MIDDLE GEORGIA STATE COLLEGE Annual Financial Report Fiscal Year Ended June 30, 2015 Macon, Georgia 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 4 6 24 25 26 28 30 31 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 14, 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 Dr. 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, 2015, 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. In addition, we have audited compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on its Federal programs for the year ended June 30, 2015. 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, 2015. 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:er Greg S. Griffin State Auditor SELECTED FINANCIAL INFORMATION - 1 - MIDDLE GEORGIA STATE COLLEGE STATEMENT OF NET POSITION - (GAAP BASIS) JUNE 30, 2015 ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Receivables - Federal Financial Assistance Receivables - Other Due from Affiliated Organizations Inventories Prepaid Items 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 Deferred Outflows of Resources Related to Defined Benefit Pension Plans LIABILITIES Current Liabilities Accounts Payable Salaries Payable Contracts 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 Net Pension Liability Total Noncurrent Liabilities Total Liabilities Deferred Inflows of Resources Related to Defined Benefit Pension Plans NET POSITION Net Investment in Capital Assets Restricted for: Nonexpendable Expendable Unrestricted Total Net Position - 2 - EXHIBIT "A" $ 11,515,580 93,627 4,263,191 28,360 1,676,652 34,949 17,612,359 187 313,055 715,528 2,738,742 232,053,400 235,820,912 253,433,271 3,032,822 839,163 177,924 42,287 1,055,865 1,731,216 293,888 869,946 1,236,736 1,377,423 7,624,448 95,219,733 680,702 27,851,184 123,751,619 131,376,067 12,102,421 135,596,931 1,014,954 2,301,371 -25,925,651 $ 112,987,605 MIDDLE GEORGIA STATE COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - (GAAP BASIS) YEAR ENDED JUNE 30, 2015 OPERATING REVENUES Student Tuition and Fees (Net of Allowance for Doubtful Accounts) Less: Scholarship Allowances Grants and Contracts Federal Other Sales and Services 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 (Expenses) Net Nonoperating Revenues Loss Before Other Revenues, Expenses, Gains, or Losses Net Position - Beginning of Year, Originally Reported Prior Year Adjustments Net Position - Beginning of Year, Restated Net Position - End of Year - 3 - EXHIBIT "B" $ 28,519,005 -9,625,195 249,753 9,293 729,101 113,905 6,438,134 3,368,409 2,097,121 242,220 17,366 1,380,751 177,908 588,590 34,306,361 19,939,795 17,987,882 11,240,900 210,450 647,677 9,024,092 3,312,593 23,760,227 8,579,766 94,703,382 -60,397,021 32,635,618 17,453,712 543,433 518,717 2,141,087 93,558 -4,727,472 55,964 48,714,617 -11,682,404 162,279,043 -37,609,034 124,670,009 $ 112,987,605 MIDDLE GEORGIA STATE COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS) YEAR ENDED JUNE 30, 2015 CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Federal Appropriations Grants and Contracts (Exchange) Sales and Services 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 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 Cash Flows Provided 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 EXHIBIT "C" $ 18,674,218 257,227 729,101 -40,780,985 -37,736,697 -9,024,092 1,525 6,408,561 2,540,527 2,043,947 240,508 16,349 1,393,148 178,838 1,342,399 -53,715,426 32,635,618 -506,595 22,100,847 133,045 54,362,915 -921,750 -1,168,736 -4,727,472 -6,817,958 54,247 -6,116,222 17,631,989 $ 11,515,767 - 4 - MIDDLE GEORGIA STATE COLLEGE STATEMENT OF CASH FLOWS - (GAAP BASIS) YEAR ENDED JUNE 30, 2015 RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (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 Prepaid Items Accounts Payable Advances (Including Tuition and Fees) Other Liabilities Compensated Absences Change in Deferred Inflows/Outflows of Resources: Deferred Inflows of Resources Deferred Outflows of Resources Net Pension Liability Net Cash Used by Operating Activities NONCASH ACTIVITY Change in Fair Value of Investments Recognized as a Component of Interest Income EXHIBIT "C" $ -60,397,021 8,579,766 -113,672 -351,224 -22,322 -108,673 -41,789 185,630 172,581 12,102,421 -262,055 -13,459,068 $ -53,715,426 $ 39,311 - 5 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY Middle Georgia State College is one of thirty (30) 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, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-College transactions have been eliminated. NEW ACCOUNTING PRONOUNCEMENTS In fiscal year 2015, the College adopted 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 requires a restatement to beginning net position. The adoption of this statement has a significant impact on the College's financial statements. In fiscal year 2015, the College adopted Governmental Accounting Standards Board (GASB) Statement No. 69, Government Combinations and Disposals of Government Operations. This statement provides specific accounting and financial reporting guidance for combinations in the governmental environment. This statement also requires that disclosures be made by governments about combination arrangements in which they engage and for disposals of government operations. The adoption of this statement does not have a significant impact on the College's financial statements. - 6 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" In fiscal year 2015, the College adopted Governmental Accounting Standards Board (GASB) Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date - an amendment of GASB No. 68. The objective of this statement is to improve accounting and financial reporting by addressing an issue in Statement No. 68, Accounting and Financial Reporting