Audit report, state of Georgia, Southern Polytechnic State University, Marietta, Georgia, year ended June 30, 1998

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AUDIT REPORT STATE OF GEORGIA SOUTHERN POLYTECHNIC'STATE UNIVERSITY MARIETTA, GEORGIA YEAR ENDED JUNE 30, 1998
STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASHINGTON STREET
ATLANTA, GEORGIA 30334-8400

SOUTHERN POLYTECHNIC STATE UNIVERSITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

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

EXHIBITS

FINANCIAL STATEMENTS

A COMBINED BALANCE SHEET

ALL FUND GROUPS

2

B COMBINED STATEMENT OF CHANGES IN FUND BALANCES

ALL FUND GROUPS

4

C STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES,

AND OTHER CHANGES

6

D NOTES TO THE FINANCIAL STATEMENTS

7

SUPPLEMENTARY INFORMATION

E COMBINING BALANCE SHEET

CURRENT FUNDS - UNRESTRICTED

22

F COMBINING STATEMENT OF CHANGES IN FUND BALANCES

CURRENT FUNDS - UNRESTRICTED

23

G COMBINING STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES,

AND OTHER CHANGES

UNRESTRICTED

25

SCHEDULES

SCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO BUDGET

1

RESIDENT INSTRUCTION

26

2

LOTTERY FOR EDUCATION

29

3 CHANGES IN INVESTMENT IN PLANT

30

4 SCHEDULE OF FUND BALANCES

CURRENT FUNDS AND PLANT FUNDS

32

5 RECONCILIATION OF SALARIES AND TRAVEL

34

SOUTHERN POLYTECHNIC STATE UNIVERSITY - TABLE OF CONTENTS -
SECTIONll AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS
SECTIONID CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

CLAUDE L. VICKERS
STATE AUDI10R
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.w.. Suite 214 Atlanta, Georgia 30334-8400
January 5, 1999

Governor of the State of Georgia Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Lisa A. Rossbacher, President Southern Polytechnic State University
. INDEPENDENT AUDITOR'S COMBINED REPORT ON FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying financial statements (Exhibits A through D) ofSouthern Polytechnic State University as of and for the year ended June 30, 1998. These financial statements are the responsibility of the University's management. Our responsibility is to express an opinion on these financial statements based on our audit.
Except as discussed in the following two paragraphs, we conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Governmental Accounting Standards Board Technical Bulletin 98-1, Disclosures About Year 2000 Issues, requires disclosure of certain matters regarding the year 2000 issue. Southern Polytechnic State University has included such disclosures in the Notes to the Financial Statements. Because ofthe unprecedented nature ofthe year 2000 issue, its effects and the success ofrelated remediation efforts will not be fully determinable until year 2000 and thereafter. Accordingly, insufficient audit evidence exists to support Southern Polytechnic State University's disclosures with respect to the year 2000 issue made in the Notes to the Financial Statements. Further, we do not provide assurance that Southern Polytechnic State University is or will be year 2000 ready, that Southern Polytechnic State University's year 2000 remediation efforts will be successful in whole or in part, or that parties with which Southern Polytechnic State University does business will be year 2000 ready.
98ARL-62A

As more fully discussed in Section Ill, Current Year Findings and Questioned Costs, material discrepancies were noted in the cash and cash equivalent records ofSouthern Polytechnic State University. We were unable to satisfy ourselves as to the amounts reported on the accompanying balance sheet; nor could we determine the effects these discrepancies may have on related financial statements.
As described in Note 1 to the financial statements, Georgia Law and State budgetary policy require the University to prepare its fmancial statements on a basis which is not consistent with generally accepted accounting principles with respect to the recording of encumbrances as expenditures and liabilities. To conform with generally accepted accounting principles, encumbrances should be recorded as a reservation offund balance. The effects on the financial statements ofthis departure from generally accepted accounting principles were not reasonably determinable, but are believed to be material.
As disclosed in Note 1 to the fmancial statements, the University did not report the liability and related expenditure for compensated absences in the current funds as required by generally accepted accounting principles. If compensated absences were reported, liabilities would be increased and fund balance would be decreased by $945,454.96 as of June 30, 1998, and the net change in fund balance for the year ended June 30, 1998, would be decreased by $45,441.33.
In our opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had we been able to examine sufficient evidence supporting year 2000 disclosures and cash and cash equivalent activity, and except for the effects on the financial statements of the matters discussed in the fifth and sixth paragraphs, the financial statements referred to above present fairly, in all material respects, the financial position of Southern Polytechnic State University as ofJune 30, 1998, and the changes in fund balances and the current operating funds revenues, expenditures, and other changes for the year then ended in conformity with generally accepted accounting principles.
Our audit was made for the purpose offorming an opinion on the financial statements taken as a whole. The accompanying supplementary information (Exhibits E through G and Schedules 1 through 5) is presented for purposes ofadditional analysis and is not a required part ofthe financial statements of Southern Polytechnic State University. Such information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, except for the effects ofsuch adjustments, ifany, as might have been determined to be necessary had we been able to examine sufficient evidence supporting year 2000 disclosures and cash and cash equivalent activity, and except for the effects ofthe matters discussed in the :fifth and sixth paragraphs, such information is fairly presented in all material respects in relation to the financial statements taken as a whole.
Respectfully submitted,
~~
Claude L. Vickers State Auditor
CLV:jb 98ARL-62A

FINANCIAL STATEMENTS - 1-

SOUTHERN POLYTECHNIC STATE UNIVERSITY COMBINED BALANCE SHEET ALL FUND GROUPS JUNE 30,1998

ASSETS
Cash and Cash EqUivalents Investments Accounts Receivable Prepaid Items Due from Other Fund Groups Investment in Plant
'"
Total Assets
LIABILITIES AND FUND BALANCES
Liabilities Accounts Payable Student Deposits Deferred Revenue Tuition and Fees Other Deposits Held in Custody for Others Due to Other Fund Groups Capital Lease Obligations
Total Liabilities
Fund Balances U. S. Govemment Grants Refundable Institutional Loans - Restricted Endowment Quasi-Endowment - Restricted Net Investment in Plant Restricted Unrestricted
Total Fund Balances
Total Liabilities and Fund Balances

CURRENT FUNDS UNRESTRICTED RESTRICTED

LOAN FUNDS

$

1,437,205.00

$

75,547,09

3,731,25

1,078,108.36 $ 701,583.07

1,015,777,76

3,213,95

$

2)518,527.31 $ 701,583,07 $ 1,095,056,10

$

353,751.13

94,037.06

1,265,382.50 3,925,00

$ 417,911.21

$

1,717,095,69 $ 417,911,21

$ 958,667.69 136,388.41

$ 283,671.86

$

801,431.62

$

801,431,62 $ 283,671.86 $ 1,095,056,10

$

2,518,527.31 $ 701,583.07 $ 1,095,056,10

The notes to the financial statements are an integral part of this statement -2 -'

EXHIBIT "A"

ENDOWMENT AND SIMILAR
FUNDS

UNEXPENDED

PLANT FUNDS RENEWALS AND REPLACEMENTS

INVESTMENT IN PLANT

AGENCY FUNDS

TOTAL (Memorandum
Only)

$ 683,595.11 $ 149,005.78 $.

