Southern Polytechnic State University, Marietta, Georgia, report on review of the financial statements for the fiscal year ended June 30, 2003

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
I
SOUTHERN POLYTECHNIC STATE UNIVERSITY
MARIEITA# GEORGIA REPORT ON REVIEW OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30# 2003
Russell W. Hinton State Auditor

SOUTHERN POLYTECHNIC STATE UNIVERSITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

INDEPENDENT ACCOUNTANT'S COMBINED REPORT ON REVIEW OF BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

3

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

5

C STATEMENT OF CASH FLOWS

6

D NOTES TO THE FINANCIAL STATEMENTS

8

SUPPLEMENTARY INFORMATION

SCHEDULES

SCHEDULES OF REVENUES AND EXPENDITURES COMPARED TO

BUDGET - (NON-GAAP BASIS)

1

RESIDENT INSTRUCTION

25

2

LOTTERY FOR EDUCATION

26

3 RECONCILIATION OF SALARIES AND TRAVEL

27

4 RECONCILIATION OF PER DIEM AND FEES

28

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

SECTION I FINANCIAL

RUSSELL W. HINTON
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street, S.W. Suite 214 Atlanta, Georgia 30334-8400
January 17, 2004

Honorable Sonny Perdue, Governor Members ofthe General Assembly of Georgia Members ofthe Board of Regents of the University System of Georgia
and Honorable Lisa A. Rossbacher, President Southern Polytechnic State University
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 (Exhibits A through D) ofSouthern Polytechnic State University, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2003, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute ofCertified Public Accountants. All information included in these financial statements is the representation ofthe management of Southern Polytechnic State University.
A review consists principally ofinquiries ofUniversity personnel and analytical procedures applied
to financial data. It is substantially less in scope than an audit in accordance with auditing standards
generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opm1on.
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.
Management's Discussion and Analysis is not a required part ofthe basic financial statements but is supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries of management regarding the methods of measurement and presentation of this supplementary information, and we are not aware of any material modifications that should be made thereto.
03ARL-66

Our review was made for the purpose of expressing limited assurance that there are no material modifications that should be made to the financial statements in order for them to be in conformity with accounting principles generally accepted in the United States ofAmerica. The accompanying supplementary information (Schedules 1 through 4) is presented for additional analysis purposes. Such information has been subjected to the inquiries and analytical procedures applied in the review ofthe financial statements, and we are not aware ofany material modifications that should be made to such data.
Respectfully submitted,

RWH:gp 03ARL-66

State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

SOUTHERN POLYTECHNIC STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Southern Polytechnic State University is one of the 34 institutions of the University System of Georgia. Located in Marietta, Georgia, the University was founded in 1948 as a two-year division of Georgia Institute of Technology. The University became accredited as a four-year college in 1970, and was one of the first colleges in the nation to offer the bachelor of Engineering Technology degree. In the summer of 1980, Southern Polytechnic State University officially became the 14th senior college and the 33rd independent unit of the University System. The campus currently encompasses more than 230 acres and contains 34 buildings.

Southern Polytechnic State University offers baccalaureate and masters degrees that contain a balance of technical, professional, and liberal arts courses with an emphasis on relevant, application-oriented teaching. The University's unique mission attracts a highly qualified faculty and a student body that has had the third highest SAT average amongst System institutions for the last four years. The University's growth over the last three years has been relatively stable with a slight upward trend as shown by the comparison numbers that follow:

Faculty

Students

FY2003 FY2002 FY2001

137

3,684

136

3,556

137

3,548

Overview ofthe Financial Statements and Financial Analysis

Southern Polytechnic State University is proud to present its financial statements for fiscal year 2003. 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 in Net Assets; and, the Statement of Cash Flows. This discussion and analysis of the University's financial statements provides an overview of its financial activities for the year. Comparative data is provided for fiscal year 2002 and fiscal year 2003.

Statement ofNet Assets

The Statement of Net Assets presents the assets, liabilities, and net assets of the University as of the end of the fiscal year. The Statement of Net Assets is a point of time financial statement. The purpose of the Statement of Net Assets is to present to the readers of the financial statements a fiscal snapshot of Southern Polytechnic State University. The Statement of Net Assets presents end-of-year data concerning Assets (current and noncurrent), Liabilities (current and noncurrent), and Net Assets (assets minus liabilities). The difference between current and noncurrent assets will be discussed in the Notes to the Financial Statements.

