SKIDAWAY INSTITUTE OF OCEANOGRAPHY SAVANNAH, GEORGIA MANAGEMENT REPORT FOR FISCAL YEAR ENDED JUNE 30, 2013 A Member Institution of the University System of Georgia Georgia Department of Audits and Accounts Greg S. Griffin State Auditor SKIDAWAY INSTITUTE OF OCEANOGRAPHY - TABLE OF CONTENTS - SECTION I FINANCIAL LETTER OF TRANSMITTAL SELECTED FINANCIAL INFORMATION EXHIBITS A STATEMENT OF NET POSITION - (GAAP BASIS) B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION (GAAP BASIS) C STATEMENT OF CASH FLOWS - (GAAP BASIS) D SELECTED FINANCIAL NOTES SUPPLEMENTARY INFORMATION SCHEDULES 1 BALANCE SHEET - (STATUTORY BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND 4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND 5 RECONCILIATION OF BUDGET TO GAAP 6 RECONCILIATION OF SALARIES AND TRAVEL Page 2 3 5 6 16 17 18 20 22 23 SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SECTION I FINANCIAL Greg S. Griffin STATE AUDITOR (404) 656-2174 DEPARTMENT OF AUDITS AND ACCOUNTS 270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400 November 25, 2013 Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the State Board of Regents of the University System of Georgia and Honorable James G. Sanders, Director Skidaway Institute of Oceanography Ladies and Gentlemen: As part of our audits of the basic financial statements of the University System of Georgia presented in the Annual Financial Report for the University System of Georgia, the basic financial statements of the State of Georgia 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, 2013, we have performed certain audit procedures at Skidaway Institute of Oceanography. Accordingly, the financial statements and compliance activities of Skidaway Institute of Oceanography were examined to the extent considered necessary in order to express an opinion as to the fair presentation of the 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 Skidaway Institute of Oceanography as of and for the year ended June 30, 2013. Information contained in this report is a by-product of our audits of the basic financial statements of the University System of Georgia and the basic financial statements of the 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 Skidaway Institute of Oceanography, members of the Board of Regents of the University System of Georgia 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, GSG:as Greg S. Griffin State Auditor SELECTED FINANCIAL INFORMATION - 1 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF NET POSITION - (GAAP BASIS) JUNE 30, 2013 ASSETS Current Assets Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Total Current Assets Noncurrent Assets Capital Assets, Net (Note 4) Total Assets LIABILITIES Current Liabilities Cash Overdraft Accounts Payable Unearned Revenue (Note 5) Compensated Absences Total Current Liabilities Noncurrent Liabilities Compensated Absences Total Liabilities NET POSITION Net Investment in Capital Assets Unrestricted Total Net Position EXHIBIT "A" $ 371,704 188,065 $ 559,769 9,963,003 $ 10,522,772 $ 14,186 107,221 255,961 97,041 $ 474,409 131,176 $ 605,585 $ 9,963,003 -45,816 $ 9,917,187 - 2 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION - (GAAP BASIS) YEAR ENDED JUNE 30, 2013 EXHIBIT "B" OPERATING REVENUES Grants and Contracts Federal State Other Sales and Services of Educational Departments Rents and Royalties Auxiliary Enterprises Residence Halls Other Organizations Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Salaries Faculty Staff Employee Benefits Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation Total Operating Expenses Operating Income (Loss) NONOPERATING REVENUES (EXPENSES) State Appropriations Grants and Contracts Federal Gifts Investment Income (Auxiliary and Other) Other Nonoperating Revenues (Expenses) Net Nonoperating Revenues Decrease in Net Position Net Position - Beginning of Year Net Position - End of Year $ 3,477,191 120,438 93,363 50 608,595 44,577 2,504 35,245 $ 4,381,963 $ 1,050,674 2,150,196 1,099,277 96,519 31,500 255,435 1,923,639 734,921 $ 7,342,161 $ -2,960,198 $ 2,366,845 177,149 104,227 1 -3,112 $ 2,645,110 $ -315,088 10,232,275 $ 9,917,187 - 3 - (This page left intentionally blank) SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF CASH FLOWS - (GAAP BASIS) YEAR ENDED JUNE 30, 2013 CASH FLOWS FROM OPERATING ACTIVITIES Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Auxiliary Enterprise Charges: Residence Halls Other Organizations Other Receipts (Payments) Net Cash Provided (Used) by Operating Activities CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Gifts and Grants Received for Other than Capital Purposes Negative Cash Balance Implicitly Financed Net Cash Flows Provided (Used) by Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchases of Capital Assets CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Net Increase (Decrease) in Cash Cash and Cash