279,571.18

$ 553,575.03 $ 3,178,499.19

3,731.25

202,996.82

14,646.44

3,013,112.45

3,213.95

417,911.21

417,911.21

_ _ _ _ _ _ $ 62,184,928.29

62,184,928.29

$ 683,595.11 $ 769,913.81 $

279,571.18 $ 62,184,928.29 $ 568,221.47 $ 68,801,396.34

$ 769,208.56 $

$ 769,208.56 $

$ 362,789.67 320,805.44
$ $ 683,595.11 $

705.25 $ 705.25 $

21,913.48
$ 21,913.48 $

$
55,970.66 55,970.66 $

497,602.15 $ 70,619.32 568,221.47 $

1,642,475.32 94,037.06
1,265,382.50 3,925.00
70,619.32 417,911.21
55,970.66
3,550,321.07

$ 62,128,957.63 257,657.70 257,657.70 $ 62,128,957.63

$

958,667.69

136,388.41

362,789.67

320,805.44

62,128,957.63

283,671.86

1,059,794.57

$ 65,251 ,075.27

$ 683,595.11 $ 769,913;81 $

279,571.18 $ 62,184,928.29 $ 568,221.47 $ 68,801,396.34

-3-

SOUTHERN POLYTECHNIC STATE UNIVERSI1Y COMBINED STATEMENT OF CHANGES IN FUND BALANCES
ALL FUND GROUPS YEAR ENDED JUNE 30, 1998

REVENUES AND OTHER ADDmONS

Unrestricted Current Fund Revenues

State Approprietions

Regular

Federal Grants end Contracts

State Grants and Contracts

Private Gifts, Grants, end Contracts

Investment Income

Endowment

Other

"j,

Net IncraaseJDecrease in Fair Value of Investments

Interest on Loans Receivable

Adjustments

Prior Years' Expenditures/Accounts Payable

Prior Years' Checks Voided

Expended for Plant Facilities

Current Funds

Plant Funds

Unexpended

Renewals and Replacements

Georgia State Financing and Investment Commission

Other Additions

Insurance Recoveries

Proceeds from Sale of Plant Assats

Recovery of Prior Years' Cancelled Loans

Total Revenues and Other Additions

EXPENDITURES AND OTHER DEDUCTIONS

Educational and General Expenditures Auxiliary Enterprises Expenditures Indirect Costs Recovered Remittances to the Board of Regents of the
University System of Georgia Prior Year's Unrestricted Fund Balance (Surplus)
Adjustments Prior Years' RevenueslAccounts Receivable
Administrative and CoUection Costs Expended for Plant FaciJilies
Capitalized Noncepitalized DisposalslDeletionslAdjustments

Total Expenditures and Other Deductions

TRANSFERS BETWEEN FUNDS

Mandatory Investment Income for Endowment Principal
Nonmandatory Renewals and Replacements Capital Projects Endowment Principal for Objec:t of Trust

Total Transfers Between Funds

Net IncreaseJ(Decraase) for the Year

FUND BALANCES JULY 1, 1997 (Restated - See Note 1)

CURRENT FUNDS

UNRESTRICTED

RESTRICTED

LOAN FUNDS

$

32,116,999,26

$

6,490,849,86 $ 1,1n,058,05 1,292,743,18
36,368,98

n,815,14 531.22

70,063,47
106.84
292.80 847.50 15,113,05

$

32,195,345,62 $

8,997,020,07 $

$

28,306,904,68 $

3,350,428,89

1,551.64 10,484,76

8,889,481,44 132,613,40
$

945.00 87,368.66
568,30

$

31,869,369,97 $

9,022,094.84 $

568,30

$

$

-162,148~91

-124,584,75

$

-286,733.66 $

$

239,241,99 $

562,189,63

-2,761,90

2,850.00 88.10
-24,986,67 $ 308,658,53

86,800,36 1,008,255.74

FUND BALANCES JUNE 30 1998 The notes to the financial statements are an integral part of this statement,

$ -4-

801,431,62 $

283,671,86 $

1,095,056,10

EXHIBIT"B"

ENDOWMENT AND SIMILAR
FUNDS

UNEXPENDED

PLANT FUNDS RENEWALS AND REPLACEMENTS

INVESTMENT IN PLANT

TOTAL (Memorandum
Only)

$

$

103.92

96.015.96

$ 611,700.00
80.000.00
105,799.40
693.50

$

96,119.88 $

665.19 2,655.25
801,513.34 $

0.00 $
0.00 $

$ 9,691.00
1.320,789.23 888,952.22 98.941.02
5.275.117.36
7,593,490.83 $

32,116.999.26
611,700.00 6.560,913.33 1,257,058.05 1,302.644.94
36,368.98 106,092.20 96,863.46
15.113.05
78.508.64 531.22
1,320,789.23
888.952.22 98,941.02
5,275,117.36
665.19 2.655.25
945.00
49,770,858.40

$

0.00

$ 37.196.386.12 3,350,428.89 132.613.40

$

1,660.01

3,211.65

10,484.76 568.30

888,952.22 $ 6,440.62

98.941.02 60,385.90
$

1,475,498.86

987,893.24 66,826.52 1.475,498.86

$

0.00 $

897,052.85 $

159,326.92 $

1,475,498.86 $ 43,223,911.74

'<..

$

2,761.90

$ -2,850.00

$

-88.10 $

$

96.031.78 $

587,563.33

$

683,595.11 $

$ 94,584.75
94,584.75 $ -954.76 $ 1,660.01

162.148.91 30,000.00
192,148.91 32.821.99 $ 224,835.71

$
$ 6.117,991.97 $ 56,010,965.66

0.00
0.00 0.00 0.00
0.00
6.546,946.66
58,704,128.61

705.25 $

257,657.70 $ 62,128.957.63 $ 65,251,075.27

-5-

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES,
AND OTHER CHANGES YEAR ENDED JUNE 30, 1998

EXHIBIT"C"