-i -

From the data presented, readers of the Statement of Net Assets are able to determine the assets available to continue the operations of the institution. They are also able to determine how much the institution owes vendors.

Finally, the Statement of Net Assets provides a picture of the net assets (assets minus liabilities) and their availability for expenditure by the institution. Net assets are divided into three major categories. The first category, invested in capital assets, net of debt, provides the institution's equity in property, plant and equipment owned by the institution. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The corpus of nonexpendable restricted resources is only available for investment purposes. Expendable restricted net assets are available for expenditure by the institution but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets. Unrestricted net assets are available to the institution for any lawful purpose of the institution.

Statement of Net Assets, Condensed (thousands of dollars)

June 30, 2003

June 30, 2002

Assets Current Assets Capital Assets, Net Other Assets

$

8,029

60,695

3 617

$

6,896

47,257

2,080

Total Assets

$

72,341

$

56,233

Liabilities Current Liabilities Noncurrent Liabilities

$

7,366

$

2,771

257

222

Total Liabilities

$

7,623

$

2,993

Net Assets Invested in Capital Assets, Net of Debt Restricted - Nonexpendable Restricted - Expendable Unrestricted

$

60,695

1,368

1,912

743

$

47,257

1,369

2,338

2,276

Total Net Assets

$

64,718

$

53,240

The total assets of the institution increased by approximately $16,108,000.00. The consumption of assets follows the institutional philosophy to use available resources to acquire and improve all areas of the institution to better serve the instruction, research and public service missions of the institution.

-11-

The total liabilities for the year increased by approximately $4,630,000.00. The combination of the increase in total assets of approximately $16,108,000.00 and the increase in total liabilities of approximately $4,630,000.00 yields a net increase in total net assets of approximately $11,108,000.00. The increase in total net assets is primarily due to the restatement of Capital Assets. See Note 1 in the Notes to the Financial Statements for additional information concerning the restatement of beginning net assets and the effect of this restatement on depreciable capital assets.

Statement ofRevenues, Expenses and Changes in Net Assets

Changes in total net assets as presented on the Statement of Net Assets are based on the activity presented in the Statement of Revenues, Expenses and Changes in Net Assets. The purpose of the statement is to present the revenues received by the institution, both operating and nonoperating, and the expenses paid by the institution, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the institution. Generally speaking operating revenues are received for providing goods and services to the various customers and constituencies of the institution. Operating expenses are those expenses paid to acquire or produce the goods and services provided in return for the operating revenues, and to carry out the mission of the institution. Nonoperating revenues are revenues received for which goods and services are not provided. For example state appropriations are nonoperating because they are provided by the Legislature to the institution without the Legislature directly receiving commensurate goods and services for those revenues.

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

June 30, 2003

June 30, 2002

Operating Revenues Operating Expenses

$

15,615

38,666

$

14,943

39,821

Operating Loss

$ -23,051

$ -24,878

Nonoperating Revenues and Expenses

20,070

24,898

Income (Loss) Before Other Revenues,

Expenses, Gains or Losses

$

-2,981

$

20

Other Revenues, Expenses, Gains or Losses

8

12,783

Increase (Decrease) in Net Assets

$

-2,973

$

12,803

Net Assets at Beginning of Year, as Originally Reported

$

53,240

$

88,969

Cumulative Effect of Changes in Accounting Principle

-48,532

Prior Period Adjustment

14 451

Net Assets at Beginning of Year Restated

$

67,691

$

40437

Net Assets at End of Year

$

64,718

$

53,240

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The Statement of Revenues, Expenses and Changes in Net Assets reflect an increase in the net assets at the end of the year in the amount of approximately $11,478,000.00. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows:
Revenue By Source (thousands of dollars) For The Years Ended June 30, 2003 and June 30, 2002

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Auxiliary Other
Total Operating Revenue
Nonoperating Revenue State Appropriations Gifts Investment Income Other
Total Nonoperating Revenue
Capital Gifts and Grants Other Capital Gifts and Grants
Total Revenues

