Middle Georgia College, Cochran, Georgia, report on review of the financial statements for the fiscal year ended June 30, 2002

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STATE OF'GEORGIA .., (

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DEPA.RTMENT OF.AUDITS AND-ACCOUNTS

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MIDDLE GEORGIA_ COLLEGE ,.,

COCHRAN, (

G, EORGI'A

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' REPORT 'ON REVIEW

"OF THE-FINANCIAL STATEMENTS

FOR THE FISCAL YEAR ENDED JUNE 30, 2002 , I

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Russell W. Hinton
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,State Auditor ,t

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MIDDLE GEORGIA COLLEGE - TABLE OF CO:NTE!\"TS -

SECTION I

FINANCIAL

INDEPENDENT ACCOUNTANT'S COMBINED REPORT ON REVIEW OF BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENTS DISCUSSION AND ANALYSIS

3

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

11

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

12

C STATEMENTOFCASHFLOWS

13

D NOTES TO THE FINANCIAL STATEMENTS

15

SUPPLEMENTARY INFORMATION

SCHEDULES

SCHEDULESOFREVENUESANDEXPENDITURESCOMPAREDTO

BUDGET - (NON-GAAP BASIS)

I

RESIDENT INSTRUCTION

33

2

LOTTERY FOR EDUCATION

34

3 RECONCILIATION OF SALARIES AND TRAVEL

35

4 RECONCILIATION OF PER DIEM AND FEES

36

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

MIDDLE GEORGIA COLLEGE -TABLE OF CONTENTS-
SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

RL1"lLI \\' H1, ro'I
STATE 1'UDJTOR 14041 6~ 2 7l.

DEPARTMENT OF AUDITS AND ACCOUNTS
::!')-t \VJ..,hmg1on Street "l \V Suite 114 AtlJnt:1 Gcnrg1.1 3013484t)f)
December 18, 2002

Honorable Sonny Perdue, Governor Members ofthe General Assembly ofGeorgia Members of the Board ofRegents of the Uruversny System of Georgia
and Honorable Richard J Fedennko, President Middle Georgia College
INDEPENDENT ACCOUNTANT'S COMBINED REPORT ON REVIEW OF BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen
We have reviewed the accompanymg basic financial statements (Exhibits A through D) of Middle Georgia College, an organizational urut ofthe State ofGeorgia, as of and for the year ended June 30, 2002. m accordance with Statements on Standards for Accountmg and Review Services issued by the Amencan Institute of Certified Pubhc Accountants All mformatlon mcluded m these financial statements 1s the representation of the management of Middle Georgia College
A review consists pnnc1pally ofmqumes of College personnel and analytical procedures apphed to financial data It 1s substantially less m scope than an audit m accordance with aud1tmg standards generally accepted m the Uruted States of Amenca, the obJectlve of wluch 1s the express10n of an op1ruon regardmg the financial statements taken as a whole Accordmgly, we do not express such an op1ruon
Based on our review, with the exception of the matter discussed m the fourth paragraph, we are not aware ofany matenal modifications that should be made to the accompanymg financial statements m order for them to be m conformity with accountmg pnnc1ples generally accepted m the Uruted States of Amenca
As descnbed m Note 1 to the financial statements. the College did not recogmze June 30, 2001, encumbrances as expenses m the June 30, 2002, basic financial statements To conform to generally accepted accountmg pnnc1ples, encumbrances should be recogmzed as expenses and hab1ht1es m the penod that goods and services are received The effects on the basic financial statements of this departure from generally accepted accounting pnnc1ples were not reasonably determmable
02ARL-67

As descnbcd m Note I, Middle Georgia College adopted the prov1s10ns of Governmental Accountmg Standards Board (GASB) Statement No 35, Basic Financial Statements - and Management's Discusswn and Ana(vsis - for Public Colleges and Unzversllles, as amended by GASB Statement No 37, Basic Financial Statements - and Management's Discusswn and Analvs1s for State and Local Governments, and GASB Statement No 38, Certain Financial Statements Note D1Sclosures, as of July I, 2001, to implement a new financial reportmg model
Management's D1scuss1on and Analysis 1s not a reqmred part ofthe basic financial statements but 1s supplementary mformalion required by the GASB We have apphed certam lumted procedures, which consisted pnnc1pally of mqumes ofmanagement regardmg the methods ofmeasurement and presentalion oftlus supplementary mformallon, and we are not aware of any matenal mod1ficalions that should be made thereto.
Our review was made for the purpose of expressmg limited assurance that there are no matenal mod1ficat1ons that should be made to the financial statements m order for them to be m conformity with accountmg pnnc1ples generally accepted m the Umted States ofAmenca The accompanymg supplementary mformallon (Schedules I through 4) 1s presented for add11ional analysis purposes Such mformalion has been subJected to the mqumes and analytical procedures apphed m the review of the financial statements, and we are not aware ofany material mochficalions that should be made to such data.
Respectfully submitted,
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RWHas 02ARL-67

State Auditor

REQUIRED SUPPLEMENTARY INFORMATION -I-

MIDDLE GEORGIA COLLEGE
Management's Discussion and Analysis

Introduction

Middle Georgia College 1s one of the 34 mstltutlons of the Umvers1ty System of Georgia The College was founded m 1884. Middle Georgia College 1s both a comprehensive two-year college servmg central Georgia and a residential college servmg traditional and non-traditional students from throughout Georgia and, to a hmlted extent, from other states and countries The mam campus m Cochran serves both commuting and residential students The Dublm Center and selected offcampus sites serve commutmg students from the middle Georgia area Middle Georgia College awards associate degrees designed to transfer to four-year mstltutlons or to prepare students for careers m 90 ma3ors and concentrations, with popular programs mcludmg busmess adm1mstratlon, education and nursmg The 1nstltut1on enrolls approximately 2,200 students, with the maJonty commg from the unrned!ate area

Faculty

Students

FY2002 FY2001 FY2000

133

2,164

127

1,941

134

2,064

Overview ofthe Financial Statements and Financial Analysis

Middle Georgia College 1s proud to present its financial statements for fiscal year 2002 The emphasis ofd1scuss1ons 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 m Net Assets, and, the Statement of Cash Flows Tlus d1scuss1on and analysis of the University's financial statements provides an overview of1ts financial act1V1tles for the year Middle Georgia College has elected to not restate pnor penods for purposes ofprov1dmg the comparative data for this Management's D1scuss10n and Analysis However, m future years, when pnor penod mformatlon 1s available, a comparative analysis will be presented

Statement ofNet Assets

The Statement ofNet Assets presents the assets, hab1ht1es, and net assets ofthe College as ofthe end ofthe fiscal year The Statement ofNet Assets 1s a pomt oftime financial statement The purpose of the Statement of Net Assets 1s to present to the readers ofthe financial statements a fiscal snapshot of Middle Georgia College The Statement ofNet Assets presents end-of-year data concemmg Assets (current and non-current), L1ab1ht1es (current and non-current), and Net Assets (assets mmus hab1ht1es) The difference between current and non-current assets will be discussed m the notes to the financial statements

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From the data presented, readers of the Statement of Net Assets are able to dctermmc the assets available to contmue the operations of the msutut10n They are also able to determmc how much the mst1tut1on owes vendors, mvestors and lendmg mslltuhons

Fmally, the Statement ofNet Assets provides a picture ofthe net assets (assets mmus hab1hues) and their availab1hty for expenditure by the mshtut10n Net assets are d1v1ded mto three maJor categones The first category, mvested m capital assets, net of debt, provides the msutuuon's equny m property, plant and eqwpment owned by the mshtuhon The next asset category 1s restncted net assets, which 1s d1v1ded mto two categones, nonexpendable and expendable The corpus of nonexpendable restncted resources 1s only available for mvestment purposes Expendable restncted net assets are available for expenditure by the mshtuhon but must be spent for purposes as determmed by donors and/or external entltles that have placed ume or purpose restnctlons on the use of the assets The final category 1s unrestncted net assets Unrestncted assets are available to the ms!ltuhon for any lawful purpose of the mshtuhon

