Savannah State University, Savannah, Georgia, management report for fiscal year ended June 30, 2009

SAVANNAH STATE UNIVERSITY
SAVANNAH, GEORGIA
MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2009
A Member Institution of the University System of Georgia
Georgia Department of .Audits and .Accounts Russell W. Hinton State Auditor

SAVANNAH STATE UNIVERSITY ~ TABLE OF CONTENTS -

SECTION I

FINANCIAL

LETTER OF TRANSMITTAL

SELECTED FINANCIAL INFORMATION

EXHIBITS

A STATEMENT OF NET ASSETS - (GAAP BASIS)

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS -

(GAAP BASIS)

3

C STATEMENT OF CASH FLOWS - (GAAP BASIS)

4

D SELECTED FINANCIAL NOTES

5

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET-(STATUTORY BASIS) BUDGET FUND

18

2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(STATUTORY BASIS) BUDGET FUND

19

3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING

SOURCE COMPARED TO BUDGET

(STATUTORY BASIS) BUDGET FUND

20

4 RECONCILIATION OF SALARIES AND TRAVEL

23

SECTION II ENTITY'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS

SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

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
December 21, 2009

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the State Board of Regents of the University System of Georgia
and Honorable Earl G. Yarbrough, Sr., President Savannah State University
Ladies and Gentlemen:
As part ofour audit ofthe basic financial statements ofthe State ofGeorgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2009, we have performed certain audit procedures at Savannah State University. Accordingly, the financial statements and compliance activities of Savannah State University were examined to the extent considered necessary in order to express an opinion as to the fair presentation ofthe financial statements contained in the foregoing documents and to issue reports on compliance and internal control as required by the Single Audit Act Amendments of 1996.
This Management Report contains information pertinent to the financial and compliance activities of Savannah State University as of and for the year ended June 30, 2009. Information contained in this report is a by-product of our audit ofthe basic financial statements ofthe State of Georgia and is the representation of management. Accordingly, we do not express an opinion or any other form of assurance on it. The particular information provided which includes a section on findings and other items reported in accordance with Commission on Colleges regulation 2.11.1 is enumerated in the Table of Contents.

This report is intended solely for the information and use of the management of Savannah State University, members ofthe Board ofRegents ofthe University System ofGeorgia and the Southern Association of Colleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as

Rus 11 W. Hinton, CPA, CGFM State Auditor

SELECTED FINANCIAL INFORMATION -I-

SAVANNAH STATE UNIVERSITY STATEMENT OF NET ASSETS- (GAAP BASIS)
JUNE 30, 2009
ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net Federal Financial Assistance Other Inventories Prepaid Items
Total Current Assets
Noncurrent Assets Noncurrent Cash Short-Term Investments Investments Notes Receivable, Net Capital Assets, Net
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Deferred Revenue other Liabilities 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
-2-

EXHIBIT "A"

$

6,617,001

408,276

1,833,799 1,295,309
52,041 931264

$ 10,2991690

$

26,282

847,812

2,375,041

837,844

117,8041061

$ 12118911040

$ 1321190z730

$

2,504,278

207,861

523,747

282

1,191,917

226,358

6361115

$

512901558

$ 53,342,577
7241963
$ 5410671540
$ 591358,098

$ 64,235,126
3,240,577 1,058,761 41298,168

$ 721832,632

SAVANNAH STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS (GAAP BASIS)
YEAR ENDED JUNE 30, 2009

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 Grants and Contracts
Federal 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
- 3-

$

13,912,811

-7,667,874

7,447,503 98,925
376.724 161,135
8,682

8,240,776 76,207
4,795,031 268,361 481,944
2,051,092 22,592 66 588

$ 3013401497

$

9,469,824

14,422,543

7,151,324

420,591

467,375

4,023,342

3,804,309

18,149,495

516511637

$ 6315601440

$ -3312191943

$ 18,894,240

9,070,618 1,901,386
471,186 -2,352,336
-713243

$ 2712711851

$

-5,948,092

1415081115

$

8,560,023

6412721609

$ ==72==1=83=2...,16=3.2...

