STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS I MEDICAL COLLEGE OF GEORGIA AUGUSTA, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2005 Russell W. Hinton State Auditor 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 BASIC FINANCIAL STATEMENTS EXHIBITS A STATEMENT OF NET ASSETS 3 B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS 5 C STATEMENT OF CASH FLOWS 6 D NOTES TO THE FINANCIAL STATEMENTS 9 SUPPLEMENTARY INFORMATION SCHEDULES SCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO BUDGET - (NON-GAAP BASIS) 1 RESIDENT INSTRUCTION 35 2 OTHER ORGANIZED ACTIVITIES 36 3 RECONCILIATION OF SALARIES AND TRAVEL 39 SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL Russell W. Hinton STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 September 23, 2005 Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia and Honorable Daniel W. Rahn, President Medical College of Georgia 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 Medical College of Georgia, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2005. These financial statements are the responsibility ofthe College's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As discussed in Note 1, the financial statements of Medical College of Georgia are intended to present the financial position and changes in financial position and cash flows ofonly that portion of the business-type activities ofthe State ofGeorgia that is attributable to the transactions ofMedical College of Georgia. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State of Georgia, in conformity with accounting principles generally accepted in the United States of America. 05ARL-62 In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Medical College of Georgia as ofJune 30, 2005, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Management's Discussion and Analysis is not a required part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally of inquiries ofmanagement regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it. Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Medical College of Georgia taken as a whole. The accompanying supplementary information (Schedules 1 through 3) 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, r~u.Qi. w.~ Russell W. Hinton State Auditor RWH:as 05ARL-62 REQUIRED SUPPLEMENTARY INFORMATION MEDICAL COLLEGE OF GEORGIA Management's Discussion and Analysis Introduction Medical College of Georgia (MCG), the oldest school of medicine in Georgia, was incorporated in 1828 as the Medical Academy of Georgia and is one of the 34 institutions of the University System of Georgia. The College, located in Augusta, Georgia, has become known for its worldclass instructional, clinical, and research programs. The College offers more than 40 academic programs in allied health sciences, dentistry, graduate studies, medicine, and nursing at the baccalaureate, masters, doctoral and professional levels. Additionally, MCG offers residency training in medical and dental specialty areas. This wide range of educational opportunities attracts a highly qualified faculty and student body. A brief historical comparison of full time faculty and student levels is shown by the comparison numbers that follow. Faculty Students FY2005 FY2004 FY2003 667 2,759 646 2,526 625 2,453 Overview ofthe Financial Statements and Financial Analysis Medical College of Georgia is proud to present its financial statements for fiscal year 2005. 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 2004 and fiscal year 2005. Statement ofNet Assets The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Medical College of Georgia. 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. - 1- 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, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. 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 June 30, 2005 June 30. 2004 Assets Current Assets Capital Assets, Net Other Assets $ 96,966,290.04 222,875,170.17 43,855,716.79 $115,089,432.01 170,755,830.81 22,517,571.44 Total Assets $363,697.177.00 $308,362,834.26 Liabilities Current Liabilities Noncurrent Liabilities $ 79,863,004.95 13,392,551.92 $ 65,742,978.97 14,086,444.49 Total Liabilities $ 93,255,556.87 $ 79,829,423.46 Net Assets Invested in Capital Assets, Net of Debt Restricted - Nonexpendable Restricted - Expendable Restricted - Capital Projects Unrestricted $220,119,373.41 1,649,294.54 61,094,628.38 472,712.23 -12,894,388.43 $166,746,503.57 1,669,065.78 48,261,364.73 22,352,303.00 -10,495,826.28 Total Net Assets $270A41 1620.13 $2281533A1o.80 The total assets of the institution increased by $55,334,342.74. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $52,119,339.36 of investment in plant, net of accumulated depreciation. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution. The total liabilities for the year increased by $13,426,133.41. The primary cause for the increase was in current liabilities, primarily $6,944,386.76 in accounts payable. The combination of the increase in total assets of $55,334,342.74 and the increase in total liabilities of $13,426,133.41 yields an increase in total net assets of $41,908,209.33. The increase in total net assets is primarily in the category of invested in capital assets, net of debt in the amount of $53,372,869.84. -11- Statement ofRevenues, Expenses and Changes in Net Assets Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and 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, 2005 June 30, 2004 Operating Revenues Operating Expenses $357,896,536.50 479,685,135.03 $ 336,094,965.08 446,360,364.79 Operating Loss $-121,788,598.53 $-110,265,399.71 Nonoperating Revenues and Expenses 121,063,617.25 117,966,094.71 Income (Loss) Before Other Revenues, Expenses, Gains or Losses $ -724,981.28 $ 7,700,695.00 Other Revenues, Expenses, Gains or Losses 