Middle Georgia State College, Macon, Georgia, management report for fiscal year ended June 30, 2014

MIDDLE GEORGIA STATE COLLEGE
MACON, GEORGIA
MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2014
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
January 28, 2015

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 Christopher Blake, 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, 2014, 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, 2014. 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.
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, 2014
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) Due from USO - Capital Liability Reserve Fund Investments Capital Assets, Net (Note 4)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Deposits Advances (Including Tuition and Fees) (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:
Nonexpendable Expendable Unrestricted
Total Net Position
- 2 -

EXHIBIT "A"
$ 17,631,802 196,378
3,973,915 28,360
1,325,428 12,627 7,923
23,176,433
187 298,436 715,528 2,714,051 239,860,467 243,588,669 266,765,102
1,161,925 160,783 858,917
1,773,006 108,258 912,421
1,172,230 1,272,703 7,420,243
96,452,975 612,841
97,065,816 104,486,059
142,235,262 3,110,106 10,931
16,922,744
$ 162,279,043

MIDDLE GEORGIA STATE COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - (GAAP BASIS)
YEAR ENDED JUNE 30, 2014
OPERATING REVENUES
Student Tuition and Fees (Net of Allowance for Doubtful Accounts) 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 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
Net Nonoperating Revenues
Loss Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts Other
Decrease in Net Position
Net Position - Beginning of Year
Net Position - End of Year

EXHIBIT "B"

$

28,996,327

-9,850,934

211,500 -8,538 78,481
853,037 66,102

6,190,676 4,079,603 2,281,618
270,137 18,170
861,217 206,920 322,906

34,577,222

21,131,331 16,727,876 12,364,671
278,360 608,562 9,916,257 3,202,867 21,074,066 8,264,672
93,568,662
-58,991,440

34,102,741
18,664,681 563,251 525,938
2,008,967 420,509
-3,796,594 673,269
53,162,762
-5,828,678
1,376,100
-4,452,578
166,731,621

$

162,279,043

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MIDDLE GEORGIA STATE COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2014
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts (Exchange) Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts, Net
Net Cash Used by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts, Net
Net Cash Flows Provided Used by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Used by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments
Net Decrease in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH USED BY OPERATING ACTIVITIES:
Operating Loss Adjustments to Reconcile Operating Loss to Net Cash
Used by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Inventories Other Assets Prepaid Items Accounts Payable Advances (Including Tuition and Fees) Other Liabilities Compensated Absences
Net Cash Used by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts
- 5 -

EXHIBIT "C"

$

19,658,648

10,743

853,037

-37,521,179

-37,882,620

-9,916,257

-4,964

6,127,008 3,137,128 2,051,985
276,865 18,181
902,532 198,511
16,236

-52,074,146

34,102,741 161,932
21,762,836 724,699
56,752,208

-1,049,023 -538,578
-3,796,594
-5,384,195

63,921 -642,212 18,274,201

$

17,631,989

$

-58,991,440

8,264,672
-1,881,715 -183,262 122,270 104,090 817,767 -293,523 4,873 -37,878

$

-52,074,146

$

22,940,947

$

356,588

$

-1,376,100

MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY Middle Georgia State College (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 outflow of resources, liabilities, deferred inflows of resources, net position, revenues, expenses, changes in net position and cash flows, if applicable.
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 2014, the College adopted the Governmental Accounting Standards Board (GASB) Statement No. 65, Items Previously Reported as Assets and Liabilities. The provisions of this Statement clarify the use of deferred inflows of resources and deferred outflows of resources. Certain items, including those items which were previously reported as assets and liabilities, will now be reported as outflows of resources or inflows of resources. As of June 30, 2014, the College did not have any deferred outflows of resources or deferred inflows of resources.
In fiscal year 2014, the College adopted Governmental Accounting Standards Board (GASB) Statement No. 66, Technical Corrections - 2012, an amendment to GASB Statements No. 10 and No. 62. The objective of this Statement is to resolve conflicting guidance by amending GASB Statement No. 10, Accounting and Financial Reporting for Risk Financing and Related Insurance Issues and GASB Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. GASB Statement No. 10 was amended by removing the provision that limited fund based reporting of an entity's risk and financing activities to certain funds. GASB Statement No. 62 was amended by modifying guidance on (1) operating lease payments that vary from

