Kennesaw State University, Kennesaw, Georgia, annual financial report for the fiscal year ended June 30, 2013 including independent auditor's reports

2013 Annual Financial Report
for the Fiscal Year Ended June 30, 2013 (Including Independent Auditor's Report)

KENNESAW STATE UNIVERSITY - TABLE OF CONTENTS -

SECTION I
FINANCIAL
INDEPENDENT AUDITOR'S REPORT
REQUIRED SUPPLEMENTARY INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
BASIC FINANCIAL STATEMENTS
EXHIBITS
A STATEMENT OF NET POSITION
B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
C STATEMENT OF CASH FLOWS
D NOTES TO THE FINANCIAL STATEMENTS
SUPPLEMENTARY INFORMATION
SCHEDULES
1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT
(NON-GAAP BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO
BUDGET BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND
5 RECONCILIATION OF BUDGET TO GAAP 6 RECONCILIATION OF SALARIES AND TRAVEL

Page
i
2 3 4 7
32 33 34 36 38 40

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

KENNESAW STATE UNIVERSITY - TABLE OF CONTENTS -
SECTION III FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS AND MANAGEMENT'S CORRECTIVE ACTION PLAN

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
December 10, 2013

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Daniel S. Papp, President Kennesaw State University
INDEPENDENT AUDITOR'S REPORT
Ladies and Gentlemen:
Report on the Financial Statements
We have audited the accompanying basic financial statements (Exhibits A through D) of Kennesaw State University, a unit of the University System of Georgia, which is an organizational unit of the State of Georgia, as of and for the year ended June 30, 2013.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to Kennesaw State University's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Kennesaw State University's internal
13ARL-62

control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the respective financial position of Kennesaw State University as of June 30, 2013, and the respective changes in financial position and cash flows thereof for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1, the financial statements of Kennesaw State University are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of Kennesaw State University. They do not purport to, and do not, present fairly the financial position of the State of Georgia as of June 30, 2013, the changes in its financial position or its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
As described in Note 1 to the financial statements, in 2013, Kennesaw State University adopted new accounting guidance, GASB Statement No. 60, Service Concession Arrangements and GASB Statement No. 63, Reporting Deferred Outflows, Deferred Inflows, and Net Position. Our opinion is not modified with respect to these matters.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages i through vi be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquires of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Other Information
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Kennesaw State University. The accompanying supplementary information (Schedules 1 through 6) is presented for purposes of additional analysis and is not a required part of the basic financial statements.
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The accompanying supplementary information (Schedules 1 through 6) is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting or other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated December 10, 2013, on our consideration of Kennesaw State University's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Kennesaw State University's internal control over financial reporting and compliance.
Respectfully,

GSG:as 13ARL-62

Greg S. Griffin State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

KENNESAW STATE UNIVERSITY
Management's Discussion and Analysis

Introduction
Kennesaw State University is one of the 31 State-supported institutions of higher education of the University System of Georgia. The University, located in Kennesaw, Georgia, was founded in 1963 and is recognized as a valuable resource helping to drive the region's educational, economic, social, and cultural advancement. Kennesaw State University (KSU) is known for outstanding programs in such diverse fields as business administration, nursing, and education. The University offers baccalaureate, masters, and doctoral degrees in a wide variety of subjects. This broad range of educational opportunities attracts a highly qualified faculty and a student body of more than 24,000 students each year. The Institution continues to grow, as shown by the following numbers:

Faculty

Students (Headcount)

Students (FTE)

Fiscal Year 2013 Fiscal Year 2012 Fiscal Year 2011

854

24,604

884

24,175

833

23,452

Overview of the Financial Statements and Financial Analysis

22,017 21,644 21,135

Kennesaw State University is pleased to present its financial statements for fiscal year 2013. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Position; the Statement of Revenues, Expenses and Changes in Net Position; and the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2013 and fiscal year 2012.
Statement of Net Position

The Statement of Net Position presents the assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position of the University as of the end of the fiscal year. The Statement of Net Position is a point-of-time financial statement. The Statement of Net Position presents a fiscal snapshot of Kennesaw State University. The Statement of Net Position presents end-of-year data concerning assets (current and noncurrent) plus deferred outflows, and liabilities (current and noncurrent) plus deferred inflows, and net position (assets plus deferred outflows minus liabilities plus deferred inflows). The differences between current and noncurrent assets are discussed in the Notes to the Financial Statements.

From the data presented, readers of the Statement of Net Position are able to determine the assets available to continue the operations of the Institution and how much the Institution owes vendors.

Finally, the Statement of Net Position provides a picture of the net position (assets plus deferred outflows of resources minus liabilities plus deferred inflows of resources) and their availability for expenditure by the Institution. Net position is divided into three major categories. The first category, net investment in capital assets, provides the Institution's equity in property, plant and equipment owned by the Institution. The next category is restricted, which is divided into two categories, nonexpendable and expendable.

i

The corpus of nonexpendable, restricted resources is available only for investment purposes. Expendable, restricted resources are available for expenditure by the Institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted. Unrestricted resources are available to the Institution for any lawful purpose.

Statement of Net Position, Condensed

June 30, 2013

June 30, 2012

Assets Current Assets Capital Assets, Net Other Assets

$ 67,530,707 477,199,638 1,103,700

$ 70,779,760 351,497,804 1,395,208

Total Assets

$ 545,834,045

$ 423,672,772

Liabilities Current Liabilities Noncurrent Liabilities

$ 31,476,875 202,342,185

$ 30,756,568 174,597,531

Total Liabilities

$ 233,819,060

$ 205,354,099

Deferred Inflows of Resources

$ 77,884,484

$

0

Net Position Net Investment in Capital Assets Restricted Nonexpendable Expendable Unrestricted

$ 194,923,797
514,662 384,882 38,307,160

$ 175,627,063
787,878 566,004 41,337,728

Total Net Position

$ 234,130,501

$ 218,318,673

Total assets increased by $122,161,273, which was primarily due to an increase of $125,701,834 in the category of Capital Assets, Net. This substantial increase is largely due to the implementation of GASB 60 and the required recognition of assets and deferred inflow of resources related to three dormitories on the KSU campus; see Note 1. Other Capital Assets, Net increased, while Current Assets and Other Assets had small decreases. The consumption of assets (Current Assets and Other Assets) follows the Kennesaw State University institutional philosophy of using available resources to acquire and improve all areas of the University to better serve the instruction, research and public service missions of the Institution.
Total liabilities and deferred inflows of resources increased for the year by $106,349,445, also primarily due to the implementation of GASB 60. The combination of the increase in total assets of $122,161,273 and the increase in total liabilities and increase in deferred inflows of resources of $106,349,445 yields an increase in net position of $15,811,828. The increase in net position is all in the category of Net Investment in Capital Assets, in the amount of $19,296,734. Besides the increase in Capital Assets, KSU's Restricted and Unrestricted Net Positions both registered small decreases.

