Southern Polytechnic State University, Marietta, Georgia, report on review of the financial statements for the fiscal year ended June 30, 2002

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DEPARTMENT OF: AUDITS AND,ACCOUNTS

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SOUTHER"! POLYTECHNIC .STATE UNIVERSITY

, MARIEITA, GEORGIA

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REPORT ON REVIEW

OF THE FINANCIAL STATEMENTS ,

FORTHE FISCAL YEAR ENDED JUNE' 30, 2' 002

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Russell W. Hinton State Auditor ' '-

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SOUTHERN POLYTECHNTC STATE UNNERSITY -TABLE OF CONTENTS-

SECTION I

FINANCIAL

INDEPENDENT ACCOUNTANTS COMBINED REPORT ON REVIEW OF BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENTS DISCUSSION AND ANALYSIS

2

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

11

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

12

C STATEMENTOFCASHFLOWS

13

D NOTESTOTHEFINANCIALSTATEMENTS

14

SUPPLEMENTARY INFORMATION

SCHEDULES

SCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO

BUDGET - (NON-GAAP BASIS)

I

RESIDENT INSTRUCTION

31

2

LOTTERY FOR EDUCATION

32

3 RECONCILIATION OF SALARIES AND TRAVEL

33

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

SOUTHERN POLYfECHNIC STATE UNIVERSITY - TABLE OF CONTENTS SECTION III
CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS
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SECTION! FINANCIAL
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STATE AUC'ITQR cCMl 6~217

DEPARTl\.1ENT OF AUDITS AND ACCOUNTS
254 \\'J..,hmgron Street S W Suue 214 Atlanta, Georg1J 30334-8400
December 27, 2002

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the Umvers1ty System of Georgia
and Honorable Lisa A Rossbacher, President Southern Polytechmc State Umversny
INDEPENDENT ACCOUNTANT'S COMBINED REPORT ON REVIEW OF BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen
We have reviewed the accompanying basic financial statements (Exh1b1ts A through D) ofSouthern Polytechmc State Umvers1ty, an orgaruzatlonal urut of the State of Georgia, as of and for the year ended June 30, 2002, in accordance with Statements on Standards for Accounting and ReVJew Services issued by the Amencan lns!Jtute ofCernfied Pubhc Accountants All mformat1on included in these financial statements 1s the representation ofthe management ofSouthern Polytechmc State Umvers1ty
A review consists pnnc1pally ofinqumes ofUmvers1ty personnel and analytical procedures apphed to financial data It 1s substantially less in scope than an audit in accordance with auditing standards generally accepted in the Uruted States of Amenca, the obJechve ofwh1ch 1s the expression of an op1ruon regarding the financial statements taken as a whole Accordingly, we do not express such an op1mon
Based on our review, we are not aware of any matmal mod1ficauons that should be made to the accompanying financial statements in order for them to be in conformity with accounting pnnc1ples generally accepted in the Umted States of Ammca
As descnbed in Note \, the Umvers1ty adopted the prov1s1ons of Governmental Accounting Standards Board (GASB) Statement No 35, Baszc Fznanczal Statements - and Management's Dzscusszon and Ana(vs1s -for Public Colleges and Umversllles, as amended by GASB Statement No 37, Basic Financial Statements - and Management's Discusszon and Ana(vsis -for State and Local Governments, and GASB Statement No 38, Certain Fznanc1al Statements Note Disclosures, as of July I. 2001, to implement a new financial reporting model
02ARL-66

Management's D1scuss10n and Analysts 1s not a requtred part of the baste financial statements but 1s supplementary mformatton required by the GASB We have apphed ccrtam hm1ted procedures, which consisted pnnc1pally of mqumes of management regardmg the methods ofmeasurement and presentation of this supplementary mformatton, and we are not aware of any matenal mod1ficat1ons that should be made thereto
Our review was made for the purpose of expressmg hm1ted assurance that there are no matenal mod1ficat1ons that should be made to the financial statements m order for them to be m conformity with accountmg pnnc1ples generally accepted m the Uruted States ofAmenca The accompanymg supplementary mformat10n (Schedules I through 3) 1s presented for add1t1onal analysis purposes. Such mformatlon has been subjected to the mqwnes and analytical procedures applted m the reVIew ofthe financial statements, and we are not aware of any matenal mod1ficattons that should be made to such data
Respectfully submllted,
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RWH.gp 02ARL-66

State Auditor

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REQUIRED SUPPLEMENTARY INFORMATION
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SOUTHERN POLYTECHNIC STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Southern Polytechruc State Umvers1ty 1s one of the 34 mst1tullons of the Umvers1ty System of Georgia Located m Manetta, Georgia, the Uruvers1ty was founded m 1948 as a two-year d1v1S1on of Georgia Institute ofTechnology The Umvers1ty became accredited as a four-year college m 1970, and was one of the first colleges m the nallon to offer the bachelor of Enginecnng Technology
degree. In the summer of 1980, Southern Polytechruc State Umvers1ty officially became the 14th
semor college and the 33nl mdependent unit of the Uruverslly System The campus currently encompasses more than 230 acres and contains 35 bmldmgs

Southern Polytechnic State Umvers1ty offers both baccalaureate and masters degrees that contain a balance oftechrucal, profess10nal and hberal arts courses with an emphasis on relevant, apphcallononented teaching. The Uruvers1ty's uruque rruss1on attracts a Jughly quahfied faculty and a student body that has had the tJ;irrd Jughest SAT average amongst System 1nslltullons for the last three years The Umvers1ty's growth over the last three years has been relallvely stable with a shght upward trend as shown by the companson numbers that follow

Faculty

Students

FY2002 FY2001 FY2000

136

3,685

137

3,522

135

3,546

Overview ofthe Financial Statements and Finandal Analysis

Southern Polytechruc State Uruvers1ty 1s proud to present its finanbal statements for fiscal year 2002. The emphasis of discussions about these statements will be on current year data There are three financial statements presented: the Statement of Net Assets; the Statement of Revenues, Expenses and Changes m Net Assets; and, the Statement of Cash Flows Tills d1scuss1on and analysis of the Umvers1ty's fmanc1al statements proVJdes an overVJew of its fmanc1al aclIVJlles for the year. Southern Polytechruc State Uruvers1ty has elected to not restate pnor pcnods for purposes of prov1dmg the comparallve data for tlus Management's D1scuss1on and Analysis. However, m future years, when pnor penod mformallon 1s available, a comparative analysis will be presented.

Statement ofNet Assets

The Statement ofNet Assets presents the assets, hab1h1Ies, and net assets ofthe Umvers1ty as of the end of the fiscal year. The Statement of Net Assets 1s a pomt of lime financial statement The purpose ofthe Statement ofNet Assets 1s to present to the readers ofthe financial statements a fiscal snapshot of Southern Polytechruc State Umvers1ty. The Statement of Net Assets presents end-of-

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year data concerning Assets (current and non-current), L1ab1ht1es (current and non-current), and Net Assets (assets minus hab1ht1es) The difference between current and non-current assets will be discussed m the notes to the financial statements

From the data presented, readers of the Statement of Net Assets are able to determme the assets available to continue the operallons of the instltul!on They are also able to determme how much the msl!tul!on owes vendors, mvestors and lendmg msl!tut1ons

Fmally, the Statement ofNet Assets provides a picture ofthe net assets (assets mmus hab1hlles) and their availab1hty for expenditure by the mslltullon Net assets are d1v1ded mto three maJor categones The first category, mvested m capital assets, net ofdebt, proV1des the IIlSIItut1on's eqwty m property, plant and equipment owned by the mst1tutJon. The next asset category 1s restncted net assets, wluch 1s d1V1ded mto two categones, nonexpendable and expendable. The corpus of nonexpendable restncted resources 1s only ava!lable for mvestment purposes Expendable restncted net assets are available for expenditure by the mstltullon but must be spent for purposes as determined by donors and/or external enlitles that have placed tune or purpose restncllons on the use of the assets. The final category 1s unrestncted net assets. Unrestncted assets are available to the mstJtutJon for any lawful purpose of the mslitulion

