,039 1,040,440 1,544,386 319,554 $ 4,830,419 $ 40,267,513 $ 44.060.961 Additions $ 1,793,086 $ 5,371,046 558,362 13,719,320 646,264 $ 20,294,992 $ 679,671 548,61 I 525,182 122,974 $ 1,876,438 $ 18,418,554 $ 20211 640 Reductions Ending Balance June 30, 2008 $ 5,371,046 $ 215,488 $ 30,568,552 $ 154,142 1,860,765 30,999,124 77 384 1,732,957 $ 231,526 $ 65,161,398 $ 2,605,710 $ 142,891 1,446,160 2,069,568 77,385 365,143 $ 220,276 $ 6,486,581 $ 11,250 $ 58,674,817 $ 5 382.296 $ 58 890.305 NOTE 5: DEFERRED REVENUE Deferred revenue consisted of the following at June 30, 2008: Prepaid Tuition and Fees Other $ 224,766 900,000 Totals $ 1,124.766 -10- GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "D" NOTE 6: LONG-TERM LIABILITIES Long-term liability activity for the year ended June 30, 2008 was as follows: Beginning Balance July I, 2007 Additions Reductions Ending Balance June 30. 2008 Current Portion Leases Lease Obligations $ 14,844,123 $ 13,719,320 $ 624,945 $ 27,938,498 $ 657,902 Other Liabilities Compensated Absences 272.969 491,526 159 098 605.397 331,752 Total Long-Term Obligations $ )5 117 092 $ 14,210.846 $ 784.043 $ 28 543.895 $ 989.654 NOTE 7: SIGNIFICANT COMMITMENTS The College executed two rental agreements with a related party during fiscal 2008 for a Student Services building and a Student Recreation center. Both rental agreements commence in fiscal year 2009 and expire in fiscal year 2032. The present value of the minimum lease payments for each rental agreement is approximately $7.8 million and $6.2 million, respectively. These amounts are not reflected in the accompanying basic financial statements. NOTE 8: LEASE OBLIGATIONS Georgia Gwinnett College is obligated under two capital leases for the acquisition of real property. CAPITAL LEASES Georgia Gwinnett College has two capital leases payable in monthly and semi-annual installments with the terms expiring in fiscal 2023 and 2032. Expenditures for fiscal year 2008 were $1,695,668, of which $1,070,723 represented interest expense. Principal paid on capital leases was $624,945. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008: Buildings $ 28,929,556 FUTURE COMMITMENTS Future commitments for capital leases as of June 30, 2008, were as follows: - 11 - GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "D" NOTE 8: LEASE OBLIGATIONS FUTURE COMMITMENTS Year Ending June 30: 2009 2010 2011 2012 2013 2014 - 2018 2019 - 2023 2024 -2028 2029 - 2032 Real Property and Equipment Capital Leases $ 2,091,839 2,093,384 2,109,976 2,510,933 2,543,295 12,200,042 11,936,164 5,964,608 4,764.196 Total Minimum Lease Payments $ 46,214,437 Less: Interest Less: Executory Costs 16,502,970 1,772,969 Principal Outstanding $ 27,938.498 NOTE 9: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Plan Description Georgia Gwinnett College participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of Georgia Gwinnett College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Gwinnett College makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: - 12 - GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"D" NOTE 9: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Funding Policy Fiscal Year Percentage Contributed Required Contribution 2008 100% $ 507,371 2007 100% $ 265,393 2006 100% $ 64,331 EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description Georgia Gwinnett College participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected 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. All other members are "new plan" members subject to the modified plan provisions. Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. 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. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP 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 SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. - 13 - GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "D" NOTE 9: RETIREMENT PLANS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2008, for employees covered by ERS was $78,200. The College's total payroll for all employees was $13,501,894. For the year ended June 30, 2008 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation for both old and new plans. For the year ended June 30, 2008, the ERS employer contribution rate for the College amounted to 10.41 % of covered payroll and included the amounts contributed on behalf of the employees under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Percentage Required Fiscal Year Contributed Contribution 2008 2007 2006 100% 100% 100% $ 8,141 $ 0 $ 0 Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 financial report, which may be obtained