for Pensions, concerning transition provisions related to certain pension contributions made to defined benefit pension plans prior to implementation of statement. This statement amends paragraph 137 of Statement No. 68 which limited recognition of pension-related deferred outflows of resources and deferred inflows of resources at the transition to circumstances in which it is practical to determine the amounts of all deferred outflows of resources and deferred inflows of resources related to pensions. Adoption of this statement does have a significant impact on the College's financial statements. PENSIONS For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Teachers' Retirement System of Georgia (TRS) and Employees' Retirement System (ERS), additions to/deductions for TRS's and ERS's fiduciary net position have been determined on the same basis as they are reported by TRS and ERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. CAPITAL LIABILITY RESERVE FUND In fiscal year 2014, the Capital Liability Reserve Fund (Fund) was established by the Board of Regents to protect the fiscal integrity of the University System of Georgia (USG) to maintain the strongest possible credit ratings associated with Public Private Venture (PPV) projects and to ensure that the Board of Regents can effectively support its long-term capital lease obligations. The Fund is financed by all USG institutions participating in the PPV program. The Fund serves as a pooled reserve that is managed by the Board of Regents. The Fund shall only be used to address significant shortfalls and only insofar as a requesting USG institution is unable to make the required PPV capital lease payment to the designated cooperative organization. The Fund will continue as long as the Board of Regents has rental obligations under the PPV program and at the conclusion of the program, funds will be returned to the College. Middle Georgia State College's contribution to the fund as of June 30, 2015 was $715,528. 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 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. - 7 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" Unrestricted: Unrestricted net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of Investment in Capital Assets. Included in the net deficit reported is the College's Net Pension liability of $27.85 million which is required for financial reporting and will not impact the economics of the plan or affect budgets or cash flows. RESTATEMENT NOTE DISCLOSURE For fiscal year 2015, the College made prior period adjustments due to the adoption of GASB Statement No. 68, Accounting and Financial Reporting for Pensions, and GASB Statement No. 71, Pension Transition for Contributions Made Subsequent to the Measurement Date, which requires the restatement of the June 30, 2014, net position. The result is a decrease in Net Position at July 1, 2014 of $38,539,485 of which $41,310,252 is represented in the Net Pension Liability and $2,770.767 is represented in deferred outflow. This change is in accordance with generally accepted accounting principles. Additionally, the College also made a prior period adjustment for the incorrect reporting of accounts receivable related to state funded construction projects. The result is an increase in Net Position at July 1, 2014 of $930,451. NOTE 2: DEPOSITS AND INVESTMENTS DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the Colleges 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. - 8 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" At June 30, 2015, the carrying value of deposits was $8,189,119 and the bank balance was $10,427,237. Of the College's deposits, $10,177,237 were uninsured. Of these uninsured deposits, $10,117,608 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the College's name and $59,629 were uncollateralized. INVESTMENTS At June 30, 2015, the carrying value of the College's investment was $6,310,211, which is materially the same as fair value. The College's investments at June 30, 2015 are presented below. Investment Pool Board of Regents Short-Term Fund Balanced Income Fund Diversified Fund $ 3,258,414 943,714 1,731,475 5,933,603 Other Investments Equity Securities - Domestic 376,608 Total Investments $ 6,310,211 The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia - System Office (oversight unit). This audit can be obtained from the Georgia Department of Audits and Accounts - Education Audit Division or on their web site at http://www.audits.ga.gov. 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, 2015: Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State and Private Funds Due from Affiliated Organizations Other $ 1,092,354 1,480,673 793,620 28,360 1,698,575 Less Allowance for Doubtful Accounts 5,093,582 708,404 Net Accounts Receivable $ 4,385,178 - 9 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" NOTE 4: CAPITAL ASSETS Following are the changes in the College's capital assets for the year ended June 30, 2015: Capital Assets, Not Being Depreciated: Land Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Infrastructure Beginning Balance July 1, 2014 Additions Reductions Ending Balance June 30, 2015 $ 10,716,289 $ 0$ 0$ 10,716,289 185,170,000 7,093,119 12,865,813 96,700,459 5,219,693 7,234 10,596,156 7,751 891,845 64,441 23,079 426,179 140,284 7,234 185,146,921 7,100,870 13,331,479 96,700,459 5,143,850 0 10,596,156 Total Assets Being Depreciated Less: Accumulated Depreciation: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections Infrastructure 317,652,474 964,037 54,264,842 4,870,043 9,160,310 11,266,186 4,335,898 0 4,611,017 3,762,183 191,312 1,382,180 2,403,936 193,809 646,346 596,776 6,270 258,884 140,284 318,019,735 58,020,755 5,061,355 10,283,606 13,670,122 4,389,423 