Audit report, state of Georgia, Savannah State University, Savannah, Georgia, year ended June 30, 1998

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AUDIT REPORT STATE OF GEORGIA SAVANNAH STATE UNIVERSITY SAVANNAH, GEORGIA YEAR ENDED JUNE 30,1998

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASHINGTON STREET
ATLANTA, GEORGIA 30334-8400

SAVANNAH STATE UNIVERSITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON 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

CURR, ENT 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

SAVANNAH STATE UNIVERSITY - TABLE OF CONTENTS -
.SECTION ill
CURRENT YEAR FINDINGS AND QUESTIONED COSTS
SCHEDULE OF 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
December 15, 1998

Governor ofthe State of Georgia Members ofthe General Assembly of Georgia Members ofthe Board of Regents ofthe University System of Georgia
and Honorable Carlton E. Brown, President Savannah State University
INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying financial statements (Exhibits A through D) of Savannah State University as of and for the year ended June 30, 1998. These financial statements are the responsibility of the University's management. Our responsibility is to express an opinion on these fmancial statements based on our audit.
Except as discussed in the following paragraph, we conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perfonn the audit to obtain reasonable assurance about whether the fmancial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Governmental Accounting Standards Board Technical Bulletin 98-1, Disclosures About Year 2000 Issues,
requires disclosure of certain matters regarding the year 2000 issue. Savannah State University has included such disclosures in the Notes to the Financial Statements. Because of the unprecedented nature of the year 2000 issue, its effects and the success ofrelated remediation efforts will not be fully determinable until year 2000 and thereafter. Accordingly, insufficient audit evidence exists to support Savannah State University's disclosures with respect to the year 2000 issue made in the Notes to the Financial Statements. Further, we do not provide assurance that Savannah State University is or will be year 2000 ready, that Savannah State University's year 2000 remediation efforts will be successful in whole or in part, or that parties with which Savannah State University does business will be year 2000 ready.
98ARL-62A

As described in Note 1 to the financial statements, Georgia Law and State budgetary policy require the University to prepare its financial statements on a basis which is not consistent with generally accepted accounting principles with respect to the recording of encumbrances as expenditures and liabilities. To conform with generally accepted accounting principles, encumbrances should be recorded as a reservation of fund balance. The effects on the financial statements ofthis departure from generally accepted accounting principles were not reasonably determinable, but are believed to be material.
As disclosed in Note 1 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 $895,173.37 as of June 30, 1998, and the net change in fund balance for the year ended June 30, 1998, would be decreased by $30,402.18.
In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine sufficient evidence regarding year 2000 disclosures, and except for the effects on the financial statements ofthe matters discussed in the fourth and fifth paragraphs, the financial statements referred to above present fairly, in all material respects, the financial position of Savannah State University as of June 30, 1998, and the changes in fund balances and the current operating funds revenues, expenditures, and other changes for the year then ended in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplementary information (Exhibits E through G and Schedules 1 through 5) is presented for purposes of additional analysis and is not a required part of the financial statements of Savannah State University. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, except for the effects of such adjustments, ifany, as might have been determined to be necessary had we been able to examine sufficient evidence regarding year 2000 disclosures, and except for the effects ofthe matters discussed in the fourth and fifth paragraphs, such information is fairly presented in all material respects in relation to the financial statements taken as a whole.
Respectfully submitted,
~~
Claude L. Vickers State Auditor
CLV:gp 98ARL-62A

FINANCIAL STATEMENTS - 1-

SAVANNAH STATE UNIVERSITY COMBINED BALANCE SHEET ALL FUND GROUPS JUNE 30, 1998

ASSETS
Cash and Cash Equivalents Accounts Receivable Inventories Prepaid Items Due from Other Fund Groups Investment in Plant
Total Assets
LIABILITIES AND FUND BALANCES
Liabilities Accounts Payable Salaries Payable Student Deposits Deferred Revenue Tuition and Fees Deposits Held in Custody for Others Due to Other Fund Groups
Total Liabilities
Fund Balances U. S. Government Grants Refundable Institutional Loans - Restricted Endowment Term Endowment Net Investment in Plant Restricted Unrestricted
Total Fund Balances
Total Liabilities and Fund Balances

CURRENT FUNDS

UNRESTRICTED

RESTRICTED

LOAN FUNDS

$

1.899.364.59 $

393.325,71

692,443.81

14,060.55

12,027.73

112,368.26 780,704,35 $

887.270.49

$

3.011.222.39 $

893,072.61 $ _ ......8.8.7.2=70....4..9=

$

1,459,238.79

10,719,88

94.239,00

660.662.25

$

2,224,859.92

$

12.027,73

$

12,027.73

$

800,125.38

75,117.38

$

893.072.61

$

786,362.47

$

786,362.47 $

893,072,61 $

875.242.76

$

3.011.222.39 $

893.072.61 $ ====.8=8..7.2.7..0....4..9.

The notes to the financial statements are an integral part of this statement. -2-

EXHIBIT "A"

ENDOWMENT AND SIMILAR
FUNDS

UNEXPENDED

PLANT FUNDS RENEWALS AND REPLACEMENTS

INVESTMENT IN PLANT

AGENCY FUNDS

TOTAL (Memorandum
Only)

$

804.283.18 $

765.022.70 $

453.426.69

$

350.849.78 $

4.385.315.20

164.958.64

10.533.56

2.236.792.75

692.443.81

14.060.55

12.027.73

$ 57.481.3n.37 .

57.481.377.37

$

804.283.18 $

929.981.34 $

453.426.69 $

57.481.377.37 $

361.383.34 $ .........0;64;;;;82;;;;20.1.7..4..1....

$

926.375.84 $

54.092.24

$

926.375.84 $

54.092.24

$

153.314.09 $

2.593.020.96

10.719.88

94.239.00

208.069.25

660.662.25 208.069.25
12.027.73

$

361.383.34 $

3.578.739.07

$

599.554.96

204.728.22

$

$

804.283.18 $

3.605.50 $ 3.605.50 $

$ 399.334.45 399.334.45 $

57.481.377.37 57.481.377.37

$

800.125.38

75.117.38

599.554.96

204.728.22

57.481.3n.37

893.072.61

1.189.302.42

$

61,243.278.34

$

804.283.18 $

929.981.34 $

453.426.69 $ 57.481.3n.37 $

361.383.34 $ -===.....,;;;64;;;;82;;;;2;;,;.0.1,;,;7.41....