Statement of Net Assets, Condensed (thousands of dollars)

Assets Current Assets Capital Assets, Net Other Assets

$ 6,896 47,257 2,080

Total Assets

$ 56,233

Liabilities Current L1ab1h1Ies Non-Current L!ab11!1Ies

$ 2,771

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Total Liabilities

$ 2,993

Net Assets Invested m Capital Assets, Net of Debt Restncted - Nonexpendable Restncted - Expendable Loans Unrestncted
Total Net Assets

$ 47,257 1,369
2,338 2,276
$ 53 240

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Statement ofRevenues, Expenses and Changes in Net Assets

Changes m total net assets as presented on the Statement of Net Assets are based on the act1v1ty presented m the Statement of Revenues, Expenses and Changes m Net Assets. The purpose of the statement 1s to present the revenues received by the mstltutlon, both operating and nonoperatlng, and the expenses prud by the mstltutlon, operatmg and nonoperatmg, and any other revenues, expenses, gams and losses received or spent by the 1nstltu!Ion Generally speak.mg operatmg revenues are received for prov1dmg goods and services to the vanous customers and constituencies of the 1nstltut1on Operatmg expenses are those expenses prud to acquire or produce the goods and services provided m return for the opera!Ing revenues, and to carry out the m1ss1on of the mstltutlon Nonoperatmg revenues are revenues received for which goods and services are not provided For example state appropnatlons arc nonoperatmg because they are provided by the Legislature to the mstltul!on without the Legislature drrectly rece1vmg commensurate goods and services for those revenues

Statement of Revenues, Expenses and Changes m Net Assets, Condensed (thousands of dollars)

Operating Revenues Operating Expenses

$ 14,943 39.821

Operating Loss

$ -24,878

Nonoperatmg Revenues and Expenses

24,898

Income (Loss) Before Other Revenues, Expenses, Gruns or Losses

$ 20

Other Revenues, Expenses, Gruns or Losses

12.783

Increase m Net Assets
Net Assets at Beginrung of Year, as Ongmally Reported

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$ 12,803

$ 88,969

Cumulative Effect of Changes m Accounting Pnnc1ple

-48.532

Net Assets at Beginrung of Year Restated
Net Assets at End of Year

$ 40.437
$ 53,240

The Statement of Revenues, Expenses and Changes m Net Assets reflects a pos1t1ve year with an mcrease m the net assets at the end ofthe year Some lughhghts ofthe mformatJon presented on the Statement of Revenues, Expenses and Changes m Net Assets are as follows

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Revenue By Source (thousands of dollars) For The Ycar Ended June 30, 2002

Operatmg Revenue TU1t1on and Fees Grants and Contracts Sales and Services of Educational Departments Aux1hary Other
Total Operatmg Revenue
Nonoperatmg Revenue State Appropnatlons Gifts Investment Income Other
Total Nonoperatmg Revenue
Total Revenues

s 8,397
2,526 908
2,768 344
$ 14,943
$ 22,067 3,090 1 -260
$ 24,898
$ 39,841

Expenses (thousands of dollars) For The Year Ended June 30, 2002

Operatmg Expenses Instruction Research Pubhc Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Aux1hary Enterpnses Unallocated Depreciation

$ 17,927

359

,

454

3,079

3,134

4,582

3,161

2,069

2,722

2,334

Total Operating Expenses

$ J2.~,1

Statement ofCash Flows

The final statement presented by the Southern Polytechruc State Uruvers1ty 1s the Statement ofCash Flows The Statement of Cash Flows presents detailed mformatlon about the cash actlVJty of the 1nst1tutlon dunng the year. The statement 1s d1v1ded mto five parts The first part deals with operatmg cash flows and shows the net cash used by the operatlng acuvit1es of the institution The second section reflects cash flows from non-capital financmg act1v11.les This section reflects the

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cash received and spent for nonoperatmg, non-mvestmg, and non-capital fmancmg purposes The third sect10n reflects the cash flows from mvestmg act1v1t1es and shows the purchases, proceeds, and mterest received from mvestmg actlvilles The fourth sect10n deals with cash flows from capital and related financmg act1v1tJes Tius section deals with the cash used for the acqws1tJon and construct10n ofcapital and related items The fifth section reconciles the net cash used to the operatmg mcome or loss reflected on the Statement of Revenues, Expenses and Changes m Net Assets

Cash Flows for the Year Ended June 30, 2002, Condensed (thousands of dollars)

Cash Provided (Used) By: Operatmg ActlVJtles Non-Capital Fmancmg ActJVJtles Investmg Act1VJtles Capital and Related Fmancmg ActlVJtles

$ -22,900 24,919 -2,084 -708

Net Change m Cash Cash, Begmmng of Year
Cash, End of Year
Capital Assets

$ -773 1,691
$ 918

The Umvers1ty had two s1gmficant capital asset add1t1ons for fac1ht1es m Fiscal Year 2002 The Arclutecture Bmldmg as well as the Facihties Management Complex were both completed and placed mto seTVJce dunng Fiscal Year 2002.

Southern Polytechmc State Umvers1ty also completed major renoval!ons to the Crawford Laboratory Bmldmg m Fiscal Year 2002 The $659,506 00 for tlus project was funded by Major Repair and Renovat10n (MRR) State Appropnat1on funds Other renovauons funded by the Umvers1ty's MRR allocation mcluded $45,734.00 for regulatory and mfrastructure needs Projected funding for Fiscal Year 2003 will be provided by Georgia State Fmancmg and Investrnel}I Comrmss1on and IS estunated to be approximately 40% of the funds received m Fiscal Year 2002

For add111onal mformat1on concernmg Capital Assets, see Notes 1 and 5 in the notes to the fmanc1al statements

Economic Outlook

The Umvers1ty 1s not aware ofany currently known facts, dec1s10ns orcond11Jons that are expected to have a s1gmficant effect on the financial pos1Uon or results of operations dunng tlus fiscal year beyond those unknown vanallons havmg a global effect on virtually all types ofb11Smess operauons. The Umvers1ty's overall fmanc1al pos1tJon 1s strong. Even with a s1gmficant reducuon m fundmg dunng the year, the Umversity was able to generate a modest increase m Net Assets The Umvers1ty anticipates the current fiscal year will be much hke last and Will maintain a close watch over resources to mamtam the Umvers1ty's ab1hty to react to unknown mternal and external issues.

Lisa A. Rossbacher, President Southern Polytechmc State Uruvers1ty

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BASIC FINANCIAL STATEMENTS
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SOUTHERN POLYTECHNIC STATE UNIVERSITY
STATEMENT OF NET ASSETS
JUNE 30 2002

EXHIBIT"A"

ASSETS
Current Assets Cash and Cash Equivalents Short-Term Investments Accounts Receivable, Net Federal Fmanaal Assistance Other Prepaid Items
Total Current Assets
Noncurrent Assets Investments Notes Receivable, Net Caprtal Assets, Net /See Note 5)
Total Noncurrent Assets
Total Assets
LIABILmES
Current L,abllrt1es Contracts Payable Salanes Payable Payroll Withholdings Accounts Payable Deferred Revenue Funds Held for Others Compensated Absences Other L1ab1lrtJes
Total Current l.Jab1lrtJes
Noncurrent L1ab1hbes Compensated Absences
Total l.Jab1hbes
NET ASSETS
Invested m Caprtal Assets, Net of Related Debt Restncted for
Nonexpendable Expendable Unrestncted