The notes to the financial statements are an integral part of this statement. -6-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY Southern Polytechnic State University is one ofthirty-four (34) State supported member institutions ofhigher 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 Southern Polytechnic 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. Southern Polytechnic State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Southern Polytechnic State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for fmancial 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 Codification of Governmental Accounting and Financial Reporting Standards.
FUND ACCOUNTING In order to ensure observance of limitations and restrictions placed on the use of the resources available to the University, the accounts of the University are maintained in accordance with the principles of fund accounting. This is the procedure by which resources for various purposes are classified for accounting and reporting purposes into funds that are in accordance with activities or objectives specified. Separate accounts are maintained for each fund; however, in the accompanying financial statements, funds that have similar characteristics have been combined into fund groups. Accordingly, all financial transactions have been recorded and reported by fund group.
Within each fund group, the University's fund balance allocations and designations represent those portions ofthe fund balances that are reserved, restricted and/or designated for specific future use by legal covenants, State policies, or institutional policies.
Fund groups and funds presented in the accompanying financial statements are as follows:
CURRENT FUNDS
UNRESTRICTED - The fund used to account for those economic resources over which the University retains full control to use for purposes of performing the primary functions of the University, e.g., instruction, research, public service, etc.
RESTRICTED - The fund used to record externally restricted funds which may only be utilized in accordance with the purposes established by their source. Restricted current funds are recorded as revenues and expenditures when expended for current operating purposes.
-7-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FUND ACCOUNTING
LOAN FUNDS
The fund used to account for resources which have been made available for financial loans to students.
ENDOWMENT AND SIMILAR FUNDS
The fund used to account for endowment funds and quasi-endowment funds. Endowment funds are subject to the restrictions ofgift instruments requiring that the principal be invested in perpetuity and income only be utilized. While quasi-endowment funds have been established by the University for the same purposes as endowment funds, any portion of quasi-endowment funds may be expended. Restricted quasiendowment funds may be expended only for the purposes established by the source of such funds.
PLANT FUNDS
UNEXPENDED - The fund used to account for financial resources utilized to acquire or to construct physical properties for institutional purposes.
RENEWALS AND REPLACEMENTS - The fund used to account for resources set aside for the renewal and replacement ofinstitutional properties.
INVESTMENT IN PLANT - The fund which shows the total amounts representing the book value of all physical properties owned by the University. Net Investment in Plant is an equity account showing the total book value of physical properties belonging to the University less the amount of any indebtedness to others.
AGENCY FUNDS
The fund used to account for resources held by the University as custodian or fiscal agent for individual students, faculty, staff members, and organizations.
BASIS OF ACCOUNTING Except as otherwise disclosed in these notes, the financial statements are prepared on the modified accrual basis ofaccounting, which is materially the same as the accrual basis ofaccounting applicable to colleges and universities prescribed in the American Institute ofCertified Public Accountants' audit guide reporting model. The modified accrual basis ofaccounting is defined as that method ofaccounting in which expenditures, other than accrued interest on general long-term debt, are recorded at the time liabilities are incurred and revenues are recorded when available and measurable to finance expenditures ofthe fiscal period.

-8-

SOUTHERN POLYTECHNIC STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 1998

EXlllBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING Contractual obligations for goods and services which have not been received at the end of the fiscal year are recognized as expenditures and liabilities in the accompanying financial statements. This accounting practice causes expenditure-driven grant revenues to be accrued based, in part, on the unexecuted portion of contracts for goods and services. The recognition of encumbrances as expenditures and liabilities is in conformity with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, but is not consistent with generally accepted accounting principles, which provide for the recording of encumbrances as a reservation of fund balance. Further, revenue recognition for expenditure-driven grants should be based upon expenditures determined in accordance with generally accepted accounting principles.
Compensated absences represent obligations of the University relating to employees' rights to receive : compensation for future absences based upon services already rendered. This obligation relates only to . vesting accumulated annual leave in which payment is probable and can be reasonably estimated. The
compensated absences liability of $945,454.96 and the related net current year expenditures of $45,441.33 have not been reported in the current funds as required by generally accepted accounting principles.
Prior period adjustments and certain other items are reported as additions to and deductions from fund balances of current funds in the accompanying financial statements. This presentation is in accordance with accounting practices prescribed or permitted by statutes and regulations of the State of Georgia, but differs from generally accepted accounting principles in that immaterial adjustments should be reported as current period revenues and expenditures. The effect of this departure is deemed to be immaterial to the fair presentation ofthe financial statements.
To the extent that Current Funds and Plant Funds are used to finance plant assets, the amounts so provided are accounted for as expenditures. The balances shown on the Combined Balance Sheet as Net Investment in Plant reflect the accumulated expenditures made for plant facilities through Current Funds and Plant Funds and also include expenditures made for plant facilities expended by the Georgia State Financing and Investment Commission on behalf ofthe University. Donated fIXed assets are recorded at fair market value on the date donated. Disposals are deleted at recorded values. No depreciation has been provided on physical plant and equipment.
It is the policy of Southern Polytechnic State University to record assets acquired through capital leases as additions to Investment in Plant when received at the total acquisition cost including interest. The liability for such leases at fiscal year-end is recorded in Investment in Plant including interest. This presentation differs from generally accepted accounting principles in that the assets and the related liability resulting from capital leases should be recorded in Investment in Plant at the inception of the agreement at the net present value ofthe future minimum lease payments, not to exceed the fair value of the leased property. The effect of this departure is deemed to be immaterial to the fair presentation of the financial statements.

-9-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1998

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF ACCOUNTING The Statement of Current Funds Revenues, Expenditures, and Other Changes is a statement of financial activities ofcurrent funds related to the current reporting period. It does not purport to present the results of operations or the net income or loss for the period as would a statement ofincome or a statement ofrevenues and expenses.

RESTATEMENT OF PRIOR YEAR FUND BALANCE In fiscal year 1998, Southern Polytechnic State University implemented GASB Statement 31, "Accounting and Financial Reporting for Certain Investments and for External Investment Pools". The statement requires certain investments to be reported at fair value rather than at cost. As a result, the beginning fund balances ofthe following funds have been increased for this change in accounting principle.

Current Funds - Unrestricted Loan Funds Endowment and Similar Funds

$

963.78

$

984.37

$ 6,119.93

BUDGET The Board of Regents of the University System of Georgia - Administrative Central Office receives State appropriation allotments for units ofthe University System of Georgia. The appropriated budget is adopted at the departmental level and represents appropriations provided by the Amended Appropriations Act of 19971998. The appropriated budget covers current funds and plant funds, except for Auxiliary Enterprises and Student Activities which are not subject to appropriation. The allocation of the appropriated budget is made to the University by the Administrative Central Office. In addition, the University receives Federal funds and other funds directly and includes these funds in the budget filed with the Administrative Central Office.

A comparison ofanticipated funds available and budgeted expenditures by budget unit object class indicates that the following object classes were overspent by the amounts identified below:

Resident Instruction Personal Services: Sponsored Operations

$ 337,723.14

Operating Expenses: Education, General and Departmental Services

$ 378,662.54

Capital Outlay

$ 290,118.76

These overexpenditures of budget constitute a violation of Board of Regents policy, but do not constitute statutory violations of budget authority. Statutory violations of budget authority are reported at the departmental level.

