REVIEW REPORT STATE OF GEORGIA NORTH GEORGIA COLLEGE AND STATE UNIVERSITY DAHLONEGA, GEORGIA YEAR ENDED JUNE 30, 1997 STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS 254 WASHINGTON STREET ATLANTA, GEORGIA 30334-8400 NORTH GEORGIA COLLEGE AND STATE UNIVERSITY - TABLE OF CONTENTS - SECTION I FINANCIAL INDEPENDENT ACCOUNTANT'S COMBINED REPORT ON REVIEW OF FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION EXIllBITS FINANCIAL STATEMENTS A COMBINED BALANCE SHEET ALL FUND GROUPS 2 B COMBINED STATEMENT OF CHANGES IN FUND BALANCES ALL FUND GROUPS 4 C STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES, AND OTHER CHANGES 6 D NOTES TO THE FINANCIAL STATEMENTS 7 SUPPLEMENTARY INFORMATION E COMBINING BALANCE SHEET CURRENT FUNDS - UNRESTRICTED 20 F COMBINING STATEMENT OF CHANGES IN FUND BALANCES CURRENT FUNDS - UNRESTRICTED 21 G COMBINING STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES, AND OTHER CHANGES UNRESTRICTED 23 SCHEDULES SCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO BUDGET 1 RESIDENT INSTRUCTION 24 2 LOTTERY FOR EDUCATION 27 3 CHANGES IN INVESTMENT IN PLANT 28 4 SCHEDULE OF FUND BALANCES CURRENT FUNDS AND PLANT FUNDS 30 5 RECONCILIATION OF SALARIES AND TRAVEL 32 SECTIONll AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS SECTION I FINANCIAL CLAUDE L. VICKERS STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 September 16, 1997 Honorable Zell Miller, Governor Members ofthe General Assembly of Georgia Members of the Board of Regents of the University System of Georgia and Honorable Sherman R. Day, Acting President North Georgia College and State University INDEPENDENT ACCOUNTANT'S COMBINED REPORT ON REVIEW OF FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Ladies and Gentlemen: We have reviewed the accompanying financial statements (Exhibits A through D) of North Georgia College and State University as of and for the year ended June 30, 1997, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these fmancial statements is the representation of the management of North Georgia College and State University. A review consists principally of inquiries of University personnel and analytical procedures applied to fmancial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, with the exception of the matters described in the fourth and fifth paragraphs, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles. As disclosed in Note I to the financial statements, generally accepted accounting principles require encumbrances to be recorded as a reservation of fund balance. However, in accordance with Georgia Law and State budgetary policy, management recorded encumbrances as expenditures and liabilities. The effects of this departure from generally accepted accounting principles on the financial statements were not reasonably determinable. 97ARL-67 As disclosed in Note I to the fmancial statements, the University did not report the liability and related expenditure for compensated absences in the current funds as required by generally accepted accounting principles. If compensated absences were reported, liabilities would be increased and fund balance would be decreased by $759,951.39 as of June 30, 1997, and the net change in fund balance for the year ended June 30, 1997, would be decreased by $61,710.98. Our review was made for the purpose ofexpressing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with generally accepted accounting principles. The accompanying supplementary information (Exhibits E through G and Schedules 1 through 5) is presented only for supplementary analysis purposes. Such information has been subjected to the inquiries and analytical procedures applied in the review of the financial statements, and except for the effects of the matters discussed in the fourth and fifth paragraphs, we are not aware of any material modifications which should be made thereto. Respectfully submitted, ~~ Claude 1. Vickers State Auditor CLV:gp 97ARL-67 FINANCIAL STATEMENTS - 1- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY COMBINED BALANCE SHEET ALL FUND GROUPS JUNE 30,1997 ASSETS Cash and Cash Equivalents Investments Accounts Receivable Inventories Prepaid Items Due from Other Fund Groups Investment in Plant Total Assets LIABILITIES AND FUND BALANCES Liabilities Accounts Payable Student Deposits Deferred Revenue Tuition and Fees Other Deposits Held in Custody for Others Due to Other Fund Groups Total Liabilities Fund Balances U, S. Government Grants Refundable Institutional Loans - Restricted Endowment Net Investment in Plant Restricted Unrestricted Total Fund Balances Total Liabilities and Fund Balances CURRENT FUNDS UNRESTRICTED RESTRICTED