STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS MANAGEMENT REPORT MIDDLE GEORGIA COLLEGE COCHRAN, GEORGIA AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA YEAR ENDED JUNE 30, 2007 Russell W. Hinton State Auditor MIDDLE GEORGIA COLLEGE - TABLE OF CONTENTS - SECTION I FINANCIAL LETTER OF TRANSMITTAL SELECTED FINANCIAL INFORMATION EXHIBITS A STATEMENT OF NET ASSETS - (GAAP BASIS) 2 B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - (GAAP BASIS) 3 C STATEMENT OF CASH FLOWS - (GAAP BASIS) 4 D SELECTED FINANCIAL NOTES 7 SUPPLEMENTARY INFORMATION SCHEDULES 1 BALANCE SHEET- (STATUTORY BASIS) BUDGET FUND 18 2 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND 19 3 RECONCILIATION OF SALARIES AND TRAVEL 21 SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS 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 October 11, 2007 Honorable Sonny Perdue, Governor Members ofthe General Assembly of Georgia Members ofthe Board of Regents of the University System of Georgia and Honorable Richard J. Federinko, President Middle Georgia College Ladies and Gentlemen: As part ofour audit ofthe basic financial statements ofthe State of Georgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2007, we have performed certain audit procedures at Middle Georgia College. Accordingly, the financial statements and compliance activities of Middle Georgia College were examined to the extent considered necessary in order to express an opinion as to the fair presentation ofthe financial statements contained in the foregoing documents and to issue reports on compliance and internal control as required by the Single Audit Act Amendments of 1996. This Management Report contains information pertinent to the financial and compliance activities of Middle Georgia College as of and for the year ended June 30, 2007. Information contained in this report is a by-product of our audit ofthe basic financial statements ofthe State ofGeorgia and is the representation of management. Accordingly, we do not express an opinion or any other form of assurance on it. The particular information provided which includes a section on findings and other items reported in accordance with Commission on Colleges regulation 2.11.1 is enumerated in the Table of Contents. This report is intended solely for the information and use of the management of Middle Georgia College, members of the Board of Regents of the University System of Georgia and the Southern Association ofColleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties. Respectfully submitted, Q~ ~,t4 L O . ~ ~uJen W. Hinton, CPA, CGFM State Auditor RWH:as SELECTED FINANCIAL INFORMATION - 1- MIDDLE GEORGIA COLLEGE STATEMENT OF NET ASSETS - (GAAP BASIS) JUNE 30, 2007 ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories Prepaid Items Other Assets Total Current Assets Noncurrent Assets Noncurrent Cash Investments Notes Receivable, Net Capital Assets, Net (Note 4) Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue (Note 5) Other Liabilities Deposits Held for Other Organizations 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 Unrestricted Total Net Assets -2- EXHIBIT"A" $ 4,668,426 358,304 712,690 625,014 13,647 19 151 $ 6,397,232 $ 1,600 1,097,069 129,950 57,097,523 $ 58,326,142 $ 64,723,374 $ 253,377 76,728 400,442 209,807 815,125 1,045 414,243 309,872 $ 2,480,639 $ 10,776,856 329,393 $ 11,106,249 $ 13,586,888 $ 46,320,667 2,608 1,331,253 3,481,958 $ 51,136,486 MIDDLE GEORGIA COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - (GAAP BASIS) YEAR ENDED JUNE 30, 2007 EXHIBIT"B" 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 Health Services Intercollegiate Athletics 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 State 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 Capital Grants and Gifts Increase (Decrease) in Net Assets Net Assets - Beginning of Year Net Assets - End of Year -3- $ 5,730,415 -2,921,162 4,448,512 27,209 7,988 40,162 5,668 2,699,695 1,713,414 2,258,050 50,773 433,245 261,710 109 788 $ 14,865,467 $ 4,780,340 5,392,077 3,152,555 49,594 195,381 1,805,059 1,440,015 6,662,190 2,157,471 $ 25,634,682 $ -10,769,215 $ 12,067,735 44,815 117,417 352,857 -469,330 -15 021 $ 12,098,473 $ 1,329,258 $ 15,042,307 2 480 $ 15,044,787 $ 16,374,045 34,762,441 $ ====51_1,...,36_,4=8=6 MIDDLE GEORGIA COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS) YEAR ENDED JUNE 30, 2007 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 Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Health Services Intercollegiate Athletics 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 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 Proceeds from Sales and Maturities of Investments 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" $ 2,794,482 4,278,183 40,162 -11,426,861 -10,201,452 -1,805,059 17,254 2,774,349 1,571,184 2,126,137 51,011 432,853 216,195 125,752 $ -9,005,810 $ 12,067,735 284,796 168,450 $ 12,520,981 $ 1,937,233 6,418 -3,771,604 -2,384 -42 398 $ -1,872,735 $ 1,224,536 239,183 -1,230,375 $ 233,344 $ 1,875,780 2,794,246 $ ===4,.6.7.