Medical College of Georgia, Augusta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2008

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, 2008
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

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

3

C STATEMENT OF CASH FLOWS

4

D NOTES TO THE FINANCIAL STATEMENTS

7

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

35

2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

37

3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING

SOURCE COMPARED TO BUDGET

(NON-GAAP BASIS) BUDGET FUND

38

4 RECONCILIATION OF SALARIES AND TRAVEL

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 III 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
November 21,2008

Honorable Sonny Perdue, Governor Members ofthe General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Daniel 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, 2008. 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 ofGeorgia, in conformity with accounting principles generally accepted in the United States ofAmerica.

08ARL-62

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position ofMedical College ofGeorgia as ofJune 30, 2008, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Management's Discussion and Analysis is not a required part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it.
Our audit was conducted for the purpose offorming an opinion on the basic financial statements of Medical College of Georgia taken as a whole. The accompanying supplementary information (Schedules 1 through 4) is presented for purposes ofadditional 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,
~.~
ell W. Hinton, CPA, CGFM State Auditor
RWH:gp 08ARL-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 ofthe 35 institutions ofhigher education of the University System of Georgia. The College, located in Augusta, Georgia, has become known for its world-class 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 (Headcount)

Students (FTE)

Fiscal Year 2008 Fiscal Year 2007 Fiscal Year 2006

644

2,862

2,752

629

2,696

2,642

612

2,585

2,522

Overview ofthe Financial Statements and Financial Analysis

Medical College of Georgia is proud to present its financial statements for fiscal year 2008. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets; and the Statement of Cash Flows. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2008 and fiscal year 2007.

Statement ofNet Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the College as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Medical College of Georgia. The Statement of Net Assets presents end-ofyear 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.

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Finally, the Statement ofNet 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 three categories, nonexpendable, expendable and capital projects. 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 ofNet Assets, Condensed

June 30, 2008

June 30, 2007

Assets Current Assets Capital Assets, Net Other Assets

$ 111,128,807 289,104,730 50,059,564

$ 102,528,923 287,279,113 49,755,879

Total Assets

$ 450,293,101

$ 439,563,915

Liabilities Current Liabilities Noncurrent Liabilities

$ 90,051' 160 40,958,883

$ 87,504,201 41,997,809

Total Liabilities

$ 131,010,043

$ 129,502,010

Net Assets Invested in Capital Assets, Net ofDebt Restricted - Nonexpendable Restricted - Expendable Restricted- Capital Projects Unrestricted

$ 260,440,796 1,612,466
62,446,417 5,000,000
-10,216,621

$ 257,535,916 1,756,794
65,285,087 387,687
-14,903,579

Total Net Assets

$ 319!283!058

$ 310!061!905

The total assets of the institution increased by $10,729,186. A review of the Statement of Net Assets will reveal that the increase was primarily due to a net increase in cash and short-term investments of $8,481,159 and an increase in prepaids of $4,822,901.

The total liabilities for the year increased by $1,508,033. The combination of the increase in total assets of $10,729,186 and the increase in total liabilities of $1,508,033 yields an increase in total net assets of $9,221,153. The increase in total net assets is primarily in the category of Restricted - Capital Projects, in the amount of $4,612,313.

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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, 2008

June 30, 2007

Operating Revenues Operating Expenses

$ 418,062,501 590,268,506

$ 391,604,839 548,851,488

Operating Loss

$ -172,206,005

$ -157,246,649

Nonoperating Revenues and Expenses

173,068,284

157,685,908

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

$

862,279

$

439,259

Other Revenues, Expenses, Gains or Losses

8,358,874

36,019,087

Increase (Decrease) in Net Assets

$ 9,221,153

$ 36,458,346

Net Assets at Beginning of Year

31 0,061 ,905

273,603,559

Net Assets at End of Year

$ 319.283.058

$ 310,061,905

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:

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Revenue By Source For The Years Ended June 30,2008 and June 30,2007

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. 2008
$ 24,151,307 377,137,993
8,834,807 7,048,026
890,368
$ 418,062,501
$ 161,597,858 7,231,443 3,999,416 2,346,798 -111.540
$ 175,063,975
$ 8,353,317 5 557
$ 8,358,874
$ 601A85,35Q

June 30, 2007
$ 21,614,072 354,482,232
7,934,939 6,670,880
902.716
$ 391,604,839
$ 141,914,536 9,937,205 3,494,387 4,660,985 -284,669
$ 159,722,444
$ 35,231,667 787,420
$ 36,019,087
$ 587,346,370