31,581,522.69 1,490,820.25 Increase (Decrease) in Net Assets $ 30,856,541.41 $ 9,191,515.25 Net Assets at Beginning of Year, as Originally Reported $228,533,410.80 $219,341,895.55 Prior Period Adjustment 11,051,667.92 Net Assets at Beginning of Year Restated $239,585,078.72 $219,341,895.55 Net Assets at End of Year $ 270.441,620.13 $ 228,533.410.80 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: -111- Revenue By Source For The Years Ended June 30, 2005 and June 30, 2004 Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other Total Operating Revenue Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other Total Nonoperating Revenue Capital Grants and Gifts State Other Total Capital Grants and Gifts Total Revenues June 30, 2005 June 30, 2004 $ 15,931,248.71 327,413,037.45 6,791,023.26 6,560,098.33 1,201,128.75 $357,896,536.50 $ 15,950,698.23 304,750,650.48 6,653,351.45 6,674,361.66 2,065,903.26 $ 336,094,965.08 $ 111,638,934.99 7,498,680.12 802,897.24 996,952.57 239,763.29 $ 121,177,228.21 $ 106,404,347.20 11,174,456.00 888,589.28 -415,767.40 $ 118,051,625.08 $ 31,486,789.84 94,732.85 $ 31,581,522.69 $ 510,655)87.40 $ 1,480,700.52 10119.73 $ 1,490,820.25 $455,637,410.41 - IV - Expenses (By Functional Classification) For The Years Ended June 30, 2005 and June 30, 2004 June 30, 2005 June 30, 2004 Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Patient Care $ 95,443,809.09 41,627,643.06 91,628,634.04 17,553,861.35 2,078,718.09 39,813,437.94 13,507,875.82 -213,695.56 6,056,769.87 172,188,081.33 $ 97,805,943.55 33,792,915.91 86,721,673.74 20,720,728.55 2,550,399.68 27,013,837.18 9,893,712.75 1,574,924.58 7,619,266.93 158,666,961.92 Total Operating Expenses $479,685,135.03 $446,360,364.79 Nonoperating Expenses Interest Expense (Capital Assets) 113,610.96 85,530.37 Total Expenses $479,798,745.99 $446,445,895.16 State and other grants and contracts increased in the amount of $11,513,734.59. This is primarily a result of the increase in grant awards in the previous year and a sustained level of funding in fiscal year 2005. The compensation and employee benefits category increased by $16,275,391.90. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by $1,266,979.54 during the past year. The increase was primarily associated with the increased costs of electrical power and natural gas experienced in fiscal year 2005. Under nonoperating revenues (expenses) state appropriations increased by $5,234,587.79. It appears that the economy is now on an upward trend and there were no budget cuts in fiscal year 2005. Statement ofCash Flows The final statement presented by the Medical College of Georgia 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. - V- The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets. Cash Flows for the Years Ended June 30, 2005 and June 30, 2004, Condensed June 30, 2005 June 30, 2004 Cash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities $ -87,493,374.50 114,129,304.30 -12,940,970.73 -20,590,355.33 $ -89,284,239.76 116,678,985.47 -8,872,907 .16 -9,551, 744.58 Net Change in Cash Cash, Beginning of Year $ -6,895,396.26 55,353,345.05 $ 8,970,093.97 46,383,251.08 Cash, End of Year $ 48,457,948.79 $ 55.353.345.05 Capital Assets The College had capital asset additions for buildings and building improvements in fiscal year 2005. Numerous projects were completed during the fiscal year totaling $2,509,529.20. Medical College of Georgia also completed major renovations to the Interdisciplinary Research Center in fiscal year 2005. A total of $7,957,351.59 for this project was funded by the Georgia State Financing and Investment Commission (GSFIC). Other on-going projects funded by the GSFIC included $23,448,672.45. Projected funding by GSFIC for fiscal year 2006 will be approximately the same. For additional information concerning Capital Assets, see Notes 1, 6, 8 and 10 in the Notes to the Financial Statements. Long-Term Debt Medical College of Georgia had a Long-Term Debt of $29,267,524.98 of which $15,874,973.06 was reflected as current liability at June 30, 2005. For additional information concerning Long-Term Debt, see Notes 1 and 8 in the Notes to the Financial Statements. - VI - 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. Daniel W. Rahn, M.D., President Medical College of Georgia -vn - BASIC FINANCIAL STATEMENTS - 1- MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS JUNE 30, 2005 ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable (See Note 3) Federal Financial Assistance Margin Allocation Funds Other Inventories (See Note 4) Prepaid Items Total Current Assets Noncurrent Assets Investments Notes Receivable Capital Assets, Net (See Note 6) Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deferred Revenue (See Note 7) Other Liabilities Deposits Held for Others Current Portion of Long-Term Debt Compensated Absences Total Current Liabilities Noncurrent Liabilities (See Note 8) Lease Purchase Obligations Compensated Absences Total Noncurrent Liabilities Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Restricted for: Nonexpendable Expendable Capital Projects Unrestricted Total Net Assets EXHIBIT A11 11 $ 48,457,948.79 3,751,837.29 7,458,093.00 28,206,920.86 426,774.53 8,664,715.57 $ 96,966,290.04 $ 39,209,576.99 4,646,139.80 222,875,170.17 $ 266,730,886.96 $ 363,697,177.00 $ 36,707,708.38 1,167,525.15 876,227.86 20,244,277.25 2,785,167.29 2,207,125.96 879,485.12 14,995,487.94 $ 79,863,004.95 $ 1,876,311.64 11,516,240.28 $ 13,392,551.92 $ 93,255,556.87 $ 220,119,373.41 1,649,294.54 61,094,628.38 472,712.23 -12,894,388.43 $ 270,441,620.13 The notes to the financial statements are an integral part of this statement. -3- MEDICAL COLLEGE OF GEORGIA STATEMENT OF REVENUES EXPENSES AND CHANGES IN NET ASSETS YEAR ENDED JUNE 30. 