Macon State College, Macon, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2011

MACON STATE COLLEGE
MACON, GEORGIA REPORT ON AUDIT
OF THE FINANCLAL STATEMENTS FOR THE FISCAL YEAR ENDED
JUNE 30,2011
Georgia Department of Audits and Accounts
RusseP W.Hint01 State Auditor

MACON STATE COLLEGE - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENTOFNETASSETS

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

C STATEMENT OF CASH FLOWS

D NOTES TO THE FINANCIAL STATEMENTS

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

2 6

2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

2 7

3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET

BY PROGRAM AND FUNDING SOURCE

(NON-GAAP BASIS) BUDGET FUND

28

4 STATEMENT OF CHANGES TO FUND BALANCE

BY PROGRAM AND FUNDING SOURCE

(NON-GAAP BASIS) BUDGET FUND

30

5 RECONCILIATION OF SALARIES AND TRAVEL

33

MACON STATE COLLEGE
- TABLE OF CONTENTS -
SECTION I1 CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONEDCOSTS

SECTION I FINANCIAL

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
December 9,2011

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and HonorableJeffery S. Allbritten, President Macon State College
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying basic financial statements (Exhibits A through D) of Macon State College, a unit of the University System of Georgia, which is an organizational unit of the State of Georgia, as of and for the year ended June 30, 2011. These financial statements are the responsibility of the Macon State College's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of College's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As discussed in Note 1,the financial statements of Macon State College are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of Macon State College. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Macon State College as of June 30, 2011, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

Management's Discussion and Analysis is not a part of the basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of this required supplementary information. However,we did not audit this information and express no opinion on it.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Macon State College taken as a whole. The accompanying supplementary information (Schedules 1 through 5) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.

Respectfully submitted,

-.

~ u & e l lW. Hinton, CPA, CGFM State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

MACON STATE COLLEGE
Management's Discussion and Analysis

Macon State College is one of the 35 institutions of higher education of the University System of Georgia. Macon State College is a unique model of higher education: a baccalaureate institution dedicated to preparing students to succeed in occupations demanded by the new economy. Macon State College's 18 bachelor's degree programs (with over 3 0 majors) are concentrated in professionally oriented disciplines that support rewarding careers and enhance the economic vitality of the Central Georgia region. Macon State College offers day, evening and online classes at its Macon and Warner Robins campuses and on Robins Air Force Base.
Macon State College has experienced explosive growth in the last decade. Since the fall semester of 1998, enrollment has increased over 8 0 percent, one of the highest growth rates in the 35-member University System of Georgia. Macon State College's two campuses (Macon and Warner Robins) are conveniently located near major thoroughfares, a benefit to commuting students, as well as those who choose to live on campus in the college's new student housing, which opened in fall 2010. Macon State College offers tremendous value to students seeking an excellent education at an affordable price.
The continued emphasis on its focused mission and its professionally oriented baccalaureate degrees has positioned the College to continue as a major economic driver in the Central Georgia region. Enrollment for fall semester 2010 showed a slight decrease from fiscal year 2011 with a total enrollment of 6,232 students.

Faculty

Students (Headcount)

Students
(FTE)

FiscalYear 2011 Fiscal Year 2010 Fiscal Year 2009

Ovendew of the FinancialStatementsand FinancialAnalysis
Macon State College is proud to present its financial statements for fiscal year 2011. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2 0 1 1 and fiscal year 2010.
Statement of Net Assets
The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Macon State College. The Statement of Net Assets presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the Notes to the Financial Statements.

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

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, capital projects and expendable. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

Assets: Current Assets Capital Assets, Net Other Assets

June 30,2011

June 30.2010

Total Assets

$ 99,699,201

$ 86,613,635

Liabilities: Current Liabilities Noncurrent Liabilities

Total Liabilities

Net Assets:

Invested in Capital Assets, Net of Debt $ 72,506,581

Restricted - Expendable

1,432,519

Capital Projects

53,431

Unrestricted

7,740,798

$ 71,134,744 1,307,395 53,431 7,806,601

Total Net Assets

The total assets of the institution increased by $13,085,566. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $13,086,430 in the category of Capital Assets, Net. The balance of the increase is mainly in receivable categories.
The total liabilities for the year increased by $11,654,408 due to Macon State College entering into a capital lease for College Station Residence Hall. The combination of the increase in total assets of $13,085,566 and the increase in total liabilities of $11,654,408 yields an increase in total net assets of $1,431,158.