0 5,257,363 Total Accumulated Depreciation 88,508,296 8,579,766 Total Capital Assets, Being Depreciated, Net 229,144,178 -7,615,729 Capital Assets, Net $ 239,860,467 $ -7,615,729 $ 405,438 191,338 191,338 $ 96,682,624 221,337,111 232,053,400 A comparison of depreciation expense for the last three fiscal years is as follows: Fiscal Year Depreciation Expense 2015 2014 2013 $ 8,579,766 $ 8,264,672 $ 9,770,431 - 10 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" NOTE 5: ADVANCES Advances consisted of the following at June 30, 2015: Prepaid Tuition and Fees $ 1,490,339 Other Advances 240,877 Total Advances $ 1,731,216 NOTE 6: LONG-TERM LIABILITIES The College's Long-Term liability activity for the year ended June 30, 2015 was as follows: Beginning Balance July 1, 2014 (Restated) Additions Reductions Ending Balance June 30, 2015 Current Portion Leases Lease Obligations $ 97,625,205 $ 0 $ 1,168,736 $ 96,456,469 $ 1,236,736 Other Liabilities Compensated Absences Net Pension Liability 1,885,544 41,310,252 1,416,066 1,243,485 13,459,068 2,058,125 27,851,184 1,377,423 Total 43,195,796 1,416,066 14,702,553 29,909,309 1,377,423 Total Long-Term Obligations $ 140,821,001 $ 1,416,066 $ 15,871,289 $ 126,365,778 $ 2,614,159 NOTE 7: NET POSITION Changes in Net Position for the year ended June 30, 2015 are as follows: Beginning Balance July 1, 2014 (Restated) Additions Reductions Ending Balance June 30, 2015 Net Investment in Capital Assets $ 142,235,262 $ 964,037 $ 7,602,368 $ 135,596,931 Restricted Net Position 3,121,037 18,788,188 18,592,900 3,316,325 Unrestricted Net Position Total Net Position -20,686,290 70,972,751 76,212,112 -25,925,651 $ 124,670,009 $ 90,724,976 $ 102,407,380 $ 112,987,605 - 11 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" The amounts within each category at June 30, 2015 were as follows: NET POSITION Net Investments in Capital Assets $ 135,596,931 Restricted for Nonexpendable Permanent Endowment 1,014,954 Expendable Restricted E&G and Other Organized Activities Institutional Loans Term Endowments Capital Projects 346,940 212,024 1,731,476 10,931 Total Expendable 2,301,371 Unrestricted R & R Reserve Reserve for Encumbrances Other Unrestricted USO Reserve Fund 3,087,268 2,885,877 -32,614,324 715,528 Total Unrestricted -25,925,651 Total Net Position $ 112,987,605 NOTE 8: ENDOWMENTS Donor Restricted Endowments: Investments of the College's endowment funds are pooled, unless required to be separately invested by the donor. For College controlled, donor-restricted endowments, where the donor has not provided specific instructions, the Board of Regents permits Middle Georgia State College to budget for current spending an amount of realized and unrealized endowment appreciation as they determined to be prudent. Realized and unrealized appreciation in excess of the amount budgeted for current spending is retained by the endowments. Current year net appreciation for the endowment accounts was $57,193 and is reflected as restricted net position. For endowment funds where the donor has not provided specific instructions, investment return of the College's endowment funds is predicated on the total return concept. Annual payouts from the College's endowment funds are based on a spending policy which limits spending between 4% and 6% of the endowments principal's market value. To the extent that the total return for the current year exceeds the payout, the excess is added to principal. If current year earnings do not meet the payout requirements, the College uses accumulated income and appreciation from restricted expendable net asset endowment balances to make up the difference. NOTE 9: 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. - 12 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2015 and 2042. Payments for fiscal year 2015 were $5,896,208 of which $4,727,472 represented interest. Total principal paid on capital leases was $1,168,736 for the fiscal year ended June 30, 2015. 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, 2015: Description Gross Amount (+) Equipment (PPV) $ 2,425,198 Buildings (PPV) 94,020,261 Facilities and Other Improvements (PPV) 255,000 Accumulated Depreciation (-) $ 2,411,000 11,036,422 222,700 Net Capital Assets Held Under Capital Lease at June 30, 2015 (=) $ 14,198 82,983,839 32,300 Outstanding Balances per Lease Schedules at June 30, 2015 $ 2,440,343 93,758,023 258,103 Total Assets Held Under Capital Lease at June 30, 2015 $ 96,700,459 $ 13,670,122 $ 83,030,337 $ 96,456,469 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. The following capital lease schedule lists the pertinent information for each lease including the building name, lessor, total principal amount, lease term, lease begin date, lease end date, and remaining long-term debt as of June 30, 2015: Description Lessor (1) CAPITAL LEASE SCHEDULE Original Principal Lease Term Begin Date End Date Outstanding Principal Balance at June 30, 2015 Anderson Hall Gateway Hall Harris Hall Regents Hall Warrior Hall Aviation Hall College Station Wellness Center MGC Real Estate Foundation, LLC $ MGC Real Estate Foundation, LLC MGC Real Estate Foundation, LLC MGC Real Estate Foundation, LLC MGC Real Estate Foundation, LLC MGC Real Estate Foundation, LLC Macon State College Foundation Real Estate I, LLC Middle Georgia State College Real Estate Foundation, Inc. 9,177,253 10,349,924 5,680,651 13,718,412 13,499,168 8,094,095 13,345,554 22,940,947 30 Years 30 Years 30 Years 30 Years 30 Years 30 Years 30 Years 28 Years 2007 2007 2007 2009 2009 2009 2011 2014 2036 $ 2036 2036 2038 2038 2038 2041 2042 9,091,310 10,675,933 5,627,445 14,138,371 13,776,703 7,946,295 12,749,044 22,451,368 Total Leases $ 96,806,004 $ (1) All of Middle Georgia State College's capital leases are with related entities. 