Savannah State University, Savannah, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2008

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
I
SAVANNAH STATE UNIVERSITY SA VANNAH, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008
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

7

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

28

2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

29

3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING

SOURCE COMPARED TO BUDGET

(NON-GAAP BASIS) BUDGET FUND

30

4 RECONCILIATION OF SALARIES AND TRAVEL

33

SAVANNAH STATE UNIVERSITY - TABLE OF CONTENTS -
SECTION II AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
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
January 21, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members ofthe Board of Regents of the University System of Georgia
and Honorable Earl G. Yarbrough, Sr., 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, 2008. 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 ofGeorgia, in conformity with accounting principles generally accepted in the United States of America.

08ARL-62

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position ofSavannah State University as ofJune 30, 2008, 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 offorming an opinion on the basic financial statements of Savannah State University taken as a whole. The accompanying supplementary information (Schedules 1 through 4) is presented for purposes ofadditional 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,
~~... QQ.w.-a:\-~
Russell W. Hinton, CPA, CGFM State Auditor
RWH:as 08ARL-62

REQUIRED SUPPLEMENTARY INFORMATION

SAVANNAH STATE UNIVERSITY Management's Discussion and Analysis

Introduction

Savannah State University is one of the 35 institutions of higher education of the University System of Georgia. Chartered by the State of Georgia 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.

Savannah State University, located in a coastal, urban, port city setting, serves residential and commuter students from diverse educational, geographical, and racial backgrounds. In a beautiful and unique setting of a live oak forest next to a salt marsh estuary, the University is well situated for the study of commercial, technological, environmental and urban issues. The University's mission is consistent with the core missions of the University System of Georgia and the senior universities in the System.

The University's mission is to graduate students prepared to perform at higher levels of economic productivity, social responsibility, and excellence in their chosen fields of endeavor in a changing global community. 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 Sciences and Technology, which lead to baccalaureate, and master's degrees. This wide range of educational opportunities attracts a highly qualified faculty and a student body of more than 3,000 students each year. The institution has grown over the last several fiscal years as shown by the comparison numbers that follow.

Faculty

Students (Headcount)

Students
(FTE)

Fiscal Year 2008 Fiscal Year 2007 Fiscal Year 2006

136

3,169

2,950

141

3,241

3,065

118

3,091

2,853

Overview ofthe Financial Statements and Financial Analysis

Savannah State University is proud to present its financial statements for fiscal year 2008. 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 2008 and fiscal year 2007.

- 1-

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.

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, 2008

June 30, 2007

Assets Current Assets Capital Assets, Net Other Assets

$ 9,368,193 84,241,090 3,769,899

$ 8,584,873 52,722,785 3,417,316

Total Assets

$ 97,379,182

$ 64,724,974

Liabilities Current Liabilities Noncurrent Liabilities

$ 3,399,136 29,707,437

$ 2,521,155 668,199

Total Liabilities

$ 33,106,573

$ 3,189,354

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

$ 55,085,635 2,586,254 1,411,771 5,188,949

$ 52,722,785 2,305,790 1,261,120 5,245,925

Total Net Assets

$ 64,272,609

$ 61,535,620

- 11 -

The total assets of the institution increased by $32,654,208. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $31,518,305 in the category of Capital Assets, Net. The increase is directly due to asset acquisitions, which included a capital lease for campus housing.

The total liabilities for the year increased by $29,917,219 due primarily to a capital lease liability incurred. The combination of the increase in total assets of $32,654,208 and the increase in total liabilities of $29,917,219 yields an increase in total net assets of $2,736,989. The increase in total net assets is primarily in the category of Invested in Capital Assets, Net of Debt, in the amount of $2,362,850.

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, 2008

June 30, 2007

Operating Revenues Operating Expenses

$ 30,793,401 51,902,854

$ 28,811,878 47,275,338

Operating Loss

$ -21,109,453

$ -18,463,460

Nonoperating Revenues and Expenses

20,169,847

18,928,239

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

$ -939,606

$

464,779

Other Revenues, Expenses, Gains or Losses

3,676,595

3,527,228

Increase (Decrease) in Net Assets

$ 2,736,989

$ 3,992,007

Net Assets at Beginning of Year

61,535,620

57,543,613

Net Assets at End of Year

$ 64,272,609

$ 61,535,620

- iii -

The Statement of Revenues, Expenses and Changes in Net Assets reflects a loss before other revenues and expenses, but a positive increase in net assets. Although operating revenues increased $1,981,523 or 6.9% and nonoperating revenues increased $1,681,711 or 8.9%, operating expenses increased $4,627,516 or 9.8%. The net loss before Capital Grants and Gifts was $-939,606, a decrease in net margin of $1,404,385 over prior year. This loss was offset by capital gifts and grants in the amount of $3,676,595, creating an increase in net assets of $2,736,989. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows:
Revenue By Source For The Years Ended June 30, 2008 and June 30, 2007