$

918,372 20

1,963,435 53

1, 169,399 65 1,W2,179 50
852,279 93

$ 6,895,666 81

$ 1,398,986 58 681,915 83
47,256,708 10
$ 49,337,610 51
$ 56,233,2TT 32

$

14,963 30

75,282 77

74,967 65

325,108 57

1,711,794 61

-95,993 09

580,999 54

83,882 75

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$ 2,771,00610

222,313 72

$ 2,993,319 82

$ 47,256,708 10
1,369,387 04 2,337,675 53 2,276,186 83

Total Net Assets

$ 53,239,957 50

See Independent Accountant's Combined Report on ReVJew of Basic Fmanaal Statements and Supplementary lnforrnabon
The notes to the financial statements are an integral part of this statement
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SOUTHERN POLYTECHNIC STATE UNf'/ERSITY STATEMENT Of REVENUES EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30 2002

EXHIBIT "B"

OPERATING REVENUES

Student Tuition and Fees Less Scholarship Allowances
Grants and Contracts Federal
State
Nongovernmental Sa!es and SeMces of Educa\tonal Departments
Auxiliary Enterpnses Restdance Haas Bookstore Food Services
Parking IT ransponatJon
Health Services lntermloglate Athletics
Other Organizations Other Operabng Revenues

Total Operabng Revenues

OPERATING EXPENSES

Salanes Faculty Slaff
EmptO'jeO Benefits Other Personal Sal'VICeS Travel
Scholar$1ltpa and Fellowah,ps UbUtles
Suppl,es and Olher SeMCes Depreaabon

Total Operabng Expenses

Operating Income (Loss)
NONOf'ERATING RE\/ENUES rEXPENSESl

State Appropnabona

Gifts Interest and Other Investment Income

..

01her Nonoparabng R . -

Net Nonoperalng Revenues

Income Before Other Revenues, Expenses, Gem or L.oaaes

Csprtal Grants and Gifts State

lncrease/(Decrease) r, Net Assets

NetAssats Net Assets - Beginning of Year as Ongmaly Reported Cumulabve Effect of Changaa In Accounbng Pnnaple

Net Assets-Beg1nnng of Year, Restated

Net Assets - End of Year
See Independent Accountant's Combined Report on Review of Baolc Fmanaal Statements
and Supplemantary lnformabon The notes to the flnanclal statements are an Integral part of this statement
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s 9 371,015 70 -973,677 21
1,497 646 24 242 428 76 785,985 42 907,595 76
927,734 66 150,092 89 704,307 81 178,318 00 189,397 18 532,128 44 86,070 42 343,766 52
$ 14,942,810 59

$ 10,204,554 72 10 757,032 18 5,039,041 25 73,270 00 243,435 06 2,123,164 64 1,341,260 23 7,704,871 73 2,333,987 20
s 39,820,617 01
s -24 877 806 42

s 22,066,927 91 3,090,534 40 1,382 28 -260,430 26

s 24,898,414 33

s

20,607 91

12,782,521 43
s 12,803,129 34
s 88,969,006 46
-48,532,178 30
$ 40,436,828 16

s 53~391957 50

SOUTHERN POLYTECHNIC STATE UN!VEBSIIY STATEMENT OF CASH FLOWS
YEAR ENPEP JUNE 30 2002

CASH FLOWS FROM OPERATING ACTMTIES TuThon and Fees Grants and Contracts Sales end SeMCes of Educ:atJonal Depenments Payments to Suppliers Payments to Employees
Payments for Scholarah1pa and Fellowahlps Loans lssued to Students and Employees Collecbon of Loens to Students and EITIJ)klyee& Auxibery Enterpnse Charges
Residence Halla BookslOra FoodSeMces P8rklng/Tranaportat1on Health Services lntercolleg1ate Athlebcl Other Organ,zat)ons Other Rece,pts (Payments)
Net Cash Provided (Used) by Operating AdMbes
CASH FLOWS FROM NONCAPITAL FINANCING ACTMTIES State AppropnatJons A(J'eney Funds Tranaacbons
G!fts and Gmnta Recetv9d to, Other than Capital Purpooes
Net Cash Flows Pr0'1>11od (Used) by Noncapillll Fnnang Actrvrtloo
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTMTIES
Purcha9ea of Caprtal Aooelo
CASH FLOWS FROM INVESTING ACTMTIES
lnteres1 on Investments
Pun:hase of Investments
Net Cash PnMded (Uaed) by Investing Acovlbeo
Ne\ lncreasel(Decrease) in Cash
Cash and C.ah Equrvlanta - Ji.ne 30 2001 Leaa Short-Tenn tnvestmenta
Cash end Cash Ecvments - Beg1nrv:ng of Year

Cash and Cash Equvalents - End of Year I
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTMTIES
0peraong lnccme (Loss) AdJUStments to Reconc:de Net lnc:ome (Loss) to Net Cash
Prcvoded (Used) by Operatmg AdMbeo Depreaat,on
Change In Auets and Liabtlrtles
Accounts Rec:eMllbla Net ~<dttemo Notes Rac:elvables, Net Accounlo Payable Salar>eo Payable Payroll Wrthholdlngs Deferred Ravenue Other" l.JabtlrtJes Compensaled Aboenca

Net Cash Provided (Uaed) by Operaong - -

= - Sae lndepet .dent Accountanf,

Report on R - ol BaalC Frnanaal Statements

and Supplementary lnfo<mabon

Thll notes to the finenoel statements ara an Integral pat of Ihm ltatement - 13

EXHIBIT "C-

s 8 672 806 94
1,548,308 37 907 595 76
-14 225,0CM 79 -20 898 550 27
-2 123 16-4 84 -18 525 23
121 ,49,4 ea
930,982 01 150,092 89 704,307 81 178,318 00 189,397 18 532 128 44 86 070 42 343 766 52
s -22 899 995 71

s 22 066,927 91
-238 542 74 3 090 534 40
s 24 918 919 57

s

-707 585 82

s

140 359 70

-212241623 59

s -2 084 263 89

s

-7T2 925 85

s

2 964 461 39

-1273183 34

s

1 691 298 05

s

918 372 20

s -24 an,806 ,c2
2 333 987 20
-797 on 58 e 503 34
102 989 85 130 041 14
8 858 39 74 967 65 94 788 98
3 227 35 19 739 59
s 2218991995 71

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2002

EXHIBIT "D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Southern Polytechruc State Umvers1ty serves the state, and nat10nal comrnumlles by proVIdmg its students with academic mstruct10n that advances fundamental knowledge, and by d1ssemmatmg knowledge to the people of Georgia and throughout the country
REPORTING ENTITY Southern Polytechmc State Umvers1ty 1s one ofthuty-four (34) State supported member mslltutlons ofh1gher educallon m Georgia which compnse the Umvers1ty System ofGeorgia, an orgamzal!onal unit of the State of Georgia The accompanymg financial statements reflect the operat10ns of Southern Polytechruc State Umvers1ty as a separate reportmg enuty
The Board of Regents has conslltullonal authonty to govern, control and manage the Umvers1ty System of Georgia. Tlus authonty mcludes but 1s not hm1ted to the power to designate management, the ab1hty to s1gn1ficantly mfluence operations, the authonty to control 1nslltutlons' budgets, the power to deterrmne allotments of State funds to member mslltutlons and the authonty to prescnbe accounting systems and adrmmstral!ve pohc1es for member 1nsl!tut1ons Southern Polytechmc State Umvers1ty does not have authonty to retam unexpended State appropnatlons (surplus) for any given fiscal year Accordmgly, Southern Polytechruc State Umvers1ty 1s considered an organizational umt of the Board of Regents of the Umvers1ty System of Georgia reporllng entity for financial reportmg purposes because of the s1gruficance of its legal, operallonal, and financial rela!Jonslups with the Board of Regents as defined m Section 2100 of the Governmental Accountmg Standards Board (GASB) Cod1ficat1on of Governmental Accountmg and Fmanc1al Reporting Standards.
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management D1scusszon and Ana(vszsfor State and Local Govemments. Tlus was1followed m November 1999 by GASB Statement No 35, Basic Financial Statements and Management's D1scusszon and Analysis for Public Colleges and Universities The State of Georgia 1s required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002 As an orgamzauonal umt of the State of Georgia, the Umverslty 1s also reqmred to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No 37 and No 38 The financial statement presentation reqmred by GASB Statements No. 34 and No. 35 as amended by GASB Statements No 37 and No 38 provides a comprehensive, entity-wide perspective of the Umvers1ty's assets, hab1lit1es, net assets, revenues, expenses, changes m net assets, cash flows, and replaces the fund group perspective previously reqmred.
The Umvers1ty has elected to not restate Its 2001 financial statements to conform with the new financial statement presentation, therefore comparative financial mformatlon will not be presented for fiscal year 2002 S1gn1ficant accounting changes made m order to comply with the new reqmrements mclude (I) adopt10n of depreciation on capital assets, and (2) recognition of compensated absences Generally Accepted Accounting Pnnc1ples (GAAP) requires that the
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SOUTHERN POLYTECHNIC STATE UNIVERsm NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2002