Equivalents - Beginning of Year Cash and Cash Equivalents - End of Year RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES: Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivable, Net Accounts Payable Unearned Revenue Compensated Absences Net Cash Provided (Used) by Operating Activities EXHIBIT "C" $ 3,770,715 50 -3,367,423 -3,388,978 -31,500 47,127 2,504 697,378 $ -2,270,127 $ 2,366,845 281,497 14,186 $ 2,662,528 $ -532,393 $ 1 $ -139,991 139,991 $ 0 $ -2,960,198 734,921 229,743 7,448 -93,934 -188,107 $ -2,270,127 - 5 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT 'D' NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY Skidaway Institute of Oceanography is one of thirty-one (31) 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 Skidaway Institute of Oceanography as a separate reporting entity. On July 1, 2013, Skidaway Institute of Oceanography was merged into the University of Georgia. 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. Skidaway Institute of Oceanography does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Skidaway Institute of Oceanography 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. FINANCIAL STATEMENT PREPARATION The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entity-wide perspective of the Institute's assets, deferred outflows of resources, liabilities, deferred inflows of resources net position, revenues, expenses, changes in net position and cash flows. BASIS OF ACCOUNTING For financial reporting purposes, the Institute is considered a special-purpose government engaged only in business-type activities. Accordingly, the Institute's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Under the accrual basis, revenues, are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-Institute transactions have been eliminated. NET POSITION The Institute's net position is classified as follows: Net Investment in Capital Assets: This represents the Institute's total investment in capital assets, net of outstanding debt obligations and deferred inflows, or resources 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 the net investment in capital assets. Unrestricted: Unrestricted net position represents resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the Institute 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 $7,466.42. 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 State Treasurer. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff. - 6 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT 'D' NOTE 2: DEPOSITS DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the Institute's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Institute 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. At June 30, 2013, the carrying value of deposits was -$16,186 and the bank balance was $116,624. Of the Institute's deposits, $116,624 were uninsured. Of these uninsured deposits, $116,624 were collateralized with securities held by the financial institution, by its trust department or agency, but not in the Institute's name. - 7 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT 'D' NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at June 30, 2013. Federal Financial Assistance Other $ 371,704 188,065 $ 559,769 NOTE 4: CAPITAL ASSETS Following are the changes in the Institute's capital assets for the year ended June 30, 2013: Beginning Ending Balance Balance July 1, 2012 Additions Reductions June 30, 2013 Capital Assets, Not Being Depreciated: Land $ 449,460 $ 0$ 0$ 449,460 Capital Assets, Being Depreciated: Infrastructure $ 1,017,252 Building and Building Improvements 9,890,762 Facilities and Other Improvements 604,524 Equipment 6,132,441 $ Library Collections 144,859 532,393 $ $ 4,000 1,017,252 9,890,762 604,524 6,664,834 140,859 Total Assets Being Depreciated $ 17,789,838 $ 532,393 $ 4,000 $ 18,318,231 Less: Accumulated Depreciation: Infrastructure $ 73,242 $ Building and Building Improvements 3,280,566 Facilities and Other Improvements 336,712 Equipment 4,251,361 Library Collections 128,653 36,621 252,847 29,706 412,964 2,783 $ $ 767 109,863 3,533,413 366,418 4,664,325 130,669 Total Accumulated Depreciation $ 8,070,534 $ 734,921 $ 767 $ 8,804,688 Total Capital Assets, Being Depreciated, Net $ 9,719,304 $ -202,528 $ 3,233 $ 9,513,543 Capital Assets, Net $ 10,168,764 $ -202,528 $ 3,233 $ 9,963,003 - 8 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT 'D' NOTE 5: UNEARNED REVENUE Unearned revenue consisted of the following at June 30, 2013. Research Other Unearned Revenue $ 185,924 70,037 Total Unearned Revenue $ 255,961 NOTE 6: LONG-TERM LIABILITIES The Institute's Long-Term liability activity for the year ended June 30, 2013 was as follows: Beginning Balance July 1, 2012 Additions Reductions Ending Balance June 30, 2013 Current Portion Other Liabilities Compensated Absences $ 416,324 $ 161,207 $ 349,314 $ NOTE 7: NET POSITION Changes