LOAN FUNDS $ 2,561,815,89 $ 42,704.64 $ 62,885.91 468.75 801,724.19 312,224.89 757,148.66 623,652.30 61,900.26 193,163.39 $ 4,242,256.03 $ 354,929.53 $ 820,503.32 $ 610,550.97 178,918,03 935,827.50 144,934.50 $ 193,163.39 $ 1,870,231.00 $ 193,163.39 $ 695,163.04 125,340.28 $ 161,766.14 $ 2,372,025.03 $ 2,372,025.03 $ 161,766.14 $ 820,503.32 $ 4,242,256.03 $ 354,929.53 $ 820,503.32 See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information. The notes to the financial statements are an integral part of this statement. -2- EXHISIT"A" ENDOWMENT FUNDS UNEXPENDED PLANT FUNDS RENEWALS AND REPLACEMENTS INVESTMENT IN PLANT AGENCY FUNDS TOTAL (Memorandum Only) $ 315,583.04 $ 1,580,794.95 15,364.50 437,517.48 $ 1,474,805.86 $ _ _ _ _ _ _ $ 45,421,033.58 188,764.11 $ 5,084,076.93 1,581,263.70 2,300.50 1,888,762.74 623,652.30 61,900.26 193,163.39 45,421,033.58 $ 1,911,742.49 $ 437,517.48 $ 1,474,805.86 $ 45,421,033.58 $ 191,064.61 $ 54,853,852.90 $ 431,296.38 $ 374,381.08 $ 431,296.38 $ 374,381.08 $ 96,899.49 $ 1,513,127.92 178,918.03 94,165.12 935,827.50 144,934.50 94,165.12 193,163.39 $ 191,064.61 $ 3,060,136.46 $ 1,911,742.49 $ $ 1,911,742.49 $ 6,221.10 $ 6,221.10 $ $ 45,421,033.58 1,100,424.78 1,100,424.78 $ 45,421,033.58 $ 695,163.04 125,340.28 1,911,742.49 45,421,033.58 161,766.14 3,478,670.91 $ 51.793,716.44 $ 1,911,742.49 $ 437,517.48 $ 1,474,805.86 $ 45,421,033.58 $ 191,064.61 $ 54,853,852.90 -3- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY COMBINED STATEMENT OF CHANGES IN FUND BALANCES ALL FUND GROUPS YEAR ENDED JUNE 30,1997 REVENUES AND OTHER ADDITIONS Unrestrictecl Current Fund Revenues State Appropriations Regular Lottery Proceeds Federal Grants and Contracts State Grants and Contracts Local Grants and Contracts Privata Gifts, Grants, and Contracts Investment Income Endowment Other Intarest on Loans Receivable Adjustments Prior Years' Expenditures/Accounts Payable Prior Yeers' Checks Voided Expended for Plant Facilities Current Funds Plant Funds Unexpended Renewals and Replacements Georgia State Financing and Investment Commission Other Additions Insurance Recoveries Late Fees Proceeds from Sale of Plant Assets Total Revenues and Other Additions EXPENDITURES AND OTHER DEDUCTIONS Educational and General Expenditures Auxiliary Enterprises Expenditures Indirect Costs Recovered Remittances to the Board of Regents of the University System of Georgia Prior Yeer's Unrestricted Fund Balance (Surplus) Loans Assigned to Federal Govemment Loan Cancellations and Write-Offs Administrative and Collection Costs Expended for Plant Facilities Capitalized Noncapitalized DisposalslDeletionS/Adjustments Total Expenditures and Other Deductions TRANSFERS BETWEEN FUNDS Mandatory Investment Income for Principal Investment Income Allocated for Loans Unspent Loan Funds for Principal Nonmandatory Renewals and Replacements Capital Projects General Operations Total Transfers Between Funds Net Increase/(Decrease) for the Year FUND BALANCES JULY 1. 1996 FUND BALANCES JUNE 30 1997 See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information. The notes to the financial statements are an integral part of this statement. -4- CURRENT FUNDS UNRESTRICTED RESTRICTED LOAN FUNDS $ 25,833,146.19 $ 1,108,101.17 $ 2,561,003.39 116,118.00 276,157.57 16,870.00 10,888.24 2,065.05 9,167.00 -1,321.32 121,524,48 19,122.98 1,564.84 $ 25,846,099.48 $ 4,078,250.13 $ 150,057,98 $ 20,215,527.73 $ 4,125,689,58 4,369,373.73 6,559,13 4,494,79 $ 5,169.00 16,976.10 15,513.74 $ 24,589,396.25 $ 4,132,248.71 $_---'3::.:7...:,6:::5:.:8"',84~ $ $ -703,588.63 nO,488.26 10,240,16 $ -1,463,836.73 $ $ -207,133.50 $ 2,579,158.53 -279.86 -547.79 $ 547,79 -121,524,48 -10,240.16 -11,067.81 $ -120,976.69 -65,066.39 $ -8,577,55 226,832.53 829,080.87 $ 2,372,025.03 $ 161,766.14 $ 820,503.32 EXHIBIT"B" ENDOWMENT FUNDS UNEXPENDED PLANT FUNDS RENEWALS AND REPLACEMENTS INVESTMENT IN PLANT TOTAL (Memorandum Only) $ 25,833,146.19 $ 876,800.00 100,000.00 $ 0.00 876,800.00 100,000.00 1,117,268.17 2,561,003.39 116,118.00 $ 22,054.81 296,891.06 67,344.60 $ 43,256.50 16,870.00 232,125.58 19,122.98 1,717.39 7.70 12,613.33 2,065.05 1,012,405.03 1,012,405.03 2,014,267.80 174,712.56 106,439.63 2,014,267.80 174,712.56 106,439.63 261,621.14 6,624.85 261,621.14 1,564.64 6,624.85 $ 0.00 $ 1,314, 107.98 $ 43,264.20 $ 3,329.879.83 $ 34,761 ,659.60 $ 0.00 $ 24,341,217.31 4,369,373.73 6,559.13 $ 4,773.62 9,268.41 5,169.00 16,976.10 15,513.74 2,014,267.80 $ 64,107.34 174,712.56 265,894.60 $ 138,346.46 2,188,980.36 330,001.94 138,346.46 $ 0.00 $ 2,083,148.76 $ 440,607.16 $ 138,346.46 $ 31.421.406.18 $ 279,86 121,524,48 $ $ 770,488.26 $ 121,804.34 $ $ 121,804.34 $ 