EXHIBIT "D"

NOTE I SUMMARY OF SIGNJFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION reportmg of summer school revenues and expenses be between fiscal years rather than m one fiscal year Due to the lack ofmatenahty, Instltul!ons ofthe Umvers1ty System ofGeorgia will conl!nue to report summer revenues and expenses m the year m wluch the predommatc act1v1ty takes place.
BASIS OF ACCOUNTING For fmanc1al reportmg pwposes, the Umvers1ty 1s considered a special-purpose government engaged only m busmess-type actlVJl!es Accordmgly, the Umvers1ty's financial statements have been presented usmg the econo!Illc resources measurement focus and the accrual basis of accountmg, except as noted m the precedmg paragraphs Under the accrual basis, revenues are recogruzed when earned, and expenses are recorded when an obhgauon has been mcurred All s1gmficant mtraumvers1ty transactions have been ehmmated.
The Umvers1ty has the option to apply all Fmanc1al Accountmg Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB confhcts with GASB The Umvers1ty has elected to not apply FASB pronouncements issued after the apphcable date
RESTATEMENT OF NET ASSETS - BEGINNING OF YEAR As a result of the adoption of GASB Statement No 34, the Umvers1ty was also reqmred to make certain changes m accountmg prmc1ples, specifically (1) adoption of depreciation on capital assets, and (2) record:mg of compensated absences. GASB Statement No 34 requires certam summer semester revenues be recogmzed between fiscal years rather than the fiscal year m wluch the semester was predommantly conducted The Umvers1ty System of Georgia has chosen to continue to record summer revenue m the year m which the semester was predo!Illnantly conducted Net assets at July 1, 2001 were reduced by $48,532,178.30 for the cumulative effect of these changes
t
CASH AND CASH EQUIVALENTS/SHORT-TERM INVESTMENTS Cash and Cash Eqmvalents consist ofpetty cash, demand deposits and tune deposits m authonzed financial 1nst1tut1ons, and cash management pools that have the general charactenstlcs of demand deposit accounts.
INVESTMENTS The Umvers1ty accounts for its mvestments at fau value m accordance with GASB Statement No 31, Accounting and Financial Reporting/or Certain Investments and/or External Investment Pools Changes m unrealized ga.m (loss) on the carrymg value of mvestments are reported as a component ofmvestment mcome m the statements of revenues, expenses, and changes m net assets.
ACCOUNTS RECEIVABLE Accounts rece1vahle consists oftmtlon and fee charges to students and aux1hary enterpnse services provided to students, faculty and staff, the maJonty of each res1dmg m the State of Georgia Accounts receivable also mclude amounts due from the Federal government, state and local
- 15 -

SOUTHERN POLYTECHNIC STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2002

EXHIBIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE governments, or pnvate sources, m connectton with reimbursement ofallowable expenditures made pursuant to the Umvers1ty"s grant and contracts Accounts receivable are recorded net of esttmated uncollecttble amounts
NON-CURRENT INVESTMENTS Investments that are externally restncted and cannot be used to pay current 1Iab1littes are classified as non-current assets m the statements of net assets.
CAPITAL ASSETS Capital assets are recorded at cost at the date of acqu1s11ton, or fau market value at the date of donat10n m the case of gifts For eqmpment, the Umvers1ty"s cap1tal1zatton policy mcludes all items with a unit cost of $5,000.00 or more, and an esltmated useful hfe of greater than one year Renovattons to bmldmgs, infrastructure, and land unprovernents that exceed $ I00,000 00 and s1gmficantly increase the value or extend the useful hfe of the structure are capitalized Routme repairs and maintenance are charged to operattng expense m the year m which the expense was mcurred Deprec1at1on 1s computed usmg the straight-lme method over the estimated useful lives of the assets, generally 40 to 60 years for bu1ldmgs, 20 to 25 years for mfrastructure and land improvements, IO years for library books, and 3 to 7 years for eqmpment
To obtain the total picture ofplant additions m the Umvers1ty System, 1t 1s necessary to look at the acltV1t1es ofthe Georgia State Fmancmg and Investment Corruruss1on (GSFlC) - an organizatton that 1s external to the System GSFlC issues bonds for and on behalfofthe State of Georgia, pursuant to powers granted to 11 m the Conslttutton ofthe State ofGeorgia and the Act creatmg the GSFIC The bonds so issued constttute direct and general obligattons of the State of Georgia, to the payment of which the full faith, credit and taxmg power of the State are pledged
Effecttve July I, 2001, the GSFlC retams constructton m progress on their books throughout the constructton penod and transfers the entire project to Southern Polytechmc State Umvers1ty when complete For the year ended June 30, 2002, GSFlC transferred capital addtltons valued at $12,782,521 43 to Southern Polytechruc State Umvers1ty
DEFERRED REVENUES Deferred revenues mclude amounts received for tu11ton and fees and certain auxiliary acttVJltes pnor to the end of the fiscal year but related to the subsequent accounttng penod Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned
COMPENSATED ABSENCES Employee vacatton pay 1s accrued at year-end for financial statement purposes. The hab1lity and expense mcurred are recorded at year-end as accrued vacation payable m the Statement of Net Assets, and as a component of compensatton and benefit expense m the Statements of Revenues,
- 16 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
COMPENSATED ABSENCES Expenses, and Changes m Net Assets Southern Polytechruc State Umvers1ty had accrued hab1hty for compensated absences m the amount of $783,573.67 as of July 1, 2001 For Fiscal Year 2002, $676,760 01 was earned m compensated absences and employees were paid $657,020 42, for a net mcrease of$19,739.59
NON-CURRENT LIABILITIES Non-current hab1ht1es mclude hab1ht1es that will not be paid withm the next fiscal year.
NET ASSETS The Umvers1ty's net assets are classified as follows:
Invested m capital assets. net ofrelated debt Tins represents the Umvers1ty's total mvestment m capital assets, net ofoutstanchng debt obligations related to those capital assets To the extent debt has been mcurred but not yet expended for capital assets, such amounts are not mcluded as a component ofmvested ID capital assets, net ofrelated debt. (The term "debt obligations" as used m tlus defimtlon does not mclude debt of the GSFIC as discussed above )
Restncted net assets - nonexpendable Nonexpendable restncted net assets consist ofendowment and smular type funds m wluch donors or other outside sources have stipulated, as a condition ofthe gift mstrument, that the prmc1pal 1s to be maintamed mviolate and m perpetuity, and mvested for the purpose of producmg present and future mcome, which may either be expended or added to prmc1pal The Umvers1ty may accumulate as much ofthe annual net mcome ofan mst1tut1onal fund as 1s prudent under the standard established by Code Section 44-15-7 ofAnnotated Code ofGeorgia
Restncted net assets - expendable Restncted expendable net assets fmclude resources m which the Umvers1ty 1s legally or contractually obligated to spend resources ID accordance with restnctlons imposed by external third parties.
Unrestncted net assets Unrestncted net assets represent resources denved from student tu11ton and fees, state appropnatlons, and sales and services of educahonal departments and auxiliary enterpnses. These resources are used for transachons relahng to the educational and general operahons of the Umvers1ty, and may be used at the discretion of the govermng board to meet current expenses for those purposes Unexpended state appropnatmns must be refunded to the Board ofRegents ofthe Umvers1ty System of Georgia - Adm1mstratlve Central Office for remittance to the Office ofTreasury and Fiscal Services. These resources also 1Dclude aux1hary enterpnses, wluch are substantially self-supporting activities that provide services for students, faculty and staff