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MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

EXHIBIT "D"

a straight-line basis, (2) purchases of a loan or a group of loans, and (3) recognition of servicing fees on mortgage loans that are sold when the stated service fee rate differs from a current (normal) servicing fee rate. The adoption of this statement does not have a significant impact on the College's financial statements.
In fiscal year 2014, the College adopted Governmental Accounting Standards Board (GASB) Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees. This Statement establishes accounting and reporting requirements for state and local governments that extend or receive financial guarantees that are nonexchange transactions. The adoption of this statement does not have a significant impact on the College's financial statements.
FUTURE ACCOUNTING PRONOUNCEMENTS In fiscal year 2015, the College will adopt Governmental Accounting Standards Board (GASB) Statement No. 68, Accounting and Financial Reporting for Pensions. The provisions of this Statement establish accounting and financial reporting standards for pensions that are provided to the employees of state and local governmental employers through pension plans that are administered through trusts. Implementation of this Statement will require the College to record a liability for its proportionate share of the Net Pension Liability of pension plans in which it participates. Actuarial estimates are currently being made to determine the College's liability, the effects of which are believed to be material.
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, deferred outflows of resources and deferred inflows of resources related to those capital assets. To the extent debt has been incurred or deferred inflows of resources have been received 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 consists 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 $178,879.76. 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.

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MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
At June 30, 2014, the carrying value of deposits was $14,331,290 and the bank balance was $16,269,268. Of the College's deposits, $16,019,268 were uninsured, but were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name.
INVESTMENTS At June 30, 2014, the carrying value of the College's investment was $6,245,101, which is materially the same as fair value. The College's investments as of June 30, 2014 are presented below.

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MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

EXHIBIT "D"

Investment Pools Board of Regents Short-Term Fund Balanced Income Fund Diversified Fund

$

3,232,614

913,826

1,692,005

5,838,445

Other Investments Equity Mutual Funds - Domestic

406,656

Total Investments

$

6,245,101

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.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2014.

Student Tuition and Fees

$

Auxiliary Enterprises and Other Operating Activities

Federal, State and Private Funds

Georgia State Financing and Investment Commission

Due from Affiliated Organizations

Other

918,236 854,895 196,378 501,534
28,360 2,486,233

Less Allowance for Doubtful Accounts

4,985,636 786,983

Net Accounts Receivable

$

4,198,653

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MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

EXHIBIT "D"

NOTE 4: CAPITAL ASSETS Following are the changes in the College's capital assets for the year ended June 30, 2014:

Beginning Balance July 1, 2013

Capital Assets, Not Being Depreciated: Land Construction Work-In-Progress

$

9,435,189 $

412,867

Total Capital Assets, Not Being Depreciated

9,848,056

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections

10,596,156 184,794,666
7,107,051 12,397,731 73,759,512
5,118,781 7,234

Additions

Reductions

Ending Balance June 30, 2014

1,281,100 $
1,281,100
375,334 1,026,395 22,940,947
117,628

$ 412,867
412,867

10,716,289 0
10,716,289

13,932 558,313
16,716

10,596,156 185,170,000
7,093,119 12,865,813 96,700,459
5,219,693 7,234

Total Assets Being Depreciated
Less: Accumulated Depreciation: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections

293,781,131
3,965,978 50,329,362
4,611,606 8,256,418 9,499,523 4,146,101

24,460,304
645,039 3,935,480
272,369 1,438,608 1,766,663
206,513

588,961
13,932 534,716
16,716

317,652,474
4,611,017 54,264,842
4,870,043 9,160,310 11,266,186 4,335,898

Total Accumulated Depreciation

Total Capital Assets, Being Depreciated, Net

Capital Assets, Net

$

80,808,988 212,972,143 222,820,199 $

8,264,672 16,195,632 17,476,732 $

565,364 23,597
436,464 $

88,508,296 229,144,178 239,860,467

NOTE 5: ADVANCES Advances consisted of the following at June 30, 2014.
Prepaid Tuition and Fees Other Advances
Total Advances

$

1,416,990

356,016

$

1,773,006

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MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

EXHIBIT "D"