1,789,938.15 770,488.26 $ 1,447.48 $ 4,773.62 $ 0.00 0.00 0.00 703,588.63 0.00 0.00 0.00 703,588.63 $ 0.00 306,245.67 $ 3,191,533.37 $ 3,340,253.42 794,179.11 42,229,500.21 48,453,463.02 $ 1,911,742.49 $ 6,221.10 $ UOO.424.78 $ 45.421,033.58 $ 51 ?93?16.44 -5- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY STATEMENT OF CURRENT FUNDS REVENUES. EXPENDITURES, AND OTHER CHANGES YEAR ENDED JUNE 30, 1997 EXHIBIT"C" Net Increase/(Decrease) in Fund Balances $ See Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information. The notes to the financial statements are an integral part of this statement. -6- -207,133.50 $ -65,066.39 $ -272,199.89 NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997 EXHIBIT"D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY North Georgia College and State University is one ofthirty-four (34) 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 ofNorth Georgia College and State University 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 detennine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. North Georgia College and State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, North Georgia College and State University 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 ofRegents as defined in Section 2100 of the Governmental Accounting Standards Board Codification of Governmental Accounting and Financial Reporting Standards. FUND ACCOUNTING In order to ensure observance of limitations and restrictions placed on the use ofthe resources available to the University, the accounts of the University are maintained in accordance with the principles of fund accounting. This is the procedure by which resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with activities or objectives specified. Separate accounts are maintained for each fund; however, in the accompanying fmancial statements, funds that have similar . characteristics have been combined into fund groups. Accordingly, all fmancial transactions have been recorded and reported by fund group. Within each fund group, the University's fund balance allocations and designations represent those portions of the fund balances that are reserved, restricted and/or designated for specific future use by legal covenants, State policies, or institutional policies. Fund groups and funds presented in the accompanying fmancial statements are as follows: CURRENT FUNDS UNRESTRICTED - The fund used to account for those economic resources over which the University retains full control to use for purposes of performing the primary functions of the University, e.g., instruction, public service, etc. RESTRICTED - The fund used to record externally restricted funds which may only be utilized in accordance with the purposes established by their source. Restricted current funds are recorded as revenues and expenditures when expended for current operating purposes. -7- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FWANCIAL STATEMENTS JUNE 30, 1997 EXHIBIT"D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTWG POLICIES FUND ACCOUNTING LOAN FUNDS The fund used to account for resources which have been made available for financial loans to students. ENDOWMENT The fund used to account for endowment funds that are subject to the restrictions of gift instruments requiring that the principal be invested in perpetuity and income only be utilized. PLANT FUNDS UNEXPENDED - The fund used to account for fmancial resources utilized to acquire or to construct physical properties for institutional purposes. RENEWALS AND REPLACEMENTS - The fund used to account for resources set aside for the renewal and replacement of institutional properties. INVESTMENT W PLANT - The fund which shows the total amounts representing the book value of all physical properties owned by the University. Net Investment in Plant is an equity account showing the total book value of physical properties belonging to the University less the amount of any indebtedness to others. AGENCY FUNDS The fund used to account for resources held by the University as custodian or fiscal agent for individual students, faculty, staff members, and organizations. BASIS OF ACCOUNTING Except as otherwise disclosed in these notes, the financial statements are prepared on the modified accrual basis of accounting, which is materially the same as the accrual basis of accounting applicable to colleges and universities prescribed in the American Institute of Certified Public Accountants' audit guide reporting model. The modified accrual basis ofaccounting is defined as that method ofaccounting in which expenditures, other than accrued interest on general long-term debt, are recorded