=0=,0=2=6 -4- MIDDLE GEORGIA COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS) YEAR ENDED JUNE 30, 2007 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 Expense Change in Assets and Liabilities: Receivables, Net Inventories Other Assets Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities 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 Change in Accrued Interest Payable Affecting Interest Paid Gift Reducing Proceeds of Gifts and Grants Received for Other than Capital Purposes Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts EXHIBIT"C" $ -10,769,215 2,157,471 -283,254 -91,654 11,711 -2,483 17,560 22,189 -93,728 726 24,867 $ ===9'=00=5=,8=1=0 $ ==1=0'=34=9=,9,,,,2=4 $ ===11=3=6=7=4 $ ====42=6=,9=3=2 $ ====-7=,4=2=4 $ -13, 107,554 -5- (This page left intentionally blank) MIDDLE GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2007 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY Middle Georgia College 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 Middle Georgia College as a separate reporting entity. The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Middle Georgia College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Middle Georgia College is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards. 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. 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. -7- MIDDLE GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2007 EXHIBIT"D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NET ASSETS Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the College and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus) of $33,209.40. Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. NOTE 2: DEPOSITS AND INVESTMENTS DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia. 2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia. 3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use ofthe 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. -8- MIDDLE GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2007 EXHIBIT "D" NOTE 2: DEPOSITS AND INVESTMENTS DEPOSITS The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. At June 30, 2007, the carrying value of deposits was $3,899,620 and the bank balance was $4,766,060. Of the College's deposits, $4,652,396 were uninsured. Of these uninsured deposits, $4,652,396 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 At June 30, 2007, the carrying value of the College's investment was $1,860,925, which is materially the same as fair value. The College's investments as of June 30, 2007 are presented below. All investments are presented by investment type and debt securities are presented by maturity. Investment Type Fair Value Less Than 1 Year Debt Securities U.S. Agencies Implicitly Guaranteed $ 14,967 $ Other Investments Equity Mutual Funds Equity Securities - Domestic 178,341 752,224 Investment Pools Board of Regents Short-Term Fund Balanced Income Fund 763,856 151,537 Total Investments $ 1,860 225 Investment Maturity 1-5 6-10 Years Years More than 10 Years $ $ 14 26:Z $ 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 Short-Term Fund is reported as Cash and Cash Equivalents on Exhibit "A" of this report. -9- MIDDLE GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2007 EXHIBIT"D" NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2007. Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State and Private Funds Other $ 7,157 286,520 489,999 322,155 Less Allowance for Doubtful Accounts $ 1,105,831 34.837 Net Accounts Receivable $ 1,070.994 NOTE 4: CAPITAL ASSETS Following are the changes in the College's capital assets for the year ended June 30, 2007: Beginning Balance Jul~ I, 2006 Additions Reductions Ending Balance June 30, 2007 Capital Assets, Not Being Depreciated: Land Construction Work-In-Progress $ 2,020,095 $ 213,300 2,328,444 3,368,516 $ $ 2,233,395 579,101 5,117,859 Total Capital Assets Not Being Depreciated $ 4,348,539 $ 3,581,816 $ 579,101 $ 7,351,254 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections $ 524,691 $ 7,756,837 40,750,228 5,365,947 $ 2,872,584 693,126 2,437,890 354,411 0 10,349,924 2,314,645 106,564 20,269 177,745 8 436 $ 8,281,528 46,095,906 3,565,710 2,614,556 10,349,924 2,412,773 Total Assets Being Depreciated $ 48,900,038 $ 24,626,809 $ 206,450 $ 73,320,397 Less: Accumulated Depreciation: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections $ 389,722 $ 73,058 15,606,737 1,330,863 $ 2,007,001 47,997 1,576,718 367,974 0 283,325 2,021,490 54,254 20,270 156,305 8 436 $ 462,780 16,917,330 2,054,998 1,788,387 283,325 2,067,308 Total Accumulated Depreciation $ 21,601,668 $ 2,157,471 $ 185,01 I $ 23,574,128 Total Capital Assets, Being Depreciated, Net $ 27,298,370 $ 22,469,338 $ 21,439 $ 49,746,269 Capital Assets, Net $ 31,646,202 $ 26,0Sl,1S4 $ 600,540 $ SZ,02Z,S23 - 10 - MIDDLE GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2007 EXHIBIT"D" NOTE 5: DEFERRED REVENUE Deferred revenue consisted of the following at June 30, 2007. Prepaid Tuition and Fees Other Deferred Revenue $ 121,590 693,535 Totals NOTE 6: LONG-TERM LIABILITIES $=====8-15"""'==12==5 The College's Long-Term liability activity for the year ended June 30, 2007 was as follows: Leases Lease Obligations Other Liabilities Compensated Absences Total Long-Term Obligations Beginning Balance July 1, 2006 $ 2,384 614,398 $ 616.782 Additions $ 10,776,856 382,576 $ 11.159.432 Reductions Ending Balance June 30, 2007 $ 2,384 $ 10,776,856 357,709 639,265 $ 360.093 $ I 1416121 Current Portion $ 0 309,872 $ 309.872 NOTE 7: NET ASSETS Changes in Net Asset activity for the year ended June 30, 2007 are as follows: Invested in Capital Assets Net of Related Debt Restricted Net Assets Unrestricted Net Assets Total Net Assets NOTE 8: LEASE OBLIGATIONS Balance July I, 2006 Additions Reductions Balance June 30, 2007 $ 31,644,525 $ 26,051,154 $ 11,375,012 1,200,601 4,665,401 4,532,141 1,917,315 22,782,890 21,218,247 $ 34 762.441 $ 53.499.445 $ 37 125 400 $ 46,320,667 1,333,861 3,481,958 $ 5) 136 486 Middle Georgia College is obligated under various operating leases for the use of equipment, and also is obligated under capital leases for the acquisition of real property and equipment. - 11 - MIDDLE GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2007 EXHIBIT "D" NOTE 8: LEASE OBLIGATIONS CAPITAL LEASES The capital lease agreement is payable in monthly installments and has a term expiring in the fiscal year 2036. Interest expense for fiscal year 2007 was $469,302 with accrued interest of $426,932 added to the lease principal and interest paid of $42,370. The interest rate was 4.856 percent. FUTURE COMMITMENTS Future commitments for capital leases and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2007, were as follows: Capital Leases Operating Leases Year Ending June 30: 2008 2009 2010 2011 2012 2013 - 2017 2018 - 2022 2023 - 2027 2028- 2032 2033 - 2037 $ 266,860 $ 532,883 549,236 565,305 582,820 3,175,866 3,683,369 4,275,415 4,632,696 3,705.941 13,860 Total Minimum Lease Payments $ 21,970,391 $ 13,860 Less: Interest 11,193.535 Principal Outstanding $ 10,776.856 NOTE 9: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Plan Description Middle Georgia College participates in the Teachers Retirement System of Georgia {TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. 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 the Georgia Department of Audits and Accounts. - 12 - MIDDLE GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2007 EXHIBIT "D" NOTE 9: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Funding Policy Employees of Middle Georgia College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Middle Georgia College 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 2007, 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: Fiscal Year Percentage Contributed Required Contribution 2007 2006 2005 100% 100% 100% $ 655,271 $ 631,254 $ 644,235 REGENTS RETIREMENT PLAN Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et. seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts. Funding Policy Middle Georgia College makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2007, the employer contribution was 9.66% for the first six months and 8.13% 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. Middle Georgia College and the covered employees made the required contributions of $169,158 (9.66% or 8.13%) and $95,506 (5%), respectively. - 13 - MIDDLE GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2007 EXHIBIT"D" NOTE 9: RETIREMENT PLANS REGENTS RETIREMENT PLAN Funding Policy 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 Middle Georgia College 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 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 and Vesting 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 2007 amounted to $29,546 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. - 14 - MIDDLE GEORGIA COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2007 EXHIBIT"D" NOTE 10: 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 which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Middle Georgia College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Middle Georgia College (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2007. NOTE 11: SUBSEQUENT EVENTS On July 1, 2007, Middle Georgia College acquired the assets and operations of the Georgia Aviation and Technical College. The merger will enable Middle Georgia College to become Georgia's Aviation College. Middle Georgia College will continue to offer the technical degree programs in aviation at the Aviation Campus in Eastman and will offer some components of the bachelor degree courses in Eastman. NOTE 12: AFFILIATED ORGANIZATIONS The Middle Georgia College Real Estate Foundation, LLC is a legally separate, tax exempt organization whose activities primarily support Middle Georgia College. This affiliated organization is considered a potential component unit of the State of Georgia in accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of this affiliated organization are not included in these financial statements. Copies of the financial statements for the affiliated organization may be obtained from Middle Georgia College. - 15 - (This page left intentionally blank) SUPPLEMENTARY INFORMATION - 17 - MIDDLE GEORGIA COLLEGE BALANCE SHEET (STATUTORY BASIS) BUDGET FUND JUNE 30, 2007 ASSETS Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Inventories Other Assets Total Assets LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Accounts Payable Deferred Revenue Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances SCHEDULE "1" $ 1,822,801.07 349,127.56 1,376,095.30 13,647.32 10,518.08 375.00 $ =====3,=57=2=,5=6=4.