Savannah State University, Savannah, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2006

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
I
SAVANNAH STATE UNIVERSITY SAVANNAH, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Russell W. Hinton State Auditor

SAVANNAH STATE UNIVERSITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

3

C STATEMENT OF CASH FLOWS

4

D NOTES TO THE FINANCIAL STATEMENTS

5

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

24

2 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

25

3 RECONCILIATION OF SALARIES AND TRAVEL

27

SECTION II 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 III CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
September 29, 2006

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Dr. Julius Scott, Jr., Interim President Savannah State University
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying basic financial statements (Exhibits A through D) of Savannah State University, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2006. These financial statements are the responsibility of the University's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material 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.
As discussed in Note 1, the financial statements ofSavannah State University are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of Savannah State University. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State of Georgia, in conformity with accounting principles generally accepted in the United States of America.

06ARL-62

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Savannah State University as ofJune 30, 2006, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Management's Discussion and Analysis is not a required part ofthe basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Savannah State University taken as a whole. The accompanying supplementary information (Schedules 1 through 3) is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Respectfully submitted,

RWH:gp 06ARL-62

Russell W. Hinton, CPA, CGFM State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

SAVANNAH STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Savannah State University is one of the 35 institutions of the University System of Georgia. The University, located in Savannah, Georgia, was founded in 1890 as a department of the State University for the education and training of Negro students. Savannah State University now serves a diverse student population as a senior University of the University System of Georgia. The University serves a primarily African American student population, enriched by a diversity of traditional and nontraditional students from other countries, cultures, and races. The educational goal is realized through program offerings in the College of Business Administration, the College of Liberal Arts and Social Sciences, and the College of Science and Technology, which leads to baccalaureate and master's degrees. This wide range of educational opportunities attracts highly qualified faculty and a student body of almost 3,000 students each year. The institution continues to grow as shown by the comparison numbers that follows:

Faculty

Students

FY2006 FY2005 FY2004

120

2,801

136

2,507

124

2,504

Overview ofthe Financial Statements and Financial Analysis

Savannah State University is proud to present its financial statements for fiscal year 2006. The emphasis of discussions about these statements will be on current year data. There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes in Net Assets and the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2005 and fiscal year 2006.

Statement ofNet Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Savannah State University. The Statement of Net Assets presents end-ofyear data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the Notes to the Financial Statements.

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

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Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed

June 30, 2006

June 30, 2005

Assets Current Assets Capital Assets, Net Other Assets

$ 7,528,387.70 50,705,415.28 3,150,016.53

$ 5,136,183.87 50,459,188.20 2,695,584.56

Total Assets

$61,383,819.51

$58,290,956.63

Liabilities Current Liabilities Noncurrent Liabilities

$ 3,165,535.23 674,671.00

$ 3,084,206.27 657,259.73

Total Liabilities

$ 3,840,206.23

$ 3,741,466.00

Net Assets Invested in Capital Assets, Net of Debt Restricted - Nonexpendable Restricted - Expendable Unrestricted

$50,705,415.28 1,034,603.30 1,184,490.35 4,619,104.35

$50,459,188.20 814,507.96 856,454.00
2,419,340.47

Total Net Assets

$57,543,613.28

$54,549,490.63

The total assets of the institution increased by $3,092,862.88. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $1,835,238.13 and $1,189,257.53 in cash and cash equivalents and investments respectively. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.

The total liabilities for the institution increased by $98,740.23. The combination of the increase in total assets of $3,092,862.88 and the increase in total liabilities of $98,740.23 yields an increase in total net assets of $2,994,122.65. The increase in total net assets is primarily in the category of unrestricted assets in the amount of$2,199,763.88.

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Statement ofRevenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. For example state appropriations are nonoperating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed

June 30, 2006

June 30, 2005

Operating Revenues Operating Expenses

$ 27,042,961.03 45,560,682.04

$25,763,451.90 44,370,963.44

Operating Loss

$-18,517,721.01 $-18,607,511.54

Nonoperating Revenues and Expenses

19,543,706.73

17,408,209.12

Income (Loss) Before Other Revenues, Expenses, Gains or Losses

$ 1,025,985.72 $ -1,199,302.42

Other Revenues, Expenses, Gains or Losses

1,775,031.00

536,833.49

Increase (Decrease) in Net Assets

$ 2,801,016.72 $ -662,468.93

Net Assets at Beginning of Year, as Originally Reported

$ 54,549,490.63

$ 55,211,959.56

Prior Year Adjustments

193,105.93

Net Assets at Beginning of Year Restated

$ 54,742,596.56 $ 55,211,959.56

Net Assets at End of Year

$ 57,543,613.28

$ 54,549,490.63

The Statement of Revenues, Expenses and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows:

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Revenue By Source For The Years Ended June 30, 2006 and June 30, 2005

June 30, 2006

June 30. 2005

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other

$ 4,339,387.01 14,110,218.48
118,193.08 8,387,810.68
87,351.78

$ 4,770,024.29 13,877,574.65
50,612.82 6,903,196.88
162,043.26

Total Operating Revenue

$27,042.961.03

$25,763,451.90

Nonoperating Revenue State Appropriations Grants and Contracts Gifts Investment Income Other

$17,413,552.00
806,871.71 154,809.08 1,168,473.94

$15,477,839.23 171,575.91
1,554,669.09 23,137.24 180,987.65

Total Nonoperating Revenue

$19,543,706.73

$17,408,209.12

Capital Grants and Gifts State

$ 1,775,031.00

$ 536,833.49

Total Revenues

$48,361,698.76

$43, 708A94.51

Expenses (By Functional Classification) For The Years Ended June 30, 2006 and June 30, 2005

June 30. 2006

June 30. 2005

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Expenses

$12,807,464.43 1,454,993.78 2,182,563.58 4,680,972.29 2,815,832.93 6,648,194.50 5,344,945.83 933,897.83 5,704,493.69 2,987,323.18

$11,104,133.29 1,362,198.55 2,369,124.01 4,266,845.64 2,730,946.23 7,006,716.84 6,970,587.64 1,677,076.90 6,883,334.34

Total Expenses

$45,560,682.04

$443 70,963.44

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The compensation and employee benefits category increased by $1,195,861.10. The increase reflects an increased cost of health insurance for the employees of the institution. Utilities increased by $552,063.24 during the past year. The increase was primarily associated with the increased natural gas costs that were experienced in the winter of fiscal year 2006.

Under nonoperating revenues (expenses) state appropriations increased by $1,935,712.77. The increase of state appropriations can be contributed to Savannah State University's increased student enrollment.

Statement of Cash Flows

The final statement presented by Savannah State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets.

Cash Flows for the Years Ended June 30, 2006 and June 30, 2005, Condensed

June 30, 2006

June 30, 2005

Cash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities

$-15,662,225.60 18,316,374.22 -980,524.88 161,613.95

$-14,771,216.72 17,002,387.49 -1,163,120.69 23,137.24

Net Change in Cash Cash, Beginning of Year

$ 1,835,237.69 1,343,441.44

$ 1,091,187.32 252,254.12

Cash, End of Year

$ 3,178,679.13 $ 1,343,441.44

Capital Assets

The University did not add any capital assets for facilities in fiscal year 2006.