in Net Position for the year ended June 30, 2013 are as follows: 228,217 $ 97,041 Beginning Balance July 1, 2012 Additions Reductions Ending Balance June 30, 2013 Net Investments in Capital Assets $ 10,168,764 $ -202,528 $ 3,233 $ 9,963,003 Unrestricted Net Position 63,511 3,162,043 3,271,370 -45,816 Total Net Position $ 10,232,275 $ 2,959,515 $ 3,274,603 $ 9,917,187 NOTE 8: RETIREMENT PLANS Skidaway Institute of Oceanography participates in various retirement plans administered by the State of Georgia under the Teachers Retirement System of Georgia. The system issues separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the system office. The significant retirement plan that Skidaway Institute of Oceanography participates in is described below. More detailed information can be found in the plan agreements and related legislation. The plan, including benefit and contribution provisions, was established and can be amended by State law. - 9 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT 'D' Teachers Retirement System of Georgia The Teachers Retirement System of Georgia (TRS) is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS. On October 25, 1996, the Board created the Supplemental Retirement Benefit Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1, 1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits. TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 30 years of creditable service, regardless of age, or after 10 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service. Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 40 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 30 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Options are available for distribution of the member's monthly pension, at a reduced rate, to a designated beneficiary on the member's death. Death, disability and spousal benefits are also available. TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 10 years of service. If a member terminates with less than 10 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2013, were 6.00% of annual salary. Employer contributions required for fiscal year 2013 were 11.41% of annual salary as required by the June 30, 2010, actuarial valuation. The following table summarizes the Skidaway Institute of Oceanography contributions for TRS for the years ending June 30, 2013, June 30, 2012, and June 30, 2011: Fiscal Year TRS Percentage Contributed Required Contribution 2013 2012 2011 100% $ 100% $ 100% $ 239,886 231,682 221,031 - 10 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT 'D' 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. 47-21-1 et.seq. and 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 Skidaway Institute of Oceanography 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 2013, the employer contribution was 9.24% for the participating employee's earnable compensation. Employees contribute 6% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times. Skidaway Institute of Oceanography and the covered employees made the required contributions of $93,521 (9.24%) and $55,699 (6%), respectively. AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices. NOTE 9: RISK MANAGEMENT The University System of Georgia offers its employees and retirees access to four different selfinsured healthcare plan options. For the University System of Georgia's Plan Year 2013, the following health care options were available: Blue Choice HMO plan (Blue Cross Blue Shield) HSA Open Access POS plan (Blue Cross Blue Shield) Open Access POS plan Kaiser Permanente HMO plan Skidaway Institute of Oceanography and participating employs and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these plans are considered to be a self-sustaining risk fund. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the self-insured healthcare plan products. In addition to the self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HMO healthcare plan option is also offered to System employees through Kaiser. - 11 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT 'D' The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental loses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. College/University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment. A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund. NOTE 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 expenditure disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Skidaway Institute of Oceanography expects such amounts, if any, to be immaterial to its overall financial positions. Litigation, claims and assessments filed against Skidaway Institute of Oceanography (an organizational unit of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2013. NOTE 11: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 20-3-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees 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. - 