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Expenses (By Functional Classification) For The Years Ended June 30, 2008 and June 30, 2007

June 30, 2008

June 30, 2007

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Patient Care (MCG only)

$ 141,635,295 40,735,964 96,673,997 18,787,075 3,731,271 39,969,306 24,183,285 1,552,322 7,344,846
215,655,145

$ 125,064,499 38,756,421 97,227,853 17,126,406 2,116,743 45,828,736 17,721,499 1,247,631 7,045,444 196,716,256

Total Operating Expenses

$ 590,268,506

$ 548,851,488

Nonoperating Expenses Interest Expense (Capital Assets)

1,995,691

2,036,536

Total Expenses

$ 592.264.197

$ 550.888.024

Operating revenues increased by $26,457,662 in fiscal year 2008. Revenue increased in all categories including a 12% increase in tuition and fees.

Nonoperating revenues increased by $15,341,531 for the year primarily due to an increase of $19,683,322 in State Appropriations.

The compensation and employee benefits category increased by $9,306,889 and primarily affected the Instruction, Plant Operations and Maintenance, and Patient Care categories. The increase reflects an increased cost of health insurance for the employees of the institution.

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. 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.

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Cash Flows for the Years Ended June 30,2008 and June 30,2007, Condensed

June 30, 2008

June 30, 2007

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

$ -147,339,368 174,176,046 -20,051,379 -23,304,140

$ -121,104,566 153,380,747 -17,596,765 348,810

Net Change in Cash Cash, Beginning of Year

$ -16,518,841 52,245,414

$ 15,028,226 37,217.188

Cash, End of Year

$ 35.726.573

$ 52.245.414

Capital Assets

The College had capital asset additions for buildings and building improvements in fiscal year 2008. Numerous projects were completed during the fiscal year totaling $12,977,154.

Medical College of Georgia concluded additional work on the Health Sciences Building which was substantially completed in the prior fiscal year. A total of $1,819,359 of this subsequent project spending was funded by Georgia State Financing and Investment Commission (GSFIC). Other on-going projects funded by GSFIC included $8,773,064. Projected funding by GSFIC for fiscal year 2009 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 Liabilities

Medical College of Georgia had Long-Term Liabilities of $57,890,541 of which $16,931,658 was reflected as current liability at June 30, 2008.

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

Economic Outlook

The College is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The College's overall financial position is strong. The College anticipates the current fiscal year will be challenging with budget cuts on the horizon at the state level, but will continue to maintain a close watch over resources providing the College with the flexibility to react to internal and external situations that may develop.

Daniel W. Rahn, M.D., President Medical College of Georgia

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BASIC FINANCIAL STATEMENTS - 1-

MEDICAL COLLEGE OF GEORGIA STATEMENT OF NET ASSETS JUNE 30, 2008
ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Federal Financial Assistance Margin Allocation Funds Other Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Investments Notes Receivable Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deferred Revenue (Note 7) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Expendable Capital Projects Unrestricted
Total Net Assets
The notes to the financial statements are an integral part of this statement.
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EXHIBIT"A"
$ 35,726,573 25,000,000 2,051,792 7,231.443 27,635,707 529,093 12,954,199
$ 111,128,807
$ 46,157,517 3,902,047
289,104,730 $ 339,164,294 $ 450,293,101
$ 42,633,009 2,959,733 341.445
26,209,338 975,977 876,748
16,054,910 $ 90,051,160
$ 27,787,186 13,171,697
$ 40,958,883 $ 131,010,043
$ 260.440,796 1,612,466
62.446.417 5,000,000
-10,216,621
$ 319,283,058

MEDICAL COLLEGE OF GEORGIA STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2008
OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal State Other
Sales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Health Services Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Other Gifts Interest and Other Investment Income Interest Expense Other Nonoperating Revenues
Net Nonoperating Revenues
Income (Loss) Before Other Revenues. Expenses, Gains. or Losses
Capital Grants and Gifts State Other
Total Other Revenues, Expenses, Gains or Losses
Increase (Decrease) in Net Assets
Net Assets- Beginning of Year
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement.
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EXHIBIT"B"

$

26,264,325

-2,113,018

47,749,777 193,551,785 135,836,431
8,834,807 472,936

871,779 1,220,731
122,167 1,267,243 1,278,406 2,287,700
417 432

$ 418,062,501

$ 115,970,905 178,644,159 81,890,971 122,308 3,316,220 1,834,587 8,741,556 181,469,941 18,277,859
$ 590,268,506
$ -172,206,005