-3-

SAVANNAH STATE UNIVERSITY COMBINED STATEMENT OF CHANGES IN FUND BALANCES
AlL FUND GROUPS YEAR ENDED JUNE 30. 1998

EXHIBIT-B-

ENDOWMENT AND SIMILAR
FUNDS

UNEXPENDED

PLANT FUNDS RENEWALS AND REPLACEMENTS

INVESTMENT IN PLANT

TOTAL (Memorandum
Only)

$

$

145,803.72

226.39

$

146,030.11 $

1,332,127.00 38,015.00 66,345.10
22,690.01 $ 3,577.26
1,462.754.37 $

$ 17,760.00
17,760.00 $

$
41,608.00
1,884,614.02 1.427,896.80
113,529.91 589,577.00 4,057,225.73 $

29,233,587.60
1,332,127.00 38,015.00
17,672,789.00 445,287.63 55,080.12 472,463.28
37,356.56 42,400.60
328.10 11,217.41
133,641.91 5,722.41
1,884,614.02
1,427,896.80 113,529.91 589,577.00
2.898.00
53,498,532.35

$

0.00

$

42,084,505.73

4,368,715.01

191,606.92

47,364.08

2,165.00 2,219.53
316.96

$

1,427,896.80 $

113,529.91

1,541,426.71

31,252.07

52,893.50

84,145.57

$

153,099.57

153,099.57

$

0.00 $

1,459.148.87 $

166,423.41 $

153,099.57 $

48,475,565.08

$

15,862.81

$

15,862.81

$

161,892.92 $

642,390.26

$

804,283.18 $

$ $ 3,605.50 $ 0.00
3,605.50 $

221,134.18 221,134.18
72,470.77 $ 326,863.68

$
$ 3,904,126.16 $ 53,577',251.21

0.00 0.00 0.00 5,022,967.27 56,220,311.07

399,334.45 $

57.481,377.37 $

61,243,278.34

-5-

SAVANNAH STATE UNIVERSITY STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES,
AND OTHER CHANGES YEAR ENDED JUNE 30, 1998

EXHIBIT"C"

REVENUES
State Appropriations Tuition and Fees Federal Grants and Contracts State Grants and Contracts Local Grants and Contracts Private Gifts, Grants, and Contracts Endowment Income Sales and Services of Educational Activities Sales and Services of Auxiliary Enterprises Other Sources
Total Revenues
EXPENDITURES AND MANDATORY TRANSFERS
Educational and General Instruction Research Public Service Academic Support Student Services Institutional Support Operation and Maintenance of Plant Scholarships and Fellowships Mandatory Transfers for: Investment Income for Endowment Principal
Auxiliary Enterprises Student Housing Faculty and Staff Housing Food Services Stores and Shops Intercollegiate Athletics Other Service Units
Total Expenditures and Mandatory Transfers
OTHER TRANSFERS AND ADDITIONS/(DEDUCTIONSl
Excess of Restricted Receipts over Transfers to Revenues
Transfers for Renewals and Replacements Prior Period Adjustments (Net) Remittances to the Board of Regents
of the University System of Georgia Prior Year's Unrestricted Fund Balance (Surplus)
Total Other Transfers and Additions/(Deductions)

UNRESTRICTED RESTRICTED

TOTAL (Memorandum
Only)

$ 18,003,027,00

$ 18,003,027.00

5,816,831,15

5,816,831.15

191,606,92 $ 16,801,098.28

16,992,705,20

540,973,63

540,973,63

54,442.71

54,442.71

283,492,52

283,492,52

4,950,00

4,950,00

38,617,04

38,617.04

4,713,000.19

4,713,000,19

470,505,30

470,505,30

$ 29,233,587,60 $ 17,684,957,14 $ 46,918,544,74

$ 11,258,451.n $ 454,750,68 $ 11,713,202.45

24,573,00

446,960,59

471,533.59

763,596,63

1,260,519.46

2,024,116,09

2,470,153.34

598,001,89

3,068,155.23

2,086,421,81

2,086,421,81

4,607,804,94

885,n1.14

5,493,576,08

2,996,359.47

2,996,359.47

192,187.63

14,038,953.38

14,231,141.01

15,862,81

15,862,81

1,387,351,94 14,388,57
1,304,806,50 168,620,40
1,176,432.34 317,115,26

1,387,351.94 14,388.57
1,304,806.50 168,620.40
1,176,432.34 317,115,26

$ 28,768,263.60 $ 17,700,819.95 $ 46,469,083.55

$ 548,657,39 $ 548,657,39

$

-221,134,18

-221,134,18

133,622,06

133,622,06

-47,364.08

-47,364,08

$ .134,876,20 $ 548,657,39 $ 413,781.19

Net IncreaseJ(Decrease) in Fund Balances

$

The notes to the financial statements are an integral part of this statement -6-

330,447,80 $ 532,794.58 $ 863,242.38

SAVANNAH STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIBIT liD"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY Savannah 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 of Savannah 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 determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Savannah State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Savannah State University is considered an organizational unit of the Board ofRegents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and fmancial relationships with the Board of Regents 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 of the 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 financial statements, funds that have similar characteristics have been combined into fund groups. Accordingly, all financial transactions have been recorded and reported by fund group.
Within each fund group, the University's fund balance allocations and designations represent those portions ofthe 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 financial 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, research, 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-

SAVANNAH STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHlBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ACCOUNTING
LOAN FUNDS
The fund used to account for resources which have been made available for financial loans to students.
ENDOWMENT AND SIMILAR FUNDS
~ The fund used to account for endowment funds and tenn endowment funds. Endowment funds are subject to the restrictions ofgift instruments requiring that the principal be invested in perpetuity and income only be utilized. Term endowment funds are similar to endowment funds except that upon the passage of a stated period oftime or the occurrence ofa particular event, all or part ofthe principal may be expended.
PLANT FUNDS
UNEXPENDED - The fund used to account for financial 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 IN PLANT - The fund which shows the tptal 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, staffmembers, and organizations.
BASIS OF ACCOUNTING Except as otherwise disclosed in these notes, the financial statements are prepared on the modified accrual basis ofaccounting, which is materially the same as the accrual basis ofaccounting applicable to colleges and universities prescribed in the American Institute ofCertified 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 generallong-tenn debt, are recorded at the time liabilities are incurred and revenues are recorded when available and measurable to finance expenditures ofthe fiscal period.