at the time liabilities are incurred and revenues are recorded when available and measurable to finance expenditures of the fiscal period. Contractual obligations for goods and services which have not been received at the end of the fiscal year are recognized as expenditures and liabilities in the accompanying financial statements. This accounting practice causes expenditure-driven grant revenues to be accrued based, in part, on the unexecuted portion of contracts for goods and services. The recognition of encumbrances as expenditures and liabilities is in conformity with -8- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1997 EXHIBIT"D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING accounting practices prescribed or pennitted by statutes and regulations of the State of Georgia, but is not consistent with generally accepted accounting principles, which provide for the recording of encumbrances as a reservation offund balance. Further, revenue recognition for expenditure-driven grants should be based upon expenditures detennined in accordance with generally accepted accounting principles. Compensated absences represent obligations of the University relating to employees' rights to receive compensation for future absences based upon services already rendered. This obligation relates only to vesting accumulated annual leave in which payment is probable and can be reasonably estimated. The compensated absences liability of $759,95 1.39 and the related current year expenditure of$61,710.98 have not been reported in the current funds as required by generally accepted accounting principles. Prior period adjustments and certain other items are reported as additions to and deductions from fund balances of current funds in the accompanying financial statements. This presentation is in accordance with accounting practices prescribed or permitted by statutes and regulations ofthe State of Georgia, but differs from generally accepted accounting principles in that immaterial adjustments should be reported as current period revenues and expenditures. The effect of this departure is deemed to be immaterial to the fair presentation of the financial statements. To the extent that Current Funds and Plant Funds are used to finance plant assets, the amounts so provided are accounted for as expenditures. The balances shown on the Combined Balance Sheet as Net Investment in Plant reflect the accumulated expenditures made for plant facilities through Current Funds and Plant Funds and also include expenditures made for plant facilities expended by the Georgia State Financing and Investment Commission on behalf of the University. Donated fixed assets are recorded at fair market value on the date donated. Disposals are deleted at recorded values. No depreciation has been provided on physical plant and equipment. The Statement of Current Funds Revenues, Expenditures, and Other Changes is a statement of fmancial activities of current funds related to the current reporting period. It does not purport to present the results of operations or the net income or loss for the period as would a statement of income or a statement of revenues and expenses. BUDGET The Board of Regents of the University System of Georgia - Administrative Central Office receives State appropriation allotments for units of the University System of Georgia. The appropriated budget is adopted at the departmental level and represents appropriations provided by the Amended Appropriations Act of 19961997. The appropriated budget covers current funds and plant funds, except for Auxiliary Enterprises and Student Activities which are not subject to appropriation. The budget allocation and disbursement of these funds is made to the various organizational units by the Administrative Central Office. In addition, the organizational units receive Federal funds and other funds directly and include these funds in the budget filed with the Administrative Central Office. - 9- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1997 EXlllBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of petty cash, demand deposits, certificates of deposit and temporary investments in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. INVESTMENTS Investments are recorded at cost or in the case of gifts at fair market value on the date of the gift. Funds received by the University as endowments or for restricted purposes are invested according to conditions stipulated by the donor, grantor, or in accordance with the Board of Regents authorizing resolutions. Gains and losses on investment transactions are accounted for in the funds where such assets are recorded. ACCOUNTS