2005 OPERATING REVENUES Student Tuition and Fees Less: Scholarship Allowances Grants and Contracts Federal State Other Rents and Royalties Sales and Services of Educational Departments Auxiliary Enterprises Residence Halls Bookstore Parking/Transportation Health Services Other Organizations Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Salaries Faculty Staff Employee Benefits 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 Other Gifts Interest Income Interest Expense Other Nonoperating Revenues Net Nonoperating Revenues Income (Loss) Before Other Revenues, Expenses, Gains, or Losses Capital Grants and Gifts Federal State Other Total Other Revenues, Expenses, Gains, or Losses Increase (Decrease) in Net Assets Net Assets Net Assets - Beginning of Year, as Originally Reported Prior Period Adjustment to Correct Margin Allocation Funds (See Note 1) Net Assets- Beginning of Year, Restated Net Assets - End of Year The notes to the financial statements are an integral part of this statement. -5- EXHIBIT"B" $ 17,285,413.27 -1,354, 164.56 46,016,380.81 147,491,670.11 133,904,986.53 347,716.85 6,791,023.26 798,571.33 1,451,951.77 912,447.18 831,514.05 2,565,614.00 853 411.90 $ 357,896,536.50 $ 94,292, 144.44 161,049,670.44 66,883,403.88 2,228,938.32 533,456.16 6,663,321.06 134,608,060.45 13,426,140.28 $ 479,685,135.03 $ -121,788,598.53 $ 111,638,934.99 64,363.00 7,434,317.12 802,897.24 996,952.57 -113,610.96 239,763.29 $ 121,063,617.25 $ -724,981.28 $ 29,631.40 31,486,789.84 65101.45 $ 31,581,522.69 $ 30 856 541.41 $ 228,533,410.80 11,051,667.92 $ 239,585,078.72 $ 270,441,620.13 MEDICAL COLLEGE OF GEORGIA STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2005 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Parking/Transportation Health Services Other Organizations Other Receipts (Payments) Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts Net Cash Flows Provided (Used) by Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from Sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Lease Interest Paid on Capital Debt and Lease Net Cash Provided (Used) by Capital and Related Financing Activities CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Purchase of Investments Net Cash Provided (Used) by Investing Activities Net Increase (Decrease) in Cash Cash and Cash Equivalents - Beginning of Year Cash and Cash Equivalents - End of Year EXHIBIT "C" $ 16,435,460.71 335,331,195.99 6,942,703.99 -201,702,953.86 -251,569,786.44 -533,456.16 -1, 178,801.75 1,427,964.30 765,533.84 1,451,255.77 912,447.18 779,783.01 2,595,057.80 850,221.12 $ -87,493,374.50 $ 111,638,934.99 1,146,884.95 843,484.36 500,000.00 $ 114,129,304.30 $ 398,928.69 -11,868,407.41 -1,357,881.05 -113,610.96 $ -12,940,970.73 $ 1,176,820.80 -21,767, 176.13 $ -20,590,355.33 $ -6,895,396.26 55,353,345.05 $ 48,457,948.79 -6- MEDICAL COLLEGE OF GEORGIA STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30. 2005 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (Loss) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Other Assets Accounts Payable Deferred Revenue Other Liabilities Compensated Absences Net Cash Provided (Used) by Operating Activities NONCASH ACTIVITY NONCAPITAL FINANCING, CAPITAL AND RELATED FINANCING TRANSACTIONS AND INVESTING ACTIVITIES Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts EXHIBIT"C" $ -121,788,598.53 13,426,140.28 7,573,005.41 22,065.24 70,027.04 7,232,568.07 843,280.05 1,644,290.81 3,483,847.13 $ -87,493,374.50 $ 104,350.57 $ -179,868.23 $ -31,581,522.69 The notes to the financial statements are an integral part of this statement. -7- MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS Medical College of Georgia serves the local, State, and national communities by providing educational programs for health professionals, biomedical scientists, and educators at the undergraduate, graduate, and postgraduate levels and for lifelong learning through excellence in teaching and the total development of students in response to the health needs of the State of Georgia. The College strives to be a leading center of excellence in research through the generation and application of biomedical knowledge and technology to human health and disease, and to play an expanding role in the transfer of technology to the health care delivery system. REPORTING ENTITY Medical College of Georgia is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Medical College of Georgia 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. Medical College of Georgia does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Medical 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 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 In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the College was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared -9 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FINANCIAL STATEMENT PRESENTATION in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required. Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place. 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 obli"gation 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. RESTATEMENT OF PRIOR YEAR NET ASSETS - BEGINNING OF YEAR Margin allocation funds earned in fiscal year 2004 were originally reported as revenue by the College in the current fiscal period. A prior period adjustment in the amount of $11,051,667.92 was made to adjust revenues and increase net assets on July 1, 2004, for margin allocation funds earned in the prior fiscal year. 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 State Investment Pool. MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVESTMENTS The College accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. 