June 30, 2003

$

8,937

2,513

1,199 2,935
31

$

19,735

127 208

$_--=2'-"-'0,=..07'-=0

$_ _ _____..;:;.8
$==3==-5-==69==3

June 30, 2002

$

8,397

2,526

908 2,768
344

$_-----"1-'-'4,"--94"-"-3

$

22,067

3,090

1

-260

$_ _2_4,~89_8

$====39="".8"=4==1

Expenses (By Functional Classification) (thousands of dollars) For The Years Ended June 30, 2003 and June 30, 2002

June 30, 2003

June 30. 2002

Operating Expenses Instruction Research Public Service Academic Support Student Services Institutional Support Plant Operations and Maintenance Scholarships and Fellowships Auxiliary Enterprises Unallocated Depreciation

$

17,636

$

17,927

327

359

492

454

3,089

3,079

2,945

3,134

4,692

4,582

4,628

3,161

1,764

2,069

3,093

2,722

2,334

Total Operating Expenses

$====38-,6=6==6

$====39="".8==2===1

- IV -

The compensation and employee benefits category increased by $526,763.07. The increase reflects a pay raise for the employees of the institution of approximately three percent with the associated fringe benefits. The increase also includes an increased cost of health insurance for the employees of the institution.

Utilities cost remained constant by only increasing by $5,692.88 during the past year. The University was able to control utility cost by negotiating a fixed price while natural gas costs increased during the winter of fiscal year 2003.

Nonoperating revenues (expenses) decreased by $4,827,429.06 primarily due to a decrease in state appropriations of$2,331,774.91.

Statement ofCash Flows

The final statement presented by the Southern Polytechnic State University is the Statement of Cash Flows. The Statement of Cash Flows presents detailed information about the cash activity of the institution during the year. The statement is divided into five parts. The first part deals with operating cash flows and shows the net cash used by the operating activities of the institution. The second section reflects cash flows from noncapital financing activities. This section reflects the cash received and spent for nonoperating, noninvesting, and noncapital financing purposes. The third section deals with cash flows from capital and related financing activities. This section deals with the cash used for the acquisition and construction of capital and related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The fifth section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets.

Cash Flows for the Years Ended June 30, 2003 and June 30, 2002, Condensed (thousands of dollars)

June 30, 2003

June 30, 2002

Cash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities
Net Change in Cash

$

-20,339

21,178

-1,069

128

$_ _ _-_10_2

$

-22,900

24,919

-708

-2,084

$_ _ _-_77_3

Cash - June 30, 2002 Add: Short-Term Investment Pools

$

918

449

Cash, Beginning of Year

$_ _ _1,~36_7

$_ _~1~69_1

Cash, End of Year

$===1="',2==6==5

$======9===1==8

-v-

Capital Assets Southern Polytechnic State University did not have any major capital projects during fiscal year 2003. For additional information concerning Capital Assets, see Notes 1 and 5 in the Notes to the Financial Statements. Long-Term Debt Southern Polytechnic State University had a total Long-Term Debt of $865,359.00 of which $608,347.38 was reflected as current liability at June 30, 2003. For additional information concerning Long-Term Debt see Notes 1 and 7 in the Notes to the Financial Statements. Economic Outlook The University is not aware of any currently known facts, decisions, or conditions that are expected to have a significant effect on the financial position or results of operations during this fiscal year beyond those unknown variations having a global effect on virtually all types of business operations. The University's overall financial position is strong. The University anticipates the current fiscal year will be much like last and will maintain a close watch over resources to maintain the University's ability to react to unknown internal and external issues. Lisa A. Rossbacher, President Southern Polytechnic State University
- Vl -

BASIC FINANCIAL STATEMENTS - 1-

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF NET ASSETS JUNE 30, 2003
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net Federal Financial Assistance Other Prepaid Items
Total Current Assets
Noncurrent Assets Investments Notes Receivable Capital Assets, Net (See Note 5)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Salaries Payable Accounts Payable Deferred Revenue Funds Held for Others Compensated Absences Other Liabilities
Total Current Liabilities
Noncurrent Liabilities Compensated Absences
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Assets

EXHIBIT A11 11

$ 1,264,847.55
880,286.30 5,069,452.28
814,779.03
$ 8,029,365.16
$ 2,912,503.07
704,436.08 60,694,533.42
$ 64,311,472.57
$ 72,340,837.73