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Other
Total Nonoperating Revenue
Capital Grants and Gifts State
Total Revenues

June 30, 2008
$ 6,365,449 13,801,927 348,107 10,199,247 78 671
$ 30,793,401
$ 18,892,885 1,235,059 517,761 -35 755
$ 20,609,950
$ 3,676,595
$ 5510791946

June 30, 2007
$ 5,744,016 14,498,032 90,243 8,323,924 155,663
$ 28,811,878
$ 17,906,362 493,243 530,524 -1 890
$ 18,928,239
$ 3,527,228
$ 5112671345

- IV -

Expenses (By Functional Classification) For The Years Ended June 30, 2008 and June 30, 2007

June 30, 2008

June 30, 2007

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

$ 14,703,589 1,470,687 2,219,032 4,927,690 3,163,252 7,465,528 6,836,889 2,325,150 8,791,037

$ 13,817,068 1,221,386 2,131,159 4,710,079 2,887,394 7,721,673 4,279,048 1,945,002 7,479,364 1,083,165

Total Operating Expenses

$ 51,902,854

$ 47,275,338

Nonoperating Expenses Interest Expense (Capital Assets)

440,103

Total Expenses

$ 52,342.957

$ 47,275.338

Operating revenues increased by $1,981,523 in fiscal 2008. Although Tuition and Fees included a 10.8% average increase and Auxiliary revenues increased 22.5%, revenues decreased in Grants and Contracts and Other categories.

The Auxiliary revenue increase of $1,875,323 is a result of the changing environment of residential life on the University's campus. February 2008, the University entered into a capital lease for University Village. Therefore, student housing fees are collected through the campus and a fee is paid to American Campus to continue to manage the facility until such time that a housing contract may be sent for proposal and accepted. University Village rents for fiscal year 2008, without consideration of fines and fee waivers, was $1,897,881.

Nonoperating revenues increased by $1,681,711 for the year primarily due to an increase of $986,523 in State Appropriations and an increase of $741,816 in gift revenue.

The compensation and employee benefits category increased by $2,013,568 and was primarily affected by faculty, academic and institutional support, research, and auxiliary wage increases, as well as an increase in employee benefits of $619,317 or 10.3%. The increase primarily reflects merit increases; personnel increases in academic support, institutional support, and auxiliary; and the increased cost of health insurance for the employees of the institution.

Depreciation expense increased $707,252 over the prior year due directly to the acquisition of University Village housing and various other major assets (i.e., two new buses acquired in fiscal year 2008). The increase in interest expense was a direct result of the capital lease.

- V-

Utilities increased by $285,397 during the past year. The increase was primarily due to water, which increased $274,273 over the prior year.

Statement ofCash Flows

The final statement presented by the 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, 2008 and June 30, 2007, Condensed

June 30, 2008

June 30, 2007

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

$ -17,595,173 20,309,941 -2,251,593 205,769

$ -16,666,913 18,264,497 -365,474 324,020

Net Change in Cash Cash, Beginning of Year

$

668,944

4,734,809

$ 1,556,130 3,178,679

Cash, End of Year

$ 5,403.753

$ 4,734.809

Capital purchases for fiscal year 2008 were $5,489,938, as compared to $3,727,005 prior year. Additionally, the University spent $440,103 in interest expense related to a capital lease purchase.

Capital Assets

The University had two significant capital asset additions for facilities in fiscal year 2008. The Hill Hall renovation was completed at a cost of $3,407,923, which was funded by GSFIC, and will reopen August, 2008. Additionally, the University entered into a capital lease for University Village Housing in the amount of $29,229,205. Other renovations funded by the GSFIC included $378,678 for the Drew Griffith Science Building.

Included in the major equipment purchases for the University were two buses at a total cost of $398,000; five vehicles (primarily for public safety); equipment for the surveying lab; computer hardware; and various other equipment items essential for on-going operations.

- vi -

For additional information concerning Capital Assets, see Notes 1, 6, 8, 9 and 10 in the Notes to the Financial Statements. Long-Term Liabilities Savannah State University had Long-Term Liabilities of $30,466,225 of which $758,788 was reflected as current liability at June 30, 2008. For additional information concerning Long-Term Liabilities, see Notes 1 and 8 in the Notes to the Financial Statements. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. Even with a relatively flat funded year, the University was able to generate a modest increase in Net Assets. The University anticipates the current fiscal year will be challenging with budget cuts on the horizon at the state level, but will continue to maintain a close watch over resources providing the University with the flexibility to react to internal and external situations that may develop.
Earl G. Yarbrough, Sr., Ph.D., President Savannah State University
- Vll -

