Audit report, state of Georgia, Southern Polytechnic State University, Marietta, Georgia, year ended June 30, 1999

1\"600
. ~\
~101
\qq.et-q~
AUDIT REPORT STATE OF GEORGIA SOUTHERN POLYTECHNIC STATE UNIVERSITY MARIETTA, GEORGIA
l_ _YEAR ENDED JUNE 30, 1999 ~_
STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
254 WASH I NGTON STREJ;:T
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

7

D NOTES TO THE FINANCIAL STATEMENTS

8

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

24

SCHEDULES

1 SCHEDULE OF REQUIRED SUPPLEMENTARY INFORMATION

25

SCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO BUDGET

2

RESIDENT INSTRUCTION

26

3

LOTIERY FOR EDUCATION

29

4 CHANGES IN INVESTMENT IN PLANT

30

5 SCHEDULE OF FUND BALANCES

CURRENT FUNDS AND PLANT FUNDS

32

6 RECONCILIATION OF SALARIES AND TRAVEL

34

7 RECONCILIATION OF PER DIEM AND FEES

35

SOUTIIERN 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
SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

RUSSELL W. HINTON
STATE AUDITOR
(404) 6562174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.w., Suite 214 Atlanta, Georgia 30334-8400
February 4, 2000

Honorable Roy E. Barnes, Governor Members of the General Assembly of Georgia . Members ofthe Board ofRegents 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) ofSouthem Polytechnic State University as of and for the year ended June 30, 1999. These financial statements are the responsibility of the University's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with 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 ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As described in Note 1 to the financial statements, Georgia Law and State budgetary policy require the University to prepare its financial statements on a basis which is not ~onsistent 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 of fund 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 financial 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
99ARL-62

be decreased by $1,023,522.38 as of June 30, 1999, and the net change in fund balance for the year ended June 30, 1999, would be decreased by $78,067.42.
In our opinion, except for the effects on the financial statements of the matters discussed in the third and fourth paragraphs, the financial statements referred to above present fairly, in all material respects, the financial position of Southern Polytechnic State University as of June 30, 1999, 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.
The year 2000 supplementary infonnation on Schedule "1" is not a required part of the basic financial statements but is supplementary infonnation required by the Governmental Accounting Standards Board. We ,have applied certain limited procedures, which consisted principally ofinquiries of management regarding the methods ofmeasurement and presentation ofthe supplementary infonnation. However we did not audit the infonnation and do not express an opinion on it. In addition, we do not provide assurance that Southern Polytechnic State University is or will become year 2000 compliant, that the 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 are or will become year 2000 compliant.
Our audit was made for the purpose offonning an opinion on the financial statements taken as a whole. The accompanying combining statements (Exhibits E through G) and the financial schedules (Schedules 2 through 7) are presented for purposes of additional analysis and are not a required part ofthe financial statements of Southern Polytechnic State University. Such infonnation has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, except for the effects of the matters discussed in the third and fourth paragraphs, such infonnation is fairly presented in all material respects in relation to the financial statements taken as a whole.
Respectfully submitted,
~~.~ State Auditor
RWH:gp 99ARL-62

FINANCIAL STATEMENTS - 1-

SOUTHERN POLYTECHNIC STATE UNIVERSITY COMBINED BALANCE SHEET ALL FUND GROUPS JUNE 30.1999

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 Deposits Held in Custody for Others Due to Other Fund Groups Capital Lease Obligations
Total Liabilities
Fund Balances U. S. Government 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

$ 1,205,259.91 $

299.03

$

3,277.50

1,140,880.94

1,060,472.65

1,167,652.48

852,195.96

51,846.32

$ 3,250,183.13 $ 1,060,771.68 $ 1,170,929.98

$

622,870.38

84,367.09

1,553,349.00

$ 701,995.73 $

88,861.45

$ 2,260,586.47 $ 701,995.73 $

88,861.45

$

943,318.09

138,750.44

$ 358,775.95

$

989,596.66

$

989,596.66 $ 358,775.95 $ 1,082,068.53

$ 3,250,183.13 $ 1,060,771.68 $ 1,170,929.98

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)

$ 760,193.05 $

48,812.70

489,128.33 $

315,348.35

______ $

$ 70,912,714.99

142,548.76 $ 48,296.06

2,108,300.75 3,277.50
3,466,114.83 852,195.96 856,323.00
70,912,714.99

$ 760,193.05 $ 537,941.03 $

315,348.35 $ 70,912,714.99 $ 190,844.82 $ 78,198,927.03

$ 535,478.47 $

$

65,465.82

$

65,465.82 $ 535,478.47 $

$ 437,690.34 257,036.89
$ $ 694,727.23 $

2,462.56 $ 2,462.56 $

4,552.90
$ 4,552.90 $

$ .112,605.60 $ 1,275,507.35 84,367.09

26,959.46

78,239.22

1,553,349.00 78,239.22 856,323.00 26,959.46

26,959.46 $ 190,844.82 $ 3,874,745.12

$ 70,885,755.53 310,795.45 310,795.45 $ 70,885,755.53

$ 943,318.09 138,750.44 437,690.34 257,036.89
70,885,755.53 358,775.95
1,302,854.67
$ 74,324,181.91

$ 760,193.05 $ 537,941.03 $

315,348.35 $ 70,912,714.99 $ 190,844.82 $ 78,198,927.03

-3-

SOUTHERN POLYTECHNIC STATE UNIVERSITY COMBINED STATEMENT OF CHANGES IN FUND BAlANCES
All FUND GROUPS
YEAR ENDED JUNE 30. 1999