- 17 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2002

EXHIBIT"D"

NOTE I SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS When an expense 1s mc111Ted that can be paid usmg either restncted or unrestncted resources, the Umvers1ty"s pohcy 1s to first apply the expense towards unrestncted resources, and then towards restncted resources.
INCOME TAXES Southern Polytechnic State Umvers1ty, as a pohucal subd1V1s1on ofthe State ofGeorgia, 1s excluded from Federal mcome taxes under Secuon 115(1) of the Internal Revenue Code, as amended.
CLASSIFICATION OF REVENUES The Umvers1ty has classified its revenues as either operatmg or non-operatmg revenues m the Statement of Revenues, Expenses, and Changes m Net Assets accordmg to the followmg cntena:
Operating revenues Operatmg revenues mclude acUv1Ues that have the charactenstics ofexchange transactions, such as (I) student twtlon and fees, net ofscholarslup allowances, (2) sales and services of aux1hary enterpnses, (3) most Federal, state and local grants and contracts and Federal appropnatlons, and (4) mterest on mstltutlonal student loans
Non-operating revenues Non-operaung revenues mclude act1v1t1es that have the charactenst1cs of non-exchange transactions, such as gifts and contnbuhons, and other revenue sources that are defined as non-operatmg revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entitles That Use Propnetary Fund Accounting, and GASB No 34, such as state appropnahons and investment mcome
SCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certam other revenues from stuilents, are reported at gross with a contra revenue account of scholarslnp allowances m the Statement of Revenues, Expenses and Changes m Net Assets. Scholarship allowances are the difference between the stated charge for goods and semces provided by the Umvers1ty, and the amount that 1s p!lld by students and/or tlnrd parties malcmg payments on the students' behalf. Cert!lln governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperatmg revenues m the Umvers1ty"s financial statements To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Uruvers1ty has recorded contra revenue for scholarslnp allowances.
NOTE 2 CASH AND CASH EQUIVALENTS: OTHER DEPOSITS: AND INVESTMENTS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to the State ofGeorgia (and thus Southern Polytechruc State Uruvers1ty) cannot be placed m a depository paying mterest longer than ten days without the depository proVJdmg a surety

- 18 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

NOTE 2 CASH AND CASH EOUNALENTS, OTHER DEPOSITS, AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATOTES AND POLICIES bond to the State In heu of a surety bond, the depository may pledge as collateral any one or more ofthe following secuntles as enumerated in the Official Code of Georgia Annotated Section 50-1759

I Bonds, bill, certificates ofmdebtedness, notes, or otherchrect obligations ofthe Uruted States or of the State of Georgia

2 Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or rnumc1pahlles of the State of Georgia

3. Bonds of any public authonty created by the laws ofthe State of Georgia, providing that the statute that created the authonty authorized the use of the bonds for this purpose.

4 lndustnal revenue bonds and bonds of development authontles created by the laws of the State of Georgia.

5 Bonds, bills, certificates of indebtedness, notes, or other obligations of a subs1chary corporallon ofthe Umted States government, which are fully guaranteed by the Umted States government both as to pnnc1pal and interest, or debt obligations issued by the Federal Land Bank, the Federal Horne Loan Banlc, The Federal Intermediate Credit Banlc, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Horne Loan Mortgage Association, and the Federal National Mortgage Association.

6 Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
I

As authonzed in the Official Code of Georgia Annotated Section 50-17-53, the State Depository

Board has adopted pohc1es which allow agencies of the State of Georgia (and thus Southern

Polytechruc State Umvers1ty), the option of exempting demand deposits from the collateral

reqmrernents.

I

The Treasurer ofthe Board ofRegents 1s responsible for all details relative to furmshing the reqmred depository protection for all units of the Uruvers1ty System of Georgia

CATEGORIZATION OF DEPOSITS The Umvers1ty's cash deposits are categonzed by nsk as follows.

Category l - Amounts covered by depository insurance or collaterahzed with secunties (at fair value) held by the University or by its agent m the Umvers1ty's name.

- 19 -

SOUTHERN POLYTECHNIC STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2002

EXHIBIT"D"

NOTE 2 CASH AND CASH EQUIVALENTS. OTHER DEPOSITS. AND INVESTMENTS

CATEGORIZATION OF DEPOSITS Category 2 - Amounts collaterahzed with secunhes (at fa.1r value) held by the pledging financial
institution's trust department or agent in the Umvers1ty's name

Category 3 - Amounts collateral1zed with secunhes (at fa.1r value) held by the pledging financial institution, or by its trust department or agent but not in the Umvers1ty's name, and amounts uncollateral1zed

Cash Deposits as of June 30, 2002 are as follows

Cash Deposits

Cerrymg
Amount

Benk
Balances

Risk Catesones

s 111161346 s 28S445359 s 10000000 s 20222126 s 255223233

CATEGORIZATION OF INVESTMENTS The Umvers1ty's investments are categonzed as to credit nsk withm the three categones descnbed below

Category 1 - Insured or registered, or secuntles held by the Umvers1ty or its agent in the Umvemty's name

Category 2 - Umnsured and unregistered, with secunties held by the counter party's trust department or agent in the Umvers1ty's name.

Category 3 - Uninsured and unregistered, with secuntles held by the counter party, or by its trust I department or agent, but not in the Umvers1ty's name.

At June 30, 2002, the Umvers1ty's investments consisted of the following

Type of Investments
Common Stock

\_ _ _ ___.R,..,s,..k..,,.Ca,..t..,eg.,,on'-"es"---.,--

Carrying
Amount

s 3 S9940 s

000 s

000 s 3,599 40

Investments Not Subject to Catcgon2.auons Board of Regents
Balanced Income Fund Shon-Term Fund Total Return Fund

455,641 24 448,576 27
2,252,383 94

Total Investments

s 3 1602008S

Funds invested in an investment pool managed by another governmental entity are not reqwrcd to be categonzed smce the Umvers1ty did not own any specific, identifiable mvestment secuntlcs of the pool

- 20-

SOlJfHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

NOTE 3 ACCOUNTS RECEIVABLE

Accounts receivable consisted of the followmg at June 30, 2002

Aux1hary Enterpnses and Other Operatmg Acl!VJl!es Federal, State. and Pnvate Funds Other

$ 2,163,693.50 1,169,399.65 51.877 30

$ 3,384,970 45

Less Allowance for Doubtful Accounts

223,391.30

Net Accounts Receivable

$ 3.!61.579.)5

NOTE 4 NOTES/LOANS RECEIVABLE

Notes/Loans receivable at June 30, 2002, pnrnanly consISt ofstudent loans made through the Federal Perkins Loan Program (the Program) The Program proVIdes for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% 1fthe participant comphes with certam proV1s10ns. The Federal government reimburses the Uruvers1ty for amounts cancelled under these proV1s1ons As the Uruvers1ty determines that loans are uncollecllble and not ehgible for reimbursement by the Federal government, the loans are wntten off and assigned to the U S. Department of Education