-8-

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING 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 accounting practices prescribed or permitted 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 of fund balance. Further, revenue recognition for expenditure-driven grants should be based upon expenditures determined 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 $895,173.37 and the related net current year expenditure of $30,402.18 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 ofthe 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 behalfofthe 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 financial 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 ofrevenues and expenses.
RESTATEMENT OF PRIOR YEAR FUND BALANCE In fiscal year 1998, Savannah State University implemented GASB Statement 31, "Accounting and Financial Reporting for Certain Investments and for External Investment Pools". The statement requires certain investments to be reported at fair value rather than at cost. As a result, the beginning fund balance of the Current Funds- Restricted fund has been decreased by $914.64 to implement this change in accounting
-9-

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

RESTATEMENT OF PRIOR YEAR FUND BALANCE principle. The beginning fund balance ofthe Endowment and Similar Funds has been increased by $249.77 for this change in accounting principle.

BUDGET The Board of Regents of the University System of Georgia - Administrative Central Office receives State appropriation allotments for units ofthe University System of Georgia. The appropriated budget is adopted at the departmental level and represents appropriations provided by the Amended Appropriations Act of 19971998. The appropriated budget covers current funds and plant funds, except for Auxiliary Enterprises and Student Activities which are not subject to appropriation. The allocation of the appropriated budget is made to the University by the Administrative Central Office. In addition, the University receives Federal funds and other funds directly and includes these funds in the budget filed with the Administrative Central Office.

A comparison ofanticipated funds available and budgeted expenditures by budget unit object class indicates that the following object classes were overspent by the amounts identified below:

Resident Instruction Personal Services: Sponsored Operations Operating Expenses: Education, General and Departmental Services Sponsored Operations

$ 236.955.76
$ 12.046.06 $ 3.452.883.38

Lottery for Education Equipment, Technology and Construction Trust Fund

$ 1.299.72

These overexpenditures of budget constitute a violation of Board of Regents policy, but do not constitute statutory violations of budget authority. Statutory violations of budget authority are reported at the departmental level.

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.

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.

- 10-

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORIES Inventories of consumable supplies are recorded on the consumption method and are valued at cost on the Combined Balance Sheet using the weighted average method.
Inventories of goods for resale are valued at cost using the first-in, first-out method.
PREPAID ITEMS Prepaid items are payments made to vendors in advance ofthe receipt ofgoods 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 financial information and are presented only to facilitate fmancial analysis. The columns do not present information that reflects financial position or changes in fmancial 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 ofGeorgia 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 ofthe following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
(l) Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or of the 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 ofany public authority created by the laws ofthe State ofGeorgia, 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.

- 11 -

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998

EXHIBIT"D"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (5) Bonds, bills, certificates ofindebtedness, notes, or other obligations ofa 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, 1998, 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 fair value) held by the University or by its agent in the University's name.

Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agentin the University's name.

Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.

Total Cash Deposits

Carrying Amount

Bank Balances

Risk Categories

2

3

$ 3539,361 94 $ 5,844,33085 $ 280950,41 $ 370,335,75 $ 5,193,044 69

- 12-

SAVANNAH STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998

EXHIBIT "D"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS At June 30, 1998, the carrying amount ofthe University's total investments was $840,682.12 and consisted entirely of funds in the State Investment Pool administered by the State of Georgia Office of Treasury and Fiscal Services which are not required to be categorized since the University did not own any specific identifiable securities in the pool.

NOTE 3: INVESTMENT IN PLANT

The following is a summary ofInvestment in Plant fixed assets as of June 30, 1998:

Land Buildings Improvements Other Than Buildings Equipment Library Books and Collections

$ 325,975.16 35,389,112.81 7,654,672.59 9,657,291.24 4.454.325.57

Total Investment in Plant

$57.481.377.37

NOTE 4: RISK MANAGEMENT

Savannah State University is a participant in the Board ofRegents ofthe University System ofGeorgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the 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 of the 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 $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board ofRegents.

The Department ofAdministrative Services (DOAS) has the responsibility for the State ofGeorgia 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 ofthe Board ofRegents ofthe 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.

- 13-

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIBIT"D"

NOTE 4: RISK MANAGEMENT
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 ofthe performance oftheir duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
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 ofthe 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 ~o 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, 1998.
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 ofGeorgia's plan was converted effective July 1, 1998.
NOTE6: RETIREMENT PLANS
TEACHERS RETIREMENT SYSTEM OF GEORGIA
Plan Description Savannah State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances ~d other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System ofGeorgia issues a separate stand alone financial audit report and a copy can be obtained from the Georgia Department ofAudits and Accounts.
Funding Policy
Employees ofthe University who are covered by TRS are required by State statute to contribute 5% oftheir gross earnings to TRS. The University makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. For
- 14-

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998

EXHIBIT"D"

NOTE 6: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Funding Policy fiscal year 1998, the employer contribution rate was 11.81% for covered employees. In addition, the University contributed 3.91% to the TRS on behalf of employees electing to participate in the Regents Retirement Plan. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

1998

100%

$ 1,474,701.16

1997

100%

$ 1,590,288.68

1996

100%

$ 1,480,684.29

REGENTS RETIREMENT PLAN

Plan Description The Regents Retirement Plan, a single-employer defmed contribution plan, is an optional retirement plan established and administered by the Board of Regents of the University System of Georgia, under which it may purchase annuity contracts for the purpose ofproviding retirement and death benefits for eligible faculty and principal administrators. 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 Member contribution requirements are established by the Board of Trustees of the Teachers Retirement System. Employer contributions are established by statute and may be amended only by the General Assembly ofthe State ofGeorgia. The employer contributes 7.75% ofthe participating employee's earnable compensation. Employees contribute 5% oftheir earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.

The University and the covered employees made the required contributions of $249,495.54 (7.75%) and $160,964.73 (5%), respectively.