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

June 30,2011

June 30, 2010

Operating Revenues Operating Expenses

$ 18,390,804 55,774,577

$ 16,749,970 53,213,593

Operating Income (Loss) Nonoperating Revenues and Expenses Income (Loss) Before other Revenues, Expenses, Gains or Losses Other Revenues, Expenses, Gains or Losses Increase in Net Assets Net Assets at Beginningof Year, as Originally Reported Prior Year Adjustments Net Assets at Beginningof Year. Restated
Net Assets at End of Year

$ (37,383,773) 35,433,251
$ (1,950,522) 3,195,505
$ 1,244,983
$ 80,302,171 186,175
$ 80,488,346

$ (36,463,623) 36,919,200

$

455,577

1,343,817

$ 1,799,394

$ 79,203,987 (701,210)
$ 78,502,777

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

Revenue by Source For t h e Years Ended June 3 0 , 2 0 1 1 and June 30,2010

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations
Federal Stimulus - Stabilization Funds
Grants and Contracts Gifts Investment Income Other Total Nonoperating Revenue
Capital Gifts and Grants State Other Capital Gifts and Grants
Total Capital Gifts and Grants
Total Revenues

June 30,2011

June 30,2010

Expenses (By Functional Classification) For t h e Years Ended June 3 0 , 2 0 1 1 and June 3 0 , 2 0 1 0

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

June 30.2011

June 30.2010

Total Operating Expenses Nonoperating Expenses
Interest Expense (Capital Assets)
Total Expenses

Operating revenues increased by $1,640,834 in fiscal year 2 0 1 1 primarily due to a 9% increase in Student Tuition and Fees, as well as increases in Auxiliary revenues and Other revenues. The Auxiliary revenue increase of $266,594 is a result of the College offering students a residential life option, College Station, for the first time on the College's campus in fall 2010.

The compensation and employee benefits category increased by $496,478 and primarily affected the Plant Operations and Maintenance category. The increase reflects an increased cost of health insurance for the employees of the institution.

Utilities increased by $286,059 during the past year. The increase was primarily associated with the increased energy costs that were experienced in the winter of fiscal year 2 0 1 1 and affected the Plant Operations and Maintenance category.

Statement of Cash F/ows

The final statement presented by the Macon State College is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets.

Cash Flows for the Years Ended June 3 0 , 2 0 1 1 and 2010, Condensed

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

June 30,2011
$ (35,205,862) 34,933,113 (1,520,189) 79,794

June 30,2010
$ (33,413,032) 37,502,721 (1,100,561) 187,349

Net Change in Cash Cash, Beginning of Year

$ (1,713,144) 9,554,069

$ 3,176,477 6,377,592

Cash, End of Year

Capita/ Assets
During fiscal year 2011, the Macon State College Foundation, Inc. gifted Macon State College four parcels of land and one house, totaling $2,995,590 and $199,915, respectively. Macon State College also entered into a public-private venture with the Macon State College Foundation, Real Estate LLC for College Station Apartments for $11,714,593.
For additional information concerning Capital Assets, see Notes 1,5, 7, and 10 in the Notes to the Financial Statements.

Long-Tern Liabilities
Macon State College had Long-Term Liabilities of $12,818,966 which $755,492 was reflected as current liability at June 30, 2011.
For additional information concerning Long-Term Liabilities, see Notes 1and 7 in the Notes to the Financial Statements.
Economic Outlook
The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. The College anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the College's ability to react to unknown internal and external issues.
Dr. Jeffery S. Allbritten, President Macon State College

BASIC FINANCIAL STATEMENTS

MACON STATE COLLEGE STATEMENT OF NET ASSETS
JUNE 30.2011
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3)
Receivables - Federal Financial Assistance
Receivables - Other Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets lnve~tments Capital Assets. Net (Note 5)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Deposits Deferred Revenue(Note 6) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease PurchaseObligations Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets. Net of Related Debt Restricted for:
Expendable Capital Projects Unrestricted
Total Net Assets
The notes to the financial statements are an integral part of this statement. -2-

EXHIBIT "An

MACON STATE COLLEGE STATEMENT OF REVENUES, EXPENSESAND CHANGES IN NET ASSETS
YEAR ENDED JUNE 3 0 . 2 0 1 1
OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) Less: Scholarsh~pAllowances
Grants and Contracts Federal State
Sales and Services Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Other Organ~zations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salar~es 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 Other Gins Investment Income Interest Expense (Capital Assets) Other Nonoperating Revenues
Net Nonoperatlng Revenues
Income (Loss) Before Other Revenues, Expenses. Galns, or Losses
Capital Grants and Gifts Other
Increase (Decrease) In Net Assets
Net Assets - Beginning of Year, Restated
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement.
- 3 -

EXHIBIT '6"

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MACON STATE COLLEGE STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30.2011
CASH FLOWS FROM OPERATING ACTIVITIES Tuitlon and Fees Grants and Contracts Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Other Organizabons Other Receipts (Payments)
Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Recelvedfor Other than Capital Purwses Principal Paid on Installment Debt Interest Paid on Installment Debt
Net Cash Flows Provided (Used) by Noncapital FlnanclngActlvlties
CASH FLOWS FROM CAPITALAN0 RELATED FINANCINGACTIVITIES Purchases of Capltal Assets
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments
Net Increase (Decrease) In Cash
Cash and Cash Equivalents - Beg~nningoYf ear
Cash and Cash Equivalents - End of Yea!
RECONCILIATIONOF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile OperaUng lncome (Loss)to Net Cash
Provided (Used)by OperatingActlvltles Deprectation Change in Assets and Liabilities: Accounts Recelvable. Net Inventories Prepa~dItems Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Actlvltles
NONCASH ACTIVITY FixedAssets Acquired by lncurrlng Capital Lease Obligations Change In Fa~Vr alue of Investments Recognizedas a Comwnent of Interest lncome G ~ fotf Capital Assets Reduclng Proceeds of Capital Grants and Gifts
The notes to the financial statements are an integral panof this statement.
-5-