BASIC FINANCIAL STATEMENTS - 1-

SAVANNAH STATE UNIVERSITY STATEMENT OF NET ASSETS JUNE 30, 2008
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) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET 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.
-2-

EXHIBIT"A"

$

5,177,617

408,276

1,181,568 2,507,893
55,548 37,291

$

9,368,193

$

226,136

1,613,623

1,061,970

868,170

84,241,090

$ 88,010,989

$ 97,379,182

$

569,600

246,136

397,980

389,879

1,036,753

173,346

585,442

$

3,399,136

$ 28,982,109 725,328
$ 29,707,437
$ 33,106,573

$ 55,085,635
2,586,254 1,411,771 5,188,949

$ 64,272,609

SAVANNAH STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2008

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 Other Personal Services 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 Interest Expense Other Nonoperating Revenues (Expenses)
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
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement.
-3-

$

11,750,281

-5,384,832

13,315,557 107,383 378,987 348,107 5,004

4,464,020 108,770
3,332,030 5,722
413,574 1,856,592
18,539 73667

$ 30,793,401

$

8,343,305

13,486,063

6,627,341

368,040

567,919

3,826,020

2,995,775

12,563,153

3,125,238

$ 51,902,854

$ -21 109 453

$

18,892,885

1,235,059

517,761

-440,103

-35 755

$

20,169,847

$

-939,606

3,676,595

$

2,736,989

61,535,620

$ =====64=!'=27=2;!,;,6=0=9

SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2008
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 Capital Grants and Gifts Received Proceeds from Sale of Capital Assets Purchases of Capital Assets Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments
Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year

EXHIBIT"C"

$

5,932,710

14,173,243

348,107

-22,949,915

-21,591,367

-3,826,020

-49,300

4,990,726 108,770
3,213,671 5,722
407,875 1,853,280 -152,460
-60 215

$ -17 595 173

$

18,892,885

181,998

1,235,058

$

20,309,941

$

3,676,595

75,603

-5,489,938

-73,750

-440,103

$

-2,251,593

$

420,063

625,832

-840 126

$

205 769

$

668,944

4,734 809

$ ===5,=40=3=,7=5=3

-4 -

SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2008
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income 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 Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income

EXHIBIT"C"
$ -21, 109,453
3,125,238 -92,653 -10,037 -17,534 -49,300 736,612 51,643
-327,070 97 381
$ -17,595,173
$ ====2=9,=22=9=,2=0=5 $ ====10=8=0=7=1

The notes to the financial statements are an integral part of this statement. -5-

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

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 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 16, for additional information.
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis/or 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.

-7-

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

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 predominant activity 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.
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 is 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

-8-

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grants 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 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or 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.
For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC.
DEPOSITS Deposits represent good faith deposits from students to reserve housing assignments m a University residence hall.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

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 compensated absences in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Assets. Savannah State University had accrued liability for compensated absences in the amount of $1,213,388 as of July 1, 2007. For fiscal year 2008, $932,347 was earned in compensated absences and employees were paid $834,965, for a net increase of $97,382. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $1,310,770.
NONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) 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 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 44-15-7 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, 2008

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

$ 199,565 875,266 21,465 315,475

Total Restricted Expendable

$ 1,411,771

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) of $88,778.05. 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. 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&RReserve Reserve for Encumbrances Reserve for Inventory Other Unrestricted

$ 2,248,542 2,795,267 49,864 95,276

Total Unrestricted Net Assets

$ 5,188,949

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.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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:
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 Federal appropriations, 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.
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.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

DEPOSITS 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, 2008, the carrying value of deposits was $7,424,275 and the bank balance was $8,696,037. Of the University's deposits, $8,368,834 was uninsured. Of these uninsured deposits, $8,368,834 were collateralized with securities held by the financial institution's trust department or agent in the University's name.

INVESTMENTS At June 30, 2008, the carrying value of the University's investments was $1,061,970, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents investment pools as follows:

Investments Pools Board of Regents Balanced Income Fund

$ 1,061.970

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.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS

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 - University

System 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/searchRpts.html.

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.

The Weighted Average Maturity of the Balanced Income Fund is 7.84 years. Of the University's total investment of $1,061,970 in the Balanced Income Fund, $682,846 is invested in debt securities.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University does not have a formal policy for managing credit quality risk.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2008:

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

$ 585,260 631,898
1,181,568 1,988,026

Less Allowance for Doubtful Accounts

$ 4,386,752 697,291

Net Accounts Receivable

$ 3,689,461

NOTE 4: INVENTORIES

Inventories consisted of the following at June 30, 2008:

Physical Plant Other

$

50,854

4 694

Total

$====55-,5==4==8

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"D"

NOTE 5: NOTES/LOANS RECEIVABLE

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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. At June 30, 2008 the allowance for uncollectible loans was $0.