NOTE 6: LONG-TERM LIABILITIES The College's Long-Term liability activity for the year ended June 30, 2014 was as follows:

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

Current Portion

Leases Lease Obligations

$ 75,222,837 $ 22,940,947 $

538,579 $ 97,625,205 $ 1,172,230

Other Liabilities Compensated Absences

1,923,422

1,322,237

1,360,115

1,885,544

1,272,703

Total Long-Term Obligations

$ 77,146,259 $ 24,263,184 $ 1,898,694 $ 99,510,749 $

NOTE 7: NET POSITION

Changes in Net Position for the year ended June 30, 2014 are as follows:

2,444,933

Beginning Balance July 1, 2013

Additions

Reductions

Ending Balance June 30, 2014

Invested in Capital Assets Net of Related Debt

$ 147,597,362 $

25,328,537 $

30,690,637 $ 142,235,262

Restricted Net Position

3,004,247

20,219,615

20,102,825

3,121,037

Unrestricted Net Position

16,130,012

72,871,897

72,079,165

16,922,744

Total Net Position

$ 166,731,621 $ 118,420,049 $ 122,872,627 $ 162,279,043

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 2014 and 2042. Expenses for fiscal year 2014 were $4,335,173 of which $3,796,594 represented interest. Total principal paid on capital leases was $538,579 for the fiscal year ended June 30, 2014. Interest rates range from 4.63 percent to 5.42 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2014:

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MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

EXHIBIT "D"

Description

Equipment (PPV)

$

Buildings (PPV)

Facilities and Other Improvements (PPV)

Outstanding

Net Assets Held

Balances

Under Capital

per Lease

Accumulated

Lease at

Schedules at

Gross Amount

Depreciation

June 30, 2014

June 30, 2014

(+)

(-)

(=)

2,425,198 $

2,405,260 $

19,938 $

2,460,118

94,020,261

8,661,176

85,359,085

94,904,892

255,000

199,750

55,250

260,195

Total Assets Held Under Capital Lease

at June 30, 2014

$

96,700,459 $ 11,266,186 $ 85,434,273 $ 97,625,205

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 eight capital leases with related entities in the current fiscal year. In April, 2014, Middle Georgia State College entered into a capital lease of $22,940,947 at 4.63% with the Middle Georgia State College Real Estate Foundation, Inc., a related entity, whereby the College leases a building for a twenty-eight year period that will begin July, 2014 and ends June, 2042. The outstanding liability at June 30, 2014, on this capital lease is $22,940,947.
In April, 2011, Middle Georgia State College entered into a capital lease of $13,345,554 at 5.42% with the Macon State College Foundation Real Estate I, 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, 2014 on this capital lease is $12,931,828.
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 $25,664,237 at June 30, 2014.
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 $36,088,193 at June 30, 2014.
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 2014 were $87,676 for real property and/or equipment.

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MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

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, 2014, were as follows:

Year Ending June 30: 2015 2016 2017 2018 2019 2020 through 2024 2025 through 2029 2030 through 2034 2035 through 2039 2040 through 2042

$

9,462,135 $

9,656,637

9,887,875

10,110,684

10,330,922

55,090,978

61,110,833

65,275,105

48,021,894

5,422,560

87,486 87,486 67,636

Total Minimum Lease Payments

284,369,623 $

242,608

Less: Interest

186,744,418

Principal Outstanding

$ 97,625,205

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.

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MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

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 2014 were based on the June 30, 2011 actuarial valuation as follows:

Old Plan* New Plan GSEPS

18.46% 18.46% 15.18%

* 13.71% exclusive of contributions paid by the employer on behalf of old plan members

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MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

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. 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, 2014 were 6.00% of annual salary. Employer contributions required for fiscal year 2014 were 12.28% of annual salary as required by the June 30, 2011 actuarial valuation.

- 15 -

MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

EXHIBIT "D"

The following table summarizes the Middle Georgia State College contributions by defined benefit plan for the years ending June 30, 2014, June 30, 2013, and June 30, 2012:

Fiscal Year

ERS

Required

Percentage

Contribution

Contributed

TRS

Required

Percentage

Contribution

Contributed

2014

$

2013

$

2012

$

Regents Retirement Plan

84,794 67,059 54,115

100% 100% 100%

$ 2,691,922 $ 2,662,193 $ 2,458,388

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 2014, 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 $1,057,529 (9.24%) and $686,707 (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 parttime 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.