$

92,986.27

648,978.36

4,630,036.55

1,347,351.84

608,347.38

38,131.95

$ 7,365,832.35

257,011.62
$ 7,622,843.97

$ 60,694,533.42
1,367,935.47 1,912,001.32
743,523.55

$ 64,717,993.76

See Independent Accountant's Combined Report on Review of Basic Financial Statements and Supplementary Information.
The notes to the financial statements are an integral part of this statement. -3-

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF REVENUES. EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30. 2003

EXHIBIT"B"

OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal State Nongovernmental
Sales and Services of Educational Departments Auxiliary Enterprises
Residence Halls Bookstore Food Services Parking/Transportation Health Services Intercollegiate Athletics Other Organizations Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and Fellowships Utilities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES {EXPENSES)
State Appropriations Interest and Other Investment Income Other Nonoperating Revenues
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts Nongovernmental
Increase (Decrease) in Net Assets
Net Assets Net Assets - Beginning of Year, as Originally Reported Prior Period Adjustments to Capital Assets See Note 1
Net Assets - Beginning of Year, Restated

$ 10,133,883.99 -1,197,186.45
1,550,749.69 271,360.99 690,488.86
1,199,068.19
1,122,090.79 101,591.46 585,918.69 203,067.00 201,479.26 603,125.68 118,200.04 30,716.75
$ 15,614,554.94
$ 10,155,498.87 11,034,274.45 5,337,617.90 2,418.00 221,057.48 1,976,777.43 1,346,953.11 6,307,516.02 2,283,953.81
$ 38,666,067.07
$ -23,051,512.13
$ 19,735,153.00 127,149.75 208,682.52
$ 20,070,985.27
$ -2,980,526.86
7,600.00
$ -2,972,926.86
$ 53,239,957.50 14,450,963.12
$ 67,690,920.62

Net Assets - End of Year
See Independent Accountant's Combined Report on Review of Basic Financial Statements and Supplementary Information. The notes to the financial statements are an integral part of this statement.
-5-

$ 64,717,993.76

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2003

EXHIBIT C 11 11

CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parkingrrransportation Health Services Intercollegiate Athletics Other Organizations Other Receipts (Payments)
Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Proceeds from Sale of Capital Assets Purchases of Capital Assets
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - June 30, 2002 Add: Short-Term Investments Pools
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year

$ 9,296,453.30
2,864,232.27 1,199,068.19 -12,815,425.52 -21,223, 758.03 -1,976,777.43 -103, 190.57
80,670.32
1,254,876.99 96,042.83
1,150,560.69 248,557.00 269,705.98 804,771.04 93,869.16
-1,579,250.80
$ -20,339,594.58

$ 19,735,153.00
1,443,344.93
$ 21,178,497.93

$

7,600.00

252,347.52

-1,329,444.31

$ -1,069,496.79

$

128,492.52

$

-102, 100.92

$

918,372.20

448,576.27

$

1,366,948.47

$ 1,264,847.55

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SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2003

EXHIBIT"C"

RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Accounts Receivables, Net Prepaid Items Notes Receivables, Net Accounts Payable Salaries Payable Deferred Revenue Other Liabilities Compensated Absences

$ -23,051,512.13
2,283,953.81
-2,788, 159.43 37,500.90 -22,520.25
248,902.14 17,703.50
2,918,241.94 -45,750.80 62,045.74

Net Cash Provided (Used) by Operating Activities

$ -20,339,594.58

NONCASH ACTIVITY NONCAPITAL FINANCING, CAPITAL AND RELATED FINANCING TRANSACTIONS AND INVESTING ACTIVITIES Change in Fair Value of Investments Recognized as a Component of Interest Income