SAVANNAH STATE UNIVERSITY STATEMENT OF CASH FLOWS- (GAAP BASIS)
YEAR ENDED JUNE 30, 2009
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 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
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 Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts
-4-

EXHIBIT"C"

$

6,406,708

7,241,186

161,135

-28,395,125

-23,926,150

-4,023,342

30,326

8,392,005 76,207
4,823,281 278,815 495,916
2,027,495 22,873
1 041 457

$ -25,347,213

$

18,894,240

155,164

10 972 004

$

30,021.408

$

984,136

-1,917,727

-173,346

-2 352 336

$

-3 459 273

$

516,916

283,878

-776 186

$

24608

$

1,239,530

5 403 753

$

6,643,283

$ -33,219,943
5,651,637
560,353 3,507
-55,974 30,326 1,183,582 133,868 315,123 50 308
$ -25,347,213

SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 4415-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
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
-5 -

SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS 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 $28,931.82. 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.
NOTE 2: DEPOSITS AND INVESTMENTS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the Savannah State 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.
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.
-6-

SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

DEPOSITS At June 30, 2009, the carrying value of deposits was $7,897,994 and the bank balance was $9,130,124. Of the University's deposits, $8,606,284 were uninsured. Of these uninsured deposits, $8,606,284 were collateralized with securities held by the pledging financial institution's trust department or agent.

INVESTMENTS At June 30, 2009, the carrying value of the University's investment was $2,375,041, 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:

Investment Pool

Board of Regents Legal Fund Total Return Fund

$ 501,981 1,873,060

Total Investments

$ 2,375,041

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.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2009.

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State and Private Funds GSFIC Other

$ 447,756 600,434
2,374,269 350,381 235,274

Less Allowance for Doubtful Accounts

$ 4,008,114 879,006

Net Accounts Receivable

$ 3,129,108

-7-

SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 4: CAPITAL ASSETS

Following are the changes in the University's capital assets for the year ended June 30, 2009:

Beginning Balance Julx 1, 2008

Additions

Reductions

Ending Balance June 30, 2009

Capital Assets, Not Being Depreciated:

Land

$ 575,975

$ 575,975

Construction Work-In-Progress

0 $ 434,002 $ 434,002

0

Total Capital Assets Not Being Depreciated

$ 575 975 $ 434,002 $ 434,002 $ 575,975

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

$ 73,844,988 $ 14,225,028

$ 88,070,016

2,520,259

2,520,259

8,476,994

969,492 $ 4,854,306

4,592,180

29,229,205

24,586,826

53,816,031

7,065,409

247,186

8,305

7,304,290

55,285

55,285

Total Assets Being Depreciated

$ 121,192,140 $ 40,028,532 $ 4,862,611 $ 156,358,061

Less: Accumulated Depreciation:

Buildings and Building Improvements $ 24,078,478 $ 2,877,641

$ 26,956,119

Facilities and Other Improvements

1,466,477

97,634

1,564,111

Equipment

5,961,094

298,086 $ 4,040,382

2,218,798

Capital Leases

401,776

2,106,845

2,508,621

Library Collections

5,609,259

270,049

8,305

5,871,003

Capitalized Collections

9 941

1,382

11,323

Total Accumulated Depreciation

$ 37,527,025 $ 5,651,637 $ 4,048,687 $ 39,129,975

Total Capital Assets, Being Depreciated,

Net

$ 83,665,115 $ 34 376 895 $

813,924 $ 117,228,086

Capital Assets, Net

$ 84 241 090 $ 34810897 $ 1247926 $ 117.804.061

NOTE 5: DEFERRED REVENUE

Deferred revenue consisted of the following at June 30, 2009.

Other Deferred Revenue

$ 523.747

NOTE 6: LONG-TERM LIABILITIES

The University's Long-Term liability activity for the year ended June 30, 2009 was as follows:

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SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 6: LONG-TERM LIABILITIES

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

Beginning Balance July 1. 2008
$ 29,155,455
1,310.770

Additions $ 24,586,826
987,065

Reductions $ 173,346
936 757

Ending Balance
$ 53,568,935 1,361,078

Current $ 226,358
636.115

NOTE 7: NET ASSETS

Changes in Net Asset activity for the year ended June 30, 2009 are as follows:

Invested in Capital Assets Net of Related Debt
Restricted Net Assets Unrestricted Net Assets Total Net Assets
NOTE 8: LEASE OBLIGATIONS

Balance July 1. 2008

Additions

Reductions

Balance June 30. 2009

$ 55,085,635 3,998,025 5,188,949
$ 64 272 609

$ 10,224,071 17,017,567 43,660,360
$ 10 9QI 298

$ 1,074,580 16,716,254
$ 62 341 975

$ 64,235,126 4,299,338 4,298,168
$ 72 832.632

Savannah State University is obligated under various operating leases for the use of real property equipment, and also is obligated under capital leases and installment purchase agreements 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 2010 and 203 3. Expenses for fiscal year 2009 were $2,525,682 of which $2,352,336 represented interest. Total principal paid on capital leases was $173,346 for the fiscal year ended June 30, 2009. Interest rates range from 4.486 percent to 4.655 percent.

