Medical College of Georgia, Augusta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2002

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MEDICAL COLLEGE OF GEORGIA _

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, 'REPORT ON AUDIT .

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, OF THE FINA,'N, CIAL STA, TEMENTS'_

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FOR

THE

FISCAL J

YEAR ENDED



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JUNE

30.

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Russell W. Hinton

State Auditor
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MEDICAL COLLEGE OF GEORGIA - 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

3

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

II

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

12

C STATEMENT OF CASH FLOWS

13

D NOTES TO THE FINANCIAL STATEMENTS

14

SUPPLEMENTARY INFORMATION

SCHEDULES

SCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO

BUDGET - (NON-GAAP BASIS)

1

RESIDENT INSTRUCTION

35

2

LOTTERY FOR EDUCATION

36

3

OTHER ORGANIZED ACTIVn IES

37

4 RECONCILIATION OF SALARIES AND TRAVEL

39

5 RECONCILIATION or PER DIEM AND FEES

41

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

MEDICAL COLLEGE OF GEORGIA - TABLE OF CONTENTS-
SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

RllC;;'iEII \\1. HIf'l.TO'l
STATE AUDITOR \4~J 656 217.01

DEPARTMENT OF AUDITS AND ACCOUNTS
~"i4 \V..l... hmglon ~lrCCI S \V SUHC 214 All,mla, GeorglJ 30334-H400
February 3. 2003

Honorable Sonny Pcrdue, Governor Members of the Gencral Assembly of GeorgIa Members of the Board of Regcnts ofthc UmvcrsIty System of Georgia
and Honorable Damel W Rahn, President Medlc.!l College of Georgia
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladlcs and Gcntlemen
We have audited the accompanY1Og basIc financial statements (Exhibits A through D) of Medical Collegc of Georgia, an organlLalional umt of the State of GeorgIa, as of and for the year ended Junc 30. 2002 Thcse financial statements are the responsibIlIty of the College's management Our rcsponslbility IS to exprcss an op1Olon on these financial statements based on our audit
Wc conducted our audit 10 accordance with audlling standards generally accepted 10 the Umted States of Amenca Those standards reqUIre that we plan and perform the audit to obtam reasonablc assurance about whether the financial statements are free of matenal misstatement An audit 10cludcs cxam101Og, on a test basiS, eVidence support1Og the amounts and disclosures 10 the financial statements An audit also 10cludes assess10g the account1Og pnnclples used and significant eslimates made by management. as well as evaluating the overall financial statement presentalion We believe that our audit provides a reasonable baSIS for our op1OlOn
As discussed 10 Note I. the financial statements of Medical College of Georgia are 10tended to prcsent the financial pOSitIOn and changcs 10 financial poslllon (1Oclud1Og cash flows) of only that portIOn ofthe busmess-type actlvllies ofthe State of GeorgIa that IS attnbutable to the transaclions of Medical College ofGeorgJa They do not purport to, and do not, prescnt fairly the financial posllion and changes 10 finanCIal posItIOn (1Oclud1Og cash flows) of the State of GeorgIa, 10 conformity With accountmg pnnclples gencrally accepted 10 the Umted States of Amenca

02ARL-62

As descnbed In Note I to the financial statements, the Medical College of Georgia did not recognize Junc 30, 2001, encumbrances as expenses In the June 30. 2002, basic financial statements To conform to gcncrally accepted accounting pnnclples, encumbrances should be recognized as expenses and liabilities In the penod that goods and SCrvlCCS are received The effects on the basiC financial statements of thiS departure from generally accepted accounting pnnclples were not reasonably dctcrmInable
In our OpinIOn, except for the effects on the basiC financial statements ofthe matter discussed In the fourth paragraph, the basIC finanCial statcmcnts referrcd to above present faIrly, m all matenal rcspects, the finanCial pOSItIon of Medical College ofGeorgia as ofJune 30,2002, and Its changes In financial posItion (including cash flows) for the ycar then ended In conforrmty With accounting pnnclples generally accepted In the Umted States of Amcnca
As descnbed In Note I. Medical College of Georgia adopted the provIsions of Governmental Accounting Standards Board (GASB) Statements No 35, BaSIC Financial Statements - and Management'~ DISCUSSIOn and Anail'sis - for Puhllc Colleges and Ullll'erSltles, as amended by GASB Statement No 37. BasIC Financial Statements - and Management's DISCUSSIOn and Analyslsfor State and Local Governments, and GASB Statement No 38, Certam FlIIanclal Statements Note DIsclosures, as of July 1,2001, to Implement a new financial reportmg model
Management's DISCUSSion and AnalysIS IS not a reqUired part ofthe basIC finanCial statements but IS supplementary informatIon reqUired by the GASB We have applied certam limited procedures, which consIsted pnnclpally of Inqumes of management regardmg the methods ofmeasurement and prcscntatlOn of thiS supplementary informatIOn Howcvcr, we did not audit thiS informatIon and express no opmlon on It
Our audit was conducted for the purpose of forming an 0plmon on the basiC finanCial statements taken as a whole The accompanYing supplementary information (Schedulcs I through 5) IS prcsented for purposes of addl\lonal analySIS and IS not a reqUired part of the basiC finanCial statements of Medical College of Georgia Such information has been subjected to the audltmg proccdures applied by us m the audit ofthe basiC finanCial statements and, In our 0plmon, based on our audit, IS fairly stated In all matenal respects In relatIOn to the basiC finanCIal statcments taken as a whole
Respectfully submitted,
~~,~~ State Auditor
RWHgp 02ARL-62

REQUIRED SUPPLEMENTARY INFORMATION .I-

MEDICAL COLLEGE OF GEORGIA
Management's Discussion and Analysis
Introduction

Mcdlcal College of Geoflpa (MCG), the oldest school of mediCIne In GcorgIa, was Incorporated In 1828 as the MedIcal Academy of Georgia and IS onc of the 34 instItutIons of the Umvcrslty Systcm of Gcorgla The Collegc, located In Augusta, Georgia, has becomc known for ItS stateof-the-art technology and technology-related programs Currently, the Collcge offers morc than 40 academIc programs In allIed health SCiences, dentIstry, graduatc studIes, mediCine, and nursing at the certificate, baccalaureate, masters, doctoral and first profesSIOnal levcIs AddllJonally, MCG offers reSidency traInIng In medical and dental specialty areas The InstitutIon contInUCS to be cost effective as shown by the companson numbcrs that follow

Faculty

Students

Fall 2002 Fall 2001 Fall 2000

590

2,377

617

2,380

658

2,409

Overview ofthe Financial Statements and Financial Analysis

MedIcal College of Georgia IS proud to present ItS financIal statements for fiscal year 2002 The emphaSIS of diSCUSSions about thesc statements Will be on current ycar data There are three financial statements presentcd the Statcmcnt of Net Assets, the Statcment of Revenues, Expenses and Changes In Net Assets, and the Statement of Cash Flows ThIS diSCUSSion and analYSiS of the College's finanCial statcments proVides an overview of Its finanCial actlvltIcs for the year Medical College of GeorgIa has elected to not restate pnor penods for purposes of proVidIng the comparatIve data for thIS Management's DISCUSSion and AnalySIS However, In future years, whcn pnor penod InformatIOn IS available, a comparatIve analySIS Will bc prcscnted

Statement ofNet Assets

The Statement of Net Assets presents the assets, lIabilItIes, and nct assets of the College as of the end of the fiscal year The Statement of Net Assets IS a poInt of tImc finanCial statemcnt The purpose of the Statement of Net Assets IS to present to the readers of thc finanCial statemcnts a fiscal snapshot of Medical College of Georgia The Statement of Net Assets presents end-ofyear data concernIng Assets (current and non-current), LiabilItIes (current and non-current), and Net Assets (asscts mInUS lIabilItIes) Thc difference between current and non-current assets Will bc 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 owcs vcndors, Invcstors and lendmg mstItutlOns

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Finally. the Statement of Net Assets provides a picture of the net assets (assets minUS hablhtles) and their availability for expenditure by the institutIOn. Net asscts are divided mto three major categoncs 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 restncted net assets, which IS divided mto two catcgones, nonexpendable and expendable The corpus of nonexpendable restnctcd resources IS only aVailable for Investment purposes Expendable restncted net assets are avaIlable for expendIture by the institution but must be spent for purposes as determined by donors and/or cxternal entities that have placed tIme or purpose rcstnctlons on the use of the assets The final category IS umestncted net asscts Unrestncted assets are avaIlable to the institution for any lawful purpose of the institutIOn

Statement of Net Assets, Condcnsed (thousands of dollars)

Assets Current Assets CapItal Assets, Net Other Assets

$104.088 159,929 7.859

Total Assets

$271,876

Liabilities Current LiabilIties Non-Current Llablhtles

$ 43,196 10,598

Total Liabilities

$ 53,794

Net Assets Investcd In CapItal Assets, Net of Debt Restncted - Nonexpcndable Restncted - Expendablc Unrestncted

$159,916 1,598
62,449 -5,881

Total Net Assets

$218,082

Statement ofRevenues, Expenses and Changes in Net Assets

Changes In total net assets as presented on the Statement of Net Assets are based on the activIty presented In the Statement of Revenues, Expenses, and Changes m Net Assets The purpose of the statement IS to present the revenues receIved by the mstltutlon, both operatmg and nonoperating, and the expenses paId by the mslltullon, operatmg and nonoperating. and any other revenues, expenses, gains and losses received or spent by the Institution Generally speakmg operatmg revenues are recel ved for provldmg goods and servIces to the vanous customers and constituencies of the institutIOn Operating expenses are those expenses paid to acqUire or produce the goods and servIces proVIded m return for the operating revenues, and to earry out the mIssIon of the mstltutlon Nonoperating revenues are revenues receIVed for which goods and servIces are not prOVided For example state appropnatlons are nonoperatmg because they are proVIded by the Leglsldture to the mstltutlOn WIthout the legislature dIrectly receiving commensurate goods and servIces for those revenues

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Statcment of Revenues, Expenses and Changes In Nct Assets, Condensed (thousands ofdollars)