through ERS. REGENTS RETIREMENT PLAN Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. - 14 - GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"D" NOTE 9: RETIREMENT PLANS REGENTS RETIREMENT PLAN Plan Description 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 Gwinnett 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 2008, the employer contribution was 8.13% for the first six months and 8.15% for the last six months of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times. Georgia Gwinnett College and the covered employees made the required contributions of $554,490 (8.13% or 8.15%) and $340,570 (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 Gwinnett College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to - 15 - GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"D" NOTE 9: RETIREMENT PLANS GEORGIA DEFINED CONTRIBUTION PLAN Benefits 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 2008 amounted to $38,487 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 10: RISK MANAGEMENT The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Georgia Gwinnett College 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. Tl:te reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes - 16 - GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"D" NOTE 10: RISK MANAGEMENT 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 Gwinnett 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 that is disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Georgia Gwinnett College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Georgia Gwinnett 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, 2008. NOTE 12: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of - 17 - GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT "D" NOTE 12: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS 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 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%. As of June 30, 2008, there were no employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. - 18 - GEORGIA GWINNETT COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008 EXHIBIT"D" NOTE 13: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS The College's operating expenses by functional classification for fiscal year 2008 are shown below: Natural Classification Salaries Faculty Staff Employee Benefits Other Personal Services Travel Utilities Supplies and Other Services Depreciation Total Operating Expenses Instruction Fun!,tional !;;lassification Academic Su1uiort Student Services Institutional Su1mort $ 6,250,01 I $ 96,000 88,167 2,030,901 $ 1,436,146 480,780 54,185 63,394 37,199 7,136 836,911 1,084,763 302,748 189,081 $ 9 813 577 $ 3 143 845 $ $ 1,078,916 271,606 23,012 134,704 I 508 238 $ 2,607 3,762,799 775,672 112 90,932 271,970 3,244,352 -10,339 8.138 )05 Natural Classification Salaries Faculty Staff Employee Benefits Other Personal Services Travel Utilities Supplies and Other Services Depreciation Total Operating Expenses Plant Operations and Maintenance Fun!,tional Classification Auxiliary Entemrises Unallocated De~reciation Total Operating Ex~enses $ 180,574 $ 60,533 868 541,800 832,275 13,293 $ I 629 343 $ 11,919 183 303,310 $ 234,920 550 332 $ $ -364,720 364,720 $ 6,348,618 7,153,276 3,024,920 112 206,196 884,300 5,289,580 1,876,438 24 783 440 NOTE 14: AFFILIATED ORGANIZATIONS In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of GASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, Georgia Gwinnett College Foundation is a legally separate, tax exempt organization whose activities primarily support Georgia Gwinnett College, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office determined Component Units of the State of Georgia, as required by GASB Statement No. 39, should not be assessed in relation to its significance to Georgia Gwinnett College, but instead based on its significance to the State of Georgia. Accordingly, Georgia Gwinnett College has not included financial activity for this affiliated organization in these financial statements. - 19 - (This page left intentionally blank) SUPPLEMENTARY INFORMATION - 21 - GEORGIA GWINNETT COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND JUNE 30, 2008 ASSETS Cash and Cash Equivalents Accounts Receivable Other Prepaid Expenditures Total Assets LIABILITIES AND FUND EQUITY Liabilities Salaries Payable Accounts Payable Encumbrances Payable Funds Held for Others Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Departmental Sales and Services Technology Fees Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances SCHEDULE "1" $ 2,232,786.99 448,513.98 1,990.00 $ ==2=,6=83,=290=.9=7 $ 