For additional information concerning Capital Assets, see Notes 1 and 6 in the Notes to the Financial Statements.

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Long-Term Liabilities Savannah State University had Long-Term Liabilities of $1,209,462.00 of which $534,791.00 was reflected as current liability at June 30, 2006. For additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements. Economic Outlook The University is aware of decisions or conditions that are expected to have a significant effect on the financial position or results of operations. Student tuition and fee increases and energy and health insurance cost increases will have a significant adverse impact on the University's ability to expand programs, undertake new initiatives, and meet its core mission and ongoing operational needs. Additionally, the need to continue to address priority needs such as requirements for deferred maintenance, new technology, public safety, and student development and new academic programs is a large challenge facing the University in years to come. Various committees and individuals are assessing the University's performance toward identified goals, use of energy resources and ways to achieve greater efficiencies and reduce expenses in an effort to assist in meeting those future challenges. Dr. Julius Scott, Jr., Interim President Savannah State University
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BASIC FINANCIAL STATEMENTS - 1-

SAVANNAH STATE UNIVERSITY STATEMENT OF NET ASSETS JUNE 30, 2006
ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories (Note 4) Prepaid Items
Total Current Assets
Noncurrent Assets Noncurrent Cash Short-Term Investments Investments Notes Receivable, Net Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Deposits Deferred Revenue (Note 7) Other Liabilities Funds Held for Others Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Compensated Absences
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Assets
The notes to the financial statements are an integral part of this statement.
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EXHIBIT"A"

$

3,119,941.01

408,457.65

1,243,263.38 2,687,777.57
43,403.20 25,544.89

$

7,528,387.70

$

58,738.12

826,182.98

1,452,951.07

812,144.36

50,705,415.28

$ 53,855,431.81

$ 61,383,819.51

$

622,819.23

240,547.00

133,921.39

418,614.73

226,868.55

987,973.33

534,791.00

$

3,165,535.23

674,671.00

$

3,840,206.23

$ 50,705,415.28
1,034,603.30 1,184,490.35 4,619,104.35

$ 57,543,613.28

SAVANNAH STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2006

EXHIBIT"B"

OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal State Other
Sales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
State Appropriations Gifts Interest and Other Investment Income Other Nonoperating Revenues
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year, as Originally Reported
Prior Year Adjustments
Net Assets - Beginning of Year, Restated
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement.
-3-

$

9,615,471.06

-5,276,084.05

13,529,770.41 86,908.66
493,539.41 118,193.08
8,925.00

2,574,932.93 99,162.40
3,273,168.94 8,095.97
416,018.40 1,949,511.91
66,920.13 78,426.78

$ 27,042,961.03

$

7,571,741.69

11,988,590.64

5,571,950.12

618,632.50

2,604,226.50

2,741,459.87

11,819,863.49

2,644,217.23

$ 45,560,682.04

$ -18,517,721.01

$ 17,413,552.00
806,871.71 154,809.08 1,168,473.94

$ 19,543,706.73

$

1,025,985.72

$

1,775,031.00

$

2,801,016.72

$ 54,549,490.63

193,105.93

$ 54,742,596.56

$ 57,543,613.28

SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2006
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (Payments)
Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments
Net Increase (Decrease) in Cash
Cash and Cash Equivalents Beginning of Year
Cash and Cash Equivalents End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts
The notes to the financial statements are an integral part of this statement.
.4.

EXHIBIT"C"

$ 3,796,352.07 14,668,856.50 83,677.40 -20,987,652.14 -19,533,487.29 -2,604,226.50 -13,065.11
2,578,561.70 99,162.40
3,184,786.54 8,095.97
418,808.98 1,959,136.83
66,920.13 611 846.92
$ -15,662,225.60

$ 17,413,552.00 95,950.51
806 871.71
$ 18,316,374.22

$

-980 524.88

$

161 613.95

$ 1,835,237.69

1343441.44

$ 3 178 679.13

$ -18,517,721.01
2,644,217.23 274,410.72 14,802.12 23,933.28 -44,447.62 36,901.24 -6,761.06 -91,482.87 3 922.37
$ -15,662,225.60
$ ==""='6;,;;8.,.0=4~.8""7 $ -1775031.00

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Savannah State University serves the state and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and those throughout the country.
REPORTING ENTITY Savannah State University is one of thirty-five (35) 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 of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential component units of the State. See Note 14 for additional information.
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999, by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia implemented GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide perspective of the University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the activity predominately takes place.
BASIS OF ACCOUNTING For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-University transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the Board of Regents Short-Term Investment Pool.
SHORT-TERM INVESTMENTS Short-Term Investments consist of investments of 90 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
INVESTMENTS The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are reported as a component of investment income in the Statement of Revenues, Expenses and Changes in Net Assets. The Board of Regents Balanced Income Fund and the Board of Regents Short-Term Fund are included under Investments.
ACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fees charged to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable
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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
INVENTORIES Consumable supplies are carried at the lower of cost or market on the first-in, first-out ("FIFO") basis.
NONCURRENT CASH AND INVESTMENTS Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
CAPITAL ASSETS Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000.00 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 20 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Savannah State University when complete. For the year ended June 30, 2006, GSFIC transferred capital additions for renovation projects to Savannah State University for $1,775,031.00.
DEPOSITS Deposits represent good faith deposits from students to reserve housing assignments in a University residence hall.

-7-

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEFERRED REVENUES Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
COMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. Savannah State University had accrued liability for compensated absences in the amount of $1,205,539.00 as of July 1, 2005. For fiscal year 2006, $787,327.00 was earned in compensated absences and employees were paid $783,404.00, for a net increase of $3,923.00. The ending balance as of June 30, 2006 in accrued liability for compensated absences was $1,209,462.00.
NONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; and (2) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
NET ASSETS The University's net assets are classified as follows:
Invested in capital assets, net ofrelated debt: This classification represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 4415-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NET ASSETS Expendable Restricted Net Assets include the following:

Restricted - E&G and Other Organized Activities Federal Loans Institutional Loans Term Endowments

June 30, 2006
$ 38,860.22 858,435.91 21,562.22 265,632.00

Total Restricted Expendable

$ 1,184,490.35

Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the office of Treasury and Fiscal Services. At June 30, 2006, there was no surplus balance to be refunded. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

R & R Reserve Reserve for Encumbrances Other Unrestricted
Total Unrestricted Net Assets

June 30, 2006
$1,071,244.15 1,748,996.09 1,798,864.11
$4,619,104.35

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

INCOME TAXES Savannah State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115( 1) of the Internal Revenue Code, as amended.

CLASSIFICATION OF REVENUES The University has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria:

-9 -

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CLASSIFICATION OF REVENUES Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises, net of scholarship allowances, (3) most Federal, state and local grants and contracts, and (4) interest on institutional student loans.
Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
SCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances.
RESTATEMENT OF PRIOR YEAR NET ASSETS In the prior fiscal year, the depreciable capital assets and associated depreciation were not recorded correctly. As a result of adjustments made to depreciable capital assets, net assets at July 1, 2005, were increased by $193,105.93.
NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, notes, certificates of indebtedness, or other direct obligations of the United States or of the State of Georgia.