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 Total Return Fund is included under Investments. ACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of 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 grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts. No provision has been made for uncollectible accounts. INVENTORIES Consumable supplies are recorded on the consumption method and are valued at cost using the first-in, first-out ("FIFO") basis. Resale Inventories are valued at cost using the first-in, first-out method. NONCURRENT CASH AND INVESTMENTS Cash and 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 $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements. To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act - 11 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CAPITAL ASSETS creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Medical College of Georgia when complete. For the year ended June 30, 2005, GSFIC transferred capital additions valued at $31,486,789.84 to Medical College of Georgia. 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 to 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 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 liability for compensated absences in the amount of $23,027,881.09 as of July 1, 2004. For fiscal year 2005, $18,357,293.84 was earned in compensated absences and employees were paid $14,873,446.71, for a net increase of $3,483,847.13. The ending balance as of June 30, 2005 in accrued liability for compensated absences was $26,511,728.22. 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 capital assets, net of related debt: This represents the College's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section. - 12 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NET ASSETS Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The College may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 44-15-7 of Annotated Code of Georgia. Restricted 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 Federal Loans Institutional Loans Quasi- Endowments Total Restricted Expendable June 30, 2005 $48,123,744.60 6,010,244.39 1,588,509.80 5,372,129.59 $61,094,628.38 Restricted net assets - 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. The Medical College of Georgia has $472,712.23 in Restricted Net Assets - Capital Projects. These funds are on deposit with GSFIC and will be used for the construction of the Health Sciences Building and the Cancer Research Center, which will be capitalized when completed. Expected date of completion is 2006. 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 $226,017.59. Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. Unrestricted Net Assets includes the following items which are quasi-restricted by management. - 13 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NET ASSETS June 30, 2005 R&RReserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted $ 2,832,480.33 9,227,051.22 56,223.44 -25,010,143.42 Total Unrestricted Net Assets $-12,894.388.43 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 Medical College of Georgia, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. CLASSIFICATION OF REVENUES The College has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria: Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises, net of scholarship allowances, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans. Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income. SCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell - 14 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES SCHOLARSHIP ALLOWANCES 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. NOTE 2: DEPOSITS AND INVESTMENTS DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia. 2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia. 3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose. 4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. 5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. - 15 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 2: DEPOSITS AND INVESTMENTS DEPOSITS At June 30, 2005, $47,257,079.44 of the College's deposits were uninsured and collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name. INVESTMENTS Medical College of Georgia maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms with Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable federal and state laws. The College's investments as June 30, 2005 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment Type Fair Value Investment Maturity Less Than 1 Year 1 - 5 Years Debt Securities U. S. Treasuries U. S. Agencies Bond Mutual Fund Repurchase Agreements $ 785,248.00 9,103,687.11 12,005,557.21 278,000.00 $ 5,405,400.12 278,000.00 $ 785,248.00 3,698,286.99 12,005,557.21 $22,172,492.32 $ 5,683,400.12 $16,489,092.20 Other Investments Real Estate Fund Equity Mutual Funds 1,734,129.25 8,158,249.45 Investment Pools Board of Regents Total Return Fund Office of Treasury and Fiscal Services Georgia Fund I 7,022,571.25 1,307,461.07 Total Investments $40,394,903.34 The College does not have a formal policy addressing variable-rate securities. The College relies upon the judgment of its Investment Managers and the policies of the investment vehicles related to Medical College of Georgia's investment assets. The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at - 16 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 2: DEPOSITS AND INVESTMENTS INVESTMENTS fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits - Education Audit division or on their web site at http://www.audits.state.ga.us/internet/ead/colltech.html. The Weighted Average Maturity of the Total Return Fund is 4.4 years. Of the College's total investment of $7,022,571.25 in the Total Return Fund, $1,955,756.16 is invested in debt securities. The Georgia Fund 1 Investment Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company, but does operate in a manner consistent with the SEC's Rule 2a7 of the Investment Company Act of 1940. This investment is valued at the pool's share price, $1.00 per share. The Georgia Fund 1 Investment Pool is an AAA rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 24 days. The State Depository Board, which has oversight over the Office of Treasury and Fiscal Services, may permit any department, board, bureau or other agency to invest funds collected directly by such organization in short term time deposit agreements, provided that the interest income of those funds is remitted to the Director of the Office of Treasury and Fiscal Services as revenues of the State of Georgia. As a matter of general practice, however, demand funds of any department, board, bureau or other agency in excess of current operating expenses, are required to be deposited with the Director of the Office of Treasury and Fiscal Services for the purpose of pooled investment (OCGA 50-17-63). Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The College's Investment Policy and Guidelines manages interest rate risk by recognizing that short-term loss of principal may be necessary in order to achieve long-term safety and growth of principal; and that in order to maximize income from debt instruments with maturities longer than sixty days, market values may be exposed to shortterm price volatility. Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the College will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The College does not have a formal policy for managing custodial credit risk for investments. Investment Managers are held accountable for custodial safety. The College's Investment Policy and Guidelines require that - 17 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 2: DEPOSITS AND INVESTMENTS INVESTMENTS Custodial Credit Risk Managers be registered in good standing as investment advisors; and will be experienced with proven track records. At June 30, 2005, $22,172,492.32 of the College's applicable investments were uninsured and held by the investment's counterparty's trust department or agent, but not in the College's name. Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The College's Investment Policy and Guidelines for managing credit quality risk require that the fixed income (bond portion) of debt instruments have quality ratings no lower than BAA. Rated Debt Investments U.S. Agencies Bond Mutual Fund U.S. Agency Securities - Repurchase Agreements Totals by Ratings Fair Value AAA Qualiu: Ratings Al Unrated $ 9,103,687.11 $ 1,359,128.60 $ 2,310,443.50 $ 5,434,115.01 12,005,557.21 12,005,557.21 278,000.00 278,000.00 $ 21 387244 32 $ I 637 128 6Q $ 2 31Q 443 5Q $ 11 432 672 22 Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The College's Investment Policy and Guidelines for managing concentration of credit risk requires that stocks and debt issues be diversified. The College also relies upon the concentration of credit risk policy of the individual investment vehicles related to Medical College of Georgia's investment assets. Foreign Currency Risk Foreign currency risk is the risk that changes in exchange rates will adversely affect the fair value of an investment or a deposit. The College does not have a formal policy for managing exposure to foreign currency risk. NOTE 3: ACCOUNTS RECENABLE Accounts receivable consisted of the following at June 30, 2005. Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Margin Allocation Funds Other $ 32,876.79 69,675.40 3,751,837.29 7,458,093.00 28,104,368.67 Total Accounts Receivable $39,416,851.15 - 18 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 4: INVENTORIES Inventories consisted of the following at June 30, 2005. Bookstore Other $ 350,539.08 76,235.45 Total $ 426,774.53 NOTE 5: NOTES/LOANS RECEIVABLE The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2005. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the College for amounts cancelled under these provisions. As the College determines that loans are uncollectible and not eligible for reimbursement by the federal government, the loans are written off and assigned to the U.S. Department of Education. At June 30, 2005, no provision had been made for uncollectible loans. NOTE 6: CAPITAL ASSETS Following are the changes in capital assets for the year ended June 30, 2005: Beginning Balance July 1, 2004 Additions Reductions Ending Balance June 30, 2005 Capital Assets, Not Being Depreciated: Land $ 8,998,281.93 $ 8,998,281.93 Construction Work-In-Progress 2,262,912.42 $ 28,983,435.66 $ 2,509,529.20 28,736,818.88 Total Capital Assets Not Being Depreciated $ 11,261,194.35 $ 28,983,435.66 $ 2,509,529.20 $ 37,735,100.81 Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections $221,755,661.34 $ 32,046,692.20 2,339,679.00 53,139,283.04 6,384,241.81 $ 4,783,845.50 104,350.57 14,088,617.10 1,195,454.00 $253,802,353.54 2,339,679.00 2,658,586.89 56,864,937.96 543,060.27 4,345,135.80 226,530.72 15,057,540.38 Total Assets Being Depreciated $296,107,085.98 $ 39,730,738.58 $ 3,428,177.88 $332,409,646.68 Less: Accumulated Depreciation: Buildings and Building Improvements $ 91,585,281.48 $ Facilities and Other Improvements 1,339,511.39 Equipment 33,363,129.05 Capital Leases 906,840.53 Library Collections 9,417,687.07 6,284,505.03 88,748.22 5,381,097.33 $ 875,122.70 796,667.00 $ 97,869,786.51 1,428,259.61 2,317,175.90 36,427,050.48 225,305.86 1,556,657.37 226,530.72 9,987,823.35 Total Accumulated Depreciation $136,612,449.52 $ 13,426,140.28 $ 2,769,012.48 $147,269,577.32 Total Capital Assets, Being Depreciated, Net $159,494,636.46 $ 26,304,598.30 $ 659,165.40 $185,140,069.36 Capital Assets, Net $170.755.830.81 $ 55.288 033 96 $ 3,168.694 60 $222,875 170 17 - 19 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 7: DEFERRED REVENUE Deferred revenue consisted ofthe following at June 30, 2005. Prepaid Tuition and Fees Research Other Deferred Revenue $ 3,993,443.21 10,514,688.81 5,736,145.23 Totals $ 20,244,277.25 NOTE 8: LONG-TERM LIABILITIES Long-Term liability activity for the year ended June 30, 2005 was as follows: Beginning Balance July I, 2004 Additions Reductions Ending Balance June 30. 