Statement of Net Assets, Condensed (thousands of dollars)

Assets Cwrent Assets Capital Assets, Net Other Assets

$ 3,178 15,136 I 007

Total Assets

$ 19,321

Liabilities Current L1ab1hhes Non-Current L1ab1hhes

S 1,905
319

Total Liabilities

S 2.224

Net Assets Invested m Capital Assets, Net of Debt Restncted - Nonexpendable Restncted - Expendable Unrestncted

s 15,091
581 220
1.205

Total Net Assets

$ I Z,Q2Z

Statement ofRevenues, Expenses and Changes in Net Assets

Changes m total net assets as presented on the Stalement of Net Assets are based on the acl!v1ty presented m the Statement of Revenues, Expenses and Changes m Net Assets The purpose of the statement 1s to present the revenues received by the mshtuhon, both operatmg and nonoperatmg, and the expenses paid by the 1nst1tut1on, operatmg and nonoperatmg, and any other revenues, expenses, gains and losses received or spent by the msutuuon Generally speakmg operatmg revenues are received for prov1dmg goods and services to the vanous customers and consl!tuenc1es of the

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instituuon Operating expenses are those expenses paid to acqmre or produce the goods and services provided in return for the operating revenues, and to carry out the m1ss1on of the institution Nonoperatmg revenues are revenues received for which goods and services are not proVJded For example state appropnations are nonoperating because they are provided by the Legislature to the inst1tut1on without the Legislature directly receiving commensurate goods and serVJces for those revenues

Statement of Revenues, Expenses and Changes in Net Assets, Condensed (thousands of dollars)

Operating Revenues Operating Expenses

$ 7,821 19,708

Operatmg Loss

S -11,887

Nonoperating Revenues and Expenses

11,320

Increase (Decrease) in Net Assets

$ -567

Net Assets at Beginning of Year, as Onginally Reported

S 41,557

Curnulal.lve Effect of Changes in Accounl.lng Pnnc1ple

-23,893

Net Assets at Beginning of Year Restated

$ 17,664

Net Assets at End of Year

$ 17 097

The Statement of Revenues, Expenses and Changes m Net Assets reflects a negative year with a decrease m the net assets at the end ofthe year. Some lughhghts ofthe informatlon presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows

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Revenue By Source (thousands of dollars) For The Year Ended June 30, 2002

Operatmg Revenue Tmt1on and Fees Grants and Contracts Sales and Services of Educat10nal Departments Aux1hary Other
Total Operatmg Revenue
Nonoperatmg Revenue State Appropnalions Grants and Contracts Investment Income Other
Total Nonoperatmg Revenue
Total Revenues
Expenses (thousands of dollars) For The Year Ended June 30, 2002

$ 1,778 2,256 154 3,575 58
$ 7,821
$ 10,785 416 20 106
$ 11,327
$ 12,1~~

Operatmg Expenses lnstruclion Pubhc Service Acadenuc Support Student Services Insutulional Support Plant Operations and Mamtenance Scholarships and Fellowships Aux1hary Enterpnses Unallocated Depreciation

s 6,427
70 1,744 1,379 2,252 2,244
973 3,458 1.161

Total Operatmg Expenses

$ 19,708

Nonoperatmg Expenses

Interest Expense (Capital Assets)

7

Total Expenses

$ 12,715

The cumulattve effects of changes m accountmg pnnc1ple are the result of the College adoptmg deprecialion on capital assets and recogruuon of compensated absences

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Statement of Casi, Flows

The final statement presented by Middle Georgia College 1s the Statement of Cash Flows The Statement of Cash Flows presents delailed mformatlon about the cash activity of the mst1tut1on dunng the year The statement 1s divided mto five parts The first part deals with operatmg cash flows and shows the net cash used by the operatmg act1v1t1es of the mstltution The second sect10n reflects cash flows from non-capital financmg act1v1t1es This sect10n reflects the cash received and spent for nonoperatmg, non-mvestmg, and non-capital financmg purposes The tlurd secuon reflects the cash flows from mvestmg actlVItles and shows the purchases, proceeds, and mterest received from mvestmg act1v1t1es The fourth section deals with cash flows from capital and related financmg activities Tlus section deals with the cash used for the acqmsltlon and construction of capital and related items The fifth section reconciles the net cash used to the operating mcome or loss reflected on the Statement of Revenues, Expenses and Changes m Net Assets

Cash Flows for the Year Ended June 30, 2002, Condensed (thousands of dollars)

Cash Provided (Used) By. Operating Act1v1t1es Non-Capital Fmancmg ActJVItles Investmg Act1v1t1es Capital and Related Fmancmg Act1v1Ues

$ -12,007 10,902 900 -147

Net Change m Cash Cash, Begmnmg ofYear

$ -352 1,057

Cash, End of Year Capital Assets

$ 705

The College had no s1gmficant capital asset additions for fac1ht1es m fiscal year 2002

For additional mformat10n concermng Capital Assets, see Notes I, 6, 8, and 9 m the notes to the financial statements

Economic Outlook

The College 1s not aware of any currently known facts, dec1s1ons, or conditions that are expected to have a s1gmficant effect on the financial position or results of operations dunng tlus fiscal year beyond those unknown vanauons havmg a global effect on Virtually all types ofbusmess operations The College's overall financial pos1t1on 1s stable. Even with a relatively flat funded year, the College sustamed only a shght decrease m Net Assets However a number of vacant positions have gone unfilled The College antlctpates the current fiscal year will be much hke last and will mamtam a close watch over resources to mamtam the College's ab1htyto react to unknown mternal and external issues

Richard J Fedennko, President Middle Georgia College
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BASIC FINANCIAL STATEMENTS
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MIDDLE GEORGIA COLLEGE STATEMENT OF NET ASSETS
JUNE 30. 2002
ASSETS
Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, Net Federal Financial Assistance Other Prepaid Items lnventones
Total Current Assets
Noncurrent Assets Investments Notes Rece,vable, Net
Caprtal Assets, Net (See Note 6)
To1al Noncurrent Assets
To1al Assets
LIABILmES
Current L1ab1lrties Salanes Payable Payroll Wrthholdmgs Accounts Payable Deferred Revenue Funds Held for Others Capital Leases Compensated Absences Other L1ablhbes
To1al Current l.Jablhbes
Noncurrent l.Jablhbes Compensated Absences
Total L1abllrties
NET ASSETS
Invested In Capital Assets, Net of Related Deb1 Restncted for
Nonexpendable Expendable Unrestnded
Total Net Assets
See Independent Accountant's Combined Report on Review of Bas,c F1nanaal Statements and Supplementary lnformat10n
The notes to the finanaal statements are an integral part of this statement
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EXHIBIT"A"

$

704,923 12

870 850 64

444,139 82 638,68808 275,940 90 243 01140

$ 3 177 553 96

s

822,578 80

184,560 44

15,135,681 21

$ 16 143 020 45
s 19 320 574 41

$

34,298 64

59,753 42

511,362 50

876,93002

93,728 77

45,149 33

248 908 65

34 994 33

s 1 905,125 66

318 490 30
$ 2,223.615 96

$ 15,090,731 88
581,491 85 219,682 43 1,205.052 29

$ 17 096 958 45

MIDDLE GEORGIA COLLEGE STATEMENT OF RE\/ENUES. EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 3Q 2002

EXHIBIT "B"

