MIDDLE GEORGIA STATE COLLEGE MACON, GEORGIA MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2013 A Member Institution of the University System of Georgia Georgia Department of Audits and Accounts Greg S. Griffin State Auditor MIDDLE GEORGIA STATE COLLEGE - TABLE OF CONTENTS - SECTION I FINANCIAL LETTER OF TRANSMITTAL SELECTED FINANCIAL INFORMATION EXHIBITS A STATEMENT OF NET POSITION - (GAAP BASIS) B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (GAAP BASIS) C STATEMENT OF CASH FLOWS - (GAAP BASIS) D SELECTED FINANCIAL NOTES SUPPLEMENTARY INFORMATION SCHEDULES 1 BALANCE SHEET - (STATUTORY BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND 4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND 5 RECONCILIATION OF BUDGET TO GAAP 6 RECONCILIATION OF SALARIES AND TRAVEL Page 2 3 5 6 22 23 24 26 28 29 SECTION II ENTITY'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS MIDDLE GEORGIA STATE COLLEGE - TABLE OF CONTENTS - SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SECTION I FINANCIAL Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 December 4, 2013 Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the State Board of Regents of the University System of Georgia and Honorable John B. Black, President Middle Georgia State College Ladies and Gentlemen: As part of our audits of the basic financial statements of the University System of Georgia presented in the Annual Financial Report for the University System of Georgia, the basic financial statements of the 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, 2013, we have performed certain audit procedures at Middle Georgia State College. Accordingly, the financial statements and compliance activities of Middle Georgia State College were examined to the extent considered necessary in order to express an opinion as to the fair presentation of the 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 State College as of and for the year ended June 30, 2013. Information contained in this report is a by-product of our audits of the basic financial statements of the University System of Georgia and the basic financial statements of the State of Georgia 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. As discussed in Note 1 of the Selected Financial Notes, on January 8, 2013, Middle Georgia College and Macon State College merged to become Middle Georgia State College. This Management Report contains the combined information of the two previous entities as Middle Georgia State College. This report is intended solely for the information and use of the management of Middle Georgia State College, members of the Board of Regents of the University System of Georgia and the Southern Association of Colleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties. Respectfully, GSG:as Greg S. Griffin State Auditor SELECTED FINANCIAL INFORMATION - 1 - MIDDLE GEORGIA STATE COLLEGE STATEMENT OF NET POSITION - (GAAP BASIS) JUNE 30, 2013 ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Due from Affiliated Organizations Inventories Prepaid Items Other Assets Total Current Assets Noncurrent Assets Noncurrent Cash Investments (Externally Restricted) Investments Capital Assets, Net (Note 4) Total Noncurrent Assets Total Assets LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Unearned Revenue (Note 5) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences Total Current Liabilities Noncurrent Liabilities Lease Purchase Obligations Compensated Absences Total Noncurrent Liabilities Total Liabilities NET POSITION Net Investment in Capital Assets Restricted for Expendable Capital Projects Unrestricted Total Net Position - 2 - EXHIBIT "A" $ 18,274,014 239,234 2,764,872 28,360 1,142,166 116,717 130,193 $ 22,695,556 $ 187 152,788 2,500,502 222,820,199 $ 225,473,676 $ 248,169,232 $ 473,654 133,915 37,533 756,289 2,066,529 103,385 720,047 538,578 1,400,797 $ 6,230,727 $ 74,684,259 522,625 $ 75,206,884 $ 81,437,611 $ 147,597,362 2,993,316 10,931 16,130,012 $ 166,731,621 MIDDLE GEORGIA STATE COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - (GAAP BASIS) YEAR ENDED JUNE 30, 2013 OPERATING REVENUES Student Tuition and Fees Less: Scholarship Allowances Grants and Contracts Federal State Other Sales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises Residence Halls Bookstore Food Services Parking/Transportation Health Services 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 Federal State Other Gifts Investment Income (Endowments, Auxiliary and Other) Interest Expense (Capital Assets) Other Nonoperating Revenues (Expenses) Net Nonoperating Revenues Income (Loss) Before Other Revenues, Expenses, Gains, or Losses Capital Grants and Gifts State Decrease in Net Position Net Position - Beginning of Year, Restated Net Position - End of Year - 3 - EXHIBIT "B" $ 29,711,415 -10,250,464 72,903 561,118 69,240 563,204 11,108 6,466,315 6,001,802 2,469,780 90,192 19,922 593,013 426,107 387,642 $ 37,193,297 $ 20,712,774 17,107,889 12,005,543 261,257 603,834 11,640,976 3,147,255 19,782,353 9,770,431 $ 95,032,312 $ -57,839,015 $ 32,206,090 20,240,443 70,103 276,388 570,476 272,682 -3,820,617 2,002,665 $ 51,818,230 $ -6,020,785 462,272 $ -5,558,513 172,290,134 $ 166,731,621 (This page left intentionally