GEORGIA DEFINED CONTRIBUTION PLAN

Plan Description Savannah State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-
employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State e~ployees who are temporary, seasonal, and part-time and are not

- 15 -

SAYANNAB STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998

EXHIBIT "0"

NOTE 6: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description members of a public retirement or pension system. GOCP is administered by the Board ofTrustees 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. Ifa member has less than $ 3,500.00 credited to his/her account, the Board ofTrustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. .Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board ofTrustees. Upon termination ofemployment, the amount of the member's account is refundable upon request by the member.
. Total contributions made by employees during fiscal year 1998 amounted to $37,318.50 which represents 7.5% of covered payroll. These contributions met the requirements ofthe plan.
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, except as noted in the subsequent paragraph.
Effective July 1, 1998, certain employees who retire with a minimum of three months of unused sick leave are entitled to additional service credit in the Teachers Retirement System of Georgia.

- 16-

SAVANNAH STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIBIT"D"

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 detennined at this time although the University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Savannah State University (an organizational unit of the Board ofRegents ofthe 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, 1998.
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 pennit 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 ofservice with the University System ofGeorgia 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, 1998, there were 123 employees who had retired or were disabled that were receiving these postemployment health and life insurance benefits. For the year ended June 30, 1998, Savannah State University recognized as incurred $99,181.55 of expenditures, which was net of $39,057.08 ofparticipant contributions.
NOTE 10: YEAR 2000 SYSTEMS READINESS
The year 2000 issue is the result of shortcomings in many electronic data processing systems and other electronic equipment that may adversely affect the University's operations as early as calendar year 1999. The University has identified computer systems and other electronic equipment that may be affected by the year 2000 issue and are necessary to conducting UtrlversitY operations. The following stages have been identified as necessary to implement year 2000 compliant systems.
Awareness Stage - Encompasses establishing a budget and project plan for dealmg with the year 2000 issue.
Assessment Stage - The actual process ofidentifying all systems and individual components ofsystems to check for compliance.
- 17 -

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIBIT"D"

NOTE 10: YEAR 2000 SYSTEMS READINESS

Remediation Stage - The time when changes are made to systems and equipment.
validationffesting Stage - The process of ensuring that the changes made to systems and equipment .
will produce a year 2000 compliant system.

It will be necessary for the University to progress through all four ofthese stages for each computer and/or electronic system, not already year 2000 compliant, in order to assure that these systems will not be adversely affected.

The following financial systems utilized by the University are supported by the Board ofRegents, University System of Georgia. The Board intends to remediate all systems which it maintains for use by its member institutions.

The College and University Fund Accounting System is in the remediation stage and final testing is scheduled for April, 1999.

The Regents Budget Reporting System and Property Inventory System are beyond the validation/testing stage and management considers them year 2000 compliant.

The Regents Payrol1/Personnel System is in the remediation stage with validation and testing scheduled for completion in July, 1999.

The Banner Student Information System is supported by SCT Banner, Inc. Their Banner2000 product is year 2000 compliant. All institutions whose systems are supported by the Board of Regents are scheduled to install Banner2000 by May 16, 1999.

Because ofthe unprecedented nature ofthe year 2000 issue, its effects and the success ofrelated remediation efforts will not be fully determinable until year 2000 and thereafter. While management is confident that the University will be year 2000 ready, it cannot assume that its remediation efforts will be successful in whole or in part, or that parties with whom the University does business will be year 2000 ready.

NOTE 11: ENROLLMENT

The equivalent full-time student emollment of Savannah State University was as follows:

Regular Term Fall Quarter, 1997 Winter Quarter, 1998 Spring Quarter, 1998 Average
Summer School, 1997

2,705 2,563 2,523

- 18-

SUPPLEMENTARY INFORMATION -19 -

SAVANNAH STATE UNIVERSITY COMBINING BALANCE SHEET CURRENT FUNDS UNRESTRICTED
JUNE 30, 1998

EXHIBIT "I:"

ASSETS
Cash and Cash Equivalents Accounts Receivable Inventories . Prepaid Items Due from Other Fund Groups

RESIDENT

LOTTERY FOR

AUXILIARY

STUDENT

INSTRUCTION EDUCATION ENTERPRISES ACTMTIES

TOTAL

$ 1,711,647,69 $ 198,730,85 137,559,83 14,060,55 12,027,73

42,637,57 $

18,541,53 $ 126,537,80 $ 1,899,364,59

190,466,59

4,128,27

393,325,71

554,883,98

692,443,81

14,060,55

12,027,73

Total Assets

$ 2,074,026,65 $ 42,637,57 $ 763,892,10 $ 130,666,07 $ 3,011 ,222,39

LIABILITIES AND FUND BALANCES
Uabilities Accounts Payable Salaries Payable Student Deposits Deferred Revenue Tuition and Fees
Total Uabilities
Fund Balances Unrestricted

$ 1,366,661,02 $ 10,719,88
440,764,78 $ 1,818,145,68 $

35,847,19 $ 35,847,19 $

9,739,68 $ 46,990,90 $ 1,459,238,79

10,719,88

94,239,00

94,239,00

200,607.77

19,289,70

660,662,25

304,586,45 $ 66,280,60 $ 2,224,859,92

255,880,97

6,790,38

459,305,65

64,385,47

786,362,47

Total Uabilities and Fund Balances

$ 2,074,026,65 $ 42,637,57 $ 763,892,10 $ 130,666,07 $ 3,011,222,39

See notes to the financial statements,

-20

see notes to the financial statements.

- 21 -

THIS PAGE LEFT BLANK

see notes to the finanCial statements.

-23-

SAVANNAH STATE UNIVERSITY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO BUDGET
RESIDENT INSTRUCTION YEAR ENDED JUNE 30, 1998

REVENUES
State Appropriations Other Revenues Retained

CURRENT FUNDS UNRESTRICTED RESTRICTED

PLANT FUNDS RENEWALS AND
UNEXPENDED REPLACEMENTS

$ 17,721,037.00

$ 1,332,127,00

6,118.882.52 $ 17,684.957.14

89,035.11 $ _ _---.;1.;.7,"""76.;;.;0;.;;.0:.,:0'-

$ 23,839,919.52 $ 17,684,957.14 $ 1,421,162,11 $ _ _-.,;..;17..:.;,7~6,;;.;0,,;;.;00~

EXPENDITURES
Personal Services: Education, General and Departmental Services Sponsored Operations
Operating Expenses: Education. General and Departmental Services Sponsored Operations
Capital Outlay Special Funding Initiative Office of Minority Business Enterprise

$ 18,389,727.76 $ 1,627,034.76

4,484,4n.06
384,144.04 518,692.n

16,057,922.38 $ 1,421,161.11 $

166,423.41

Excess of Revenues over Expenditures

- - - - ' - - - $ 23,7n,041.63 $ 17,684,957.14 $ 1,421,161.11 $

166,423.41

$

62,8n.89 $

0.00 $

1.00 $ ===-1..4.=8,=66=3;,;".4;,,;1=

(1) To eliminate tuition waivers not bUdgeted and to reclassify prior year fund balances bUdgeted as revenues.

see notes to the financial statements.