- 10-

SOUTIIERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist ofpetty cash, demand deposits and temporary investments in authorized fmancial institutions, and cash management pools that have the general characteristics of demand deposit accounts.
INVESTMENTS Investments are reported at fair value. Funds received by the University as endowments or for restricted purposes are invested according to conditions stipulated by the donor, grantor, or in accordance with the Board of Regents authorizing resolutions. Gains and losses on investment transactions are accounted for in the funds where such assets are recorded.
,ACCOUNTSRECEIVABLE . Accounts receivable consist of reimbursements due from Federal, State, local, and private grants and
contracts, and other receivables disclosed from information available. No provision has been made for an allowance for doubtful accounts within the accompanying financial statements.
PREPAID ITEMS Prepaid items are payments made to vendors in advance ofthe receipt of goods and services that will benefit periods subsequent to the balance sheet date.
MEMORANDUM ONLY - TOTAL COLUMNS The total columns on the financial statements are captioned "Memorandum Only" because they do not represent consolidated financial information and are presented only to facilitate financial analysis. The columns do not present information that reflects financial position or changes in financial position in conformity with generally accepted accounting principles. Neither are such data comparable to a consolidation. Interfund eliminations have not been made in the aggregation of this data.
NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to the State of Georgia 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 anyone or more ofthe following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
(1) Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
(2) Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.

- 11 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT"D"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (3) Bonds ofany public authority created by the laws ofthe State ofGeorgia, providing that the statute that created the authority authorized the use ofthe bonds for this purpose.
(4) Industrial revenue bonds and bonds ofdevelopment authorities created by the laws ofthe State of Georgia.
(5) Bonds, bills, certificates ofindebtedness, notes, or other obligations ofa subsidiary corporation of the United States government, which are :fully guaranteed by the United States government both as to principal and interest, or 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.
As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (which includes organizational units of the Board of Regents of the University System of Georgia) the option of exempting demand deposits from the collateral requirements.
The treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units ofthe University System of Georgia.
CATEGORIZATION OF DEPOSITS For purposes of analysis of custodial credit risk, cash deposits consist of all bank balances which include demand deposits and/or interest bearing accounts. The bank balances as of June 30, 1998, are categorized below in order to provide information about the extent to which such deposits are exposed to custodial credit risk:
Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the University or by its agent in the University's name.
Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the University's name.
Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the University's name, and amounts uncollateralized.

- 12-

SOUTHERN POLYTECHNIC STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"D"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

CATEGORIZATION OF DEPOSITS

Cash Deposits

Carrying Amount

Bank Balances

$ 1:413 33213 $ L8i7,153.88 $

Risk Categories

2

3

100,000 00 $'=====:lO~O~O $ 171715388

Overnight repurchase agreements are included with investments for purposes of risk classifi~ation.

CATEGORIZATION OF INVESTMENTS Investments are summarized and classified as to custodial credit risk within the three categories d~scribed ; below:

Category 1 - Insured or registered, or securities held by the University or its agent in the University's name.

Category 2 - Uninsured and unregistered, with securities held by the counterparty's trust department

or agent in the University's name.

.

Category 3 - Uninsured and unregistered, with securities held by the counterparty, or by its trust department or agent but not in the University's name.

The carrying amounts of investment balances as of June 30, 1998, are categorized below:

Type ofInvestment

Risk Categories

1

2

3

Carrying Amount

Common Stock Repurchase Agreements

$ 3,731.25

$

$ 544,635.74

0.00 $ 3,731.25 544,635.74

$ 3.731.25 $ 544,635.74 $

0.00 $ 548,366.99

'<-.

Investments Not Subject to Categorizations:
Board ofRegents Balanced Income Fund Total Return Fund Short-Term Investment Fund
Total Investments

540,437.86 218,868.07 452,045.39
$ 1.759.718.31

Funds invested in an investment pool managed by another governmental entity are not required to be categorized since the University did not own any specific, identifiable investment securities of the pool.

- 13-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"D"

NOTE 3: INVESTMENT IN PLANT

The following is a summary ofInvestment in Plant fixed assets as of June 30,1998:

Land Buildings Improvements Other Than Buildings Equipment Library Books and Collections

$ 753,396.56 42,521,021.07 2,953,943.67 12,053,657.56
3,902,909.43

Total Investment in Plant

$62.184.928.29

NOTE 4: CAPITAL LEASES

Southern Polytechnic State University acquires equipment through multi-year capital leases with varying terms and options. These agreements contain fiscal funding clauses in accordance with Official Code of Georgia Annotated Section 50-5-64 which prohibits the creation of a debt to the State of Georgia for the payment ofany sums under such agreements beyond the fiscal year of execution ifappropriated funds are not available. If renewal of such agreements is reasonably assured, however, capital leases requiring appropriation by the General Assembly of Georgia are considered noncancellable for financial reporting purposes.

As ofJune 30, 1998, future minimum lease payments under capital leases are as follows:

Fiscal Year Ending June 30

1999

$ 29,011.20

2000

19,959.56

2001

6,999.90

Total Future Minimum Lease Payments

$ 55.970.66

NOTE 5: RISK MANAGEMENT

Southern Polytechnic State University is a participant in the Board of Regents ofthe University System of Georgia Health Benefits Plan, which is a self-insurance program ofhealth and dental benefits for employees and retirees ofthe University System of Georgia. The University and participating employees and retirees pay premiums to the Health Benefits Plan for this health insurance coverage. The Health Benefits Plan is included in the audit report ofthe Board of Regents ofthe University System of Georgia - Administrative Central Office. All units ofthe University System of Georgia share the risk of loss for claims of the Health Benefits Plan. The Health Benefits Plan is considered a self-sustaining risk fund that provides health coverage for its members up to a maximum lifetime benefit of$I,OOO,OOO.OO per person and dental coverage

- 14-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"D"

NOTE 5: RISK MANAGEMENT
up to an annual maximum of$I,OOO.OO per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department ofAdministrative Services (DOAS) has the responsibility for the State of Georgia ofmaking and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The University, : as an organizational unit ofthe Board of Regents ofthe 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 6: DEFERRED COMPENSATION PLAN
The State of Georgia offers its employees a deferred compensation plan in accordance with Internal Revenue Code Section 457. The plan, available to employees of the State of Georgia and county health departments, permits such employees to defer a portion of their salary until future years. Participation in the plan is optional. Participants choose the option or options in which they wish to participate. The deferred compensation is not available to employees until termination, retirement, death, or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property, or rights are (until paid or made available to the employee or other beneficiary) solely the property and rights ofthe State of Georgia subject only to the claims of the State's general creditors. Participants' rights under the plan are equal to those of a general creditor of the State of Georgia in an amount equal to the fair market value ofthe deferred account for each participant. Financial information relative to the plan will be presented in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 1998.
A change in the Internal Revenue Code Section 457, effective August 20, 1996, requires that by January 1, 1999, all existing eligible deferred compensation plans must be held in trust for the exclusive benefit of participants and their beneficiaries. The State of Georgia's plan was converted effective July 1, 1998.