EXHIBIT "C"

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Note 1.Summary of SignificantAccounting Poliues
Nature of Operations The purpose of Macon State College is to advance the intellectual, cultural, social, economic, recreational, and physical development of those within the state of Georgia as well as those outside of the state's borders. The Institution's primary objective is to provide students with the knowledge and skills needed for full constructive lives in a rapidly changing and increasingly global environment. The College is strongly committed to quality education and student success through excellence and innovation in teaching.
Reporting Entity Macon State College is one of thirty-five (35) State supported member institutions of higher education in Georgia which comprise the UniversitySystem of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Macon State College as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Macon State College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Macon State College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential component units of the State. See Note 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 College's assets, liabilities, net assets, revenues, expenses, changes in net assets and cash flows.
Basis of Accounting For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-College transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30,1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Cash and Cash Equivalents Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the Board of Regents Short-Term lnvestment Pool.
lnvestments lnvestments 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 College accounts for its investments at fair value. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Assets. The Board of Regents Diversified Fund is included in 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 each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
Inventories Resale Inventories are valued at cost using the "first in, first out" (FIFO) basis.
Noncurrent Investments Investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
Capital Assets Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation, which also includes amortization of intangible assets such as water, timber, and mineral rights, easements, patents, trademarks, and copyrights, as well as software is computed using the straight-line method over the estimated useful lives of the assets, generally 4 0 to 6 0 years for buildings, 20 to 25 years for infrastructure and land improvements, 1 0 years for library books, and 3 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financingand lnvestment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2011, GSFIC did not transfer any capital additions to Macon State College.
Deposits Deposits represent good faith deposits from students to reserve housing assignments in a residence hall.
Deferred Revenues Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related t o the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
Compensated Absences Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Assets. Macon State College had accrued liability for compensated absences in the amount of $1,067,734 as of July 1,2010. For fiscal year 2011, $795,135 was earned in compensated absences and employees were paid $758,496, for a net increase of $36,639. The ending balance as of June 30, 2 0 1 1 in accrued liability for compensated absences was $1,104,373.
Noncurrent Liabilities Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
Net Assets The College's net assets are classified as follows:
Invested in capitalassets, net of rdated debt. This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1- Capital Assets section.
Restrict& net assets - expendable: Restricted expendable net assets include resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

Expendable Restricted Net Assets include the following:

Restricted - E&G and Other Organized Activities
Institutional Loans Term Endowments

$

(18,017)

154,207

1,296,329

Total Restricted Expendable

$ 1,432,519

- 8 -

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Restricted net assetF - expendable - Capital Projects: This represents resources for which the College is legally or contractually obligated to spend resources for capital projects in accordance with restrictions imposed by external third parties.

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus) of $62,785.80. Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of the State Treasurer. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

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

R & R Reserve Reserve for Encumbrances Other Unrestricted

Total Unrestricted Net Assets

$ 7,740,798

When an expense is incurred that can be paid using either restricted or unrestricted resources, the College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
Income Taxes Macon State College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.
Classification of Revenues and Expenses
The Statement of Revenues, Expenses and Changes in Net Assets classify fiscal year activity as operating and nonoperating according to the following criteria:
Operating Revenues: Operating revenue includes activities that have the characteristics of exchange transactions, such as (1)student tuition and fees, net of scholarship allowances, (2) certain Federal, state and local grants and contracts, and (3) sales and services.
Nonoperating Revenues. Nonoperating revenue includes activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenue by GASB No. 9, 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 Expenses Nonoperating expense includes activities that have the characteristics of nonexchange transactions, such as capital financing costs and costs related to investment activity.

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Scholarship Allowances Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, 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 College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances.
Restatement of Prior Year Net Assets For fiscal year 2011, the College made a variety of prior period adjustments due to various errors and omissions, which require the restatement of net assets. The result is an increase in Net Assets at July 1,2010, of $186,175. These changes are in accordance with generally accepted accounting principles.

Net Assets, July 1,2010, as Previously Reported

$

80,302,171

Reclassificationof PrepaidAssets Reductionof CompensatedAbsences Liability Reduction in Construction in Progress Adjust the Reportingof Summer School
Revenues and Expense Between Fiscal Years

Net Assets, July 1,2010, as Restated

Note 2. Deposits and li7vesOnents

Deposits The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:

1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.

2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or
municipalities of the State of Georgia.

3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.

4.

Industrial revenue bonds and bonds of development authorities created by the laws of the

State of Georgia.