96,456,469 - 13 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" 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. 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, 2015, were as follows: Capital Leases Operating Leases Year Ending June 30: 2016 2017 2018 2019 2020 2021 - 2025 2026 - 2030 2031 - 2035 2036 - 2040 2041 - 2042 $ 5,995,747 $ 109,519 6,118,117 75,492 6,236,346 7,064 6,347,450 6,463,365 34,078,243 37,053,172 39,080,291 24,672,073 2,937,239 Total Minimum Lease Payments 168,982,043 $ 192,075 Less: Interest 72,525,574 Principal Outstanding $ 96,456,469 College fiscal year 2015 expense for rental of real property and equipment under operating leases was $104,907. NOTE 10: RETIREMENT PLANS Middle Georgia State College participates in various retirement plans administered by the State of Georgia under two major retirement systems: Teachers' Retirement System of Georgia (TRS) and Employees' Retirement System of Georgia (ERS). 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 administrative 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. - 14 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" Teachers' Retirement System of Georgia and Employees' Retirement System of Georgia General Information about the Teachers' Retirement System P lan description: All teachers of the College as defined in Section 47-3-60 of the Official Code of Georgia Annotated (O.C.G.A.) are provided a pension through the Teachers' Retirement System of Georgia (TRS). TRS, a cost-sharing multiple-employer defined benefit pension plan, is administered by the TRS Board of Trustees (TRS Board). Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. TRS issues a publicly available financial report that can be obtained at www.trsga.com/publications. Benefits provided: TRS provides service retirement, disability retirement, and death benefits. Normal retirement benefits are determined as 2% of the average of the employee's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. An employee 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. Ten years of service is required for disability and death benefits eligibility. Disability benefits are based on the employee's creditable service and compensation up to the time of disability. Death benefits equal the amount that would be payable to the employee's beneficiary had the employee retired on the date of death. Death benefits are based on the employee's creditable service and compensation up to the date of death. Contributions: Per Title 47 of the O.C.G.A., contribution requirements of active employees and participating employers, as actuarially determined, are established and may be amended by the TRS Board. Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Employees were required to contribute 6.00% of their annual pay during fiscal year 2015. The College's contractually required contribution rate for the year ended June 30, 2015 was 13.15% of annual College payroll. College contributions to TRS were $2,877,327 for the reporting period (fiscal year ended June 30, 2015), and $2,685,850 for the measurement period (fiscal year ended June 30, 2014). General Information about the Employees' Retirement System P lan description: ERS is a cost-sharing multiple-employer defined benefit pension plan 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. Title 47 of the O.C.G.A. assigns the authority to establish and amend the benefit provisions to the State Legislature. ERS issues a publicly available financial report that can be obtained at www.ers.ga.gov/formspubs/formspubs. Benefits provided: The ERS Plan supports three benefit tiers: Old Plan, New Plan, and Georgia State Employees' Pension and Savings Plan (GSEPS). Employees under the old plan started membership prior to July 1, 1982 and are subject to 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 modified plan provisions. Effective January 1, 2009, new state employees and rehired state employees who did not retain membership rights under the Old or New Plans are members of GSEPS. ERS members hired prior to January 1, 2009 also have the option to irrevocably change their membership to GSEPS. - 15 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" Under the old plan, the 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 the monthly average of the member's highest 24 consecutive calendar months, multiplied by the number of years of creditable service, multiplied by the applicable benefit factor. Annually, postretirement cost-of-living adjustments may also 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. Contributions: 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, the state pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these state 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. The College's contractually required contribution rate, actuarially determined annually, for the year ended June 30, 2015 was 21.96% of annual covered payroll for old and new plan members and 18.87% for GSEPS members. The College's contributions to ERS totaled $110,672 for the reporting period (fiscal year ended June 30, 2015) and $84,917 for the measurement period (fiscal year ended June 30, 2014). Contributions are expected to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions At June 30, 2015, the College reported a liability for its proportionate share of the net pension liability for TRS and ERS totaling $27,851,184. The net pension liability was measured as of June 30, 2014. The total pension liability used to calculate the net pension liability was based on an actuarial valuation as of June 30, 2013. An expected total pension liability as of June 30, 2014 was determined using standard roll-forward techniques. The College's proportion of the net pension liability was based on contributions