OperatIng Rcvenues OperatIng Expenses

$ 277,870 402,647

Opcratmg Loss

$-124,777

NonoperatIng Revcnues

115,878

Income (Loss) Before Other Revenues

$ -8,899

Other Revenues

II

Increase (Decrease) In Net Assets

$ -8,888

Nct Assets at BeginnIng of Year, as OngInally Rcportcd

$ 538,795

CumulatIve Effect of Changes In AccountIng Pnnclple

-31 \,825

Net Assets at BegInnIng of Year Restated

$ 226,970

Net Assets at End of Year

The Statement of Revenues, Expenses, and Changes In Net Assets reflects a shghtly negative year WIth a decrease In the net asscts at the end of the year Some hlghhghts of the Information presented on the Statement of Revenues, Expenses, and Changes In Net Assets are as follows

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Revenue By Source <thousands of dollars) For Thc Ycar Ended June 30, 2002
OperatIng Revenue TUltlOn and Fees Grants and Contracts Rents and RoyaltIes Sales and ServIces of EducatIOnal Departments AuxIlIary Othcr
Total OpcratIng Revenue
NonoperatIng Revenue State Appropnallons Grants and Contracts Invesunent Income Other
Total Nonoperating Revenue
Total Revenues
Expenses (thousands of dollars) For The Year Ended June 30, 2002
Opcrallng Expcnses Instruction Research Pubhc ServIce AcademIc Support Studcnt ServIces InslItutlonal Support Plant OperatIons and Malntcnancc ScholarshIps and FellowshIps AuxIlIary Enterpnses Patient Care Unallocated DeprecIatIOn
Total Operating Expenses

S 11,547 246,839 384 8,356 4,220 6.524
$277,870
$114,773 168 414 533
$115,888
$ 88,250 20,396 69,673 13,261 1,769 25,123 9,235 1,262 4,227 157,891 11,560

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Statement of Cash F1o",s

The final statement presented by the Me<hcal College of Georgia IS the Statement of Cash Flows The Statement of Cash Flows presents detallcd InformalJon about the cash activity of the InslJtulJon dunng the year Thc statement IS dIVIded Into five parts. The first part deals with operating cash flows and shows the net cash used by the operating aclJvIlJes of the InslJtulJon The second sectIon reflects cash flows from non-capital financing aclJvIlJes ThIs sectIOn reflects the cash received and spent for nonoperating, non-investing, and non-capital financing purposes The third sectIOn reflects the cash flows from investing aclJvIlJes and shows the purchases, proceeds, and Interest receIved from investing aclJvltles The fourth sectIon deals with cash flows from capItal and related financing aelJvltles This scclJon deals wIth the cash used for the acqUlsIlJon and constructIOn of capital and related Items 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 Year Ended June 30, 2002. Condensed (thousands of dollars)

Cash ProvIded (Used) By Operating ActIVItIes Non-Capital Financing AetlVllJes investing AclJvllJes Capital and Related Financing AclJvllJes

5-117,310 115,799 12,278 -5.877

Net Change In Cash Cash, Beglnmng of Year

$ 4,890 13.868

Cash, End of Year

S 18,758

Capital Assets

The College did not have Significant capital asset addllJons for facIlitIes In fiscal year 2002 For additIOnal InformalJon concerning CapItal Assets, see Notes I, 6, 8, and 9 In the notes to the financial statements

Economic Outlook

The College IS not aware of any currently known facts, deciSions, or condllJons that are expected to have a Significant effect on the financIal pOSIlJon or results of operatIOns dunng this fiscal year beyond those unknown vanalJons haVing a global effect on virtually all types of bUSiness operalJons The College's overall financial posltlon IS strong The College anlJclpates 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

Damel W Rahn, PreSident Medical College of GeorgIa
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BASIC FINANCIAL STATEMENTS -9-

MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS JUNE 30, 2002
ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable Federal FinanCial AsSistance Other Prepaid Items Inventones
Total Current Assets
Noncurrent Assets Investments Notes Receivable Capital Assets, Net (See Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current L,ab,hhes Payroll Withholdlngs Accounts Payable Deferred Revenue Funds Held for Others Capital Leases Compensated Absences
Total Current Llablhhes
Noncurrent LJablhhes Compensated Absences
Total Liabilities
NET ASSETS
Invested In Capital Assets, Net of Related Debt Restncted for
Nonexpendable Expendable Unrestncted
Total Net Assets
The notes to the finanCial statements are an .ntegral part of thiS statement - 11 -

EXHIBIT "A"

S 18,758,18177
26,641,485 84
4,838,31427 15,975,833 00 37,428,17457
445,84200
$ 104,087,831 45

$

1,597,91675

6,261,617 87

159,928,66799

$ 167,788,20261

$ 271,876,034 06

$ 15,629,164 66 4,152,49892 16,309,42291 1,453,557 00 12,78000 5,638,332 58
$ 43,195,756 07
10,598,00019 $ 53,793,756 26
$ 159,915,88799 1,597,91675
62,449,67513 -5,881,20207
$ 218,082,277 80

MEDICAL COLLEGE OF GEORGIA STATEMENT OF REVENUES EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30 2002

EXHIBIT "8"

OPERATING REVENUES
Student Tuibon and Fees less ScholarshIP Allowances
Grants and Contracts
Federal State Local Nongovernmental Rents and Royalties sales and 8eMCeS of Educabonal Departments AuXIliary Enterpnses
Residence Hans Bookstore ParkxlgfTransportatlon Health 8eNlces
cnhercngan~bons
Other Operating Revenues
Talai Operatmg Revenues
OPERATING EXPENSES
Salaries Faculty - Staff
Employee Benefits Travel Scholarships and Fellowstups UlIlil!eS Supplies and Other servICeS DepreCIation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES
State Appropnallons Grants and Contracts
Federal State Local Nongovernmental Interest and Other Investment Income Olher Nonoperatmg Revenues
Total Nonoperallllg Revenues
Income Before Other Revenues Expenses Gans or Losses
Capital Grants and Glfl:s Nongovernmental
IncreaseJ(Dccrease) m Net Assets
Net Assets Net Assets - Beginning of Year 8S Onglnalty Reported Cumulative Effect of Changes In Accounting PrinCIple
Net Assets Beglnnlng of Year, Restated
Net Assets - End of Year

$

13,017,39725

-1,470,084 92

18,631,07151 127,533,277 37
475,53207 100,199,366 58
384,14920 8,355,491 92

844,67364 1,706,43810
511,27349 524,37938 63305764 6,524,14874

$ 277,870,17207

$ 212,075,098 32 62,510,73258 1,816,250 37 2,219,54595 5,090,489 B5 107,374,09312 11,560,590 42
$ 402.648.800 61
$ -124,776,62854

$ 114,773,30171

60,761 27 65,89253 11,37463 2988367 41376372 523,004 40

S 115.877,98193

$

-8698,648 61

10,42391

S

-8,888,222 70

S 538,795,51465 -311,825,01415
S 226,970,500 50

S 218,082,277 SO

The notes to the finandaf statements are an Integral part of ttus statement
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MEDICAL COLLEGE OF GEORGIA
STATEMENT OF CASH Etows
YEAR ENDED JUNE 30 2002
CASH FLOWS FROM OPERATING ACTMTlES TUllJon and Fees Grants and Contract! $ales and Services 01 Educabonal Departments Payments to Suppliers Payments to Employees Payments for Scholarstups and FellowshJps Loans Issued to Students and Employees Collechon of Loans to Students and Employees AuxJlaary Enlerpnse Charges Residence Halls Bookstore Paf'1(lngIT ransportahon Health ServICeS Other Orgamzabons Other Recerpts (Payments)
Net Cash ProvIded (Used) by Opecabng AdMbeo
CASH FLOWS FROM NONCAPITAl FINANCING ACTMTIES State AppropoallOl\S Agency Funds TransactJons Gifts and Grants Recelvod for Other than Captlsl Purposes
Net Cash FIQINS PrOVIded (Used) by NOnc8prtal FinanCing A.ctlvrtIe!5
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets PnnClpal Paid on Caprtal Debt and Lease Interest Pal(] on CaprtaJ Debt end Lease
Net Cash ProVIded (Used) by Caprtalancl Related Ftn8nClng ActMlJes
CASH FLOWS FROM INVESTING ACTIVITIES Proceods from Sales and Malunlle!5 of Investmenh Interest on Investments
Net Cash Provided (Used) by Investing ActMbeS
Net Increasel(Decrease) In Cash
Cash and Cash EqUIValent5 June 30 2001 Less Short Term Investmen1s
Cash and Cash Equrvalents - Beglnmng of Year
Cash and Cash Equrvalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTMTlES
Operatrng Income (boss) Adjustments 10 Reconole Net Income (Loss) to Net Cash
PrOVIded (Used) by Operahng A.ctMues Depreoa1lon Change In Asseb and Llabltrtll!l! Accounts Recetvables Net lovertones Prepaid Items Notes Recervables Net Accounts Payable PayroD WlthholdJOg5 Deferred Revenue Compensated Absences
Net Cash ProvKied (U!5ed) by Operating Actrvibes
The notes to the finsl'lCl81 statements are an II'ltegral part of thIS s1atement
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EXHIBIT "C"

S

1181954548

251 481 787 50

8355491 92

188,450,74867

210,779,50211

221954595

76211105

1,.....600666

844 673 64 1715126 91
51127349 52437938 63571664 7568,22381

S -117,309,68235

S 114,77330171 330 202 09 69<1,96804
S 115,798,47184

S

579784353

-68,454 47

10,62553

S

5,876,92353

S

11864 471 59

413,76372

S

12276,23531

S

4,890,10127

S

46132,155 54

32,264,075 Q.4

S

13,868,080 50

S

1817581'8' 77

S 12477662854
11560 590 42
-8,140 624 94 104 358 46 -28793000 68389561
-27 104 775 87 15629 164 66 13726 67164
1,295,596 21
S .'17.309168235