ii

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

June 30, 2013

June 30, 2012

Operating Revenues Operating Expenses

$ 187,837,476 309,003,067

$ 176,704,872 290,817,683

Operating Gain/Loss

$ -121,165,591

$ -114,112,811

Nonoperating Revenues and Expenses

116,832,884

111,332,720

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

$ -4,332,707

$ -2,780,091

Other Revenues, Expenses, Gains or Losses

20,144,535

64,305

Increase (Decrease) in Net Position

$ 15,811,828

$ -2,715,786

Net Position at Beginning of Year, as Originally Reported

$ 218,318,673

$ 212,758,734

Prior Year Adjustments

8,275,725

Net Position at Beginning of Year, Restated $ 218,318,673

$ 221,034,459

Net Position at End of Year

$ 234,130,501

$ 218,318,673

The Statement of Revenues, Expenses and Changes in Net Position reflects a very positive year, showing an increase in net position from fiscal year 2012 to fiscal year 2013. Some highlights of the information presented on this statement are as follow:

iii

Revenue by Source For the Years Ended June 30, 2013 and June 30, 2012

June 30, 2013

Operating Revenue

Tuition and Fees

$

Grants and Contracts

Sales and Services of Educational Departments

Auxiliary

Other

122,535,115 6,787,922 8,921,239
48,185,688 1,407,512

Total Operating Revenue

$ 187,837,476

Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other

$ 75,897,167 48,341,125 508,260 323,721 3,573,868

Total Nonoperating Revenue

$ 128,644,141

Capital Grants and Gifts State Other

$ 20,037,198 107,337

Total Capital Grants and Gifts

$ 20,144,535

June 30, 2012
$ 118,237,054 6,432,216 7,637,563
42,310,924 2,087,115
$ 176,704,872
$ 73,079,254 47,445,970 779,525 659,240 -144,172
$ 121,819,817

$

64,305

$

64,305

Total Revenues

$ 336,626,152

$ 298,588,994

Expenses (By Functional Classification) For the Years Ended June 30, 2013 and June 30, 2012

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

June 30, 2012
$ 115,425,560 1,653,531 7,907,353
31,715,802 25,039,680 30,311,051 29,644,595 19,008,531 48,296,964

June 30, 2012
$ 112,089,500 1,595,214 7,331,384
33,168,722 22,492,137 27,220,048 25,869,435 20,126,405 40,924,838

Total Operating Expenses
Nonoperating Expenses Interest Expense (Capital Assets)

$ 309,003,067 11,811,257

$ 290,817,683 10,487,097

Total Expenses

$ 320,814,324

$ 301,304,780

iv

Operating revenues increased by $11,132,604 in fiscal year 2013. Revenues from Tuition and Fees, Grants and Contracts, Sales and Services, and Auxiliary all registered increases; Other Revenue was down slightly.
The Auxiliary revenue increase of $5,874,764 is partly a result of the opening in August of the University's newest dormitory, University Place II, located on South Campus. This dormitory was financed and constructed by a unit of the KSU Foundation, Inc., a related party, but is leased by the University. KSU rents rooms to students and collects rents and other fees, but pays certain fees and expenses to the KSU Foundation to perform nonrental operating duties at the dormitory. Rental and other revenues from this dormitory were just under $3.0 million for the year. The Food Service, KSU Bookstores, Parking, and Other Organizations auxiliary enterprises all had solid gains in revenues; Health Services and Athletics had modest decreases in revenue.
Nonoperating revenues increased $6,824,324 for the year due to increases in State Appropriations, Grants and Contracts, Gifts, and Other; Investment Income was lower, reflecting the extremely low interest rate environment for State-approved investments.
The compensation and employee benefits category increased by $8,210,848 reflecting higher total salaries for staff members and increased costs for health insurance and other employee benefits at KSU. Total faculty salaries were flat compared to fiscal year 2012 due to a reduction in faculty members from 884 to 854.
Utilities decreased by $331,176 during the past year. The decrease was primarily associated with lower natural gas prices, a warmer winter than last year, cooler than normal temperatures in spring 2013 that required less air conditioning, and more rain than the past few years, requiring less water usage for landscaping and fields. Statement of Cash Flows
The final statement presented by the Kennesaw State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the Institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the Institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Position.
v

Cash Flows for the Years Ended June 30, 2013 and 2012, Condensed

June 30, 2013

June 30, 2012

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

$

-101,224,463

125,480,312

-26,972,225

265,933

$

-97,087,713

121,308,565

-21,562,434

1,766,782

Net Change in Cash Cash, Beginning of Year

$

-2,450,443

54,189,792

$

4,425,200

49,764,592

Cash, End of Year
Capital Assets

$

51,739,349

$

54,189,792

The University had two significant capital asset additions for facilities in fiscal year 2013. A new state-of-the-art dormitory was constructed on South Campus; "University Place II" was completed and opened for student residents in August, 2012. The cost of this dormitory was $31,449,755. Construction of the Science Lab Building was completed with a total cost of $21,766,620; the new building was placed into service early in fiscal year 2013. The Georgia State Financing and Investment Commission (GSFIC) funded $19.0 million of the cost of the Science Lab Building, with KSU funding the remainder.

Other capital acquisitions by KSU included a renovation of the third floor of the Sturgis library, major upgrades to HVAC units, fire prevention equipment, and campus power supply capabilities, and some additional leased office space. Additionally, significant equipment was purchased, mostly replacement IT and mechanical and engineering equipment.

For additional information concerning Capital Assets, see Notes 1, 6, 8, and 10 in the Notes to the Financial Statements.

Long-Term Liabilities

Kennesaw State University had Long-Term Liabilities of $212,297,408 of which $9,967,329 was reflected as Current Liabilities at June 30, 2013, yielding net Long-Term Liabilities of $202,330,079.

For additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements.
Economic Outlook

Kennesaw State University is not aware of any facts, decisions, or conditions that are expected to have a significant effect on KSU's financial position or results of operations during this fiscal year, beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat-funded year, KSU was able to generate a modest increase in Net Position in fiscal year 2013. The University anticipates the current fiscal year will be much like last year and is committed to keeping a close watch over resources so as to maintain KSU's ability to react to unknown internal and external issues.

Dr. Daniel S. Papp President
vi

BASIC FINANCIAL STATEMENTS - 1 -

KENNESAW STATE UNIVERSITY STATEMENT OF NET POSITION
JUNE 30, 2013
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Due from Component Units Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Short-Term Investments Investments (Externally Restricted) Notes Receivable, Net Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Unearned Revenue (Note 7) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences Due to Component Units
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Unearned Revenue Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
DEFERRED INFLOWS OF RESOURCES
Service Concession Receipts Applicable to Future Periods
NET POSITION
Net Investment in Capital Assets Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Position
The notes to the financial statements are an integral part of this statement.
- 2 -

EXHIBIT "A"

$ 51,739,349
6,609,553 3,831,680 1,601,189 2,550,022 1,198,914
$ 67,530,707

$

24,665

638,378

440,657

477,199,638

$ 478,303,338

$ 545,834,045

$

8,034,135

390,481

260,950

15,000

10,872,890

1,663,174

4,634,727

5,332,602

272,916

$ 31,476,875

$ 199,756,630 12,105
2,573,450
$ 202,342,185
$ 233,819,060

$ 77,884,484

$ 194,923,797
514,662 384,882 38,307,160

$ 234,130,501

KENNESAW STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION
YEAR ENDED JUNE 30, 2013
OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal Federal Stimulus State Other
Sales and Services Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Federal Stimulus State Other Gifts Investment Income Interest Expense Other Nonoperating Revenues
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State Other
Total Other Revenues, Expenses, Gains or Losses
Increase (Decrease) in Net Position
Net Position - Beginning of Year (Restated)
Net Position - End of Year
The notes to the financial statements are an integral part of this statement.
- 3 -