Savannah State University has two capital leases with SSU Foundation Real Estate Ventures, LLC, of which Savannah State University Foundation, Inc., is the sole member. In February 2008, Savannah State University entered into a capital lease of $29,229,205 for University Village with the LLC. In August 2008, Savannah State University entered into a capital lease of $24,586,826 for University Commons with the LLC.

SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 8: LEASE OBLIGATIONS

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

Noncancellable operating lease rental expenses in 2009 were $65,734 for equipment.

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, 2009, were as follows:

Capital Leases

Operating Leases

Year Ending June 30: 2010 2011 2012 2013 2014 2015-2019 2020 - 2024 2025 - 2029 2030 - 2033

$ 2,838,266 $ 2,923,413 3,010,574 3, I00,809 3,193,833 17,458,927
20,237,997 23,461,385 18,430,711

2,256

Total Minimum Lease Payments

$ 94,655,915 $

2,256

Less: Interest

41,086,980

Principal Outstanding

$ 53.568.935

NOTE 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Savannah State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for

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SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description teachers of the State of Georgia. TRS provides service retirement, 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 the Georgia Department of Audits and Accounts.

Funding Policy Employees of Savannah State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Savannah State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2009, 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

2009 2008 2007

100% 100% 100%

$ 1,397,171 $ 1,286,574 $ 1,244,360

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

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

The 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 benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects 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. Members hired on or after July 1, 1982 but prior to January 1, 2009 are "new plan" members subject to the modified plan

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SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description provisions. Effective January 1, 2009, newly hired State employees, as well as rehired State employees who did not maintain eligibility for the "old" or "new" plan, are members of the Georgia State Employees' Pension and Savings Plan (GSEPS). ERS members hired prior to January 1, 2009 also have the option to change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60 or 30 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 24 consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July 1, 2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
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, 2009, for employees covered by ERS was $51,500. The University's total payroll for all employees was $23,892,367.
Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200 plus 6% of annual compensation in excess of $4,200. Under the old plan, the University pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these University contributions are included in the members' accounts for refund purposes and are used in the computation of the members' eamable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. The University is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These University contributions are not at any time refundable to the member or his/her beneficiary.
Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:
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SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Funding Policy Fiscal Year

Percentage Contributed

Required Contribution

2009 2008 2007

100% 100% 100%

$

5,361

$

10,566

$

3,383

Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2009 financial report, which may be obtained through ERS.

REGENTS RETIREMENT PLAN

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et. seq. and is administered by the Board of Regents of the University System of Georgia. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.

Funding Policy Savannah State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. For fiscal year 2009, the employer contribution was 8.15% for the first six months and 9.24% for the last six months of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.

Savannah State University and the covered employees made the required contributions of $556,811 (8.15% or 9.24%) and $318,982 (5%), respectively.

AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.

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SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Savannah State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board 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 2009 amounted to $29,000 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.
NOTE 10: 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 which 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

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SAVANNAH STATE UNIVERSITY SELECTED FINANCIAL NOTES JUNE 30, 2009

EXHIBIT "D"

NOTE 10: CONTINGENCIES
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, 2009.
NOTE 11: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The College pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2008 and 2009 plan years, the employer rate was between 70-75% of the total health insurance cost for eligible retirees and the retiree rate was between 25-30%.
As of June 30, 2009, there were 226 employees who had retired or were disabled that were receiving these post-:employment health and life insurance benefits. For the year ended June 30, 2009, Savannah State University recognized as incurred $858,296 of expenditures, which was net of $393,418 of participant contributions.
NOTE 12: AFFILIATED ORGANIZATIONS
The Savannah State University Foundation, Inc., and the Savannah State University Student Athletic Fund Association are legally separate, tax exempt organizations whose activities primarily support Savannah State University. These affiliated organizations are considered potential component units of the State of Georgia in accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of these affiliated organizations are not included in these financial statements. Copies of the financial statements for the affiliated organizations may be obtained from Savannah State University.
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SUPPLEMENTARY INFORMATION - 17 -