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 3 0 , 2 0 1 1

EXHIBIT "D"

5.

Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary

corporation of the United States government, which are fully guaranteed by the United States

government both as to principal and interest and debt obligations issued by the Federal Land

Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank

for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and

the Federal National MortgageAssociation.

6.

Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.

The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.

At June 30, 2011, the carrying value of deposits was $3,586,701 and the bank balance was $5,083,619 Of the College's deposits, $5,083,619 was uninsured but collateralized with securities held by the financial institution's trust department or agent, but not in the College's name.

Investments

At June 30, 2011, the carrying value of the College's investments was $5,522,908, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents as follows:

lnvestment Pools Board of Regents Short-Term Fund Diversified Fund

Total Investment Pools

$

5.522.908

The Board of Regents lnvestment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents lnvestment Pool is voluntary. The Board of Regents lnvestment Pool is not rated. Additional information on the Board of Regents lnvestment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia - System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits - Education Audit Division or on their web site at htt~://www.audits.r2a.t?ov.
lnterest 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 College does not have a formal policy for managing interest rate risk.
The Effective Duration of the Short-Term Fund is 1.03 years. Of the College's total investment of $4,226,579 in the Short-Term Fund, $3,687,159 is invested in debt securities.
The Effective Duration of the Diversified Fund is 4.31 years. Of the College's total investment of $1,296,329 in the Diversified Fund, $415,929 is invested in debt securities.

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBlT "D"

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

Note 3. Accounts Receivable Accounts receivable consisted of the following at June 30, 2011:

Student Tuition and Fees

$

Auxiliary Enterprises and Other Operating Activities

Federal Financial Assistance

Georgia State Financingand Investment Commission

Other

$

Less: Allowance for Doubtful Accounts

550,305 519,708 167,255 2,903,096 1.351.952 5,492,316 111.780

Net Accounts Receivable

$

5,380,536

Note 4. Inventvnks

Inventories consisted of the following at June 30, 2011:

Bookstore

$

617.148

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Note 5. Capits/ Assets

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

Capital Assets, Not Being Depreciated: Land

Beginning Balances July I,2010 (Restated)

Additions

Reductions

Ending Balance June 30,2011

$ 2,820,494 $ 3.893.216 $

- $ 6,713.710

Capital Assets. Being Depreciated/Amortized: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections

$ 78.814.205 $ 347,808

2,746.914

2,555,225

366,965 $

11,714,593

3,998,677

96,705

$
200.511 17,917

79,162,013 2,746,914 2,721,679
11,714,593 4.077.465

Total Assets Being Depreciated/Amortized

$ 88,115,021 $ 12,526,071 $ 218,428 $ 100,422.664

Less: Accumulated Depreciation/Amortization Bulldings Faciltties and Other Improvements Equipment Capital Leases Library Collections

Total Accumulated Deprec~at~on/Amortization

$ 20,988,454 $ 2,141,904 $ 215,158 $ 22,915,200

Total Capital Assets. Being Depreciated/Amortized, Net Capital Assets. Net

$ 67.126.567 $ 10.384.167 $ $ 69,947,061 $ 14,277,383 $

3,270 $ 77,507,464 3,270 $ 84,221,174

Note 6. Deferred Revenue

Deferred revenue consisted of the following at June 30, 2011:

Prepaid Tuition and Fees Other Deferred Revenue

Totals

$ 1.663.039

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Note 7. Long- Term Liabilities Long-Term liability activity for the year ended June 30, 2 0 1 1was as follows:

Leases Lease Obligations

Beginning Balance July 1,2010 (Restated)

Additions

Reductions

Ending Balance June 30,2011

Current Portion

Other Liabilities Compensated Absences
Total Long-Term Obligations

1,067,734

795.135

758.496

$

1,240,841 $ 12,509,728 $

931.603 $

1,104,373 12,818,966 $

662,444 755,492

Note 8. Net Assets Changes in Net Assets for the year ended June 3 0 , 2 0 1 1 were as follows:

Beginning Balance July 1,2010 (Restated)

Additions

Reductions

Invested in Capital Assets Net of Related Debt

Restricted Net Assets

1,360.826

16,601,606

16.476.482

Unrestricted Net Assets

9,180,459

37,881,922

39,321.583

Total Net Assets

Ending Balance June 30,2011
1,485,950 7,740.798

Note 9. Significant Commitments
The College did not have any significant unearned, outstanding, construction or renovation contracts as of June 30,2011.
Note 10. Lease Obligations
Macon State College is obligated under various operating leases for the use of copiers, and is also obligated under a capital lease and installment purchase agreement for acquisition of computers and real property.

MACON STATE COLLEGE NOTES TO THE RNANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "DM

CAPITAL LEASES

Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2011 and 2041. Expenditures for fiscal year 2 0 1 1 were $179,841 of which $6,734 represented interest. Total principal paid on capital leases was $173,107 for the fiscal year ended June 30, 2011. The interest rate on the lease outstanding at June 30, 2 0 1 1 was 6.06 percent. The following is a summary of the carrying values of assets held under capital lease at June 30,2011.