EXHIBIT "B"

$

152,044,382

-29,509,267

1,331,242 52,698
4,730,661 673,321
8,921,239 370,719

3,973,500 11,405,110 13,269,081
8,547,424 2,714,201 7,717,942
558,430 1,036,793

$

187,837,476

$

64,142,185

86,010,168

40,408,878

652,187

2,851,736

22,595,412

5,737,846

66,790,300

19,814,355

$

309,003,067

$

-121,165,591

$

75,897,167

43,682,254 302,361 238,908
4,117,602 508,260 323,721
-11,811,257 3,573,868

$

116,832,884

$

-4,332,707

$

20,037,198

107,337

$

20,144,535

$

15,811,828

218,318,673

$

234,130,501

KENNESAW STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2013
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts (Exchange) Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (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 Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments
Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year

EXHIBIT "C"

$

122,324,523

5,149,439

8,921,239

-117,294,016

-150,059,868

-22,595,412

-100,998

168,185

3,632,426 11,595,489 13,452,081
8,313,305 2,725,680 7,204,841
823,898 4,514,725

$ -101,224,463

$

75,897,167

411,273

49,180,193

-8,321

$

125,480,312

$

1,037,198

-13,026,614

-3,171,552

-11,811,257

$

-26,972,225

$

219,704

359,319

-313,090

$

265,933

$

-2,450,443

54,189,792

$

51,739,349

- 4 -

KENNESAW STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2013
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income (loss) to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Unearned Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income GASB 60 Revenue of Gifts and Grants Received for Other Than Capital Purposes Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts

EXHIBIT "C"

$ -121,165,591
19,814,355
-1,511,600 30,588
2,279,621 36,206
-543,904 -833,841 176,440 493,263
$ -101,224,463

$

31,692,167

$

-35,598

$

-3,582,189

$

-19,107,337

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

(This page left intentionally blank)

KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Note 1. Summary of Significant Accounting Policies
Nature of Operations
Kennesaw State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge and understanding of business, science, and the arts, and by disseminating knowledge to and building valuable skills in the people of Georgia and throughout the country.
Reporting Entity
Kennesaw State University (KSU) is one of thirty-one (31) 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 Kennesaw State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Kennesaw State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, KSU is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt Affiliated Organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential Component Units of the State. See Note 16 for additional information.
Financial Statement Presentation
The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the University's assets, liabilities, net position, revenues, expenses, changes in net position and cash flows.
Basis of Accounting
For financial reporting purposes, Kennesaw State University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

New Accounting Pronouncements
In fiscal year 2013, the University adopted the Governmental Accounting Standards Board (GASB) Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The provisions of this Statement establish accounting and financial reporting standards for governments who enter into Service Concession Arrangements (SCA) with other governmental or nongovernmental entities. See "Service Concession Arrangements" below for further information.
In fiscal year 2013, the University adopted the Governmental Accounting Standards Board (GASB) Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in PreNovember 30, 1989 FASB and AICPA Pronouncements. The provisions of this Statement incorporate certain accounting and financial reporting guidance into authoritative GASB literature.
In fiscal year 2013, the University adopted the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position. The provisions of this Statement establish financial reporting standards for the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government's net position. The University changed its presentation of net assets to net position for fiscal year 2013. The University also recorded deferred inflows related to Service Concession Arrangements as described below.
Cash and Cash Equivalents
Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the Board of Regents Short-Term Investment Pool.

Short-Term Investments
Short-Term Investments consist of investments of 90 days - 13 months, which include certificates of deposits or other time-restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
Investments
Investments include financial instruments with terms in excess of 13 months, certain other securities for the production of revenue, land, and other real estate held as investments by endowments. The University accounts for its investments at fair value. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Position. The Board of Regents Legal Fund is included under Investments.
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 who reside in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Inventories
Resale Inventories are valued at cost or market using the "first in, first out" (FIFO) basis.
Noncurrent Cash and Investments
Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Position.
Capital Assets
Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation, which also includes amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, and copyrights, as well as software, is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values generally are 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To fully understand plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. These bonds constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
For projects managed by GSFIC, GSFIC retains construction-in-progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, KSU retains construction-in-progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2013, GSFIC transferred capital additions valued at $19,107,337 to Kennesaw State University.
Deposits
Deposits represent a vendor payment that is required per contractual agreement.
Unearned Revenues
Unearned revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Unearned Revenues also include amounts received from grant and contract sponsors that have not yet been earned.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Compensated Absences
Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense associated with the accrual are recorded at year-end as compensated absences in the Statement of Net Position, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Position. Kennesaw State University had accrued liability for compensated absences in the amount of $7,412,790 as of July 1, 2012. For fiscal year 2013, $5,224,884 was earned in compensated absences and employees were paid $4,731,622, for a net increase of $493,262. The ending balance as of June 30, 2013 in accrued liability for compensated absences was $7,906,052.
Noncurrent Liabilities
Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Service Concession Agreements
Service concession agreements, as defined in GASB 60, are arrangements between a government (transferor, one of our institutions) and a third party (operator) in which all of the following criteria are met:
a. The institution conveys to the operator the right and obligation to provide public services through the use and operation of a capital asset in exchange for significant consideration. Significant consideration could be in the form of up-front payments, installment payments, a new facility or improvements to existing facility
b. The operator collects and is compensated by fees from third parties. c. The institution has the ability to modify or approve what services the operator is required to
provide, to whom services are provided, and prices or rates that can be charged for those services. d. The institution is entitled to significant residual interest in the service utility of the asset at the end of the arrangement.
Kennesaw State participates in three Service Concession Agreements:
1. In August 2001, KSU entered into an agreement with Kennesaw State University Foundation, Inc. (KSUF) whereby KSUF will operate and collect revenues for housing operations from students. KSUF is required to operate the dormitory ("University Place") in accordance with the contractual agreement. Under the terms of the agreement the University received no funds upfront from KSUF, but will take full ownership of the dormitory at the end of the operating agreement (July, 2031).
2. In August 2003, KSU entered into an agreement with Kennesaw State University Foundation, Inc. (KSUF) whereby KSUF will operate and collect revenues for housing operations from students. KSUF is required to operate the dormitory ("University Village") in accordance with the contractual agreement. Under the terms of the agreement the University received no funds upfront from KSUF, but will take full ownership of the dormitory at the end of the operating agreement (July, 2034).

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

3. In August 2007, KSU entered into an agreement with Kennesaw State University Foundation, Inc. (KSUF) whereby KSUF will operate and collect revenues for housing operations from students. KSUF is required to operate the dormitory ("University Suites") in accordance with the contractual agreement. Under the terms of the agreement the University received no funds upfront from KSUF, but will take full ownership of the dormitory at the end of the operating agreement (July, 2037).