RECEIVABLE Accounts receivable consist of allotments due from the Board of Regents of the University System of Georgia - Administrative Central Office, reimbursements due from Federal, State, local, and private grants and contracts, and other receivables disclosed from information available. No provision has been made for an allowance for doubtful accounts within the accompanying financial statements. INVENTORIES Inventories of consumable supplies are recorded on the consumption method and are valued at cost on the Combined Balance Sheet using the first-in, first-out method. Inventories of goods for resale are valued at cost using the last-in, first-out method. PREPAID ITEMS Prepaid items are payments made to vendors in advance ofthe receipt of goods and services that will benefit periods subsequent to the balance sheet date. MEMORANDUM ONLY - TOTAL COLUMNS The total columns on the financial statements are captioned "Memorandum Only" because they do not represent consolidated [mancial information and are presented only to facilitate financial analysis. The columns do not present information that reflects financial position or changes in financial position in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data. NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to the State of Georgia 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 anyone or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: - 10- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997 EXlllBIT "D" NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (1) Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or ofthe State of Georgia. (2) Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia. (3) Bonds of any public authority created by the laws ofthe State of Georgia, providing that the statute that created the authority authorized the use ofthe bonds for this purpose. (4) Industrial revenue bonds and bonds ofdevelopment 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, or 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. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (which includes organizational units of the Board of Regents of the University System of Georgia) the option of exempting demand deposits from the collateral requirements. 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. CATEGORIZATION OF DEPOSITS For purposes of analysis of custodial credit risk, cash deposits consist of all bank balances which include demand deposits and/or interest bearing accounts. The bank balances as of June 30, 1997, are categorized below in order to provide information about the extent to which such deposits are exposed to custodial credit risk: Category 1 - Amounts covered by depository insurance or collateralized with securities (at market value) held by the University or by its agent in the University's name. Category 2 - Amounts collateralized with securities (at market value) held by the pledging fmancial institution's trust department or agent in the University's name. - 11 - NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997 EXInBIT"D" NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS CATEGORIZATION OF DEPOSITS Category 3 - Amounts collateralized with securities (at market value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized. Cash Deposits Carrying Amount Bank Balances Risk Categories 2 3 $ 44581068 $ 192263895 $ 15298334 $ 1.011 56200 $ 758,09361 CATEGORIZATION OF INVESTMENTS Investments are summarized and classified as to custodial credit risk within the three categories described below: Category 1 - Insured or registered, or securities held by the University or its agent in the University's name. Category 2 - Uninsured and unregistered, with securities held by the counterparty's trust department or agent in the University's name. Category 3 - Uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent but not in the University's name. The carrying amounts of investment balances as of June 30, 1997, are categorized below: Type ofInvestment Common Stock State of Georgia Securities U. S. Government Securities Investments Not Subject to Categorizations: State Investment Pool Total Investments Risk Categories 2 $ 78,404.40 $ 1,502,390.55 468.75 0,00 $ $ 158126370 $ 0.00 $ Carrying Market 3 Amount Value 0.00 $ 78,404.40 $ 315,426.25 1,502,390.55 1,478,221.00 468.75 3,153.90 000 $ 1,581,263.70 $ 1,796,801.15 4,616.571.43 4,616.571.43 $ 619783513 $ 6413 372 58 Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool. - 12- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997 EXHIBIT"D" NOTE 3: INVESTMENT IN PLANT The following is a summary of Investment in Plant fixed assets