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS MedIcal Collcgc of GeorgIa serves the state, and natIOnal eommumtles byprovldmg lis students WIth academIC mstructIon that advances fundamental knowledge, and by dissemInatIng knowledgc to the people of GeorgIa and throughout the country
REPORTING ENTITY MedIcal College of Georgia IS one of thirty-four (34) State supported member InstItutIons of higher educatIOn m Georgia which eompnse the UniversIty System ofGeorgta, an organizatIonal urut ofthe State of GeorgIa The accompanyIng finanCIal statements reflect the operatIons of Medical College of GeorgIa as a separate reportIng entIty
The Board of Regents has constitutIOnal authonty to govern, control and manage the University System of Georgia This authonty Includes but IS not hmlted to thc power to deslgnatc management, the abIlity to Significantly mfluenee operatIons, the authonty to control InstItutIons' budgets, the power to determme allotments of State funds to member InstitutIOns and the authonty to prescnbe accountIng systems and admInIstratIve poliCies for member mstltutIons Medical College ofGeorgIa does not have authonty to retam unexpended State appropnatlons (surplus) for any !,'1ven fiscal year Accordmgly, Mcdlcal College of Georgia 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 liS legal, operatIonal, and finanCIal relatIOnshIps wllh the Board of Regents as defined m SectIon 2100 of the Governmental Accountmg Standards Board (GASB) CodIficatIOn ofGovemmental Accountmg and Fmanclal Reportmg Standards
FINANCIAl.. STATEMENT PRESENTATION In June 1999, thc GASB ISSUed Statement No 34, BaSIC Fmanclal Statements and Management D,SCUSSIOn and AnaZvslsfor State and Local Governments ThiS was followed m November 1999 by GASB Statement No 35, BaSIC Fmanclal Statements and Management's D,SCUSSIOn and AnaZvsls for Publtc Colleges and UllIverSltles The State of Georgta IS reqUIred to Implement GASB Statement No 34 as of and for the year ended June 30, 2002 As an organizatIOnal Unit of the State of Georgia, the College IS also reqUIred to adopt GASB Statements No 34 and No. 35 as amended by GASB Statements No 37 and No 38 The finanCIal statement presentatIOn reqUIred by GASB Statements No 34 and No 35 as amended by GASB Statements No 37 and No 38 proVides a comprehenSive. entlty-wlde perspectlve of the Col1ege's assets, lIabllltles, net assets. rcvcnues, expenses. changes m nct assets, cash flows, and replaces the fund group perspective preVIOusly reqUIred
The College has elected to not restate Its 2001 finanCIal statements to conform With the new finanCial statement presentatIon, therefore comparatIve finanCIal mformatIon Will not be presented for fiscal year 2002 SIgnificant accountIng changes made In order to comply WIth the new requirements mclude (I) adoptIOn of deprecIation on capItal assets, and (2) recogrutlOn of compensated absences Gencrally Accepted Accountmg Pnnclples (GAAP) reqUIres that thc reportmg of summer school
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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTAnON rcvcnucs and cxpcnscs bc between fiscal years rather than In onc fiscal year Due to the lack of matenalIty, InstitutIOns ofthc UnIversity System of Georgia Will contmuc to report sununer revenues and expenses In the year In which the predominate activity takes place
At June 30, 2001, encumbrances (contractual oblIgations for goods and ServiCes not received at fiscal year end) were recorded as expenditures by the College Instead of reservatlons of fund balance as reqUired by generally accepted accounting pnnclples For fiscal year 2002, the College changed ItS method of recording encumbrances such that encumbranccs at June 30, 2002 were not recorded as expenses ThiS change IS In accordance With generally accepted accountmg prmclples.
No adjustments however, have been made on the financial statements to restate the fund balance at July 1,2001 for the Junc 30, 2001 encumbrances recorded as expenditures In fiscal year 2001 The net effect of the above accounting trcatmcnt resultcd In an understatement of expenses on thc accompanymg finanCial statements for pnor year encumbrances which should have been reflected as eJ\penses m the penod when goods and servlccs were received.
BASIS OF ACCOUNTING For finanCial reporting purposes, the College IS conSidered a speCial-purpose government engaged only m bUSiness-type activIties Accordmgly, the College's finanCial statements have been presented USing thc cconomlc resources measurement focus and the accrual basiS of accountmg, except as noted In the precedmg paragraphs Under the accrual basiS, revenues are recognized whcn earned, and cxpenses arc rccorded when an obhgatlOn has been Incurred All Significant mtra-college transactIOns have been elImmated
Thc 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
RESTATEMENT OF NET ASSETS - BEGINNING OF YEAR As a result ofthe adoption ofGASB Statement No. 34, the College was also reqUired to makc ccrtam changcs In accounting pnnclplcs, speCifically (I) adoptIOn of depreclatlon on capital asscts, and (2) rccordIng of compcnsatcd absences GASB Statcment No 34 rcqUircs ccrtam summer semester revenues be rccognlzed betwccn fiscal years rather than the fiscal year m which the semester was predommantly conducted The Umverslty System of Georgia has chosen to contmue to record summer revcnue m the year m which the semester was predominantly conducted Net assets at July I, 200 1 were reduccd by $311,825,014 15 for the cumulatlve effect of these changes
CASH AND CASH EQUIVALENTS/SHORT-TERM INVESTMENTS Cash and Cash EqUivalents consist of petty cash, demand depOSits and time depOSits In authonzed finanCial Instltutlons, and cash management pools that have the general charactenstlcs of demand dcposlt accounts
- 15 -

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "0"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS The College accounts for Its mvestments at fair value m accordance With GASB Statement No 31, Accounting and Financial Reporting/or Certain Investments and/or External Investment Pools Changes m unrealized gam (loss) on the carrymg value ofmvestments are reported as a component ofmvestment mcome m the statements of revenues, expenses, and changes m net assets
ACCOUNTS RECEIVABLE Accounts receivable consIsts of tUItIOn and fee charges to students and aUXIlIary cnterpnse servIces proVldcd to students, faculty and staff, the maJonty of each resldmg m the State of Georgia Accounts receivable also mclude amounts duc from the Federal government, state and local governments, or pnvate sources, m connecllon with reimbursement ofallowable expenditures made pursuant to thc Collcge's grant and contracts No provISion has been made for an allowance for doubtful accounts
INVENTORIES Consumable supplies are recordcd on thc consumptIOn method and are valued at cost usmg thc firstm, first-out or last-m, last-out methods
Rcsalc lnvcntoncs arc valued at cost usmg thc first-m, first-out method
PREPAID ITEMS Prepmd Items consIst of payments made to vendors m advance of the receipt of goods and servIces that Will benefit subsequent penods and Early Rellrement Program pensIOn costs paid ill advance
NOl'\-CURRENT CASH AND INVESTMENTS Cash and mvestments that are externally restncted and cannot be used to pay currcnt lIabllilles are claSSified as non-current assets m thc statements of net assets
CAPITAL ASSETS Capital assets are recorded at cost at the date of acqulsillon, or faIr market valuc at the date of donatIOn m the case of gifts For eqUipment, the Collegc's capltaJ1zallon policy mcludes all Items with a umt cost of $5,000 00 or more, and an esllmated useful lIfe of greater than one year RenovatIOns to bUlldmgs, mfrastructure, and land Improvements that exceed $100,00000 and slgmficantly mcrease the value or extend the useful IIfc of the structure are capltalI.led Routme repairs and mamtenance are charged to operatmg expense m the year m which the expense was mcurred Depreclallon IS computed usmg the straIght-lIne method over the esllmated useful lIves of thc assets, generally 40 to 60 years for bUIldmgs, 20 to 25 years for mfrastructure and land Improvements, 10 years for library books, and 3 to 7 years for eqUIpment
To obtam the total plcturc of plant additIOns m the Umverslty System, It IS necessary to look at the acllvilles ofthe Georgia State Fmancmg and Investment Comnusslon (GSFIC) - an organlzallon that IS cxternal to the System GSFIC Issues bonds for and on behalfofthe State ofGeorgia, pursuant to
- 16 -

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS powers granted to It In the Conslltutlon ofthe State ofGeorgIa and the Act creating thc GSFIC. The bonds so Issued constitute dlTect 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
EfTective July 1,2001, the GSFIC retainS construction In progress on thelT books throughout the construcllon penod and transfers the entlTe project to Medical College of Georgia when complete
DEFERRED REVENUES Deferred revenues Include amounts received for tuItion and fees and certain auxIliary actiVItIes pnor to the end ofthe fiscal year but related to the subsequent accounting penod Deferred revenues also Include amounts rccelved 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 accrued vacation payable In the Statement of Net Assets, and as a component of compensatIon and benefit expense In the Statements of Revenues, Expenses, and Changes In Net Assets Medical College of GeorgIa had accrued hability for compensated absences In the amount of$14,940,736 56 as of July 1,2001 For fiscal year 2002, $7,480,38653 was earned In compensated absences and employees were paid $6,184,79032, for a net Increase of$I,295,596 21
NON-CURRENT LIABILITIES Non-current liabIlities Include (I) habllIlles that WIll not be paid WIthin the next fiscal year, (2) capital lease obligatIOns with contractual matuntles greater than one year, and (3) other lIabilities that, although payable WIthin one year, arc to be paid from funds that are clasSIfied as non-eurrent assets
NET ASSETS The College's net assets arc clasSIfied as follows
Invested In capital assets. net of related debt ThIS represents the College's total Investment In capItal assets, net of outstanding debt obligatIOns related to those capItal assets To the extent debt has been Incurred but not yet expended for capItal assets, such amounts are not Included as a component of Invested In capital assets, net of related debt (The term "debt obligallons" as used In thiS defimtlon does not Include debt of the GSFIC as dJscussed above)
Reslrlcted net asset~ - nonexpendable Nonexpcndable restneted net assets consIst of endowment and Similar type funds In whIch donors or other outSide sources have stipulated, as a condition ofthe gIll Instrument, that the pnnclpalls to be maintained inVIOlate and In perpetUIty, and Invested for the purpose of prodUCing present and future Income, whIch may either be expended or added to
- 17 -