$ 161,597,858

7,231,443 3,999,416 2,346,798 -1,995,691 -111 540

$ 173,068,284

$

862 279

$

8,353,317

5 557

$

8 358,874

$

9,221 '153

310,061,905

$ 319,283,058

MEDICAL COLLEGE OF GEORGIA STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services ParkingfTransportation 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 Capital Grants and Gifts Received Proceeds from Sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments 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"

$

24,918,631

382,791,342

9,067,510

-275,734,007

-294,360,433

-1,834,587

-726,485

1,073,738

1,002,716 1,215,941
120,352 1,425,460 1,089,908 2,300,592
309,954

$ -147,339,368

$ 161,597,858 -1,231,050 13,920,778 -111 540
$ 174,176,046

$

6,533,958

1,525,313

-24,886,180

-1,228,779

-1,995,691

$ -20,051,379

$

1,695,860

-25,000,000

$ -23,304,140

$ -16,518,841

52,245,414

$ =~3~5,~72;;6;=;,5~7,;;;,3

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MEDICAL COLLEGE OF GEORGIA STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2008
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Notes Receivable Accounts Payable Deferred Revenue Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts

EXHIBIT"C"
$ -172,206,005
18,277,859 2,699,420 -4,805 -210,588 347,253 304,148 3,480,485 -27 135
$ -147,339,368
$ ==~14~9~5~1~6 $==~65~0~,9~3~8
$ ==-.=!1=82=4""',9=1=6

The notes to the financial statements are an integral part of this statement.
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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

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-five (35) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of 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 17 for additional information.
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the College was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB
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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION 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 predominant 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 obligation has been incurred. All significant intra-College transactions have been eliminated.
The College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The College has elected to not apply FASB pronouncements issued after the applicable date.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the State Investment Pool.
SHORT-TERM INVESTMENTS Short-Term Investments consist of investments of 90 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are n0t readily available and there is a penalty for early withdrawal.
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.

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the College's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
INVENTORIES 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 ofNet Assets.
CAPITAL ASSETS Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the College's capitalization policy includes all items with a unit cost of $5,000 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation 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 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 ofthe State are pledged.
For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the College when complete. For projects managed by the College, the College retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2008, GSFIC transferred capital additions valued at $1,819,359 to Medical College of Georgia.
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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. Medical College of Georgia had accrued liability for compensated absences in the amount of $29,253,742 as of July 1, 2007. For fiscal year 2008, $20,223,682 was earned in compensated absences and employees were paid $20,250,817, for a net decrease of $27,135. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $29,226,607.
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.
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.
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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NET ASSETS Expendable Restricted Net Assets include the following:

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

$ 49,836,150 5,365,889 1,793,990 5,450,388

Total Restricted Expendable

$ 62.446.417

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 $5,000,000 in Restricted Net Assets- Capital Projects. These funds are on deposit with GSFIC and will be used for construction of the School of Dentistry.

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). 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. At June 30, 2008, there was no surplus to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

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

R& RReserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted

$ 1,235,068 10,424,688 127,467 -22,003,844

Total Unrestricted Net Assets

$ -10,216,621

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS 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 (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
SCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the College, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the College has recorded contra revenue for scholarship allowances.
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

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS 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 ofthe University System of Georgia.
At June 30, 2008, the carrying value of deposits was $60,581,580 and the bank balance was $71,949,496. Of the College's deposits, $71,849,496 was uninsured. Of these uninsured deposits, $1,358,460 were collateralized with securities held by the financial institution's trust department or agent in the College's name, $70,491,036 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name and $0 were uncollateralized.
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 to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws.
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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS The College's investments as of June 30, 2008 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. Agencies Explicitly Guaranteed Implicitly Guaranteed Mutual Bond Funds

$ 266,964 $ 11,403,637 11,596,634

102,487 $ 164,477

4,608,522

6,795,115

11,596,634

$ 23,267,235 $ 4.711.009 $ 18.556.226

Other Investments Equity Mutual Funds Real Estate Investment Fund

12,646,555 1,822,413

Investment Pools Board of Regents Total Return Fund Office of Treasury and Fiscal Services Georgia Fund 1

7,062,854 1,495,407

Total Investments

$ 46.294.464

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 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/searchRpts.html.