to TRS and ERS during the fiscal year ended June 30, 2014. At June 30 2014, the College's TRS proportion was 0.214387%, which was a decrease of 0.017418% from its proportion measured as of June 30, 2013. At June 30, 2014, the College's ERS proportion was 0.020429%, which was an increase of 0.001501% from its proportion measured as of June 30, 2013. For the year ended June 30, 2015, the College recognized pension expense of $1,294,489 for TRS and $74,808 for ERS. At June 30, 2015, the College reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: - 16 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" TRS Deferred Deferred Outflow of Inflows of Resources Resources ERS Deferred Deferred Outflow of Inflows of Resources Resources Net difference between projected and actual earnings on pension plan investments $ 9,442,395 $ 187,009 Changes in proportion and differences between College contributions and proportionate share of contributions 2,473,017 $ 44,823 College contributions subsequent to the measurement date $ 2,877,327 110,672 Total $ 2,877,327 $ 11,915,412 $ 155,495 $ 187,009 College contributions subsequent to the measurement date of $2,877,327 for TRS and $110,672 for ERS are reported as deferred outflows of resources and will be recognized as a reduction of the net pension liability in the year ended June 30, 2016. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows: Year Ending June 30: TRS ERS 2016 2017 2018 2019 2020 $ -2,922,647 $ -2,922,647 $ -2,922,647 $ -2,922,650 $ -224,821 $ -18,738 $ -29,944 $ -46,752 $ -46,752 $ Actuarial assum ptions: The total pension liability as of June 30, 2014 was determined by an actuarial valuation as of June 30, 2013 using the following actuarial assumptions, applied to all periods included in the measurement: Teachers' Retirement System: Inflation 3.00% Salary increases 3.75% - 7.00% Investment rate of return 7.50% average, including inflation net of pension plan investment expense including inflation Mortality rates were based on the RP-2000 Combined Mortality Table for Males or Females set back two years for males and set back three years for females. The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 - June 30, 2009. - 17 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" Employees' Retirement System: Inflation Salary increases Investment rate of return 3.00% 5.45% - 9.25% 7.50% average, including inflation net of pension plan investment expense including inflation Mortality rates were based on the RP-2000 Combined Mortality Table for the periods after service retirement, for dependent beneficiaries, and for deaths in active service, and the RP-2000 Disabled Mortality Table set back eleven years for males for the period after disability retirement. The actuarial assumptions used in the June 30, 2013 valuation were based on the results of an actuarial experience study for the period July 1, 2004 - June 30, 2009. The long-term expected rate of return on TRS and ERS pension plan investments was determined using a log-normal distribution analysis in which best-estimate ranges of expected future real rates of return (expected nominal returns, net of pension plan investment expense and the assumed rate of inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Asset Class Target Long-Term Expected Allocation Real Rate of Return * Fixed Income Domestic large equities Domestic mid equities Domestic small equities International developed market equities International emerging market equities 30.00% 39.70% 3.70% 1.60% 18.90% 6.10% 3.00% 6.50% 10.00% 13.00% 6.50% 11.00% 100.00% * Rates shown are net of the 3.00% assumed rate of inflation Discount rate: The discount rate used to measure the total TRS and ERS pension liability was 7.50%. The projection of cash flows used to determine the discount rate assumed that plan member contributions will be made at the current contribution rate and that employer and State of Georgia contributions will be made at rates equal to the difference between actuarially determined contribution rates and the member rate. Based on those assumptions, the TRS and ERS pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Sensitivity of the College's proportionate share of the net pension liability to changes in the discount rate: The following presents the College's proportionate share of the net pension liability calculated using the discount rate of 7.50%, as well as what the College's proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage-point lower (6.50%) or 1-percentage-point higher (8.50%) than the current rate: - 18 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" Teachers' Retirement System: College's proportionate share of the net pension liability 1% Decrease (6.50%) $ 49,913,965 Current Discount Rate (7.50%) $ 27,084,970 1% Increase (8.50%) $ 8,285,766 Employees' Retirement System: College's proportionate share of the net pension liability $ 1% Decrease (6.50%) 1,117,292 Current Discount Rate (7.50%) $ 766,214 1% Increase (8.50%) $ 467,365 P ension plan fiduciary net position: Detailed information about the pension plan's fiduciary net position is available in the separately issued TRS and ERS financial reports which are publically available at www.trsga.com/publications and www.ers.ga.gov/formspubs/formspubs, respectively. Regents Retirement Plan Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. Section 47-21-1 et.seq. and administered by the Board of Regents of the University System of Georgia. O.C.G.A. Section 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or all exempt full and partial benefit eligible employees, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from three approved vendors (VALIC, Fidelity, and TIAACREF) 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 2015, 