- 10 -

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS 2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or
municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest and debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association and the Federal National Mortgage Association.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.
At June 30, 2006, the carrying value of deposits was $4,411,760.76 and the bank balance was $5,649,323.15. Of the University's deposits, $5,324,472.57 was uninsured. Of these uninsured deposits, $5,293,398.71 were collateralized with securities held by the financial institution's trust department or agent in the University's name, and $31,073.86 were uncollateralized.
INVESTMENTS Savannah State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws.
The University's investments as of June 30, 2006 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS Investment Type

Fair Value

Other Investments Equity Securities - Domestic

$ 410,855.22

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

182.00 1,042,095.85

Total Investments

$ 1,453,133.07

The Board of Regents Investment Pool is not registered with the Securities and Exchange Commission as an investment company. The fair value of investments is determined daily. The pool does not issue shares. Each participant is allocated a pro rata share of each investment at fair value along with a pro rata share of the interest that it earns. Participation in the Board of Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated. Additional information on the Board of Regents Investment Pool is disclosed in the audited Financial Statements of the Board of Regents of the University System of Georgia Administrative Central Office (oversight unit). This audit can be obtained from the Georgia Department of Audits - Education Audit Division or on their web site at http://www.audits.state.ga.us/intemet/ead/colltech.html.

The Weighted Average Maturity of the Short-Term Fund is 3.1 years. Of the University's total investment of $182.00 in the Short-Term Fund, $179.00 is invested in debt securities.

The Weighted Average Maturity of the Balanced Income Fund is 8.2 years. Of the University's total investment of $1,042,095.85 in the Balanced Income Fund, $686,329.00 is invested in debt securities.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a formal policy for managing interest rate risk.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of a failure of the counterparty to a transaction, the University will not be able to recover the value of the investments or collateral securities that are in the possession of an outside party. The University does not have a formal policy for managing custodial credit risk for investments.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS At June 30, 2006, $410,855.22 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name and $1,042,277.85 were uninsured and held by the investment's counterparty's trust department or agent, but not in the University's name.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2006.

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Other

$ 1,287,607.00 416,994.00
1,243,263.38 1,366,237.57

Less Allowance for Doubtful Accounts

$ 4,314,101.95 383,061.00

Net Accounts Receivable

$ 3,931,040.95

NOTE 4: INVENTORIES

Inventories consisted of the following at June 30, 2006.

Physical Plant Other
Total
NOTE 5: NOTES/LOANS RECEIVABLE

$ 39,531.89 3,871.31
$====4=3'="'40=3=.2"=0

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2006. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U.S. Department of Education. The University has provided an allowance for uncollectible loans, which, in management's opinion, is sufficient to absorb loans that will ultimately be written off.

NOTE 6: CAPITAL ASSETS

Following are the changes in capital assets for the year ended June 30, 2006:

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE6: CAPITAL ASSETS

Beginning Balance (Restated)
Julx I, 2005

Additions

Reductions

Ending Balance June 30, 2006

Capital Assets, Not Being Depreciated: Land

$ 575 975.16 $

0.00 $

0.00 $ 575 975.16

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

$ 63,869,000.50 $ 1,806,568.54

2,520,259.00

6,532,517.76

780,783.63 $

6,546,290.51

222,460.59

55,285.00

106,428.80 6,045.58

$ 65,675,569.04 2,520,259.00 7,206,872.59 6,762,705.52 55,285.00

Total Assets Being Depreciated

$ 79,523,352.77 $ 2,809,812.76 $ 112 474.38 $ 82,220,691.15

Less: Accumulated Depreciation: Building and Building Improvements Facilities and Other Improvements Equipment Library Collections Capitalized Collections

$ 19,270,707.84 $ 1,658,910.23 $

1,166,811.07

103,112.77

4,210,736.97

510,616.03

4,792,984.28

370,352.33

5 793.64

1,225.87

0.00 $ 20,929,618.07 1,269,923.84 4,721,353.00 5,163,336.61 7 019.51

Total Accumulated Depreciation

$ 29,447,033.80 $ 2,644,217.23 $

0.00 $ 32,091,251.03

Total Capital Assets, Being Depreciated,

Net

$ 50,076,318.97 $ 165,595.53 $ 112 474.38 $ 50,129,440.12

Capital Assets, Net

$ 50,652,294.13 $ 165,595.53 $ 112 474.38 $ 50,705,415.28

NOTE 7: DEFERRED REVENUE

Deferred revenue consisted of the following at June 30, 2006.

Other Deferred Revenue

$ 418,614.73

NOTE 8: LONG-TERM LIABILITIES

Long-term liability activity for the year ended June 30, 2006 was as follows:

Other Liabilities Compensated Absences

Beginning
Balance July I, 2005

Additions

Reductions

Ending Balance June 30, 2006

Current Portion

$ 1 205 539.00 $ 787 327.00 $ 783 404.00 $ I 209 462.00 $ 534,791.00

NOTE 9: 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 Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. TRS

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Savannah State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Savannah State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2006, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2006 2005 2004

100% 100% 100%

$1,147,045.76 $1,138,813.05 $1,157,294.27

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Plan Description Savannah State University participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia.

The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions.

Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion ofERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.
The ERS issues a financial report each fiscal year, which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2006, for employees covered by ERS was $40,000.00. The University's total payroll for all employees was $19,560,332.33.
Under the old plan, member contributions consist of 7.41 % of annual compensation. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2006, the ERS employer contribution rate for the University amounted to 10.41% of covered payroll and included the amounts contributed on behalf of the employees under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees.
Total contributions to the plan made during fiscal year 2006 amounted to $4,764.00, of which $4,164.00 was made by the University and $600.00 was made by employees. These contributions met the requirements of the plan.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2006, financial report, which may be obtained through ERS.
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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et.seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy Savannah State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2006, the employer contribution was 9.65% of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Savannah State University and the covered employees made the required contributions of $501,274.94 (9.65%) and $259,025.20 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description 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 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 of Trustees. 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
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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Benefits periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2006 amounted to $47,466.36 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
NOTE 10: RISK MANAGEMENT
The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Savannah State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of Well Point, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different self-insured healthcare plan options offered to the employees of the University System of Georgia, two fully insured HMO healthcare plan options are also offered to System employees.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers'
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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 10: RISK MANAGEMENT
indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Savannah State 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.
NOTE 11: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures that are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Savannah State 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 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, 2006.
NOTE 12: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000.00 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 12: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS

As of June 30, 2006, there were 168 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2006, Savannah State University recognized as incurred $781,073.66 of expenditures, which was net of $322,653.17 of participant contributions.