-24-

TOTAL

ADJUSTMENTS (1)

TOTAL (Budget Basis)

BUDGET

VARIANCEFAVORABLE (UNFAVORABLE)

$ 19.053.164.00

$ 19.053.164.00 $ 19.053.164.00 $

23,910.634.n $ _ _--=3..97:8..5=9~ 23.906.656.18

21.388.767.00

0.00 2.517.889.18

$ 42.963.798.n $

-3.978.59 $ 42.959.820.18 $ 40.441.931.00 $

2.517.889.18

$ 18.389.727.76 1.627.034.76
4.484.4n.06 $ 16.057.922.38
1.587.584.52 384.144.04 518.692.n

$ 18.389.727.76 $ 18,423.225.00 $

1.627.034.76

1.390.079.00

-152.642.00

4.331.835.06 16.057.922.38
1.587.584.52 384.144.04 518.692.n

4.319.789.00 12.605.039.00 2.684.201.00
469.598.00 550.000.00

33.497.24 -236.955.76
-12.046.06 -3.452.883.38 1.096.616.48
85.453.96 31.307.23

$ 43,049.583.29 $

-152.642.00 $ 42.896.941.29 $ 40,441.931.00 $ -2.455.010.29

$

-85,784.52 $

148.663.41 $ =====6.2.=..8:::;78.8;;;;9...

$ = .......6;0;;2;;;;.8.7...8..8..9...

-25-

THIS PAGE LEFT BLAHK

SAVANNAH STATE UNIVERSITY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO BUDGET
LOTTERY FOR EDUCATION YEAR ENDED JUNE 30, 1998

SCHEDULE "2-

REVENUES State Appropriations

CURRENT FUNDS UNRESTRICTED

PLANT FUNDS UNEXPENDED

TOTAL (Budget Basis)

BUDGET

VARIANCEFAVORABLE (UNFAVORABLE)

$

281,990,00 $

38,015,00 $ 320,005,00 $ 320,005.00 $

0.:.;.:.;00:,..

EXPENDITURES

Equipment. Technology and Construction

Trust Fund

$

Special Funding Initiatives

$

Excess of Revenues over Expenditures

$

137,311.96 $ 146,005,00

37,987.76 $ 175,299.72 $ 174,000.00 $ 146,005,00 146,005.00

-1,299.72 0.00

283,316.96 $

37,987.76 $ 321,304,72 $ 320,005,00 $

-1,299.72

----:.;;,.,;..;;.;,;.;;.,.

-1,326.96 $

27.24 $ _.....-.1..,2;,;;9.9,.72==

$ =="""""-11,12ii=99;;,;.7.2==

see notes to the financial statements,

-27-

SAVANNAH STATE UNIVERSIIX CHANGES IN INVESTMENT IN PLANT
YEAR ENDED JUNE 30, 1998

Land Buildings Improvements Other Than Buildings Equipment Library Books and Collections

BALANCE JULY 1,1997

CURRENT FUNDS

UNRESTRICTED

RESTRICTED

$

325,975,16

33,329,411.11

7,611,129.58

8,081,249,50 $ 1,229,498.65 $

423,275,66

4,229,485,86

231,839,71

$

53,577,251.21 $ 1,461,338,36 $

42;;;;;3.,2;,;,7=5,=6.6 .

See notes to the financial statements.

-28-

SCHEDULE "3"

ADDITIONS
PLANT FUNDS RENEWALS AND
UNEXPENDED REPLACEMENTS

GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION

$ 1,384,353.79 $ 43,543.01

85,770.91 $

589,577.00

27,759.00

$

PRIVATE GIFTS

DEDUCTIONS DISPOSALS! DELETIONS! ADJUSTMENTS

BALANCE JUNE 30,1998

$

325,975.16

35,389,112.81

7,654,672.59

41,608.00 $

146,099.57

9,657,291.24

7,000.00

4,454,325.57

$ 1,427,896.80 $

113,529.91 $

589,577.00 $

41,608.00 $

153,099.57 $ 57,481,377.37

-29-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FUND BALANCES CURRENT FUNDS AND PLANT FUNDS
JUNE 30, 1998

NET INVESTMENT IN PLANT Investment in Plant Facilities
RESTRICTED Designated for SUbsequent Years' Expenditures
UNRESTRICTED Designated For Bus Replacement Reserve For EqUipment, Technology and Construction Trust Fund For Intercollegiate Athletics For Inventory Reserve For Renewals and Replacements Reserve For Subsequent Years' Expenditures For Uncollectible Accounts Surplus RegUlar Lottery for Education

RESIDENT INSTRUCTION

CURRENT FUNDS

UNRESTRICTED

LOTTERY FOR

AUXILIARY

EDUCATION ENTERPRISES

STUDENT ACTMTIES

$ $ 137,624,83

6,790.38 $

-195,282,46 554,883,98

28,823.04

67,189,02 $ 32,515.11

64,385.47

89,433,10

$ 255,880.97 $

6,790.38 $ 459,305,65 $

64,385.47

$ 255,880,97 $

6,790,38 $ 459,305.65 $ =-=64::=,3=8=5,=47=

See notes to the financial statements,

-30-

SCHEDULE "4"

RESTRICTED

PLANT FUNDS

UNEXPENDED

LOTIERY FOR RENEWALS AND

REGULAR

EDUCATION

REPLACEMENTS

INVESTMENT IN PLANT

TOTAL

$ 57,481,377.37 $ 57,481,377.37

$ 893,072.61

$ 893,072.61

$

2,610.90

396,723.55

$

2,610.90

6,790.38 -195,282.46 692,508.81 396,723.55 131,574.49
61,338.15

$

3,578.26

_ _ _ _ $ _ _--=2::.,:7.:.24:_

$

3,578.26 $

27.24 $ _ _.::39::.::9:.L:,3::::.34~.4.:.:5:...