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 $1,087,738 (9.24%) and $706,324 (6%), respectively. VALIC, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. NOTE 11: RISK MANAGEMENT The University System of Georgia offers its employees and retirees access to four different healthcare plan options. For the University System of Georgia's Plan Year 2015, the following healthcare plan options were available: - 19 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" BlueChoice HMO Comprehensive Care Plan Consumer Choice HSA Plan Kaiser Permanente HMO Middle Georgia State College and participating employees and retirees pay premiums to the healthcare plan options to access benefits coverage. The respective health 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 the self-insured plans; including the BlueChoice HMO, Comprehensive Care Plan and Consumer Choice HSA Plan. 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 to serve as the claims administrator for the selfinsured healthcare plans. 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 Permanente. The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. 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. 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 12: 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 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, 2015. - 20 - MIDDLE GEORGIA STATE COLLEGE SELECTED FINANCIAL NOTES JUNE 30, 2015 EXHIBIT "D" NOTE 13: 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 2015 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, 2015, there were 308 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2015, Middle Georgia State College recognized as incurred $1,406,479 of expenditures, which was net of $720,706 of participant contributions. NOTE 14: 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. 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. 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, 2015, and as such, are 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. - 21 - SUPPLEMENTARY INFORMATION - 22 - (This page left intentionally blank) MIDDLE GEORGIA STATE COLLEGE BALANCE SHEET (STATUTORY BASIS) BUDGET FUND JUNE 30, 2015 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Federal Financial Assistance Other Prepaid Expenditures Other Assets Total Assets LIABILITIES AND FUND EQUITY Liabilities Accrued Payroll Encumbrances Payable Accounts Payable Deferred Revenue 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 Carryover per OPB Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances SCHEDULE "1" $ 5,765,872.12 1,094,932.98 93,627.35 2,619,870.62 26,721.96 1,485.00 $ 9,602,510.03 $ 154,537.80 2,580,479.15 1,562,749.56 1,391,305.77 14,803.12 5,703,875.40 302,303.07 142,296.18 2,988.52 10,930.60 1,111,826.05 425,322.32 535,610.77 1,292,218.02 75,139.10 3,898,634.63 $ 9,602,510.03 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 - MIDDLE GEORGIA STATE COLLEGE SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015 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 Teaching 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, 2014 Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30 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 Carryover per OPB Total Reserved Unreserved Surplus Total Fund Balance BUDGET ACTUAL VARIANCE FAVORABLE (UNFAVORABLE) $ 32,814,498.00 $ 32,814,498.00 $ 0.00 52,702,875.00 49,468,084.25 -3,234,790.75 85,517,373.00 82,282,582.25 -3,234,790.75 0.00 85,517,373.00 3,718,072.12 86,000,654.37 3,718,072.12 483,281.37 85,517,373.00 $ 0.00 82,516,866.87 3,483,787.50 $ 3,000,506.13 3,483,787.50 4,165,820.79 178,879.76 88,379.43 -121,280.97 -178,879.76 -3,718,072.12 $ 3,898,634.63 $ 302,303.07 142,296.18 2,988.52 10,930.60 1,111,826.05 425,322.32 535,610.77 1,292,218.02 3,823,495.53 75,139.10 $ 3,898,634.63 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. - 25 - 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, 2015 Special Funding Initiative State Appropriation State General Funds Teaching State Appropriation State General Funds Other Funds Total Operating Activity Original Appropriation Amended Appropriation Final Budget Current Year Revenues $ 0.00 $ 0.00 $ 0.00 $ 0.00 33,114,498.00 51,326,890.00 33,114,498.00 51,326,890.00 32,814,498.00 52,702,875.00 32,814,498.00 49,468,084.25 $ 84,441,388.00 $ 84,441,388.00 $ 85,517,373.00 $ 82,282,582.25 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 "3" Prior Year Carry-Over Funds Available Compared to Budget Adjustments and Total Program Transfers Funds Available Variance Positive Expenditures Compared to Budget Variance Actual Positive Excess of Funds Available Over Expenditures $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 0.00 3,718,072.12 0.00 0.00 32,814,498.00 53,186,156.37 0.00 483,281.37 32,813,894.44 49,702,972.43 603.56 2,999,902.57 603.56 3,483,183.94 $ 3,718,072.12 $ 0.00 $ 86,000,654.37 $ 483,281.37 $ 82,516,866.87 $ 3,000,506.13 $ 3,483,787.50 - 27 - MIDDLE GEORGIA STATE COLLEGE STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2015 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 2014 Surplus Prior Period Adjustments $ 39.61 $ 0.00 $ -39.61 $ 10.00 153,622.31 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 53,727.34 -86,638.88 -32,911.54 -32,901.54 447,748.67 0.00 0.00 0.00 Budget Unit Totals $ 4,344,700.55 $ -3,718,072.12 $ -178,879.76 $ -32,901.54 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. - 28 - SCHEDULE "4" Other Adjustments Early Return Fiscal Year 2015 Surplus Excess of Funds Available Over Expenditures Ending Fund Balance June 30 Analysis of Ending Fund Balance Reserved Surplus Total $ 0.00 $ 0.00 $ 0.00 $ 10.00 $ 0.00 $ 10.00 $ 10.00 0.00 22,426.35 22,426.35 22,426.35 0.00 0.00 0.00 0.00 603.56 