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS pnnclpal The College may accumulate as much ofthe annual nct Income ofan InstItutIonal fund as IS prudent under the standard established by Code SectIon 44-15-7 of Annotated Code of GeorgIa.
Restrzcted net assets - expendahle Restncted expendablc nct assets Include resources In whIch the College IS legally or contractually obhgated to spend resources In accordance WIth restnctIons Imposed by external thIrd parties
Unrestrzcted net assets Unrestncted net assets represent resources denved from student tuItIon and fees, state appropnatIons, and sales and servIces of educatIOnal departments and auxlhary enterpnses 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 appropnatIons (surplus) of $33,803 58 Unexpended state appropnatlOns must be refunded to the Board ofRegents ofthe Umverslty System of GeorgIa - AdmInIstratIve Central Office for remittance to the Office of Treasury and FIscal ServIces These resources also Include auxl hary enterpnses, which are substantIally self-supporting actIVItIes that proVIde servIces for students, faculty and staff
When an expense IS Incurred that can be paJd USIng Clther restneted or unrestncted resources, the College's policy IS to first apply the expense towards unrestneted resources, and then towards restneted resources
INCOME TAXES MedIcal College of GeorgIa, as a pohtIcal subdIVISIOn of the State of GeorgIa, IS excluded from Fcderal Income taxes under SectIon 115( I) of the Internal Revenue Code, as amended
CLASSIFICATION OF REVENUES The College has claSSIfied ItS revenues as eIther operatIng or non-operatIng revenues In thc Statement of Revenues, Expenses, and Changes In Net Assets accordIng to the follOWIng entena
Operatmg revenues OperatIng revenues Include actIvItIes that have the eharactenstlcs of exchange transactIons, such as (I) student tUItIon and fees, net ofscholarshIp allowances, (2) sales and SCfVlees of auxlhary enterpnses, (3) most Federal, state and local grants and contracts and Federal appropnatlOns, and (4) Interest on InstItulIonal student loans

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "0"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CLASSIFICATION OF REVENUES Non-operatmg revenues Non-operatlng revenues Include activIties that have the charactcnstlcs of non-cxchange transactions, such as gIfls and contnbutlons, and other revenue sources that are defined as non-operating revenues by GASB No.9, Reportmg Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entl/les That Use Proprietary Fund Accountl1lg, and GASB No 34, such as state appropnatlOns and Investment Income
SCHOLARSHIP ALLOWANCES Student tUitIon and fee revenues, and certaIn other revenues from students, are reported at gross WIth a contra rcvenue 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 elthcr operating or nonoperating revenues In the Collcgc'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 allowanccs
NOTE 2 CASH AND CASH EOUNALENTS, OTHER DEPOSITS, AND INVESTMENTS
STATE OF GEORGIA COLLATERALlZATlON STATUTES AND POLICIES Funds belonging to the State ofGeorgia (and thus MedIcal College of Georgia) carmot be placed In a depOSItory paYIng Interest longcr 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 onc or morc of the follOWing sccuntlcs as enumerated In the OffiCIal Code of Georgia Annotated SectIon 50-17-59
I Bonds, bIll, certificates of Indebtedness, notes, or other dIrect oblIgatIOns ofthe Uruted States or of the State of Georgia
2 Bonds, bills, certIficates of Indebtedness, notes, or other oblIgations of the counties or mUnICipalIties of the State of Georgia
3 Bonds of any publIc authonty created by the laws of the State ofGeorgia, proVidIng that the statute that created the authonty authonzed the use of the bonds for thiS purpose
4 Industnal rcvenue bonds and bonds of development authontles created by thc laws of the Statc of Georgia

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 2' CASH AND CASH EOUNALENTS, OTHER DEPOSITS, AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZAnON STATVTES AND POLICIES 5 Bonds, bIlls, certIficates of mdcbtcdness, notes, or other obligatIOns of a SUbSIdIary corporalJon ofthe Uruted Statcs government, which are fully guaranteed by the Umted Statcs government both as to pnnclpal and mtcrest, or debt oblIgatIons ISSUed by thc 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 msurancc of accounts prOVIded by the Federal DepOSIt Insurance CorporatIon

As authonzed m the OffiCial Code of GeorgIa Annotated Secllon 50-17-53, the State DepOSitory Board has adoptcd polIclcs which allow agencies ofthe State of GeorgIa (and thus MedIcal College of GeorgIa), the optIOn of cxemptmg demand depOSits from the collateral reqUiremcnts

The Trcasurer of the Board of Regents IS responsible for all details relallve to furrushmg the reqUired deposllory protectIOn for all umts of the Umverslty System of GeorgIa

CATEGORlZAnON OF DEPOSITS The College's cash depOSIts arc categonzed by nsk as follows

Catcgory I - Amounts covered by depOSitory msurance or collatcralIzed WIth secuntles (at faIr value) held by the College or by ItS agent m the College's name

Category 2 - Amounts collateralIzcd WIth secunlles (at faIr value) held by the pledgIng fmanclal mstllutlOn's trust department or agent m the College's name

Category 3 - Amounts collateralIzed WIth secunlles (at faIT value) held by the pledgmg finanCIal mstllutIon, or by Its trust department or agent but not m the College's name, and amounts uncollateralIzed

Cash DepOSits as of Junc 30,2002 are as follows

Cash DePOSitS Investment PortfoliO
Accounts
Total Cash DePOSits

r-'llT)'lng AmQunt

Bank BalanCes

RIsk CategoDes

2

3

51g,735,n813 527,302,13266 5 242,19463 5

000 S27,059,93803

23,90723

23 907 2l

2390723

S 18..U-2..6~5 36 $27 326(31) 89 $ 26619186 S_ _,.!.lli>!o.\QOll,' 52705293693

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANClAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE2 CASH AND CASH EOUIVALENTS, OTHER DEPOSITS, AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS At June 30, 2002, the College's Investments consIsted of the follOWing

Investments Not Subject to CategorIzations Board of Regents
Total Return Fund Investment Portfoho Accounts
Mutual Funds State Investment Pool

S 6,801,802 06
414,68638 20,999,00692

Total Investments

$28,215,495,36

Funds Invcsted In an Investment pool managed by another governmcntal entity are not reqUired to be catcgorIzed SInce the College dId not own any specIfic, Identifiable Invcstment secuntles ofthe pool

NOTE 3 ACCOUNTS RECEIVABLE

Accounts receivable conSIsted of the follOWIng at June 30, 2002

Auxlhary Enterpnscs and Other OperatIng ActiVIties Federal, State, and Pnvate Funds Other

$ 12,14203 4,838,31427 15,963,690 97

Total Accounts ReceIvable

$2Q.814,147,27

NOTE 4 INVENTORIES

Inventones consisted of the follOWing at June 30, 2002

Bookstore PhYSical Plant Other

$ 402,053 16 13,38061 30,40823

Total

$ 44~~2,00

NOTE 5 NOTESILOANS RECEIVABLE

Notes/Loans receIvable at Junc 30, 2002, pnmanly consIst of student loans made through the Federal PerkinS Loan Program (the Program) The Program proVIdes for cancellatIon of a loan at ratcs of 10% to 30% pcr year up to a maxImum of 100% Ifthc particIpant comphes WIth certaIn proVISIOns The Federal govcrnment reImburses the College for amounts cancelled under these proVISIOns As

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 5 NOTES/LOANS RECEIVABLE

the College detenmnes that loans are uncollectIble and not eligIble for TClITlbursement by the Federal government. thc loans are wntten off and asSigned to the U. S. Department of EducatIon Management considers all loans to be colleclible and has not proVided an allowance for uncolleclible loans

NOTE 6 CAPITAL ASSETS

The balance at July 1,2001 was adjusted for accountmg changes reqUired m Implementmg GASB Statements 34 and 35 as disclosed m Notc I Followmg are the changes m capital assets for the year ended June 30. 2002

Adjusted Balance July I 2001

Additions

Reductions

Balance June 10 2002

Capital Assets, Not Bemg Depreciated

Land Jnd Land Irnprovcmcnts

5 8.998.281 93

5 8,998.281 93

('Jpltdl A.sset". Bemg Depreciated Buildmg and BUlldmg Improvements raclhues and Other Improvement'i Equipment CapItOl! Leases llhrary CollectIOns

5215.267,70200 5 2,339,67900
43,816,886 64 264,10373
1. . 1 1 4 0 7 6 0 0

1,524,455 00
4,184,98444 S 12,78000 98,82800

5216,792,15700

2,339,67900

1,088,01664 46,913,85444

228,96864

47,91509

209,55800 13,203.346 00

527'.002.44737 $ 582104744 S 1,526.543 28 5279 296 951 53

Less Accumulated Depreciation

BUIldmgs .md BUIlding Improvements $ 83,608.86209 S

Facilltlcc; and Other Improvements

1,162,513 57

Equipment

25,686,985 91

Capital Leases

139,66960

Library Collec[lons

8 218 4~7 00

6,150,732 36
114,36335
4,505,24301 5 78,011 70 712,24Q QQ

5 89,759.59445

1,276,876 92

1,615,48104 28,576,74788

185,47408

32,20722

209.558 QII 872111900

SI18.816.488 17 5 II 560,59Q,42 5 2.01051112 5)28,366,56547

Total CapltJI Assct~, Being Deprecl.llcd,

~et

5156.185,95920 S -5 739 ~42 98 S -481 969 84 S15Q.93Q,386 06

Capital Assets, Net

5165,)84 ~1.u S -~ 139,542 9.8 S -4~\2g? 84 5159,928.667,22

NOTE 7 DEFERRED REVENUE

Deferred revenue conSisted of the followmg at June 30, 2002

Prepaid Tuition and Fees Research Other Deferred Revenue

$ 2,860,253 42 13,347,43521 101,734,28

Totals

$16.30942291

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 8 LONG-TERM LIABILITIES

Long-tenu lIabilIty aetl\"lty for the year ended June 30, 2002, was as follows

Lca.c;;cs I ease Obhg,.UIon~
Other LiabilitIes
Compensated Ah<;cncc<;
Total Long-Term Obl1g~llons

B . .i1Jncc July 1 2001
S 118,11456
14940711> 56 Sl-.5,.Q:;:M~I."t~

Addlllonc;;
S 12,78000
7480.38653 S 149) I 61j..5.3

ReductIOns
S 118 11456 6,IS4,790J2
S 6,302.9J!:!.&J!