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MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

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 2014 amounted to $81,249 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 self-insured healthcare plan options. For the University System of Georgia's Plan Year 2014, 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

- 17 -

MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

EXHIBIT "D"

Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
NOTE 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, 2014.
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 2014 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%.

- 18 -

MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2014

EXHIBIT "D"

As of June 30, 2014, there were 289 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2014, Middle Georgia State College recognized as incurred $1,265,478 of expenditures, which was net of $634,449 of participant contributions.
NOTE 13: AFFILIATED ORGANIZATIONS
The Middle Georgia State College 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 the 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.
Middle Georgia State College Real Estate Foundation, Inc. and subsidiaries have been determined to be significant to the State of Georgia for the year ended June 30, 2014, and as such, is reported as a blended component unit in the Comprehensive Annual Financial Report of the State of Georgia (CAFR). Significant blended affiliated organizations issue separate audited financial statements that can be obtained from Middle Georgia State College.

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SUPPLEMENTARY INFORMATION - 21 -

MIDDLE GEORGIA STATE COLLEGE BALANCE SHEET (STATUTORY BASIS)
BUDGET FUND JUNE 30, 2014
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 Advances 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 OPB Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

8,694,902.49

1,022,025.07

196,377.82 2,680,908.85
12,800.69

12,607,014.92

140,871.93 5,080,801.71 1,523,589.82 1,480,941.59
10,786.32 25,323.00
8,262,314.37

479,694.79 148,207.14
80,725.94 10,930.60 1,131,327.45 447,748.67 574,968.18 1,292,218.02
178,879.76
4,344,700.55

$

12,607,014.92

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, 2014

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Other Funds
Total Revenues
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, 2013
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 34,390,867.00 $ 34,390,867.00 $

0.00

54,327,582.00

51,876,164.68

-2,451,417.32

88,718,449.00

86,267,031.68

-2,451,417.32

0.00 88,718,449.00

3,975,379.39 90,242,411.07

3,975,379.39 1,523,962.07

176,250.00 88,542,199.00

88,718,449.00

$

0.00

176,210.39 86,120,575.33

39.61 2,421,623.67

86,296,785.72

2,421,663.28

3,945,625.35 $ 3,945,625.35

4,252,501.84 288,125.74

162,536.03 -40,583.28
-288,125.74 -3,975,379.39 $ 4,344,700.55

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 OPB
Total Reserved
Unreserved Surplus
Total Fund Balance

$

479,694.79

148,207.14

80,725.94

10,930.60

1,131,327.45

447,748.67

574,968.18

1,292,218.02

4,165,820.79

178,879.76

$ 4,344,700.55

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, 2014

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

$

176,250.00 $

176,250.00 $

176,250.00 $

176,250.00

34,065,820.00 56,897,136.00
90,962,956.00

34,214,617.00 61,467,653.00
95,682,270.00

34,214,617.00 54,327,582.00
88,542,199.00

34,214,617.00 51,876,164.68
86,090,781.68

$

91,139,206.00 $

95,858,520.00 $

88,718,449.00 $ 86,267,031.68

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 of Funds Available
Over Expenditures

$

0.00 $

0.00 $

176,250.00 $

0.00 $

176,210.39 $

39.61 $

39.61

0.00 3,975,379.39
3,975,379.39

0.00 0.00
0.00

34,214,617.00 55,851,544.07
90,066,161.07

0.00 1,523,962.07
1,523,962.07

34,209,657.46 51,910,917.87
86,120,575.33

4,959.54 2,416,664.13
2,421,623.67

4,959.54 3,940,626.20
3,945,585.74

$ 3,975,379.39 $

0.00 $ 90,242,411.07 $

1,523,962.07 $ 86,296,785.72 $

2,421,663.28 $

3,945,625.35

- 25 -

MIDDLE GEORGIA STATE COLLEGE STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2014

Special Funding Initiative State Appropriation State General Funds
Teaching State Appropriation State General Funds Other Funds
Total Teaching
Total Operating Activity
Prior Year Reserves Not Available for Expenditure Uncollectible Accounts Receivable