NOTE 5 CAPITAL ASSETS

The balance at July I, 2001 was adjusted for accountmg changes required m 1mplemenl!ng GASB Statements 34 and 35 as disclosed m Note 1 Following are the chanljes m capital assets for the year endedJune30,2002

- 21 -

SOUTHERN POLYTECHNIC STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT"D"

NOTE 5 CAPITAL ASSETS

Adjusted
Balance
July I. 2001

Addn100s

ReductJODS

Balance June 30, 2002

Capital Assets, Nol Bemg Deprccialed

Land and Land Improvements

S

Construction Work-In-Progress

753,3% 56
O00 S

86 048 64

$ 753,396 56
86 048 64

Total Capital Assets Not Bemg Deprectaled

S 753 396 56 S 86 048 64

S 839 445 20

Capital Assets, Bemg Depreciated Infrastructure Bu1ldmg and Building Improvements Fac1ht1es and Other Improvements Equ1pmen1 Library Collcct1ons
Cap1tahzcd CollCCllons

$ 1,623,504 00

47,977,978 42 $ 12,714,463 18

567,531 00 6,888,308 99

453,440 23 s

4,783,815 00

251,118 50

10,500 00

s S 61,871 63HI ll.4J902j 91 $

s 1,623,504 00

60,692,441 60

567,531 00

260,430 26

so 7,081,318 96
5,034,933

30,500 00

260430,26 s 75,Q3QJ29 06

Less Accumulated Deprec1anon Infrastructure

s 546,579 68 s

Bu1ldmgs and Bu1ldmg Improvements 16,687,582 44

Fac1l1t1cs and Other Improvements

483,448 30

Equipment

5,133,232 07

Library Collcct1ons

3,4 I 8,050 00

Capitalized CollCCllons

JO 086 47

64,940 16 $ 1,449,559 53
17,2IO 23 545,802 79 255,712 00
762 49

S 2~ 278,978 96 s ;l,J33 987 20 S

0 00 $ 611,51984 18,137,141 97 500,658 53 5,679,034 86 3,673,762 00 l0,848 96
0,00 S 28,612,966 J6

Total Capital Assets, Bemg Depreciated,

Net

s S 35 592,658 45 S 11 085 034 71

Capital Assets, Nel

S 36 346 055 01 s 11 171 08} 15 $

s 260 430 26 46,417,262 90
260 430 26 S 47 256 708 10

NOTE 6 DEFERRED REVENUE



Deferred revenue consisted of the followmg at June 30, 2002:

Prepaid Tu1t1on and Fees Other Deferred Revenue

$1,618,952 61 92,842.00

Totals

$ ),711.79416)

NOTE 7 LONG-TERM LIABILITIES

Long-term hab1hty activity for the year ended June 30, 2002, was as follows

Other L1ab1htJ.es Compensated Absences

Balance
JyJy J. 2001

Add1hons

Rcductmns

Balance June 30 2002

Current Port:Jon

s 761 5ZJ 67 s ~z~ z~o 01 s 6~7 o~o 42 s ~OJ JJJ ~6 $ ~60 222 ~~

-22-

SOUTHERNPOLYTECHNICSTATEUNNERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

NOTE 8 RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Southern Polytechmc State Uruvers1ty part1c1pates m the Teachers Retirement System of Georgia (TRS), a cost-shanng multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of prov1dmg retrrement allowances and other benefits for teachers of the State of Georgia TRS provides service retlrement, d1sab1lity retlrement, and survivor's benefits for its members m accordance with State statute The Teachers Retlrement System of Georgia issues a separate stand alone financial audit report and a copy can be obtamed from the Georgia Department of Audits and Accounts

Funding Policy Employees of Southern Polytechmc State Umvers1tywho are covered byTRS are required by State statute to contnbute 5% of the!f gross earnmgs to TRS. Southern Polytechmc State Umvers1ty makes monthly employer contnbutions to TRS at rates adopted by the TRS Board of Trustees m accordance with State statute and as adV1sed by the!f mdependent actuary. For fiscal year 2002, the employer contnbutlon rate was 9 24% for covered employees. Employer contnbutlons for the current fiscal year and the precedmg two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Reqwred Contnbutlon

2002 2001 2000

100%, 100%, 1000/o

$1,214,55034 $1,647,725.22 $ 1,684,254 59

REGENTS RETIREMENT PLAN

Plan Description The Regents Ret!fement Plan, a smgle-employer defined contnbutlon plan, 1s an optional retirement plan established and adm1rustered by the Board of Regents of the Umvers1ty System of Georgia, under wluch 1t may purchase annuity contracts for the purpose of prov1dmg retlrement and death benefits for eligible faculty and pnnc1pal adm1mstrators Benefits depend solely on amounts contnbuted to the plan plus mvestment earnmgs. Benefits are payable to part1c1patmg employees or their benefic1anes m accordance with the terms of the annuity contracts.

Funding Policy Member contnbuuon requ=ents are established by the Board of Trustees of the Teachers Retirement System Employer contnbutlons are established by statute and may be amended only by the General Assembly of the State of Georgia The employer contnbutes 9 62% of the part1c1pat1ng employee's carnable compensation. Employees contnbute 5% of their earnable compensation Amounts attnbutable to all plan contnbutlons are fully vested and non-forfe1table at all ttmes

- 23 -

SOUTHERN POLYTECHNIC STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT"D"

NOTE 8 RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Funding Policy Southern Polytechmc State Umverslly and the covered employees made the reqwred contnbuttons of $519,488.81(962%) and $271,967 96 (5%), respectively
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Southern Polytechmc State Umvers1typart:tc1pates m the Georgia Defined Contnbut:ton Plan (GDCP) which 1s a smgle-employer defined contnbutlon plan established by the General Assembly of Georgia for the purpose of proVIdmg retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system GDCP 1s adnumstered by the Board of Trustees of the Employees' Retuement System of Georgia
Benefits A member may retire and elect to receive penod1c payments after attamment ofage 65 The payment will be based upon mortality tables and mterest assumptions to be adopted by the Board ofTrustees. If a member has less than$ 3,500.00 credited to !us/her account, the Board ofTrustees has the opt:ton ofrequmng a lump sum d1stnbut1on to the member m lieu ofmakmg penodic payments Upon the death of a member, a lump sum d1stnbut1on equalmg the amount credited to his/her account will be paid to the member's designated beneficiary Benefit proV1s1ons are established by State statute
Contributions and Vesting Member contributions are seven and one-halfpercent (7.5%) of gross salary. There are no employer contnbut1ons Contnbutlon rates are established by State statute I Earmngs are credited to each member's account m a manner established by the Board of Trustees Upon termmatlon of employment, the amount of the member's account is refundable upon request by the member
Total contributions made by employees dunng fiscal year 2002 amounted to $65,582 15 wluch represents 7.5% of covered payroll These contnbut:tons met the reqmrements of the plan
NOTE 9: RISK MANAGEMENT
Southern Polytechmc State Uruvers1ty 1s a part:tc1pant m the Board of Regents of the Umvers1ty System of Georgia Health Benefits Plan, wluch 1s a self-msurance program of health and dental benefits for employees and retirees of the Uruvers1ty System ofGeorgia Southern Polytechmc State Umvers1ty and part1c1patmg employees and retirees pay premiums to the Health Benefits Plan for this health msurance coverage The Health Benefits Plan 1s mcluded m the financial statements of the Board ofRegents ofthe Umvers1ty System ofGeorgia - Adrmrustratlve Central Office All uruts of the Umvers1ty System of Georgia share the nsk of loss for claims of the Health Benefits Plan
- 24-

SOUTHERN POLYTECHNIC STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2002

EXHIBIT "D"

NOTE 9 RISK MANAGEMENT

The Health Benefits Plan 1s considered a self-sustaining nsk fund that provides health coverage for its members up to a maximum hfetrme benefit of$2,000,000 00 per person and dental coverage up to an annual maximum of $1,000.00 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia to process cJ3.1ms in accordance with the Health Benefits Plan as estabhshed by the Board of Regents.