REVENUES AND OTHER ADDITIONS
Unrestricted Current Fund Revenues State Appropriations
Regular Federal Grants and Contracts State Grants and Contracts Private Gifts, Grants, and Contracts Investment Income
Endowment Other Net IncreaseIDecrease 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 Ananclng and Investment Commission Other Additions Proceeds from Sale of Plant Assets late Fees
Total Revenues and Other Additions
EXPENDITURES ANq 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' Revenues/Accounts Receivable'
Refunded to Grantors Administrative and Col1ectlon Costs loan Cancellations and Write-Offs Expended for Plant FaciUties
Capitalized Noncapitalized DlsposalslDeletionslAdjustments
Total Expenditures and Other Deductions
TRANSFERS BETWEEN FUNDS
Mandatory Investment Income for Endowment Principal
Nonmandatory Renewals and Replacements
Total Transfers Between Funds
Net Increasel(Decrease) for the Year
FUND BAlANCES JULY 1, 1998

CURRENT FUNDS

,UNRESTRICTED

RESTRICTED

LOAN FUNDS

$

31,411,033.33

$

7,209,439.51 1,478,028.80 1,384,926.74 $
25,062.24

-42,155.01 81,938.33

105,672.61

250.00
244.80 -453.75 12,437.91

$

31,450,816.65 $

10,203,129.90 $

$

29,204,028.96 $

1,850,736.65

33,138.56 88,290.84

9,933,706.74 175,287.88
17,764.00 $

305.00 12.783.96
23,324.44 2,447.09

$

31,176,195.01 $

10,126,758.62 $ _ _----'2=5::.:.n~1.=.:53~

$

$---=,-8-6,4,56=.60~

$---....;;.;;,:,-8.;6,;,4;.5;6;;.6=0... $

$

188,165.04 $

801,431.62

-1,267.19

-1,267.19 75,104.09 $ 283,671.86

-12,987.57 1,095,056.10

FUND BAlANCES JUNE 30. 1999 The notes to the financial statements are an Integral part of this statement
-4-

989,596.66 $

358,n5.95 $

1.082,068.53

EXHIBIT"B"

ENDOWMENT AND SIMILAR
FUNDS

UNEXPENDED

PLANT FUNDS RENEWALS AND REPLACEMENTS

INVESTMENT IN PLANT

TOTAL (Memorandum
Only)

$

$

10,245.00

-380.07

665,500.00 130,434.07 64,252.16 $

2,281.41

$

9,864.93 $

862,467.64 $

288.04 $
288.04 $

$
1,656,891.55 860,005.08 28,129.00
6,182,761.07 8,727,786.70 $

31,411,033.33
665,500.00 7,209,439.51 1,478,028.80 1,395,421.74
25,062.24 130,678.87
-833.82 12,437.91
128,057.80 81,938.33
1,656,891.55
860,005.08 28,129.00
6,182,761.07
2,281.41 305.00
51,267,137.82

$

0.00

$

39,137,735.70

1,850,736.65

175,287.88

$

705.25

33,843.81

88,290.84 17,764.00 23,324.44 2,447.09

860,005.08 $

28,129.00 5,4n.89
$

-29,011.20

888,134.08 5,477.89
-29,011.20

$

0.00 $

860,710.33 $

33,606.89 $

-29,011.20 $

42,194,031.18

$

1,267.19

$

1,267.19

$

11,132.12 $

683,595.11

$

694,727.23 $

$ $ 1,757.31 $ 705.25

86,456.60 86,456.60 53,137.75 $ 257,657.70

$
$ 8,756,797.90 $ 62,128,957.63

0.00 0.00 0.00 9,073,106.64 65,251,075.27

2,462.56 $

310,795.45 $

70,885,755.53 $

74,324,181.91

-5-

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES,
AND OTHER CHANGES YEAR ENDED JUNE 30, 1999

EXHIBIT .C"

Net Increasel(Decrease) in Fund Balances

$

188,165,04 $

The notes to the financial statements are an integral part of this statement 7

75,104,09 $ ....====26;0,;3=,2;;;;6;0;9,=13=

SOUTHERN POLYTECHNIC STATE UNIVERSITY
NOTES TO THE FINANCIAL STATEMENTS ruNE 30. 1999

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 ofthe Board ofRegents ofthe University System of Georgia reporting entity for financial reporting purposes because of the significance ofits 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 Re.porting 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 e~h 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.
-8-

SOUTHERN POLYTECHNIC STATE UNNERSITY
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1999

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 of gift 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 ofquasi-endowment funds may be expended. Restricted quasi-endowment 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 of institutional 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, staffmembers, 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 of the fiscal period.

-9-

SOUTHERN POLYTECHNIC STATE UNNERSITY
NOTES TO THE FINANCIAL STATEMENTS JUNE 30.1999

EXHlBIT "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 ofencumbrances as expenditures and liabilities is in confonnity with accounting practices prescribed or pennitted 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 offund balance. Further, revenue recognition for expenditure-driven grants should be based upon expenditures detennined 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$l,023,522.38 and a related net current year expenditure of$78,067.42 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 pennitted by statutes and regulations ofthe 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 plantfacilities through Current Funds and Plant Funds and also include expenditures made for plant facilities expended by the Georgia State Financing and Investment Commission on behalfofthe 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 ofthe agreement at the net present value ofthe future minimum lease payments, not to exceed the fair value ofthe leased property. The effect ofthis departure is deemed to be immaterial to the fair presentation ofthe financial statements.

-10 -

SOUTHERN POLYTECHNlC STATE UNNERSITY
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1999

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 of current 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 of income or a statement ofrevenues and expenses.