At June 30, 2013, Kennesaw State University reports the three dormitories as capital assets with a combined net carrying value of $77,884,484. For fiscal year 2013, KSU also reported revenue of $3,582,190, which is the annual recognition of deferred inflows based on the life of the Service Concession Arrangements. As part of the contractual agreement, the Kennesaw State University Foundation is responsible for insuring each of the three dormitories and for providing maintenance services. As such, the University has no reportable obligation for these services.
Net Position

The University's net position is classified as follows:
Net Investment in Capital Assets: This represents Kennesaw State University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of the net investment in capital assets. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section.
Restricted - nonexpendable includes endowment and similar type funds, in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may be either expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted - expendable includes resources in which KSU is legally or contractually obligated to spend in accordance with restrictions imposed by external third parties.

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

$

-107,749

411,808

80,823

Total Restricted Expendable

$

384,882

Unrestricted: Unrestricted represents 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 KSU, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of the State Treasurer. At June 30, 2013, there was a surplus balance of $52,636.12 to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Unrestricted resources include the following items which are quasi-restricted by management at June 30, 2013:

R & R Reserve Reserve for Encumbrances Other Unrestricted

$

7,036,886

13,015,734

18,254,540

Total Unrestricted Net Position

$

38,307,160

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

Income Taxes

Kennesaw State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

Classification of Revenues and Expenses

The Statement of Revenues, Expenses and Changes in Net Position classify fiscal year activity as operating and nonoperating according to the following criteria:
Operating Revenue includes activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) certain Federal, state and local grants and contracts, and (3) sales and services.
Nonoperating Revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenue by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
Operating Expenses: Operating expense includes activities that have the characteristics of exchange transactions.
Nonoperating Expense includes activities that have the characteristics of nonexchange transactions, such as capital financing costs and costs related to investment activity.

Scholarship Allowances

Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Position. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf.

Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, KSU has recorded contra revenue for scholarship allowances.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Restatement of Prior Year Net Position
Kennesaw State University has a restatement of prior year Capital Assets increasing beginning Building and Building Improvements by $108,634,017 and associated depreciation of $27,167,343 for a net increase to Capital Assets of $81,466,674. This increase is offset by an increase to beginning deferred inflows of resources of $81,466,674 which resulted in no overall effect to beginning net position. This is due to recording net position relating to three Service Concession Arrangements with Kennesaw State University Foundation, Inc., to construct and operate dormitories in KSU's campus, in accordance with the adoption of GASB Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements.
Note 2. Deposits and Investments
Deposits
The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to KSU (and thus, the State of Georgia) 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 50-1759:
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.
At June 30, 2013, the carrying value of Kennesaw State University's deposits was $14,766,699 and the bank balances was $16,642,049, all of which were insured or collateralized. 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.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Investments
Kennesaw State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws.
The University's investments as of June 30, 2013 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investment Type

Fair Value

Less Than 1 Year

Investment Maturity

1 - 5 Years

6 - 10 years

More than 10 Years

Debt Securities Mutual Bond Fund

$

100,808 $

2,133 $

39,376 $

42,549 $

16,750

Other Investments Bond/Equity Mutual Funds Equity Mutual Funds Equity Securities - Domestic

92,744 200,125 115,749

Investment Pools Board of Regents Short-Term Fund Legal Fund

36,923,316 128,951

Total Investments

$

37,561,693

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 - Education Audit Division or on their web site at http://www.audits.ga.gov.

Interest Rate Risk

Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a formal policy for managing interest rate risk.

The Effective Duration of the Short-Term Fund is 0.56 years. Of the University's total investment of $36,923,316 in the Short-Term Fund, $32,392,456 is invested in debt securities.

The Effective Duration of the Legal Fund is 3.72 years. Of the University's total investment of $128,951 in the Legal Fund, $76,663 is invested in debt securities.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Custodial Credit Risk

Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the University will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. KSU does not have a formal policy for managing custodial credit risk for investments.

At June 30, 2013, all of the University's applicable investments were insured by the Securities Investor Protection Corporation (SIPC) against financial loss due to the failure of the third-party investment companies that hold the investments in Kennesaw State University's or KSU Foundation, Inc.'s name.

Credit Quality Risk

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

The investments subject to credit quality risk as of June 30, 2013 are shown below:

Credit Quality Risk

Fair Value

AA

A

BBB

Unrated

Related Debt Investments

Mutual Bond Fund

$

Concentration of Credit Risk

100,809 $

61,139 $

13,875 $

5,633 $

20,162

Concentration of credit risk is the risk of loss attributed to the magnitude of any entity's investment in a single issuer. The University does not have a formal policy for managing concentration of credit risk. Investments (other than obligations of U.S. government agencies explicitly guaranteed by the U. S. government) in any one issuer in a concentration of greater than 5% of total investments held is generally deemed to be a credit risk. At June 30, 2013, KSU did not have any investments which would constitute a credit risk under this criterion.
Foreign Currency Risk

Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The University does not have a formal policy for managing exposure to foreign currency risk.
At June 30, 2013, KSU held $1,818 in international equity investments. These make up a portion of the $106,192 that has been donated to KSU students in the Coles College of Business for instruction purposes. This represents less than 0.005% of the Institution's total investments and is not believed to be a significant risk to Kennesaw State University.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2013:

Student Tuition and Fees

$

Auxiliary Enterprises and Other Operating Activities

Federal Financial Assistance

Georgia State Financing and Investment Commission

Due from Affiliated Organizations

Other

903,691 743,510 6,609,553 182,939 1,601,189 3,521,058

Less Allowance for Doubtful Accounts

$

13,561,940

1,519,518

Net Accounts Receivable

$

Note 4. Inventories

Inventories consisted of the following at June 30, 2013:

12,042,422

Bookstore Other

$

2,512,113

37,909

Total Inventories Note 5. Notes/Loans Receivable

$

2,550,022

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2013. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University for amounts cancelled under these provisions. As KSU determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U. S. Department of Education. The Institution has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off. At June 30, 2013, the allowance for uncollectible loans was $0.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Note 6. Capital Assets Following are the changes in capital assets for the year ended June 30, 2013:

Beginning Balance July 1, 2012 (Restated)

Additions

Reductions

Ending Balance June 30, 2013

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

$

25,844,320

3,628,201

1,479,927 $

7,774,387 $

$ 3,998,022

25,844,320 3,628,201 5,256,292

Total Capital Assets, Not Being Depreciated $

30,952,448 $

7,774,387 $

3,998,022 $

34,728,813

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

$

6,622,147

317,411,930 $

4,784,258

22,695,317

172,226,805

20,287,335

5,243,062

23,584,395 587,349
2,783,633 $ 33,124,633
119,176 91,682

$
752,109 55,086

6,622,147 340,996,325
5,371,607 24,726,841 205,351,438 20,351,425
5,334,744

Total Assets Being Depreciated

$

549,270,854 $

60,290,868 $

807,195 $

608,754,527

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

$

1,713,598 $

76,850,838

2,822,324

14,372,904

32,247,863

18,525,569

725,728

252,280 8,638,812
163,754 2,558,716 $ 7,614,831
453,966 131,996

$
734,391 55,086

1,965,878 85,489,650
2,986,078 16,197,229 39,862,694 18,924,449
857,724

Total Accumulated Depreciation

$

147,258,824 $

19,814,355 $

789,477 $

166,283,702

Total Capital Assets, Being Depreciated, Net $

402,012,030 $

40,476,513 $

17,718 $

442,470,825

Capital Assets, Net

$

432,964,478 $

48,250,900 $

4,015,740 $

477,199,638

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Note 7. Unearned Revenue Unearned Revenue consisted of the following at June 30, 2013:

Prepaid Tuition and Fees Other Unearned Revenue

$

8,374,727

2,498,163

Total Unearned Revenue Note 8. Long-Term Liabilities

$ 10,872,890

Long-Term liability activity for the year ended June 30, 2013 was as follows:

Beginning Balance July 1, 2012

Additions

Reductions

Ending Balance June 30, 2013

Current Portion

Leases Lease Obligations

$ 175,870,741 $ 31,692,167 $ 3,171,552 $ 204,391,356 $ 4,634,727

Other Liabilities Compensated Absences

7,412,790

5,224,884

4,731,622

7,906,052

5,332,602

Total Long-Term Obligations $ 183,283,531 $ 36,917,051 $ 7,903,174 $ 212,297,408 $ 9,967,329

Note 9. Significant Commitments
KSU had significant outstanding campus renovation contracts executed in the amount of $2,157,494 as of June 30, 2013. Additionally, the University entered into a capital lease in March, 2013 with the KSU Foundation, Inc. whereby the KSU Foundation will finance and construct a student recreation and activities center on the KSU campus and lease the facility to KSU. The first rental payment is due in December, 2014, so there is no lease payment due from the University in fiscal year 2014. The minimum lease payments for this asset have a present value of $45,060,551 at an interest rate of 3.51%. This amount is not reflected in the accompanying basic financial statements.
Note 10. Lease Obligations
Kennesaw State University is obligated under various capital leases for the use of real property (land, buildings, office facilities, and student housing facilities) and equipment, and also is obligated under one operating lease for equipment.
CAPITAL LEASES
Capital leases are leases that involve large financial commitments and are for terms covering multiple years. These leases are generally payable in installments ranging from monthly to annually. Certain capital leases provide for renewal and/or purchase options. Ownership of the leased property often transfers to the lessee at the end of the lease term, sometimes with no additional cost or at a bargain price (such as one dollar). KSU is a party to capital leases that have terms expiring in various years between 2016 and 2041. Expenditures for fiscal year 2013 were $16,901,253, of

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

which $11,811,257 represented interest, $3,171,552 went to repayment of principal, and $1,918,444 was for executor costs. Interest rates range from 2.0 percent to 9.14 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2013:

Description

Gross Amount (+)

Accumulated Depreciation
(-)

Net Position Held Under Capital Lease at June 30, 2013
(=)

Outstanding Balances per Lease Schedules at June 30, 2013

Land Equipment Buildings

$

21,694,066

$ 21,694,066 $ 16,781,920

129,610 $

41,573

88,037

91,694

205,221,828

39,821,121

165,400,707

187,517,742

$

227,045,504 $ 39,862,694 $ 187,182,810 $ 204,391,356

All capital leases are for one-year terms and provide for renewal options covering the remaining term. Nonrenewal is considered a remote possibility. Most of the leases provide that the asset will become the property of the University at the end of the lease term.
Kennesaw State University had sixteen capital leases with Kennesaw State University Foundation, Inc. (KSUF), a discretely presented component unit, in place during fiscal year 2013.
In August 2002, the University entered into a capital lease of $3,965,768 at 9.14 percent with KSUF whereby the University leases nine houses for a twenty-five year period that expires in April 2027. Improvements were made to the property bringing the value of the lease to $4,420,132. The outstanding liability on this capital lease at June 30, 2013 was $3,133,737.
In May 2002, KSU entered into a capital lease of $21,016,938 at 4.7 percent with KSUF whereby the University leases two parking decks for a twenty-four year period that expires in July 2026. In August 2003, the lease payments increased because additional space was added to one of the decks, bring the value of the lease to $24,093,887. The decks are constructed on land owned by the University and leased to the KSU Foundation for $1 annually for a period of twenty-five years commencing in June 2001. At the expiration of the ground lease and capital lease, ownership of the parking decks transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $16,026,582.
In January 2004, KSU entered into a capital lease of $2,718,028 at 5.5 percent with KSUF whereby the University leases a portion of a building for a twenty-five year period that expired in June 2029. The University has the right of first refusal to lease additional space in the building complex. Should the cumulative value of the rent payments equal the value of the Foundation's financing instrument and all additional rent under the terms of the agreement, Kennesaw State University Foundation, Inc. will gift the property to the University. In December 2004, the University entered into a capital lease at 5.5 percent for additional space in the complex, bringing the value of the lease to $3,378,929. In February 2007, the University substituted space and added additional space in a capital lease at 5.5 percent, bringing the value of the lease to $4,326,537. In September 2007, the University entered into a capital lease at 5.5 percent for additional space in the complex, bringing the value of the lease to $6,232,158. In May 2010 and June 2010, the University entered into a capital lease at 5.5 percent for additional space in the complex, bringing the value of the lease to $8,615,209. In November 2010, the University entered into a capital lease at 5.5 percent for more

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

space in the complex, bringing the value of the lease to $8,872,893. Improvements were made to the property in 2011 in the amount of $609,003, increasing the value of the capital lease to $9,481,896. In June 2012, the University entered into additional capital leases at 5.5 percent for additional space in the complex, bringing the value of the lease to $11,430,351. In July 2012, the University entered into additional capital leases at 5.5 percent for additional space in the complex, bringing the value of the lease to $11,672,763. The outstanding liability at June 30, 2013, on these capital leases is $8,812,205.
In February 2004, KSU entered into a capital lease of $200,000 at 2.0 percent with KSUF whereby the University leases a house for a fifteen year period that expires in January 2019. The outstanding liability on this capital lease at June 30, 2013 was $81,525.
In September 2004, KSU entered into a capital lease of $14,323,134 at 5.79 percent with KSUF whereby the University leases a parking deck for a twenty-five year period that expires in August 2029. The deck is constructed on land owned by the University and leased to the KSU Foundation for $197,600 annually for a period of twenty-five years commencing in September 2004. At the expiration of the ground lease and capital lease, ownership of the parking deck transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $11,325,053.
In April 2006, KSU entered into a capital lease of $4,015,944 at 8.22 percent with KSUF whereby the University leases a portion of an office building for a twenty-four year period that expires in June 2030. The University is obligated to lease additional space in the building as it becomes available. At the expiration of the lease, ownership of the building transfers to the University. In September 2006, the University entered into a capital lease at 8.22 percent for additional space in the complex, bringing the value of the lease to $4,157,971. In July 2007, January 2008, April 2008, and May 2008, the University entered into additional capital leases at 8.22 percent for additional space in the complex, bringing the value of the lease to $7,955,987. In December 2009 and February 2010, the University entered into additional capital leases at 8.22 percent for additional space in the complex, bringing the value of the lease to $8,599,056. In October 2010, January 2011, and May 2011, the University entered into additional capital leases at 8.22 percent for more space in the complex, bringing the value of the lease to $9,845,565. In January 2012, the University entered into an additional capital lease at 8.22 percent for additional space in the complex, and improvements were made to the property bringing the value of the lease to $12,068,921. The University now leases all of the space in the office building. The outstanding liability at June 30, 2013, on these capital leases is $10,518,706.
In April 2006, KSU entered into a capital lease of $1,814,402 at 5.07 percent with KSUF whereby the University leases 7.242 acres of unimproved land for a twenty-four year period that expires in June 2030. At the expiration of the lease, ownership of the land transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $1,475,112.
In November 2006, KSU entered into a capital lease of $1,041,207 at 5.38 percent with KSUF whereby the University leases classroom space in a multi-purpose building for a twenty-three year period that expires in June 2030. The building is constructed on land owned by the University and leased to the KSU Foundation for $10 annually for a period of twenty-five years commencing in June 2004. At the expiration of the ground lease and capital lease, ownership of the building transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $824,253.
In July 2007, KSU entered into a capital lease of $11,493,855 at 7.09 percent with KSUF whereby the University leases a portion of a building for office and classroom space for a twelve year period that expires in June 2019. The outstanding liability on this capital lease at June 30, 2013 was $6,906,349.
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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