as of June 30, 1997: Land Buildings Improvements Other Than Buildings Equipment Library Books and Collections $ 468,968.31 32,415,671.62 3,241,158.77 6,576,693.70 2,718,541.18 Total Investment in Plant $45.421.033.58 NOTE 4: RISK MANAGEMENT North Georgia College and State University is a participant in the Board of Regents ofthe University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees ofthe University System of Georgia. The University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the audit report of the Board of Regents of the University System of Georgia Administrative Central Office. All units of the University System of Georgia share the risk of loss for claims ofthe Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of $1,000,000.00 per person and dental coverage up to an annual maximum of$I,OOO.OO per person. The Board ofRegents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents. The Department ofAdministrative Services (DOAS) has the responsibility for the State of Georgia ofmaking 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. The University, 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. - 13 - NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30,1997 EXHIBIT"D" NOTE 5: DEFERRED COMPENSATION PLAN The State of Georgia offers its employees a deferred compensation plan in accordance with Internal Revenue Code Section 457. The plan, available to employees of the State of Georgia and county health departments, permits such employees to defer a portion of their salary until future years. Participation in the plan is optional. Participants choose the option or options in which they wish to participate. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts ofcompensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights ofthe State ofGeorgia subject only to the claims ofthe State's general creditors. Participants' rights under the plan are equal to those of a general creditor of the State of Georgia in an amount equal to the fair market value ofthe deferred account for each participant. Financial information relative to the plan will be presented in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 1997. A change in the Internal Revenue Code Section 457, effective August 20, 1996, requires that by January 1, 1999, all existing eligible deferred compensation plans must be held in trust for the exclusive benefit of participants and their beneficiaries. The State of Georgia's plan will be converted effective July 1, 1998. NOTE6: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Plan Description North Georgia College and State University participates in the Teachers Retirement System ofGeorgia (TRS), a cost-sharing multiple-employer public employee retirement system (PERS) established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members. A member is eligible for service retirement after the member (1) has attained the age of 60 years and has at least ten years of creditable service, or (2) has at least 25 years of creditable service. For those members with 30 years of service or those age 60 with at least ten years of service, normal retirement benefits are equal to 2% ofthe average ofthe member's two consecutive highest paid years of service multiplied by the number ofyears of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of 1/12 of7% 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. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at a reduced rate to a designated beneficiary on the member's death. Retirement benefits also include death and disability benefits whereby the disabled member or surviving spouse is entitled to receive annually an amount equal to the member's service retirement benefit or disability retirement, whichever is greater. The benefit is based on member's creditable service (minimum of 10 years of service) and compensation up to the date of death or up to the time of disability. - 14- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997 EXHlBIT"D" NOTE6: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Plan Description Members become fully vested after ten years of service. If a member terminates with less than ten years of service, no vesting of employer contributions occurs, but the member's contributions are refunded with interest. Funding Policy Employees ofthe University who are covered by TRS are required to pay 5% of their gross earnings to TRS. The University makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees as advised by their independent actuary. For fiscal year 1997, the employer contribution rate was 11.81% for covered employees. In addition, the University contributed 4.24% to