2005 Current Portion Leases Lease Obligations $ 4,009,327.24 $ 104,350.57 $ 1,357,881.05 $ 2,755,796.76 $ 879,485.12 Other Liabilities Compensated Absences 23,027,881.09 18,357,293.84 14,873,446.71 26,511,728.22 14,995.487.94 Total Long-Term Obligations $ 21 Q31 2Q8.33 $ 18 461,644 41 $ 16 231 32116 $29,261,524.28 $ 15,814 213 Q6 NOTE 9: SIGNIFICANT COMMITMENTS The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $3,655,351.35 as of June 30, 2005. This amount is not reflected in the accompanying basic financial statements. NOTE 10: LEASE OBLIGATIONS Medical College of Georgia is obligated under various operating leases for the use equipment and also is obligated under capital leases and installment purchase agreements for the acquisition of equipment. CAPITAL LEASES Capital leases are generally payable in monthly installments and have terms expiring in various years between 2006 and 2009. Expenditures for fiscal year 2005 were $1,471,492.01 of which $113,610.96 represented interest. Total principal paid on capital leases was $1,357,881.05 for the fiscal year ended June 30, 2005. Interest rates range from 2.87 percent to 34.93 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2005: Equipment $ 2,788,478.43 - 20 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 10: LEASE OBLIGATIONS CAPITAL LEASES 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. Medical College of Georgia has various leases for equipment with an outstanding balance at June 30, 2005 in the amount of $2,755,796.76. OPERATING LEASES Medical College of Georgia's noncancellable operating leases having remaining terms of more than one year expire in fiscal years 2006 and 2007. All agreements are cancelable 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 generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment. Noncancellable operating lease expenditures in fiscal year 2005 were $8,208.00 for real property. 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, 2005, were as follows: Capital Leases Operating Leases Year Ending June 30: 2006 2007 2008 2009 $ 972,097.39 $ 870,058.22 808,048.16 280,983.40 8,208.00 1,644 Total Minimum Lease Payments $ 2,931,187.17 $ 9,852.00 Less: Interest 175,390.41 Principal Outstanding $ 2,755,796.76 - 21 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2005 EXHIBIT "D" NOTE 11: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Plan Description Medical College of Georgia participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts. Funding Policy Employees of Medical College of Georgia who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Medical College of Georgia makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2005, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2005 2004 2003 100% 100% 100% $12,643,828.09 $12,164,375.94 $11,850,917.51 EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description Medical College of Georgia participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia. The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions. -22 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 11: RETIREMENT PLANS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 1O years of creditable service and attainment of age 65. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age. Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. The ERS issues a financial report each fiscal year, which may be obtained through ERS. Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2005, for employees covered by ERS was $279,178.49. The College's total payroll for all employees was $255,341,814.88. Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2005, the ERS employer contribution rate for the College amount to 10.62% of covered payroll and included the amounts contributed on behalf of the employees under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees. - 23 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 11: RETIREMENT PLANS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Funding Policy Total contributions to the plan made during fiscal year 2005 amounted to $33,844.26, of which $29,640.27 was made by the College and $4,203.99 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2005, financial report, which may be obtained through ERS. REGENTS RETIREMENT PLAN Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. 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 Medical College of Georgia 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 2005, the employer contribution was 9.65% of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Medical College of Georgia and the covered employees made the required contributions of $6,898,829.63 (9.65%) and $3,601,943.75 (5%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. - 24- MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 11: RETIREMENT PLANS GEORGIA DEFINED CONTRIBUTION PLAN Plan Description Medical College of Georgia participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500.00 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 2005 amounted to $293,796.29 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. EARLY RETIREMENT PENSION PLAN Plan Description Medical College of Georgia Early Retirement Pension Plan (ERP) is a single-employer defined benefit pension plan administered by Bryan, Pendleton, Swats and McAllister. The plan was devised by MCG as a means of manpower reduction and was approved by the Board of Regents of the University System of Georgia (BOR) effective January 1, 2000. - 25 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 11: RETIREMENT PLANS EARLY RETIREMENT PENSION PLAN