7,282.09 232,036.01 1,781,496.89 164.00 138,774.92 26,876.84 $ 2,186,630.75 $ 69,690.00 311,802.82 115,167.40 $ 496,660.22 $ ====2=,6=8=3=,2=9=0=.9=7= Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. - 22 - GEORGIA GWINNETT COLLEGE SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 SCHEDULE "2" REVENUES State Appropriation State General Funds Other Funds Total Revenues CARRY-OVER FROM PRIOR YEAR Transfer 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, 2007 Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30 BUDGET ACTUAL VARIANCEFAVORABLE (UNFAVORABLE) $ 23,010,556.00 $ 23,010,556.00 $ 3,148,947.00 2,278,614.62 $ 26,159,503.00 $ 25,289,170.62 $ 0.00 -870,332.38 -870,332.38 0.00 314 178.93 314,178.93 $ 26,159,503.00 $ 25,603,349.55 $ _ _ _-.;a;55::.::6 1;.;:;5.;a;3;..;.45;a.. $ 11,010,778.00 $ 11,010,778.00 $ 15,148,725.00 14,209,494.61 $ 26,159,503.00 $ 25,220,272.61 $ $ 0.00 $ 383,076.94 $ 0.00 939,230.39 939,230.39 3831076.94 314,178.93 2,629.16 113,583.28 -2,629.16 -314 178.93 $ ======49=6_,6_6_0._22_ SUMMARY OF FUND BALANCE Reserved Departmental Sales and Services Technology Fees Total Reserved Unreserved Surplus $ 69,690.00 311,802.82 $ 381,492.82 115,167.40 Total Fund Balance $ =====49.,.6..,,6.,.6,..0.,..22.,. Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. -23- GEORGIA GWINNETT COLLEGE STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET (NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008 Special Funding Initiatives State Appropriation State General Funds Original Appropriation Final Budget Current Year Revenues Funds Available Comeared to Budget Prior Year Carry~Over Total Funds Available Variance Positive {Negative) $ 11,010 778.00 $ 11,010,778.00 $ 11,010,778.00 $ 0.00 $ 11,010,778.00 $ 0.00 Teaching State Appropriation State General Funds Other Funds Total Teaching Grand Totals - All Programs 11,607,506.00 3 511 683.00 11,999,778.00 $ 3148 947.00 11,999,778.00 $ 2 278 614.62 $ 15119189.00 $ 15148725.00 $ 14 278 392.62 $ 0.00 $ 314 178.93 314 178.93 $ 11,999,778.00 $ 2,592,793.55 0.00 -556 153.45 14 592 571.55 $ ====-5=5=6=1=53...4,..5= 26,129,967.00 $ 26,159,503.00 $ 25,289,170.62 $ 314,178.93 $ 25,603,349.55 $ ===-5=5=6=1.,.53.,,.4=5= Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. - 24 - SCHEDULE "3" Exeenditures Comeared to Budget Variance Positive Actual (Negative) Actual Funds Available Over/(Under) Expenditures Prior Period Adjustments Other Adjustments Program Fund Balances Transfers Program Fund Balances Reserve Surplus Total Fund Balances $ 11 010,778.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 12,127,080.42 $ -127,302.42 $ 2082.414.19 1066532.81 14 209 494.61 $ 939 230.39 $ -127,302.42 $ 510,379.36 383,076.94 $ 109,873.89 $ 0.00 $ -17,428.53 $ 127,302.42 $ 3 709.39 ------'o"".o~o,._ 514.088.75 -127,302.42 113,583.28 s ====o.,,.o"'o= s 496,660.22 s 0.00 $ 0.00 $ 381,492.82 381.492.82 $ 109,873.89 $ 5,293.51 115167.40 $ 109,873.89 386,786.33 496 660.22 25,220,272.61 $ 939,230.39 $ 383,076.94 $ 113,583.28 s====o=.o"'o= s 496,660.22 s 0.00 $ 381,492.82 $ 115167.40 $ 496,660.22 -25- (This page left intentionally blank) GEORGIA GWINNETT COLLEGE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2008 SCHEDULE "4" Totals per Annual Supplement Accruals June 30, 2008 June 30, 2007 Compensated Absences June 30, 2008 June 30, 2007 SALARIES $ 13,225,896 $ TRAVEL 206,196 7,858 -40,666 562,377 -253,571 $ 13,501,894 $ =====20=6,1=9=6 -27 - SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS GEORGIA GWINNETT COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS 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 weakness. A control deficiency exists when the design or operation ofa control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Georgia Gwinnett College's ability to initiate, authorize, record, process, or report financial data reliability in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Georgia Gwinnett College's financial statements that is more than inconsequential will not be prevented or detected by the Georgia Gwinnett College's internal control. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Georgia Gwinnett College's internal control. Any identified deficiencies in internal controls that we did not consider to be significant deficiencies and/or material weaknesses have been communicated to management and those charged with governance within a separate management letter dated January 23, 2009. Internal control deficiencies identified during the course of this engagement that were considered to be significant deficiencies and/or material weaknesses are presented below: CASH AND CASH EQUIVALENTS Inadequate Controls Over Cash and Cash Equivalents Significant Deficiency Finding Control Number: FS-540-08-01 Condition: Accounting procedures for the College's management ofcash were not being administered timely to provide adequate controls over the bank reconciliation process. Criteria: An adequate system of internal controls dictate that bank reconciliations be performed at a minimum on a monthly basis, and as appropriate, include the following: 1) adequate supporting documentation, 2) reconciling items correctly identified by description and amount, 3) accurate general ledger balances and 4) evidence of an effective supervisory review and approval. - 1- GEORGIA GWINNETT COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CASH AND CASH EQUIVALENTS Inadequate Controls Over Cash and Cash Equivalents Significant Deficiency Finding Control Number: FS-540-08-01 Questioned Cost: NIA Information: We noted the following weaknesses/deficiencies related to Cash and Cash Equivalents: 1. The monthly bank statements for the operating account were not reconciled with the general ledger in a timely manner. 2. Book errors disclosed through the bank reconciliation process were carried as reconciling items for extended periods of time. 3. Reconciling items reflected on the bank reconciliation for the General Operating account could not be properly documented. Cause: College management failed to ensure that safeguards for cash and cash equivalents were operating effectively. Effect: The failure to maintain an effective bank reconciliation process increases the risk of material misstatements to the financial statements including misstatements due to fraud. Recommendation: The College should ensure that appropriate accounting procedures and controls are operating effectively in an effort to ensure that cash transactions are reviewed and posted on a monthly basis, that detailed records supporting the general ledger are complete, and that reconciling items are resolved in a timely manner. CAPITAL ASSETS Capital Assets not Properly Maintained Significant Deficiency Finding Control Number: FS-540-08-02 Condition: The accounting procedures of the College were insufficient to provide adequate controls over Capital Assets. -2- GEORGIA GWINNETT COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL ASSETS Capital Assets not Properly Maintained Significant Deficiency Finding Control Number: FS-540-08-02 Criteria: The College should maintain its Capital Asset records in accordance with capitalization guidelines and instructions provided in Chapter 7 ofthe Board of Regents' Business Procedures Manual. Property management records should be maintained such that additions and deletions are properly recorded, adequate documentation is available supporting deletions and transfers, and subsidiary Capital Asset module information supports balances reported in the College's general ledger and financial statements. Questioned Cost: NIA Information: The following weaknesses/deficiencies were noted relating to Capital Assets: I. A reconciliation between the Asset Management Module, the General Ledger and the Capital Asset Listing was performed only at year-end instead of monthly, as required. 2. Although the ending balance for Buildings was properly reported on the financial statements, a review of the Construction in Progress activity revealed that prior year expenditure amounts of $938,635 were included in beginning balance as well as being recorded as current year additions to Construction in Progress. In an effort to correct this duplication in additions, the College also overstated current year reductions to Construction in Progress which effectively "zeroed out" the construction in progress balance upon completion of the project. Adjustments were made to Note 6 to correct the misstatements. 3. Construction in Progress associated with building improvements, of $215,488 was inappropriately classified as Repairs and Maintenance and not properly capitalized. Cause: The College's management failed to adequately monitor the existing policies, procedures and controls to ensure that capital assets were properly recorded and that the capital asset records were adequately maintained. Effect: Without effective monitoring ofaccounting controls the College could place itself in a position that could lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles. -3 - GEORGIA GWINNETT COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS CAPITAL ASSETS Capital Assets not Properly Maintained Significant Deficiency Finding Control Number: FS-540-08-02 Recommendation: The College should reevaluate policies and procedures to strengthen internal accounting