blank) MIDDLE GEORGIA STATE COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS) YEAR ENDED JUNE 30, 2013 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation 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 Gifts and Grants 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 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Other Assets Prepaid Items Notes Receivable, Net Accounts Payable Salaries Payable Unearned Revenue Due to Affiliated Organizations Other Liabilities Compensated Absences Net Cash Provided (Used) by Operating Activities NONCASH ACTIVITY Change in Fair Value of Investments Recognized as a Component of Interest Income - 5 - EXHIBIT "C" $ 19,591,166 1,266,046 563,203 -37,860,206 -37,800,215 -11,640,976 32,010 -250 6,395,132 6,456,559 2,226,233 90,371 19,738 564,395 429,796 -151,209 $ -49,818,207 $ 32,206,090 -1,505 22,903,989 $ 55,108,574 $ 462,272 44,005 -2,509,703 -415,567 -3,820,617 $ -6,239,610 $ 33,383 80,990 -30,929 $ 83,444 $ -865,799 19,140,000 $ 18,274,201 $ -57,839,015 9,770,431 814,141 366,891 -734,846 -75,722 -250 -624,744 -23,181 -499,798 -826,836 -171,265 25,987 $ -49,818,207 $ 191,692 MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY On January 8, 2013, Middle Georgia College and Macon State College merged to become Middle Georgia State College. Middle Georgia State College is one of thirty-one (31) 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 State 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 State College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Middle Georgia State 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. FINANCIAL STATEMENT PREPARATION The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the College's assets, deferred outflows, liabilities, deferred inflows, net position, revenues, expenses, changes in net position and cash flows. BASIS OF ACCOUNTING For financial reporting purposes, the College is considered a special-purpose government engaged only in business-type activities. Accordingly, the College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues, are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-College transactions have been eliminated. New Accounting Pronouncements In fiscal year 2013, the College adopted the Governmental Accounting Standards Board (GASB) Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The provisions of this Statement establish accounting and financial reporting standards for governments who enter into Service Concession Arrangements (SCA) with other governmental or nongovernmental entities. As of June 30, 2013, the College has not entered into any arrangements that meet the qualifications to be reported as a SCA in accordance with this standard. In fiscal year 2013, the College adopted the Governmental Accounting Standards Board (GASB) Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in PreNovember 30, 1989 FASB and AICPA Pronouncements. The provisions of this Statement incorporate certain accounting and financial reporting guidance into authoritative GASB literature. In fiscal year 2013, the College adopted the Governmental Accounting Standards Board (GASB) Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources and Net Position. The provisions of this Statement establish financial reporting standards for the presentation of deferred outflows of resources and deferred inflows of resources and their effects on a government's net position. The College changed its presentation of net assets to net position for fiscal year 2013. There were no other applicable reporting changes for the College - 6 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" NET POSITION The College's net position is classified as follows: Net Investment in Capital Assets: This represents the College's total investment in capital assets, net of outstanding debt obligations and deferred inflows, or resources 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 the net investment in capital assets. Restricted - Nonexpendable: Nonexpendable restricted net position 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 - Expendable: Restricted expendable net position includes resources in which the College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties. Unrestricted: Unrestricted net position represents 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 $288,125.74. 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 State Treasurer. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. RESTATEMENT OF PRIOR YEAR NET POSITION Middle Georgia State College has a restatement of prior year net position decreasing beginning net position by $466,852. Of this restatement, $200,000 is due to removing an invalid accounts receivable and $266,852 is due to an increase in accumulated depreciation for equipment. Net position, July 1, 2012, as previously reported $ 172,756,986 Removal of invalid accounts receivable Increase in accumulated depreciation - equipment -200,000 -266,852 Net position, July 1, 2012, as restated $ 172,290,134 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: - 7 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" 1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia. 2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia. 