The Department of Adm1mstral!ve Services (DOAS) has the respons1b1hty for the State of Georgia ofmaking and canying out dec1S1ons that will muum1ze the adverse effects of accidental losses that involve State government assets The State beheves It 1s more economical to manage its nsks internally and set aside assets for cJ3.1m settlement Accordingly, DOAS processes claims for nsk of loss to which the State 1s exposed, including general hab1hty, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indernruficat1on L1m1ted amounts of commercial insurance are purchased apphcable to property, employee and automobile hab1hty, fidehty and cert3.ln other nsks. Southern Polytechruc State Umvers1ty, as an organ1zat1onal unit ofthe Board of Regents of the Uruvers1ty System of Georgia, 1s part ofthe State of Georgia reporting entity, and as such, 1s covered by the State of Georgia nsk management program adm1rustered by DOAS. Premiums for the nsk management program are charged to the vanous state orgaruzatlons by DOAS to provide cl3.lms servicing and cl3.lms payment

A self-lIISlJTed program of professional hab1hty for its employees was estabhshed by the Board of

Regents of the Umvers1ty System of Georgia under powers authonzed by the Official Code of

Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are

not unmune from hab1hty ag3.1nst personal hab1hty for damages ansing out of the performance of

their dunes or in any way connected therewith The program 1s adrrurustered by DOAS as a Self-

Insurance Fund.

..

NOTE IO CONTINGENCIES

Amounts received or receivable from grantor agencies are subject to aucht 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 tlus time although Southern Polytechruc State Uruvers1ty expects such amounts, 1f any, to be 1mmatenal to its overall financial pos11Ion

L1t1gat1on, cl3.lms and assessments filed ag3.1nst Southern Polytechnic State Uruvers1ty (an orgaruzatJonal urut of the Board of Regents of the Umvers1ty System of Georg1a), 1f any, are generally considered to be actions ag3.1nst the State of Georgia. Accordingly, s1gruficant htlgatlon, cJ3.1ms and assessments pending ag3.1nst the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2002

- 25 -

SOUTHERN POLYTECHNIC STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2002

EXHIBIT "D"

NOTE 11 POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Secnon 20-331, the Board of Regents ofthe Umvers1ty System ofGeorgia has estabhshed group health and hfe msurance programs for regular employees ofthe Uruvers1ty System ofGeorgia It 1s the pohcyofthe Board ofRegents to penmt employees ofthe Uruvers1ty System of Georgia ehgible for retrrement or that become permanently and totally disabled to connnue as members of the group health and hfe insurance programs Employees who are ehgible for retrrement or d1sab1hty under the cntena estabhshed by the Teachers Renrement System ofGeorgia and who have at least ten years ofservice With the Umvers1ty System of Georgia are ehgible for these post-employment health and hfe msurance benefits Orgaruzanonal umts of the Board of Regents of the Uruvers1ty System of Georgia pay the employer portion for group msurance for affected md1V1duals
As ofJune 30, 2002, there were 153 employees who had retired or were disabled that wererece1VIng these post-employment health and hfe msurance benefits. For the year ended June 30, 2002, Southern Polytechnic State Umvers1ty recogruzed as mcurred $490,212.96 of expenditures, which was net ofS169,105.55 ofpart1c1pant contnbutlons.

- 26 -

SOUTHERN POLYTECHNIC STATE UNNERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2002

EXHIBIT "D"

NOTE12 NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The Umvers1ty's operating expenses by functional class1ficat1on are shovm below

Statement of Opcratmg Expenses - Nawral vs Funcnonal Cla!s1ficahons For the F1SC8l Year Ended June 30, 2002

~Dt!.1111 Ci1:mfi!ri1Hm
Salanes Facultv Staff
Employee Benefits Other Penonal ~ Travel Scholar.ih,ps and
FcUowsh1ps Uulmes Supplies and Other
Sorv,ces Deprec1ab00
TOllll Operatmg Expenses

lo.:illlH;llm:1

Reoearch

s s 9,955,791 55
1,875,615 55 2,472,391 12
21,667 32

177,16193
s 121,373 34
40,046 80
11,811 14

115,532 94 3,486,095 23

8,819 70

s 1792700371 s 359 212 21 s

l:w:ilalm:ial Carnfgnoo

Pubhc
Sm'l~

Acadenuc Stmnort

~,,~ Student

fnstlWbonal
SwUOCNt

s

8,500 00

354,401 14

s 1,833,470 77 $ I,790,698 98

2,613.296 50

76,147 85

381,435 82

430,512 79

I, I56,039 90

73,270 00

16,020 00

96,IOI 22

40,51004

35,884 JO

4,585 13 2,801 86

63,501 32 695,405 JI

43,489 41 828,491 81

45,694 29 658,250 98

45] 9:15 9& s 3WR 414 44 s J133 703 91 s 4 S824JS?Z

~1ll!lll C]M51fi~nm
~lanes Faculty Staff
Employee Benefits Other Personal Services Travel Scholar.ilnps and
Fcllowstnps l.Jbhbcs Supples and Other
Serv,ccs Deprcc1abon
Total Operaong Expenses

PlllJ\t Operations and Mf1ntman~

EunctKm.aJ em~1fgnao

Scholmh,ps
m:id ~l~Jnm

Aux1hary J;u~~

Unallocated DcOJCCJ:lllHlll

Total Operanng
f~~

s s 1,537,158 60
23,947 24
3,205 04

63,101.24
s
3,658 60 7,351 38

631,017 JO 454,861 13
10,884 62

S I0,204,554 72 ID,757,032 18 5,039,041 25 73.27000 243,435 06

971,119 40 625,944 22

1,994,503 64

128,661 00
,97,337 74
1,399,062 62

s 2,JJJ 2BZ 2Q

2,123,164 64 1,341,260 23
7,704,871 73
lJ>l 2az ~Q

s~ 1~1 J74~D s ~W~l~B6 s ~721 ~441 s ~ JJ] 27 20 S ]2~9~1791

-27 -

SUPPLEMENTARY INFORMATION
..
-29-

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE Of REVENUES AND EXPENDITURES COMPARED TO
BUDGET - INON-GAAP BASIS!
RESIDENT INSTRUCTION YEAR ENDED JUNE 30 2002

SCHEDULE "1"

REVENUES
State Appropnabons Other Revenues Retained

BUDGET

ACTUAL (11

VARIANCEFAVORABLE (UNFAVORABLE)

$ 21,808,11000 $ 19 452 913 00

21,808,110 00 $ 17,728,325 33

000 -1 724 587 67

$ 41,261,02300 $ 39,536,435 33 $ _ _--"1'c..;72a.-4'-C5CC8'-7.c.67'--

EXPENDITURES
Personal Services EducatJon, General and Depar1mental Serv1ces Sponsored Operabons
Qperabng Expenses Educabon, General and Departmental Services Sponsored Operations
Cap:tal Outlay Speaal Fund:ng lnrtJatlve Research Consortium

s 23,159,998 00 $
1,494,976 00
5,668,026 00 8,654,689 00 1,161,526 00
298,92900 822,87900

23,002,426 08 $ 1,015,929 75
5,370,970 26 6,847 449 77 1,234,996 94
276,019 74 822 894 87

157,571 92 479,046 25
297,055 74 1,807 239 23
-7347094 22,909 26
-15 87

Excess of Revenues over Expendrtures

$ 41,261,02300 $ 38,570,687 41 $ _ _~2.c.690=,335=~59'--

-------- S 1 965 747 92 $

965 747 92

(1) Actual amourns wera preparnd on a prescnbed baSls of accounlmg lhal demonstra19s compl:ance wllh budgetary statu1es and regulabons of the Sta18 of Georg:a, wh:ch rs a comprehensive baSls of accounbng other than generally accepted accounbng pnncoples