$ ======1,=34=2=.7=7

See Independent Accountant's Combined Report on Review of Basic Financial Statements and Supplementary Information.
The notes to the financial statements are an integral part of this statement. -7-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS Southern Polytechnic State University serves the state, and national communities by providing its students with academic instruction that advances fundamental knowledge, and by disseminating knowledge to the people of Georgia and throughout the country.
REPORTING ENTITY Southern Polytechnic State University is one of thirty-four (34) State supported member institutions of higher education in Georgia which comprise the University System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Southern Polytechnic State University as a separate reporting entity.
The Board of Regents has constitutional authority to govern, control and manage the University System of Georgia. This authority includes but is not limited to the power to designate management, the ability to significantly influence operations, the authority to control institutions' budgets, the power to determine allotments of State funds to member institutions and the authority to prescribe accounting systems and administrative policies for member institutions. Southern Polytechnic State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Southern Polytechnic State University is considered an organizational unit of the Board of Regents of the University System of Georgia reporting entity for financial reporting purposes because of the significance of its legal, operational, and financial relationships with the Board of Regents as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysis for State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia was required to implement GASB Statement No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the University is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required 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 University's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required.
Generally Accepted Accounting Principles (GAAP) requires that the reporting of summer school revenues and expenses be between fiscal years rather than in one fiscal year. Due to the lack of materiality, Institutions of the University System of Georgia will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING For financial reporting purposes, the University is considered a special-purpose government engaged only in business-type activities. Accordingly, the University's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-university transactions have been eliminated.
The University has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The University has elected to not apply FASB pronouncements issued after the applicable date.
RESTATEMENT OF PRIOR YEAR NET ASSETS - BEGINNING OF YEAR In the initial year of implementation of GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities, the University failed to include residual values on its depreciable capital assets in accordance with asset capitalization policies adopted in the Capital Asset Guide for the University System of Georgia. As the result of the University's inclusion of residual values for depreciable capital assets, net assets at July 1, 2002 were increased by $1,924,932.03 for the effects on accumulated depreciation.
In addition the University failed to include a completed building on its depreciable capital assets in accordance with asset capitalization policies adopted in the Capital Asset Guide for the University System of Georgia. As the result of the University's inclusion of the building value for depreciable capital assets, net assets at July 1, 2002 were increased by $12,526,031.09 for the effects on Building and Building Improvements.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents consist of petty cash, demand deposits and time deposits in authorized financial institutions, and cash management pools that have the general characteristics of demand deposit accounts. This includes the Board of Regents Short-Term Investment Pool.
INVESTMENTS The University accounts for its investments at fair value in accordance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investment Pools. Changes in unrealized gain (loss) on the carrying value of investments are

-9-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS reported as a component of investment income in the statements of revenues, expenses and changes in net assets. The Board of Regents Balanced Income Fund and the Board of Regents Total Return Fund are included under Investments.
ACCOUNTS RECEIVABLE Accounts receivable consists of tuition and fee charges to students and auxiliary enterprise services provided to students, faculty and staff, the majority of each residing in the State of Georgia. Accounts receivable also include amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable expenditures made pursuant to the University's grant and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
NONCURRENT CASH AND INVESTMENTS Cash and investments that are externally restricted and cannot be used to pay current liabilities are classified as noncurrent assets in the Statement of Net Assets.
CAPITAL ASSETS Capital assets are recorded at cost at the date of acquisition, or fair market value at the date of donation in the case of gifts. For equipment, the University's capitalization policy includes all items with a unit cost of $5,000.00 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000.00 and significantly increase the value or extend the useful life of the structure are capitalized. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 40 to 60 years for buildings, 20 to 25 years for infrastructure and land improvements, 10 years for library books, and 3 to 7 years for equipment. Residual values will generally be 10% of historical costs for infrastructure, buildings and building improvements, and facilities and other improvements.
To obtain the total picture of plant additions in the University System, it is necessary to look at the activities of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to the System. GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution of the State of Georgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged.
Effective July 1, 2001, the GSFIC retains construction in progress on their books throughout the construction period and transfers the entire project to Southern Polytechnic State University when complete.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DEFERRED REVENUES Deferred revenues include amounts received for tuition and fees and certain auxiliary activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned.
COMPENSATED ABSENCES Employee vacation pay is accrued at year-end for financial statement purposes. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statements of Revenues, Expenses and Changes in Net Assets. Southern Polytechnic State University had accrued liability for compensated absences in the amount of $803,313.26 as of July 1, 2002. For fiscal year 2003, $715,653.31 was earned in compensated absences and employees were paid $653,607.57, for a net increase of $62,045.74. The ending balance as of June 30, 2003 in accrued liability for compensated absences is $865,359.00. Compensated absences include a current liability of $608,347.38.
NONCURRENT LIABILITIES Noncurrent liabilities include liabilities that will not be paid within the next fiscal year.
NET ASSETS The University's net assets are classified as follows:
Invested in capital assets, net ofrelated debt: This represents the University's total investment in capital assets, net of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed previously in Note 1 - Capital Assets section.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 4415-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.
- 11 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NET ASSETS Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University, and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus) of $53,638.23. Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia - Administrative Central Office for remittance to the Office of Treasury and Fiscal Services. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.