SAVANNAH STATE UNIVERSITY BALANCE SHEET (STATUTORY BASIS)
BUDGET FUND JUNE 30, 2009
ASSETS
Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Cash Overdraft Accrued Payroll Accounts Payable Encumbrances Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$

8,275.65

1,833,799.72 1,666,982.12
45,800.19 52,041.04

$ =====3,=60=6=,8=98==72=

$

241,225.78

176,472.42

168,493.39

1,162,549.17

523,746.77

$ 2,272,487.53

$

73,965.66

440,848.50

382,041.76

-2,823.24

366,003.66

45,443.03

28,931.82

$

1,334,411.19

$ 3,606,898.72 =======

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
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SAVANNAH STATE UNIVERSITY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2009

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Federal 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 Non-Mandatory Transfers Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2008
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$

18,983,018.00 $

18,983,018.00 $

190,831.00

190,831.00

32,455,555.00

31 711 330.76

$

51,629,404.00 $

50,885,179.76 $

0.00 0.00 -744 224.24
-744,224.24

0.00

1,014 900.04

$

51 629 404.00 $

51,900,079.80 $

1,014,900.04 270,675.80

$

412,025.00 $

479,215.75 $

51,217,379.00

50 384161.02

$

51 629 404.00 $

50,863,376.77 $

$

1,036,703.03 $

-67,190.75 833,217.98
766,027.23
1,036,703.03

1,466,934.86 88,778.05

70,198.65 -111,820.20 -112,705.11
-88,778.05 -1 014 900.04

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

$

73,965.66

440,848.50

382,041.76

-2,823.24

366,003.66

45 443.03

$

1,305,479.37

28,931.82

Total Fund Balance
Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
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SAVANNAH STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET
(STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2009

Special Funding Initiatives
State Appropriation State General Funds

Original Appropriation

Final Budget

Current Year Revenues

Funds Available Comeared to Budset

Prior Year Carry-Over

Total Funds Available

Variance Positive (Negative)

473,804.00 $

412,025.00 $

412,025.00 $

0.00 $

412,025.00 $

0.00

Teaching State Appropriation State General Funds Federal Funds American Recovery and Reinvestment Act of 2009 Federal Stabilization Funds Other Funds
Total Teaching

21.424,328.00 $ 18,570,993.00 $ 18,570,993.00 $

0.00 $ 18,570,993.00 $

0.00

0.00 26 782 144.00
48,206 472.00

190,831.00 32 455 555. 00
51 217 379.00

190,831.00 31 711 330.76

0.00 1,014,900.04

190,831.00 32 726 230.80

0.00 270 675.80

50473154.76 $ 1014900.04 $ 51 488 054.80 $ 270 675.80

Grand Totals All Programs

48,680,276.00 $ 51,629,404.00 $ 50,885,179.76 $ 1,014,900.04 $ 51,900,079.80 $ 270,675.80

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.
20-

SCHEDULE "3"

Expenditures Comeared to Budset

variance

Positive

Actual

(Negative)

Actual Funds Available
Over/(Under) Expenditures

Prior Period Adjustments

Other Adjustments

Program Fund
Balances

Transfers

Prosram Fund Balances

Reserve

Surplus

Total Fund Balance

$

479,215.75 $ -67 190.75 $

-67,190.75 $

0.00 $

0.00 $ -67,190.75 $ 67,190.75 $

0.00 $

0.00 $

o.oo

18,541,706.14 $

29,286.86 $

29,286.86 $ 41,621.55 $ 40,588.13 $ 28,253.44 $

678.38 $

0.00 $ 28,931.82 $

28,931.82

190,831.11 31 651 623.77
$ 50 384 161.02

-0.11 803 931.23
833 217.98

-0.11 1 074,607.03
1 103 893.78

o.oo
0.00
-41 621 55

0.00 -112 705.11
-7211698

-0.11 961 901.92
990 155.25

0.11 -67 869.24
-67 190.75

0.00

000

894,032 68

0.00

894 032.68 $ 28 931.82

0.00 894 032.68
922 964.50

$ 50,863,376.77 $ 766,027.23 $ 1,036,703.03 $ 41,621.55 $ -72,116.98 $ 922,964.50 $