Buildings

$ 11,714,593

Certain Capital Leases provide for renewal and/or purchase options. Generally, purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.
Macon State College had one capital lease with related entities in the current fiscal year. In April, 2011, Macon State College entered into a capital lease of $11,714,593 at 6.06 percent with the Macon State College Foundation, Inc. whereby the College leases a building for a thirty-year period that began April, 2 0 1 1 and ends April, 2041. The outstanding liability at June 30, 2 0 1 1 on this capital lease is $11,714,593.
OPERATING LEASES
Macon State College's noncancellable operating leases are for copiers and have remaining terms of more than one year and expire in various fiscal years from 2012 through 2016. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are renewed or replaced by other leases are payable on a monthly basis.
FUTURE COMMITMENTS
Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30,2011, were as follows:

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "DM

Year Ending June 30: 2012 2013 2014 2015 2016 2017 - 2021 2022 - 2026 2027 - 2031 2032 - 2036 2037 - 2041
Total minimum lease payments Less: Interest
Principal Outstanding

Real Pro~ertvand EauiDment Capital Leases Operating Leases

Macon State College's fiscal year 2011 expense for rental of real property and equipment under operating leases was $96,353.
Note 11.Retimment Plans
Macon State College 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 Macon State College participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.
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.

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

On November 20,1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1,1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415.

The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1,1982, is an "old plan" member subject to the plan provisions in effect prior to July 1,1982. Members hired on or after July 1,1982 but prior to January 1,2009 are "new plan" members subject to the modified plan provisions. Effective January 1,2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1,2009 also have the option to change their membership to the GSEPS plan.

Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 1 0 years of creditable service and attainment of age 6 0 or 3 0 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.

Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 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, Macon State College pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Macon State College contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. Macon State College 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 Macon State College contributions are not at any time refundable to the member or his/her beneficiary.

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

Old Plan* New Plan GSEPS

10.41% 10.41% 6.54%

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

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011
Members become vested after 1 0 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 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 2 5 years of creditable service.
Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of onetwelfth of 7% for each month the member is below age 6 0 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lumpsum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.
TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 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, 2 0 1 1 were 5.53% of annual salary. Employer contributions required for fiscal year 2 0 1 1 were 10.28% of annual salary as required by the June 30, 2008 actuarial valuation.

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 3 0 , 2 0 1 1

EXHIBIT " D

The following table summarizes the Macon State College contributions by defined benefit plan for the years ending June 30,2011, June 30,2010, and June 30,2009:

Fiscal Year

ERS

Required

Percentage

Contribution

Contributed

TRS

Required

Percentage

Contribution

Contributed

Regents Retirement Plan
Plan Description The Regents Retirement Plan, a singleemployer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 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 four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Macon State College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2011, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 5%of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Macon State College and the covered employees made the required contributions of $789,190 (9.24%) and $427,098 (5%),respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
Georgia Defined Contribution Plan
Plan Description Macon State College participates in the Georgia Defined Contribution Plan (GDCP) which is a singleemployer 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.

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2 0 1 1 amounted to $77,878 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
Note 12. Risk Management
The University System of Georgia offers its employees and retirees access to three different selfinsured healthcare plan options. A PPO/PPO Consumer healthcare plan was offered for the entire reporting period, and effective 01/01/2011, a HSA/High Deductible PPO and a HMO are also offered on a self-insured basis. The HSA/High Deductible PPO and HMO were previously insured through Blue Cross Blue Shield of Georgia. Macon State College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of Wellpoint, to serve as the claims administrator for the self-insured healthcare plan products. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Macon State College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
Note 13. Contingencies
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Macon State College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Macon State College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30,2011.
Note 14. Post-Employment Benefits Other ThanPension 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 College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2010 and 2 0 1 1 plan years, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.
As of June 30, 2011, there were 120 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2011, Macon State College recognized as incurred $566,771 of expenditures, which was net of $295,622 of participant contributions.

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Note 15.Natural Classifcationswith Functional Classifications The College's operating expenses by functional classification for fiscal year 2011are shown below:

Functional Classification Fiscal Year 2011

Natural Classification

Instruction

Public Service

Academic Support

Student Services

Institutional Support

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

Total Expenses

Natural Classification

Plant Operations & Maintenance

Functional Classification Fiscal Year 2011

Scholarships & Fellowships

Auxiliary Enterprises

Total Expenses

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

$

- $

-

1,173,649

387,597

3,259
1,035,743 3,914,969

11,316.045

$

-

507,009

134.404

3.610

212,469 3,696,917

$13,678,715 9,005,640 6,470,443 205,186 270,287
11.348.595 1.471,203
11,182.604

Total Expenses

MACON STATE COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

Note 16. Affiliated Oryanizaifons
In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are
Component Units, an amendment of GASB Statement No. 14, The Reportng Entity which became effective for the year ended June 30, 2004, the Macon State College Foundation, Inc. is a legally separate tax exempt organization whose activities primarily support Macon State College, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office determined Component Units of the State of Georgia, as required by GASB Statement No. 39 should not be assessed in relation to their significance to Macon State College, but instead based on their significance to the State of Georgia. Accordingly, Macon State College has not included this affiliated organization in the financial statements.