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 Board level and represents appropriations provided by the Amended Appropriations Act of 1998-1999. The appropriated budget covers current funds and plant funds, except for Auxiliary Enterprises and Student Activities which are not subject to appropriation. The allocation ofthe 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 of anticipated 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

$ 150.522.41

Operating Expenses: Education, General and Departmental Services Sponsored Operations

$=122.055.01 $ 797.570.33

Capital Outlay

$ = 122.053.97

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

CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist ofpetty cash, demand deposits and temporary investments in authorized financial 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 ofRegents authorizing resolutions. Gains and losses on investment transactions are accounted for in the funds where such assets are recorded.

- 11 -

SOUTHERN POLYTECHN1C STATE UNIVERSITY
NOTES TO THE FINANCIAL STATEMENTS
JUNE 3Q, 1999

EXHIBIT "D"

NOTE I: SUMMARy OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE Accounts receivable consist of reimbursements due from Federal, State, local, and private grants and contracts, and other receivables disclosed from infonnation 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 infonnation and are presented only to facilitate financial analysis. The columns do not present infonnation 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 ofGeorgia Annotated Section 50-17-59:
(I) Bonds, bills, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
(2) aonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
(3) Bonds ofany public authority created by the laws ofthe State of Georgia, providing that the statute that created the authority authorized the use ofthe 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 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 Intennediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home {pan Mortgage Association, and the Federal National Mortgage Association.
-12 -

SOUTHERN POLYTECHNIC STATE UNNERSITY
NOTES TO THE FINANCIAL STATEMENTS
WNE30.1999

EXHIBIT"D"

'NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES (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 ofthe 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 of the 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, 1999, 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.

Cash Deposits

Carrying
Amount

Bank Balances

Risk Categories

1

2

3

$ 887,040.94 $ 1.509.044.43 $ 100,000.00 $===O~.O~O $ 1.409,044.43

CATEGORIZATION OF INVESTMENTS The carrying amounts of investment balances as ofJune 30, 1999, are categorized below:

- 13-

SOUTHERN POLYTECHNIC STATE UNIVERSITY
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1999

EXHIBIT "D"

NOTE 2: CUSTODIAL CREDIT RISKS OF CASH DEPOSITS AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS

T)!pe of Investment

Common Stock

$

Investments Not Subject to Categorizations:

Board ofRegents Balanced Income Fund Total Return Fund Short-Tenn Investment Fund

Risk Categories

1

2

3.277.50 $

0.00 $

Carrying

3

Amount

0.00 $

3,277.50

444,484.02 316,008.06 451.587.73

Total Investments

$ 1.215.357.31

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.

NOTE 3: INVESTMENT IN PLANT

The following is a summary of Investment in Plant fixed assets as of June 30, 1999:

Land Buildings Improvements Other Than Buildings Equipment Library Books and Collections

$ 753,396.56 49,416,410.72 3,049,947.13 13,483,650.47 4.209.310.11

Total Investment in Plant

$70.912.714.99

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 of any sums under such agreements beyond the fiscal year ofexecution if appropriated 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.

-14-

SOUTHERN POLYTECHNIC STATE UNIVERSITY
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1999

EXHIBIT"D"

NOTE 4: CAPITAL LEASES

As ofJune 30, 1999, future minimum lease payments under capital leases are as follows:

Fiscal Year Ending June 30

2000 2001

$ 19,959.56 6.999.90

Total Future Minimum Lease Payments

$ 26.959.46

NOTE 5: RISK MANAGEMENT

Southern Polytechnic State University is a participant in the Board ofRegents ofthe University System of Georgia Health Benefits Plan, which is a self-insurance program ofhealth and dental benefits for employees and retirees of the 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 financial statements of the Board of Regents of the 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 $1,000,000.00 per person and dental coverage up to an annual maximum of$I,OOO.OO per person. The Board ofRegents has contracted with Blue Cross Blue Shield of Georgia to process claims in accordance with the Health Benefits Plan as established by the Board ofRegents.

The Department ofAdministrative Services (DOAS) has the responsibility for the State ofGeorgia ofmaking and carrying out decisions that will minimize the adverse effects of accidenta110sses that involve State government assets. The State believes it is more economical to manage its risks intemallyand 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 ofRegents 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 ofprofessional liability for its employees was established by the Board ofRegents 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 ofthe performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.

- 15-

SOUTHERN POLYTECHNIC STATE UNIVERSITY
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1999

EXHIBIT "D"

NOTE6: RETmEMrnNIPLANS

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 of Georgia 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% of their 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 1999, the employer contribution rate was 11.95% for covered employees. In addition, the University contributed 3.46% 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

1999

100%

$ 1,782,285.01

1998

100%

$ 1,678,485.91

1997

100%

$ 1,557,845.21

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 ofRegents of the University System of Georgia, under which it may purchase annuity contracts for the pmpose 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 terms. 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 8.34% ofthe participating employee's earnable compensation. Employees contribute 5% of theirearnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.

- 16-

SOUTHERN POLYTECHNIC STATE UNNERSITY
NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 1999

EXHIBIT"D"

NOTE 6: RETmEMENIPLANS
REGENTS RETIREMENT PLAN
Funding Policy The University and the covered employees made the required contributions of $367,705.30 (8.34%) and $220,405.31 (5%), respectively.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Southern Polytechnic State University participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose 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 ofrequiring a lump sum distribution to the member in lieu ofmaking 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 1999 amounted to $52,160.89 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
NOTE7: LEAVEPOUCrnS
Employees earn annual leave ranging from one and one-quarter days to one and three-quarter days each month depending upon the employees' length ofcontinuous 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)
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.
- 17-

SOUTHERN POLYTECHN1C STATE UNNERSITY
NOTES TO THE FINANCIAL STATEMENTS
ruNE 30. 1999

EXHIBIT"D"