- 15 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXInBIT"D"

NOTE7: RETIREMENTPLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

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

Funding Policy Employees ofthe University who are covered by TRS are required by State statute to contribute 5% oftheir gross earnings to TRS. The University makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. For fiscal year 1998, the employer contribution rate was 11.81% for covered employees. In addition, the University contributed 3.91% to the TRS on behalf of employees electing to participate in the Regents Retirement Plan. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

1998 1997 1996

100% 100% 100%

$ 1,678,485.91 $ 1,557,845.21 $ 1,510,411.87

REGENTS RETIREMENT PLAN

Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan established and administered by the Board of Regents ofthe University System of Georgia, under which it may purchase annuity contracts for the purpose ofproviding retirement and death benefits for eligible faculty and principal administrators. 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 tenns ofthe annuity contracts.

Funding Policy Member contribution requirements are established by the Board of Trustees of the Teachers Retirement System. Employer contributions are established by statute and may be amended only by the General Assembly ofthe State ofGeorgia. The employer contributes 7.75% ofthe participating employee's earnable compensation. Employees contribute 5% oftheir earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.

- 16-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"D"

NOTE 7: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Funding Policy The University and the covered employees made contributions of $340,835.12 (9.26%) and $179,118.45 (5%), respectively. During the period from January 1, 1997 to June 30, 1997 the University made contributions of 4% instead of the required 7.42%. The University made the additional required payments from July 1, 1997 to December 31, 1997.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description ,- Southern Polytechnic State University participates in the Georgia Defined Contribution Plan (GDCP) which
is a single-employer defmed contribution plan established by the General Assembly of Georgia for the purpose ofproviding 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. Ifa member has less than $ 3,500.00 credited to his/her account, the Board ofTrustees 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 ofTrustees. 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 1998 amounted to $66,152.38 which ~~presents 7.5% of covered payroll. These contributions met the requirements of the plan.
NOTE 8: LEAVEPOUCffiS
.Employees earn annual leave ranging from one and one-quarter days to one and three-quarter days each month depending upon the employees' length of continuous State service with maximum accumulation of forty-five days. Employees are paid for unused accumulated annual leave upon retirement or termination of employment. See Note 1 - Basis of Accounting (Compensated Absences)

- 17 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT"D"

NOTE 8: LEAVEPOUCffiS
Employees earn one day of sick leave each month with no maximum accumulation established. Unused accumulated sick leave does not vest with the employee and is forfeited upon retirement or termination of employment, except as noted in the subsequent paragraph.
Effective July 1, 1998, certain employees who retire with a minimum ofthree months of unused sick leave are entitled to additional service credit in the Teachers Retirement System of Georgia.
NOTE 9: CONTINGENCffiS
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 ofexpenditures which may be disallowed by the grantor cannot be determined at this time although the University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Southern Polytechnic State University (an organizational unit ofthe Board ofRegents ofthe 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, 1998.
NOTE 10: POSTEMPLOYMENT 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 ofthe University System ofGeorgia It is the policy ofthe Board ofRegents to permit employees ofthe University System ofGeorgia eligible for retirement or that become permanently and totally disabled to continue as members ofthe group health and life insurance programs. Employees who are eligible for retirement or disability under the criteria established by the Teachers Retirement System of Georgia and who have at least ten years ofservice with the University System ofGeorgia are eligible for these postemployment 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.
As of June 30, 1998, there were 65 employees who had retired or were disabled that were receiving these postemployment health and life insurance benefits. For the year ended June 30, 1998, Southern Polytechnic State University recognized as incurred $234,849.54 of expenditures, which was net of $53,054.10 of participant contributions.

- 18-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1998

EXHIBIT"D"

NOTE 11: YEAR 2000 SYSTEMS READINESS
The year 2000 issue is the result of shortcomings in many electronic data processing systems and other electronic equipment that may adversely affect the University's operations as early as calendar year 1999. The University has identified computer systems and other electronic equipment that may be affected by the year 2000 issue and are necessary to conducting University operations. The following stages have been identified as necessary to implement year 2000 compliant systems.
Awareness Stage - Encompasses establishing a budget and project plan for dealing with the year 2000 Issue.
Assessment Stage - The actual process ofidentifying all systems and individual components of systems to check for compliance.
Remediation Stage - The time when changes are made to systems and equipment.
Validationffesting Stage - The process of ensuring that the changes made to systems and equipment will produce a year 2000 compliant system.
It will be necessary for the University to progress through all four of these stages for each computer and/or electronic system, not already year 2000 compliant, in order to assure that these systems will not be adversely affected.
The following financial systems utilized by the University are supported by the Board ofRegents, University System of Georgia. The Board intends to remediate all systems which it maintains for use by its member institutions.
The College and University Fund Accounting System is in the remediation stage and :final testing is scheduled for April, 1999.
The Regents Budget Reporting System and Property Inventory System are beyond the validation/testing stage and management considers them year 2000 compliant.
The Regents PayrolllPersonnel System is in the remediation stage with validationand testing scheduled for completion in July, 1999.
The Banner Student Information System is supported by SCT Banner, Inc. Their Banner2000 product is year 2000 compliant. All institutions whose systems are supported by the Board of Regents are scheduled to install Banner2000 by May 16, 1999.
Because ofthe unprecedented nature ofthe year 2000 issue, its effects and the success ofrelated remediation efforts will not be fully determinable until year 2000 and thereafter. While management is confident that the University will be year 2000 ready, it cannot assume that its remediation efforts will be successful in whole or in part, or that parties with whom the University does business will be year 2000 ready~
- 19-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 1998

EXHIBIT"D"

NOTE 12: ENROLLMENT

The equivalent full-time student enrollment of Southern Polytechnic State University was as follows:

Regular Term Fall Quarter, 1997 Winter Quarter, 1998 Spring Quarter, 1998

, 3,214 3,070 2,915

Average

Summer School, 1997

- 20-

SUPPLEMENTARY INFORMATION - 21 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY COMBINING BALANCE SHEET
CURRENT FUNDS - UNRESTRICTED JUNE 30. 1998

EXHIBIT "eo

ASSETS Cash and Cash EquivaJents Accounts Receivable Prepaid Items
Total Assets

RESIDENT INSTRUCTION

LOTIERYFOR EDUCATION

AUXILIARY ENTERPRISES

STUDENT ACTIVITIES

TOTAL

$

408.741.01 $

878.371.64

3,016.95

41.942.16 $

598.599.12 $ 198,134.92
197.00

387.922.71 $ 1.601.80

1.437.205.00 1,078.108.36
3.213.95

$ 1.290.129.60 $

41.942.16 $

796.931.04 $

389.524.51 $ 2.518,527.31

LIABILITIES AND FUND BALANCES
Uabilitias Accounts Payable Student Deposits Deferred Revenue Tuition and Feas Other
Total Uabirlties
Fund Balances Unrastricted

$

245,782.09 $

961.004.50 3.925.00
$ 1.210.711.59 $

41,942.16 $ 41.942.16 $

45.020.26 $ 94,037.06 185,423.00
324.480.32 $

21.006.62 $

353,751.13 94,037.06

118.955.00

1.265,382.50 3.925.00

139.961.62 $ 1.717.095.69

79,418.01

0.00

472.450.72

249.562.89

801.431.62

Total Liabilities and Fund Balances

$ 1,290,129.60 $

41,942.16 $

796.931.04 $

389.524.51 $ 2.518.527.31

See netas to the financial statements.