controls over Capital Assets and to ensure that reconciliations are performed on a timely basis so that capital assets are properly recorded on the general ledger. FINANCIAL REPORTING Deficiencies in Financial Statement Preparation Material Weakness Finding Control Number: FS-540-08-03 Condition: The College's accounting procedures were insufficient to provide for adequate controls over the financial statements preparation process. Criteria: A system of internal control over financial reporting does not stop at the general ledger. Management is responsible for implementing a system of internal control over the preparation of financial statements prepared in accordance with generally accepted accounting principles (GAAP). Additionally, the College is required to annually submit GAAP basis financial statements for inclusion in the State of Georgia's Comprehensive Annual Financial Report (CAFR) and the State of Georgia's Single Audit Report. Questioned Cost: NIA -4- GEORGIA GWINNETT COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Deficiencies in Financial Statement Preparation Material Weakness Finding Control Number: FS-540-08-03 Information: The following deficiencies were noted in the College's GAAP basis financial statements: 1. Proceeds of $900,000 from a contractual agreement with Sodexho Food Service Company were improperly recorded as revenue in the current year. A material audit adjustment was proposed by auditors and posted to defer these proceeds over the life of the agreement. 2. Several significant errors were noted in the Notes to the Financial Statements, requiring auditor's adjustment. Cause: College's management failed to adequately review the year-end financial statements to ensure that the statements as presented for audit were accurate and properly supported by underlying accounting records. Effect: Significant errors and material misstatements were included in the financial statements presented for audit. In addition, the lack of controls and failure to adhere to Board of Regents policies could impact reporting of the College's financial position and results of operations. Recommendation: The College should review the accounting controls and procedures currently in place, identify weaknesses, and design and implement procedures necessary to strengthen controls over the preparation of the financial statements. -5- GEORGIA GWINNETT COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Inadequate Accounting Procedures for Budget Preparation/Execution Significant Deficiency Finding Control Number: FS-540-08-04 Condition: Through our examination, it was determined that the College's budgetary basis financial statements were inaccurate and employees and/or management lacked adequate guidance/training to reasonably ensure that these budgetary basis financial statements were properly presented. Criteria: Management is responsible for establishing and maintaining internal controls, the purpose ofwhich is to ensure that employees or management are proficient in their assigned functions and for the fair presentation of the budgetary basis financial statements provided for inclusion of the State of Georgia Budgetary Compliance Report. Questioned Cost: NIA Information: Based on information revealed by audit procedures, employees appear to lack sufficient training and/or knowledge to adequately perform their assigned functions related to budgetary compliance activity. A review of the budget basis financial statements revealed multiple post closing entries made by the College between lapsable and non-lapsable funds which suggests that management did not utilize the budgetary components of their financial accounting system as intended. Cause: These deficiencies were the result of a lack of internal controls over the preparation ofbudgetary basis financial statements. In addition, the College failed to ensure that personnel in key accounting functional areas were adequately trained and proficient. Effect: A lack of adequate accounting controls and procedures, coupled with ineffective or insufficient training ofpersonnel, could place the College in a situation where incorrect reporting of budget basis financial position could occur. -6- GEORGIA GWINNETT COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS FINANCIAL REPORTING Inadequate Accounting Procedures for Budget Preparation/Execution Significant Deficiency Finding Control Number: FS-540-08-04 Recommendation: The College should establish policies and procedures to ensure that personnel responsible for the accounting and reporting functions are adequately trained and proficient in preparing the entity's budget basis financial statements. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. -7- SECTION III MANAGEMENT'S RESPONSES GEORGIA GWINNETT COLLEGE SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008 Georgia Gwinnett College's responses to the findings described below were not audited and accordingly, we express no opinion on them. Finding Control Number: FS-540-08-01 CASH AND CASH EQUIVALENTS Inadequate Controls Over Cash and Cash Equivalents We concur with the finding. The College acknowledges that bank reconciliations were not conducted in a timely manner. The College experienced problems with canceled checks early in the fiscal year that were not corrected for several months. The College had difficulty reconciling its statement with the outstanding issue. The overall unreconciled amount was immaterial. In addition, the College was short of staff and experienced employee turnover. While the College attempted to keep up with the day-to-day operations, the month end reconciliations could not be maintained at the staffing level available at that time. The situation described in this finding has been corrected, and the College is following appropriate accounting procedures and maintaining proper controls to ensure that cash transactions are reviewed and posted on a monthly basis, that detailed records supporting the general ledger are complete, and that reconciling items are resolved in a timely manner. The College took the following corrective actions to ensure compliance with adequate controls over cash and cash equivalents: 1.) The College hired a consultant to revamp the bank reconciliations to make the format simplified and user friendly. 2.) The Accounting staff from Georgia Gwinnett College received a week oftraining on Bank Reconciliations. 3.) The College hired two new accountant positions, the Director of Accounting and an Accounting Assistant. 4.) In addition, the College is recruiting an Accountant III position whose primary function will be to perform all reconciliations and Internal Control functions. 5.) All month end reconciliations are being conducted and overseen by management. 6.) The College created extensive and detailed policies and procedures that have been developed during the course ofthe year and are part ofon-going training and review for all accounting personnel. These policies follow the Board of Regents policies and follow sound financial accounting practices. This response includes an Internal Control policy that establishes a system to monitor the checks and balances in the system. Contact Person: Eddie Beauchamp, Vice President of Business and Finance Telephone: (678) 407-5381; Fax: (678) 407-5491; E-mail: ebeauchamp@ggc.usg.edu - 1- GEORGIA GWINNETT COLLEGE SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008 Finding Control Number: FS-540-08-02 CAPITAL ASSETS Capital Assets not Properly Maintained We concur with the finding. The College acknowledges that month end reconciliations were not conducted in a timely manner and as a result Construction in Progress was overstated and inappropriately classified. The College was short of staff and had employee turnover. While the College attempted to keep up with the day-to-day operations, the month end reconciliations could not be maintained at the staffing level. As a result ofstaffturnover, the current staffwas unaware ofthe erroneous postings that occurred in the Construction in Progress area. These findings have been corrected and the College is following appropriate accounting procedures and maintaining proper controls to ensure Capital Assets are posted, maintained and capitalized correctly and in a timely manner. The College took the following corrective actions to ensure compliance with adequate controls over Capital Assets: 1.) The College made all correcting accounting entries. 2.) The College has worked with the Board of Regents to gain a full understanding of maintaining Capital Assets. 3.) The Board of Regents will provide additional training for the College accounting and logistics staff on Capital Assets and capitalization. 4.) The College hired two new accounting positions, the Director of Accounting and an Accounting Assistant. 5.) In addition, the College is recruiting an Accountant III position whose primary function will be to perform all reconciliations and Internal Control functions. 6.) All month end reconciliations are being conducted and overseen by management. 