(This page left intentionally blank)

SUPPLEMENTARY INFORMATION

MACON STATE COLLEGE BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND
JUNE 30,2011
Cash and Cash Equ~valents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIESAND FUND EOUITY
Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Carry-Over Per State Accounting Office Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

Actual amounts were prepared on a prescribed basis of accountingthat demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
-26-

MACON STATE COLLEGE SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GMP BASIS)
BUDGET FUND YEAR ENDED JUNE 30.2011

REVENUES
State Appropriation State General Funds
Other Funds
Total Revenues
ADJUSTMFNTS AND PROGRAM TRANSFERS
CARRY-OVER FROM PRIOR YEARS
Transfersfrom Resewed Fund Balance
Total FundsAvailable
FXPENDITURES
Teaching
Excessof FundsAva~lableover Expenditures
FUND BALANCE JULY I
Resewed Unresewed
ADJUSTMENTS
Prior Year Payables/Expenditures Prior Year Rece~vables/Revenues Unresewed Fund Balance (Surplus) Returned
to Board of Regents- University System Office Year EndedJune 30.2010
Early Return of Surplus in Fiscal 2011 Prior Year Resewed Fund Balance Includedin Funds Available
FUND BALANCEJUNE 30

BUDGET

SUMMARY OF FUND W N C E
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Capital Outlay Restricted/Sponsored Funds UncollectibieAccounts Receivable Tuition Carry-Over Carry-Over per State Accounting Office
Total Reserved
Unreserved Surplus
Total Fund Balance
Actual amounts were preparedon a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensivebasis of accounting other than generallyaccepted accounting principles.

ACTUAL

SCHEDULE " 2
VARIANCE -
FAVORABLE (UNFAVORABLE)

MACON STATE COLLEGE STATEMENT OF FUNDS AVAllABLEAND EXPENDITURESCOMPARED TO BUDGET BY PROGRAMAND FUNDING SOURCE
(NON-GA4P BASIS) BUDGET FUND YEAR ENDED JUNE 30.2011

Teaching State Appropriation State General Funds Federal Funds American Recovety and Reinvestment Act of 2009 Federal Stabilization Funds Other Funds
Total Teach~ng
Total Operating Actlvlty

Or~ginal Appropr~abon

Amended Approprlatlon

Final Budget

Current Year Revenues

Actual amounts were prepared on a prescribed basls of accounting that demonstrates compliance with budgetaty statutes and regulations of the State of Georg~aw, hich IS a comprehensive basis of accounting other than generally accepted accounting principles.

SCHEDULE "3"

Funds Available Compared to Budget

Prlor Year

Adjustments and

Total

Carty-Over

Program Transfers Funds Available

Variance Positive (Negative)

Expendttures Compared to Budget

Actual

Variance Positive (Negative)

Excess (Deficiency)
of Funds Available
Over,/lU.nd~e~r).
Expend~tures

MACON STATE COLLEGE STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30,2011

Beginning Fund Balance/(Deficit)
July 1

Fund Balance
Carried Over from
nor Period
as Funds Available

Return of Fiscal Year 2010
Surplus

Prior Period Adjustments

Teachlng

State Appropriation

State General Funds

$

Federal Funds

American Recovery and Reinvestment Act of 2009

Federal Stabilization Funds

Other Funds

Total Teaching

Total Operating Actlvlty

$

Prior Year Reserves Not Available for Expenditure Uncollectible Accounts Rece~vable

292.69 $

0.00 $

0.00 1,426,265.83

0.00 -1,424,550.11

1,426.558.52 $

-1,424,550.11 5

-292.69 $

23,405.03

0.00 -1,715.72

0.00 -8,916.87

-2,008.41 $

14,488.16

Budget Unlt Totals

Actual amounts were prepared on a prescr~bedbasis of accountingthat demonstrates compliance with budgetary statutes and regulations of thestate of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

SCHEDULE "4"

Other Adjustments

Early Return Fiscal Year 2 0 1 1
Surplus

Excess (Deficiency) of Funds Ava~lable
Over/(Under) Expenditures

Ending Fund Balance/(Deficit)
June 3 0

Analysis of Ending Fund Balance

Reserved

Surplus/(Deficit)

Total

Summary of Endlng Fund Balance Reserved
Department Sales and Services lnd~recCt ost Recoveries Technology Fees Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Rece~vable Tuit~onCarry-Over Carly-Over per State Accounting Office Unreserved Surplus
Total Ending Fund Balance -June 30

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MACON STATE COLLEGE RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDEDJUNE 30,2011

Totals per Annual Supplement

Accruals June 30,2011 June 30,2010

Compensated Absences June 30,2011 June 30,2010

Prepaid Salaries June 30,2011

Adjustments Summer Fiscal Year 2010 Salaries Paid in Fiscal Year 2 0 1 1

Jointly Staffed Faculty

Middle Georgia College

Johnson,

Kevin

Georgia College and State University

Williams,

Jerry

Georgia Southern University

Kluge.