Beginning Fund Balance July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2013
Surplus

Prior Period Adjustments

$

16,391.69 $

0.00 $

-16,391.69 $

0.00

131,159.09 4,115,954.35
4,247,113.44
4,263,505.13

0.00 -3,975,379.39
-3,975,379.39
-3,975,379.39

-131,159.09 -140,574.96
-271,734.05
-288,125.74

148,662.77 -26,710.02
121,952.75
121,952.75

277,122.45

0.00

0.00

0.00

Budget Unit Totals

$

4,540,627.58 $

-3,975,379.39 $

-288,125.74 $

121,952.75

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 2014
Surplus

Excess of Funds Available
Over Expenditures

Ending Fund Balance June 30

Analysis of Ending Fund Balance

Reserved

Surplus

Total

$

0.00 $

0.00 $

39.61 $

39.61 $

0.00 $

39.61 $

39.61

0.00 -170,626.22
-170,626.22
-170,626.22

0.00 0.00
0.00
0.00

4,959.54 3,940,626.20
3,945,585.74
3,945,625.35

153,622.31 3,743,289.96
3,896,912.27
3,896,951.88

0.00 3,718,072.12
3,718,072.12
3,718,072.12

153,622.31 25,217.84
178,840.15
178,879.76

153,622.31 3,743,289.96
3,896,912.27
3,896,951.88

170,626.22

0.00

0.00

447,748.67

447,748.67

0.00

447,748.67

$

0.00 $

0.00 $

3,945,625.35 $

4,344,700.55 $ 4,165,820.79 $

178,879.76 $ 4,344,700.55

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 OPB Unreserved Surplus
Total Ending Fund Balance - June 30

$ 479,694.79 148,207.14 80,725.94 10,930.60
1,131,327.45 447,748.67 574,968.18
1,292,218.02
$
$ 4,165,820.79 $

$
178,879.76 178,879.76 $

479,694.79 148,207.14
80,725.94 10,930.60 1,131,327.45 447,748.67 574,968.18 1,292,218.02
178,879.76
4,344,700.55

- 27 -

MIDDLE GEORGIA STATE COLLEGE RECONCILIATION OF BUDGET TO GAAP
YEAR ENDED JUNE 30, 2014

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")

$

4,344,700.55

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.

239,860,467.00

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.

-447,749.00

Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity

$

407,393.00

-407,593.00

-200.00

Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity

$ 7,483,894.00 -588,745.00

6,895,149.00

Endowment Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Endowment Fund Activity

$ 1,998,150.00 0.00

1,998,150.00

Loan Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Loan Fund Activity

$

211,747.00

0.00

211,747.00

Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activity Fund Activity

$ 4,975,050.00 -197,873.00

4,777,177.00

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. 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

$ 5,080,801.70 -930,451.00

4,150,350.70

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 Total Liabilities

$ -97,625,205.00 -1,885,544.00

-99,510,749.00

Rounding Variance

-0.25

Net Position of Business-Type Activities (Exhibit "A")

$ 162,279,043.00

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 -

MIDDLE GEORGIA STATE COLLEGE RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2014

SCHEDULE "6"

Totals per Annual Supplement
Accruals June 30, 2014 June 30, 2013
Compensated Absences June 30, 2014 June 30, 2013
Adjustments Shared Services on Jointly Staffed Personnel Abraham Baldwin Agricultural College Saylor, Allen Bainbridge State College Lucas, Gerald Columbus State University Fitzgerald, Tammy Georgia College and State University Blick, Jeffrey Conine, Clyde Ubah, Charles Georgia Perimeter College Strecker, Jonas Georgia Southern University Brown, Terri Georgia Southwestern State University Sullivan, Troy Southern Polytechnic State University Patti, Rose Valdosta State University Cain, Sarah Hull, Karla
Unidentified Variance

SALARIES

$

37,846,826 $

TRAVEL 608,562

160,783 -133,915

1,751,550 -1,786,736

15,000 -300 -945
1,500 3,000 4,970 -4,200 3,000 -5,500 -1,594 6,000 3,716 -3,948

$

37,859,207 $

608,562

- 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, 2014

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-0584-12-01 FA-0583-13-01

Partially Resolved See Corrective Action/Responses 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

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.