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS
INVESTMENTS 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 ofthe 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 AAAm rated investment pool by Standard and Poor's. The Weighted Average Maturity of the Fund is 40 days.
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.
The Weighted Average Maturity of the Total Return Fund is 7.84 years. Of the College's total investment of $7,062,854 in the Total Return Fund, $2,231,862 is invested in debt securities.
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 managers be registered in good standing as investment advisors; and will be experienced with proven track records.
At June 30, 2008, $11,670,601 of the College's applicable investments were uninsured and held by the investment's counterparty's trust department or agent 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. All debt issues must be eligible investments under Georgia Code 50-17-63. Portfolios of debt security funds must also meet the eligible investment criteria under the same code section.
The investments subject to credit quality risk are reflected below:

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS

Fair Value

Unrated

Related Debt Investments U.S. Agencies Mutual Bond Funds

$ 11,403,637 11.596,634

$ 11,403,637 11.596,634

$ 23.000.271

$ 23.000.271

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. More than 5 percent of the College's investments are in the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. These investments are 14.8% and 7.3% respectively of the College's total investments.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2008:

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Margin Allocation Funds Other

$ 359,075 374,207
2,051,792 7,231,443 27,058,807

Less Allowance for Doubtful Accounts

$ 37,075,324 156,382

Net Accounts Receivable

$ 36!918!942

NOTE 4: INVENTORIES

Inventories consisted of the following at June 30, 2008:

Bookstore Other

$ 399,103 129,990

Total

$=~5~29~~0~9~3

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2008

EXHIBIT "D"

NOTE 5: NOTES/LOANS RECEIVABLE

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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. The College has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off.

NOTE 6: CAPITAL ASSETS

Following are the changes in capital assets for the year ended June 30, 2008:

Beginning Balance Julx I, 2007

Additions

Reductions

Ending Balance June 30, 2008

Capital Assets, Not Being Depreciated:

Land

$

Construction Work-In-Progress

9,053,256 II 489 517 $

$ 8 040 747 $ I 0,080,374

9,053,256 9 449 890

Total Capital Assets Not Being Depreciated

$ 20,542,773 $ 8 040 747 $ 10,080,374 $ 18,503,146

Capital Assets, Being Depreciated:

Building and Building Improvements $ 320,281,292 $

Facilities and Other Improvements

2,339,679

Equipment

63,668,132

Capital Leases

33,887,929

Library Collections

16,807,856

13,158,043
7,856,997 $ 149,516
1,308,283

$
I ,515,995 170,473 29 076

333,439,335 2,339,679
70,009,134 33,866,972 18,087,063

Total Assets Being Depreciated

$ 436,984,888 $ 22,472,839 $ I 715 544 $ 457,742,183

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

111,514,359 $ 1,605,756
41,608,617 4,309,714 11,210,102

7,779,713 91,538
7,216,485 $ 2,274,970
915 153

$
1,237,764 118,969 29 075

119,294,072 1,697,294
47,587,338 6,465,715 12,096,180

Total Accumulated Depreciation

$ 170,248,548 $ 18,277,859 $ 1,385,808 $ 187,140,599

Total Capital Assets, Being Depreciated,

Net

$ 266,736,340 $

4 194 980 $

329 736 $ 270,601,584

Capital Assets, Net

$ 287.279 113 $ 12 235 727 $ 10.410.110 $ 289. I04.730

NOTE 7: DEFERRED REVENUE

Deferred revenue consisted of the following at June 30, 2008:

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 7: DEFERRED REVENUE

Prepaid Tuition and Fees Research Other Deferred Revenue

$ 6,163,218 16,416,673 3,629,447

Totals

$ 26.209.338

NOTE 8: LONG-TERM LIABILITIES

Long-term liability activity for the year ended June 30, 2008 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences
Total Long-Term Liabilities

Beginning Balance Julx I, 2007

Additions

Reductions

Ending Balance June 30, 2008

Current Portion

$ 29,743,197 $

149,516 $ 1,228,779 $ 28,663,934 $

876,748

29,253,742

20,223,682

20,250,817

29,226,607

16,054,910

$ 58 996 939 $ 20.373.198 $ 21.479.596 $ 57.890.541 $ 16.931.658

NOTE 9: SIGNIFICANT COMMITMENTS

The College had significant unearned, outstanding, construction or renovation contracts executed in the amount of $8,621,741 as of June 30, 2008. 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 of equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of equipment and the use of several floors of the Cancer Research Center building.