3,483,183.94 3,483,787.50 3,483,787.50 54,330.90 3,418,971.41 3,473,302.31 3,473,312.31 0.00 3,398,173.21 3,398,173.21 3,398,173.21 54,330.90 20,798.20 75,129.10 75,139.10 54,330.90 3,418,971.41 3,473,302.31 3,473,312.31 -22,426.35 0.00 0.00 425,322.32 425,322.32 0.00 425,322.32 $ 0.00 $ 0.00 $ 3,483,787.50 $ 3,898,634.63 $ 3,823,495.53 $ 75,139.10 $ 3,898,634.63 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 Carryover per OPB Unreserved Surplus Total Ending Fund Balance - June 30 $ 302,303.07 142,296.18 2,988.52 10,930.60 1,111,826.05 425,322.32 535,610.77 1,292,218.02 $ $ 3,823,495.53 $ $ 302,303.07 142,296.18 2,988.52 10,930.60 1,111,826.05 425,322.32 535,610.77 1,292,218.02 75,139.10 75,139.10 75,139.10 $ 3,898,634.63 - 29 - MIDDLE GEORGIA STATE COLLEGE RECONCILIATION OF BUDGET TO GAAP YEAR ENDED JUNE 30, 2015 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") $ 3,898,634.63 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. 232,053,400.00 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. -425,322.00 Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity $ 939,460.00 -939,460.00 0.00 Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity $ 5,922,660.00 -705,862.00 5,216,798.00 Endowment Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Endowment Fund Activity $ 1,964,552.00 0.00 1,964,552.00 Loan Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Loan Fund Activity $ 212,024.00 0.00 212,024.00 Student Activities Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Student Activity Fund Activity $ 4,272,058.00 -155,342.00 4,116,716.00 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. Reimbursement from grantors reported as revenues in the Budget Fund that are for expenditures based on encumbrances are deferred for GAAP reporting. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Total Net Effect of Encumbrance Activity $ -1,152,013.00 2,580,479.15 1,428,466.15 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 Net Pension Liability Deferred Gain on Defined Benefit Pension Plan Deferred Loss on Defined Benefit Pension Plan Total Liabilities $ -96,456,469.00 -2,058,125.00 -42,287.00 -27,851,184.00 -12,102,421.00 3,032,822.00 -135,477,664.00 Rounding Variance 0.22 Net Position of Business-Type Activities (Exhibit "A") $ 112,987,605.00 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. - 30 - MIDDLE GEORGIA STATE COLLEGE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2015 SCHEDULE "6" Totals per Annual Supplement Accruals June 30, 2015 June 30, 2014 Compensated Absences June 30, 2015 June 30, 2014 Adjustments Shared Services on Jointly Staffed Personnel Abraham Baldwin Agricultural College Saylor, Allen Fort Valley State University Chatmon, Roderick Coleman, Toya Georgia College and State University Canady, Krystall St. Clair, Nelbert Taylor, Marvin Ubah, Charles Georgia Southwestern State University Sullivan, Troy Georgia State University Brown, Jasmine Gordon State College Sisson, James Kennesaw State University Allen, Chancey Dickens, Lynn Harper, Andy Mauldin, Greg Naska, Randy Roberson, James Roland, Shane Snyder, Brock South Georgia State College Sutliff, Danielle Wright, Andrew Valdosta State University Cain, Sarah Unidentified Variance SALARIES $ 37,753,849 $ TRAVEL 647,677 177,924 -160,783 1,916,177 -1,751,550 12,000 4,200 -660 -2,562 -5,000 4,060 4,200 -2,750 5,042 -4,200 -2,660 -5,689 -1,478 -7,092 -905 -4,728 -3,879 -296 5,000 -1,950 12,000 -10,593 $ 37,927,677 $ 647,677 - 31 - 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, 2015 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 FA-0583-14-01 FA-0583-14-02 Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Response CORRECTIVE ACTION/RESPONSES ACTIVITIES ALLOWED OR UNALLOWED ELIGIBILITY Weaknesses in IT General Controls U. S. Department of Education 84.SFA Student Financial Assistance Cluster Finding Control Number: FA-0583-14-01 These issues are due to delivered roles in the baseline Banner system and are necessary for our Systems Administrator to perform delivered modifications. The USG System Office is addressing these issues with the Department of Audits and Accounts as they affect all institutions that employ baseline Banner. We are awaiting instructions from the outcomes of these discussions to determine how to proceed. SPECIAL TESTS AND PROVISIONS Inadequate Control Procedures over Withdrawals U. S. Department of Education 84.SFA Student Financial Assistance Cluster Finding Control Number: FA-0583-14-02 The College has implemented procedures to ensure that exception reports are generated and consistently monitored to ascertain a student's correct last date of 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 ensure timely and appropriate calculations are performed. All days of the payment period are accounted for to ensure 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. The College returned $200,800.47 to the U.S. Department of Education during fiscal year 2015. SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2015 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 No matters were reported. OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) Financial Financial Reporting Observation: Our review of the College's GAAP basis financial statements, Notes to the Financial Statements and Budget Basis financial statements revealed errors. Recommendation: While these errors were immaterial to the financial statements, we recommend that the College strengthen internal controls over the financial statement preparation and review process. Views of Responsible Officials: Enhanced review procedures over the preparation of the Annual Financial Report have been put into place to ensure that significant account balances and classes of transactions, along with related activity, are properly reported. - 1 - MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2015 OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) Public Private Venture not Self-Liquidating Observation: For fiscal year ended June 30, 2015, an analysis of the financial statement activity for the College's Student Housing public private venture projects, as well as the Recreation Center public private venture, revealed that two of the projects' required capital lease payments and other operating costs exceeded yearly revenues by $879,853.43. 