Stacy

Georgia Southwestern State UniversiQ

Long,

Collette

Unidentified Variance

SALARIES

SCHEDULE "5'
TRAVEL

SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS

MACON STATE COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 3 0 , 2 0 1 1

FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES

The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weakness.

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Macon State College's ability to initiate, authorize, record, process, or report financial data reliability in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Macon State College's financial statements that is more than inconsequential will not be prevented or detected by the Macon State College's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Macon State College's internal control.

Any identified deficiencies in internal controls that we did not consider to be significant deficiencies and/or material weaknesses have been communicated to management and those charged with governance within a separate management letter dated December 9, 2011. Internal control deficiencies identified during the course of this engagement that were considered to be significant deficiencies and/or material weaknesses are presented below:

FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-581-11-01

Condition:

The College's accounting procedures were insufficient to provide adequate controls over the financial statement preparation process.

Criteria:

A system of internal control over financial reporting does not stop at the general ledger. Management is responsible for implementing a system of internal control over the preparation of financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP). Additionally, the College is required to annually submit GAAP basis financial statements for inclusion in the State of Georgia's Comprehensive Annual Financial Report (CAFR) and the State of Georgia's Single Audit Report.

Questioned Cost:

N/A

Information:

During the audit, the following deficiencies were noted in the College's GAAP basis financial statements:

MACON STATE COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30,2011
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-581-11-01
1) The entity did not properly report GSFlCmanaged project J-147 on its financial records, resulting in an overstatement of Capital Grants and Gifts - State of $318,727, an overstatement of Nonoperating Revenues Gifts of $2,235,397, an overstatement of Construction Work In Progress of $1,261,481, an overstatement of Expenditures (Supplies and Other Services) of $485,268, and an understatement of Accounts Payable of $1,995,058. The entity overstated Beginning Net Assets due to the inaccurate reporting of this project in the prior year of $1,187,683. In addition, Capital Outlay Revenues and Expenditures were misstated on the budget basis statements. An audit adjustment was proposed and posted to correct the error.
2) Deferred Revenues and Accounts Receivable - Other were overstated by $477,945, related to Fall Semester Housing Fees that were not properly removed with year end adjusting entries. An audit adjustment was proposed and posted to correct the error.
3) Revenues and Accounts Receivable-Otherwere understated by $106,164 related to significant cash-basis accounts that were not posted to the Peoplesoft financial system from BANNER.
4) The entity improperly reported its Capital Lease Liability as a result of using an incorrect amortization schedule. The total liability was understated by $118,518, which included an overstatement of the current liability of $688,748 and an understatement of the noncurrent portion of $807,266.
5) Both Cash and Accounts Payable were overstated by $340,452 as a result of an insurance payment made in December, 2010 which was not recorded on the general ledger until July, 2011. An audit adjustment was proposed and posted to correct the error.
6) Undocumented Accounts Payable of $121,184, some of which dated back to 2002, were reported by the entity.
7) The entity overstated its Compensated Absences Liability by $572,851, which included an understatement of the current portion of $36,937 and an overstatement of the noncurrent portion of $609,788. A portion of this misstatement dated back to prior years causing Beginning Net Assets to be understated by $487,502 and Salaries - Staff Expense was overstated by $85,349. An audit adjustment was proposed and posted to correct the error.

MACON STATE COLLEGE SCHEDULE OF FINDINGS AND QUESTIONEDCOSTS
YEAR ENDEDJUNE 3 0 , 2 0 1 1

FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
FINANCIAL REPORTING Inadequate Controls over Financial Reporting Material Weakness Finding Control Number: FS-581-11-01

8) The entity misclassified Insurance Proceeds of $584,320 as Other Operating Revenue rather than Other Nonoperating Revenue.

9) The entity failed to reverse its accrued payroll from fiscal year 2010 in the fiscal year under audit, resulting in an overstatement of Accounts Payable and Salaries Expense of $21,437.

10)Numerous adjustments were made to the Statement of Cash Flows, Notes to the Financial Statements and the Management's Discussion and Analysis.

11)An audit adjustment was made to report summer session activity in the proper period, which corrected an understatement of Tuition and Fees of $202,176, an overstatement of Deferred Revenues of $2,096,303, an overstatement of Prepaid Expenses of $656,849, an understatement of Beginning Fund Balance of $1,231,875, an understatement of Salaries Expense of $2,166, and an overstatement of Benefits Expense of $7,569.

Cause:

The College's management failed to adequately review the year-end financial statements to ensure that the statements as presented for audit were accurate and properly supported by underlyingaccounting records.

Effect:

Significant and material misstatements were included in the financial statements presented for audit. In addition, the lack of controls and monitoring could impact the reporting of the College's financial position and results of operations.