OPERATING REVENUES
F-Student Tu1bon and Fees Less Scholaratup Allowances Grants and Conlracls
Rents and Royalties Sales and Services of Educabonal Departmorts Aulalialy Enle!J>rtses
ROllldence Halls Book&I019 FoodSeMcea Health Services lntercollaglate AINetlcs Othor Orgarizallons Other Operating - ......
Total Operating Revenues
OPERATING EXPENSES
Salanes Faa,tty Slaff
Employee Benefita OlhorPenlonalS8Mces Travel SdlolaBh!ps and Fellowahlps Ubllbes Supplies and Other SeMces Depreciation
Total Operating Expenses
Operating Income (Lou)
NONOPERATING REVENUES {EXPENSES)
State Appropr1allons Grants and Contracts
Federal State Nongowrrrnen1al Interest and Other Investment Income I - Expense (Capllal Aslets) Other Nonoperating R.....-.-
Nat NonoperatJng R9V9IUIS
lncreasel(Oecrease) In Nat As8ets
NatAsaets Nat Assets - Begoruung of Year aa Originally Reported
CimutalMI Effect of Changes n Accou1bng Principle
Net Assets - Beg111nmg of Year, Re.stated
Net Assets - End of Year
See Independent Accountant's Combined Report on Review of Basic Fmanoal Statements
a n d s ~ lnformaUon
The notes to the flnandsl statements are an Integral part of this .statement - 12 -

s 3 088 648 15
-1,310,817 78
2,256,232 83 15,002 10
153,545 63
1,046,357 26 794 833 65
1217,14808 42 081 53
357,048 30 117,601 70 43 509 43
$ 7 821 390 88

$ 4131,557 83 4 981,956 79 2,559,355 84 4083000 11801597 1159 557 21 837,325 6e 4 718 876 73 1.181.28969
s 19.708.365 72
s -1188697484

s 10,785 042 82

381 813 94
3,969 27
29 no 10
19,830 45
-6,956 32
106 200 00

s 11,319.67026

s

-567 304 58

s 41 557,582 87
-23,893,319 84
s 17,664,263 03

s 1710961958 45

MIPQLE GEORGIA COLLEr'S STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30 2002

CASH FLOWS FROM OPERATING ACTIVITIES Tuttlon and Fee1 Grw1tl and Caitradl Sain and Servlcet of Educatlonal Depertmentl PayrnentstoSupplter. Payments to Ernployeeill Payme:ntl k)r Schollnhlpa and Fellowlhlp.s Leana luuecl to Studants and Emptoyees
-.-. I--th---- Co1ecUonOfLoan1to StudentsaidE~
Aulllaary EIUl'pnM Charges R..-aHalll
Otner Cl<ganlza110nS 011w ,._,.. ( P - )
Net Cash PnMdecl (Used) by Operdig AdMbel
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITlES State Apprcpriabonl Agency Fund1 T/'&'1Ud,onl Giftl and Graril ReeeMKI tor Other tt.-. Capo! Pl.rpolel Ot1W Nonoperatllg Rece,pts
Net Cash Flows PnMded (Uam) by Noncapltal Fmndng Ac:bv1Ue1
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTMTIES
_.,c.pllal ....... Cepltal Gr.-a and Glf'll Recllved
Pl'Tlapal Paid on Capftal Dllbl and leae lnter91t Paid on Capital Debt and LUie
Nelcah-(UIOd)by~llnd-F--
CASH FLOWS FROM INVESTING ACTI\ITTIES lnterell on 111welb1a.1ta PLnN'Ndlmwt.1.a1t1
Net c a h - (UIOd) by lnwlt/ng-
Net lncreUel(Deauu) .n Cah
Cah and C a t i ~ - June 30 2001 lNI Short-Tenn lnveamenll
CUh aid CUh Eqlivalentl - Begmln,g cf Y..-

Cash and Cash Equtvalentl - Encl of y..,

__, RECONCILIATION Of OPERATING LOSS TO NET CASH
PROVIDED (USED) BY OPERATING ACTIVITIES

Operatlng lnoorne (Lou) AdJUIUl'Wl'dl, to Reconclle Net lnCorne (Lou) to Net CUh

-

(\)NCI) by ()porBOng-

Change Ill AaNtl and Uabllltial
..,,.._..........., Not
, _ Notes R.aiMlblff, Net
--Aoco.-u Peyable -""'"'"-"'"- Olher L~lbel
eo,... ete1Atanc:a

Nat Cah PrtMdeCI (UNCI) by 0perat.n,g AdMlles S-1116$ idm1l&ccct 1ta'sComblnodReportonR8\M"NofBu1c:FlnanaalStatements aKI $'4Jil 1::e1.t.-y tnfonnabon
The notes to the financial statements .., ., Integral pa1 of ttu ltatemenl
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EXHIBIT-C~

s 1878-43162
180051863 153 5,,45 63
-9600 729 88 -9 t01 704 78 -1 159 557 21
-1390000 5839 !!7
1 083 538 -46 7941133 65
1 27!! 521 65 "8 fl97 78
-40315660 117,601 70 30411102
s -12 006 797 36

s 10,785 042 82
-304 53305 -415 553 31
6 20000
I 10902 2130B

s

100 00000

-198 589 17

-4180473

-6~32

s

-1-47 350 22

s

15&9-4-45

!!84 783 89

s

ecJ0-478 1-4

s

-351-45636

s 2 6570096S
-1 600,~ 17

s 1 056 379 -48

s

70-4 923 12

s -11 88e97-48,4
11e1.2&969
-257'5518 -3 744 -41
-22"4-48 -8 Ol50 13 -1 261 -486 17
7;7159 299 31904 -3!!,610 T-4
11 01215
s -12 ooe 797 :,s

MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 1 SUMMARY OF SIGNIFICM'T ACCOUNTING POLICIES
NATURE OF OPERATIONS Middle Georgia College serves the state, and nat10nal commurutles by prov1dmg its students with academic mstructlon that advances fundamental knowledge, and by d1ssemmatmg knowledge to the people of Georgia and throughout the country
REPORTING ENTITY Middle Georgia College 1s one of thirty-four (34) State supported member mst1tut10ns of higher education m Georgia which compnse the Uruvers1ty System ofGeorgia, an orgaruzat1onal urut ofthe State of Georgia The accompanymg financial statements reflect the operat10ns of Middle Georgia College as a separate reporting entity
The Board of Regents has consl!tuUonal authonty to govern, control and manage the Umvers1ty System ofGeorgia. Tlus authonty mcludes but 1s not !muted to the power to designate management, the ab1hty to stgiuficantly mfluence operations, the authonty to control mst1tut1ons' budgets, the power to determme allotments of State funds to member mst1tut1ons and the authonty to prescnbe accountmg systems and adrmrustratlve pohc1es for member 1nst1tut1ons Middle Georgia College does not have authonty to retam unexpended State appropnatlons (surplus) for any given fiscal year Accordmgly, Middle Georgia College 1s considered an orgaruzallonal urut ofthe Board ofRegents of the Uruvers1ty System of Georgia reportmg entity for financial reportmg purposes because of the s1gmficance of its legal, operational, and financial relat10nslups with the Board ofRegents as defined m Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accountmg and Fmanc1al Reportmg Standards
,
FINANCIAL STATEMENT PRE~ENTATION In June 1999, the GASB issued Statement No 34, Basic Financial Statements and Management Dtscusswn and Analysisfor State and Local Governments Tlus was followed m November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Ana(vsis for Publzc Colleges and Umversllles The State of Georgia 1s requ1red to implement GASB Statement No. 34 as of and for the year ended June 30, 2002 As an organ1zat10nal urut of the State of Georgia, the College 1s also reqmred to adopt GASB Statements No 34 and No 35 as amended by GASB Statements No 37 and No 38 The financial statement presentation required by GASB Statements No. 34 and No 35 as amended by GASB Statements No 37 and No 38 provides a comprehensive, entity-Wide perspective of the College's assets, hab1ht1es, net assets, revenues, expenses, changes m net assets, cash flows, and replaces the fund group perspective previously reqmred.
The College has elected to not restate its 2001 financial statements to conform With the new financial statement presentation, therefore comparauve financial mformation will not be presented for fiscal year 2002 S1gn1ficant accountmg changes made m order to comply With the new reqmrements mclude (1) adoption ofdepreciation on capital assets, and (2) recognition ofcompensated absences