In August 2008, KSU entered into a capital lease of $32,625,518 at 5.94 percent with KSUF whereby the University leases a parking deck for a thirty year period that expires in June 2038. The deck is constructed on land owned by the University and leased to the KSU Foundation for $10 annually for a period of thirty years commencing in August 2008. At the expiration of the ground lease and capital lease, ownership of the parking deck transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $30,721,528.
In November 2008, KSU entered into a capital lease of $1,637,679 at 9.0 percent with KSUF whereby the University leases a classroom building for a thirty-one year period that expires in June 2039. At the expiration of the lease, ownership of the building transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $1,567,849.
In November 2008, KSU entered into a capital lease of $18,535,311 at 6.95 percent with KSUF that became effective in August 2009, whereby the University leases a dining hall facility for a thirty year period that expires in June 2039. The dining hall is constructed on land owned by the University and leased to the KSU Foundation for $10 annually for a thirty year period commencing in August 2009. At the expiration of the ground lease and capital lease, ownership of the parking deck transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $18,042,984.
In January 2010, KSU entered into a capital lease of $242,257 at 6.04 percent with KSUF whereby the University leases a house for a thirty year period that expires in December 2039. At the expiration of the lease, ownership of the house transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $229,944.
In July 2010, KSU entered into a capital lease of $685,028 at 5.26 percent with KSUF whereby the University leases space in a multi-purpose building for a twenty-six year period that expires in June 2036. Improvements were made to the property in 2011 in the amount of $260,603, increasing the value of the capital lease to $945,631. The building is constructed on land owned by the University and leased to the KSU Foundation for $10 annually for a twenty-five year period commencing in June 2004. At the expiration of the ground lease and capital lease, ownership of the building transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $642,118.
In July 2010, KSU entered into a capital lease of $58,918,976 at 5.50 percent with KSUF whereby the University leases a sports stadium, recreation fields, and a recreation facility for a thirty year period that expires in June 2040. At the expiration of the lease, ownership of the stadium, fields, and facility transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $61,848,602.
In August 2011, KSU entered into a capital lease of $31,449,755 at 5.13 percent with KSUF, to be effective beginning August 2012 whereby the University leases a student housing facility for a twenty-nine year period that expires in June 2041. The student housing facility is constructed on land owned by the University and leased to the KSU Foundation for $10 annually for a thirty year period commencing in August 2011. At the expiration of the ground lease and the capital lease, ownership of the student housing facility transfers to the University. The outstanding liability on this capital lease at June 30, 2013 was $32,143,115.
Kennesaw State University also has one capital lease with an unrelated party. In November 2011, KSU entered into a capital lease of $129,610 at 7.54 percent whereby the University leases an Expresso Book Machine/Copier for a five year period that expires in October 2016. The outstanding liability on this capital lease at June 30, 2013 was $91,694.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

OPERATING LEASES
Kennesaw State University is a party to one noncancellable operating lease. The lease is for space in a nonrelated party's parking lot for KSU students' vehicles. The lease was renewed for one year and expires in May, 2014; however, it is likely that KSU will renew the lease at the end of the current one-year term. The University's annual obligation under the lease is $43,000.
FUTURE COMMITMENTS
Future commitments for capital leases and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2013, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2014 2015 2016 2017 2018 2019 - 2023 2024 - 2028 2029 - 2033 2034 - 2038 2039 - 2041

$

18,169,269 $

43,000

18,270,290

18,384,964

18,495,052

18,616,737

89,425,410

87,668,689

66,824,369

60,394,110

19,925,763

Total Minimum Lease Payments

$

416,174,653 $

43,000

Less: Interest Less: Executory Costs (if paid)

174,466,557 37,316,740

Principal Outstanding

$

204,391,356

Kennesaw State University's fiscal year 2013 expense for rental of real property and equipment under operating leases was $208,204.
Note 11. Retirement Plans
Kennesaw State University participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia. These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that KSU 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.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Employees' Retirement System of Georgia
The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers Retirement System of Georgia. One of the ERS System plans, the Employees' Retirement System of Georgia (ERS), is a cost-sharing multiple-employer defined benefit pension plan that was established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract.
On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1, 1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415.
The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are "new plan" members subject to the modified plan provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009 also have the option to change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 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 a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, the Institution pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these KSU 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

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

annual compensation. The University is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These Kennesaw State University contributions are not at any time refundable to the member or his/her beneficiary.

Employer contributions required for fiscal year 2013 were based on the June 30, 2010 actuarial valuation as follows:

o Old Plan* o New Plan o GSEPS

14.90% 14.90% 11.54%

*10.15% exclusive of contributions paid by the employer on behalf of old plan members

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

Teachers Retirement System of Georgia

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

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

TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Options are available for distribution of the member's monthly pension, at a reduced rate, to a designated beneficiary on the member's death. Death, disability and spousal benefits are also available.

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2013 were 6.00% of annual salary. Employer contributions required for fiscal year 2013 were 11.41% of annual salary as required by the June 30, 2010 actuarial valuation.
The following table summarizes the Kennesaw State University contributions by defined benefit plan for the years ending June 30, 2013, June 30, 2012, and June 30, 2011 (dollars in Thousands):

Fiscal Year

ERS

Required

Percentage

Contribution

Contributed

TRS

Required

Percentage

Contribution

Contributed

2013

$

2012

$

2011

$

Regents Retirement Plan

19,792 21,502 18,239

100% 100% 100%

$ 7,772,709 $ 6,932,081 $ 6,425,378

100% 100% 100%

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 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 three approved vendors (AIG-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

Kennesaw State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2013, 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.

KSU and the covered employees made the required contributions of $5,809,666 (9.24%) and $3,465,604 (6%), respectively.