Plan Description The manpower reduction plan was designed to allow vested employees aged 55 or employees of any age with 25 years of creditable service to retire without penalties as applied by the Teachers Retirement System of Georgia (TRS) for early retirement. The plan would allow for all participants to retire as if they were vested and aged 60 or had attained 30 years of creditable service. No other benefits will be paid by this plan. A financial statement is maintained by the Medical College of Georgia, Controller's Division, and is available for review during normal business hours. Funding Policy The plan is to be funded by the purchase of an annuity utilizing salary savings of departed employees. The funding period for the annuity is 15 years. The fund sources that provided for an employees salary, as of December 31, 1999, would be responsible for funding the annuity to provide the retiree benefits. There is no additional funding cost to the employee/retiree, BOR, or the State of Georgia for this plan. Since this plan was not pre-funded, MCG is taking an aggressive approach to collect and deposit as much into the annuity fund in the earlier years as is possible, thereby realizing a greater return on investment. Annual Pension Cost and Net Pension Obligation The ERP's annual pension cost and net pension obligation for Fiscal Year 2005 was a follows: Total MCG Other Units Annual Required Contribution Interest on Net Pension Obligation Adjustments on Annual Required Contributions $ 12,591,344.00 $ 6,795,548.36 $ 5,795,795.64 -699,833.69 -638,860.45 -60,973.24 1,057,096.33 964,996.47 92,099.86 Annual Pension Cost $ 12,948,606.64 $ 7,121,684.38 $ 5,826,922.26 Contributions Made -12,591,344.00 -6,795,548.36 -5,795,795.64 Increase (Decrease) in Net Pension Obligation $ 357,262.64 $ 326,136.02 $ 31,126.62 Net Pension Obligation Beginning of Year -9,331,115.89 -8,518,139.36 -812,976.53 Net Pension Obligation End of Year $ -8.973.853.25 $ -8,192,003.34 $ -781,849.91 -26 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 11: RETIREMENT PLANS EARLY RETIREMENT PENSION PLAN Annual Pension Cost and Net Pension Obligation Three-Year Trend Information FY 2005 Total MCG Other Units Annual Pension Cost (APC) $ 12,948,606.64 $ 7,121,684.38 $ 5,826,922.26 Percentage of APC Contributed 97.24% 95.42% 99.47% Net Pension Obligation End of Year $ -8,973,853.25 $ -8,192,003.34 $ -781,849.91 FY2004 Total MCG Other Units Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation $ 15,762,607.99 $ 8,703,107.02 $ 7,059,500.97 100.54% 98.97% 102.49% $ -9,331,115.89 $ -8,518,139.36 $ -812,976.53 FY 2003 Total MCG Other Units Annual Pension Cost (APC) (1) Percentage of APC Contributed Net Pension Obligation $ 15,723,093.77 $ 8,676,620.11 $ 7,046,473.66 97.63% 93.53% 102.68% $ -9,245,376.60 $ -8,608,016.38 $ -637,360.22 The annual required contribution for the current year was determined as part of the September 22, 2004 actuarial valuation using the Entry Age Actuarial cost method. Effective January 1, 2004, the remaining amortization period was extended 4 years to 15 years utilizing the Level Dollar, Closed method. The actuarial value of assets recognizes a portion of the difference between the market value of assets and the expected actuarial value of assets, based on the assumed interest rate of return. The amount recognized each year is 20% of the difference between market value and expected actuarial value. The actuarial assumptions included (a) 7.5% rate of return on investment, (b) annual inflation of 3.5%, and (c) annual cost of living increases of3.0%. NOTE 12: RISK MANAGEMENT The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Medical College of Georgia 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 -27 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 12: RISK MANAGEMENT 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 two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes 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. Medical College of Georgia, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. NOTE 13: CONTINGENCIES Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Medical College of Georgia expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Medical College of Georgia (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally -28 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT"D" NOTE 13: CONTINGENCIES 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, 2005. NOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of 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. As of June 30, 2005, there were 2,044 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2005, Medical College of Georgia recognized as incurred $6,103,644.07 of expenditures, which was net of $2,252,058.17 of participant contributions. NOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS The College's operating expenses by functional classification for fiscal year 2005 are shown below: -29 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2005 Functional Classification Natural Classification Instruction Research Public Service Academic Support Student Services Institutional Support Salaries Faculty Staff Employee Benefits Travel Scholarship and Fellowships Utilities Supplies and Other Services Depreciation $ 37,971,155.10 $ 9,853,967.30 $ 39,146,404.29 $ 1,903,490.16 $ 49,953.46 22,533,947.61 12,647,901.33 32,131,188.81 8,193,421.44 $ 1,181,001.63 15,404,962.98 15,898,479.10 4,717,046.20 12,169,508.29 4,744,118.25 275,774.99 10,233,257.73 760,794.89 499,279.53 373,593.46 98,601.92 23,941.36 218,000.34 557,360.77 680,528.68 4,807.97 39,845.52 12,832.73 194,992.77 23,635.58 163,548.49 2,413.16 18,993.48 144,201.78 153,088.10 11,698,993.82 5,342,549.12 13,273,836.00 590 959.21 6,310,044.00 1,290,069.69 1,328,864.00 1,098,181.51 537,361.68 39,231.79 