NOTE 7: LEAVB POLICIES
Certain employees who retire with a minimum ofthree months ofunused sick leave are entitled to additional service credit in the Teachers Retirement System of Georgia.
NOTE 8: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount 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 of the University System ofGeorgia), ifany, are generally considered to be actions against the State ofGeorgia. Accordingly, significant litigation, claims and assessments pending against the State ofGeorgia are disclosed in the State ofGeorgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 1999.
NOTE 9: 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, 1999, there were 49 employees who had retired or were disabled that were receiving these postemployment health and life insurance benefits. For the year ended June 30, 1999, Southern. Polytechnic State University recognized as incurred $252,391.06 of expenditures, which was net of $47,222.70 of participant contributions.
NOTE 10: ENROLLMENT
The equivalent full-time student enrollment of Southern Polytechnic State University was as follows:

- 18-

SOUTHERN POLYTECHNIC STATE UNNERSITY
NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 1999

NOTE 10: ENROLLMENT
Regular Tenn Fall Semester, 1998 Spring Semester, 1999
Average
Summer School, 1998

2,558 2,442

EXHIBIT "D"

- 19-

supPLEMENTARY INFORMATION - 21-

SOUTHERN POLYTECHNIC STATE UNIVERSITY COMBINING BALANCE SHEET
CURRENT FUNDS - UNRESTRICTEP JUNE 30,1999

EXHIBIT"E"

ASSETS Cash and Cash Equivalents Accounts Receivable Prepaid "ems Due from Other Fund Groups
Total Assets

RESIDENT INSTRUCTION

LOTTERY FOR EDUCATION

AUXILIARY ENTERPRISES

STUDENT ACTIVITIES

TOTAL

$ 227,423,36 $ 718,056,42 843,125.96 51,846,32

20,258,44 $

492,569,20 418,419,31
5,283,04

$ 465,008,91 4,405.21 3,786.96

$ 1,205,259,91 1,140,880,94 852,195.96 51,846,32

$ 1,840,452,06 $

20,258,44 $ 916,271,55 $ 473,201,08 $ 3,250,183.13

LIABILITIES AND FUND BALANCES
Liabilities Accounts Payable Student Deposits Deferred Revenue Tuition and Fees
Total Liabilities
Fund Balances Unrestricted

$ 573,098.12 $ 1,208,931,68
$ 1,782,029.80 $ 58,422,26

20,231.79 $ 20,231.79 $

20,986.65 $ 84,367,09

8,553,82 $ 622,870.38 84,367.09

180,605.58

163,811,74

1,553,349,00

285,959,32 $ 172,365.56 $ 2,260.586,47

26.65

630,312,23

300,835.52

989,596,66

Total Liabilities and Fund Balances

$ 1,840,452,06 $

20,258,44 $ 916,271.55 $ 473,201,08 $ 3,250,183,13

See notes to the financial statements,

-22-

SOUTHERN POLYTECHNIC STATE UNIVERSITY COMBINING STATEMENT OF CHANGES IN FUND BALANCES
CURRENT FUNPS - UNRESTRICTEP YEAR ENDEp JUNE 30.1999

EXHIBIT"P

FUND BALANCES JUNE 30. 1999

$

58,422.26 $

26.65 $

630,312.23 $ 300,835.52 $

989,596.66

See notes to the financial statements.

-23-

SOUTHERN POLYTECHNIC STATE UNIVERSITY COMBINING STATEMENT OF CURRENT FUNDS REVENUES, EXPENDITURES,
AND OTHER CHANGES UNRESTRICTED
YEAR ENDED JUNE 30.1999

EXHIBIT "G"

RESIDENT INSTRUCTION

LOTTERY FOR EDUCATION

AUXILIARY ENTERPRISES

STUDENT ACTIVITIES

TOTAL

REVENUES

State Appropriations Tuition and Fees Federal Grants and Contracts Private Gifts, Grants, and Contracts Sales and Services of Educational Activities Sales and Services of Auxiliary Enterprises Other Sources

$ 19,838,887,00 $ 6,730,945.47 35,764.26 139,523,62 10,066,31
1,486,734.42

274,000,00 $

$
2,142,409,55 16,750.89

$ 20,112,887,00

719,737,85

7,450,683,32

35,764.26

139,523.62

10,066,31

2,142,409,55

16,213,96

1,519,699.27

Total Revenues

$ 28,241,921.08 $ 274,000,00 $ 2,159,160.44 $ 735,951,81 $ 31,411,033,33

EXPENDITURES

Educational and General Instruction Public Service Academic Support Student Services Institutional Support Operation and Maintenance of Plant Scholarships and Fellowships
Auxiliary Enterprises Student Housing Food Services Stores and Shops Intercollegiate Athletics Other Service Units

$ 15,525,661,77 $ 9,244.81
2,528,306.02 2,499,197.27 4,499,307,76 2,841,665,72
542,207.00

228,556,90 45,416.45
$

$ 15,754,218,67

9,244,81

2,573,722,47

$ 483,465,26

2,982,662,53

4,499,307,76

2,841,665,72

1,000.00

543,207.00

755,457.11 255,867,67
70,406,24 396,673.40 372,332.23

755,457.11 255,867,67
70,406.24 396,673,40 372,332,23

Total Expenditures

$ 28,445,590.35 $ 273,973.35 $ 1,850,736.65 $ 484,465.26 $ 31,054,765.61

OTHER TRANSFERS AND ADDITIONS/(DEDUCTIONSl

Transfers for Renewals and Replacements Transfers in Lieu of State Appropriations Prior Period Adjustments (Net)
Remittances to the Board of Regents
of the University System of Georgia Prior Year's Unrestricted Fund Balance (Surplus)

$ 269,120.00 -53,307.92
-33,138.56

$

-86,456.60

$ -86,456.60

-70,522.00 $ -198,598,00

0.00

6,416.32

-1,615.92

-48,507,52

-33,138.56

Total Other Transfers and Additions/(Deductions)

$ 182,673.52

$ -150,562.28 $ -200,213.92 $ -168,102.68

Net Increase/(Decrease) in Fund Balances

$ -20,995.75 $

26.65 $ 157,861.51 $ 51.272.63 $ __1..8.8.,1..6.5..0.4...