See accompanying no1es and Independent Accountant's Comb:ned Report on Rev:ew of Basic Flnancoal Statements and Supplementary Information
31 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUDGET - CNON-GAAP BASIS) WTTERY FOR EDUCATION
YEAR ENDED JUNE 30. 2002

SCHEDULE "2"

REVENUES State Appropnat,ons

BUDGET

ACTUAL (1)

VARIANCEFAVORABLE (UNFAVORABLE)

$

266 644 00 $

266,644 00 $ _ _ _ _ _0"'-'-00"-

EXPENDITURES
Equipment, Technology and Construcllon Trust Fund
Special Funding lnrt1at1ves

$

167,612 00 $

167,612 00 $

000

99 032 00

99,032 00

000

$

266 644 00 $ 266,644 oo s ____......:o..;o=o

Excess of Revenues over Expenditures

$

0 00 $ ~---~0~0:::,0

(1) Actual amounts were prepared on a prescnbed basis of accourmng that demonstrates compliance with budgetary statutes and regulations of the Sta1e of Georgia, which 1s a comprehensive basis of accounhng other than generally accepted accounhng prinaples
I

See accompanying notes and lndependerrt Accourrtanfs Combined Report on ReVJew of Basic Financial Statemerrts and Supplemerrtary lnforma11on
- 32 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30. 2002

SCHEDULE "3"

Totals per Annual Supplement

Prepaid Salanes June 30, 2002 June 30, 2001

Accruals June 30, 2002 June 30, 2001

Compensated Absences June 30, 2002 June 30, 2001

AdJustments

Barnes,

Wilson

Hanratty,

Nicholas

TIiiman,

Richard

Shared SeMces on Jointly Staffed Personnel

Kennesaw State Un1versrty

Dennison, Wayne

McDonald, Shelly

Unidentified Vanance

SALARIES $ 20,955,269 44 $

TRAVEL 242,275 46

-688,612 54 723,251 19
75.282 n
-66,624 38

628,666 99 -610,330 17

1,400 00 -217 00
-23 40

16,147 50 -64,004 09
-7 459 81

$

201961,586 oo

s ___24_3_._43_5...,oo._
1

..

See accompanying notes and Independent Accountant's Combined Report on Review of Basic Financial Sta1emen1s and Supplementary lnfonna11on
- 33 -

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

SOUTHERNPOLYTECHNICSTATEUNNERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2002

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-550-00-01 FS-550-00-03 FS-550-01-01 FS-550-01-02

Prev10usly Reported Correcllve Acllon Implemented Prev10usly Reported Correcllve Acllon Implemented Previously Reported Correcllve Acllon Implemented PreV!ously Reported Correcllve Act10n Implemented

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-550-00-04

Partially Resolved - See Corrective Acllon/Responses

CORRECTIVE ACTION/RESPONSES

SPECIAL TESTS AND PROVISIONS Failure to Reconcile Program Reports Wilham D. Ford Federal Direct Loan Program (CFDA 84 286) Fmdmg Control Number: FA-550-00-04

The Uruvers1ty has reconciled the open prograin years for the Wilham D Ford Federal Direct Loan Program as follows:

1997-98 1998-99 1999-2000 2000-2001

Closed by the LOC (Loan Origmat1on Center) $26,189 44, remammg loans to be booked'by the LOC $110,329.75, remairung loans to be booked by the LOC $23,323.00, remairung loans to be booked by the LOC

All borrower's add111ons, adJustments and/or correcllons have been 1den1Ified and reported to the Loan OngmatJon Center (LOC) smce February 2002, therefore there 1s no further acllon to be taken by the Umvers1ty at this llme

In June 2002, the Department ofEducallon suspended electromc transfer ofdata forpnor years, thus requmng the LOC to manually process each borrower's records. Tlus manual process 1s both labor mtens1ve and llme consummg Once all transacllons have been recorded by the LOC, the Umvers1ty will then receive perm1ss1on from the Department of EducatJon to request re!Illbursement m the amount of$159,842.19 as noted above

SECTION ID CURRENT YEAR FINDINGS AND QUESTIONED COSTS
t

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30. 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
ACCOUNTING CONTROLS (OVERALL) Inadequate General Controls Fmdmg Control Number FS-550-02-01
Dunng Fiscal Year 2002, the Board ofRegents ofthe Uruvers1ty System ofGeorgia converted umts ofthe Umvers1ty System from the College Uruvers1ty Fmanc1al Accountmg (CUFA) legacy system to the new GeorgiaF/RSTSystem (Fmanc1al, Informatmn and Reporting Systems for Tomorrow). In March of2002, Southern Polytechruc State Uruvers1ty placed this accountmg system mto productJon.
The management of Southern Polytechruc State Uruvers1ty is responsible for 1mplementmg procedures to establish and mamtam adequate control over the operatJon, utJlizaUon and mtegnty of their data processed with the GeorgiaF/RSTSystem We encountered problems with the financial data presented by the Umvers1ty The Uruvers1ty"s failure to establish and adhere to a final closmg for the year ended June 30, 2002, created a s1tuat1on where data presented for review was mcomplete Extensive review procedures were necessary to determme the vahd1ty of the mformatlon provided
To reduce the nsk ofreportmg mcomplete mformatJon, the University should work with the Board of Regents Central Office to develop procedures that will result m complete reportmg of all financial data m a more efficient and tJmely manner
GENERAL LEDGER Inadequacies m Control Over Subs1d1ary Ledgers Fmdmg Control Number FS-550-02-02
t
Our exammallon mcluded a review of the procedures utilized by the Uruvers1ty m recordmg transactions to the vanous modules compnsmg the GeorgiaF/RST accountmg system Our testmg revealed that, at June 30, 2002, the Umvers1ty"s general ledger module chd not balance with the subs1chary modules Tlus conchnon was pnmanly due to errors m posting subs1chary records dunng the conversion from the old College Uruvers1ty Fmanc1al AccountJng (CUFA) legacy accountmg system to the new GeorgiaF/RST accountmg system and due to transactions bemg posted to the general ledger module rather than m the appropnate subsidiary modules The Uruvers1ty chd not provtde a reconc1liat1on of the general ledger balances to the subs1chary records which resulted m extensive work required by the auditors to identify reconclimg items at June 30, 2002
Our testmg also revealed that certam general ledger balance sheet accounts for deferred revenues and accounts receivable, which are supported by mformatlon proVJded from the Uruvers1ty"s Banner Student Registration System, mcluded numerous errors These errors were the result of mcorrect postmgs between the Banner Student RegistratJon System module and the Uruvers1ty"s GeorgiaF/RSTaccountmg system Extensive procedures were reqwred to produce an accurate detail for these accounts. Net adJustmg entnes of $171,895 79 were made to accounts receivable and deferred revenues, respectively
-I-

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2002
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS GENERAL LEDGER Inadequacies m Control Over Subs1d1ary Ledgers Fmdmg Control Number FS-550-02-02 Management's failure to ensure that subs1d1ary records are accurate and properly support general ledger balances causes mternal reports to management, generated from these subs1d1ary records, to be maccurate and m1sleadmg This condltlon can lead to erroneous dec1s1ons by the Uruvers1ty's management and result m maccurate reportmg of financial mformanon To ensure accurate and nmely reporting of financial mformat1on from the subs1d1ary records, the Uruvers1ty should post transactions correctly to the appropnate subs1d1ary ledgers which support financial data reported m the general ledger. The Uruvers1tyshould develop appropnate controls and procedures to ensure that reconc1hat1ons of subsidiary ledgers and the general ledger are performed on a regular basis.

-2-