NOTE 6: CAPITAL ASSETS

Following are the changes in capital assets for the year ended June 30, 2008:

Capital Assets, Not Being Depreciated: Land Construction Work-In-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections
Total Assets Being Depreciated
Less: Accumulated Depreciation: Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections
Total Accumulated Depreciation
Total Capital Assets, Being Depreciated, Net
Capital Assets, Net

Beginning Balance July 1, 2007
$ 575,975 444,189
$ 1,020,164
$ 68,976,721 2,520,259 7,740,282 0 6,818,959 55,285
$ 86,111,506
$ 22,424,877 1,368,843 5,248,359 0 5,358,247 8,559
$ 34,408,885
$ 51,702,621
$ 52 722 785

Additions
$ 3,671,145
$ 3,671,145
$ 4,868,267 812,312
29,229,205 253,548
$ 35,163,332
$ 1,653,601 97,634
712,735 401,776 258,110
1,382 $ 3,125,238
$ 32,038,094
$ 35.709.239

Reductions $ 4,115,334 $ 4,115,334

$

75,600

7,098

$

82,698

$

7,098

$

7 098

$

75,600

$ 4 190 934

Ending Balance June 30, 2008
$ 575,975 0
$ 575,975
$ 73,844,988 2,520,259 8,476,994
29,229,205 7,065,409 55,285
$ 121,192,140
$ 24,078,478 1,466,477 5,961,094 401,776 5,609,259 9 941
$ 37,527,025
$ 83,665,115
$ 84.24).090

NOTE 7: DEFERRED REVENUE

Deferred revenue consisted of the following at June 30, 2008:

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 7: DEFERRED REVENUE

Other Deferred Revenue NOTE 8: LONG-TERM LIABILITIES

$====3==89~,8~7==9

Long-term liability activity for the year ended June 30, 2008 was as follows:

Leases Lease Obligations
Other Liabilities Compensated Absences
Total Long-Term Obligations

Beginning Balance Julx I, 2007

$

0

1,213,388
$ 1,213.388

Additions $ 29,229,205
932,347
$ 30 161 552

Reductions

Ending Balance June 30, 2008

$

73,750 $ 29,155,455

834,965

1,310,770

$ 908 715 $ 30.466.225

Current Portion
$ 173,346
585,442
$ 758.788

NOTE9: SIGNIFICANT COMMITMENTS

In February 2008, Savannah State University entered into a capital lease of $24,586,826 at 4.655 percent with the SSU Foundation Real Estate Ventures, LLC. Under the capital lease agreement, the University will lease a 742-bed housing facility and adjacent buildings situated on existing land acquired by the SSU Foundation Real Estate Ventures, LLC. The twenty-five-year lease for this facility commences August 2009 and expires June 2033, with payments due the 15th of month each February, May, August, and November. The 0.275 acre of land on which these buildings are located (also known as 4750 LaRoche Avenue) is part of the capital lease agreement. This capital lease is not reflected in the accompanying basic financial statements. The University did not have any significant unearned, outstanding, construction or renovation contracts.

NOTE 10: LEASE OBLIGATIONS

Savannah State University is obligated under various operating leases for the use of equipment, but has no operating leases for real property (land, buildings, and office facilities). The University is obligated under a capital lease for the acquisition of real property.

CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2009 and 2033. During the year, the University paid the SSU Foundation Real Estate Ventures, LLC $416,037 (principal of $73,750, interest of $276,614, and rent expense of $65,673) for the capital lease related to University Village. At

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"D"

NOTE 10: LEASE OBLIGATIONS

CAPITAL LEASES year-end, the University recorded interest accrual on this same lease in the amount of $163,489, for total interest recorded of $440,103 for fiscal year 2008. Total principal paid on capital leases was $73,750 for the fiscal year ended June 30, 2008. The interest rate was 4.486 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008:

Buildings

$ 28,827.429

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.

Savannah State University Foundation, Inc., a Georgia nonprofit corporation (the "Foundation") adopted resolutions authorizing the organization of SSU Foundation Real Estate Ventures, LLC (the "LLC"), a Georgia limited liability company of which the Foundation is the sole member. Savannah State University has one capital lease with the LLC in the current fiscal year. In February 2008, Savannah State University entered into a capital lease of $29,229,205 at 4.486 percent with the LLC. Under the agreement, the University leases a 660-bed housing facility, University Village, for a twenty-five-year period that began February 2008 and expires June 2032, with payments due the 15th of month each February, May, August, and November. The 13.768 acres of land on which this building is located is owned by the Board of Regents, and was leased to the LLC for $10 per year, payable in advance upon commencement of the lease.

OPERATING LEASES Savannah State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2009 through 2010. Certain operating leases provide for renewal options for periods from one to three years at their fair rental value at the time of renewal. All agreements are cancellable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are copiers and other small business equipment.