SPECIAL TESTS AND PROVISIONS Inadequate Control Procedures over Unofficial Withdrawals Finding Control Number: FA-583-13-01

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.

SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2014

COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES

The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit 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 were 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-0583-14-01

Weaknesses in IT General Controls

Compliance Requirement:
Internal Control Impact: Compliance Impact: Federal Awarding Agency: CFDA Number and Title:

Activities Allowed or Unallowed Eligibility Significant Deficiency N/A U. S. Department of Education 84.SFA Student Financial Assistance

Description: College policies and procedures were insufficient to provide adequate internal controls over change management and logical access IT general controls.

Criteria: Management of the College is responsible for designing and maintaining internal controls that provide reasonable assurance that transactions are properly processed and reported.

Condition: Our review of the established internal control structure associated with significant financial applications at the College revealed design and operating effectiveness deficiencies in change management, including separation of duties, and logical access controls intended to protect financial and student financial assistance information from unauthorized access, manipulation and corruption.

The details related to these deficiencies have been provided to College Management in accordance with Official Code of Georgia Annotated 50-6-9.

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MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2014

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Questioned Cost: N/A

Cause: In discussing these deficiencies with the College, management stated that the cause was directly related to ineffective policies and failure to adequately monitor change management, general security settings and user access to the financial application.

Effect or Potential Effect: Failure to maintain adequate internal controls related to change management and logical access increases the risk that misappropriation of assets, fraud, errors, irregularities and/or noncompliance with federal regulations could occur.

Recommendation: Management should review and enhance their policies and procedures to ensure the integrity and accuracy of the information used within the financial statements and as part of awarding financial assistance to students. Additionally, management should ensure proper separation of duties as it relates to financial and student financial assistance processes.

Views of Responsible Officials and Corrective Action Plans: We concur with this finding. The College has begun to leverage its IT helpdesk ticket system to ensure that all system upgrades and local modifications are appropriately tested and approved. Periodic system monitoring will be implemented to attempt to detect anomalies in key database tables. All anomalies will be investigated to determine the cause. The College will develop and implement change management control procedures to separate duties related to the request/approval of program developments or program changes, the programming of the developments or changes and the moving of the developments or changes in and out or production. The College will also systematically review logical access to ensure that end-users have the correct permissions with the least amount of access for their jobs.

Contact Person: Beverly Bergman, Director of Enterprise Information Systems Telephone: (478) 471-2721; Fax: (478) 471-2896; E-mail: beverly.bergman@mga.edu

FA-0583-14-02

Inadequate Control Procedures over Withdrawals

Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: CFDA Number and Title:

Special Tests and Provisions Significant Deficiency Nonmaterial Noncompliance U. S. Department of Education 84.SFA Student Financial Assistance Cluster

Description: This is a repeat finding (FA-584-12-01 and FA-583-13-01) from the year ended June 30, 2012 and June 30, 2013. Withdrawal determinations and federal aid return calculations were not consistently correct.