See notes to the financial statements.

-24-

SOUTHERN POLYTECHNIC STATE UNNBRSITY

SCHEDULE "1"

SCHEDULE OF REQlJIREP SupPLEMENTARY INFORMATION

YEAR 2000 DISCLOSURES

YEAR ENDED ruNE 30. 1999

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 beyond calendar year 1999. Southern Polytechnic State University has completed an inventory of computer systems and other electronic equipment that may be effected by the year 2000 issue and that are necessary to conducting institutional 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 ofsystems to check for compliance.
Remediation Stage - The time when changes are made to systems and equipment.
Validation/Testing 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 ofthese 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.
Southern Polytechnic State University has identified the following financial systems requiring year 2000 remediation that are supported by the Board of Regents, University System of Georgia and have been remediated by the Board.
The College and University Fund Accounting System has been remediated, validated and tested.
The Regents Budget Reporting System has been remediated, validated and tested.
The Regents Payrol1/Personnel System has been remediated, validated and tested.
The Regents Property Inventory System has been remediated, validated and tested.
The Banner Student Information System is supported by SCT Banner, Inc. Their year 2000 version has been released and distributed to the University.
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.
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, 1999

REVENUES
State Appropriations Other Revenues Retained

CURRENT FUNDS UNRESTRICTED RESTRICTED

PLANT FUNDS RENEWALS AND
UNEXPENDED REPLACEMENTS

$ 19,838,887.00

$ 665,500.00 $

0.00

8,403,034,08 $ 9,933,706,74

132,715.48

$ 28,241,921,08 $ 9,933,706.74 $ 798,215,48 $

0._00_

EXPENDITURES
Personal Services: Education, General and Deparbnental Services Sponsored Operations
Operating Expenses: Education, General and Deparbnental Services Sponsored Operations
Capital Outlay Special Funding Initiative Year 2000 Project

$ 21,898,522.19 $ 1,136,251,41

5,824,753.01
630,665.15 91,650.00

8,797,455.33 $

860,005.08 $

33,606.89

$ 28,445,590.35 $ 9,933,706.74 $ 860,005.08 $ _ _.-;.;33;.:.;,6;.;.0.;;.;6'.;;.;89;...

Excess of Revenues over Expenditures

$

-203,669.27 $

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

0.00 $ -61,789.60 $ =======-=3=3=,6=0=6=.=8=9=

See notes to the financial statements.

-26-

SCHEDULE "2"

TOTAL

ADJUSTMENTS (1)

TOTAL (Budget Basis)

BUDGET

VARIANCEFAVORABLE (UNFAVORABLE)

$ 20,504,387.00 18,469,456.30 $

$ 20,504,387.00 $ 20,504,387.00 $

-239,480.11

18,229,976.19 17,317,375.00

0.00 912,601.19

$ 38,973,843.30 $

- - - " - - - - -239,480.11 $ 38,734,363.19 $ 37,821,762.00 $

912,601.19

$ 21,898,522.19 1,136,251.41
5,824,753.01 $ 8,797,455.33
893,611.97 630,665.15
91,650.00

$ 21,898,522.19 $ 22,164,468.00 $

1,136,251.41

985,729.00

-542,207.00

5,282,546.01 8,797,455.33
893,611.97 630,665.15
91,650.00

5,160,491.00 7,999,885.00
n1,558.00 632,072.00 107,559.00

265,945.81 -150,522.41
-122,055.01 -797,570.33 -122,053.97
1,406.85 15,909.00

$ 39,272,909.06 $

-542,207.00 $ 38,730,702.06 $ 37,821,762.00 $ _ _-.;;.90;;;.;8;.:.;,94~0';;';'..;.;06;...

$ -299,065.76 $

302,726.89 $ ===3,!:6:ii::61:..1=3=

$ =====3:!:i,6:=6=1.=13=

-27-

SOUTHERN POLTECHNIC STATE UNIVERSITY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO BUDGET
LOTTERY FOR EDUCATION YEAR ENDED JUNE 30. 1999

SCHEDULE "3"

REVENUES State Appropriations
EXPENDITURES Equipment, Technology and Construction
Trust Fund Special Funding Initiatives

CURRENT FUNDS UNRESTRICTED

BUDGET

VARIANCEFAVORABLE (UNFAVORABLE)

$

274,000.00 $

274,000.00 $- - - - - -0.0-0

$

174,000.00 $

174,000.00 $

99,973.35

100,000.00

0.00 26.65

Excess of Revenues over Expenditures

$

273,973.35 $

274,000.00 $ - - - - -2-6.6-5

$====2=6.=65==

$=========2=6.=65=

See notes to the financial statements.

-29-

SOUTHERN POLTECHNIC STATE UNIVERSITY CHANGES IN INVESTMENT IN PLANT . YEAR ENDED JUNE 30, 1999

Land Buildings Improvements Other Than Buildings Equipment Library Books and Collections
SUMMARY OF INVESTMENT College Capital Leases

BALANCE JULY 1,1998

CURRENT FUNDS

UNRESTRICTED

RESTRICTED

$

753,396,56

42,521,021,07

2,953,943.67

12,053,657,56 $

1,305,777.62 $

44,713,25

3,902,909.43

306,400,68

$

62,184,928.29 $

1,612,178.30 $ =======44~,7=13=,2=5=

$ 62,128,957,63 $ 55,970,66

1,612,178,30 $

44,713,25

$ 62,184,928.29 $

1,612,178,30 $ =====4..4...,.7..1..3=.2:=5=

See notes to the financial statements.