Savannah State University has two operating leases. The Xerox lease for copy machines requires a monthly minimum lease payment in the amount of $26,182 and expires at the end of September, 2008. The University also has a lease agreement with LADCO Leasing for the use of credit card machines, which carries a minimum lease payment of $188.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"D"

NOTE 10: LEASE OBLIGATIONS

FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows:

Real Property and Equipment

Capital

Operating

Leases

Leases

Year Ending June 30: 2009 2010 2011 2012 2013 2014 - 2018 2019 - 2023 2024-2028 2029 -2033

$ 1,478,371 $ 1,522,723 1,568,404 1,614,914 1,663,280 9,090,869
10,535,487 12,213,518 11,157,220

80,802 2,256

Total Minimum Lease Payments

$ 50,844,786 $

83.058

Less: Interest

21,689,331

Principal Outstanding

$ 29,155.455

Savannah State University's fiscal year 2008 expense for rental of real property and equipment under operating leases was $289,981.

NOTE 11: 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 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.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

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 2008, the employer contribution rate was 9.28% 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

2008

100%

$ 1,286,574

2007

100%

$ 1,244,360

2006

100%

$ 1,147,046

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Plan Description Savannah State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-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.

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.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Plan Description 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 of ERS. 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, 2008, for employees covered by ERS was $101,500. The University's total payroll for all employees was $21,829,368.

For the year ended June 30, 2008 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. 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 both old and new plans. For the year ended June 30, 2008, 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.

Employer contributions for the current fiscal year and the preceding two fiscal years are as

follows:

Percentage

Required

Fiscal Year

Contributed

Contribution

2008 2007 2006

100% 100% 100%

$ 10,566 $ 3,383 $ 4,164

Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2008 financial report, which may be obtained through ERS.

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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 11: 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 Trustee in accordance with State statute and as advised by their independent actuary. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable 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 $453,784 (8.13% or 8.15%) and $275,923 (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
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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Benefits of Trustees. If a member has less than $3,500 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2008 amounted to $28,292 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 12: 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 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the 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, a fully insured HSA/High Deductible PPO healthcare plan and 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
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SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT"D"

NOTE 12: RISK MANAGEMENT
losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. 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 13: 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, 2008.
NOTE 14: 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
- 23 -

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 14: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%.
As of June 30, 2008, there were 191 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Savannah State University recognized as incurred $922,999 of expenditures, which was net of $384,331 of participant contributions.
NOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS
The University's operating expenses by functional classification for fiscal year 2008 are shown below:

- 24-

SAVANNAH STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2008

EXHIBIT "D"

NOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

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

Instruction

Functional Classification

Research

Public Service

Academic Su1mort

Student Services

$ 8,060,146 2,099,717 2,499,343
98,287
408,777 82,675
1,385,797 68 847
$ 14 703 589

$ 144,387 272,875 75,059
26,886
305,237 8,015
622,788 15 440
$ l 470 687

$

48,501

1,009,509

219,981

38,626

133,037 12,555

754,249 2 574

$ 2 219 032

$

88,771

2,504,082

623,622

127,923

25,540 49,218

1,154,135 354,399

$ 4 927 690

$

1,500

1,680,333

472,510

60,518

17,200 32,424

884,488 14 279

$ 3 163 252

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

Institutional Su1mort

Functional Classification

Plant

Operations and Scholarships

Auxiliary

Maintenance and Fellowshi11s Entemrises

Total Operating Ex11enses

$ 3,500,767 1,984,677 368,040 109,422
61,675
1,296,316 144,631
$ 7 465 528

$ 1,093,777 387,266 -254,294 6,177
2,542,937
1,513,936 1,547,090
$ 6 836 889

$ 2,324,150 1,000
$ 2 325 150

$ 1,325,003 364,883 254,294 100,080
612,079 206,276
4,950,444 977 978
$ 8 791 037

$ 8,343,305 13,486,063 6,627,341 368,040 567,919
3,826,020 2,995,775
12,563,153 3,125,238
$ 51 902 854

NOTE 16: 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 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.

- 25 -

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SUPPLEMENTARY INFORMATION
- 27 -

SAVANNAH STATE UNIVERSITY BALANCE SHEET (NON-GAAP BASIS)
BUDGET FUND JUNE 30, 2008
ASSETS
Cash and Cash Equivalents Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Accrued Payroll Encumbrance Payable Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Tuition Carry-Over Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

1,173,072.93

8,275.65

1,181,567.63 1,932,279.19
37,099.90 55,548.49

$ ====4=,3=87=,=84=3=.7=9=

$

235,313.28

2,143,624.84

63,314.16

389,878.60

$

2,832,130.88

$

110,832.61

509,384.37

177,751.33

67,283.72

402,170.83

49,863.99

149,648.01

88,778.05

$

1,555,712.91

$ ==4='=38=7=,8=43==79=

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.
- 28 -

SAVANNAH STATE UNIVERSITY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2008