NOTE 13: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The University's operating expenses by functional classification for fiscal year 2006 are shown below:

Natural Classification
Salaries Faculty Staff
Employee Benefits Personal Services Travel Scholarships and
Fellowships Utilities Supplies and Other
Services Depreciation
Total Operating Expenses

Instruction

Research

Functional Classification

Public Service

Academic Sutmort

Student Services

Institutional Sum;iort

$ 7,283,408.75 $ 193,551.43 $ 48,981.54 $ 33,299.97 $ 12,500.00

1,617,552.70

97,596.64

1,110,744.04

2,321,496.14

1,421,038.29 $ 3,023,257.54

2,155,486.14

54,417.18

206,831.66

574,008.95

376,652.66

1,565,276.16

70,832.69

80,154.26

33,237.97

114,607.22

56,099.65

179,040.12

364,376.18 92,501.25

366,563.42 3,216.23

148,779.80 23,243.40

9,806.00 63,627.18

18,223.00 32,991.62

277,934.11 76,001.59

I, 130,196.50 93,110.22

610,370.14 49 124.48

610,986.49 -241.32

1,131,235.90 432,890.93

886,879.62 11 448.09

1,409,112.86 117,572.12

$ 12 807 464 43 $ 1,454,993 78 $ 218256358 $ 4 680 972 29 $ 2,815 832 93 $ 6 648,194 50

Natural Classification
Salaries Faculty Staff
Employee Benefits Personal Services Travel Scholarships and
Fellowships Utilities Supplies and Other
Services Depreciation
Total Operating Expenses

Plant Operations and Maintenance

Functional Classification

Scholarships and Fellowshigs

Auxiliary Entergrises

Unallocated Exgenses

Total Operating Exgenses

$ 1,302,155.13 402,220.72 -294,524.93 3,740.15

$ 1,094,750.16 237,056.65 294,524.93 80,920.44

$ 7,571,741.69 11,988,590.64 5,571,950.12 0.00 618,632.50

$ 932,897.83 2,263,060.03

485,646.16 186,818.57

2,604,226.50 2,741,459.87

1,592,742.92 75551.81

1,000.00

3,514,420.42 $ 932,918.64

-189 643.64

2,054,404.54

11,819,863.49 2,644,217.23

$ 5,344,945 83 $_2.ll89783 $ 5 704,493.69 $_2,9_8,_"Z,lli_J_8 $ 45 560,682 04

NOTE 14: AFFILIATED ORGANIZATIONS

In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of GASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, Savannah State University Foundation and Savannah State University Student Athletic Fund Association have been determined to be legally separate, tax exempt organizations whose activities primarily support Savannah State University, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The

- 20 -

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2006

EXHIBIT "D"

NOTE 14: AFFILIATED ORGANIZATIONS
State Accounting Office has determined Component Units of the State of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, Savannah State University has not included financial activity for Savannah State University Foundation and Savannah State University Student Athletic Fund Association in these financial statements.

- 21 -

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SUPPLEMENTARY INFORMATION - 23 -

SAVANNAH STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2006
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Items Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Accounts Payable Other Liabilities
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

546,269.10

1,275,072.72 1,500,283.95
19,032.89 43,403.20

$ 3,384,061.86

$

269,725.54

1,846,381.09

40,911.83

$ 2,157,018.46

$

24,154.54

702,120.45

171,229.85

38,860.22

290,678.34

$ 1,227,043.40

$ 3,384,061.86

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- 24 -

SAVANNAH STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2006

SCHEDULE "2"

REVENUES State Appropriations State General Funds Federal Funds Other Funds Total Revenues
EXPENDITURES Public Services/Special Funding Initiatives Teaching Total Expenditures Excess of Funds Available over Expenditures
FUND BALANCE JULY 1 Reserved
ADJUSTMENTS Prior Year Payables/Expenditures
FUND BALANCE JUNE 30
SUMMARY OF FUND BALANCE Reserved Department Sales and Services Indirect Cost Recovery Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable
Total Fund Balance

BUDGET

ACTUAL

VARIANCE FAVORABLE (UNFAVORABLE)

$ 17,413,552.00 $ 17,413,552.00 $

15,168,752.00

13,831,408.58

11,505,355.00

12,109,822.87

$ 44,087,659.00 $ 43,354,783.45 $

0.00 -1,337,343.42
604,467.87
-732,875.55

$

448,847.00 $

451,283.58 $

43,638,812.00

42,778,612.93

$ 44,087,659.00 $ 43,229,896.51 $

$

0.00 $

124,886.94 $

-2,436.58 860 199.07
857,762.49
124,886.94

820,507.00

281,649.46
$ 1,227,043.40

$

24,154.54

702,120.45

171,229.85

38,860.22

290,678.34

$ 1,227,043.40

Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
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SAVANNAH STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2006

SCHEDULE "3"

Totals per Annual Supplement
Accruals June 30, 2006 June 30, 2005
Compensated Absences June 30, 2006 June 30, 2005
Adjustments Shared Services on Jointly Staffed Personnel Armstrong Atlantic State University Alemayehu, Tsehai Richardson, Joseph
Unidentified Variance

SALARIES

TRAVEL

$ 19,551,837.94 $

618,632.50

240,547.00 -216,784.80

1,123,512.78 -1,119,869.15

-6,415.56 -20,764.81
8,268.93
$ 19,560,332.33 $ ==61=8=,6=3=2.=50=

- 27 -

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, 2006

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-548-04-01 FS-548-04-02 FS-548-04-04 FS-548-04-06 FS-548-05-01 FS-548-05-02 FS-548-05-03

Further Action Not Warranted Further Action Not Warranted Further Action Not Warranted Previously Reported Action Implemented Unresolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Previously Reported Action Implemented

CORRECTIVE ACTION/RESPONSES

REVENUES/RECEIVABLES/RECEIPTS Failure to Monitor Out-of-State Tuition Fee Waivers Finding Control Number: FS-548-05-01

The finding is not corrected. The planned corrective action that was implemented did not correct the deficiency and the University exceeded the allowable number of out-of-state fee waivers for fiscal year 2006. New policies and procedures which include the direct monitoring ofthe out-of-state fee waivers issued by the Office of the Comptroller will be implemented for fiscal year 2007. It is anticipated that these new procedures will fully correct the finding.

GENERAL LEDGER Deficiencies in Accounting Procedures Finding Control Number: FS-548-05-02

The finding is partially resolved. The planned corrective action implemented only partially corrected the deficiency. The University will implement policies and procedures during fiscal year 2007 that will address the unresolved deficiency.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-548-01-07 FA-548-02-01 FA-548-02-03 FA-548-03-02 FA-548-04-01

Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented

SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Controls Finding Control Number: FS-548-06-01

Condition:

The accounting procedures ofthe University were insufficient to provide for adequate controls over (1) Cash and Cash Equivalents; (2) Revenues/ Receivables/Receipts; and (3) Expenditures/Liabilities/Disbursements.

Criteria:

NCGA Statement 1, paragraph 1, prescribes that an accounting system (1) present fairly and fully disclose its financial position including its financial operation of its funds and account groups in accordance with generally accepted accounting principles and (2) demonstrate compliance with finance related legal and contractual provisions. Administrative requirements contained in the University System of Georgia, Board of Regents Business Procedures Manual and pertinent sections of the Official Code of Georgia Annotated (O.C.G.A.).