-30- .

SCHEDULE -4-

ADDITIONS

PLANT FUNDS

RENEWALS AND

UNEXPENDED

REPLACEMENTS

GEORGIA STATE FINANCING AND
INVESTMENT COMMISSION

DEDUCTIONS DISPOSALS! DELETIONS! ADJUSTMENTS

$

0.00 $

$

740,288.62 $

8,377.00 $

6,146,724.03

90,070.46

5,933.00

29,646.00

13,819.00

36,037.04

BALANCE JUNE 30,1999
753,396.56 49,416,410.72
3,049,947.13 13,483,650.47 4,209,310.11

$

860,005.08 $

28,129.00 $

6,182,761.07 $

0.00 $ =====7:=0,=9=12=,7=1=4.:=99=

$

860,005.08 $

28,129.00 $

6,182,761.07 $

-29,011.20 $ 29,011.20

70,885,755.53 26,959.46

$

860,005.08 $

28,129.00 $

6,182,761.07 $

0.00 $======7=0,=91=2;0,;,7=1.4..=99=

- 31 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FUND BALANCES
CURRENT FUNDS AND PLANT FUNDS JUNE 30,1999

NET INVESTMENT IN PLANT Investment in Plant Facilities
RESTRICTED Designated for Subsequent Years' Expenditures
UNRESTRICTED Designated For Athletic Facility For Intercollegiate Athletics For Recreation and Wellness Center For Renewals and Replacements Reserve For Subsequent Years' Expenditures For Uncollectible Accounts For Year 2000 Project SurpluslDeficit Regular Lottery for Education

RESIDENT INSTRUCTION

CURRENT FUNDS

UNRESTRICTED

LOTTERY FOR

AUXILIARY

EDUCATION

ENTERPRISES

$

32,179.34

$

31,173.83

35,909.00

596,438.62 1,694.27

-8,660.57 _____ $

$

58,422.26 $

..;;;2;,;;;6.;,;;.65;;.. 26.65 $ _---.;6;,;;.30;;.:.,3;;;.;1~2.;;;.23;;..

$

58,422.26 $

630,312.23

See notes to the financial statements.

- 32-

SCHEDULE "5"


STUDENT ACTIVITIES

RESTRICTED

UNEXPENDED REGULAR

PLANT FUNDS RENEWALS AND REPLACEMENTS

INVESTMENT IN PLANT

TOTAL

$ 70,885,755.53 $ 70,885,755.53

$ 358,n5.95

$ _--.;3:;,;:5;,;;.8:.;,..7.;.,;75:;:.;.9:;,;:5;.,.

$ 35.751.44 98,736.27
165.578.14 769.67

$

310,795.45

$

35.751.44

32,179.34

98.736.27

310.795.45

762.016.76

33,637.n

35,909.00

$ 300,835.52

$

2,462.56

$

2,462.56 $ _ _.;;3.;.;10;.:;.7.;;9.;;;.;5...;.;45;....

-6.198.01 26.65
$ 1,302,854.67

$ 300,835.52 $ 358,n5.95 $

2,462.56 $

310,795.45 $ 70.885,755.53 $ 72,547,386.15

- 33-

SOUTHERN POLYTECHNIC STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30.1999

SCHEDULE "6"

Totals per Annual Supplement

Accruals Prepaid Salaries June 30, 1999

Adjustments

Shared Services on Jointly Staffed Personnel

Georgia Institute of Technology

Papp,

Daniel S.

Kennesaw State University

Dennison,

Wayne

Other

Fischer,

Robert J.

SALARIES

$

20,037,404.87 $

TRAVEL 230,349.44

-679,345.68

9,629.31 7,350.00

-176.02

$

19,375,038.50 $ ====23:::0=,1=73=.4:::::2=

See notes to the financial statements.

- 34-

SOUTHERN POLTECHNIC STATE UNIVERSITY RECONCILIATION OF PER DIEM AND FEES . YEAR ENDED JUNE 30,1999

SCHEDULE "7"

Totals per Annual Supplement
Adjustments Dennison, Wayne

FEE AMOUNT

EXPENSE AMOUNT

$

793,681.22 $

23,341.80 $

-7,912.28

TOTAL 817,023.02
-7,912.28

$

793,681.22 $

15,429.52 $ ====80=9:l::,1=10:=.7:::4=

See notes to the financial statements.

- 35-

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

SOUTHERN POLYTECHNIC STATE UNNERSITY
AUDITEE'S RESPONSE
SUMMARy SCHEDULE OF PRIOR YEAR FINPlNGS AND QUESTIONED COSTS
YEAR ENDED ruNE 30. 1999

PRIOR YEAR FlNANCIAL STATEMENT FINPlNGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

550-96-01
550-96-02 FS-550-97-01
FS-550-98-01 FS-550-98-02

Significantly Differing Corrective Action Implemented See Corrective Action/Responses Previously Reported Corrective Action Implemented Significantly Differing Corrective Action Implemented :.. See Corrective Action/Responses Partially Resolved - See Corrective Action/Responses Unresolved - See Corrective Action/Responses

CORRECTIVE ACTIONIRESPONSES

FUND EQUITIES Deficit Fund Balances Finding Control Number: 550-96-01

The Vice President for Development and University Relations declined on behalf ofthe Board of Development and University Relations to remit funds to cover this finding. These expenditures could have been legitimately paid from general operating funds. After consultation with the Department ofAudits, the University chose to cover this deficit with current year general operating funds.