=33= $ 76,727.82 3,038,326.77 151,485.00 1,045.20 $ 3,267,584.79 $ 1,382.36 15,381.03 164,461.27 56,595.06 24,962.82 8,987.60 33,209.40 $ 304,979.54 $ ====3,,..57=2=,5=6=4..3...3= Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrated compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. - 18 - MIDDLE GEORGIA COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2007 SCHEDULE "2" REVENUES State Appropriation State General Funds Federal Funds Other Funds Total Revenues EXPENDITURES Special Funding Initiative 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, 2006 FUND BALANCE JUNE 30 SUMMARY OF FUND BALANCE Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted Funds/Sponsored Funds Uncollectible Accounts Receivable Inventories Total Reserved Unreserved Surplus Total Fund Balance BUDGET ACTUAL VARIANCEFAVORABLE (UNFAVORABLE) $ 12,097,221.00 $ 12,097,221.00 $ 3,536,007.00 4,542,582.04 6,600,156.00 21,532,023.98 $ 22,233,384.00 $ 38,171,827.02 $ 0.00 1,006,575.04 14,931,867.98 15,938,443.02 $ 509,183.00 $ 507,241.03 $ 21,724,201.00 37,570,691.05 $ 22,233,384.00 $ 38,077,932.08 $ $ 0.00 $ 93,894.94 $ 1,941.97 -15,846,490.05 -15,844,548.08 93 894.94 209,323.89 29,486.03 16,361.86 -14,601.15 -29,486.03 $ 304,979.54 $ 1,382.36 15,381.03 164,461.27 56,595.06 24,962.82 8,987.60 $ 271,770.14 33,209.40 $ 304 979.54 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrated compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles. - 19 - (This page left intentionally blank) MIDDLE GEORGIA COLLEGE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2007 SCHEDULE "3" Totals per Annual Supplement Accruals June 30, 2007 June 30, 2006 Compensated Absences June 30, 2007 June 30, 2006 Adjustments July 1, 2007, Bi Weekly Payroll Expensed in Fiscal Year 2007 Shared Services on Jointly Staffed Personnel East Georgia College Canady, Christy Georgia College and State University Logan, William P. Georgia Southwestern State University Logan, William P. Sullivan, Troy V. Macon State College Burnette, Lavette M. Student Restitution - College Work Study Program SALARIES $ 10,141,051 $ TRAVEL 195,381 76,728 -139,893 593,836 -570,737 102,361 -2,799 -2,960 -10,227 -9,689 -1,938 -3,316 $ 10 172 417 $ ======19=5:!:i,3=8=1 - 21 - SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS MIDDLE GEORGIA COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2007 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No findings were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No findings were reported. OTHER ITEMS {NOTED FOR MANAGEMENT'S CONSIDERATION} REVENUES/RECEIVABLES/RECEIPTS The College did not reverse the fiscal year 2005 YE-38 entry to adjust the Banner feed for deferred revenue in either fiscal year ended June 30, 2006 or June 30, 2007. Management should reverse the entry and implement procedures to ensure that the appropriate entries are posted to the general ledger. PROCUREMENT The College paid sales tax on numerous procurement card transactions during fiscal year 2007. Although this practice appears isolated, the College should take proper steps to ensure that sales tax is not paid on purchases. GENERAL LEDGER Fiscal year 2006 unexpended state appropriations (surplus) in Resident Instruction fund of$3,413.91 and Unexpended Plant fund of $26,072.12 was returned to Board of Regents of the University System ofGeorgia, University System Office during fiscal year 2007; however, the entire amount of $29,486.03 was returned from the Resident Instruction fund. The College should make the necessary adjustment to correct this error and reflect the return of surplus from the funds in which the surplus was accumulated. BUDGETARY OVEREXPENDITURE The approved budget ofMiddle Georgia College provided for expenditures totaling $22,233,384. A comparison ofanticipated funds available and expenditures by budgetary line item indicated that the Teaching category was overspent by $15,846,490.05. Units ofthe University System should closely monitor their internal control procedures over budget operations to prevent expenditure of funds in excess of budget approval. SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS The Schedule ofExpenditures ofFederal Awards (SEFA) information submitted by Middle Georgia College did not contain non-monetary activity in the amount of $5,721,323.67 for the Federal Family Education Loan Program (CFDA No. 84.032). The SEFA information was corrected by the auditors. Management should take appropriate steps to ensure that all Federal activity is properly reflected for the entity on the SEFA.