12 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY SELECTED FINANCIAL NOTES JUNE 30, 2013 EXHIBIT 'D' 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/University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For the 2013 plan year, 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, 2013, there were 31 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2013, Skidaway Institute of Oceanography recognized as incurred $161,970 of expenditures, which was net of $71,225 of participant contributions. NOTE 12: AFFILIATED ORGANIZATIONS The Skidaway Marine Science Foundation is a legally separate, tax exempt organization whose activities primarily support Skidaway Institute of Oceanography. This affiliated organization is considered a potential component unit of the State of Georgia in accordance with GASB Statement No. 61, The Financial Reporting Entity: Omnibus - an amendment of GASB Statements No. 14 and No. 34, and GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of the affiliated organization are not included in these financial statements. Copies of the financial statements for the affiliated organization may be obtained from Skidaway Institute of Oceanography. - 13 - (This page left intentionally blank) SUPPLEMENTARY INFORMATION - 15 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY BALANCE SHEET (STATUTORY BASIS) BUDGET FUND JUNE 30, 2013 ASSETS Accounts Receivable Federal Financial Assistance Other Total Assets LIABILITIES AND FUND EQUITY Liabilities Cash Overdraft Accounts Payable Unearned Revenue Total Liabilities Fund Balances Reserved Indirect Cost Recoveries Unreserved Surplus Total Fund Balances Total Liabilities and Fund Balances SCHEDULE "1" $ 371,703.48 190,922.78 $ 562,626.26 $ 147,236.90 4,129.30 255,960.74 $ 407,326.94 $ 147,832.90 7,466.42 $ 155,299.32 $ 562,626.26 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 special purpose framework. - 16 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2013 SCHEDULE "2" REVENUES State Appropriation State General Funds Other Funds Total Revenues CARRY-OVER FROM PRIOR YEARS Transfers from Reserved Fund Balance Total Funds Available EXPENDITURES Skidaway Institute of Oceanography Teaching Total Expenditures Excess of Funds Available over Expenditures FUND BALANCE JULY 1 Reserved Unreserved ADJUSTMENTS Unreserved Fund Balance (Surplus) Returned to Board of Regents - University System Office Year Ended June 30, 2012 Prior Year Reserved Fund Balance Included in Funds Available FUND BALANCE JUNE 30 BUDGET ACTUAL VARIANCE FAVORABLE (UNFAVORABLE) $ 2,393,134.00 $ 2,393,134.00 $ 4,878,592.00 4,581,925.59 $ 7,271,726.00 $ 6,975,059.59 $ 0.00 -296,666.41 -296,666.41 0.00 433,089.02 $ 7,271,726.00 $ 7,408,148.61 $ 433,089.02 136,422.61 $ 5,902,426.00 $ 5,982,399.67 $ 1,369,300.00 1,270,449.62 $ 7,271,726.00 $ 7,252,849.29 $ $ 0.00 $ 155,299.32 $ -79,973.67 98,850.38 18,876.71 155,299.32 433,089.02 26,288.70 -26,288.70 -433,089.02 $ 155,299.32 SUMMARY OF FUND BALANCE Reserved Indirect Cost Recoveries Unreserved Surplus $ 147,832.90 7,466.42 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 special purpose framework. - 17 - $ 155,299.32 SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2013 Skidaway Institute of Oceanography State Appropriation State General Funds Other Funds Total Skidaway Institute of Oceanography Teaching State Appropriation State General Funds Other Funds Total Teaching Total Operating Activity Original Appropriation Amended Appropriation Final Budget Current Year Revenues $ 1,229,305.00 $ 1,229,305.00 $ 1,192,426.00 $ 1,192,426.00 3,550,000.00 3,550,000.00 4,710,000.00 4,512,153.43 $ 4,779,305.00 $ 4,779,305.00 $ 5,902,426.00 $ 5,704,579.43 $ 1,237,350.00 $ 1,237,350.00 $ 1,200,708.00 $ 1,200,708.00 0.00 0.00 168,592.00 69,772.16 $ 1,237,350.00 $ 1,237,350.00 $ 1,369,300.00 $ 1,270,480.16 $ 6,016,655.00 $ 6,016,655.00 $ 7,271,726.00 $ 6,975,059.59 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 special purpose framework. - 18 - SCHEDULE "3" Funds Available Compared to Budget Prior Year Adjustments and Total Carry-Over Program Transfers Funds Available Variance Positive (Negative) Expenditures Compared to Budget Variance Actual Positive (Negative) Excess (Deficiency) of Funds Available Over/(Under) Expenditures $ 0.00 $ 433,089.02 $ 433,089.02 $ 0.00 $ 0.00 1,192,426.00 $ 4,945,242.45 0.00 $ 6,137,668.45 $ 0.00 $ 1,192,425.68 $ 235,242.45 4,789,973.99 235,242.45 $ 5,982,399.67 $ 0.32 $ -79,973.99 -79,973.67 $ 0.32 155,268.46 155,268.78 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 1,200,708.00 $ 69,772.16 0.00 $ 1,270,480.16 $ 0.00 $ 1,200,707.23 $ -98,819.84 69,742.39 -98,819.84 $ 1,270,449.62 $ 0.77 $ 98,849.61 98,850.38 $ 0.77 29.77 30.54 $ 433,089.02 $ 0.00 $ 7,408,148.61 $ 136,422.61 $ 7,252,849.29 $ 18,876.71 $ 155,299.32 - 19 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (STATUTORY BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2013 Skidaway Institute of Oceanography State Appropriation State General Funds Other Funds Total Skidaway Institute of Oceanography Teaching State Appropriation State General Funds Other Funds Total Teaching Beginning Fund Balance/(Deficit) July 1 Fund Balance Carried Over from Prior Period as Funds Available Return of Fiscal Year 2012 Surplus Prior Period Adjustments $ 0.32 $ 440,524.58 $ 440,524.90 $ $ 0.77 $ 18,852.05 $ 18,852.82 $ 0.00 $ -433,089.02 -433,089.02 $ 0.00 $ 0.00 0.00 $ -0.32 $ -7,435.56 -7,435.88 $ -0.77 $ -18,852.05 -18,852.82 $ 0.00 0.00 0.00 0.00 0.00 0.00 Budget Unit Totals $ 459,377.72 $ -433,089.02 $ -26,288.70 $ 0.00 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 special purpose framework. - 20 - SCHEDULE "4" Other Adjustments Early Return Fiscal Year 2013 Surplus Excess (Deficiency) of Funds Available Over/(Under) Expenditures Ending Fund Balance/(Deficit) June 30 Analysis of Ending Fund Balance Reserved Surplus/(Deficit) Total $ 0.00 $ 0.00 $ 0.00 $ $ 0.00 $ 0.00 $ 0.00 $ $ 0.00 $ 0.00 $ 0.00 0.00 $ 0.32 $ 155,268.46 155,268.78 $ 0.32 $ 155,268.46 0.00 $ 147,832.90 155,268.78 $ 147,832.90 $ 0.32 $ 7,435.56 7,435.88 $ 0.32 155,268.46 155,268.78 0.00 $ 0.00 0.00 $ 0.77 $ 29.77 30.54 $ 0.77 $ 29.77 30.54 $ 0.00 $ 0.00 0.00 $ 0.77 $ 29.77 30.54 $ 0.77 29.77 30.54 0.00 $ 155,299.32 $ 155,299.32 $ 147,832.90 $ 7,466.42 $ 155,299.32 Summary of Ending Fund Balance Reserved Indirect Cost Recoveries Unreserved Surplus Total Ending Fund Balance - June 30 $ 147,832.90 $ $ 147,832.90 $ $ 7,466.42 7,466.42 $ 147,832.90 7,466.42 155,299.32 - 21 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY RECONCILIATION OF BUDGET TO GAAP YEAR ENDED JUNE 30, 2013 SCHEDULE "5" Presented below is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A. Total Fund Balances - Budget Fund - Non-GAAP Basis (Schedule "1") $ Amounts reported for Business-Type Activities in the Statement of Net Position are different because: Capital Assets used in Business-Type Activities are not reported in the Budget Fund. Georgia State Financing and Investment Commission (GSFIC) projects are not reported as a component of the Budget Fund. Liabilities Agency Fund activities are not reported as a component of the Budget Fund. Assets Liabilities Total Net Effect of Agency Fund Activity $ -163 164 Auxiliary Enterprises Fund activities are not reported as a component of the Budget Fund. Assets $ Liabilities Total Net Effect of Auxiliary Enterprises Fund Activity 30,213 0 The budgetary basis of accounting implemented by the State of Georgia made to eliminate this activity for reporting on the Statement of Net Position. Payables reported in the Budget Fund that are based on encumbrances are eliminated for GAAP reporting. Certain Liabilities are not due and payable in the current period and therefore are not reported as liabilities in the Budget Fund. Compensated Absences Payable Net Position of Business-Type Activities (Exhibit "A") $ 155,299 9,963,003 -2,694 1 30,213 -418 -228,217 9,917,187 The supplementary information presented on Schedules 1, 2, 3 and 4 was prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a special purpose framework. The information was derived from, and relates directly to, the same information used to prepare the financial statements. However, the budgetary statutes and regulations of the State of Georgia require reporting of certain information that is not in accordance with generally accepted accounting principles. Presented on this schedule is a reconciliation of the fund balance of the Budget Fund, as reported on Schedule 1, to Net Position of business-type activities, as reported on Exhibit A. - 22 - SKIDAWAY INSTITUTE OF OCEANOGRAPHY RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2013 SCHEDULE "6" Totals per Annual Supplement Compensated Absences June 30, 2013 June 30, 2012 Adjustments Shared Services on Jointly Staffed Personnel Georgia Southern University Alexander, Clark Shapp, Adam SALARIES $ 3,431,740 $ TRAVEL 96,519 211,999 -386,738 -59,856 3,725 $ 3,200,870 $ 96,519 - 23 - SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS SKIDAWAY INSTITUTE OF OCEANOGRAPHY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS YEAR ENDED JUNE 30, 2013 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. OTHER ITEMS (NOTED FOR MANAGEMENT'S CONSIDERATION) BUDGETARY OVER-EXPENDITURE Observation: The approved budget of the Institute provided for expenditures totaling $7,271,726.00 A comparison of budgeted expenditures to actual expenditures by budgetary program and funding source indicated that Other Funds in the Skidaway Institute of Oceanography program were overspent by $79,973.67. Recommendation: We recommend that the Institute closely monitor their internal control procedures over budget operations to prevent expenditure of funds in excess of budget approval.