-22-

SOUTHERN POLYTECHNIC STATE UNIVERSITY COMBINING STATEMENT OF CHANGES IN FUND BALANCES
CURRENT FUNDS - UNRESTRICTED YEAR ENDED JUNE 30, 1998

EXHIBIT"P

REVENUES AND OTHER ADDITIONS
Unrestricted Current Fund Revenues Adjustments
Prior Years' Expenditures/Accounts Payable' Prior Years' Checks Voided
Total Revenues and Other Additions
EXPENDITURES AND OTHER DEDUCTIONS
Educational and General Expenditures Auxiliary Enterprises Expenditures Remittances to the Board of Regents of the
University System of Georgia Prior Year's Unrestricted Fund Balance (SurplUS)
Adjustments Prior Years' Revenues/Accounts Receivable
Total Expenditures and Other Deductions
TRANSFERS BETWEEN FUNDS
Nonmandatory Renewals and Replacements Capital Projects In Ueu of State Appropriations
Total Transfers Between Funds
Net Increasel(Decrease) for the Year
FUND ErALANCES JULY 1,1997

RESIDENT INSTRUCTION

LOTIERYFOR EDUCATION

AUXILIARY ENTERPRISES

STUDENT ACTMTIES

TOTAL

$ 27,238,636,10 $
43,520.84 531.22
$ 27,282,688,16 $

356,085.00 $

3,676,683.88 $ 35,297,50

356,085.00 $ 3,711,981.38 $

845,594.28 $ 32,116,999.26

-1,003.20

n,815.14 531.22

844,591.08 $ 32,195,345.62

$ 27,515,088,97 $

340,454.00 $

$ 3,350,428.89

451,361.71 $ 28,306,904.68 3,350,428.89

1,OB3.82 -3,644,37

467.82

14,129,13

1,551.64 10,484.76

$ 27,512,528.42 $

340,921.82 $ 3,364,558.02 $

451,361.71 $ 31,669,369.97

$

-162,148.91

$

-162,148.91

$

-7,225.00 $

-15,631.00

-41,375.00 $

-60,353,75

-124,584.75

269,120,00

-70,522.00

-19B,59B.00

0.00

$

261,895,00 $

-15,631.00 $

-274,045.91 $

-258,951.75 $

-286,733.66

$

32,054.74 $

-467.82 $

73,3n.45 $

134,2n.62 $

239,241.99

47,363,27

467.82

399,073,27

115,285.27

562,189,63

FUND BALANCES JUNE 30, 1998

$

79,418.01 $

0.00 $

472,450.72 $

249,562.89 $

801,431.62

See notes to the financial statements.

-23-

THIS PAGE LEFT BLAHK

See notes to the financial statements.

-25-

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO BUDGET
RESIDENT INSTRUCTION YEAR ENDED JUNE 30, 1998

REVENUES
State Appropriations Other Revenues Retained

CURRENT FUNDS

UNRESTRICTED

RESTRICTED

PLANT FUNDS

RENEWALS AND

UNEXPENDED

REPLACEMENTS

$

18.208.976,Q0

$

611.700.00 $

0.00

9,029,660,10 $ _ _....;8;,.:,8:.::;89;:;".,4.:,:8;.:,1;..:,.44..;..

189,119.84

$

27.238.636.10 $

8.889,481,44 $

800.819.84 $

...;;0.,;;.;00;",.

EXPENDITURES

Personal Services:

Education. General and Departmental Services

$

Sponsored Operations

. Operating Expenses:

Education. General and Departmental Services

Sponsored Operations

Capital OuUay

Special Funding Initiative

21.558,552.55 $
5.852.523,49
104,012,93

1,136.241.14
7.753,240.30 $

879,761.84 $

159.326.92

Excess of Revenues over Expenditures

$

27.515,088.97 $

8,889,481,44 $

$

-276.452.87 $

0.00 $

879,761.84 $ _ _~15;;.;9~.3;.;;;2.;.;6'.;.;92;;.",

-78.942,00 $

-.1.5.9...3. .2.6,.92..

(1) To eliminate tuition waivers not budgeted and to reclassify current year transfers and prior year fund balances budgeted as revenues.

see notes to the financial statements.

-26-

SCHEDULE "1"

TOTAL

ADJUSTMENTS (1)

TOTAL (Budget Basis)

BUDGET

VARIANCEFAVORABLE (UNFAVORABLE)

$

18,820,676.00

18,108,261.38 $

$ 95,045.72

18,820,676.00 $ 18,203,307.10

18,820,676.00 $ 18,167,390.00

0.00 35,917.10

$

36,928,937.38 $

95,045.72 $

37,023,983.10 $ 36,988,066.00 $

35,917.10

$

21,558,552.55

1,136,241.14

$

21,558,552.55 $ 22,068,986.00 $

1,136,241.14

798,518.00

5,852,523.49 $ 7,753,240.30 1,039,088.76
104,012.93

-412,354.95

5,440,168.54 7,753,240.30 1,039,088.76
104,012.93

5,061,506.00 8,205,585.00
748,970.00 104,501.00

510,433.45 -337,723.14
-378,662.54 452,344.70 -290,118.76
488.07

$

37,443,659.17 $

-412,354.95 $

37,031,304.22 $ 36,988,066.00 $

-43,238.22

$

-514,721.79 $

507,400.67 $

-7.,3.2.1..1. .2. .

$

-7;,;;,3.2;,;;1.;,;;1.2 .

- 27-

THIS PAGE LEn BLAHK

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO BUDGET
LOTTERY FOR EDUCATION YEAR ENDED JUNE 30. 1998

SCHEDULE "Z'

REVENUES Slate Appropriations

CURRENT FUNDS UNRESTRICTED

PLANT FUNDS UNEXPENDED

TOTAL (Budget Basis)

BUDGET

VARIANCEFAVORABLE (UNFAVORABLE)

$

356,085.00 $

0.00 $

356,085.00 $

356,085.00 $

0.00

EXPENDITURES

Equipment, Technology and Construction

Trust Fund

$

168,369.00 $

15,631.00 $

184,000.00 $

184,000.00 $

0.00

Special Funding Initiatives

172,085.00

172,085.00

172,085.00

0.00

$

340,454.00 $

15,631.00 $

356,085.00 $

356,085.00 $

Excess of Revenues over Expenditures

$

15,631.00 $

-15,631.00 $

....0...0. .0. .