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

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Georgia Defined Contribution Plan
Plan Description
Kennesaw State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits
A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions
Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2013 amounted to $531,604, which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. Risk Management
The University System of Georgia offers its employees and retirees access to four different selfinsured healthcare plan options. For the University System of Georgia's Plan Year 2013, the following health care options were available:
o Blue Choice HMO plan o (Blue Cross Blue Shield) HSA Open Access POS plan o (Blue Cross Blue Shield) Open Access POS plan o Kaiser Permanente HMO plan
KSU and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the self-insured healthcare plan products. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser.
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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

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. Kennesaw State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditure disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although the University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Kennesaw State University (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2013.
Note 14. Post-Employment Benefits Other Than Pension Benefits
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
The Board of Regents Retiree Health Benefit Plan is a single-employer, defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The Institution pays the employer portion of health insurance for its eligible retirees based on rates that

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

are established annually by the Board of Regents for the upcoming plan year. For the 2013 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, 2013, there were 359 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2013, Kennesaw State University recognized as incurred $1,796,133 of expenditures, which was net of $715,884 of participant contributions.
Note 15. Natural Classifications with Functional Classifications
Kennesaw State University's operating expenses by functional classification for fiscal year 2013 are shown below:
Functional Classification

Natural Classification

Instruction

Research

Public Service

Academic Support

Student Services

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

$ 61,962,213 $ 20,113,466 19,164,359 130,679 1,505,627 1,125,756 388,533 10,452,742 582,185

193,776 $ 531,889 141,251
33,971 4,550 396
683,640 64,058

330,678 $ 4,600,463 1,389,319
7,388 115,221
9,005 41,017 1,413,150
1,112

1,291,885 $ 17,276,602
5,091,195 12,832
475,450
210,938 5,860,233 1,496,667

140,686 12,781,004
3,392,500 16,196
375,077 735,874 184,103 5,947,528 1,466,712

Total Operating Expenses

$ 115,425,560 $

1,653,531 $ 7,907,353 $ 31,715,802 $ 25,039,680

Natural Classification

Institutional Support

Functional Classification

Plant Operations Scholarships

and

and

Maintenance

Fellowships

Auxiliary Enterprises

Total Operating Expenses

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

$

2,381

14,041,645 $

6,888,655

421,027

227,629

153,096

191,066

7,489,879

895,673

7,774,545 2,385,338
-73,247 50,534
$ 4,258,042 8,425,853 6,823,530

$ 19,008,531

220,566 $ 8,890,554 1,956,261
137,312 68,227
1,558,600 463,751
26,517,275 8,484,418

64,142,185 86,010,168 40,408,878
652,187 2,851,736 22,595,412 5,737,846 66,790,300 19,814,355

Total Operating Expenses

$ 30,311,051 $

29,644,595 $ 19,008,531 $ 48,296,964 $ 309,003,067

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KENNESAW STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2013

EXHIBIT "D"

Note 16. Affiliated Organizations
In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units and GASB No. 61, The Financial Reporting Entity: Omnibus, which are amendments of GASB Statement No. 14, The Reporting Entity, Kennesaw State University Foundation, Inc. is a legally separate, tax-exempt organization whose activities primarily support Kennesaw State University, 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 and No. 61 should not be assessed in relation to their significance to Kennesaw State University, but instead based on their significance to the State of Georgia.
The Kennesaw State University Foundation, Inc. is a legally separate, tax exempt organization whose activities primarily support Kennesaw State University. This affiliated organization is considered a potential component unit of the State of Georgia in accordance with GASB Statement No. 61, The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units and as such, is reported as a discretely presented component unit in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). Therefore, the financial statements of the affiliated organization are not included in these financial statements. Copies of the financial statements for the affiliated organization may be obtained from Kennesaw State University.
Kennesaw State University Real Estate Foundation, Kennesaw State University Research Foundation, and Kennesaw State University Athletic Association have been determined not to be significant to the State of Georgia for the year ended June 30, 2013, and therefore, the financial statements of these affiliated organizations are not included in the Comprehensive Annual Financial Report (CAFR) of the State of Georgia. Copies of their financial statements may be obtained from Kennesaw State University.

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SUPPLEMENTARY INFORMATION - 31 -

KENNESAW STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2013
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Unearned Revenue
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

27,204,365.17

90,842.88

3,821,480.29 2,949,134.24
537,304.39

$

34,603,126.97

$

367,898.18

12,126,952.17

1,890,741.88

8,595,873.34

$

22,981,465.57

$

5,101,734.63

1,586,267.01

68,153.52

225,686.24

1,316,592.76

3,270,591.12

52,636.12

$

11,621,661.40

$

34,603,126.97

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 32 -

KENNESAW STATE UNIVERSITY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2013

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 Research Consortium Special Funding Initiative Teaching Total Expenditures Excess of Funds Available over Expenditures
FUND BALANCE JULY 1 Reserved
ADJUSTMENTS Prior Year Receivables/Revenues 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 Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Total Reserved Unreserved Surplus
Total Fund Balance

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 75,897,167.00 $ 75,897,167.00 $

0.00

236,098,972.00

198,706,290.68

-37,392,681.32

$ 311,996,139.00 $ 274,603,457.68 $ -37,392,681.32

0.00

653,292.00

653,292.00

0.00

9,395,672.93

9,395,672.93

$ 311,996,139.00 $ 284,652,422.61 $ -27,343,716.39

$

207,896.00 $

126,000.00

311,662,243.00

207,896.00 $ 73,363.88
273,562,888.38

0.00 52,636.12 38,099,354.62

$ 311,996,139.00 $ 273,844,148.26 $ 38,151,990.74

$

0.00 $ 10,808,274.35 $ 10,808,274.35

10,556,560.58

-347,500.60 -9,395,672.93
$ 11,621,661.40

$

5,101,734.63

1,586,267.01

68,153.52

225,686.24

1,316,592.76

3,270,591.12

$ 11,569,025.28

52,636.12

$ 11,621,661.40

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 33 -

KENNESAW STATE UNIVERSITY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2013

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

Original Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

$

214,326.00 $

214,326.00 $

207,896.00 $

207,896.00

$

0.00 $

0.00 $

126,000.00 $

126,000.00

$

79,267,047.00 $

79,267,047.00 $

75,563,271.00 $ 75,563,271.00

191,664,931.00

191,664,931.00

236,098,972.00

198,706,290.68

$

270,931,978.00 $

270,931,978.00 $

311,662,243.00 $ 274,269,561.68

$

271,146,304.00 $

271,146,304.00 $

311,996,139.00 $ 274,603,457.68

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 34 -

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers

Funds Available

Variance Positive (Negative)

Expenditures Compared to Budget

Variance

Actual

Positive (Negative)

Excess (Deficiency) of Funds Available
Over/(Under) Expenditures

$

0.00 $

0.00 $

207,896.00 $

0.00 $

207,896.00 $

0.00 $

0.00

$

0.00 $

0.00 $

126,000.00 $

0.00 $

73,363.88 $

52,636.12 $

52,636.12

$

0.00 $

9,395,672.93

$ 9,395,672.93 $

52,636.12 $ 75,615,907.12 $

600,655.88

208,702,619.49

653,292.00 $ 284,318,526.61 $

52,636.12 $ 75,615,907.12 $

-27,396,352.51

197,946,981.26

-27,343,716.39 $ 273,562,888.38 $

-52,636.12 $ 38,151,990.74
38,099,354.62 $

0.00 10,755,638.23
10,755,638.23

$ 9,395,672.93 $

653,292.00 $ 284,652,422.61 $ -27,343,716.39 $ 273,844,148.26 $

38,151,990.74 $

10,808,274.35

- 35 -

KENNESAW STATE UNIVERSITY STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2013

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

Beginning Fund Balance/(Deficit)
July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2012
Surplus