93,011.36 27.24
$ 1,189,302.42

$ 893,072.61 $

3,578.26 $

27.24 $

399,334.45 $ 57,481,3n.37 $ 59,563,752.40

- 31 -

SAVANNAH STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30. 1998

SCHEDULE "5"

Totals per Annual Supplement

Accruals June 30, 1998

Adjustments

Shared Services on Jointly Staffed Personnel

Armstrong Atlantic State University

Awan,

Ijaz

Eason,

Thomas

Other

Bruce,

Dexter

Cohen,

Rufus

Frome,

Jean

Rahming,

Tamica

Roberson,

Jeffrey

Rosen,

Joel

SALARIES $ 17,341,119.03 $

TRAVEL 368,556.78

10,719.88

-3,670.00 -10,309.76
-154.50 -55.00 665.00
-132.00 -5.25
1,614.75

$ 17,339,792.15 $_====36=8=,5=56=:..7.8.;,.,

See notes to the financial statements.

-32-

SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS

SAVANNAH STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1998

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

548-96-01 548-96-02 548-96-03 548-96-05 FS-548-97-01

Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented

CORRECTIVE ACTIONIRESPONSES

REVENUE/RECEIVABLES/RECEIPTS Student Accounts Receivable Not Supported by Financial Aid Finding Control Number: 548-96-01

The University has increased its collection efforts to reduce accounts receivable. Uncollectible debts under $100 will be gradually written offunder.House Bill 1536, O.C.G.A. Section 50-16-17. Surplus funds will be used to increase the reserve for uncollectible debts in excess of $1 00. The institution will examine internal operations and put controls in place to ensure that deferments awarded are supported by Financial Aid.

EXPENDITURESILIABILITIESIDISBURSEMENTS Deficit Cash Balance Finding Control Number: 548-96-02

To eliminate this deficit, the University will continue to monitor the awarding ofthe Naval Science Scholarship and increase fund raising efforts. The $20,000 donation from ARAMARK will be applied to the deficit. In addition, at the end ofthe fiscal year, a portion ofthe General Scholarship Funds will be redirected to Naval Science Scholarships to further reduce the deficit.

FUND BALANCE Deficit to be Funded from Subsequent Years' Operation Finding Control Number: 548-96-03

The University will continue to apply future annual surplus of the Athletic Program to the deficit until full satisfaction. Though probably small in amount, we are projecting a surplus from this year's operation which will serve to reduce the deficit. Prior year purchase orders cancelled totalling $10,059.53 has been applied to the deficit.

SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS

SAVANNAH STATE UNNERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS
CASH AND CASH EQUNALENTS Inadequate Accounting Procedures Finding Control Number: FS-548-98-01
For the year under review, the University's accounting procedures were insufficient to provide for adequate internal control over the cash accounts and the bank reconciliation process. The following deficiencies were noted:
1) Quarterly bank statements for the Dr. K.B. Raut Endowment bank account were not obtained by the University, therefore the interest earned was not recorded on the general ledger.
2) Numerous book errors disclosed through the bank reconciliation process were carried as reconciling items for extended periods oftime.
3) Checks totaling $4,069.18 were carried as outstanding on the bank reconciliations for periods in excess of six (6) months.
These deficiencies were the result ofmanagement's failure to establish the proper internal control procedures over cash and bank reconciliations which are necessary to adequately safeguard and report the cash and cash equivalents of the University. The Univer~ity should implement appropriate procedures and controls to ensure that bank statements are obtained and reconciled with the accounting records and that required adjustments are identified and recorded in a timely manner.
EXPENDlTURESILIABILITIESIDISBURSEMENTS Deficit Cash Balance Finding Control Number: FS-548-98-02
Our examination ofRestricted Funds revealed that the University had a deficit cash balance of$158,703.25 in the locally funded Naval Reserve Officers Training Corps Room and Board Scholarship Account that was not supported by a valid accounts receivable. The deficit occurred because management failed to provide local funding for the awarding ofthese scholarships.
The University should implement procedures to ensure that funds are available prior to disbursement. The University should take appropriate action to secure funding to liquidate this deficit cash balance.
- 1-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
EXPENDITURESILIABILITIESIDISBURSEMENTS Failure to Monitor Accounts Payable Finding Control Number: FS-548-98-03
For the year under review, an examination of the accounts payable subsidiary records was performed to test transactions for validity and accuracy. The following deficiencies related to accounts payable were disclosed:
1) Payments of accounts payable were incorrectly charged to expenditure accounts rather than as liquidation of accounts payable.
2) Remaining accounts payable balances were not transferred to surplus after final payment ofinvoices.
These deficiencies occurred because of the University's failure to have procedures in place to adequately monitor accounts payable. The University should develop and implement policies and procedures to ensure that accounts payable are adequately monitored and properly liquidated on a timely basis.
FUND BALANCE Deficit to be Funded from Subsequent Years' Operations Finding Control Number: FS-548-98-04
At June 30, 1998, the University's Intercollegiate Athletics had a deficit balance of $195,282.46. The deficit was a result ofthe University's lack ofsufficient funds to meet obligations on a current basis. The Board of Regents Policy Manual Section 702.02 states that auxiliary enterprises "will be placed on a self-supporting basis, and the State will not make an appropriation to finance its operation".
The University should take appropriate action to ensure the deficit is funded.
GENERAL LEDGER Deficiencies in Accounting Procedures Finding Control Number: FS-548-98-05
Our examination and testing for the year under review revealed the following deficiencies in accounting for financial transactions by Savannah State University.
1) Receipts were recorded in an Agency-clearing/holding account and were not disbursed in a timely manner to the proper funds Adjustments in the amount of $78,631.40 were necessary to correctly reflect receipts/revenue in the proper fund.
2) Bookstore revenue was recorded twice in the amount of $136,491.52. Adjustment was made to correct this duplicate recording ofrevenue.
-2-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Deficiencies in Accounting Procedures Finding Control Number: FS-548-98-05
3) Numerous journal entries were improperly prepared and incorrectly recorded in Restricted Funds without the approval or knowledge of the Director of Contracts and Grants.
4) Rental income was incorrectly recorded in the Agency Fund. An adjustment for $10,000.00 was made to correctly record the revenue in the Resident Instruction Fund.
5) Restricted Fund revenues were not recognized in an amount equivalent to the Restricted Fund expenditures. Variances were identified and adjustments were made.
6) Two different general ledgers and associated reports with different printing dates were presented for audit; however, this financial information was not used to prepare the University's fmancial statements. A third set ofreports were obtained that supported the financial statements prepared by the University.
7) Expenditures for the Board of Regents Opportunity Grant were improperly recorded in Restricted Funds.
8) An improper transfer of$23,100.31 was made from a Restricted Fund to cover deficit balances in scholarship funds in the Restricted and Agency Funds.
These deficiencies occurred because the University failed to have adequate accounting policies and procedures, to adhere to current policies and procedures, to monitor accounting records, to correctly identify and record revenue and to identify the final printing of the general ledger and associated reports presented for audit. The University should review current accounting policies and procedures, identify weaknesses, and implement procedures to ensure that the accounting records are monitored and revenue is properly recorded in accordance with the Board ofRegents Business Procedures Manual.
GENERAL LEDGER Dormant Restricted Funds Finding Control Number: FS-548-98-06
For the year under review, ten restricted fund projects had no activity. It was noted that the grant period had ended on all ten projects, however fund balances remained at June 30, 1998.
These dormant accounts are a result ofmanagement's failure to monitor the activity occurring in the Restricted Funds and failure to return excess funds promptly to the grantor when the project is complete. The University should implement procedures that will provide proper monitoring ofthe Restricted Funds and grant periods
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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 1998
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL LEDGER Dormant Restricted Funds Finding Control Number: FS-548-98-06
to ensure that funds are returned to the grantor when the project is complete. The University should contact the grantors to deterrillne if the dormant account funds are to be returned.
GENERAL LEDGER Inadequacies in Travel Advances/Prepaid Travel Finding Control Number: FS-548-98-07
For the year under review, an examination of prepaid travel and travel advances revealed the following deficiencies:
1) Travel advances to employees were not cleared in a timely manner. The employees involved failed to submit a travel expense report for more than six months, which is a violation of the University's policies and procedures for advances mid travel.
2) Travel advances were incorrectly recorded between funds. In some cases, travel advances were . recorded in one fund and the offsetting credits to clear the advances were incorrectly recorded in another fund.
3) Travel advances to employees were not monitored throughout the year. As a result, prepaid travel and travel advances were outstanding for individuals that were no longer employees of the University.
The deficiencies occurred because of management's disregard of the University's travel policy and management's failure to properly account for travel advances and prepaid travel. The University's travel policy states "advances must be cleared within three days subsequent to returning to campus or the conclusion of the event". The University should follow policies and procedures to ensure that travel advances and prepaid travel are correctly recorded in the proper fund, monitored, and cleared in a timely manner.
GENERAL LEDGER Inadequate Documentation ofJournal Entries Finding Control Number: FS-548-98-08
For the year under review, numerous journal entries were made with little or no documentation. This situation occurred because of the University's failure to ensure that journal entries were properly documented and approved by appropriate supervisory personnel. The University should develop procedures to ensure that all journal entry transactions are properly maintained and supported by adequate documentation.
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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ALLOWABLE COSTS/COST PRINCIPLES Budget Amendments Not Posted to the Accounting Records Higher Education - Institutional Aid (CFDA 84.031) Finding Control Number: FA-548-98-01
The accounting records presented for audit ofthe Title ill Federal program did not reflect the final approved budget for Title ill projects. The University recorded original budget information at the beginning of the fiscal year, but failed to record budget amendments as they were approved. This deficiency resulted in a lack of control over expenditures due to the absence ofcorrect budget information. Federal regulations contained in 34 CFR 74.21 require that the Institution maintain a financial management system which, in part, provides for effective control over the accountability of Federal funds including a comparison of outlays to budget amounts for Federal awards. This condition is a result ofmanagement's failure to require budget amendments be posted to the accounting records. Management should require that all budget amendments be posted to the accounting records to ensure control over expenditures.
ALLOWABLE COSTS/COST PRINCIPLES Employee Compensation Deficiencies Higher Education - Institutional Aid (CFDA 84.031) Questioned Cost: $16,500.00 Finding Control Number: FA-548-98-02
For the year under review, our examination of salaries charged to the Title ill program revealed the following deficiencies:
1) It was determined that salaries were charged to the Title ill program based on budgeted amounts rather than actual time and effort reports. An examination of time and effort reports noted the following problems:
a. Time and effort reports for the Title ill Coordinator and six hourly employees who worked on Title ill activities were not available for examination.
b. Time and effort reports for other personnel who worked on Title ill activities failed to contain all the required elements such as the employee's signature, the Title ill Coordinator's signature, and the percentage of time spent on all activities during the period.
c. Although reasonable, one employee's time and effort reports were not consistent with the employee's class schedules.
d. A summer salary of $2,000.00 for one individual was charged to Title ill program but was not documented by time and effort reports. Determination could not be made as to whether the employee actually worked on the Title ill program.
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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 1998
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
ALLOWABLE COSTS/COST PRINCIPLES Employee Compensation Deficiencies Higher Education - Institutional Aid (CFDA 84.031) Questioned Cost: $16,500.00 Finding Control Number: FA-548-98-02
According to OMB Circular A-21, activity reports or other payroll documents used as original documentation for payroll and payroll charges should be prepared and signed by the employee and the responsible official when salaries are charged to Title ill. Time and effort reports should reflect 100% of an individual's time spent on all activities performed during the period. The reports should also be supported by other documentation such as class schedules.
2) Stipends for four individuals in the total amount of $2,750.00 were incorrectly charged to the Title ill program. The stipends were in addition to regular salaries; however, the work performed for Title ill was not in addition to their regular departmental workloads. Also, $1,750.00 in stipends for another individual charged to the Title ill program were not documented by appropriate time and effort reports.
According to OMB Circular A-21, additional compensation above the base salary is only allowed in cases where the Title ill duties are in addition to the regular departmental load.
3) Salaries of $10,000.00 were charged to the Title ill program for two employees ($5,000.00 each) who were to receive release time from their normal duties to work on Title ill activities. However, the individuals did not actually receive release time to work for the Title ill program.
Salaries should not be charged to the Title ill program for release time unless the individual is actually released from normal duties and carries out the Title ill duties.
These conditions occurred because of management's failure to ensure that all time and effort reports were properly prepared by Title ill employees and that Title ill salaries were correctly paid to individuals who performed Title ill services. Management should ensure that complete time and effort reports are prepared by all employees whose salaries are charged to the Title ill program. Time and effort reports should contain all required elements so that management can rely on the reports to support accounting and payroll records. Management should also ensure that Title ill activities are in addition to employees' regular departmental workloads before Title ill stipends are paid to employees. Lastly, management should ensure that Title ill employees are actually receiving release time from their departments before charging salaries to the Title ill program.
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SAYANNAB STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 1998
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
DAVIS-BACON ACT Payment ofPrevailing Wage Rates Not Monitored Higher Education - Institutional Aid (CFDA 84.031) Finding Control Number: FA-548-98-03
For the year under review, wages paid by a contractor associated with a Title ill construction project of $25,013.00 were not monitored by the University. Federal regulations as reflected in Appendix A to 34 CFR 74 require that all laborers employed bythe contractor who work on construction contracts in excess of $2,000.00 financed by Federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates). This condition resulted because of management's failure to ensure that all individuals at the University were aware of their responsibilities regarding the Davis-Bacon Act. The University should take steps to ensure that wages paid for construction projects fInanced with Federal funds are monitored and are in compliance with the provisions ofthe Davis-Bacon Act.
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Higher Education - Institutional Aid (CFDA 84.031) Finding Control Number: FA-548-98-04
Our examination included a review of the internal accounting controls utilized by the University in maintaining their property management system and testing the system for compliance with Federal laws and regulations. The following conditions existed:
1) The University failed to maintain a property management system that identifIed Federal equipment purchases by award number. The University only identifIed the source of the equipment as federal. This defIciency is system-wide and affects all Federal awards.
2) A physical inventory was not conducted within the last two years.
3) The University was unable to ensure appropriate Federal Agencies were notifIed when disposing of equipment due to inadequacies in identifying equipment by fund source and grant award number in the property management records.
4) A sample of 39 equipment items identifIed from current year purchases were examined. This examination revealed three computers and monitors purchased in March 1998 at a cost $6,933.00 were not in use as of the last day of fIeldwork. The three computers were not in the location as identifIed by the Title ill Director; however, they were located in the central warehouse in their original shipping container. In addition, two other computers and monitors purchased during the period under review with a total cost of $4,732.00 were not being used in the Title ill project or program for which they were acquired.
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SAVANNAH STATE UNNERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30.1998
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
EQUIPMENT AND REAL PROPERTY MANAGEMENT Inadequacies in Operation of Property Management System Higher Education - Institutional Aid (CFDA 84.031) Finding Control Number: FA-548-98-04
The University failed to have internal controls in place and operational to ensure compliance with Federal requirements for equipment as set forth in 34 CFR 74 and OMB Circular A-110, Subpart C.34. The University should establish policies and procedures to ensure that equipment purchases are identified by fund sources and grant award numbers, property records are maintained in accordance with Federal requirements and physical inventories are conducted at least once every two years.. Also, the University should establish policies and procedures to ensure Title ill equipment purchases are utilized for the Title ill program. The U. S. Department ofEducation should review these matters and determine appropriate action by the University to resolve this finding.
PERIOD OF AVAILABILITY Unallowable Expenditures Higher Education - Institutional Aid (CFDA 84.031) Questioned Cost: $41,121.19 Finding Control Number: FA-548-98-05
A test of transactions was made to determine if underlying obligations occurred during the period of availability and if obligations were liquidated not later than 90 calendar days after the budget period. Our testing revealed the following deficiencies:
1) Expenditures in the amount of $12,139.65 were incurred and were charged to the program for up to nine months after the budget period ended September 30, 1997.
2) Obligations in the amount of $26,501.54 were not liquidated within the required 90 calendar days after the end ofthe budget period.
3) One voucher package in the amount of $2,480.00 was missing and a determination could not be made if the expenditures occurred in the budget period.
These deficiencies occurred because management failed to have written policies and procedures in place and operational to ensure that the University was in compliance with- requirements for the period of availability ofFederal funds as set forth in 34 CFR 74.28 and 34 CFR 74.71 as well as in OMB Circular A-II0, Subpart C.28 and SubpartD.71.
Management should implement policies and procedures to ensure that the Universityis in compliance with Federal regulations, expenditures are incurred within the budget period and obligations are liquidated within 90 calendar days after the budget period. The University should contact the U. S. Department ofEducation for resolution ofthe $41,121.19 in questioned cost.
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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 1998