3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose. 4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia. 5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia. At June 30, 2013, the carrying value of deposits was $15,017,508 and the bank balance was $16,813,238. Of the College's deposits, $16,563,238 was uninsured but collateralized with securities held by the financial institution's trust department or agent, but not in the College's name. INVESTMENTS At June 30, 2013, the carrying value of the College's investment was $5,857,378, which is materially the same as fair value. These investments were comprised of funds invested in the Board of Regents and/or Office of State Treasurer investment pools and stock certificates as follows: Investment Pools Board of Regents Short-Term Fund Balanced Income Fund Diversified Fund $ 3,204,088 819,770 1,448,464 $ 5,472,322 Other Investments Equity Securities-Domestic 385,056 Total Investments $ 5,857,378 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. - 8 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The College does not have a formal policy for managing interest rate risk. The Effective Duration of the Short-Term Fund is .56 years. Of the College's total investment of $3,204,088 in the Short-Term Fund, $2,810,914 is invested in debt securities. The Effective Duration of the Balanced Income Fund is 5.10 years. Of the College's total investment of $819,770 in the Balanced Income Fund, $509,708 is invested in debt securities. The Effective Duration of the Diversified Fund is 5.43 years. Of the College's total investment of $1,448,464 in the Diversified Fund, $463,508 is invested in debt securities. Concentration of Credit Risk Concentration of credit risk is the risk of loss attributed to the magnitude of a government's investment in a single issuer. The College does not have a formal policy for managing concentration of credit risk. The College has 6.5% of its investments in Coca-Cola stock with fair market value of $385,056. This stock is part of the Harris Endowment and was donated to the College in 1966. The donor prefers that this investment remain intact. NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2013. Student Tuition and Fees $ Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Due from Georgia State Financing and Investment Commission Due from Affiliated Organizations Other 479,779 526,142 239,234 347,057 28,360 1,908,007 Less Allowance for Doubtful Accounts $ 3,528,579 496,113 Net Accounts Receivable $ 3,032,466 - 9 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" NOTE 4: CAPITAL ASSETS Following are the changes in the College's capital assets for the year ended June 30, 2013: Beginning Balance Ending July 1, 2012 Balance (Restated) Additions Reductions June 30, 2013 Capital Assets, Not Being Depreciated: Land Construction Work-In-Progress $ 9,425,589 $ 9,600 $ 9,435,189 750,269 1,229,484 $ 1,566,886 412,867 Total Capital Assets, Not Being Depreciated $ 10,175,858 $ 1,239,084 $ 1,566,886 $ 9,848,056 Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections $ 10,596,156 183,305,653 $ 7,107,051 11,520,906 73,759,512 5,032,566 7,234 1,489,013 1,215,274 $ 114,691 $ 338,449 28,476 10,596,156 184,794,666 7,107,051 12,397,731 73,759,512 5,118,781 7,234 Total Assets Being Depreciated Less: Accumulated Depreciation: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections $ 291,329,078 $ $ 3,261,757 $ 45,318,404 4,324,345 7,078,935 7,466,383 3,965,418 0 2,818,978 $ 704,221 5,134,569 $ 303,471 1,385,871 2,033,140 209,159 366,925 $ 293,781,131 $ 123,611 16,210 208,388 28,476 3,965,978 50,329,362 4,611,606 8,256,418 9,499,523 4,146,101 0 Total Accumulated Depreciation $ Total Capital Assets, Being Depreciated, Net $ Capital Assets, Net (Restated) $ 71,415,242 $ 219,913,836 $ 230,089,694 $ 9,770,431 $ -6,951,453 $ -5,712,369 $ 376,685 $ -9,760 $ 1,557,126 $ 80,808,988 212,972,143 222,820,199 NOTE 5: UNEARNED REVENUE Unearned revenue consisted of the following at June 30, 2013. Prepaid Tuition and Fees Other Deferred Revenue Total Deferred Revenue $ 1,772,229 294,300 $ 2,066,529 - 10 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" NOTE 6: LONG-TERM LIABILITIES The College's Long-Term liability activity for the year ended June 30, 2013 was as follows: Beginning Balance July 1, 2012 Additions Reductions Ending Balance June 30, 2013 Current Portion Leases Lease Purchase Obligations $ 75,638,404 $ 415,567 $ 75,222,837 $ 538,578 Other Liabilities Compensated Absences 1,897,435 $ 1,311,523 1,285,536 1,923,422 1,400,797 Total Long-Term Obligations $ 77,535,839 $ 1,311,523 $ 1,701,103 $ 77,146,259 $ NOTE 7: NET POSITION Changes in Net Position for the year ended June 30, 2013 are as follows: 1,939,375 Beginning Balance July 1, 2012 (Restated) Additions Reductions Ending Balance June 30, 2013 Net Investments in Capital Assets $ 154,451,290 $ -5,296,802 $ 1,557,126 $ 147,597,362 Restricted Net Position 2,985,249 21,335,430 21,316,432 3,004,247 Unrestricted Net Position 14,853,595 72,621,578 71,345,161 16,130,012 Total Net Position $ 172,290,134 $ 88,660,206 $ 94,218,719 $ 166,731,621 NOTE 8: LEASE OBLIGATIONS Middle Georgia State College