Questioned Cost: NIA

Information:

We noted the following weaknesses/deficiencies relating to various control categories:

(1) Cash and Cash Equivalents

A review of the bank reconciliations for the Operating and Payroll accounts revealed the following:

(a) The University failed to post receipts and disbursements in a timely manner to the financial records for items that had cleared the bank. Reconciling items were carried on the bank reconciliation for an unreasonable amount of time.
(b) The University erroneously recorded duplicate receipts totaling $337,376.41 in the financial records for up to four months.
(c) Unidentified variances were noted on the reconciliations for the Operating and Payroll accounts in the amounts of$4,449.19 and $15,422.68, respectively for April 2006.

- 1-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Controls Finding Control Number: FS-548-06-01
(2) Revenues/Receivables/Receipts
Our examination and testing for the year under review revealed the following:
(a) The University failed to properly update student accounts in the subsidiary ledger (BANNER) and interface the BANNER
system with the GeorgiaFIRST system that records the activity
on the general ledger. Numerous adjustments were posted directly to the general ledger via journal entry. (b) The student information system (BANNER) acts as a subsidiary ledger for student accounts receivable, collections of student tuition and fees, and various other revenues. The University is required to prepare reconciliations of the BANNER activity to
the GeorgiaFIRST system to ensure the accuracy of the
interfaced data. Section 1.7.2 of the Business Procedures Manual published by the Board of Regents, recommends that these reconciliations be performed weekly and requires them to be performed on a monthly basis. Performance of monthly reconciliations is a necessary control to detect and correct
variances between BANNER and GeorgiaFIRST in a timely
manner. Based on a review of six months of reconciliations, the student accounts receivable subsidiary ledger (BANNER) was not properly reconciled to the general ledger. No reconciliation was performed for August 2005 and numerous adjustments to student accounts in the BANNER system were necessary in order to reconcile to the general ledger. (c) Based on a review often j oumal entries, recording the receipt of Federal funds, the University failed to post receipts for thirtyeight Restricted Fund grants to the financial records in a timely manner. (d) Based on a review of twenty-five daily receipt files, adequate documentation was not available to support the cash receipts for two of the days tested.
-2 -

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Inadequate Accounting Controls Finding Control Number: FS-548-06-01

(3) Expenditures/Liabilities/Disbursements

Our examination and testing for the year under review revealed the following:

(a) Based on testing of eighty-five expenditures, one item did not have an approved purchase order or check request. Additionally, original invoice documentation was not maintained for one of the vouchers tested. A copy of this invoice was not properly stamped to prevent duplicate payment.
(b) Based on testing of fifty purchasing card transactions, adequate documentation was not available to support six transactions. In addition, sales tax was paid on ten transactions and one instance of splitting payments was noted.

Cause:

These conditions occurred because the University failed to have adequate accounting policies and procedures in place.

Effect:

Without satisfactory accounting controls and procedures in place, the University could place itself in a position where potential misappropriation of assets could occur. In addition, the lack of controls could impact reporting of its financial position and results of operations.

Recommendation:

Management should review accounting controls and procedures currently in place, identify weaknesses, and implement procedures relative to the above control categories to strengthen the internal controls over the accounting functions.

-3-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS EXPENDITURES/LIABILITIES/DISBURSEMENTS Improper Loan Agreement Finding Control: FS-548-06-02

Condition:

The University entered into a promissory note agreement with an employee whereby funds were loaned to the employee for personal use.

Criteria:

Opinion of the Attorney General 2004-3 has held that transactions of this nature would be a violation of the "gratuities clause" of the Constitution of the State of Georgia because no "substantial benefit" was obtained by the University from this transaction. The Opinion states in part:

"The common thread that runs through both the case law and our opinions is that in order to avoid violations of the gratuities clause the state, city, or county must derive some "substantial benefit" from the transaction."

Questioned Cost: NIA

Information:

During a review ofthe accounts receivable reconciliations, a reconciling item of$8,500.00 was identified. Upon examination ofthe documentation, it was determined that the University authorized and issued a hardship loan to an employee in management. A promissory note was executed and the loan was repaid by payroll deduction.

Cause:

University personnel advanced funds to an employee in violation of the "gratuities clause" of the Constitution of the State of Georgia.

Effect:

The University disbursed funds to an employee through a promissory loan agreement without receiving any "substantial benefit" from the transaction which is a violation of State law.

Recommendation:

The University should review current accounting policies and procedures, identify weaknesses and implement procedures to ensure that transactions of this nature do not occur in the future.

-4 -

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Failure to Monitor Out-of-State Tuition Fee Waivers Finding Control Number: FS-548-06-03

Condition:

Our examination of fee waivers for the year under review, revealed that management failed to monitor out-of-state tuition fee waivers.

Criteria:

The Board of Regents Policy Manual, Section 704.0302 concerning fee waivers states, "the number of such waivers in effect at any time does not exceed two-percent of the equivalent full-time students enrolled at the institution in the fall semester immediately preceding the semester for which the out-of-state tuition is to be waived".

Questioned Cost: NIA

Information:

Waivers for out-of-state tuition granted by the University exceeded the amount allowable per Board of Regents policy by $159,849.32.

Cause:

Management did not comply with the Board of Regents policy.

Effect:

The University granted out-of-state tuition waivers in excess of amount allowable by Board of Regents policy.

Recommendation: The University should follow established policies and procedures to ensure that out-of-state tuition fee waivers are within the allowable limits.

REVENUES/RECEIVABLES/RECEIPTS Inadequate Control Procedures for Collection of Tuition and Fees Finding Control Number: FS-548-06-04

Condition:

Internal control procedures of Savannah State University were insufficient to provide for adequate collection of tuition and fees.

Criteria:

Board of Regents Policy Manual Section 704.03 states "All tuition and fees are due and payable upon registration. Exceptions to the time ofpayment are as follows:

l) An institution may defer tuition and fees up to the amount authorized for a specific academic term for students whose fees are guaranteed and will be paid by an outside agency under a documented agreement with the institution.

-5-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Inadequate Control Procedures for Collection of Tuition and Fees Finding Control Number: FS-548-06-04

2) An institution may defer tuition and fees up to the amount of the aid granted for a specified academic term for students who have an institution administered loan or scholarship in process.

3) An institution may defer tuition and fees up to the limit stated in the certificate or other document for a specified academic term for foreign students who have a certificate or other acceptable documented evidence that payment will be made after a statement of charges from the student has been presented for payment".

Questioned Cost: NIA

Information:

A test of 20 student accounts receivable under one year old revealed 17 instances in which Savannah State University did not comply with the Board of Regents Policy Manual for collecting tuition and fees. It was determined that out of the $71,784.87 accounts receivable tested, $67,657.87 was not supported by approved student financial aid.

Cause:

University's management failed to implement adequate policies and procedures to ensure that only students with approved financial aid would receive tuition and fee deferments.

Effect:

By allowing students to enroll and remain in school without approved financial aid, the University has incurred student accounts receivable which were not in accordance with Board of Regents policy.

Recommendation:

The University should follow billing and collection guidelines for student accounts receivable as established in the Board of Regents' Business Procedures Manual. Also, no student should be granted a deferment without having approved financial aid.