Unrestricted Net Assets includes the following items which are quasi-restricted by management.

June 30, 2003

R&RReserve Reserve for Encumbrances Other Unrestricted

$ 232,377.07 749,672.94 -238,526.46

Total Unrestricted Net Assets

$ 743,523.55

When an expense is incurred that can be paid using either restricted or unrestricted resources, the University's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.

INCOME TAXES Southern Polytechnic State University, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended.

CLASSIFICATION OF REVENUES The University has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses and Changes in Net Assets according to the following criteria:

Operating revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) sales and services of auxiliary enterprises, (3) most Federal, state and local grants and contracts and Federal appropriations, and (4) interest on institutional student loans.

- 12 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CLASSIFICATION OF REVENUES Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of nonexchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 9, Reporting Cash Flows of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting, and GASB No. 34, such as state appropriations and investment income.
SCHOLARSHIP ALLOWANCES Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses and Changes in Net Assets. Scholarship allowances are the difference between the stated charge for goods and services provided by the University, and the amount that is paid by students and/or third parties making payments on the students' behalf. Certain governmental grants, such as Pell grants, and other Federal, state or nongovernmental programs, are recorded as either operating or nonoperating revenues in the University's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the University has recorded contra revenue for scholarship allowances.
NOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to the State of Georgia (and thus Southern Polytechnic State University) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.

- 13 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES 5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, The Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

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

As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies which allow agencies of the State of Georgia (and thus Southern Polytechnic State University), 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 The University's cash deposits are categorized by risk as follows:

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 as of June 30, 2003 are as follows:

Cash Deposits

Carrying Amount

Bank Balances

$ 801.11s.22 $2,346,022.21 $

Risk Categories

2

3

1.489.os $.===o=o=o $ 2 338 603 86

- 14 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 2: CASH AND CASH EQUIVALENTS; OTHER DEPOSITS; AND INVESTMENTS

CATEGORIZATION OF INVESTMENTS The University's investments are categorized as to credit risk within the three categories described below:

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

Category 2 - Uninsured and unregistered, with securities held by the counter party's trust department or agent in the University's name.

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

At June 30, 2003, the University's investments consisted of the following:

Type of Investments

Common Stock

$

Investments Not Subject to Categorizations: Board of Regents Short-Term Fund Balanced Income Fund Total Return Fund

Total Investments

Risk Categories 2

4011 00 $

0 00 $

Carrying

3

Amount

0,00 $ 4,011.00

448,692.26 472,589.09 2,435,902.98
$ 336I,19533

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: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2003.

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal, State and Private Funds

$ 2,708,052.59 1,639,847.06 1,793,461.30

Less Allowance for Doubtful Accounts

$ 6,141,360.95 191,622.37

Net Accounts Receivable

$ 5,949,738.58

- 15 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 4: NOTES/LOANS RECEIVABLE

Notes/Loans receivable primarily consist of student loans made through the Federal Perkins Loan Program (the Program) comprise substantially all of the loans receivable at June 30, 2003 and 2002. The Program provides for cancellation of a loan at rates of 10% to 30% per year up to a maximum of 100% if the participant complies with certain provisions. The Federal government reimburses the University for amounts cancelled under these provisions. As the University determines that loans are uncollectible and not eligible for reimbursement by the Federal government, the loans are written off and assigned to the U. S. Department of Education.

NOTES: CAPITAL ASSETS

Following are the changes in capital assets for the year ended June 30, 2003:

Beginning Balance July 1, 2002 (Restated}

Additions

Reductions

Ending Balance June 30, 2003

Capital Assets, Not Being Depreciated:

Land

$

Construction Work-In-Progress

753,396.56 86,048.64 $

560,134.14 $

$ 646,182.78

753,396.56 0.00

~Total Capital Assets Not Being Depreciated

$ 839,445.20 $ 560,134.14 $ 646,182.78 $ 753,396.56

Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Library Collections Capitalized Collections