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

PROCUREMENT AND SUSPENSIONIDEBARMENT Failure to Obtain Suspension/Debannent Certification Higher Education - Institutional Aid (CFDA 84.031) Finding Control Number: FA-548-98-06

Our testing of contracts revealed that controls were not in place and operational to determine if any

contractors paid from Federal funds had been debarred, suspended or otherwise excluded from participation

in Federal assistance programs, other than those appearing on the State suspension list. This noncompliance

occurred because procurement personnel were not aware of the Federal requirement and failed to obtain

copies ofFederal listings of debarred and suspended parties. The University should implement policies and

procedures to ensure Federal compliance requirements are met as contained in 34 CFR 85 and Appendix A

to 34 CFR 74.

.

REPORTING' Final Performance Report Prepared with Budget Figures Higher Education - Institutional Aid (CFDA 84.031) Finding Control Number: FA-548-98-07

The Final Performance Report submitted to the U. S. Department of Education for Federal fiscal year ended September 30, 1997 reported that the University incurred $1,386,465.00 in Title ill expenditures. However, the University's accounting records reflected $1,267,857.30 in expenditures for the same budget period. This condition occurred because management prepared the financial portion ofthe Final Performance Report from the approved budget instead of preparing the report from the accounting records. According to Federal regulation 34 CFR 74.21, the University's fmancial management system should provide for accurate and complete disclosure of fmancial results of the Title ill program consistent with the reporting requirements established in 34 CFR 74.52. Management should ensure that the financial portion ofthe Final Performance Report is prepared from accounting records which reflect actual exp~nditures rather than budgeted amounts.

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