is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also is obligated under capital leases and installment purchase agreements for the acquisition of real property and equipment. CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2013 and 2041. Expenses for fiscal year 2013 were $4,236,184 of which $3,820,617 represented interest. Total principal paid on capital leases was $415,567 for the fiscal year ended June 30, 2013. Interest rates range from 4.856 percent to 5.42 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2013: - 11 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" Description Gross Amount (+) Accumulated Depreciation (-) Net Position Held Under Capital Lease at June 30, 2013 (=) Outstanding Balances per Lease Schedules at June 30, 2013 Equipment - (PPV Only) $ Buildings - (PPV Only) Facilities and Improvements 2,425,198 $ 71,079,314 255,000 2,303,052 $ 7,034,971 161,500 122,146 $ 64,044,343 93,500 1,851,779 73,103,420 267,638 $ 73,759,512 $ 9,499,523 $ 64,259,989 $ 75,222,837 Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms. Middle Georgia State College had seven capital leases with related entities in the current fiscal year. In April 2011, Middle Georgia State College entered into a capital lease of $13,345,554 at 5.42 percent with the Macon State College Foundation Real Estate LLC, a related entity, whereby the College leases a building for a thirty-year period that began April 2011 and ends April 2041. The outstanding liability at June 30, 2013, on this capital lease is $13,089,281. Middle Georgia State College entered into three residential facilities thirty-year capital leases at 4.856% interest with MGC Real Estate Foundation, LLC, a related entity, in November 2005. One facility was occupied in August 2006 and the remaining two facilities became operational in July 2007. The total outstanding liability, including accrued interest, was $25,879,039 at June 30, 2013. Middle Georgia State College entered into three residential facility thirty-year capital leases at 5.083% interest with MGC Real Estate Foundation II, LLC, a related entity, in February 2008 with the leases beginning when the facilities are occupied. One facility was occupied in August 2008 and the remaining two facilities became operational in August 2009. The total outstanding liability, including accrued and unpaid interest added to principal, was $36,254,517 at June 30, 2013. OPERATING LEASES Middle Georgia State College's noncancellable operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers, other small business equipment, and buildings. Noncancellable operating lease rental expenses in 2013 were $86,418 for real property and/or equipment. - 12 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Position includes other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2013, were as follows: Capital Leases Operating Leases Year Ending June 30: 2014 2015 2016 2017 2018 2019 through 2023 2024 through 2028 2029 through 2033 2034 through 2038 2039 through 2041 $ 4,335,172 $ 4,445,111 4,544,141 4,666,205 4,783,340 25,608,103 28,678,743 31,000,078 28,247,958 2,030,805 95,974 63,893 56,448 594 Total Minimum Lease Payments $ 138,339,656 $ 216,909 Less: Interest 63,116,819 Principal Outstanding $ 75,222,837 NOTE 9: RETIREMENT PLANS Middle Georgia State College participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia. These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that Middle Georgia State College participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law. Employees' Retirement System of Georgia The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers Retirement System of Georgia. One of the ERS System plans, the Employees' Retirement System of Georgia (ERS), is a cost-sharing multiple-employer defined benefit pension plan that was established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract. - 13 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS) of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1, 1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415. The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. Members hired on or after July 1, 1982 but prior to January 1, 2009 are "new plan" members subject to the modified plan provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009 also have the option to change their membership to the GSEPS plan. Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60. Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS. Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, Middle Georgia State College pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Middle Georgia State College contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. Middle Georgia State College is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These Middle Georgia State College contributions are not at any time refundable to the member or his/her beneficiary. Employer contributions required for fiscal year 2013 were based on the June 30, 2010 actuarial valuation as follows: Old Plan* New Plan GSEPS 14.90% 14.90% 11.54% * 10.15% exclusive of contributions paid by the employer on behalf of old plan members - 14 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" Members become vested after 10 years of service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions; the member forfeits all rights to retirement benefits. Teachers Retirement System of Georgia The Teachers Retirement System of Georgia (TRS) is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. On October 25, 1996, the Board created the Supplemental Retirement Benefit Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits. TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Options are available for distribution of the member's monthly pension, at a reduced rate, to a designated beneficiary on the member's death. Death, disability and spousal benefits are also available. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2013, were 6.00% of annual salary. Employer contributions required for fiscal year 2013 were 11.41% of annual salary as required by the June 30, 2010, actuarial valuation. - 15 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" The following table summarizes the Middle Georgia State College contributions by defined benefit plan for the years ending June 30, 2013, June 30, 2012, and June 30, 2011: Fiscal Year ERS Required Percentage Contribution Contributed TRS Required Percentage Contribution Contributed 2013 $ 2012 $ 2011 $ Regents Retirement Plan 67,059 54,115 12,570 100% 100% 100% $ 2,662,193 $ 2,458,388 $ 1,096,991 100% 100% 100% Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 47-21-1 et.seq. and 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 State 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 2013, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 6% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Middle Georgia State College and the covered employees made the required contributions of $1,011,248 (9.24%) and $600,258 (6%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. Georgia Defined Contribution Plan Plan Description Middle Georgia State 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. - 16 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" 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 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 2013 amounted to $112,335 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. NOTE 10: RISK MANAGEMENT The University System of Georgia offers its employees and retirees access to four different selfinsured healthcare plan options. For the University System of Georgia's Plan Year 2013, the following health care options were available: Blue Choice HMO plan (Blue Cross Blue Shield) HSA Open Access POS plan (Blue Cross Blue Shield) Open Access POS plan Kaiser Permanente HMO plan Middle Georgia State College and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the self-insured healthcare plan products. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental loses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Middle Georgia State College, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. - 17 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. NOTE 11: 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 expenditure disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Middle Georgia State College expects such amounts, if any, to be immaterial to its overall financial positions. Litigation, claims and assessments filed against Middle Georgia State 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, 2013. NOTE 12: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee. The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2013 plan year, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%. As of June 30, 2013, there were 273 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2013, Middle Georgia State College recognized as incurred $1,262,249 of expenditures, which was net of $595,869 of participant contributions. - 18 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT "D" NOTE 13: AFFILIATED ORGANIZATIONS The Middle Georgia State College Foundation, Inc., and the Middle Georgia State College Real Estate Foundation, Inc., and their subsidiaries are legally separate, tax exempt organizations whose activities primarily support Middle Georgia State College. These affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statement No. 61, The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of these affiliated organizations are not included in these financial statements. Copies of the financial statements for the affiliated organizations may be obtained from Middle Georgia State College. - 19 - (This page left intentionally blank) SUPPLEMENTARY INFORMATION - 21 - MIDDLE GEORGIA STATE COLLEGE BALANCE SHEET (STATUTORY BASIS) BUDGET FUND JUNE 30, 2013 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Total Assets LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Unearned Revenue Funds Held for Others Other Liabilities Total Liabilities Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Carry-Over per Governor's Office of Planning and Budget Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances SCHEDULE "1" $ 8,153,450.01 833,128.94 239,233.92 1,935,219.76 727.43 $ 11,161,760.06 $ 122,292.23 4,282,614.14 490,639.79 1,567,833.13 11,866.72 145,886.47 $ 6,621,132.48 $ 373,408.52 135,612.43 245,956.45 10,930.60 964,263.25 277,122.45 544,827.34 