$

0._00_ .0..00...

See notes to the financial statements.

-29-

SOUTHERN POLYTECHNIC STATE UNIVERSITY CHANGESININVES]MENTINPLANT YEAR ENDED JUNE 30, 1998

Land Buildings Improvements Other Than Buildings Equipment
.'),
Ubrary Books and Collections
SUMMARY OF INVESTMENT College Capital Leases

BALANCE JULY1,1997

CURRENT FUNDS

UNRESTRICTED

RESTRICTED

PLANT UNEXPENDED

$

753,396,56

36,591,309.68

$

643,041.50

2.715,386.95

238.556.72

12,407.974,61 $

1.013,403.27 $

27,124.27

7.354.00

3.622,647,74

280.261.69

$ 56,090,715.54 $

1.293,664.96 $

27,124.27 $=== 88..8,.,9.5.2'0;;22=

$ 56,010.965.66 $ 79,749.88

1,293,664.96 $

27,124.27 $

888,952.22

$ 56.090,715.54 $

1,293.664,96 $

27,124,27 $ =======88..8==,9.5=2'0;;22=

see notes to the financial statements.

30

SCHEDULE "3"

ADDITIONS
FUNDS RENEWALS AND REPLACEMENTS

GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION

$

10,441.45 $

5,275,117.36

88,499.57

$

CAPITAL LEASES
78,716.00 $

PRIVATE GIFTS

DEDUCTIONS DISPOSALSI DELETIONSI ADJUSTMENTS

$

$

-1,111.08

9,691.00

1,579,105.16

BALANCE JUNE 30,1998
753,396.56 42,521,021.07
2,953,943.67 12,053,657.56 3,902,909.43

$

98,941.02 $

5,275.117.36 $

78,716.00 $

9,691.00 $

1,577,994.08 $ =====6,...2'6:184;;;",;,;;,9=2,...8.:;:29=

$

98,941.02 $

5,275,117.36

$

______ $

7:..;:8"",,7...:.16;:':';:.:00,,-

$

98,941.02 $

5,275.117.36 $

78,716.00 $

9.691.00 $

1,475,498.86 $ 102,495.22

62,128,957.63 55,970.66

9.691.00 $

1.577,994.08 $ =====6=2'6:.1~84::lO,9=2=8.=29=

- 31 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FUND BALANCES
CURRENT FUNDS AND PLANT FUNDS JUNE 30.1998

NET INVESTMENT IN PLANT Investment in Plant Facilities
RESTRICTED Designated for Subsequent Years' Expenditures
UNRESTRICTED Designated For Athletic Facility For Intercollegiate Athletics
For Reaeation and Wellness center
For Renewals and Replacements Reserve For SUbsequent Years' Expenditures For Uncollectible Accounts Surplus
Regular lotteIy for Education

RESIDENT INSTRUCTION

CURRENT FUNDS

UNRESTRICTED

LOTTERY FOR

AUXILIARY

EDUCATION

ENTERPRISES

STUDENT ACTIVITIES

$

46,279.45

33,138.56 ______ $

$

79.418.01 $

$

79,418.01 $

$

16,670.15

$

39,522.69

65,236.62

425,493.45 7,434.58

166,549.62 1,106.50

0:::,.0:::0::.. 0.00 $
0.00 $

472,450.72 $

.::;24;:.::9:.t.:,5::::62:::;.8::;:9:.,.

472,450.72 $ .........._ _2.4.9.,.56.28..9.

see notes to the financial statements.
-32-

SCHEDULE "4"

RESTRICTED

PLANT FUNDS

UNEXPENDED

LOTTERY FOR

RENEWALS AND

REGULAR

EDUCATION

REPLACEMENTS

INVESTMENT IN PLANT

TOTAL

$

62.128.957.63 $_---"6""2,""12:;;:8""'.9;;;.57;.;..6:;;:3;...

$ _ _-=28:,:3;:,:.6;.:,.71.:.::.8:,:6:.,.

$ _ _-=28:,:3:.:;.6:.:..71.:.::.8::=6:.,.

$

705.25

______ $

$

705.25 $

$

283,671.86 $

705.25 $

$

257,657.70

$

16,670.15

39,522.69

65,236.62

257,657.70

592,043.07

54,820.53

--"'O.;.;;.OO=_ 0.00 $ _ _--=257::..:..J.:,6:.:;57.:..:.:..;70:.,.

33,843.81 0.00
$ _ _-'"1,""05:;;:9""',7""94.;.;..57;;.;....

0.00 $

257,657.70 $

62,128.957.63 $ _ _6.3.47.2;,;;,4;,;2,.4.0..6...

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SOUTHERN POLYTECHNIC STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 1998

SCHEDULE "5"

Totals per Annual Supplement

Adjustments

Shared Services on Jointly Staffed Personnel

Georgia Institute of Technology

Papp,

Daniel S,

Kennesaw State University

Cheshier,

Stephen R

Dennison,

Wayne

;,)

South Georgia College

Bowe,

Erik

Other Bowe, Davis, Jones, Kelly, Mcallister, Ring, Tucci, Way,

Erik Derick 0, Cedric 0, Rebecca CeciliaR Carolyn Stephanie E, Travis B,

SALARIES $ 18,983,525,85 $

TRAVEL 291,690,83

131,616,00
-18,000,00 15,750,00
-7,557,00
6,666,74 -153,00 -1,008,00 17,341,00
-45,58 426,21 -224.00 -548.00

$ 19,127,790,22 $======29=:1=,6=90=,=83=

See notes to the financial statements,

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SECTIONll AUDITEE'S RESPONSE TO PRIOR YEAR FINDINGS AND QUESTIONED COSTS
"'.

SOUTHERN POLYTECHNIC STATE UNNERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 1998

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

550-96-01 550-96-02 FS-550-97-01

Unresolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTIONIRESPONSES

FUND EQUITIES Deficit Fund Balances Amount: $17,132.58 Finding Control Number: 550-96-01

After a careful review ofthe specific disbursements involved in this finding, it was determined that the best course ofaction is to transfer these disbursements to private sources. The University will contact the Foundation to request funds to cover the deficit.

REVENUES/RECEIVABLES/RECEIPTS Student Accounts Receivable Not Supported by Financial Aid Amount: $25,577.32 Finding Control Number: 550-96-02

The University has performed due diligence in collecting student accounts receivable. The

University has hired a new comptroller who will join the management team on February 1, 1999.

The University may consider placing uncollected student accounts receivable balances with a third

party collection agency.

.