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MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEME:t-<'TS
JUNE 30. 2002

EXHIBIT "D"

NOTE I SUMMARY OF SIGNIFICAf,ff ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION Generally Accepted Accountmg Prmc1ples (GAAP) reqmres that the reportmg of summer school revenues and expenses be between fiscal years rather than m one fiscal year Due to the lack of matenallly, lnslitulions ofthe Uruvers1ty System ofGeorgia will contmue to report summer revenues and expenses m the year m wluch the predommate act1V1ty takes place
At June 30, 2001, encumbrances (contractual obhgat!ons for goods and serV1ces not received at fiscal year end) were recorded as expenditures by the College mstead ofreservat10ns of fund balance as required by generally accepted accountmg pnnc1ples For fiscal year 2002, the College changed its method ofrecordmg encumbrances such that encumbrances at June 30, 2002 were not recorded as expenses This change 1s m accordance with generally accepted accounting pnnc1ples
No adJustments however, have been made on the financial statements to restate the fund balance at July I, 2001 for the June 30, 2001 encumbrances recorded as expenditures m fiscal year 2001 The net effect of the above accountmg treatment resuJted m an understatement of expenses on the accompanymg financial statements for pnor year encumbrances wluch should have been reflected as expenses m the penod when goods and SerV1ces were received
BASIS OF ACCOUNTING For financial reportmg purposes, the College 1s considered a special-purpose government engaged only m busmess-type acUV11ies Accordmgly, the College's financial statements have been presented usmg the economic resources measurement focus and the accrual basis of accountmg, except as noted m the precedmg paragraphs. Under the accrual basis, revenues are recogmzed when earned, and expenses are recorded when an obhgal!on has been mcurred All s1gruficant mtra-college transaclions have been ehmmated
The College has the opuon to apply all Fmanc1al Accountmg Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB The College has elected to not apply FASB pronouncements issued after the applicable date
RESTATEMENT OF NET ASSETS - BEGINNING OF YEAR As a result of the adoplion ofGASB Statement No 34, the College was also required to make certam changes m accountmg pnnc1ples, specifically (I) adopl!on ofdepreciation on capital assets, and (2) recordmg of compensated absences GASB Statement No 34 requires certam summer semester revenues be recogruzed between fiscal years rather than the fiscal year m which the semester was predommantly conducted The Uruvers1ty System of Georgia has chosen to contmue to record summer revenue m the year m which the semester was predommantly conducted Net assets at July I, 2001 were reduced by $23,893,319.84 for the cumulal!ve effect of these changes

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MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS/SHORT-TERM INVESTMENTS Cash and Cash Eqmvalents consist of petty cash, demand deposits and hme depos!ls in authonzed financial inst1tut10ns, and cash management pools that have the general eharactensl!cs of demand deposit accounts
INVESTMENTS The College accounts for its investments at faJT value in accordance with GASB Statement No 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools Changes in unreahzed gain (loss) on the carrying value of investments are reported as a component of mvestment mcome m the statements of revenues, expenses, and changes m net assets
ACCOUNTS RECEIVABLE Accounts receivable consists oftm!Jon and fee charges to students and aux1hary enterpnse services provided to students, faculty and staff, the maJonty of each residing m the State of Georgia Accounts receivable also include amounts due from the Federal government, state and local governments, or pnvate sources, m connecnon with reimbursement ofallowable expenditures made pursuant to the College's grant and contracts Accounts receivable are recorded net of estimated uncollectlble amounts
INVENTORIES Consumable supphes are recorded on the consumphon method and are valued at cost using the weighted average method
Resale Inventones are valued at cost using the first-m, first-out method
NON-CURRENT CASH AND INVESTMENTS Cash and investments that are externally restncted and cannot be used to pay current hab1ht1es are classified as non-current assets m the statements of net assets
CAPITAL ASSETS Capital assets are recorded at cost at the date of acqu1s1t1on, or fair market value at the date of donation in the case of gifts For equipment, the College's cap11ahzat10n pohcy mcludes all items with a umt cost of $5,000 00 or more, and an esl!mated useful hfe of greater than one year Renovations to bmldmgs, infrastructure, and land improvements that exceed $100,000 00 and s1gmficantly increase the value or extend the useful hfe of the structure are cap1tahzed Routme repairs and maintenance are charged to operating expense m the year m which the expense was incurred Depreciation 1s computed using the straight-line method over the estimated useful hves of the assets, generally 40 to 60 years for bmldings, 20 to 25 years for infrastructure and land improvements, IO years for hbrary books, and 3 to 7 years for equipment

- 17 -

MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS To obtain the total picture of plant add1t1ons in the Uruverslty System, 1t 1s necessary to look at the activities ofthe Georgia State Fmancmg and Investment Comn11ss1on (GSFIC)- an orgaruzatlon that 1s external to the System GSFIC issues bonds for and on behalfofthe State ofGeorgia, pursuant to powers granted to 1t in the Constitution ofthe State ofGeorgia and the Act creatmg the GSFIC The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of wluch the full faith, credit and taxmg power of the State are pledged
Effective July I, 2001, the GSFIC retams construction m progress on their books throughout the construction penod and transfers the entire proJect to Middle Georgia College when complete For the year ended June 30, 2002, GSFIC did not transfer any capital additions to Middle Georgia College The balance of construction m progress retamed by GSFIC totaled $4,373,537 03 at June 30,2002
DEFERRED REVENUES Deferred revenues mclude amounts received for tu1t1on and fees and certam aux1hary activities pnor to the end of the fiscal year but related to the subsequent accounting penod Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned
COMPENSATED ABSENCES Employee vacation pay 1s accrued at year-end for financial statement purposes The hab1hty and expense incurred are recorded at year-end as accrued vacation payable m the Statement of Net Assets, and as a component of compensation and benefit expense m the Statements of Revenues, Expenses, and Changes in Net Assets Middle Georgia College had accrued hab1hty for compensated absences m the amount of $556,386 80 as of July I, 2001 For Fiscal Year 2002, $380,957 76 was earned m compensated absences and employees were paid $369,945 61, for a net mcrease of$1l,01215
NON-CURRENT LIABILITIES Non-current hab1h11es mclude (I) hab1h11es that will not be paid w1thm the next fiscal year, (2) capital lease obhgallons with contractual matunlles greater than one year, and (3) other hab1ht1es that, although payable withm one year, are to be paid from funds that are classified as non-current assets
NET ASSETS The College's net assets are classified as follows
Invested m capital assets, net of related debt Tlus represents the College's total mvestment m capital assets, net of outstandmg debt obhgallons related to those capital assets To the extent debt has been incurred but not yet expended for capital assets, such amounts are not mcluded as a component of invested m capital assets, net ofrelated debt (The term "debt obligations" as used m this defirullon does not include debt of the GSFIC as discussed above )
- 18 -

MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS Restricted net assets - nonexpendable Nonexpendable restncted net assets consist of endowment and s1m1lar type funds m which donors or other outside sources have supulated, as a condition of the gift mstrurnent, that the pnnc1pal 1s to be mamtamed mviolate and m perpetmty, and mvested for the purpose of producmg present and future mcome, wluch may either be expended or added to pnnc1pal The College may accumulate as much ofthe annual net mcome of an mst1tut1onal fund as 1s prudent under the standard estabhshed by Code Section 44-15-7 of Annotated Code of Georgia.
Restricted net assets - expendable Restncted expendable net assets mclude resources m wluch the College 1s legally or contractually obhgated to spend resources m accordance with restnct1ons imposed by external tlurd parties
Unrestricted net assets Unrestncted net assets represent resources denved from student tuition and fees, state appropnatlons, and sales and services of educat10nal departments and aux1hary enterpnses These resources are used for transactions relating to the educat10nal and general operat10ns of the College, and may be used at the discretion of the govemmg board to meet current expenses for those purposes, except for unexpended state appropnatlons (surplus) of$12,267 39 Unexpended state appropnatlons must be refunded to the Board ofRegents ofthe Uruvers1ty System of Georgia - Admmtstratlve Central Office for remittance to the Office of Treasury and Fiscal Services These resources also mclude aux1hary enterpnses, wluch are substantially self-supporting actlv1t1es that provide services for students, faculty and staff.
When an expense 1s mcurred that can be prud usmg either restncted or unrestncted resources, the College's pohcy 1s to first apply the expense towards unrestncted resources, and then towards restncted resources.
INCOME TAXES Middle Georgia College, as a pohtical subd1v1s1on ofthe State of Georgia, 1s excluded from Federal mcome taxes under Section I 15(1) of the Internal Revenue Code, as amended.
CLASSIFICATION OF REVENUES The College has classified its revenues as either operatmg or non-operatmg revenues m the Statement of Revenues, Expenses, and Changes m Net Assets accordmg to the followmg cntena
Opera/mg revenues Operatmg revenues mclude act1v1lles that have the charactenstlcs ofexchange transactions, such as (I) student tUit10n and fees, net ofscholarslup allowances, (2) sales and services of aux1hary enterpnses, (3) most Federal, state and local grants and contracts and Federal appropnat1ons, and (4) mterest on mst1tullonal student loans

- I9 -

MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CLASSIFICATION OF REVENUES Non-operating revenues Non-operatmg revenues mclude act1vllles that have the charactenstlcs of non-exchange transactions, such as gifts and contnbutions, and other revenue sources that are defined as non-operatmg 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 appropnations and mvestrnent mcome
SCHOLARSHIP ALLOWANCES Student tu1t1on and fee revenues, and certam other revenues from students, are reported at gross with a contra revenue account of scholarship allowances m the Statement of Revenues, Expenses and Changes m Net Assets. Scholarslup allowances are the difference between the stated charge for goods and services provided by the College, and the amount that 1s paid by students and/or third parties makmg payments on the students' behalf Certam governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operatmg or nonoperatmg revenues m 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 scholarslup allowances
NOTE 2 CASH AND CASH EOUNALENTS. OTHER DEPOSITS: AND INVESTME1'.'TS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belongmg to the State of Georgia (and thus Middle Georgia College) cannot be placed ma depository paymg mterest longer than ten days without the depository prov1dmg a surety bond to the State. In heu of a surety bond, the depository may pledge as collateral any one or more of the followmg secunties as enumerated m the Official Code of Georgia Annotated Section 50-17-59
1 Bonds, bill, certificates ofmdebtedness, notes, or other direct obhgat1ons ofthe Uruted States or of the State of Georgia
2 Bonds, bills, certificates of mdebtedness, notes, or other obhgauons of the counties or muruc1paht1es of the State of Georgia
3. Bonds of any pubhc authonty created by the laws ofthe State of Georgia, prov1dmg that the statute that created the authonty authonzed the use of the bonds for tlus purpose
4 Industnal revenue bonds and bonds of development authont1es created by the laws of the State of Georgia

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MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

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

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES 5 Bonds, bills, cerllficates of mdebtedness, notes, or other obhgauons of a subs1d1ary corporation ofthe Umted States government, which are fully guaranteed by the Umted States government both as to pnnc1pal and mterest, or debt obhgat10ns issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Fann Credit Banks, the Federal Home Loan Mortgage Associanon, and the Federal National Mortgage Associal!on

6 Guarantee or msurance of accounts proVIded by the Federal Deposit Insurance Corporation

As authonzed m the Official Code of Georgia Annotated Sect10n 50-17-53, the State Depository Board has adopted pohc1es which allow agencies of the State of Georgia (and thus Middle Georgia College), the option of exemptmg demand deposits from the collateral requirements

The Treasurer ofthe Board ofRegents 1s responsible for all details relative to fum1shmg the required depository protection for all umts of the Umvers1ty System of Georgia

CATEGORIZATION OF DEPOSITS The College's cash deposits are categonzed by nsk as follows

Category 1 - Amounts covered by depository insurance or collaterahzed with secuntles (at fa.1r value) held by the College or by its agent m the College's name

Category 2 - Amounts collaterahzed with secuntles (at fau value) held by the pledging financial mstltutlon's trust department or agent m the College's name

Category 3 - Amounts collaterahzed with secunl!es (at fau value) held by the pledgmg financial mst1tut1on, or by its trust department or agent but not m the College's name, and amounts uncollaterahzed

Cash Deposits as of June 30, 2002 are as follows

Cash Deposits Investment Ponfol10
Accounts
Total Cash Deposits

Carrymg
Amount

Bank
Balances

Risk Catcgoacs

2

3

$ 667.563 24 S 994.738 52 $ 168,196 86 $ 826.541 66 S

000

29,984 06

29 984 06

29,984 06

S 69754730 SI 0247225R S 19818092 S_,,82654166 s.___9,...,0.0

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MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 2 CASH AND CASH EQUIVALENTS, OTHER DEPOSITS, AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS The College's mvestments are categonzed as to credit nsk w1thm the three categones descnbed below

Category 1 - Insured or registered, or secunlles held by the College or its agent m the College's name

Category 2 - Uninsured and unregistered, With secunlles held by the counter party's trust department or agent m the College's name

Category 3 - Urunsured and unregistered, w1tb secunlles held by the counter party, or by its trust department or agent, but not m the College's name

At June 30, 2002, the College's mvestments consisted of the followmg

Type of Investments
Common Stock

Risk Catcgones
2

Carrymg Amount

S 822 57 80 S

ooo s_ ____.o..,oo.,. s s22,s1s so

Investments Not Subject to Categonzattons Board of Regents
Short-Tenn Fund Balanced Income Fund

721,618 09
149,232 55

Total Investments

s I 693 429 44

Funds mvested m an mvestment pool managed by another governmental enllty are not reqmred to be categonzed smce the College did not own any specific, 1den11fiable mvestment secunlles ofthe pool

NOTE 3 ACCOUNTS RECEIVABLE

Accounts receivable consisted of the followmg at June 30, 2002

Student Tu1t1on and Fees Aux1hary Enterpnses and Other Operatmg Ac11v11Ies Federal, State, and Pnvate Funds Other

$ 339,064 83 72,210 80
684,078 15 53,441 25
$1,148,795 03

Less Allowance for Doubtful Accounts Net Accounts Receivable

65,967 13
S 1,082.827 90

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MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE 4 INVENTORIES

Inventones consisted of the followmg at June 30, 2002

Bookstore Other
Total

$ 231,881 00 11 130 40
s 243 Q)IAQ

NOTE 5 NOTES/LOANS RECEIVABLE

Notes/Loans receivable at June 30, 2002, pnmanlycons1st ofstudent loans made through the Federal Perkms Loan Program (the Program). The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of I00% 1fthe part1c1pant complies with certam proV1s1ons The Federal government reimburses the College for amounts cancelled under these prov1s10ns As the College determmes that loans are uncollect1ble and not eligible for re1mbursement by the Federal government, the loans are wntten off and assigned to the U S Department of Education The College has no allowance for uncollect1ble loans at June 30, 2002

NOTE 6 CAPITAL ASSETS

The balance at July I, 2001 was adjusted for accountmg changes reqwred m 1mplementmg GASB Statements 34 and 35 as disclosed m Note I Followmg are the changes m capital assets for the year ended June 30, 2002:

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MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 6 CAPITAL ASSETS

AdJusted Balance
July l 200!