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Other Funds
Total Revenues
CARRY-OVER FROM PRIOR YEAR
Transfer from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Special Funding Initiative Teaching
Total Expenditures
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2007
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$

19,262,450.00 $

19,262,450.00 $

30 416 385.00

29,981,138.92

$

49,678,835.00 $

49,243,588.92 $

0.00 -435 246.08
-435,246.08

0.00

1 253 482.78

$

49,678,835.00 $

50 497 071. 70 $

1 253 482.78 818 236.70

$

466,038.00 $

462,177.49 $

49,212,797.00

49,063,722.03

$

49 678 835.00 $

49,525,899.52 $

$

0.00 $

971,172.18 $

3,860.51 149 074.97
152 935.48
971 172.18

1,749,245.46 369,564.64

318,799.63 -230,021.58

-369,564.64 -1,253,482. 78

$

1 555 712.91

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Tuition Carry-Over
Total Reserved
Unreserved Surplus

$

110,832.61

509,384.37

177,751.33

67,283.72

402,170.83

49,863.99

149 648.01

$

1,466,934.86

88 778.05

Total Fund Balance
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.
- 29 -

SAVANNAH STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008

Special Funding Initiatives
State Appropriation State General Funds

Original Appropriation

Final Budget

Current Year Revenues

Funds Available Comeared to Budget

Prior Year Carry-Over

Total Funds Available

Variance Positive (Negative)

$

466 038.00 $

466 038.00 $

466 038.00 $

0.00 $

466,038.00 $

0.00

Teaching State Appropriation State General Funds Other Funds
Total Teaching

$

18,639,605.00 $

18,796,412.00 $

18,796,412.00 $

25,737 434.00

30 416 385.00

29 981 138.92

44,377 039.00 $

49 212 797.00 $

48 777 550.92 $

0.00 $ 1 253,482.78
1 253 482. 78 $

18,796,412.00 $ 31234621.70

0.00 818 236.70

50 031 033.70 $ =="""81_.8,.,2_.3;;;.6.7.0..._

Grand Totals - All Programs

$

44,843,077.00 $

49,678,835.00 $

49,243,588.92 $

1,253,482.78 $

so,497,011. 10 $ = = = 8..1..,8.,.2..3.=6..7.,...o

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

-30-

SCHEDULE "3"

Exe!nditures Comeared to Budget

Variance

Positive

Actual

(Negative)

Actual Funds Available
Over/(Under) Expenditures

Prior Period Adjustments

Other Adjustments

Program Fund
Balances

Transfers

Program Fund Balances

Reserve

Surplus

Total Fund Balance

$

462177.49 $

3 860.51 $

3 860.51 $

0.00 $

0.00 $

3 860.51 $

0.00 $

0.00 $ 3,860.51 $

3 860.51

18,591,449.81 $ 204,962.19 $

30.472 272.22

-55 887.22

$ 49 063 722.03 $ 149 074.97 $

204,962.19 $ 762 349.48
967 311.67 $

-120,044.65 $ 208,822.70
88 778.05 $

0.00 $ 43 727.86
43127.86 s

84,917.54 $

0.00 $

1,014 900.04 --~o=.o=o~

1.099 817.58 s_==o=.o=o= s

0.00 $ 1 014.900.04
s 1.014.900.04

84,917.54 $
o.oo 84 917.54 s

84,917.54 1 014 900.04
1.099.817.58

$ 49,525,899.52 $ 152,935.48 $

971,172.18 $ 88,778.05 $ 43,727.86 s 1,103,678.09 s===o=.o_o= s 1,014,900.04 s 88,778.05 s 1,103,678.09

Unexpendable Reserves Uncollectible Accounts Receivable Inventories

402,170.83 49 863.99
$ 1 555 712.91

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SAVANNAH STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2008

SCHEDULE "4"

Totals per Annual Supplement

Accruals June 30, 2008 June 30, 2007

Compensated Absences June 30, 2008 June 30, 2007

Adjustments

Shared Services on Jointly Staffed Personnel

Armstrong Atlantic State University

German,

Millie

Richardson,

Joseph

Accounts Receivables Established for Salary Overpayments

Unidentified Variance

SALARIES

$

21,629,523 $

TRAVEL 567,919

246,136 -104,147

1,217,622 -1,127,161

-463 -5,687
-1,800

$

21,829,368 $ ======56=7=,9=1=9

- 33 -

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, 2008

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-548-06-01 FS-548-06-04 FS-548-06-06 FS-548-06-08 FS-548-07-01 FS-548-07-02 FS-548-07-03 FS-548-07-04 FS-548-07-05 FS-548-07-06 FS-548-07-07

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

CORRECTIVE ACTION/RESPONSES

ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Finding Control Number: FS-548-07-01

Savannah State University's corrective action plan was not fully implemented until fiscal year 2009.