REVENUES/RECEIVABLES/RECEIPTS Improper Write-off of Accounts Receivable Finding Control Number: FS-548-06-05

Condition:

Accounts Receivable approved by the State Accounting Office to be writtenoff were not appropriately removed from the University's financial records.

-6-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Improper Write-off of Accounts Receivable Finding Control Number: FS-548-06-05

Criteria:

Section 10 ofthe Board ofRegents' Business Procedures Manual (BPM) sets forth requirements for documentation and collection ofaccounts receivable. In accordance with Section 10.4 of the BPM and the Official Code of Georgia (O.C.G.A.) 50-16-18, Institutions may write-off uncollectible accounts receivable ofless than or equal to $3,000.00, ifproper due diligence has been performed and the write-offs have been approved by the State Accounting Office and the State Auditor's Office.

Questioned Cost: NIA

Information:

Accounts Receivable written-offby the University for the current fiscal year totaled $32,585.88. This amount exceeded the amount approved by the State Accounting Office of $30,617.22. These Accounts Receivables were inappropriately removed from the general ledger by journal entry and were not removed from the subsidiary ledger (BANNER system).

In addition, the journal entry posted to write-off Accounts Receivable in the Student Activities and Auxiliary Enterprises funds was posted to the wrong accounts. The University's entry was posted to Bad Debt Expense and Allowance for Doubtful Accounts, but the entry should have been posted to Allowance for Doubtful Accounts and Accounts Receivable, removing the activity from the general ledger. Furthermore, the listing of accounts which comprised the Uncollectible Accounts Receivable balance for Student Activities and Auxiliary Enterprises funds did not include the students on this journal entry.

Cause:

This condition occurred because management failed to comply with state law regarding Accounts Receivable eligible to be written-off. Management also failed to appropriately remove the Accounts Receivable from the general ledger.

Effect:

The University did not comply with state law concerning the write-off of Accounts Receivable. The University posted inappropriate journal entries to the general ledger.

-7-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Improper Write-off of Accounts Receivable Finding Control Number: FS-548-06-05

Recommendation:

The University should reverse the entries made to the general ledger and write-off eligible Accounts Receivable through the subsidiary ledger. Additionally, the University should follow instructions provided in Sections 10.4 and 10.7 of the BPM regarding due diligence collection efforts on accounts receivable and appropriate write-off procedures.

REVENUES/RECEIVABLES/RECEIPTS GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-548-06-06

Condition:

The accounting procedures ofthe University were insufficient to provide for adequate controls over Revenues/Receivables/Receipts and the General Ledger.

Criteria:

NCGA Statement 1, paragraph 1, prescribes that an accounting system (1) present fairly and fully disclose the funds of the governmental unit in accordance with generally accepted accounting principles and (2) demonstrate compliance with finance related legal and contractual provisions. Additional administrative requirements are contained in the University System of Georgia, Board of Regents Business Procedures Manual and pertinent sections of the Official Code of Georgia Annotated (O.C.G.A.).

Questioned Cost: NIA

Information:

Our examination and testing for the year under review revealed the following deficiencies:

(1) The GAAP journal entry to reclassify negative student accounts receivable to accounts payable was made incorrectly. The total amount reclassified of $281,147.61 represented individual transactions on the student accounts and not the overall balance.

-8-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
REVENUES/RECEIVABLES/RECEIPTS GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-548-06-06
Additionally, the GAAP journal entry, to reclassify Accounts Payable - BANNER Clearing Accounts of students with debit balances to Accounts Receivables, was made incorrectly. The total amount reclassified of $164,638.89 represented individual transactions on the student accounts and not the overall balance. (2) The Accounts Receivable on the Annual Financial Report was overstated by $181,631.64. The reversal entry recorded by the University in the prior period failed to remove the invalid student accounts receivable. (3) The University failed to record deferred revenue in the amount of $103,335.77 for the Restricted Funds. (4) The University recorded an accounts receivable of$133,741.19 in Unexpended Plant Funds that was determined to be invalid. (5) A GAAP journal entry, to set up Accounts Receivable for agency accounts with deficit balances, was recorded in excess ofthe actual deficits creating an overstatement of $32,502.09. (6) The Students Accounts Receivable and the BANNER Clearing Accounts reported in the General Ledger were not supported by the BANNER subsidiary ledger. Numerous adjustments to BANNER have been identified. However, the University has failed to record them. (7) Other Accounts Receivable - Travel Advances from the prior period in the amount of $32,764.80 were inappropriately reclassified to Allowance for Uncollectible Accounts Receivable. (8) In a review ofthirty-five accounts receivable over one year old, the following deficiencies were noted:
a. A fictitious student by the name of Jane Doe (SN#999-99999) was noted on the BANNER subsidiary ledger. The student has an invalid accounts receivable balance of $4,295.98.
b. The University established an Accounts Receivable from a prior period for employee garnishments. The University remitted payment on behalf of the employee but failed to withhold the deduction from the employee's paycheck.
-9-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-548-06-06

Cause:

University's management failed to implement satisfactory controls to: (1) ensure revenues, receivables and receipts were properly documented and recorded in the accounting records, (2) ensure amounts posted to the general ledger were accurate and (3) properly record and maintain the BANNER subsystem.

Effect:

Failure to implement satisfactory accounting controls and procedures could cause information generated from the general ledger and the BANNER subsystem to be inaccurate and misleading. In addition, the University could place itself in a position where a material misrepresentation of financial reporting could occur.

Recommendation:

The University should review the accounting controls and procedures currently in place, identify weaknesses, and design and implement procedures necessary to ensure correct reporting of Revenues, Receivables and Receipts. It is recommended that the University implement all of the required processes established by the Board of Regents to ensure that the BANNER subsidiary ledger supports the general ledger accounts.

EXPENDITURES/LIABILITIES/DISBURSEMENTS Deficit Cash Balances Finding Control Number: FS-548-06-07

Condition:

The accounting procedures of the University were insufficient to provide adequate control over the Restricted grant account activity to ensure that funds were available prior to disbursements.

Criteria:

NCGA Statement 1, paragraph 1, which prescribes that an accounting system (1) present fairly and fully disclose its financial position including its financial operation of its funds in accordance with generally accepted accounting principles and (2) demonstrate compliance with finance related legal and contractual provisions. Administrative requirements contained in the University System of Georgia, Board of Regents Business Procedures Manual and pertinent sections of the Official Code of Georgia Annotated (O.C.G.A.).

Questioned Cost: NIA

- 10 -

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS Deficit Cash Balances Finding Control Number: FS-548-06-07

Information:

At June 30, 2006, the University had two restricted funds that had deficit cash balances totaling $25,283.65. These deficits were not supported by a valid accounts receivable.

Cause:

These deficits occurred because management failed to ensure funds were available prior to disbursement.

Effect:

The University disbursed funds in excess of availability.

Recommendation:

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 these deficit cash balances.

EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Deficiencies in Accounting Procedures Finding Control Number: FS-548-06-08

Condition:

The University failed to have sufficient accounting policies and procedures in place to provide for adequate controls over Expenditures/Liabilities/ Disbursements and General Ledger.