Addmoos

Rectucuons

Balance
June 30, 2002

Capua! Assets, Not Bemg Depreciated

Land and Land Improvements

S

1840000

s 18 400 00

Capital Assets, Bemg Depreciated Infrastructure Bu1ldmg and Bu1ldmg Improvements Fac1hhes and Other Improvements Equipment Capua! Leases Library Collect1ons

S 494,674 00 S 21,155,800 88 2,352,707 00 1,800,668 31 355,472 00
2 l3l 329 33

30,017 00 S
13,262 50 131,6S700
23,652 67

0 00 S 524,691 00 27,155,800 88 2,365,969 50 1,932,325 31 355,472 00
2,154 982 00

s S 34,290,651 52 $,_.J..1<9>8s5. 89 17 _ __,,Oe1000, S 34 489 240 69

Less Accumulated Deprcc1at1on

Infrastructure

S 389,049 76 S

Buildings and Bu1ldmg Improvements 12,719,304 44

Fac1hhes and Other Improvements

2,027,737 75

Equipment

1,198,68143

Capital Leases

20, 143 41

Library Collechons

1,855,553 00

12,451 65 s
850,028 25 30,224 57
204,130 34 14,218 88
50,236 00

0 00 S 401,501 41 13,569,332 69 2,057,962 32 1,402,811 77 34,362 29
I,905,789,00

s 18,210.469 79 s~l.J~ 61,289 69 s _ __,,o""oo"' s 19,311,752 48

Total Capital Assets, Being Depreciated,

Net

s 16,080 I 81 73 s---'"-"9"6"2-,-7'00 52 s _ __,o,.,o"'o s l, 117481 21

Cap1ta1 Assets, Net

zoo $ 16 09 58) 73 $----'9~62,.. 52 s _ _....,o,..oo"" 5 I5 l3 58 IJJ.

NOTE 7 DEFERRED REVENUE

Deferred revenue consisted of the followmg at June 30, 2002

Preprud Tu1uon and Fees Other Deferred Revenue

$ 700,747 63 176.182 39

Totals

S 876,930.02

NOTE 8 LONG-TERM LIABILITIES

Long-term hab1hty activ1ty for the year ended June 30, 2002, was as follows

Balance
July 1. 2001

Addn10ns

Reductmns

Balance June30 2002

Current
Poomn

Leases Lease Obhgat1ons

s 86,954 06

s s 41,804 73

45,149 33 s 45,149 33

Other L1ab1h11es Compensated Absences

556,386.80 s 380,957 76

369,945 6!

567 398 95

248,908 65

Total Long-Term Obhgauons s 643 340 86 s 380 957 76 s 4ll 75034 s 612 548 28 s 294 057 98

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MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 9 LEASE OBLIGATIONS

CAPITAL LEASES Capital leases are generally payable m mstallments rangmg from monthly to annually and have terms expmng m 2003 Expenses for fiscal year 2002 were $48,761 05 of which $6,956 32 represented mterest Total pnnc1pal paid on capital leases was $41,804 73 for the fiscal year ended Jime 30, 2002 The mterest rate was 8 percent The followmg 1s a summary of the carrymg values of assets held Imder capital lease at Jime 30, 2002

Fac1h!ies and Other Improvements

$ 32).)09 ZI

Certain capital leases provide for renewal and/or purchase op!ions Generally purchase op!ions at bargain pnces of one dollar are exercisable at the expira!ion of the lease terms

SUMMARY OF LEASE OBLIGATION Future commitments for capital leases (which here and on the Statement ofNet Assets mclude other installment purchase agreements) and for noncancellable operatmg leases havmg remairung terms m excess of one year as of Jime 30, 2002, were as follows

Capital Leases

Year Endmg Jime 30 2003

S 48,761 05

Less Interest Pnnc1pal Outstandmg NOTE IO RETIREMENT PLANS

-3 611 72
$ 45 149.33

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Middle Georgia College part1c1pates m the Teachers Re!irement System of Georgia (TRS), a costshanng mul!iplc-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of prov1dmg re!irement allowances and other benefits for teachers of the State of Georgia TRS provides service retirement, d1sab1htyret1rement, and survivor's benefits for its members m accordance with State statute The Teachers Re!irement System ofGeorgia issues a separate stand alone financial audit report and a copy can be obtamed from the Georgia Department of Audits and Accoimts

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MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE IO RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Funding Policy Employees of Middle Georgia College who are covered by TRS are reqmred by State statute to contnbute 5% of their gross earrungs to TRS Middle Georgia College makes monthly employer contnbullons to TRS at rates adopted by the TRS Board ofTrustees m accordance with State statute and as advised by therr mdependent actuary For fiscal year 2002, the employer contnbutlon rate was 9 24% for covered employees Employer contnbuuons for the current fiscal year and the precedmg two fiscal years are as follows.

Fiscal Year

Percentage Contnbuted

Reqmred Contnbutlon

2002 2001 2000

100% 100% 100%

$ 646,64001
s 772,296 51 s 783,713 54

REGENTS RETIREMENT PLAN

Plan Description The Regents Retirement Plan, a smgle-employer defmed contnbutlon plan, 1s an opl!onal retirement plan estabhshed and adm1rustered by the Board of Regents of the Uruvers1ty System of Georgia, under which 11 may purchase annuity contracts for the purpose of prov1dmg retirement and death benefits for eligible faculty and pnnc1pal adrrurustrators Benefits depend solely on amounts contnbuted to the plan plus mvestment earrungs Benefits are payable to part1c1pat1ng employees or theu benefic1anes m accordance with the terms of the annmty contracts

Funding Policy Member contnbutlon reqmrements are estabhshed by the Board of Trustees of the Teachers Retrrement System Employer contnbul!ons are established by statute and may be amended only by the General Assembly ofthe State ofGeorgia. The employer contnbutes 9 62% ofthe part1c1patmg employee's earnable compensation Employees contnbute 5% of their earnable compensation Amounts attnbutable to all plan contnbut1ons are fully vested and non-forfe1table at all times

Middle Georgia College and the covered employees made the reqmred contnbutlons of$88,916 41 (9 62%) and $50,472 47 (5%), respectlvely.