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MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2014
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Criteria: 34 CFR 668 provides general provisions for administering Student Financial Assistance programs. 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 grants that the student earned as of the student's withdrawal date when a recipient of the 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 the Title IV programs when the total amount of the Title IV grant that a student earned is less than the amount of Title IV grant that was disbursed to the student as of the withdrawal date. 34 CFR 668.22(j)(1) states than "An institution must return the amount of Title IV funds...as soon as possible but no later than 45 days after the date of the institution's determination that the student withdrew."
Condition: The College did not properly perform the refund process for official and unofficial withdrawals.
A sample of 40 students that received federal financial assistance and withdrew officially or unofficially from the College were selected to determine if refunds were calculated in conformity with Title IV requirements and returned in a timely manner in accordance with federal regulations. Our examination revealed the following:
1. The refund calculation for 32 students was calculated incorrectly due to the improper number of scheduled break days, inclusion of incorrect institutional charges or an amount that could have been disbursed was not included. This resulted in an underpayment of Title IV funds returned by the College to the U.S. Department of Education in the amount of $3,258.06. In addition, these errors resulted in student overpayments in the net amount of $2,537.20.
2. Seven refunds were not processed within the required timeframe of 45 days.
3. One refund was returned twice to the U.S. Department of Education.
4. The amount of refunds calculated for five students were returned to the U.S. Department of Education in a different amount.
In addition, auditor sampled 40 students who received all failing and/or incomplete grades for which no return of Title IV funds were made to ascertain whether the students sufficiently completed the enrollment period. A refund was not calculated for 34 students with all failing and/or incomplete grades and did not complete 60% of the enrollment period. This resulted in an underpayment of Title IV funds to the U.S. Department of Education in the amount of $74,978.35.
This matter was brought to the attention of the College. The College was asked to determine the number of students and the amount of refunds related to students who received all failing and/or incomplete grades and did not complete 60% of the enrollment period.
The College determined that 245 students receiving all failing and/or incomplete grades did not complete 60% of the enrollment period. The estimated refunds related to these withdrawals were $200,800.47. Auditor performed procedures to ensure the College's estimate was reasonable. The College returned $200,800.47 to the U.S. Department of Education as of the end of field work.
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MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2014
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
Questioned Cost: Questioned costs of $204,058.53, with likely questioned costs of $226,765.53, were identified for unearned Title IV funds not returned to the U.S. Department of Education by the College.
Cause: In discussing these deficiencies with the College, management stated that the cause was directly related to ineffective policies and relying on professors to report students' attendance. However, there was not a mandated attendance policy in place.
Effect or Potential Effect: The College was not in compliance with federal regulations concerning the return of unearned Title IV federal funds to the U.S. Department of Education.
Recommendation: The College should implement policies and procedures to ensure that unofficial withdrawals that received Title IV funds are identified, that the required refund calculation is performed, that refund calculations are reviewed for accuracy, and that refunds are sent back to the various SFA programs in a timely manner. 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 has implemented procedures to ensure that exception reports are generated and consistently monitored to ascertain a student's correct last date if attendance. Faculty have been instructed on these procedures and are now required to report all last dates of attendance for students not receiving a successful attempt at the course. The Financial Aid Office generates and reviews these reports to insure timely and appropriate calculations are performed. All days of the payment period are accounted for to insure compliance with regard to the formula used to calculate the amounts returned. The funds returned by the institution are also reviewed to compare amounts calculated to actual amounts returned.
Contact Person: Lee Ann Kirkland, Director of Financial Aid Telephone: (478) 471-2795; Fax: (478) 471-2790; E-mail: leeann.kirkland@mga.edu
OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION)
Financial Statement Preparation Process Observation: Our review of the College's Year-End Journal Entries, GAAP basis financial statements and Notes to the Financial Statements revealed errors.
Recommendation: 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 Observation: A review of capital assets additions and a scanning of the capital asset listing revealed weaknesses in the capitalization process. Numerous assets were added which do not meet the capitalization thresholds established by the Board of Regents Business Procedures manual. In addition, one asset was capitalized at an incorrect value. Finally, several assets are not being depreciated in accordance with the useful lives established in the College's capitalization policy.
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MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2014
OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION)
Recommendation: The College should review its capital assets records and make appropriate adjustments to ensure the capital assets records are accurate and conform to the College's approved capital assets policy and generally accepted accounting principles.
Encumbrances Observation: A review of encumbrance payable at June 30, 2014 revealed invalid encumbrances in the amount of $37,340.10. An adjustment was proposed and accepted to increase current year surplus by $35,340.60 and increase tuition reserve by $1,999.50.
Recommendation: Management should review procedures in place and implement changes necessary to ensure that all outstanding purchase orders are reviewed for validity.
Budget Basis Reporting Observation: A review of the College's budget statements revealed an undocumented entry made in the amount of $194,537.40. In addition, a manual entry was made to the College's encumbrance payable in the amount of $81,585.19 for which adequate documentation was not available to support the entry.
Recommendation: Management should review procedures in place and implement changes necessary to ensure that all journal entries and manual adjustments are adequately documented and reviewed for validity.
General Ledger Observation: 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.
Recommendation: 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.
Public Private Venture Not Self-Liquidating Observation: For fiscal year ended June 30, 2014, 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 $238,479.91. The College had sufficient reserves to cover this operating deficit.
Recommendation: 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.
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