Criteria:

NCGA Statement 1, paragraph 1, which prescribes that an accounting system (1) present fairly and fully disclose its financial position including its financial operation of its funds in accordance with generally accepted accounting principles and (2) demonstrate compliance with finance related legal and contractual provisions. Administrative requirements contained in the University System of Georgia, Board of Regents Business Procedures Manual and pertinent sections of the Official Code of Georgia Annotated (O.C.G.A.).

Questioned Cost: NIA

- 11 -

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EXPENDITURES/LIABILITIES/DISBURSEMENTS GENERAL LEDGER Deficiencies in Accounting Procedures Finding Control Number: FS-548-06-08

Information:

Our examination and testing for the year under review revealed the following deficiencies:

(1) The amounts reported in the General Ledger for Accounts Payable BANNER Clearing Accounts were not supported by the BANNER subsidiary ledger.
(2) For budgetary purposes, encumbrances tested of $17,840.27 were paid and deemed invalid.
(3) For budgetary purposes, $384,907.24 in encumbrances for Resident Instruction was removed to cover budget overexpenditures. This still left a budget fund balance deficit of $107,322.35 in the Resident Instruction Fund. This deficit was offset with a matching surplus amount in the Unexpended Plant Fund.

Cause:

These conditions occurred because the University failed to have adequate accounting policies and procedures in place.

Effect:

Without satisfactory accounting controls and procedures in place, the University could place itself in a position where potential misappropriation of assets could occur. In addition, the lack of controls could impact reporting of its financial position and results of operations.

Recommendation:

Management should review current accounting policies and procedures, identify weaknesses, and implement procedures to ensure that the BANNER subsidiary ledger properly supports the general ledger and that the University does not expend or encumber funds in excess of funds available.

CAPITAL ASSETS Inadequate Capital Asset Records Finding Control: FS-548-06-09

Condition:

The accounting procedures of the University were insufficient to provide adequate control over Capital Assets.

Criteria:

The University should maintain capital asset records in accordance with capitalization guidelines and instructions provided in Chapter 7 ofthe Board of Regents Business Procedures Manual.

- 12 -

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Inadequate Capital Asset Records Finding Control: FS-548-06-09

Questioned Cost: NIA

Information:

The following weaknesses/deficiencies were noted relating to Capital Assets:

(1) The University incorrectly capitalized encumbrances of$12,130.00 in the current year additions for Library Collections.
(2) Library collections in the amount of $172,685.97 were recorded twice by the University resulting in an overstatement for Library Collections on the Annual Financial Report.
(3) Library Collections - Accumulated Depreciation is overstated by $65,006.69. The University incorrectly posted Library Collections directly to the Asset Management module in the Capitals Ledger.
(4) Equipment deletions in the amount of$51,506.00 were improperly removed from the Capital Asset records. The items removed were never reported on the equipment listing.
(5) Equipment-Accumulated Depreciation totaling $25,755.71 for five assets was erroneously deleted from the Capital Asset records. Depreciation expense was never recognized on these items.
(6) Equipment - Accumulated Depreciation is understated by $22,468.81. The University improperly removed the accumulated depreciation ofassets retired in prior periods from the Capital Asset records.
(7) Depreciation Expense reported on the University's Annual Financial Report is overstated by $225,466.41. The University incorrectly recognized prior period adjustments in Accumulated Depreciation for Buildings, Library Collections and Equipment as current year expense.

Cause:

University's management failed to implement satisfactory controls and procedures necessary to properly record and maintain capital asset records.

Effect:

Without proper accounting controls and procedures in place, capital acquisitions and depreciation expense could be reported at amounts not consistent with provisions set forth in Chapter 7 of the Board of Regents Business Procedures Manual.

- 13 -

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Inadequate Capital Asset Records Finding Control: FS-548-06-09

Recommendation:

The University should review the accounting procedures in place and design and implement procedures necessary to ensure that assets are properly recorded and accounted for in the Asset Management Module and on the general ledger.

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Inadequate Satisfactory Academic Progress Procedures Student Financial Aid Cluster Program Finding Control Number: FA-548-06-01

Condition:

The Student Financial Aid (SFA) Office improperly applied satisfactory academic progress standards to SFA recipients. The University has not included in its written satisfactory academic progress policy the handling of course repetitions.

Criteria:

Provisions included in 34 CFR 668 provide general guidelines for administering Student Financial Aid (SFA) programs.

Questioned Cost: NIA

Information:

An examination of the University's procedures revealed that satisfactory academic progress standards were evaluated on students enrolled for Spring semester only. The University allows for course repetitions where only the highest grade is counted. However, the University failed to include the method of handling course repetitions in its written policy.

Cause:

The University did not properly monitor satisfactory academic progress as required by the Federal guidelines.

Effect:

Students not enrolled for Spring semester failed to be evaluated for satisfactory academic progress standards and ineligible students may have been awarded SFA funds. The University's written policy regarding course repetitions did not meet Federal guidelines.

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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Inadequate Satisfactory Academic Progress Procedures Student Financial Aid Cluster Program Finding Control Number: FA-548-06-01

Recommendation:

Procedures should be implemented to ensure satisfactory academic progress is reviewed for all SFA students enrolled in any semester during the academic year under review. The written policy for satisfactory academic progress should be revised to include how course repetitions are processed.

ELIGIBILITY Inadequate Control Procedures for Determining Enrollment Status Student Financial Aid Cluster Program Finding Control Number: FA-548-06-02

Condition:

The University does not have adequate procedures in place to determine a student's enrollment status prior to disbursing Federal financial aid. In addition, procedures are not in place to determine if a student's award should be recalculated due to a change in enrollment status.

Criteria:

Provisions included in 34 CFR 668 provide general prov1s10ns for administering Student Financial Aid (SFA) programs. Provisions included in 34 CFR 685 and 34 CFR 690 provide eligibility and other related program requirements that are specific to William D. Ford Direct Student Loan Program and Federal Pell Grant Program, respectively.

Questioned Cost: NIA

Information:

Procedures utilized to determine a student's enrollment status prior to disbursing Federal financial aid are inadequate. The University's grading policy requires instructors to report those students who never attended class to the Registrar's office. However, the enrollment hours utilized in disbursing student financial aid is determined prior to the reporting deadline for instructors noted above. In addition, once the instructors have identified students on the class roster that have never attended, the University does not reevaluate to determine if Federal financial aid was adequately distributed.

Cause:

The Registrar's office does not have effective procedures in place to determine a student's enrollment status prior to the disbursement of financial aid.

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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Inadequate Control Procedures for Determining Enrollment Status Student Financial Aid Cluster Program Finding Control Number: FA-548-06-02

Effect:

The Student Financial Aid Office disbursed funds without regard to enrollment status. The SFA Office has failed to implement procedures to identify Pell recipients who drop below half time status.

Recommendation:

The University should review internal controls in place and implement procedures to properly monitor and update a student's enrollment status. Recalculations should be performed, if necessary, prior to disbursement of financial aid.

ELIGIBILITY Overpayment of Student Financial Aid Student Financial Aid Cluster Program Finding Control Number: FA-548-06-03

Condition:

The Student Financial Aid (SFA) Office improperly determined the financial need of eligible students.