B.lI.rncc June ll) 200:!
S 12,7800\1
16,236,33277
S 16 249,II2,U

Current Portion
S 12,780 ()(I
5,63833258
S 56'\ I J 12 '\8

NOTE 9 LEASE OBLIGATIONS

C O\PIT<\L LEASES hpenses It>r fiscal ycar 2002 \\ere S79,080 00 of which SIO,625 53 represented lIlterest Total prinCipal pdlJ on cdpltdlleases was 568,454 47 for the fiscal year ended June 30, 2002 The lIlterest rate IS 12 10 percent I'wo edpltalleases were cancelled dunng the fiscal year ended June 30, 2002 totalmg $19,03456

Cenam edplldl leases provide lor renewal dnd/or purchase options Generally purchase options at hargam prll-CS of one dollar arc e,erelsahle at the e"plrallon of the lease tenus

Medical Collcge of Georgia has a capital lease for equipment with an outstandmg balance at Junc 30, 2002 mthe amount of$12,780 (JO

SUMMARY OF LEASE OBLIGATION Future commitments for capItal leases as of June 30, 20()2, were as follows

Capital Leases

Year Endlllg June 30 2003

S )2,78000

NOTE II) RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Medical College of Georgld partIcIpates m the Teaeher~ Retirement System of GeorgIa (TRSj, a eost-shanng multIple-employer defined benefit pension plan establIshed by the Geneml Assembly of Georgia for the purpose of provldmg retirement allowances and other benefits for teachers of the State of GeorgIa TRS provides service retirement, dlsabl IIty rellrement, and SUrviVOr'S benefits for

- 23 -

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "0"

NOTE 10 RETIREMENT PLA.L\lS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Its members 10 accordance wIth State statutc The Teachers RelIremcnt System of Georgia ISSUCS a separate stand alone financIal audIt report and a copy can bc obtamed from the GeorgIa Departmcnt of AudIts and Accounts.

Funding Policy Employees of Medical Collcge of Georgia who arc covered by TRS are reqUired by State statute to contnbute 5% ofthelf 1,'I'OSS earmngs to TRS Medical College of Georgia makes monthly employer contnbulIons to TRS at ratcs adopted by the TRS Board ofTrustees 10 accordancc WIth State statute and as advIsed by theIr 10dependent actuary For fiscal year 2002, the employer contnbulIon rate was 9 24% for covered employees Employer contnbutIOns for thc currcnt fiscal year and the preced10g two fiscal years are as follows

Fiscal Ycar

Percentage Contnbuted

ReqUired C o n t n bulIon

2002 2001 2000

100% 100% 100%

$11,359,99841 $15,431,61425 S23,757,68610

REGENTS RETIREMENT PLAN

Plan Description The Regents RelIremcnt Plan, a s1Ogle-employer dcfined contnbulIon plan, IS an oplIonal relIrement plan established and adnurustered by the Board of Regents of the Umvcrslty System of GeorgIa, under which It may purchase annuIty contracts for the purpose of provld1Og retIrement and death benefits for eligIble faculty and pnnclpal admlrustrators Benefits depend solely on amounts contnbuted to the plan plus 10vestrnent eam10gs Benefits are payable to partlclpat10g employees or their beneficlanes 10 accordance With the tenns of the annUity contracts

Funding Policy Member contnbutIOn reqUirements are established by thc Board of Trustees of the Teachers RelIrement System Employer contnbulIons are established by statute and may bc amended only by the General Assembly of the State ofGeorgIa The employer contnbutes 9 62% ofthe partlclpat10g employee's earnable compensatIOn Employees contnbute 5% of their camable compensatIOn Amounts attnbutable to all plan contnbutIOns are fully vested and non-forfeItable at all lImes

MedIcal College of GeorgIa and thc covered employees made the reqUired contnbulIons of $5,213,692 09 (9 62%) and $2,714,966.54 (5%), respeclIvely

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHffiIT "D"

NOTE I 0 RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Medical Collcgc ofGcorgIa participates m the Georgia Defined ContnbutlOn Plan (GDCP) which IS a smgle-employer defined contnbulIon plan establIshed by the General Assembly of Georgia for the purpose ofprovldmg relIrement coverage for State employees who are temporary, seasonal, and partIImc and arc not members of a publIc rctIrement or pensIOn system GDCP IS admmlstered by the Board of Trustees of the Employees' RetIrement System of GcorgIa
Benefits A member may rellre and elect to receive penodIe payments after attamment ofage 65 The payment Will be based upon mortalIty tables and mterest assumplIons to be adopted by the Board of Trustees If a member has less than $ 3,500 00 credited to hlslher account, the Board ofTrustccs has the oplIon of requmng a lump sum dlstnbullon to the member m lIeu ofmakmg penodle payments Upon the death of a member, a lump sum dlstnbutlOn equalIng the amount credIted to hlslher account WIll be paid to the member's dcslgnated beneficIary Benefit provIsIOns arc establIshed by State statute
Contributions and Vesting Member contnbulIons are seven and one-halfpercent (7 5%) of gross salary There are no employer contnbutlOns ContnbutlOn rates are cstablIshed by State statute Earnmgs are credIted to each member's account m a manner establIshed by the Board of Trustees Upon termmatlOn of employment, the amount of the member's account IS refundable upon request by the member.
Total contnbulIons made by employees dunng fiscal year 2002 amounted to $226,32401 which represents 7 5% of covered payroll These contnbullons met the requirements of the plan
EARLY RETIREMENT PENSION PLAN
Plan Description The Medical Collegc of Georgia (MCG) Early Retuement Pension Plan (ERP) IS a smgle-employer defined benefit pensIOn plan admmIstered by WillIam M Mereer, Incorporated The plan was deVised by MCG as a means of manpower reduclIon and was approved by the Board of Regents of thc Umvcrslty System of Georgia (BOR) effectIve January 1,2000
The manpower reductton plan was deSIgned to allow vested employees aged 55 or employees ofany age With 25 years of credItable SCfV1ce to retue WIthout penaltIes as applIed by the Teachers Rellrement System of Georgia (TRS) for early retIrement The plan would allow for all partIcIpants to relIre as If they were vested and aged 60 or had attamed 30 years of creditable servIce No other benefits will be paid by thiS plan
A financIal statement IS maintained by the Medical College ofGeorgIa, Comptroller's DIVISion, and IS available for revIew dunng normal busmess hours
- 25 -

\1EDlCAL COLLEGE OF GEORGIA NOTES TO THE FIl\ANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 10 RETIREMENT PLAl\S

EARLY RETIREMENT PENSIOI' PLAN

Funding Policy The plan IS to be funded by the purchase of an annUIty utilizing salary savings of departed employees The fundmg penod lor the annuity IS 15 years The fund sources that provIded for an employees salary, as of December 31, 1999, would be responsible for fundmg the annUIty to proVIde the retlTee benefits There IS no addItional fundmg cost to the employee/rellree, BOR, or the State of GeorgIa for this plan

SInce this plan was not pre-funded, \'ICG IS takIng an aggressive approach to collect and depOSit as much Into the annuIty fund m the earlier years as IS pOSSIble, thereby realizmg a greater return on mvestmenl

Annual Pension Cost and ~et Pension Obligation The ERP's annual pension cost and net pensIOn obligallon for the fiscal years 2001 and 2002 were as follo\\s

FISCAL YEAR 2001

Totdl

MCG

Other As<ouated
Umts

Annual ReqUIred Contnhutlon Intere<t on Net PenSlOn OhligdtlOn Adjustments on Annual ReqUIred
Contnbutlons

$ 15.960.000 -336,171
29,033

$ 8.613.nO -181,426
15.668

$ 7,346.770 -154,745
13,365

Annual PensIOn Cost

S 15,652,862 $ 8,447.472 $ 7,205,390

ConmhutlOn, Made

-13.0n 679

-I \.280,065

-1818.614

mCred'e (\)ecrea,e) In Net l'enslOn OblIgatIOn

S 2.554.183 $ -2.832.593 S 5.386.776

Net PenslOn OhligdtlOn Begmmng of Year

-13.638.335

-7.158,998

-6.479,317

!\ell'en'lOn ObhgatlOn l:.nd of Year $ -I \.08U.'4 $ -9 991.~91 $ -1.0;22 561

- 26-

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXrHBIT"D"

NOTE I0 RETIREMENT PLANS

EARLY RETIREMENT PENSION PLAN

Annual Pension Cost and Net Pension Obligation

FISCAL YEAR 2002

Total

MCG

Other ASSOCIated
Umts

Annual ReqUired ContnbutlOn Interest on Net PensIOn OblIgatton AdJu'tments on Annual ReqUired
Contnbullons

S 15,960,000
-666,326
-208,692

$ 8,613,230 -359,600
-118,240

$ 7,346,770 -306,726
-90.452

Annual PensIOn Cost

$ 15,084,982 $ 8,135,390 $ 6,949,592

ContnbutlOns Made

-15,850,380

-8,601,160

-7,249,220

Increase (Decrease) m Net Pension OblIgatton

S -765,398 $ -465,770 S -299,628

Net Pension OblIgatIon Begmnmg of \ ear

-11,084,152

-9,991,591

-1,092,561

Net PensIOn OblIgatIOn End of Ycar $ -U.1l42550 $ -10 45].161 S ~ 392.lll9

Adjustments on Annual Required Contributions: Lump Sum Payment Adjustments AUXIlIary ServICes Annual ContnbutlOn GCHC Annual ContnbutIon Dental FoundatIOn Annual ContnbutlOn HCCU Annual ContnbutlOn Charbonmer Annual ContnbutlOn AdmInIstratIve Fees on RetIrement Accounts

$ -II 1,017 -30,166 -25,108 -33,350 -51,563 42,512

Net AdJustInents on Annual ReqUired ContnbutlOns

$ -2Q8,692

Thc annual reqUIred c~:mtnbutIon for the current year was determIned as part of the December 18, 2000 actuarIal valuation USIng the UOlt Credit actuanal cost method The amortIzal1on penod IS 15 years utIlIZIng the Level Dollar, Closcd method The asset valuatIon method IS 5 year smoothed market value The actuarIal assumptIons Included (a) 75% ratc of return on Investment, (b) proJccted salary Increases of 1 12% (3% per year Increase, compounded annually), (c) cost of