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MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE 10 RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Middle Georgia College part1c1pates m the Georgia Defined Contnbutlon Plan (GDCP) wluch 1s a smgle-employer defined contnbut1on plan estabhshed by the General Assembly of Georgia for the purpose ofprov1dmg retuement coverage for State employees who are temporary, seasonal, and parttune and are not members of a pubhc retirement or pension system GDCP 1s adm1mstered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A m~ber may retire and elect to receive penochc payments after attamment ofage 65 The payment Will be based upon mortality tables and mterest assumptions to be adopted by the Board of Trustees
Ifa member has less than$ 3,500.00 credited to !us/her account, the Board ofTrustees has the option
of reqwnng a lump sum d1stnbut1on to the member m heu of makmg penod1c payments Upon the death of a member, a lump sum d1stnbut1on equalmg the amount credited to !us/her account will be paid to the member's designated beneficiary Benefit proV1s10ns are established by State statute
Contributions and Vesting Member contnbutlons are seven and one-halfpercent (7 5%) ofgross salary There are no employer contnbutlons. Contnbutlon rates are estabhshed by State statute Earnmgs are credited to each member's account m a manner estabhshed by the Board of Trustees Upon termmatlon of employment, the amount of the member's account 1s refundable upon request by the member.
Total contnbuuons made by employees dunng fiscal year 2002 amounted to $29,846 12 wluch represents 7 5% of covered payroll. These contnbutions met the requirements of the plan
NOTE 11. RISK MANAGEMENT
Middle Georgia College 1s a part1c1pant m the Board ofRegents ofthe Umvers1ty System ofGeorgia Health Benefits Plan, which 1s a self-insurance program ofhealth and dental benefits for employees and retirees of the Umvers1ty System of Georgia Middle Georgia College and parllc1patmg employees and retirees pay premiums to the Health Benefits Plan for tlus health insurance coverage The Health Benefits Plan 1s mcluded m the financial statements of the Board of Regents of the Umvers1ty System of Georgia - Admm1strat1ve Central Office All units ofthe Umvers1ty System of Georgia share the nsk of Joss for claims of the Health Benefits Plan The Health Benefits Plan 1s considered a self-sustainmg nsk fund that provtdes health coverage for its members up to a maxunum hfetune benefit of $2,000,000.00 per person and dental coverage up to an annual maximum of $1,000 00 per person The Board of Regents has contracted with Blue Cross Blue Slueld ofGeorgia to process claims m accordance with the Health Benefits Plan as estabhshed by the Board of Regents.

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MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 11 RISK MANAGEMENT
The Department of Adnumstral!ve Services (DOAS) has the respons1b1hty for the State of Georgia ofmaking and carrying out dec1s10ns that will m1mm1ze the adverse effects of accidental losses that involve State government assets. The State believes 1t 1s more economical to manage its nsks mtemally and set aside assets for claim settlement Accordmgly, DOAS processes claims for nsk of loss to which the State 1s exposed, mcludmg general llab1hty, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemmficatlon Lmuted amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other nsks Middle Georgia College, as an organ1zat1onal umt of the Board of Regents of the Umvers1ty System of Georgia, 1s part of the State of Georgia reportmg entity, and as such, 1s covered by the State of Georgia nsk management program admuustered by DOAS Premmms for the nsk management program are charged to the vanous state orgamzaaons by DOAS to provide claims servicing and claims payment
A self-insured program of professional hab1hty for its employees was established by the Board of Regents of the Umvers1ty System of Georgia under powers authonzed by the Official Code of Georgia Annotated Section 45-9-1. The program msures the employees to the extent that they are not immune from hab1hty against personal hab1llty for damages ansing out of the perfonnance of their duties or in any way connected therewith The program 1s admllllstered by DOAS as a SelfInsurance Fund
NOTE 12 CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to aucht and adjustment by grantor agencies Tins could result in refunds to the grantor agency for any expenditures which are disallowed under grant tenns. The amount of expenditures wluch may be disallowed by the grantor cannot be detennmed at tlus time although Middle Georgia College expects such amounts, 1fany, to be 1mrnatenal to its overall financial pos11Jon
Litigation, claims and assessments filed against Middle Georgia College (an organ1zallonal umt of the Board of Regents of the Umvers1ty System of Georgia), 1f any, are generally considered to be act10ns against the State of Georgia Accorchngly, s1gmficant llt1gallon, claims and assessments pendmg agamst the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Fmanc1al Report for the fiscal year ended June 30, 2002
NOTE 13 POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Secnon 20-331, the Board of Regents of the Umvers1ty System of Georgia has established group health and life insurance programs for regular employees ofthe Umvers1ty System ofGeorgia It 1s the policy ofthe Board ofRegents to pennil employees of the Umvers1ty System ofGeorgia ehg1ble for renrement or that become pennanently and totally disabled to conbnue as members of the group health and hfe
- 28 -

MIDDLE GEORGIA COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE 13 POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS

msurance programs. Employees who are ehgible for retirement or d1sab1hty under the cntena estabhshed by the Teachers Relirement System ofGeorgia and who have at least ten years ofscrv1ce with the Uruvers1ty System of Georgia are ehgible for these post-employment health and hfe msurance benefits Orgaruzalional uruts of the Board of Regents of the Uruvers1ty System of Georgia pay the employer portion for group msurance for affected md1v1duals

As ofJune 30, 2002, there were 108 employees who had retired or were disabled that were rece1vmg these post-employment health and hfe msurance benefits For the year ended June 30, 2002, Middle Georgia College recogruzed as mcurred $280,405 89 ofexpenditures, winch was net of$ I I0,256.68 of part1c1pant contnbutlons

NOTE 14 NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The College's operaling expenses by functional class1ficat1on are shown below

Suu.ement of ()pen.ting cx:penscs -Natural vs Funcbonal Clus1ficaooru;
For the flSCil Year Ended June 30, 2002

Natural C!arnficanon
Salancs Faculty Staff
~)oycc Benefits Other Personal SCl"Vlccs TraYCI ScholarshipS and
Fcllowslups Uhhbes Supplies and Other
Scrv,ccs Dcprccianon
Total Opcraang Expenses

fnstructlon

t1111is:a1001I Q11mfienw

Public
Scmcc

Acadennc
Support

Student
Servtrn

lnsritubonal ~Upport

s 3,992,938 13 ss s 821.379 53
1,084,557 31,73949
l07,345 JS 389,156 82

s 138,61970

18,028 34 20404

s s 905,451 98 ss 248,076 15

716.31144 183,652 69

1,147,125 79 657,605

40,630 00

l,~640

23,432 02

21,181 46

20,911 79

10,780 JS

29,822 45 15,486 01

65,137 32 29,964 64

51,17933

418,256 56

412.259 25

290.386 08

s 6427 116 87 s Z0 49 II s I 744 616 76 s I JZ87lJJO s 2.,s, 761 17

Ns.tunl C\iwfica.bon
Salanes Faculty Staff
Employcc BencfilS Other Personal SC'l'Vlces Travel
Scholarships and Fellowsh1ps
Uhllhcs
Supphes and Other Scrv.ccs
Deprec1abon
Total Opcranng Expenses

Plant Operations and
Mamtenance

Eumaumru Climlfi'=!tJQO

Schoianlups
and Fe1Jov.1h1m

Aux1hary
EnternnID

Unallocated Qem:egauon

Total Opcranng
l;.xpcnsc,

s 983,564 00
-37,922 09

s 390,095 71
423,181 95

5,034 38
s 973 082 44
664,037 90

14,630 43
91,515 00 9 711 41

s 4,131.557 83
4,981,956 79 2.559,355 84
40,63000 I 18,015 97
1,159.557 21 837.325 66

628,940 76

2,528,497 93
s I 161-289 69

4,718,676 73
I 161.28969

z~ S-2~~J ~~ 2"i s 2Zl ~~ M s J~"iz ~J~ ~J s l l~I 2a2 ~~ s 12 zgs J~~

-29-

SUPPLEMENTARY INFORMATION - 31 -

MIDDLE GEORGIA COLLEGE SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUDGET - <NON:GAAP BASIS} RESIDENT INSTRUCTION
YEAR ENDED JUNE 30 2002

SCHEDULE "1"

REVENUES
State Appropnabons Other Revenues Retained

BUDGET

ACTUAL(1)

VARIANCEFAVORABLE (UNFAVORABLE)