The University has taken active steps to ensure that under no circumstances will sponsored programs be permitted to operate in a deficit position. The Director of Grants and Sponsored Programs will monitor sponsored program costs to ensure that program expenses are in compliance with the funding agency agreements. The Director ofGrants and Sponsored Programs will ensure that invoicing and reimbursements are completed in a timely manner.

REVENUES/RECENABLESIRECEIPTS Deficit Cash BalanceslInadequate Accounts Receivable Documentation Finding Control Number: FS-550-97-01

The Vice President for Development and University Relations declined on behalf ofthe Board of Development and University Relations to remit funds to cover this finding. These expenditures could have been legitimately paid from general operating funds. After consultation with the Department ofAudits, the University chose to cover this deficit with curr~t year general operating funds.

- 1-

SOUTHERN POLYTECHNIC STATE UNNERSITY
AUDITEE'S RESPONSE
SUMMARy SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTIONIRESPONSES

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

The University has taken active steps to ensure that under no circumstances will sponsored programs be permitted to operate in a deficit position. The Director of Grants and Sponsored Programs will monitor sponsored program costs to ensure that program expenses are in compliance with the funding agency agreements. The Director of Grants and Sponsored Programs will ensure that invoicing and reimbursements are completed in a timely manner.

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

1) Cash and Cash Equivalents

All monthly bank reconciliations are complete and current as of January 20, 2000. The unidentified variance has been identified except for $3,172.91. After exhaustive efforts, this remains the consistent unidentified variance for the most recent nine months. The monthly reconciliation function has been reassigned to the Senior Administrative Secretary (ten years of university fund accounting experience) who reports directly to the Controller. This function will continue under the Controller's direct oversight and review.

2) Revenues/Receivable/Receipts

The revenue collection area has been divided into three main areas of focus.

a) The Student Accounts Coordinator coordinates the student administration software and serves as the liaison between the financial aid function, Bursar function and accounting functions. This position's primary focus is to ensure timely and accurate recording of

-2-

SOUTHERN POLYTECHNIC STATE UNNERSITY
AUDITEEiS RESPONSE
SUMMARy SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTIONIRESPONSES

CASH AND CASH EQUNALENTS REVENUES/RECEIVABLES/RECEIPTS EXPENDITURESILIABILITIESIDISBURSEMENTS EMPLOYEE COMPENSATION INFORMATION TECHNOLOGY CONTROLS Inadequate Internal Controls Finding Control Number: FS-550-98-01

disbursements, refunds and accounts receivables that result from the current registration software.

b) The Collections Coordinator will oversee, monthly short-term debt collection due diligence (less than 90 days). Any debts owed to the University will I) be turned over to the newly contracted Collection Agency or 2) the State Attorney General's office for legal collections.

c) The Bursar will oversee the accounting of all in-coming funds to the University. This function will coordinate items A and B above and all other debts and/or incoming revenues due to the University.

3) ExpenditureslLiabilitieslDisbursements

Outstanding Accounts Payables are now reviewed monthly and annually to ensure that only valid account payables remain outstanding.

4) Employee Compensation! Information Technology Controls

Controls and 'check points' have been implemented to ensure that reconciliation is done both on the payroll ~ubsystem and on the accounting subsystem. In addition, immediate contact is made to the Board of Regents OIT department and a solution is found before proceeding to the next step.

-3-

SOUTHERN POLYTECHNIC STATE UNNERSITY
AUDITEE'S RESPONSE
SUMMARy SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTIONIRESPONSES

GENERAL LEDGER Agency Funds Deficits Finding Control Number: FS-550-98-02

The Agency Fund deficits occurred in prior years dating back to 1993. It appears that the payroll department did not have the correct account numbers assigned in the payroll subsystem; therefore, the payroll deductions and/or contributions were recorded in the wrong agency accounts.

In order to address this issue, an accountant will be assigned to research these accounts by tracing the discrepancies and taking appropriate action to correct the deficits.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-550-97-0l FA-550-97-02 FA-550-98-0l

Further Action Not Warranted Further Action Not Warranted Unresolved - See Corrective Action/Responses

CORRECTIVE ACTIONIRESPONSES

REPORTING SPECIAL TESTS AND PROVISIONS Inadequate Internal Controls and Compliance Deficiencies for FISAP Reporting and Exit Counseling FInding Control Number: FA-550-98-01

1) FISAP Reporting

The Student Accounts Coordinator functions as a liaison between the financial aid office and the accounting office. This individual is assigned the responsibility to facilitate the reconciliation ofthe cluster Federal programs prior to the close ofthe fiscal year accounting records.

At fiscal year end, a draft copy of the FISAP report will be prepared and reviewed with the Controller (and the Director of Financial Aid if needed). This will ensure that receipt of and disbursement ofFederal funds have been properly

-4-

SOUTHERN POLYTECHN1C STATE UNIVERSITY
AuPITEE'S RESPONSE
SUMMARy SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

CORRECTIVE ACTIONIRESPONSES

REPORTING SPECIAL TESTS AND PROVISIONS Inadequate Internal Controls and Compliance Deficiencies for FISAP Reporting and Exit Counseling Finding Control Number: FA-550-98-0l

recorded and accounted for prior to the final close ofthe books. Any discrepancies will be corrected and correctly included on the subsequent FISAP report which is due to the Department of Education each October.