REVENUES/RECEIVABLES/RECEIPTS Deficit Cash Balances/Inadequate Accounts Receivable Documentation Amount: $67,622.05 Finding Control Number: FS-550-97-01

After a careful review ofthe specific disbursements involved in this finding, it was determined that the best course ofaction is to transfer these disbursements to private sources. The University will contact the Foundation to request funds to cover the deficit.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND OUESTIONED COSTS YEAR ENDED JUNE 30. 1998

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-550-97-01 FA-550-97-02

Unresolved - See Corrective ActionlResponses Unresolved - See Corrective ActionlResponses

CORRECTIVE ACTIONIRESPONSES

REPORTING FISAP Report Not Reconciled to Accounting Records Student Financial Aid Cluster Program Finding Control Number: FA-550-97-01

The University's internal auditor will review all reconciliations at the close of fiscal year 1999 and advise the chief business officer if any accounts are not in a reconciled position.

SPECIAL TESTS AND PROVISIONS Exit Counseling Not Conducted Student Financial Aid Cluster Program Finding Control Number: FA-550-97-02

The Title IV administrator will review the graduation list and determine ifany ofthe graduates have financial aid in the fonn offederal loans. The University will mail the candidate for graduation an exit package which contains a USDOE exit booklet which contains the infonnation sheet. The candidate for graduation will be asked to fill out certain fonns and return them to the University. The University will freeze the student records until this sheet has been returned to the University. This document, once returned, will be placed in the student's financial aid file.

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SECTIONID CURRENT YEAR FINDINGS AND QUESTIONED COSTS

SOUTHERN POLYTECHNIC STATE UNNERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 1998

FINANCIAL STATEMENTS FINDINGS AND OUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUEIRECEIVABLEIRECEIPTS EXPENDITURESILIABILITIESIDISBURSEMENTS EMPLOYEE COMPENSATION INFORMATION TECHNOLOGY CONTROLS Inadequate Internal Controls Finding Control Number: FS 550-98-01

For the year under review, internal control testing revealed deficiencies in the following internal control categories:

1) Cash and Cash Equivalents

Controls over the bank reconciliation process were not functioning effectively. Bank reconciliations for the payroll and operating accounts, which accurately reconcile to the University's general ledger cash, have not been performed since November 1996. From March 1998 until the time of our audit, several attempts were made to produce accurate and complete bank reconciliations. However, as ofJune 30,1998, audit tests revealed an unidentified variance of $361,640.46 between the general ledger cash balance and the bank cash balance.

As a result ofthe discrepancies noted above we are unable to determine the validity of the cash and cash equivalent balances reported in the financial statements.

2) Revenues/Receivable/Receipts

Audit tests for this control category revealed the following deficiencies:

a) Accounts receivable were not aged regularly, with older accounts receiving special attention.

b) The responsibility for maintaining detail accounts receivable records was not segregated from responsibilities pertaining to collections and general ledger.

c) The responsibility for ensuring collection, control, and deposit offunds was not segregated from responsibilities ofmaintaining accounting records.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 1998

FINANCIAL STATEMENTS FINDINGS AND QUESTIONED COSTS

CASH AND CASH EQUIVALENTS REVENUEIRECEIVABLEIRECEIPTS EXPENDlTURESlLlABILITIESIDISBURSEMENTS . EMPLOYEE COMPENSATION INFORMATION TECHNOLOGY CONTROLS Inadequate Internal Controls Finding Control Number: FS 550-98-01

3) ExpendituresILiabilitiesIDisbursements

Audit tests revealed that Accounts Payables were not properly reviewed to ensure that older purchase orders were still valid at fiscal year end. No monthly reconciliation verifying outstanding requisitions to encumbrances per general ledger was performed.

4) Employee Compensation! Information Technology Controls

Audit tests performed on the year end payroll reconciliation noted $8,802.81 of needed audit adjustments due to the failure ofthe payroll subsystem to properly interface to the general ledger system. The payroll subsystem interface procedures should be reviewed to identify system problems so that necessary corrections can be made.

The deficiencies noted in the above control categories occurred because management failed to ensure that adequate internal controls were implemented and operating effectively. Management should review its' sy~em ofinternal controls, initiate necessary changes, and monitor the effectiveness ofcontrols implemented.
GENERAL LEDGER Agency Funds Deficits Finding Control Number: FS 550-98-02
At June 30, 1998, the University had several agency funds, with deficit balances totaling $30,699.68. A number of funds have been in deficit positions for several years.
These deficiencies were the result of the University's disbursing funds prior to or in excess of the receipt of funds. The University should implement procedures to monitor the individual agency funds and to ensure that all funds are received prior to disbursements. The University should seek reimbursement of the deficit balances from the organizations involved.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30. 1998

FEDERAL AWARDS FINDINGS AND QUESTIONED COSTS

REPORTING SPECIAL TESTS AND PROVISIONS Inadequate Internal Controls and Compliance Deficiencies for FISAP Reporting and Exit Counseling Student Financial Aid Cluster Program Finding Control Number: FA 550-98-01

For the year under review, internal control and compliance testing procedures performed on the Student Financial Aid Cluster Program revealed deficiencies in the following control categories:

1) Reporting

Amounts reported on the Fiscal Operations and Application to Participate (FISAP) Report submitted by Southern Polytechnic State University to the U. S. Department of Education for the fiscal 1997-1998 award year, did not agree with the accounting records as indicated below:

FISAP Report Item

Report

Accounting Records

Difference

PELL Expenditures for F.Y. 98'

$ 975,074.00 $ 981,635.35 $ 6,561.35

State Grants and Scholarships to Undergraduates

$ 963,331.00 $1,168,921.35 $205,590.35

Federal regulation (34 CFR 675.19) requires the University to ensure that financial information reported is accurate and reconciled to the accounting records.

The differences between the accounting records and the

FISAP report were not reconciled. The University should

"

implement procedures to ensure that the FISAP Report is

accurately completed and supported by the accounting

records. Detailed reconciliations should be prepared for any

adjusted amounts and maintained as a part ofthe supporting

documentation.

2) Special Tests and Provisions

There were no controls in place to ensure that in-person exit counseling was conducted with Federal loan recipients who were graduating or would otherwise be enrolled less than half-time as required by Federal regulations.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FINDINGS AND OUESTIONED COSTS
YEAR ENDED JUNE 30, 1998

FEDERAL AWARDS FINDINGS AND OUESTIONED COSTS

REPORTING SPECIAL TESTS AND PROVISIONS Inadequate Internal Controls and Compliance Deficiencies for FISAP Reporting and Exit Counseling Student Financial Aid Cluster Program Finding Control Number: FA 550-98-01

2) Special Tests and Provisions

Our examination of twenty-five Student Financial Aid recipients identified four students who were required to have exit counseling. However, the University did not provide in-person exit counseling for these students, nor could the University document the mailing of any exit counseling information to these students.

The University should ensure that all students requiring exit counseling are properly identified and that exit counseling is conducted as required by Federal regulations.

Federal Programs!Awards Affected: Student Financial Aid Cluster Program
U.S. Department of Education Federal Pell Grant Program (CFDA 84.063) Federal Family Education Loan Program (CFDA 84.032) Federal Perkins Loan Program (CFDA 84.038)

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