- 27-

MEDIC AL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE I0 RETIREMENT PLANS

EARLY RETIREMENT PENSION PLAN

Annual Pension Cost and Net Pension Obligation living Increases of I 1/2% each January I and July I, (d) recogruze the liability ofan excess benefit plan to pay for benefits that excced the Federal maximums as stated In Sec 415(b) of the Internal Revenue Code

Three-Year Trend Information

FY 2000 Total

MCG

Other AsSOCiated
Umts

Annual PensIOn Cost (APC) Percentage of APC Contnbuted Net PensIOn OblIgatIon End of Year

S 4,136,820 42968%
$ -13,638,335

S 2,231,008 42088%
S -7,158,998

$ 1,905,812 43997%
$ -6,479,337

FY 2001 Total

MCG

Other A~'IDCtated
Umts

Annual PensIOn Cost (APC) Percentage of APC Contnbuted Net Pension ObligatIOn End of Year

$ 15,652,862 8368%
S -11,084,152

$ 8,447,472 13353%
S -9,991,591

S 7,205,390 2524%
$ -1,092,561

FY2002 Total

MCG

Other ASSOCiated
Umts

Annual PensIon Cost (APC) Percentage of APC Contnbuted Net PensIOn OblIgatIOn End of Year

S 15,084,982 10507%
S -11,849,550

$ 8,135,390 10573%
S -10,457,361

S 6,949,592 104 31%
$ -1,392,189

NOTE II RISK MANAGEMENT

Mcdlcal Collegc of Georgia IS a partlClpant In the Board of Regents of the University System of Georgta Health Benefits Plan, wluch IS a self-Insurance program of health and dental bcnefits for employccs and retIrees of thc Umverslty System of Georgia Medical College of Georgta and parltelpatmg employees and retIrees pay premIUms to the Health Benefits Plan for thiS health Insurance coverage The Health Benefits Plan IS Included In the finanCial statements ofthe Board of Regents of the UmversIty System of Georgia - AdmlmstratIve Central Office All umts of the Umverslty System of Georgta share the nsk of loss for claims of the Health Benefits Plan The Health Benefits Plan IS conSidered a self-sustaining nsk fund that prOVides health coverage for ItS

- 28-

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "0"

NOTE II RISK MANAGEMENT
members up 10 a maJ{)mum hfclime bencfit of$2,000,000 00 per person and dental coverage up to an annual maxImum of $1 ,000 00 per pcrson The Board of Regents has contracted WIth Blue Cross Bluc Shicld ofGcorgIa to process claIms In accordance with the Health Benefits Plan as estabhshed by thc Board of Rcgents
The Departmenl of AdmInIstrative ServIces (DOAS) has the responslblhty for thc State of GeorgIa of makIng and carryIng out decISIOns that WIll mmlmlze the adverse effects ofaccldcntallosses thaI Involve State govcrnment assets The State beheves It IS more economIcal to manage Its nsks Internally and set aSldc assets for claIm settlement AccordIngly, OOAS processes clalms for nsk of loss to whIch the State IS cxposed, IncludIng general habIllty, property and casualty, workcrs' compcnsatlOn, unemployment compensatIOn, and law enforcement officers' IndemnIficatIOn LImited amounts of commerCIal Insurance are purchased apphcable to property, employee and automobIle hablhty, fidelity and certaIn other nsks Medical College of Georgia, as an organIzational umt ofthe Board ofRcgcnts of the UmvcrsIty System ofGcorgla, IS part of the State of GcorgIa rcpomng entity, and as such, IS covered by the State of GeorgIa nsk management program admInIstered by DOAS PremIUms for the nsk management program are charged to the various state organIzatIOns by OOAS to proVIde clalms servlcmg and claims payment
A self-Insured program of professlOnaliIablhty for ItS employccs was cstabhshcd by the Board of Regents of the UnIvcrslty System of GeorgIa under powers authonzed by the OffiCIal Code of GeorgIa Annotated SectIOn 45-9-1 The program Insures the employees 10 the extent that thcy are not Immune from hablhty agaInst personal hablhly for damages anSIng out of the performancc of theIr dulies or In any way connected thereWIth The program IS admInIstered by OOAS as a SelfInsurance Fund
NOTE 12 CONTINGENCIES
Amounts received or receIvable from grantor agencIes are subJcct to audIt and adjustment by grantor agenclcs ThIS could result In refunds to the grantor agency for any expendlturcs whIch are dIsallowed under grant terms The amount ofexpendItures whIch may be dIsallowed by the grantor cannot bc determIned at thIS time although MedIcal College ofGeorgIa expects such amounts, Ifany, to bc Immatcrlal to ItS overall finanCIal posllion
LItIgation, claIms and assessments filed agaInst MedIcal College of GeorgIa (an organIzatIOnal umt ofthc Board of Regents of the UnIversIty Systcm ofGcorgla), If any, are generally conSidered to bc aclions agaInst the Stale of GeorgIa AccordIngly, SIgnIficant htlgalion, claIms and assessments pendmg agaInst thc State of Georgia are dlscloscd In the State of Georgia ComprehcrlSlve Annual FInancIal Report for the fiscal year ended June 30, 2002

- 29-

YfEDICAL COLLEGE OF GEORGIA :"OTES TO THE rINA~CIALSTATEr\'IENTS
J UNF 30, 2002

EXHIBIT "D"

NOTE 13 POST-EMPLOYME:-lT BENEFlTS OTHER THAN PENSION BE!\EFITS
Pursuant to the general power~ conferred by the Official Code of GeorgIa Annotated SeclIon 20-331, the Board ofRcgents of the University System of GeorgIa has establIshe~ group health and lIfe Insurance programs for regular employees of the University System of GeorgIa It IS the polIcy ofthe Board of Regents to perrmt employees ofthe UniversIty System of Georgia eligible forretlrement or that become permanently and totally dIsabled to eont1l1ue dS members of the group health and life Insurance programs Employee~ who arc clIglhle for retIrement or dlsahllIty under the CrIterIa establIshed hy the Teachers RetIrement Sy~tem of GeorgI a and who have at least ten years ofsernee WIth the UnIversity System of Georgia are elIgible for the~e post-employment health and lIfe In~uranee benefit~ OrganIzatIonal umts of the Board of Regents of the UnIversIty System of Gcorgla pay the employer portIOn for group Insurance for affected IndiViduals
As of June 30, 2002, there were 3,38 I employees who had retIred or were dIsabled that were receIVIng these post-employment health and lIfe Insurance benefits For the year ended June 30, 2002, Medical College ofGeorglU recognized as Incurred 55.630.162 84 ofexpcnses, whIch wa~ net of$2,022,391 55 of particIpant eontnbutIons

- 30 -

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 14 NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The College's operatmg expenses by funellonal classification are shown below

"tatement ofU~ttng Expenses - Natural ~ runctl(mal CI~lficatlons lor the I-Iscal "ear ...nded June 30, 2002

FynctlOnal ClaSSificatIon

'{iatyral C13$S1ficat1Qn

Instrucnoo

Re:.ean::h

Public Sm,ce

ALadt..mIL C;;urmort

~tudent
"enlct:j

InstlwtJOoal Suppon

'ialanes !"acuity - Staff
[mployel. Benefits Travel ~cholarshlps and
FellowshtpS Utilities Supplies and Other
ServiCes T>epreclatJon
Total Opernlmg Upc:rlSC'S

S 60,393,510 05 $ 9,664,65658 S 52,090.32869 S 6.407,151 97 $ 1,118,372 33 $ 10,754,372 90

16,964,44951

2.002,60141

9,795,75969

4 792,574 78

299,60824

9,645,746 77

542,780 79

522,699 98

226,096 78

63,08262

30,33690

223,866 28

518.996 67 I ,064.829 07

81,05934 36,41992

45,771 38 311,44518

25.2U124 1<8,43754

-7,51923 36,62533

293.55610 264,632 13

8,765,073 54

8,088.704 77

7,203,682 25

1,814,063 82

291,19779

3.941.14954

S 56 249,639.63 S 20..19.:6,14200 S 69671 081 27 $ !32WS::8n Sa ! 76M2! 36 5..25 If} 32W

NillUrnl ClasufiCjll!OD
SalanLs raculty Staff
Employee Benefits rravel Schobrshlps aoo
Fellowships Utilities \upphes and Other
>emeos J)epret.lauon
Toml Operating Expcn~

Plant OperationS and Mamtenance

'icholarshlps and Fellllwshms

tunet100DI ( Ia.c;aficatlon

Auxlhary m1LTIJIlSes

Patlenl Cpre

Unallocated DepreclallOn

lotal Operatmg EXlXIlse>

$ 3,560.88673 1,044.67472 7,22470

S 1,275.882 C>4 S 66,809,93643

602,82933 17,362,48813

10,43048

IX9,73184

$212,075,098 12 62,510,73258 1,816.250 37

12500 S 1,261.386 12 2,702,18291

75233 168,73933

347,17844

2,219,54595 5.090.48985

1,919,600 2J S 'l.2Y8~19

34' 82 S I 261 711 94

2168tJ1682 S 4.l2U5.Q.2J

73.181,65854
'a Sill890 29'

S II ,0;;60,590 42 S II 0;;60 5QM;!