Prior Period Adjustments

$

0.00 $

0.00 $

0.00 $

0.00

$

0.00 $

0.00 $

0.00 $

0.00

$

0.00 $

0.00 $

9,395,672.93

-9,395,672.93

$

9,395,672.93 $

-9,395,672.93 $

$

9,395,672.93 $

-9,395,672.93 $

0.00 $ 0.00
0.00 $
0.00 $

0.00 -347,500.60
-347,500.60
-347,500.60

1,160,887.65

0.00

0.00

0.00

Budget Unit Totals

$

10,556,560.58 $

-9,395,672.93 $

0.00 $

-347,500.60

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework.
- 36 -

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2013
Surplus

Excess (Deficiency) of Funds Available
Over/(Under) Expenditures

Ending Fund Balance/(Deficit)
June 30

Analysis of Ending Fund Balance

Reserved

Surplus/(Deficit)

Total

$

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00 $

0.00

$

0.00 $

0.00 $

52,636.12 $

52,636.12 $

0.00 $

52,636.12 $

52,636.12

$

0.00 $

-155,705.11

$

-155,705.11 $

$

-155,705.11 $

0.00 $ 0.00
0.00 $
0.00 $

0.00 $ 10,755,638.23

0.00 $

0.00 $

10,252,432.52

10,252,432.52

10,755,638.23 $ 10,252,432.52 $ 10,252,432.52 $

10,808,274.35 $ 10,305,068.64 $ 10,252,432.52 $

0.00 $

0.00

0.00

10,252,432.52

0.00 $

0.00

52,636.12 $ 10,305,068.64

155,705.11

0.00

0.00

1,316,592.76

1,316,592.76

0.00

1,316,592.76

$

0.00 $

0.00 $

10,808,274.35 $ 11,621,661.40 $ 11,569,025.28 $

52,636.12 $ 11,621,661.40

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

$ 5,101,734.63 1,586,267.01 68,153.52 225,686.24 1,316,592.76 3,270,591.12
$
$ 11,569,025.28 $

$ 5,101,734.63 1,586,267.01 68,153.52 225,686.24 1,316,592.76 3,270,591.12

52,636.12

52,636.12

52,636.12 $ 11,621,661.40

- 37 -

KENNESAW STATE UNIVERSITY RECONCILIATION OF BUDGET TO GAAP
YEAR ENDED JUNE 30, 2013

SCHEDULE "5"

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")

$ 11,621,661.40

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.

477,199,638.41

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.

-1,316,592.76

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.

170,582.11

Changes in the Fair Market Value of Investments are recognized on the Statement of Net Position, but are not reported in the Budget Fund.

-127,928.83

Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity

$

5,964,846.72

-5,964,846.72

0.00

Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity

$ 12,005,296.67 -2,433,879.16

9,571,417.51

Endowment Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Endowment Fund Activity

$

494,609.92

0.00

494,609.92

Loan Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Loan Fund Activity

$

491,281.50

0.00

491,281.50

Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activity Fund Activity

$ 16,912,658.21 -963,087.67

15,949,570.54

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. Prepaid items 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

$ 12,126,952.17 -951.10
-1,293,218.49 -562,522.59

10,270,259.99

- 38 -

KENNESAW STATE UNIVERSITY RECONCILIATION OF BUDGET TO GAAP
YEAR ENDED JUNE 30, 2013

SCHEDULE "5"

Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Capital Leases Payable Compensated Absences Payable Unearned Revenue (Noncurrent) Total Liabilities
Deferred inflows of resources are not reported as a component of the Budget Fund.
Rounding
Net Position of Business-Type Activities (Exhibit "A")

$ -204,391,356.77 -7,906,052.41 -12,105.00 $ -212,309,514.18 -77,884,484.55 -0.06
$ 234,130,501.00

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.
- 39 -

KENNESAW STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2013

SCHEDULE "6"

Totals per Annual Supplement
Accruals June 30, 2013 June 30, 2012
Compensated Absences June 30, 2013 June 30, 2012
Adjustments Shared Services on Jointly Staffed Personnel Armstrong Atlantic State University Anderson, Cheryl Copeland, Richard Atlanta Metropolitan College Richardson, Norma Board of Regents Rugg, Edwin Noble, Linda Blumentritt, Timothy Clayton State University Nakos, George College of Coastal Georgia Mitchell, Beverly Columbus State University Dias, Michael Fox, Marian Dalton State College Barton, Kristin Georgia College & State University Bowe, Erik Grooms, Tony Georgia Gwinnett College Goodwin, Randall Georgia Highlands College Crooks, Ariel Dyke, Kevin Haverkos, Brenda Myles, Nicoly Georgia Institute of Technology Lewis, Gary Stolberg, David Georgia Perimeter College Hammiller, Meghan Negrelli, Kathryn Georgia Southern University Roberts, Gary Georgia State University Bachman, Irma Bedard, Brandie Bole, James Sanders Dee, Brian Donaldson, Justin Hedeen, Timothy

SALARIES

TRAVEL

$ 150,220,346.13 $ 2,851,735.50

390,481.35 -501,086.46

7,344,173.40 -6,886,010.11

3,000.00 -3,821.58
10,335.21
-90,681.29 -198,284.86
-1,168.90
5,382.50
-538.25
-1,882.45 -2,121.24
3,000.00
-19,377.00 -1,345.63
-38,754.00
-226.07 4,400.00 -38,667.18 -4,307.09
-3,274.16 4,800.00
2,906.55 -968.85
-10,765.00
2,260.65 3,150.00
538.25 14,500.00
5,167.20 -300.00

- 40 -

KENNESAW STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2013

SCHEDULE "6"

Adjustments Shared Services on Jointly Staffed Personnel University of Georgia Abbott-Lyon, Heather Arabnia, Hamid Campbell, W. Keith Katzman, Brett University of West Georgia Anderson, Raeda Jones, Armand Joyce, Pamela Pate, Alice Patterson, Mark Vladimirov, Katya Summer, Melanie
On-Behalf from Kennesaw State University Foundation For Deferred Compensation Plan Papp, Daniel
Prior Year Salary Overpayment
Rounding

SALARIES

TRAVEL

$

-5,382.50

861.20

1,097.50

-2,153.00

-7,608.75 -4,200.00 -2,531.25
-215.30 -2,992.67
-215.30 -292.23

-90,000.00 55,125.00
-0.82 $

0.50

$ 150,152,353.00 $ 2,851,736.00

- 41 -

SECTION II COMPLIANCE AND INTERNAL CONTROL REPORTS

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
December 10, 2013

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia and Honorable Daniel S. Papp, President Kennesaw State University
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
Ladies and Gentlemen:
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of Kennesaw State University as of and for the year ended June 30, 2013, and have issued our report thereon dated December 10, 2013.
Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Kennesaw State University's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Kennesaw State University's internal control. Accordingly, we do not express an opinion on the effectiveness of Kennesaw State University's internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
2013YB-10

Compliance and Other Matters
As part of obtaining reasonable assurance about whether Kennesaw State University's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Respectfully submitted,

GSG:as 2013YB-10

Greg S. Griffin State Auditor

SECTION III FINDINGS AND QUESTIONED COSTS

KENNESAW STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS AND MANAGEMENT'S CORRECTIVE ACTION PLAN
YEAR ENDED JUNE 30, 2013
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.