BUDGET PREPARATION/EXECUTION GENERAL LEDGER Inadequate Accounting Procedures Finding Control Number: FS-548-07-02

Savannah State University will ensure that the Budget Reports are properly prepared and reviewed. Support for the entries, particularly the budget adjustments, will be reviewed to ensure that they have been appropriately accounted for.

- 1-

SAVANNAH STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTION/RESPONSES

REVENUES/RECEIVABLES/RECEIPTS Inadequate Control Procedures for Collection of Tuition and Fees Finding Control Number: FS-548-07-04

Savannah State University has taken steps to reduce, and eventually eliminate, the number and percentage ofstudents having a balance that has not been guaranteed by Financial Aid or some other source. Additionally, the University has taken steps to strengthen the registration clearance process. The University is confident that these steps taken together will resolve these issues.

CAPITAL ASSETS Inadequate Capital Asset Records Finding Control Number: FS-548-07-07

Savannah State University is going to work with OIIT to resolve this issue since this is due to a system error. However, ifthis issue cannot be resolved through OIIT, an adjustment will be made for the system variance. Additionally, the University is reviewing existing asset receiving and tagging processes.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-548-06-01 FA-548-06-02 FA-548-06-03 FA-548-06-04 FA-548-06-05 FA-548-07-01 FA-548-07-02 FA-548-07-03 FA-548-07-04 FA-548-07-05

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

-2-

SAVANNAH STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2008
PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS CORRECTIVE ACTION/RESPONSES SPECIAL TESTS AND PROVISIONS Deficiencies in Student Financial Aid Refund Process Student Financial Aid Cluster Program Finding Control Number: FA-548-07-05 The University is waiting on a response from the U. S. Department ofEducation regarding resolution of this finding.
-3 -

SECTION III CURRENT YEAR FINDINGS AND QUESTIONED COSTS

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CONTROL DEFICIENCIES

The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weakness.

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Savannah State University's ability to initiate, authorize, record, process, or report financial data reliability in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Savannah State University's financial statements that is more than inconsequential will not be prevented or detected by the Savannah State University's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Savannah State University's internal control.

Internal control deficiencies identified during the course ofthis engagement that were considered to be significant deficiencies and/or material weaknesses are presented below:

BUDGET PREPARATION/EXECUTION GENERAL LEDGER Inadequate Accounting Procedures Significant Deficiency Finding Control Number: FS-548-08-01

Condition:

Through our examination of the University's budgetary basis financial statements, it was determined that the financial statements contained a number of errors. This deficiency was previously reported in finding FS548-07-02 from fiscal year ended June 30, 2007.

Criteria:

Management is responsible for establishing and maintammg internal controls, including monitoring ongoing activities and for the fair presentation of the budgetary basis financial statements.

Questioned Cost: NIA

- 1-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATION/EXECUTION GENERAL LEDGER Inadequate Accounting Procedures Significant Deficiency Finding Control Number: FS-548-08-01

Information:

A review of the budget basis financial statements revealed the following:

1. Problems were detected in the way that the University voids student refund checks. From our testing, it appears that when the University voids a student refund check, a coding error has been occurring which improperly creates a Student Accounts Receivable. Normally a voided refund should produce a liability which would either be paid to the student or returned to the appropriate funding agency or lender. In an effort to correct the overstatement of Accounts Receivable created by this processing error, the University wrote off $108,579.73 of student receivables in the year under review. However, it does not appear that the University has addressed situations where a credit/liability should have been created and posted to students' accounts.

2. The University inadvertently wrote off accounts receivables for payroll withholdings in Agency Funds of $87,819.50 against the budgeted funds. A correcting entry was proposed by the auditor and made to correct the financial statements.

3. The University adjusted an accounts receivable from GSFIC in error by $19,340.89. An adjustment was proposed by the auditor and made to correct the financial statements.

Cause:

These deficiencies were the result of a lack of controls over the preparation of the budgetary basis financial statements.

Effect:

A lack of adequate accounting controls and procedures could place the University in a situation where incorrect reporting offinancial position could occur.

-2 -

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

BUDGET PREPARATION/EXECUTION GENERAL LEDGER Inadequate Accounting Procedures Significant Deficiency Finding Control Number: FS-548-08-01

Recommendation:

The University should establish policies and procedures to ensure that amounts posted to the budgetary basis statements are accurate and properly documented.

The University should also review activity posted to students' accounts in the Banner subsidiary ledger to determine ifcharges/credits are properly applied to students' accounts and if information is properly fed to the Peoplesoft general ledger.