CAPITAL LEASES Capital leases are generally payable in monthly installments and have terms expiring in various years between 2009 and 2037. Expenditures for fiscal year 2008 were $3,224,470 of which $1,995,691 represented interest. Total principal paid on capital leases was $1,228,779 for the fiscal year ended June 30, 2008. Interest rates range from 1.64 percent to 34.93 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008:

Buildings Equipment

$ 24,613,745 2,787,512

Total Assets Held Under Capital Lease

$ 27.401.257

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

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 had one capital lease with an affiliated organization in the current fiscal year. In November 2004, Medical College of Georgia entered into a capital lease of $27,659,678 at 6.85 percent with the MCG-PPG Cancer Research Center, LLC, whereby the College leases the third, fourth, and fifth floors of the Cancer Research Center for a thirty-year period that began January, 2006 and expires December, 2035. At the end of the lease, title to the building is transferred to the College. The outstanding liability at June 30, 2008, on this capital lease is $26,939,615.
Medical College of Georgia also has various capital leases for equipment with an outstanding balance at June 30, 2008 in the amount of $1,724,319.
OPERATING LEASES Medical College of Georgia's noncancellable operating leases have remaining terms oftwo years or less. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are 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.
FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows:

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"D"

NOTE 10: LEASE OBLIGATIONS

FUTURE COMMITMENTS
Year Ending June 30: 2009 2010 2011 2012 2013 2014 through 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2037
Total Minimum Lease Payments
Less: Interest
Principal Outstanding

Real Pronem and Eguinment Canital Leases Onerating Leases

$ 2,812,070 $ 2,768,487 2,756,869 2,291,787 2,181,520 10,878,086 10,878,086 10,878,086 10,878,086 5,439,043

12,547 375

$ 61,762,120 $

12.922

33,098,186

$ 28~663~934

Medical College of Georgia's fiscal year 2008 expense for rental of real property and equipment under operating leases was $25,631.

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 2008, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Funding Policy Fiscal Year

Percentage Contributed

Required Contribution

2008 2007 2006

100% 100% 100%

$ 14,403,080 $ 13,884,229 $ 13,331,269

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Plan Description Medical College of Georgia participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia.

The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions.

Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.

In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Plan Description The ERS issues a financial report each fiscal year, which may be obtained through ERS.

Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The College's payroll for the year ended June 30, 2008, for employees covered by ERS was $625,917. The College's total payroll for all employees was $294,615,064.

For the year ended June 30, 2008 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. Of these member contributions, the employee pays the first 1.5% and the College pays the remainder on behalf of the employee.

Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation for both old and new plans. For the year ended June 30, 2008, the ERS employer contribution rate for the College amounted to 10.41% of covered payroll and included the amounts contributed on behalf of the employees under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees.

Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2008 2007 2006

100% 100% 100%

$

65,531

$

48,203

$

37,388

Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 financial report, which may be obtained through ERS.

REGENTS RETIREMENT PLAN

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-

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MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Plan Description 21-1 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 2008, the employer contribution was 8.13% for the first six months and 8.15% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Medical College of Georgia and the covered employees made the required contributions of $7,042,577 (8.13% or 8.15%) and $4,326,070 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description 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 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
- 23-

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Benefits 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 2008 amounted to $408,963 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 ofthe University System of Georgia (BOR) effective January 1, 2000.
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.
The ERP does not issue a standalone report, however, 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 initial funding period of the annuity was 15 years; however, effective January 1, 2004, the remaining amortization period was extended 4 years. The fund sources that provided for an employees salary, as of December 31, 1999, would be responsible for funding the annuity
-24-

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS

EARLY RETIREMENT PENSION PLAN

Funding Policy to provide the retiree benefits. There is no additional funding cost to the employee/retiree, BOR, or 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. The funding policy is reasonable and in compliance with the minimum funding requirements set forth in Code Section 47-20-10 of the Public Retirement Systems Standards Law. The plan should be fully funded by June 30,2019.

Annual Pension Cost and Net Pension Obligation The ERP's annual pension cost and net pension obligation for the current year were as follows:

Total

Annual Required Contribution Interest on Net Pension Obligation Adjustments on Annual Required
Contributions

$ 12,996,492 -710,615
1,224,890

Annual Pension Cost

$ 13,510,767

Contributions Made

12,996,492

Increase (Decrease) in Net Pension Obligation

$ 514,275

Net Pension Obligation Beginning of Year

-8,577,887

Adjustment

-896,976

Net Pension Obligation End of Year $ -8,260,588

MCG $ 7,052,602
-376,626 649,192 $ 7,325,168 7,052.602
$ 272,566
-7,512,997 -475,397
$ -7,715,828

Other Units $ 5,943,890 -333,989
575.698 $ 6,185,599
5,943,890
$ 241,709
-1,064,890 -421,579
$ -1,244,760