1,700,380.80 288,125.74 $ 4,540,627.58 $ 11,161,760.06 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. - 22 - MIDDLE GEORGIA STATE COLLEGE SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2013 SCHEDULE "2" REVENUES State Appropriation State General Funds Other Funds Total Revenues ADJUSTMENTS AND PROGRAM TRANSFERS CARRY-OVER FROM PRIOR YEARS Transfers from Reserved Fund Balance Total Funds Available 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, 2012 Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30 BUDGET ACTUAL VARIANCE FAVORABLE (UNFAVORABLE) $ 32,375,925.00 $ 32,375,925.00 $ 0.00 57,623,569.00 52,556,782.97 -5,066,786.03 $ 89,999,494.00 $ 84,932,707.97 $ -5,066,786.03 0.00 10,235.06 10,235.06 0.00 2,817,224.38 2,817,224.38 $ 89,999,494.00 $ 87,760,167.41 $ -2,239,326.59 $ 185,700.00 $ 169,308.31 $ 89,813,794.00 83,469,447.46 16,391.69 6,344,346.54 $ 89,999,494.00 $ 83,638,755.77 $ 6,360,738.23 $ 0.00 $ 4,121,411.64 $ 4,121,411.64 3,129,971.88 169,834.96 261,373.81 -154,905.37 -169,834.96 -2,817,224.38 $ 4,540,627.58 SUMMARY OF FUND BALANCE Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Carry-Over per Governor's Office of Planning and Budget Total Reserved Unreserved Surplus $ 373,408.52 135,612.43 245,956.45 10,930.60 964,263.25 277,122.45 544,827.34 1,700,380.80 $ 4,252,501.84 288,125.74 Total Fund Balance $ 4,540,627.58 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. - 23 - MIDDLE GEORGIA STATE COLLEGE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2013 Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching Total Operating Activity Original Appropriation Amended Appropriation Final Budget Current Year Revenues $ 0.00 $ 0.00 $ 185,700.00 $ 185,700.00 $ 33,731,744.00 $ 33,731,744.00 $ 32,190,225.00 $ 32,190,225.00 54,032,019.00 54,032,019.00 57,623,569.00 52,556,782.97 $ 87,763,763.00 $ 87,763,763.00 $ 89,813,794.00 $ 84,747,007.97 $ 87,763,763.00 $ 87,763,763.00 $ 89,999,494.00 $ 84,932,707.97 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. - 24 - SCHEDULE "3" Funds Available Compared to Budget Prior Year Adjustments and Total Carry-Over Program Transfers Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Excess (Deficiency) of Funds Available Over/(Under) Expenditures $ 0.00 $ 0.00 $ 185,700.00 $ 0.00 $ 169,308.31 $ 16,391.69 $ 16,391.69 $ 0.00 $ 2,817,224.38 $ 2,817,224.38 $ 0.00 $ 32,190,225.00 $ 10,235.06 55,384,242.41 10,235.06 $ 87,574,467.41 $ 0.00 $ 32,176,295.24 $ -2,239,326.59 51,293,152.22 -2,239,326.59 $ 83,469,447.46 $ 13,929.76 $ 6,330,416.78 6,344,346.54 $ 13,929.76 4,091,090.19 4,105,019.95 $ 2,817,224.38 $ 10,235.06 $ 87,760,167.41 $ -2,239,326.59 $ 83,638,755.77 $ 6,360,738.23 $ 4,121,411.64 - 25 - MIDDLE GEORGIA STATE COLLEGE STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2013 Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Teaching Prior Year Reserves Not Available for Expenditure Uncollectible Accounts Receivable Beginning Fund Balance/(Deficit) July 1 Fund Balance Carried Over from Prior Period as Funds Available Return of Fiscal Year 2012 Surplus Prior Period Adjustments $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 93,429.55 $ 2,893,629.79 $ 2,987,059.34 $ 0.00 $ -2,817,224.38 -2,817,224.38 $ -93,429.55 $ -76,405.41 117,310.39 -10,841.95 -169,834.96 $ 106,468.44 $ 312,747.50 $ 0.00 $ 0.00 $ 0.00 Budget Unit Totals $ 3,299,806.84 $ -2,817,224.38 $ -169,834.96 $ 106,468.44 Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. - 26 - SCHEDULE "4" Other Adjustments Early Return Fiscal Year 2013 Surplus Excess (Deficiency) of Funds Available Over/(Under) Expenditures Ending Fund Balance/(Deficit) June 30 Analysis of Ending Fund Balance Reserved Surplus/(Deficit) Total $ 0.00 $ $ -81.06 $ 35,706.11 $ 35,625.05 $ $ -35,625.05 $ $ 0.00 $ 0.00 $ 16,391.69 $ 16,391.69 $ 0.00 $ 16,391.69 $ 16,391.69 0.00 $ 0.00 0.00 $ 13,929.76 $ 4,091,090.19 4,105,019.95 $ 131,159.09 $ 4,115,954.35 0.00 $ 3,975,379.39 4,247,113.44 $ 3,975,379.39 $ 131,159.09 $ 131,159.09 140,574.96 4,115,954.35 271,734.05 $ 4,247,113.44 0.00 $ 0.00 $ 277,122.45 $ 277,122.45 $ 0.00 $ 277,122.45 0.00 $ 4,121,411.64 $ 4,540,627.58 $ 4,252,501.84 $ 288,125.74 $ 4,540,627.58 Summary of Ending Fund Balance Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Capital Outlay Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Carry-Over per Governor's Office of Planning and Budget Unreserved Surplus Total Ending Fund Balance - June 30 $ 373,408.52 135,612.43 245,956.45 10,930.60 964,263.25 277,122.45 544,827.34 1,700,380.80 $ $ 4,252,501.84 $ $ 373,408.52 135,612.43 245,956.45 10,930.60 964,263.25 277,122.45 544,827.34 1,700,380.80 288,125.74 288,125.74 288,125.74 $ 4,540,627.58 - 27 - MIDDLE GEORGIA STATE COLLEGE RECONCILIATION OF BUDGET TO GAAP YEAR ENDED JUNE 30, 2013 SCHEDULE "5" Presented below is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A. Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "1") Amounts reported for Business-Type Activities in the Statement of Net Position are different because: Capital Assets used in Business-Type Activities are not reported in the Budget Fund. Uncollectible accounts receivable are reported as an asset and reserved fund balance in the Budget Fund and as a contra-asset account on the Statement of Net Position. Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity Endowment Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Endowment Fund Activity Loan Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Loan Fund Activity Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activity Fund Activity The budgetary basis of accounting implemented by the State of Georgia recognizes expenditures when encumbered. The following adjustments were made to eliminate this activity for reporting on the Statement of Net Position. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Prepaid items reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Payables for goods and services provided in the current fiscal year reported in the Budget Fund as encumbrances payable are reported as accounts payable for GAAP reporting. Reimbursement from grantors reported as revenues in the Budget Fund that are for expenditures based on encumbrances are deferred for GAAP reporting. Total Net Effect of Encumbrance Activity Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Capital Leases Payable Compensated Absences Payable Contracts Payable Total Liabilities $ 4,540,627.58 222,820,199.00 $ 767,144.00 -767,144.00 $ 10,131,152.00 -663,876.00 $ 1,825,161.00 0.00 $ 211,438.00 0.00 $ 2,107,923.00 -160,544.00 -269,136.00 0.00 9,467,276.00 1,825,161.00 211,438.00 1,947,379.00 $ 4,282,614.00 114,082.00 -93,777.00 -930,451.00 3,372,468.00 $ -75,222,837.00 -1,923,422.00 -37,533.00 -77,183,792.00 Net Position of Business-Type Activities (Exhibit "A") The supplementary information presented on Schedules 1, 2, 3 and 4 was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. The information was derived from, and relates directly to, the same information used to prepare the financial statements. However, the budgetary statutes and regulations of the State of Georgia require reporting of certain information that is not in accordance with generally accepted accounting principles. Presented on this schedule is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A. - 28 - $ 166,731,620.58 MIDDLE GEORGIA STATE COLLEGE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2013 SCHEDULE "6" Totals per Annual Supplement Accruals June 30, 2013 June 30, 2012 Compensated Absences June 30, 2013 June 30, 2012 Adjustments Error Noted During Reconciliation Process Parks, Charles James Shared Services on Jointly Staffed Personnel Abraham Baldwin Agricultural College Saylor, Allen Columbus State University Fitzgerald, Tammy Georgia College and State University Davis, Matthew Ubah, Charles Williams, Jerry Georgia Southern University Brown, Terri Georgia Southwestern State University Sullivan, Troy Georgia State University Cantwell, Kevin Kennesaw State University Langan, Elise Macon State College Beverly, Michele Miller, Charlotte Ward, Charles Middle Georgia College Beverly, Michele Miller, Charlotte Ward, Charles University of North Georgia Miller, Charlotte Valdosta State University Cain, Sarah Waycross College Wilson, Mary Ellen Unidentified Variance SALARIES $ 37,923,180 $ TRAVEL 603,834 133,915 -163,454 1,786,736 -1,762,596 -5,992 -14,700 250 -2,100 3,090 5,250 15,000 -5,921 1,000 600 1,292 1,292 1,292 1,200 1,200 1,200 4,500 -1,659 -104,246 334 $ 37,820,663 $ 603,834 - 29 - SECTION II ENTITY'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS MIDDLE GEORGIA STATE COLLEGE ENTITY'S RESPONSE SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2013 PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FINDING CONTROL NUMBER AND STATUS FA-584-12-01 Partially Resolved See Corrective Action/Responses CORRECTIVE ACTION/RESPONSES SPECIAL TESTS AND PROVISIONS Inadequate Control Procedures over Unofficial Withdrawals Finding Control Number: FA-584-12-01 Although unofficial withdrawal calculations were completed during fiscal year 2013 for the Return to Title IV process, the internal control procedures used to determine whether a student completed the academic period or unofficially withdrew failed to incorporate a segment of the student population. SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2013 COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES The auditor is required to communicate to management and those charged with governance control deficiencies identified that, in the auditor's judgment, constitute significant deficiencies or material weakness. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Internal control deficiencies identified during the course of this engagement that was considered to be significant deficiencies and/or material weaknesses are presented below: FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS FA-583-13-01 Inadequate Control Procedures over Unofficial Withdrawals Compliance Requirement: Special Tests and Provisions Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U. S. Department of Education CFDA Number and Title: 84.SFA Student Financial Assistance Cluster Description: Determinations made to determine whether a student completed the academic period or unofficially withdrew did not incorporate a segment of the student population. Criteria: 34 CFR 668.22 provides requirements over the treatment of the Title IV funds when