2) Exit Counseling

The 1998-99 Federal Student Handbook. Chapter
1 provides an exception to the requirement for
conducting exit counseling in person. A school is allowed to use computer-assisted means to conduct exit counseling. The electronic exit counseling does not have to take place at the school. For example, a school may provide personalized exit counseling through a web site that students can access from off campus. However the school must document that the exit counseling took place and that knowledgeable personnel were standing by to answer questions, as needed. The University will re-write the web page so that documentation is captured to verify that borrowers have completed the exit counseling process.

-5-

SECTION ill CURRENT YEAR FINDINGS AND QUESTIONED COSTS

SOUTHERN POLYTECHN1C STATE UNNERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30.1999
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
REVENUEIRECEIVABLESIRECEIPTS EXPENDITURESILIABILITIESIDISBURSEMENTS Inadequate Accounting Procedures Finding Control Number: FS-550-99-01
For the year under review, audit tests revealed deficiencies in the following internal control categories:
REVENUEIRECEIVABLESIRECEIPTS
Accounts receivable were not aged regularly, with older accounts receiving special attention. In addition, six (6) of fifty (50) cash receipts tested did not have adequate documentation.
EXPENDITURESILIABILITIESIDISBURSEMENTS
A cash disbursements sample of fifty (50) items revealed that thirteen (13) disbursements were made without appropriate administrative approval, five (5) disbursements were supported by only copies of invoices instead of original invoices, and one (1) disbursement for travel reimbursement was made and was not supported by appropriate mileage documentation.
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 system ofinternal controls, initiate necessary changes, and monitor the effectiveness ofcontrols implemented.
GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding Control Number: FS-550-99-02
For the year under review, equipment inventorytests offive (5) individually significant items and seventy-five (75) randomly selected items were utilized to determine the accuracy and validity of the University's equipment inventory records. The results ofour testing procedures disclosed the following deficiencies:
(1) Two (2) items could not be located.
(2) Eighteen (18) items had been surplused but were not removed from the equipment inventory records.
(3) Seven (7) items were designated as stolen but were not removed from the equipment inventory records.
(4) Ten (10) items did not have adequate descriptions in the inventory records.
(5) Five (5) items had no audit trail to the original invoice.
- 1-

SOUTHERN POLYTECHNIC STATE UNIVERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999
.FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
GENERAL FIXED ASSETSIPROPERTY MANAGEMENT Inadequacies in Operation ofProperty Management System Finding Control Number: FS-550-99-02
In addition, the equipment amount reflected on the University's financial statements was not reconciled to the accounting records.
It was also noted that a complete physical inventory of equipment had not been taken by the University since Fiscal Year 1997.
These deficiencies occurred because ofmanagement's failure to adequately monitor the subsidiary equipment inventory records. The University should take a complete physical inventory of equipment. In addition, the University should establish appropriate procedures to strengthen internal accounting controls and to ensure that assets are safeguarded against loss from unauthorized use or disposition.
GENERAL LEDGER Agency Fund Deficits Inadequate Documentation ofNew Agency Funds Finding Control Number: FS-550-99-03
At June 30, 1999, the University had several agency funds with deficit balances totaling $65,486.16. A number of funds have been in deficit positions for several years.
These deficits were the result ofthe University's disbursing funds prior to or in excess ofthe 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 ofthe deficit balances from the organizations involved.
In addition: the University established forty-five (45) new Agency Funds in the year under review. The
University could not provide adequate documentation for Forty (40) ofthe new Agency Funds. The B.Qm:l
ofRe~ts Business Procedures Manual states that ''before establishing an agency account, each institution should determine that its relationship with the third party is that of custodian or fiscal agent. When this relationship has been determined, the institution should obtain, where practical, complete information on the terms and conditions of the agency relationship, the purpose of the funds being placed, and their ultimate disposition. Complete files should be maintained for all agreements, letters, or other documents, for guidance in the proper handling of funds."
-2-

SOUTHERN POLYTECHNIC STATE UNNERSITY
SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30. 1999

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

REPORTING Inadequate Internal Controls and Compliance Deficiencies for FISAP Reporting Student Financial Aid Cluster Program Finding Control Number:FA-550-99-01

For the year under review, amounts reported on the following reports for Federal Financial Assistance Programs submitted by the University to the U. S. Department of Education were not reconciled as follows:

1) The Student Payment Summary (SPS) report, which reports Pell Grant expenditures for the year, was not reconciled to the accounting records.

2) Pell Grant expenditures reported on the Fiscal Operations and Application to Participate (FISAP) were not reconciled to the accounting records.

Federal regulations (34 CFR 668.24 and 690.83) require the University to ensure that financial information reported is accurate and reconciled to the accounting records. Management should ensure that reports are reconciled to the accounting records prior to being submitted to the U. S. Department of Education.

Federal Programs/Awards Affected: Student Financial Aid Cluster Program
U. S. Department of Education Federal Pell Grant Program (CFDA 84.063)

SPECIAL TESTS AND PROVISIONS Inadequate Internal Controls and Compliance Deficiencies for Promissory Notes and Exit Counseling Student Financial Aid Cluster Program Finding Control Number: FA-550-99-02

Our examination of twenty-five (25) Student Financial Aid recipients identified one (1) student who was

required to have exit counseling. The University did not provide exit counseling for this student. Federal

regulations require the University to conduct exit counseling and maintain documentation that the University

has complied with the requirements.

.

In addition, our examination oftwenty-five (25) Student Financial Aid recipients identified seven (7) students who received Perkins Loan Funds for which the University could not provide promissory notes. Federal regulation (34 CFR 674.19) requires the University to keep the original promissory notes and repayment schedules in a locked, fireproof container until (a) the loans are satisfied; or (b) the original documents are needed in order to enforce the loan obligation.

Management should implement policies and procedures to ensure that the University is in compliance with Federal regulations.

-3-