107,374,093 12
II 560 0;;90 42
SiD2 ~800 61

- 31 -

SUPPLEMENTARY INFORMATION - 33 -

MEDICAL COLLEGE OF GEORGIA SCHEDULE OF REVENUES AND EXPENPITURES COMPARED TO
BUDGET - (NON-GAAP BASIS) RESIDENT INSTRUCTION
YEAR ENDED JUNE 30 2002

SCHEDULE "1"

REVENUES
State Appropnabons Other Revenues Retained

BUDGET

ACTUAL (1)

VARIANCE FAVORABLE (UNFAVORABLE)

$ 114,853,97600 $ 114,103,97600 $

295,757,954 00

276,594,727 60

-750,()()() 00 -19,163,22640

$ 410611,93000 $ 39069870360 $

EXPENDITURES
Personal ServiceS Education, General and Departmental ServiceS Sponsored Operabons
Operating Expenses Educabon, General and Departmental Services Sponsored Operabons
Cap,tal Outlay Speaal Funding Imbabve Student Educat,on Ennchment Program Research ConsortJum

$ 110,492,193 00 $ 107,29072041 $

177,125,70700

162,46780822

25,653,684 00 87,435,444 00
4,794,764 00 2,302754 00
358,97900 2,448,405 00

27,893,391 57 93,636,360 57
3,725,296 50 2,290,609 90
366 865 00 1,711,18810

3,201,472 59 14,657,898 78
-2,239,70757 -6,400,91657 1,069,46750
12,144 10 -2790600 737,21690

$ 410,611,93000 $ 399,602,26027 $ 11,009,66973

Excess of Revenues over EXpenditures

S -8,903,558 67 $_...;;-8.:.,903=:..:.,558=::.67;.

(1) Actual amounts were prepared on a prescnbed bas,s of accountHlg that demonstrates compliance WIth budgetary staMes and regUlations of the State of Georgia which IS a comprehensIVe baSIS of accounting other than generally accepted accounting pnncples

See notes to the financal statements

- 35-

------------- - ---

MEDICAL COLLEGE OF GEORGIA SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUDGET - (NON-GAAP BASIS) LOTIERY FOR EDUCATION YEAR ENDED JUNE 30. 2002

SCHEDULE "2"

REVENUES State Appropnal1ons

BUDGET

ACTUAL (1)

VARIANCEFAVORABLE (UNFAVORABLE)

$

870,37600 $

-=O-=OO:=_

EXPENDITURES
EqUipment, Technology and Construction Trust Fund
Special Funding 1",~al1ves

$ 736,82600 $ 703,22600 $

133,55000

133,34642

33,60000 20358

$ 870,37600 $

Excess of Revenues over Expenditures

$ 33,80358 $====33=,8;,;;0;;,3;;,58;;,

(1) Actual amounts were prepared on a prescnbed baSIS of accounting that demonstrates compliance WIth budgetary statutes and regulations of the State of Georgia, which IS a comprehenSive baSIS of accounting other than generally accepted accounting pnnClples

See notes to the financial statements

- 36-

MEDICAL COLLEGE OF GEORGIA SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUDGET (NON-GAAP BASIS) OTHER ORGANIZED ACTIVITIES
YEAR ENDED JUNE 30, 2002

SCHEDULE "3"

MEDICAL COLLEGE OF GEORGIA HOSPITAL AND CLINICS
REVENUES
Other Revenues Retained

BUDGET

ACTUAL (1)

VARIANCE FAVORABLE (UNFAVORABLE)

$ 193,500 00 $ 193,500 00 S

--=O..:oo:.=..

EXPENDITURES Operating Expenses
Education, General and Departmental Services
Excess of Revenues over Expendrtures

S 193,500 00 $ 193,500 00 $

--=.0..:;0.::..0

$

00 S_===~O.;;O,;.O

(1) Actual amounts were prepared on a prescnbed baSIS of accounbng that demonstrates compliance wrth budgetary statutes and regulations of the State of Georgia, which IS a comprehenSive baSIS of accounting other than generally accepted accounbng pnnClples

See notes to the finanCIal statements

- 37-

MEDICAL COLLEGE OF GEORGIA SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUDGET - (NON-GAAP BASIS) OTHER ORGANIZED ACTIVITIES
YEAR ENDER JUNE 30, 2002

SCHEDULE "3"

GEORGIA RADIATION THERAPY CENTER REVENUES
Other Revenues Retained

BUDGET

ACTUAl(1)

VARIANCEFAVORABLE (UNFAVORABLE)

$ 3,625,81000 $

000 $ _ _-3::..:,::..:62:..:5""8;,,,:1,;:.0,;:.00,,-

EXPENDITURES
Personal Services Education, General and Departmental SeNlces
Operanng Expenses Education, General and Departmental Services

$ 2,224,653 00 $ 1,401,15700

$ 3,625,81000 $

Excess of Revenues over Expenditures

$

000 $ 000

2,224,653 00 1,401,15700

00 $ _ _",3,,,,62,,,5,,,,8::..:1-,,0-,,00,,-

00 $ ~===.;;0.;;00;;;,

(1) The Georgia Radlabon Therapy Center was transferred to MCG Health, Incorporated as part of the establishment of the MCG dln,cal system

See notes to the finanCial statements

-38-

Totals per Amual Supplement
Compensated Absences June 30, 2002 June 30, 2001
Adjustments Ash, John M A1bntton, Thomas Andnsl, Larry L Baural, sangeeta Bergeron. Michael Berry, Tammy BIles Lantz Black, Ernest Bowman, Latanya Bradford Robert Branam, Heather S Bray, Carlos M BreaseUe, Wilbam
Breltmann Troy Alan Bndges, Frances C
Brown Eula S Bums Chnstopher Bynes, Tracy
Cartledge, Crystal A. Carvant-Tangel, Marti A
Ctuu Fungchow A Chong Raymond Chnstmas. Elizabeth Click Rebecca Coleman Demse Cooper, unda S Coule Ptulhp
Dancer. Jl1Tlmte 0
Dalllels, Suffeama DeVaughn, Linda Evans Beth T Finn, Danrel J Flynn PhyUlS H Fuchs Leslie C
Gaines. Bndgel
Gowan Jimmy l Haas Cheryl Haas, Richard E Hall lena Hallden, VICkIe L Hannah Lenora B Henson John S Holland Debbie F Howdoeshell, Laurhetla Howser Okal 0 Imig John D Jackson, Willynda Jester, DaVId M Johnson. Glenda l Johnson, Melissa Renee Jones, Denise K Jones, Me~nda B Kearney, ~enceC KerWIn, Rebecca L Kluger. MaUhew J Lee Tamers Liang, Yayun utile, Detra I
a Long, Crystal
McBnde, William

MEDICAL COLLEGE OF GEORGIA RECONCILIATION OF SALARIES AND mAVEL
YEAR ENDED JUNE 3Q 2QQ2

SCHEDULE "4"

- 39-

SALARIES

TRAVEL

$ 21Q 837,482 74 $ 1,692 337 74

15,Q82,51999 -13,878,99355

13Q 24
99261 3,34548
lQ24Q 1,429 87
39QQ5 17Q 72 1,Q36 54
7176 3,47606 1 50516
126 39
6180 89
67519 1,12541 1,QQ591
57143
31467 87676 12396
1,2478Q 334 63

-11 25 51384
5298
46685 5298
51Q 81 51Q 81 5298Q 68874
168 38
-306 00 7Q98
-1,35996 794 7Q 317 88
-1,220 4Q 40983
68550
lQ596
158 94 -868 80 -l,66Q 7Q 17694
-25778
45984 -4368
5298
26490 -649 Q5
-15528 -811 16 5298Q
-3175Q
-1829 QQ 5298
-155 Q7
600 81

Mcleod, Kyle
Mellick, larry
Miller, Mike MfShoe, Shelly
Mo Xlanmlng
MUSIC Penny A Newman. L 0 Newton Andrew Nussbaum Juhan J O'Conner Marsha OraClon, Amy R Owen. Mary Ann Owensby Knsty Parker, Maroe A Parks WlIrsha J Passmore Gregory Pearson, Thomas P Peavy Sherne N Peckham, Herbert Pelper, Stephen PeloqUin Cindy Perry. Stephanie Peler-Kala~n1c, Jasna Poduslo Shirley Poon AIysla Poorbaugh Susan Poteet, Mary Rachels, Teresa Rahn, Damel Roberts Mary V Rosenkoeuer. Marlen
Scar1ett,Beverty
Schrelhofer, Derek A Schwartz, Richart! SISCO, Jerry Smith lisa R Sneed Teresa F Slachura, Max E StacyI Phillip Steadman Clayton 0 Slurgln, Angela Tarver, Beverty Thompkuls, Lenora Thompson. KeVIn R Thompson, Mason P Thompson Penelope A Turner. David Vernon, Brenda L Walker, Michael WhIle RIChard White, Sheila Wiles, l-lenry Willcox Barbara
W~hams, G~bert
Wingard Chnstopher Woods, Vlf'Qlma
Unldenhfied Vanances

MEDICAL COLLEGE OF GEORGIA RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30 2002

SCHEDULE "4"

SALARIES

TRAVEL

$

794 70

1 334 70

21294

5298

$

2,95998

2,48582

14196

101722

-24850

18049

1,05860

15894

144 55

111 96

-72430

158 94

653 Q4

89230

40385

90850

5298

5298

31850

-168599

48123

37086

-$64 00

158 94

68750

1,55514

47700

40560

-1 897 B6

799 50

254 90

11540

122 40

-91 28

51081

-1,21090

48123

264 90

2,017 69

2,261 58

-1 07682

1 33505

158 94

2,94915

376966

74376

-62824

68125

264 90

14196

4B800

42232

14,78888

124,18983

$ 212,D75[09832 $ 1[816[250 37

see notes to the finanCIal statements

- 40-

MEDICAL COlLEGE OF GEORGIA RECONCILIATION OF PER RIEM AND FEES
YEAR ENDER JUNE 30 2002

SCHEDULE "5"

Totals per Annual Supplement
Adjustments BaITS, Joseph Bowman, Kimberly Boyd DaVIS, VIrginia Dixon, Clinton Gambrell, Robert C Gilleland Brad E Graham-Ga1"Cla Judy Gramling, Joshua A GUIon, Kent Jones, Theron Kaldas, Eman Kavll, Meena Lightsey, Anon L Linder, Charles W Lohse, Jennifer E McCord, Sheila MIddleton, Tamsis Mills, Thomas M Mozallan, Mahmood Penmston. TIm Poole, Charles R,ley Calhenne Rudow, Gabnel W Shull, Jess'ca G Strong, William B
Totals
Umdenbfied Vananee
Totals per Report