Recommendation:

The College should review the accounting controls and procedures currently in place, identify weaknesses, and design and implement procedures necessary to strengthen controls over the preparation of the financial statements.

ACCOUNTING CONTROLS (OVERALL) IT General Controls Significant Deficiency Finding Control Number: FS-581-11-02

Condition:

The College does not have a formal, documented process to periodically grant or review application access; to document the authorization and testing of changes; or to document the resolution of identified issues related to financial systems.

MACON STATE COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 3 0 , 2 0 1 1

FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

ACCOUNTING CONTROLS (OVERALL) IT General Controls Significant Deficiency Finding Control Number: FS-581-11-02

Criteria:

Management of the College is responsible for designing and maintaining internal controls that provide reasonable assurance that financial applications are operating as they should and access to financial applications is appropriate.

Questioned Cost:

N/A

Information:

The following deficiencies were noted:

1. No documentation was available for access granted to numerous users added to the BANNER financial system duringthe fiscal year.

2. The College did not document performance of a recertification of user access to BANNER to ensure access was appropriate during the fiscal year.

3. The College did not adequately maintain documentation for the authorization and testing of changes to the BANNER financial system.

4. The College was unable to identify or document the resolution of BANNER issues occurring duringthe fiscal year.

Cause:

The College did not adequately establish a process to (1) provision access to financial systems; (2) ensure access continues to be appropriate based on job responsibility; (3) document changes to the BANNER financial system are appropriately authorized, tested, and approved prior to movement into the production environment; or (4) document financial system issues and the subsequent resolution.

Effect:

A lack of provisioning and monitoring processes or recertification of access may potentially allow inappropriate access to financial systems to go undetected. Without satisfactory policies and procedures governing financial system access and maintenance, the College could place itself in a position where potential misappropriation of assets, fraud, errors and/or irregularities could occur. In addition, the lack of controls could impact reporting of the College's financial position and results of operations.

MACON STATE COLLEGE SCHEDULE OF FINDINGSAND QUESTIONEDCOSTS
YEAR ENDED JUNE 30.2011

FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

ACCOUNTING CONTROLS (OVERALL) IT General Controls Significant Deficiency
Finding Control Number: FS-581-11-02

Recommendation:

A periodic review of financial system access should be documented by Management to determine that access continues to be appropriate based on job responsibility. Management should establish policies and procedures requiring changes to the BANNER financial system be authorized, tested, and approved prior to placement into production and that sufficient documentation be maintained to support the process. Additionally, a process for documenting identified system issues and the subsequent resolution should be created.

EMPLOYEE COMPENSATION Inadequate Internal Controls Significant Deficiency
Finding Control Number: FS-581-11-03

Condition:

The accounting procedures of the College were insufficient to ensure adequate separation of duties over Employee Compensation functions, and to ensure that the data in the consolidated payroll system provided by Automatic Data Processing, Inc. (ADP) was reconciled to the general ledger.

Criteria:

Management of the College is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are properly processed and reported. Separation of duties involving key accounting functions, both manual and automated, is the basis for achieving an adequate system of internal control.

Additional administrative requirements contained in the University System of Georgia Board of Regents' Business Procedures Manual require that the general ledger be reconciled to subsidiary records as a routine matter with any variances noted and resolved in a timely manner.

Questioned Cost:

N/A

Information:

The following deficiencies were noted:

1. Four employees were able to add and make changes to compensation for
the same employee within the ADP system.

2. The College failed to formally document their reconciliation of the general
ledger to its subsidiary modules for Employee Compensation (ADP).

MACON STATE COLLEGE SCHEDULE OF FINDINGS AND QUESTIONEDCOSTS
YEAR ENDEDJUNE 30.2011

FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

EMPLOYEE COMPENSATION Inadequate Internal Controls Significant Deficiency Finding Control Number: FS-581-11-03

Cause:

The College's management failed to implement satisfactory controls to ensure that the separation of duties within the financial accounting system complemented the entity's established separation of duties policy. Compensating controls were either not adequately designed or not formally documented. In addition, management failed to ensure that the subsidiary ledgers were reconciled to the general ledger.

Effect:

Without satisfactory accounting controls and procedures in place, the College could place itself in a position where potential misappropriation of assets could occur. In addition, the lack of controls and procedures could impact reporting of its financial position and results of operations.

Recommendation:

Management should review the established internal control structure and revise or implement controls to ensure that proper separation of duties exists. Application access controls in the accounting information systems should complement the system of internal control by limiting an employee's access to only the accounting functions necessary for the performance of the employee's duties. In the case when management determines separation of duties is not cost beneficial, management should implement compensating controls that assist in assuring that financial transactions are properly processed and reported. In addition, management should implement procedures to ensure that the general ledger is regularly reconciled to the subsidiary ledgers to ensure the accuracy of the data in the general ledger and, by extension, the financial statements.

FEDERAL AWARD FINDINGS AND OUESTIONED COSTS

No matters were reported.