REVENUES/RECEIVABLES/RECEIPTS Inadequate Control Procedures for Collection of Tuition and Fees Significant Deficiency Finding Control Number: FS-548-08-02

Condition:

Internal control procedures were insufficient to provide for adequate collection of tuition and fees. This deficiency was previously reported in findings FS-548-07-04 and FS-548-06-04 from fiscal years ended June 30, 2007 and June 30, 2006, respectively.

Criteria:

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

I. 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.

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-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Inadequate Control Procedures for Collection of Tuition and Fees Significant Deficiency Finding Control Number: FS-548-08-02

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 10 students accounts receivable under one year old revealed 7 instances in which Savannah State University did not comply with the Board ofRegents' policies for collecting tuition and fees. It was determined that out ofthe $28,805.96 accounts receivable tested, $22,210.96, were not supported by approved student financial aid.

Inadequate collection procedures contributed to the increase of $157,888.41 in Allowance for Doubtful Accounts. Also, the University wrote off $129,688.92 of accounts receivable considered to be uncollectible during fiscal year 2008.

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 in accordance with the Board of Regents' policies.

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. In addition, the University continued to establish accounts receivable that are not likely to be collected.

Recommendation:

The University should follow billing and collection guidelines as set forth in the Board ofRegents' Business Procedures Manual. Furthermore, no student should be granted a deferment without having approved financial aid.

-4 -

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Inadequate Capital Asset Records Significant Deficiency - Material Weakness Finding Control Number: FS-548-08-03

Condition:

Accounting procedures of the University were insufficient to provide adequate control over Capital Assets. This deficiency was previously reported in finding FS-548-07-07 from fiscal year ended June 30, 2007.

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.

Questioned Cost: NIA

Information:

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

1. The University's Capital Asset Management Module could not be reconciled to the balances reported in the Annual Financial Report. Unidentified variances of$605,222.00 for Accumulated DepreciationBuildings and $2,247.00 for Accumulated Depreciation - Equipment were noted.

2. The schedule ofLibrary Collections was not corrected for adjustments made during the prior year audit. The beginning balances on the schedule for Library Collections and Accumulated Depreciation Library Collections did not agree to prior year ending balances by $12,130.00 and $7,848.00 respectively.

3. One asset in the amount of $6,624.00 was erroneously excluded from the Equipment account balance at June 30th.

4. Variances were noted between the Capitals Ledger and Asset Management Module for Buildings and Accumulated Depreciation Buildings in the amounts of $10,826,670.00 and $2,872,817.00 respectively; however, the University's financial statements were adjusted to properly reflect this information.

5. A sample of sixty-six (66) equipment items revealed the following:
a) Five assets selected from the listing totaling $52,288.54 could not be located.

-5-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
CAPITAL ASSETS Inadequate Capital Asset Records Significant Deficiency- Material Weakness Finding Control Number: FS-548-08-03

b) Two assets totaling $67,031.01 were traded-in and one asset with a cost of $58,000.00 was surplused, however, the University failed to remove these items from the Capital Asset Module.
c) One asset was not properly decaled.

Cause:

University's management failed to implement appropriate internal controls and procedures necessary to properly record, maintain and track capital assets.

Effect:

By failing to accurately record and track capital assets, the University could place itself in a position where potential misappropriation of assets could occur and impact reporting ofits financial position and results ofoperations.

Recommendation:

The University should establish appropriate procedures and controls to ensure that reconciliations are performed for the Capital Assets Module and the related subsidiary records. In addition, policies and procedures should be established to ensure that an accurate physical inventory of equipment is performed and that all capital assets listed on the capital assets inventory records can be identified by decal number, description and location.

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Special Tests and Provisions Deficiencies in Student Financial Aid Refund Process Significant Deficiency Student Financial Aid Cluster Program Finding Control Number: FA-548-08-01

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. This deficiency was previously reported in findings FA-548-07-05 and FA-548-06-05 from fiscal years ended June 30, 2007 and June 30, 2006, respectively.

-6-

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Special Tests and Provisions Deficiencies in Student Financial Aid Refund Process Significant Deficiency Student Financial Aid Cluster Program Finding Control Number: FA-548-08-01

Criteria:

Provisions included in 34 CFR 668 provide general requirements 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 Program, respectively.

Questioned Cost: NIA

Information:

Fifteen 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. For two students, 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.

2. In one instance, the University applied the second disbursement ofSFA funds to a student's account in error after receiving notification of the student's official withdrawal. The University failed to "drop" the student from classes in the student information system (BANNER) before the refund was disbursed. The student received funds in excess ofamount earned, resulting in an accounts receivable of$634.06 that is due to the University. The $634.06 was returned to the grantor agency.

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 a student 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, 2008

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

Special Tests and Provisions Deficiencies in Student Financial Aid Refund Process Significant Deficiency Student Financial Aid Cluster Program Finding Control Number: FA-548-08-01

Recommendation

The University should develop and implement procedures to ensure that student financial aid refunds are properly calculated and 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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