- 25-

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS

EARLY RETIREMENT PENSION PLAN

Annual Pension Cost and Net Pension Obligation

Three-Year Trend Information

FY 2006

Total

MCG

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation End of Year

$ 12,874,094 100.24%
$ -9,004,838

$ 7,095,216 95.78%
$ -7,892,336

FY 2007

Total

MCG

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation

$ 13,363,491 96.81%
$ -8,577,887

$ 7,393,903 94.87%
$ -7,512,997

FY 2008

Total

MCG

Other Units
$ 5,778,878 105.72%
$ -1,112,502
Other Units
$ 5,969,588 99.20%
$ -1,064,890
Other Units

Annual Pension Cost (APC) Percentage of APC Contributed Net Pension Obligation

$ 13,510,767 96.19%
$ -8,960,588

$ 7,325,168 96.28%
$ -7,715,828

$ 6,185,599 96.09%
$ -1,244,760

Funded Status and Funding Progress As of January 1, 2008, the most recent actuarial valuation date, the plan was 35.0 percent funded. The actuarial accrued liability for benefits was $148,797,058, and the actuarial value of assets was $52,044,359, resulting in an unfunded actuarial accrued liability (UAAL) of$96,752,699.

Schedule of Funding Progress

The schedule of funding progress which follows, presents multiyear trend information about whether the actuarial value of plan assets are increasing or decreasing over time relative to the actuarial accrued liability for benefits:

- 26-

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS

EARLY RETIREMENT PENSION PLAN

Annual Pension Cost and Net Pension Obligation

Schedule of Funding Progress

Actuarial Valuation
Date
111/2006 11112007 1/1/2008

Actuarial Value of
Assets (a)
$ 43,203,598 $ 47,722,236 $ 52,044,359

Actuarial Accrued Liability
(b)
$ 148,323,853 $ 148,253,721 $ 148,797,058

Unfunded AAL
(UAAL) (b-a)
$ I05,120,255 $ 100,531,485 $ 96,752,699

Funded Ratio (a/b)
29.1% 32.2% 35.0%

Annual Covered Payroll
(c)
N/A N/A N/A

UAAL as a
Percentage of
Covered Payroll ((b-a)/c)
N/A NIA NIA

Actuarial Methods and Assumptions The Annual required contribution for the current year was determined as part of the January 1, 2007 actuarial valuation using the Entry Age Actuarial cost method. The remaining amortization period is 11 years utilizing the entry age, 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 ofliving increase 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 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 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees.

- 27-

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 12: RISK MANAGEMENT
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 ofthe 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 considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2008.
NOTE 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 ofthe Board ofRegents ofthe University
- 28-

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2008

EXHIBIT "D"

NOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%.
As of June 30, 2008, there were 1,399 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Medical College of Georgia recognized as incurred $7,372,215 of expenditures, which was net of $2,668,446 of participant contributions.
NOTE15: SUBSEQUENTEVENTS
In the subsequent fiscal year, there was a significant decline in the market value of investments in the amount of $3,926,820.

-29-

MEDICAL COLLEGE OF GEORGIA NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 16: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The College's operating expenses by functional classification for fiscal year 2008 are shown below:

Natural Classification
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and
Fellowships Utilities Supplies and Other
Services Depreciation
Total Operating Expenses

Instruction

Research

Functional Classification

Public Service

Academic SUQQOrt

Student Services

Institutional SUQQOrt

$ 57,445,896 $ 9,547,120 $ 42,294,394 $

30,660,754

]] ,799,706

28,977,179

21,388,977

4,531,407

13,667,144

26,559

272

1,223,171

485,112

580,355

3,474,767 $ 7,935,240 5,069,555
1,070 239,118

309,098 625,932

2,820 20,992

27,310 158,661

112,762

24,043,966 5 910 942

13,443,397 905 138

10,719,746 249 208

564,095 I 390 468

$ 141 635 295 $ 40,735,964 $ 96 673 997 $ 18,787 075 $

437,519 $ 1,619,104
573,733 459
56,280
17,212
1,001,842 25,122
3 731 271 $

301,016 14,234,118 12,965,980
93,869 343,463
167,968
4,173,154 7,689,738
39 969 306

Natural Classification
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and
Fellowships Utilities Supplies and Other
Services Depreciation
Total Operating Expenses