TYPE PAYMENT

FEE AMOUNT

EXPENSE AMOUNT

TOTAL

$ 13,658,890 94 $ 307,36919 $ 13,966,260 13

Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees Other Fees

27080 2744 5298
22792 2,19680
27080 2,039 B4
27080 12544 26400 54272 10000 1,87648 3,28762 1,00000 35490
4396 2,322 82 2,706 48
7330 20264 26490
8000 27080
17,806 87

27080 2744 5298
22792 2,196 80
27080 2,039 B4
27080 12544 26400 54272 10000 1,87648 3,28782 1,000 00 35490
4396 2,32282 2,70648
7330 20264 26490
6000 27080 17,806 87

$ 13,695,55125 $ 307,36919 $ 14002,92044 -43,629 38

$ 13,959,291 06

See notes to the finaneal statements

- 41 -

SECIION" AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUES nONED COSTS

MEDICAL COLLEGE OF GEORGIA AUDITEE'S RESPONSE
SUMMARY SCHEDULE or PRIOR YEAR FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002

PRIOR YEAR FINANCIAL STATEMEI\T FINDI\lGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER A;\/D STATUS

FS-512-01-01

Partially Resolvcd - Scc Corrcctlve ActIOn/Responses

CORRECTIVE ACTION/RESPONSES

REVENUESIRECEIVABLES/RECEIPTS Inadcquate DocumentatIOn Fmdmg Control Number FS-512-lll-01

As noted, thc findmg has been partIally resolved The weakness that stili nceds additional efforts Involves thc InstItutIOn ha\ Ing adcquatc documentatIOn that supports defiCIt balances In restncted accounts To assIst In correcttng thiS ISSUC, the InstItution Will begm on February 3,2003, USIng the control feature ofthe PcopleSoft financIal reportIng system that Will not allow expendItures to he processed wIthout sufficient fundmg and/or project end date By June 30, 2003, the Institution Will review all restncted accounts to ensure that any defiCit balance IS supportcd with adequate documentatton of fundIng avaIlabIlity

S!:'CTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS

MEDICAL COLLEGE OF GEORGIA SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 2002
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Fmdmg Control Number FS-5 I2-02-0 I
Dunng fiscal year 2002, the Board ofRegents ofthe UnIversIty System ofGcorgla converted uruts of the UnIversity System from the cXlstmg computer systems to the new PcopleSoft System In January of 2002, Medical College of Georgia placed thIS accountmg system mto productIOn
The managemcnt of Medical Collegc of GeorgIa IS responsIble for Implementmg procedures to establish and mamtam adequate control over the operatIOn, uulizatlOn and mtegnty of their data processed With the PeopleSoft System We encountered problems WIth the financial data presented by the Collcgc The College's failure to establish and adhcre to a final closmg for the year ended June 30, 2002. created a sItuatIOn where data presented for audit was not complete. ExtenSive audit procedures were necessary to detenmne the validIty of the mformatlOn proVIded
To reduce the nsk ofrcportmg mcomplete mformauon, the College should work WIth the Board of Regcnts Central Officc to develop proccdures that Will result ill complcte reportmg of all financial data m a more efficlcnt and umely manner
REVE~1JES/RECEIVABLESIRECEIPTS Restncted Funds DefiCIt Balances Fmdmg Control Number FS-5l2-02-02
Our exammatlOn mcluded a revIew of source documentahon supportmg Revenues!Recelvables! ReceIpts for Rcstncted Funds Our review of twenty-one Restncted Funds WIth defiCit balances revealed that fundmg was not available for ten proJccts WIth dcfiCIt balances totaling $53,851 70 Restncted funds should not be expended m proJccts that do not have funds aVaIlable
The defiCit balances are a result ofmanagement's failure to establish controls to ensure that grants are available and that relmbursemcnt requests are made m a tImely manner The College should Implement procedures to ensurc that all grants are current, that funds arc aVailable to cover cxpendltures and that relmburscment requests are made m a hmely maJJner The College should revlcw mdlvldual Restncted Funds to determme Ifall aVailable fundmg was requested, Ifthe receIpts were correctly posted to the funds, and Ifany other sourcc offundmg can be used to fund the defiCits
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MEDICAL COLLEGE OF GEORGIA SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR EI\1J)ED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
REVENUESiRECEIV ABLESiRECEfPTS EXPENDITURESiLLt\BILITIESiDISBlJRSEMENTS GEI\ERAL LEDGER Agency Funds - DefiCienCies m Accountmg Procedures Fmdmg Control Number rS-5l2-02-03
A review of accounting procedures utl1lLed by the College m mamtammg their Agency Funds dlscloscd the followmg dcficlencles
At June 30, 2002, the College's SUbSidiary rccords rcflected twenty-eight Agency Funds with defiCit balances The College was unable to provide documentatIOn of funds aVailable to cover the defiCits Agency Funds should not be disbursed from proJccts that do not have funds aVailable
2 Rcccipts and disbursements for Agency Funds were not supported by adequate documentatIOn and were posted to mcorrect accounts All receipts and disbursements should be supported by adequate documentatIon to demonstrate proper receipt, disbursement and accountmg of funds The College should ensurc that receipts and disbursements are posted to the proper Agency Fund accounts
3 The College's subSidiary records for Agency Funds did not agree With the general ledger SubSidiary records should be supported by the General Ledger
These defiCiencies are the result of management's fUilure to establIsh controls to momtor all Agency Funds actiVity, to ensurc that funds are available for disbursement and to ensure that correct acwunt codes are used by accountmg personnel The College should Implement proccdures to ensure that funds are available to cover disbursements and that the correct account codes are used when disbursements are made The College should review indiVidual agency funds to deterrmne Ifrccelpts and disbursements werc po;ted correctly to the funds SUbSidiary records should be revIewed to ensure that amounts agree With the general ledger
EXPENDITURESiLiABILlTlESiDlSBURSEMENTS EMPLOYEE COMPENSATION Inadequate Aeeountmg Procedures Fmdmg Control 1\ umber FS-5l2-02-04
Thc aceountmg procedures of the College were msufficlent to provide adequate control over the Expendltureo;iLlabllItlesiDlsbursements and Employee CompensatIOn control catcgoTles as noted below
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MEDICAL COLLEGE OF GEORGIA SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURESfLIABILlTIESfDISBURSEMENTS EMPLOYEE COMPENSATION Inadequatc Accountmg Procedures Finding Control Number FS-512-02-04
Salary, travel and per diem and fees listmgs as submitted by the Medical College ofGeorgJa to the Georgia Department of Audits did not reconcile to the Collegc's general ledger Umdentlfied vanances of$14,788 88 for salanes, $124,189 93 for travel and $43,629 38 for pcr diem and fecs eXisted at June 30, 2002
2 The travcl listmg as submitted by the Medical College of Georgia mcluded thud party payments m the amount of$138,489 90, and payments to non-employees m the amount of $29,271 08 Extensive audn procedures were necessary to IdentIfy third party payments by cmployee and to reclasSIfy payments for non-employces
Thesc deficlenclcs occurred as a result of management's faIlure to reconcile salary, travel and per dlcm and fees SUbSidIary reports on a quarterly basiS and the faIlure to establish procedures to ensure that travel paymcnts are properly reportcd by employec
The College should establish controls to ensure that the salary, travcl and per diem and fees listmgs submlttcd to the Georgia Department of Audits arc properly clasSified and reconciled With thc general ledger
GENERAL LEDGER Inadcquacles In Control Over SUbSidiary Ledgers Finding Control Number FS-512-02-05
Our exammatlOn mcluded a revIew of the procedures utIlized by Medical College of Georgia m recording transactIOns to the variOus modules compnsmg the PcopleSoft accountmg software. Our testing rcvealed that, at June 30, 2002, the College's general ledger module did not balancc wllh the SUbSIdiary modules ThIs condItIOn was pnmanly due to errors In postmg subSIdiary records dunng the conversIOn from thc old accountmg system to the new PeopleSoft accountmg system and due to transactions bemg posted to the general ledger module rather than the appropnate SUbSidiary modulcs The College dId not proVide a reconciliation of the general ledger balances to the subSidiary rccords which resulted In extenslvc work by the auditors to IdentIfy reconCIlIng Items at June 30, 2002
Management's failure to ensure that subSidIary records are reconcIled With the gcneralledger causes Intcrnal reports to management, generated from the SUbSidiary modules, to be Inaccurate and mlslcadmg This conditIOn can lead to erroneous deciSIOns by thc College's managcment and result In Inaccuratc reportmg of finanCial mformatlon
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MEDICAL COLLEGE OF GEORGIA SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 2002
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS GENERAL LEDGER InadequacIes In Control Over SubsIdIary Ledgers FIndmg Control Number FS-512-02-05 To ensure accurate and tImely reportIng offinancIaI mformatlOn from subsIdIary records, the College should post transactIOns corrcctly to the subsidiary ledgers rather than as Journal entnes In the general Icdger The Collegc should develop Internal accountIng controls and procedures to ensure that reconCIlIatIons of subSidiary lcdgcrs and the general ledger are performcd on a regular basIS CAPITAL ASSETS Inadequate CapItal Asset Records FIndIng Control Number FS-512-02-06 Our reVIeW of MedIcal College of Georgia's accountIng procedures for the CapItal Asset Management System determIned that procedures In place were Insufficlcnt to proVIde adequate control ovcr thc Collegc's capital assets Thc followmg dcficlencles were noted
I EffectIVe July I, 2001, the capitalIzatIOn threshold for eqUipment was Increased from $1,000 00 to $5,000 00. The College failed to reconCile the equlpmcnt component of thc Asset Managcment module as of July 1,2001, With the equIpment mventorybalance as of June 30, 2001
2 Thc Collcge's Asset Managemcnt module dId not reconCIle to the CapItal Ledger 3 Thc Collegc failed to record penodlcals purchased for the Library on the CapItal Ledger These defiCienCies are a result of management's faIlure to Implement adequate polICies and procedures to ensure that thc College's capital assets are properly maIntaIned The College should establIsh appropnate proccdures to strengthen controls and ensure that asscts arc properly accounted for and safeguarded
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