the TRS on behalfofemployees electing to participate in the Regents Retirement Plan. The interest rate assumption (rate of return on investments) was 7.50%. The University's payroll for the year ended June 30, 1997, for employees covered by TRS was $10,054,106.20. The University's total payroll for all employees was $13,727,543.40. Total contributions to the plan made during fiscal year 1997 amounted to $1,787,473.18, of which $1,284,767.87 was made by the University and $502,705.31 was made by employees. These contributions represented 12.78% (University) and 5% (employees) of covered payroll. Total contributions from all employers to TRS for the year ended June 30, 1997, were $652,928,555.00. The University's contribution for the year ended June 30, 1997, of$I,284,767.87 was actuarially determined and represented .1967% of total contributions made by all participating employers. Actuarial and Trend Information Actuarial and historical trend information is presented in the TRS June 30, 1997, financial report which can be obtained through TRS. REGENTS RETIREMENT PLAN Plan Description The State of Georgia provides optional pension benefits for eligible faculty and principal administrators through a defined contribution plan. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. Funding Policy State legislation requires that prior to January 1, 1997, the employer contribute 4% of the participating employee's earnable compensation, and on and after January 1, 1997, an amount equal to the normal cost contribution determined by the TRSBoard of Trustees. Since January 1, 1997, the employer contribution rate was 7.42%. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan - 15 - NORTH GEORGIA COLLEGE AND STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1997 EXlllBIT "D" NOTE 6: RETIREMENTPLANS REGENTS RETIREMENT PLAN Funding Policy contributions are fully vested and non-forfeitable at all times. The University's payroll for employees covered by the Regents Retirement Plan for the year ended June 30, 1997, was $2,296,648.53. The University's total payroll for all employees was $13,727,543.40. The University and the covered employees made the required contributions of $139,023.01 (6.0%) and $114,696.87 (5%), respectively. GEORGIA DEFINED CONTRIBUTION PLAN Plan Description North Georgia College and State University participates in the Georgia Defmed Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose ofproviding retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board ofTrustees. If a member has less than $ 3,500.00 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. The Employees' Retirement System of Georgia issues a fmancial report each fiscal year which may be obtained through ERS. . Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board ofTrustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member. The University's payroll for the year ended June 30, 1997, for employees covered by GnCp was $459,811.55. The University's total payroll for all employees was $13,727,543.40. Total contributions made by employees during fiscal year 1997 amounted to $34,486.72 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. - 16- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1997 EXHIBIT"D" NOTE 7: LEAVEPOUCffiS Employees earn annual leave ranging from one and one-quarter days to one and three-quarter days each month depending upon the employees' length of continuous State service with maximum accumulation of forty-five days. Employees are paid for unused accumulated annual leave upon retirement or. termination of employment. See Note 1- Basis of Accounting (Compensated Absences) Employees earn one day of sick leave each month with no maximum accumulation established. Unused accumulated sick leave does not vest with the employee and is forfeited upon retirement or termination of employment. NOTE 8: CONTINGENCffiS Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount ofexpenditures which may be disallowed by the grantor cannot be determined at this time although the University expects such amounts, if any, to be immaterial to its overall fmancial position. Litigation, claims and assessments filed against North Georgia College and State University (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, 1997. NOTE 9: POSTEMPLOYMENT 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 ofthe University System of Georgia. It is the policy ofthe Board ofRegents to permit employees ofthe University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members ofthe group health and life insurance programs. Employees who are eligible for retirement or disability under the criteria established