Plant Operations and Maintenance

Functional Classification

MCG only

Scholarships

Auxiliary

Patient

and FellowshiQs

EnterQrises

Care

Total Operating ExQenses

$ $ 8,053,377
2,633,386 -483,604
43,206
7,248,794
5,028,202 1,659,924
$ 24,183,285 $

2,912 $ 42,987 11,064
1,495,359
1,552,322 $

210,352 $ 2,256,929 $ 115,970,905

2,207,442

73,114,252

178,644,159

839,298

20,210,427

81,890,971

483,683

122,308

19,638

325,877

3,316,220

61,812

327,423

1,834,587 8,741,556

3,075,302 447 319

119,420,237

181,469,941 18,277,859

7,344,846 $ 215,655,145 $ 590 268 506

NOTE 17: 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). 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, 2008

EXHIBIT "D"

NOTE 17: AFFILIATED ORGANIZATIONS
MCG Health, Inc., Medical College of Georgia Foundation, Inc., and Medical College of Georgia Physicians Practice Group Foundation have been determined significant to the State of Georgia for the year ended June 30, 2008, and as such, are reported as discretely presented component units in the Comprehensive Annual Financial Report ofthe State of Georgia (CAFR). The significant discretely presented component units issue separate audited financial statements that can be obtained from the Board ofRegents ofthe University System of Georgia.

- 31 -

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SUPPLEMENTARY INFORMATION - 33-

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MEDICAL COLLEGE OF GEORGIA BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2008
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Margin Allocation Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Encumbrances Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Departmental Sales and Services Capital Outlay Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Early Retirement Program Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$ 27,113,832.42
34,422,833.10
4,174,859.61 22,159,953.36
7,231,443.00 7,603,386.87
129,989.41
$ 102,836,297.77

$

2,906,076.67

1,465, 718.64

17,899,750.46

25,729,048.61

$ 48,000,594.38

$

1,741,880.35

153,399.84

9,189,588.39

608,011.49

35,506,285.19

144,054.70

7,365,016.53

127,466.90

0.00

$ 54,835,703.39

$ 102,836,297.77

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.
- 35-

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MEDICAL COLLEGE OF GEORGIA SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2008

SCHEDULE "2"

REVENUES
State Appropriation State General Funds Tobacco Funds
Other Funds
Total Revenues
CARRY-OVER FROM PRIOR YEAR
Transfer from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Georgia Radiation Therapy Center Special Funding Initiative Research Consortium Student Education Enrichment Program Teaching
Total Expenditures
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2007
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE}

$ 156,678,006.00 $ 156,678,006.00 $

5,000,000.00

5,000,000.00

436,897,346.00

439,068,905.15

$ 598,575,352.00 $ 600,746,911.15 $

0.00 0.00 2,171,559.15
2,171,559.15

0.00

44,357,297.62

$ 598,575,352.00 $ 645,1 04,208.77 $

44,357,297.62 46,528,856.77

$

3,625,810.00 $

3,625,810.00 $

13,447,543.00

13,448,021.48

904,658.00

904,658.00

314,737.00

314,737.00

580,282,604.00

579,399,159.94

$ 598,575,352.00 $ 597,692,386.42 $

$

0.00 $

47,411,822.35 $

0.00 -478.48
0.00 0.00 883444.06
882,965.58
47,411,822.35

51,781,178.66 80,148.40

977,297.77 -977,297.77

-80,148.40 -44,357,297.62

$

54,835,703.39

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Capital Outlay Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Early Retirement Program Inventories
Total Reserved
Unreserved Surplus
Total Fund Balance
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.
-37-

$

1,741,880.35

153,399.84

9,189,588.39

608,011.49

35,506,285.19

144,054.70

7,365,016.53

127,466.90

$

54,835,703.39

0.00

$

54,835,703.39

MEDICAL COLLEGE OF GEORGIA STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008

Georgia Radiation Therapy Center Other Funds

Original Appropriation
3,625,810.00

Final Budget
3,625,810.00

Current Year Revenues

Funds Available Com~ared to Budget

Prior Year Carrv-Over

Total Funds Available

3,625,810.00

0.00

3,625,810.00

Variance Positive (Negative)
0.00

Special Funding Initiatives State Appropriation State General Funds Tobacco Funds
Total Special Funding Initiatives