7.) The College created extensive and detailed policies and procedures that have been developed during the course ofthe year and are part ofon-going training and review for all accounting personnel. These policies follow the Board of Regents policies and follow sound financial accounting practices. This initiative includes an Internal Control policy that establishes a system to monitor the checks and balances in the system. Contact Person: Eddie Beauchamp, Vice President of Business and Finance Telephone: (678) 407-5381; Fax: (678) 407-5491; E-mail: ebeauchamp@ggc.usg.edu -2- GEORGIA GWINNETT COLLEGE SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008 Finding Control Number: FS-540-08-03 FINANCIAL REPORTING Deficiencies in Financial Statement Preparation We concur with the finding. The College acknowledges that the proceeds from the Food Service Contract were improperly recorded as revenue and errors as noted in Finding FS-540-08-02 were made in the preparation process ofthe financial statements. As noted above in Finding FS-540-0802, the College was short of staff and had employee turnover. Additionally, the staffwas unable to attend valuable year-end Financial Reporting training due to the lack of staffing. The situation described in this finding has been corrected and the College is following appropriate accounting procedures and maintaining proper controls to ensure proceeds are correctly recorded. The College took the following corrective actions to ensure compliance with adequate controls over Contract Proceeds and Notes to the Financial Statements: 1.) The College made all correcting accounting entries. 2.) The College hired two new accounting positions, the Director of Accounting and an Accounting Assistant. 3.) In addition, the College is recruiting an Accountant III position whose primary function will be to perform all reconciliations and Internal Control functions. 4.) Year-end training provided by the Board of Regents will be attended by the College accounting staff. 5.) The College created extensive and detailed policies and procedures that have been developed during the course ofthe year and are part of on-going training and review for all accounting personnel. These policies follow the Board ofRegents policies and follow sound financial accounting practices. This response includes an Internal Control policy that establishes a system to monitor the checks and balances in the system. Contact Person: Eddie Beauchamp, Vice President of Business and Finance Telephone: (678) 407-5381; Fax: (678) 407-5491; E-mail: ebeauchamp@ggc.usg.edu -3 - GEORGIA GWINNETT COLLEGE SCHEDULE OF MANAGEMENT'S RESPONSES YEAR ENDED JUNE 30, 2008 Finding Control Number: FS-540-08-04 FINANCIAL REPORTING Inadequate Accounting Procedures for Budget Preparation/Execution We concur with the finding. The College acknowledges that the accounting staff did lack the PeopleSoft skills and knowledge to manipulate the budgetary data to align expenditures with its funding throughout the year. The College did seek help from the OUT early in the fiscal year but was denied due to the impending PeopleSoft Upgrade. The College was aware of the issue and maintained a separate spreadsheet to make the necessary adjustments at year-end. Therefore, although the budgetary component ofthe PeopleSoft system was not being utilized during the fiscal year, resources were still being tracked accurately to ensure financial controls were in place. These findings have been corrected and the College is using the budgetary module of the upgraded PeopleSoft accounting software. The College took the following corrective actions to ensure compliance with accounting controls and procedures: 1.) The College has converted to the upgraded version of PeopleSoft. 2.) The College hired a consultant to ensure PeopleSoft was converted correctly and trained the accounting staff on all modules. 3.) The accounting staff attended the training provided by OUT on the upgraded version of Peoplesoft in their appropriate areas. 4.) The College utilizes both the budgetary module of Peoplesoft as well as manual spreadsheets to ensure funds are accounted for correctly. 5.) The College hired two new accounting positions, the Director of Accounting and an Accounting Assistant. 6.) The College is in the process of hiring an additional Accountant III position. 7.) The College created extensive and detailed policies and procedures that have been developed during the course ofthe year and are part of on-going training and review for all accounting personnel. These policies follow the Board ofRegents policies and follow sound financial accounting practices. This initiative includes an Internal Control policy that establishes a system to monitor the checks and balances in the system. Contact Person: Eddie Beauchamp, Vice President of Business and Finance Telephone: (678) 407-5381; Fax: (678) 407-5491; E-mail: ebeauchamp@ggc.usg.edu -4-