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. Views of Responsible Officials: The University has sufficient reserves to cover the reported operating deficit and continually monitors related activity to ensure that the reserves remain adequate. Failure to Reconcile Subsidiary Modules 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 and appropriately documented in accordance with the Business Procedures Manual Section 10.6.2. Views of Responsible Officials: While the payroll system (ADP) and the bank accounts were reconciled monthly during the year under review, the other external systems were not. Procedures have been put into place to ensure that all external systems are reconciled at least quarterly. Encumbrances Observation: A review of encumbrances payable at June 30, 2015 revealed invalid encumbrances in the amount of $20,517.03. An adjustment was proposed and accepted to increase current year surplus by that amount. Recommendation: Management should review procedures in place and implement changes necessary to ensure that all outstanding purchase orders are reviewed for validity. Views of Responsible Officials: Procedures were put into place during the year under review to ensure that outstanding encumbrances are valid. This was an immaterial obligation remaining from pre-consolidation activity that had been inadvertently left encumbered. - 2 - MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2015 OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) Budget Basis Reporting Observation: A review of the College's budget statements revealed two undocumented entries made in the amount of $260,198.30. 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. Views of Responsible Officials: These journal entries were made to eliminate variances caused by the recording of surplus in incorrect funds in prior years. They were one time journals and brought the fund balances in line between the budget basis statements and the accounting records. Federal Accounting Controls Overall Observation: Our review of the established internal control structure associated with significant financial applications at the College revealed design deficiencies in overall IT entity level, logical access, and change management controls intended to protect information from unauthorized access, manipulation, corruption, inaccurate processing and loss. The details related to these deficiencies have been provided to management of the College in accordance with Official Code of Georgia Annotated 50-6-9. 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: These issues are due to delivered roles in the baseline Banner System and are necessary for our Systems Administrator to perform delivered modifications. The USG System Office is addressing these issues as they affect all institutions that employ baseline Banner. Return of Title IV Funds Observation: Our review of a sample of 25 students to test the College's compliance with 34 CFR 668.22, which is related to the return of Title IV funds, revealed that refunds were calculated incorrectly for four students due to the use of the incorrect number of break days and/or the use of inaccurate institutional charges. In addition, the proration between the school and student portion of the refund was incorrect for two of the students noted above and two other students tested. Recommendation: We recommend that the College develop and implement procedures to ensure that Title IV funds are calculated at the appropriate amount and prorated properly between the school and student portion. Views of Responsible Officials: MGA has rectified any discrepancies that existed in calculation of scheduled breaks. The MGA calendar now annotates ALL closed dates. We have re-verified with Academic Affairs the class offerings on weekends and breaks. All calculations were vetted against the institutional pro-rata refund schedule. - 3 - MIDDLE GEORGIA STATE COLLEGE SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2015 OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) Untimely Enrollment Reporting Observation: Our testing of 25 students who withdrew during the Fall 2014 and Spring 2015 semesters revealed that 20 students' withdrawn enrollment statuses were reported to the National Student Loan Data System (NSLDS) in an untimely manner. Additionally, nine of the 25 students' withdrawn enrollment statuses reported to NSLDS were incorrect. Recommendation: The College should implement policies and procedures to ensure that all changes in student enrollment statuses are reported in a timely manner. Views of Responsible Officials: MGA was subject to several upgrades by the National Student Clearinghouse in late 2014 which effected the reporting of enrollment. All upgrades have been implemented and reporting is accurate. MGA has implemented a quality control to insure reporting is accurate and timely. The Financial Aid Office will provide the Registrar's Office with a sample of 25 students at midterm each term to track their enrollment reporting. This will detect any discrepancies in the system and we will be able to correct any necessary data. Contact Person: Telephone: Fax: Email: Brian J. Stanley (478) 471-2864 (478) 471-2097 brian.stanley@mga.edu - 4 -