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: -8- 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 - 10 - 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 - 11 - 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: - 12 - 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. - 13 - 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 - 14 - 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. - 15 - (This page left intentionally blank) 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. - 18 - 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. -19- 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 - 21 - (This page left intentionally blank) 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 - 23 - 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 - 1- 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. -2- 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. - 1- 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 -2 - 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. -3- 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. -4 -