Criteria:

Provisions included in 34 CFR 668 provide general prov1s10ns for administering Student Financial Aid (SFA) programs. Provisions included in 34 CFR 685 and 34 CFR 690 provide eligibility and other related program requirements that are specific to William D. Ford Direct Student Loan Program and Federal Pell Grant Award Program, respectively.

Questioned Cost:

Questioned Costs of $16,611.00 were identified for students who received student financial aid in excess of their eligible need. The projection of Questioned Costs was $1,430,884.26 for students who received student financial aid in excess of their eligible need.

Information:

A sample of thirty five financial aid files was selected to determine if financial aid was properly calculated and disbursed to eligible students. The items sampled contained financial aid disbursements of$266,585.00 out ofa population of $22,963,836.00. The following deficiencies were noted:

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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

ELIGIBILITY Overpayment of Student Financial Aid Student Financial Aid Cluster Program Finding Control Number: FA-548-06-03

(1) Two students were not in compliance with the University's published satisfactory academic progress policies. Federal regulations (34 CPR 668.32 and 668.34) state that a student must maintain satisfactory academic progress to be to eligible to receive financial assistance under Title IV programs. The University's policy states that students are required to earn a minimum number of hours each academic year depending upon their enrollment status. The two students failed to meet the quantitative requirements of satisfactory academic progress and this noncompliance resulted in over-disbursements of $12,611.00.

(2) One student was not in compliance with the annual loan limit provisions set forth in 34 CPR 685.203 for the Federal Direct Student Loan Program. The student exceeded the annual loan limit and received an over-disbursement of $4,000.00.

Cause:

SFA office had not performed a risk assessment of its procedures to identify areas subject to nonconformity with eligibility requirements and thus there were insufficient controls in place to assure that SFA funds were awarded in correct amounts to students based on their financial need.

Effect:

SFA office was not in compliance with Federal regulations concerning the awarding of SFA funds to students. For three students, a total of$16,611.00 was disbursed in excess of their eligibility.

Recommendation:

The University should perform a risk assessment of its procedures to assure that a proper eligibility determination of a student's financial aid is made in line with regulations. Where vulnerable, the University should develop and/or modify its policies and procedures to ensure that correct amounts are awarded to students in conformity with financial need requirements. Additionally, the University should develop and implement a monitoring process to ensure that controls are properly implemented. The University should also contact the U.S. Department of Education regarding resolution of this finding.

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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Inadequate Control Procedures over Unofficial Withdrawals Student Financial Aid Cluster Program Finding Control Number: FA-548-06-04

Condition:

The internal control procedures to determine whether a student completed the academic period or unofficially withdrew were inadequate.

Criteria:

Provisions included in 34 CFR 668 provide general prov1s10ns for administering Student Financial Aid (SFA) programs.

Questioned Cost: NIA

Information:

The University failed to perform refund calculations for students who unofficially withdrew in accordance with the University's grading policy. Based on the grading policy, a student with all IW grades denotes an unofficial withdrawal. For the year under review, the Bursar's office calculated refunds for students who earned F grades and did not calculate a refund for students with all IW grades.

Cause:

These conditions occurred because the University did not follow its established procedures to identify unofficial withdrawals.

Effect:

The University has not properly identified students who unofficially withdrew and students who have earned all F grades. Unearned Title IV funds are not being returned as required and earned Title IV funds are being returned in error. Due to the condition and lack of supporting documentation, the number ofstudents who unofficially withdrew or earned failing grades could not be determined.

Recommendation:

The University should establish appropriate controls to ensure that the procedures in place are utilized and properly applied to determine whether a SFA recipient who began attendance during a semester completed the academic period or unofficially withdrew.

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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Deficiencies in Student Financial Aid Refund Process Student Financial Aid Cluster Program Finding Control Number: FA-548-06-05

Condition:

The Student Financial Aid office failed to properly perform the refund process and to ensure that unearned Title IV funds were returned in a timely manner.

Criteria:

Provisions included in 34 CFR 668 provide general prov1s10ns for administering Student Financial Aid (SFA) programs. Provisions included in 34 CFR 685 and 34 CFR 690 provide eligibility and other related program requirements that are specific to William D. Ford Direct Student Loan Program and Federal Pell Grant Program, respectively.

Questioned Cost: NIA

Information:

Eighteen students that received Federal financial aid and officially withdrew from the University were randomly selected to determine if refunds were calculated and returned in the correct amount to the proper funding agency and/or student. Our examination revealed the following deficiencies:

(1) Unearned Title IV funds were not applied by the University to the appropriate student financial aid programs within 30 days as required by the Higher Education Amendments of 1998, Public Law 105-244 for nine students.

(2) Four student refunds were not calculated correctly. The charges for housing and meals were excluded from the refund calculation and removed from the students' accounts. The University failed to prorate housing and meals charges for the portion earned by the University. Funds were returned to SFA program that were earned by the University. All the students received a post-withdrawal disbursement. However, the University assessed the pro-rated amount to one student's account after the disbursement was issued and created a balance due from the student.

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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Deficiencies in Student Financial Aid Refund Process Student Financial Aid Cluster Program Finding Control Number: FA-548-06-05

(3) The University established accounts receivable for two students totaling $6,380.00 after post-withdrawal disbursements were issued. The University discovered that one student was suspended in the prior semester and was not eligible to receive any SFA funds and one student's effective withdrawal date was changed to the notification date of military deployment. The withdrawal date for each student was disregarded and the University removed all charges and payments from the students' accounts and all Title IV funds were returned.

(4) The University applied the second disbursement of SFA funds to three students' accounts in error after receiving notification oftheir official withdrawal. Each student was issued a refund check because the University failed to "drop" the students from their classes in the student information system (BANNER) before the refund was disbursed. All Title IV funds were returned. However, the University reflects accounts receivables of $4,499.00 on the students' accounts. In addition, the University has created accounts receivable for one of the students for a salary overpayment of $3, 182.21 for two direct deposits made in error.

(5) The University failed to properly calculate a withdrawal refund for one student who received an institutional basketball scholarship. Initially, the University removed all charges for meals and issued a refund to the student for $1,289.99. Subsequently, the student's account was further adjusted and the entire scholarship was removed and an accounts receivable ofthe entire scholarship award of $4,200.00 was setup on the student's account. The University failed to consider and prorate the portion of the scholarship earned by the student in either the refund calculation or the establishing of the student accounts receivable.

Cause:

These deficiencies were the result of management's failure to properly process student financial aid refunds in accordance with Federal regulations.

Effect:

The SFA Office refunded SFA funds to students incorrectly and unearned funds were not returned in a timely manner.

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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2006

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

SPECIAL TESTS AND PROVISIONS Deficiencies in Student Financial Aid Refund Process Student Financial Aid Cluster Program Finding Control Number: FA-548-06-05

Recommendation:

The University should develop and implement procedures to ensure that student financial aid refunds are properly calculated and that unearned funds are correctly returned to the appropriate accounts in a timely manner in accordance with the Higher Education Amendments of 1998, Public Law 105-244. The University should contact the U.S. Department of Education regarding resolution of this finding.

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