8,906,363.35 4,703,610.20 Total Operating Expenses $ 95 443 809 09 $ 4) 627 643 06 $ 91 628 634 04 $ )7 553 861 35 $ 2 078 7)8 09 $ 39 813 437 94 Natural Classification Salaries Faculty Staff Employee Benefits Travel Scholarship and Fellowships Utilities Supplies and Other Services Depreciation Total Operating Expenses Plant Operations and Maintenance Functional Classification Scholarship and Fellowships Auxiliary Enterprises Patient Care Total Operating Expenses $ 3,954,351.92 1,089,387.12 11,049.90 $ 99,617.80 $ 5,267,556.33 $ 94,292,144.44 1,995,474.72 63,007,420.00 161,049,670.44 616,660.04 17,139,172.16 66,883,403.88 13,727.94 229,948.98 2,228,938.32 $ -213,695.56 5,069,364.50 1,899.73 70,803.43 272,156.09 533,456.16 6,663,321.06 3,172,716.95 211,005.43 3,108,052.88 150,533.33 86,271,827.77 134,608,060.45 13,426,140.28 $ 13 507 875 82 $ -213 695 56 $ 6 056 769 87 $)72 188 081 33 $479 685 135 03 NOTE 16: AFFILIATED ORGANIZATIONS In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of GASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, MCG Health, Inc., Medical College of Georgia Foundation, Inc., Medical College of Georgia Dental Foundation, Medical College of Georgia Research Institute and Medical College of Georgia Physicians Practice Group Foundation are legally separate, tax exempt organizations whose activities primarily support Medical College of Georgia, a unit of the University System of Georgia (an organizational unit of the State of Georgia). These affiliated organizations were reported as component units of the State of Georgia for the year ended June 30, 2004, based on their significance to Medical College of Georgia. For the year ended June 30, 2005, 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 Medical College of Georgia, but instead based on their significance to the State of Georgia. Accordingly, Medical College of Georgia has not included financial activity for these affiliated organizations in these financial statements. - 30 - MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2005 EXHIBIT "D" NOTE 16: AFFILIATED ORGANIZATIONS MCG Health, Inc. and Medical College of Georgia Foundation, Inc. have been determined significant to the State of Georgia for the year ended June 30, 2005, and as such, are reported as discretely presented component units in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). The significant discretely presented component units issue separate audited financial statements that can be obtained from the Board of Regents of the University System of Georgia. - 31 - SUPPLEMENTARY INFORMATION - 33 - MEDICAL COLLEGE OF GEORGIA SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO BUDGET - (NON-GAAP BASIS} RESIDENT INSTRUCTION YEAR ENDED JUNE 30, 2005 SCHEDULE "1" REVENUES State Appropriations Other Revenues Retained BUDGET ACTUAL (1) VARIANCEFAVORABLE (UNFAVORABLE) $ 113,076,628.00 $ 113,076,628.00 $ 408,124,661.00 364,265,583.30 0.00 -43,859,077.70 $ 521,201,289.00 $ 477,342,211.30 $ _ _-4_3~,8_59~,0_7_7_.7_0 EXPENDITURES Personal Services: Education, General and Departmental Services Sponsored Operations Operating Expenses: Education, General and Departmental Services Sponsored Operations Capital Outlay Special Funding Initiative Student Education Enrichment Program Research Consortium $ 111,817,848.00 $ 110,326,517.10 $ 227,703,315.00 203,089,129.67 37,621,062.00 135,819,704.00 1,549,711.00 5,505,786.00 311,863.00 872,000.00 35,554,299.75 117,254,029.00 1,652,498.99 5,503,794.06 311,163.00 871,658.28 1,491,330.90 24,614,185.33 2,066,762.25 18,565,675.00 -102,787.99 1,991.94 700.00 341.72 $ 521,201,289.00 $ 474,563,089.85 $ _ _4_6~,6_38~,_19_9_.1_5 Excess of Revenues over Expenditures $ 2,779,121.45 $ ===2=7,=79='=12=1=.4=5 (1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. See notes to the financial statements. - 35- MEDICAL COLLEGE OF GEORGIA SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO BUDGET - (NON-GAAP BASIS) OTHER ORGANIZED ACTIVITIES YEAR ENDED JUNE 30. 2005 SCHEDULE "2" MEDICAL COLLEGE OF GEORGIA HOSPITAL AND CLINICS REVENUES Other Revenues Retained BUDGET ACTUAL (1) VARIANCEFAVORABLE (UNFAVORABLE) $ 193,500.00 $ 193,soo.oo $______:oc:.:.o:..:..o EXPENDITURES Operating Expenses: Education, General and Departmental Services $ 193,500.00 $ 193,500.00 $ _ _ _ _ _0._00_ Excess of Revenues over Expenditures $ o.oo $=====,,;;o~.o~o (1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. 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. 2005 SCHEDULE "2" GEORGIA RADIATION THERAPY CENTER REVENUES Other Revenues Retained BUDGET ACTUAL(1) VARIANCEFAVORABLE (UNFAVORABLE) $ 3,625,810.00 $ o.oo $ _ _-_3'-,6_25""",8_1_0_.o_o EXPENDITURES Personal Services: Education, General and Departmental Services Operating Expenses: Education, General and Departmental Services $ 2,224,653.00 $ 1,401,157.00 0.00 $ 0.00 2,224,653.00 1,401,157.00 $ 3,625,810.00 $ o.oo $ _ _ _3,:_,6_25-',_81_0_.o_o Excess of Revenues over Expenditures $ o.oo $ ========o.=oo= (1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. See notes to the financial statements. - 37- MEDICAL COLLEGE OF GEORGIA RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30. 2005 SCHEDULE "3" Totals per Annual Supplement Accruals June 30, 2004 June 30, 2005 Compensated Absences June 30, 2004 June 30, 2005 Adjustment Shared Services on Jointly Staffed Personnel Augusta State University Platt, Daniel Unidentified Variance SALARIES TRAVEL $ 251,838,980.94 $ 2,211,974.46 -879,343.84 1,167,525.15 16,963.86 -21,391,436.22 24,627,708.52 -19,915.25 -1 704.42 $ 255,341,814.88 $ ==2.,,,,22=8=,9=3=8.=32= See notes to the financial statements. -39- SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS MEDICAL COLLEGE OF GEORGIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2005 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.