8,292,639.00 5,000,000.00
13,292,639.00

8,447,543.00 5 000 000.00
13,447,543.00

8,447,543.00 5 000 000.00
13,447,543.00

0.00

8,447,543.00

0.00

0.00

5 000 000.00

0.00

0.00

13,447,543.00

0.00

Research Consortium State Appropriation State General Funds

0.00 $

904 658.00 $

904 658.00 $

0.00 $

904 658.00 $

0.00

Student Education Enrichment Program State Appropriation State General Funds

314 737.00 $

314 737.00 $

314 737.00 $

0.00 $

314 737.00 $

0.00

Teaching State Appropriation State General Funds Other Funds
Total Teaching
Grand Totals All Programs

148,028,053.00 417 525 943.00
565 553 996.00

147,011,068.00 433,271 536.00
580 282 604.00

147,011,068.00 435 443 095.15
582,454,163.15

0.00 44 357 297.62
44 357,297.62

147,011,068.00 479 BOO 392.77
626 811 460.77

0.00 46,528,856.77
46 528 856.77

582,787,182.00 $

598,575,352.00 $ 600,746,911.15 $

44,357,297.62 $

645,104,208.77 $ 46,528,856.77

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.

-38-

SCHEDULE "3"

Expenditures Compared to Budget

Variance

Positive

Actual

<Negative)

Actual Funds Available
Over/( Under) Expenditures

Prior Period Adjustments

Other Adjustments

3,625,810.00

0.00

0.00

0.00

0.00

Program Fund
Balances
0.00

Transfers 0.00

Program Fund Balances

Reserve

Surplus

0.00

0.00

Total Fund Balance
0.00

8,448,021.48 5 000000.00
13,448 021.48

-478.48 0.00
-478.48

-478.48 0.00
-478.48

26,940.69 0.00
26,940.69

0.00

26,462.21

0.00

0.00

0.00

26,462.21

478.48 0.00
478.48

0.00

26,940.69

0.00

0.00

0.00

26,940.69

26,940.69 0.00
26,940.69

904 658.00 $

o.oo $ _ _ _....;o._.o,o"" $ -973934.33 $

0.00 $ -973 934.33 $ 820,085.30 ===-="'o.,oo~ s -153 849.03 $_..;;.:.1,53~84=9.~03~

314 737.00 $

0.00 $

0.00 $ _ __;0~.0~0~ $

0.00 $

0.00 $

0.00 $

0.00 $--~0-li)OO~$

0.00

147,017,814.12 432 381 345.82
579 399159.94

-6,746.12 890,190.18
883444.06

-6,746.12 47 419 046.95
47 412 300.83

112,528.03 834 465.61
946 993.84

0.00 -212 657.09
-212 657.09

105,781.91 48,040,855.47
48,146 637.38

6,746.12 -827 309.90
-820 563.78

0.00 47 199,165.26
47 199165.26

112,528.03 14 380.31
126 908.34

112,528.03 47 213,545.57
47 326,073.60

s_ _ _ 597,692,386.42 $ 882,965.58 $ 47,411,822.35 $===o"'.o:::O;.$ -212,657.09 $ 47,199,165.26

o;;,;;;;;oo:. $ 47,199,165.26 $==="'o."'oo:. $ 47,199,165.26

Unexpendable Reserves Early Retirement Program Uncollectible Accounts Receivable Inventories

7,365,016.53 144,054.70 127 466.90
54,835,703.39

-39-

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MEDICAL COLLEGE OF GEORGIA RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2008

SCHEDULE "4"

Totals per Annual Supplement

Accruals June 30, 2008 June 30, 2007

Compensated Absences June 30, 2008 June 30, 2007

Adjustments

Shared Services on Jointly Staffed Personnel

Augusta State University

Hilliard,

Jennifer L.

Georgia State University

Brinton,

Margo A

Greer,

Susanna F.

University of Georgia

Hohnadel, Elizabeth

Kozak,

Anna

Middlemore, Mary L.

SALARIES
$ 294,327,267 $

TRAVEL 3,112,436

2,959,733 -2,677,967

300,338 -96,554

27,149,658 -27,174,864

-1,830 300 300
15,404 6,688
10,375
$ 294,615,064 $ ==,.,.3,=31=6=,2=20=

- 41 -

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

MEDICAL COLLEGE OF GEORGIA AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-512-07-01

Further Action Not Warranted (1)

AUDITOR'S COMMENTS

(1) Findings/internal control deficiencies ofthis nature, that are not deemed significant deficiencies or material weaknesses and do not require reporting in the audit report in accordance with Statements on Auditing Standards (SAS) 112 will be communicated in a management letter in subsequent periods.

SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS

MEDICAL COLLEGE OF GEORGIA SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.