$ 10,642,005 00 $ 10,642,005 00 $

8 019176 00

5 977 787 07

000 -2 041 388 93

$ 18 661.181 00 $ 16 619,792 07 $ _ _-,,c2"",04-""-1""38""8-'9~3

EXPENDITURES
Per.;onal SeMces Educabon, General and Departmental Services Sponsored Operabons
Operabng Expenses Education, General and Departmental SeMces Sponsored Operabons
Cap,tal Outlay Speaal Funding lniba1ive

$ 10,494,605 00 $ 10,303,546 53 $

207,483 00

215,215 21

2,289,412 00 4,118,538 00
954,26600 596 877 00

2,552,481 82 2,514,380 19
598,704 70 593 970 24

191,058 47 -7,732 21
-263,069 82 1,604157 81
355,561 30 2 906 76

$ 18,661,181 00 $ 16,778,298 69 $ _ _ _1~,8_82~,88_2_3_1

Excess of Revenues over Expenditures

$

-158 506 62 $ _ _ _-.,15_8_,,506=6_,2

(1) Actual amourns were prepared on a presa,bed basis of accounting that demonstra1es compliance wrth budgetary statutes and regulabons of the State of Georgie, wt11ch Is a comprehens,ve basis of eccounbng other than generally accepted eccounbng pnnciples

See accompanying notes end Independent Accountant's Combined Report on Review of BaS1c Financial Sl81ements end Supplementary lnfonnabon
-33 -

MIDDLE GEORGIA COLLEGE SCHEDULE OF REVENUES ANO EXPENDITURES COMPARED TO
BURGET !NON-GAAP BASIS} LOTTERY FOR EDUCATION YEAR ENDED JUNE 30 2002

SCHEDULE "2"

REVENUES
State Appropnabons

BUDGET

ACTUAL (1)

VARIANCE FAVORABLE (UNFAVORABLE)

$

16426800 $

164,268 00 $ _ _ _ __::0..::0c:c.0

EXPENDITURES
Equipment, Technology and Construcilon Trust Fund
Spec,al Funding ln1bat,ves

$

119,752 00 $

119,752 00 $

64 516 00

64 298 59

0 00 217 41

$

16426800 $

164,050 59 $ _ _ _-C2::..1c:.7.::4..:..1

Excess of Revenues over Expendrtures

$

217 41 $---~2~1.;.7.;;4.;.1

(1) Actual amounts were prepared on a presatbed basis of accounting that demonstrates compliance wrth budgetary statutes and regulations of the State of Georgia, which 1s a comprehensive baS1s of accounbng
other than generally accepted accounbng pnnc,ples

See accompanying notes and Independent Accountanfs Combined Report on ReVJew of Ba61c F1nanaal Statements end Supplementary Information
-34-

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

SCHEDULE "3"

Totals per Annual Supplement

Accruals June 30, 2002 June 30, 2001

Compensated Absences June 30, 2002 June 30, 2001

Prepaid Expense June 30, 2001 June 30, 2002

AdJustments

Shared SeMces on Jointly Staffed Personnel

Abraham Baldwin Agncultural College

Louder,

Vera Jenelle

Georgia College and State Unrvers1ty

Richards, Betty E

Georgia Southern Unrversrty

Murphey, Connie Grtggs

Southern Polytechnic State Unrversrty

Acell,

Smac,I M

Valdosta State Unrversrty

Moore,

Tommy A

SALARIES $ 9,061,973 70 $

TRAVEL 118,015 97

34,298 64 -33,500 95

527,077 52 -516,962 85

208,814 32 -234,462 53

1,345 63 -1,93770 1,614 75 64,004 09 125000
$ 91113151462 $_....;1,,:;18=01,:.:5:,;9;;..:7_

See accompanying notes and Independent Accountant's Combined Report on Review of Basic F1nanc1al Statements and Supplementary Information
- 35 -

MIDDLE GEORGIA COLLEGE RECDNC!LIATION-OF PER D!EM AND FEES
YEAR ENDED JUNE 30 2002

SCHEDULE "4"

Totals per Annual Supplement
AdJUstments
Phillips, Joshua

TYPE PAYMENT

FEE AMOUNT

EXPENSE AMOUNT

$ 176,904 12 $ 980917 $

TOTAL
186 713 29

Reimbursable Expense

-17500

-175 00

Totals per Report

$ 17690412 $ 953411 s_....,1ss.._.5_3_s._29_

See accompanying notes and Independent Accountant's Combined Report on ReVJew of Ba91c Fmanaal Statements and Supplementary lnformabon
-36-

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

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

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-584-99-02

Further Action Not Warranted

SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS

MIDDLE GEORGIA COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS NET ASSETS Deficit to be Funded from Subsequent Years' Opera!ions Finding Control Number FS-584-02-01 For the year ended June 30, 2002, the College had a net deficit of $82,309 73 in the Aux1hary Enterpnses Intercollegiate Athletics The Board of Regents' Pohcy Manual, Section 702 02, states that Aux1hary Enterpnses "shall be placed on a self-supporting basis, and the State will not make an appropnat1on to finance its opera!ions". This deficn 1s due to the lack of sufficient funds to meet obhgat10ns. The College should budget and proVIde for adequate funds to cover this deficit ACCOUNTING CONTROLS (OVERALL) Inadequate Closing Procedures Finding Control Nunber FS-584-02-02 Dunng fiscal year 2002, the Board ofRegents ofthe Uruvers1ty System ofGeorgia converted uruts of the Umvers1ty System from the College Umvers1ty Financial Accounting (CUFA) legacy system to the new GeorgiaFIRST System (Financial, Information and Reporting Systems for Tomorrow) In Apnl of 2002, Middle Georgia College placed this accounting system into produc!ion The management ofMiddle Georgia College 1s responsible for implementing procedures to estabhsh and maintain adequate control over the operation, u!ihza!ion, and integnty of their data processed with the GeorgiaFJRST System We encountered problems with the financial data presented by the College. The College's failure to estabhsh and adhere to a final closing for the year ended June 30, 2002, created a s1tuat1on where data presented for review was incomplete Extensive review procedures were necessary to determine the val1chty of the informatJon provided To reduce the nsk ofreporung incomplete informa!ion, the College should work with the Board of Regents Central Office to develop procedures that will result in complete reporting of all financial data in a more efficient and timely manner
-I-

MIDDLE GEORGIA COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Inadequacies m Control Over Subs1d1ary Ledgers Fmdmg Control Nwnber FS-584-02-03 Our exammauon mcluded a review of the procedures utlhzed by Middle Georgia College m recordmg transactions to the vanous modules compnsmg the GeorgiaFJRSTaccountmg system Our testmg revealed that, at June 30, 2002, the College's general ledger module did not balance with the subsidiary modules. Tlus condition was pnmanly due to errors m postmg subs1d1ary records dunng the conversion from the old College Umvers1ty Fmancial Accountmg (CUFA) legacy accountmg system to the new GeorgiaFIRST accountmg system and due to transactions bemg posted to the general ledger module rather than the appropnate subs1d1ary modules The College did not proVIde a reconc1hat1on of the general ledger balances to the subs1d1ary records which resulted m extensive work by the auditors to identify reconc1lmg items at June 30, 2002 Management's failure to ensure that subs1d1ary records are reconc!led with the general ledger causes mtemal reports to management, generated from the subs1d1ary modules, to be maccurate and m1sleadmg. Tlus condition can lead to erroneous dec1s1ons by the College's management and result m maccurate reportmg of financial mformatJon To ensure accurate and limely reportmg offinancial mformauon from subsidiary records, the College should post transactions correctly to the subs1d1ary ledgers rather than as Journal entnes m the general ledger. The College should develop mternal accountmg controls and procedures to ensure that reconcihanons of subs1d1ary ledgers and the general ledger are performed on a regular basis
-2 -