a student withdraws. The College is required to determine the amount of Title IV grant that the student earned as of the student's withdrawal date when a recipient of a Title IV grant withdraws from an institution during a payment period or period of enrollment in which the recipient began attendance. A refund must be returned to Title IV programs when the total amount of Title IV grant that the student earned is less than the amount of Title IV grant that was disbursed to the student as of the withdrawal date. Condition: The College did not properly perform the refund process for a portion of students who unofficially withdrew. Sixty-five students had grades that were incorrectly excluded from the Return to Title IV process. - 1 - MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2013 FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Questioned Cost: The College performed procedures to estimate likely questioned costs of $15,344.57. Auditor performed procedures to ensure the College's estimate was reasonable. Cause: In discussing this condition with Middle Georgia State College, this condition resulted from an oversight in reviewing the report of students with unofficial withdrawals. Effect or Potential Effect: The College was not in compliance with Federal regulations concerning the refund of Title IV funds to the U. S. Department of Education. Recommendation: The College should develop and implement procedures to ensure that all student financial aid refunds are properly calculated in accordance with the Higher Education Amendments 1998, Public Law 105-244. The College should also contact the U. S. Department of Education regarding the resolution of this finding. Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The College implemented a new grade code of "FA", which is a failing grade to be assigned by faculty to any student who has stopped attending class and should therefore be considered an unofficial withdrawal. During the fiscal year under review, Financial Aid Office staff identified all affected students who were missed in the initial unofficial withdrawal review, performed an unofficial withdrawal calculation on them and returned all funds to the U. S. Department of Education. Contact Person: Title: Telephone: Fax: Email: Patricia Simmons Director of Financial Aid (478) 471-2872 (478) 471-2790 pat.simmons@maconstate.edu OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) Financial Statement Preparation Process Our review of the College's GAAP basis financial statements revealed errors. Additionally, adjustments were made to properly report Federal expenditures on the Schedule of Expenditures of Federal Awards. While these errors were relatively insignificant to the financial statements, we recommend that the College strengthen internal controls over the financial statement preparation and review process. Capital Assets The College was unable to reconcile a variance between the Asset Management Module and the Financial Statements for Accumulated Depreciation - Equipment. A correction was made to the Financial Statements by the College. - 2 - MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2013 OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) The College should ensure that the various ledgers/modules are reconciled to the Financial Statements. Encumbrances A review of encumbrances payable at June 30, 2013 revealed an invalid entry made to the Budget Basis Financial Statements in the amount of $223,517.72 in outstanding purchase orders for goods that had been received or services that had been provided. Of this total, an adjustment was proposed and accepted to increase current year surplus by $200,900.00 and increase tuition reserve by $22,617.77. Management should review procedures in place and implement changes necessary to ensure that all journal entries and outstanding purchase orders are reviewed for validity. Public Private Venture Not Self-Liquidating For fiscal year ended June 30, 2013, an analysis of the financial statement activity for the College's Student Housing public private venture project revealed that the project's required capital lease payments and other operating costs exceeded yearly revenues by $175,645.15. The College had sufficient reserves to cover this operating deficit. Management should closely monitor project activity to ensure that revenues are sufficient to service capital lease debt as well as all other associated project costs. Also, management should continue to maintain adequate reserves for the project to protect against potential economic downturns. General Ledger According to the Board of Regents' Business Procedures Manual, subsidiary reconciliations are required to be performed quarterly. Our review revealed a lack of documentation of quarterly reconciliations of the activity recorded in the subsidiary modules of the financial accounting system (Accounts Payable/Expense, Accounts Receivable/Revenue, Payroll, Purchasing (PO)/Encumbrances and Asset Management) to the General Ledger. The College should review procedures in place and implement changes necessary to ensure that subsidiary reconciliations are completed in accordance with the Business Procedures Manual Section 10.6.2. - 3 -