by the Teachers Retirement System of Georgia and who have at least ten years of service with the University System of Georgia are eligible for these postemployment 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. As of June 30, 1997, there were 141 employees who had retired or were disabled that were receiving these postemployment health and life insurance benefits. For the year ended June 30, 1997, North Georgia College and State University recognized as incurred $279,747.60 of expenditures, which was net of $62,504.40 of participant contributions. - 17 - NORTH GEORGIA COLLEGE AND STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1997 EXHIBIT"D" NOTE 10: ENROLLMENT The equivalent full-time student emollment ofNorth Georgia College and State University was as follows: Regular Term Fall Quarter, 1996 Winter Quarter, 1997 Spring Quarter, 1997 2,884 2,889 2,749 Average Summer School, 1996 - 18 - SUPPLEMENTARY INFORMAnON - 19- NORTH GEORGIA COLLEGE AND STATE UNIVERSITY COMBINING BALANCE SHEET CURRENT FUNDS UNRESTRICTED JUNE 30,1997 EXHIBIT"E" ASSETS Cash and Cash EqUivalents Accounts Receivable Inventories Prepaid Items Due from Other Fund Groups RESIDENT LOTTERY FOR AUXILIARY STUDENT INSTRUCTION EDUCATION ENTERPRISES ACTIVITIES TOTAL $ 455,644.44 $ 571,651.99 51,817.52 44,622,65 193,163,39 42,286.01 $ 1,829,783.37 $ 227,076.45 571,834.78 17,117.63 234,102.07 $ 2,995.75 159.98 2,561,815.89 801,724.19 623,652.30 61,900.26 193,163.39 Total Assets $ 1,316,899.99 $ 42,286.01 $ 2,645,812.23 $ 237,257.80 $ 4,242,256.03 LIABILITIES AND FUND BALANCES Liabilities Accounts Payable StUdent Deposits Deferred Revenue Tuition and Fees Other Total Liabilities Fund Balances Unrestricted $ 487,023.73 $ 755,261.00 $ 1,242,284.73 $ 74,615,26 42,286.01 $ 42,286.01 $ 37,854.18 $ 43,387.05 $ 610,550.97 178,918.03 178,918.03 180,566.50 88,671.50 56,263.00 935,827.50 144,934.50 486,010.21 $ 99,650.05 $ 1,870,231.00 0.00 2,159,802.02 137,607.75 2,372,025.03 Total Liabilities and Fund Balances $ 1,316,899.99 $ 42,286.01 $ 2,645,812.23 $ 237,257.80 $ 4,242,256.03 See accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information. 20 NORTH GEORGIA COLLEGE AND STATE UNIVERSITY COMBINING STATEMENT OF CHANGES IN FUND BALANCES CURRENT FUNDS - UNRESTRICTED YEAR ENDED JUNE 30,1997 EXHIBIT"F" REVENUES AND OTHER ADDITIONS Unrestricted Current Fund Revenues Adjustments Prior Years' expenditures/Accounts Payable Prior Years' Checks Voided Total Revenues and Other Additions EXPENDITURES AND OTHER DEDUCTIONS Educational and General Expenditures Auxiliary Enterprises Expenditures Remittances to the Board of Regents of the University System of Georgia Prior Year's Unrestricted Fund Balance (Surplus) Total Expenditures and Other Deductions TRANSFERS BETWEEN FUNDS Nonmandatory Renewals and Replacements Capital Projects General Operations Total Transfers Between Funds Net Increase/(Decrease) for the Year FUND BALANCES JULY 1. 1996 RESIDENT LOTTERY FOR AUXILIARY STUDENT INSTRUCTION EDUCATION ENTERPRISES ACTIVITIES TOTAL $ 19,543,639,19 $ 193,000.00 $ 5,655,918.52 $ 440,588,48 $ 25,833,146,19 8,888,96 1,990.27 1,705.05 9.01 360.00 10,888.24 2,065.05 $ 19,552,528.15 $ 193,000,00 $ 5,659,613.84 $ 440,957.49 $ 25,846,099.48 $ 19,543,479.76 $ 193,000.00 $ 479,047.97 $ 20,215,527.73 $ 4,369,373.73 4,369,373.73 4,494.79 4,494.79 $ 19,547,974.55 $ 193,000.00 $ 4,369,373.73 $ 479,047.97 $ 24,589,396.25 $ 10,240.16 $ 10,240.16 $ 14,793.76 $ 59,821.50 $ -703,588.63 -770,488.26 $ -703,588.63 -770,488.26 10,240.16 $ -1 ,474,076.89 $ -1 ,463,836.73 0.00 $ -183,836.78 $ -38,090.48 $ -207,133.50 0.00 2,343,638.80 175,698.23 2,579,158.53 FUND BALANCES JUNE 30.1997 $ 74,615.26 $====,,0=.0=0 $ 2,159,802.02 $ 137,607.75 $ 2,372,025.03 see accompanying notes and Independent Accountant's Combined Report on Review of Financial Statements and Supplementary Information. - 21 - THIS PAGE LEn BLANK NORTH GEORGIA COLLEGE AND STATE UNIVERSITY COMBINING STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES, AND OTHER CHANGES UNRESTRICTED YEAR ENDED JUNE 30, 1997 EXHIBIT"G" REVENUES State Appropriations Tuition and Fees Federal Grants and Contracts Private Gifts, Grants, and Contracts Sales and Services of Educational Activities Sales and Services of Auxiliary Enterprises Other Sources Total Revenues EXPENDITURES Educational and General Instruction Academic Support Student Services Institutional Support Operation and Maintenance of Plant Scholarships and Fellowships Auxiliary Enterprises Student Housing Faculty and Staff Housing Food Services Stores and Shops Intercollegiate Athletics Other Service Units Total Expenditures OTHER TRANSFERS AND ADDITIONS/