000 $ 894,032.68 $ 28,931.82 $

922,964.50

Unexpendable Reserves Uncollectible Accounts Receivable Inventories

366,003.66 45 443.03
1 334 411.19

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SAVANNAH STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2009

SCHEDULE "4"

Totals per Annual Supplement
Accruals June 30, 2009 June 30, 2008
Compensated Absences June 30, 2009 June 30, 2008
Unidentified Variance

SALARIES

$

23,861,221 $

TRAVEL 467,090

207,861 246, 136

1,264,355 -1,217,622

22,688

285

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

SAVANNAH STATE UNIVERSITY ENTITY'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2009

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

ENTITY'S RESPONSE/ST A TUS

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

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

CORRECTIVE ACTION/RESPONSES

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

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 Assets Records Finding Control Number: FS-548-08-03

Savannah State University is working with the Board ofRegents Office oflnformation and Instructional Technology to resolve this matter

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

ENTITY'S RESPONSE/STATUS

FA-548-07-05 FA-548-08-01

Further Action Not Warranted Partially Resolved - See Corrective Action/Responses

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SAVANNAH STATE UNIVERSITY ENTITY'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2009
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-548-08-01 The University implemented a corrective action during the 2009 fiscal year resulting from the 2008 audit report. The corrective action had not taken effect during the 2009 audit year. It is anticipated that the corrective action will be fully implemented and reflected in the 2010 fiscal year operations.
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SECTION III FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER MATTERS
YEAR ENDED JUNE 30, 2009

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Inadequate Control Procedures for Collection of Tuition and Fees Significant Deficiency Finding Control Number: FS-548-09-01

Condition:

Internal control procedures were insufficient to provide for adequate collection of tuition and fees. This deficiency was previously reported in findings FS-548-08-02 and FS-548-07-04 from fiscal years ended June 30, 2008 and June 30, 2007, 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:

1. 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 document 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. 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 present for payment".

Questioned Cost: NIA

Information:

A test of ten students accounts receivable under one year old revealed five instances in which Savannah State University did not comply with the Board of Regents Policy Manual for collecting tuition and fees. It was determined that out of the $26,651 accounts receivable tested, $12,304 were not supported by approved student financial aid.

Inadequate collection procedures contributed to the increase of $429,626 in Allowance for Doubtful Accounts. Also, the University wrote off $202,057 of accounts receivable considered to be uncollectible during fiscal year 2009.

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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER MATTERS
YEAR ENDED JUNE 30, 2009

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Inadequate Control Procedures for Collection of Tuition and Fees Significant Deficiency Finding Control Number: FS-548-09-01

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 continuing to allow students to enroll and remain in school without approved financial aid, the University incurs student accounts receivable which are not in accordance with Board of Regents policy. In addition, accounts receivable of this nature have been historically difficult to collect.

Recommendation:

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

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-548-09-01

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 finding FA548-08-01 and FA-548-07-05 from fiscal years ended June 30, 2008 and June 30, 2007, respectively.

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

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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER MATTERS
YEAR ENDED JUNE 30, 2009

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-548-09-01

Information:

Ten 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 of SFA 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 of amount earned, resulting in an accounts receivable of $2,522 that is due to the University. The $2,522 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.

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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SAVANNAH STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER MATTERS
YEAR ENDED JUNE30, 2009
OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) BUDGETARY OVEREXPENDITURES Savannah State University did not have sufficient procedures in place to ensure that the funds were not expended in excess of the approved budgetary authority. Savannah State University had an approved expenditure budget for the Special Funding Initiative in the amount of $412,025.00. The University exceeded the approved budgetary spending authority amount by $67,190.75. The University should closely monitor their budget operations to prevent expenditure of funds in excess of budget approval. REVENUES/RECEIVABLES/RECEIPTS Savannah State University wrote off accounts receivables for payroll withholdings in Agency funds of $48,667 in error. The University should re-establish the accounts receivable and the allowance for doubtful accounts in the Agency funds. REVENUES/RECEIVABLES/RECEIPTS Procedures were not in place to ensure that fee waivers did not exceed limitation established by Board of Regents policy. Waivers for out-of-state tuition granted by the University exceeded the amount allowable per Board of Regents policy by $21,123.31. The University should follow established policies and procedures to ensure that out-of-state tuition fee waivers are within the allowable limits.
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