$ 1,623,504.00 73,877,737.48 $ 567,531.00 7,081,318.96 5,034,933.50 30,500.00

646,182.78
677,789.06 $ 76,557.81

$ 1,623,504.00 74,523,920.26 567,531.00
85,363.08 7,673,744.94 101,445.97 5,010,045.34
30,500.00

'x.Total Assets Being Depreciated

$ 88,215,524.94 $ 1,400,529.65 $ 186,809.05 $ 89,429,245.54

Less: Accumulated Depreciation:

Infrastructure

$ 550,367.86 $

Buildings and Building Improvements 16,982,692.56

Facilities and Other Improvements

450,592.68

Equipment

5,679,034.86

Library Collections

3,673,762.00

Capitalized Collections

10,848.96

58,446.14 1,392,114.37
15,489.20 554,457.60 $ 262,684.00
762.50

$ 608,814.00 18,374,806.93 466,081.88
41,698.08 6,191,794.38 101,445.97 3,835,000.03
11,611.46

x'J'otal Accumulated Depreciation

$ 27,347,298.92 $ 2,283,953.81 $ 143,144.05 $ 29,488,108.68

Total Capital Assets, Being Depreciated,

Net

$ 60,868,226.02 $ -883,424.16 $

43,665.00 $ 59,941,136.86

Capital Assets, Net

$ 61 707,671.22 $ -323.290.02 $ 689,847.78 $ 60.694.533.42

NOTE 6: DEFERRED REVENUE

Deferred revenue consists of the following at June 30, 2003.

- 16 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30. 2003

EXHIBIT "D"

NOTE 6: DEFERRED REVENUE

Prepaid Tuition and Fees Federal and Private Funds Other Deferred Revenue

$ 3,952,867.40 641,325.89 35.843.26

Totals

$ 4,630,036.55

NOTE 7: LONG-TERM LIABILITIES

Long-Tenn liability activity for the year ended June 30, 2003 was as follows:

Other Liabilities Compensated Absences

Beginning
Balance
July 1, 2002

Additions

Reductions

Ending
Balance
June 30, 2003

Current Portion

$ 803 313 26 $ 715 653 31 $ 653 607 57 $ 865.359.00 $ 608 347 38

NOTE 8: RETIREMENT PLANS

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 of Southern Polytechnic State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Southern Polytechnic State University makes monthly employer contributions to TRS at rates adopted by the TRS Board of Trustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2003, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year
2003 2002 2001

Percentage Contributed
100% 100% 100%

Required Contribution
$ 1,219,223.44 $ 1,214,550.34 $1,647,725.22

- 17 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 8: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Plan Description The Regents Retirement Plan, a single-employer defined contribution plan, is an optional retirement plan that was created/established by the Georgia General Assembly in O.C.G.A. 4721-1 et. seq. and is administered by the Board of Regents of the University System of Georgia. Under this plan, the Board of Regents may purchase annuity contracts for the purpose of providing 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 of the annuity contracts.
Funding Policy Southern Polytechnic State University makes monthly employer contributions for the Regents Retirement Plan at rates adopted by the Teachers Retirement System of Georgia Board of Trustees in accordance with State Statute and as advised by their independent actuary. The employer contributes 10.02% of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Southern Polytechnic State University and the covered employees made the required contributions of $600,652.80 (10.02%) and $299,728.78 (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 of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $ 3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
- 18 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 8: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2003 amounted to $63,144.14 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
NOTE 9: RISK MANAGEMENT
Southern Polytechnic State University is a participant in the Board of Regents of the University System of Georgia Health Benefits Plan, which is a self-insurance program of health and dental benefits for employees and retirees of the University System of Georgia. Southern Polytechnic State 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 - University System Office. All units of the 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 $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 claims in accordance with the Health Benefits Plan as established by the Board of Regents.
The Department of Administrative Services (DOAS) has the responsibility for the State of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. Southern Polytechnic State University, as an organizational unit of the Board of Regents of the University System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.

- 19 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 9: RISK MANAGEMENT
A self-insured program of professional liability for its employees was established by the Board of Regents of the University System of Georgia under powers authorized by the Official Code of Georgia Annotated Section 45-9-1. The program insures the employees to the extent that they are not immune from liability against personal liability for damages arising out of the performance of their duties or in any way connected therewith. The program is administered by DOAS as a Self-Insurance Fund.
NOTE 10: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Southern Polytechnic State 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 of the Board of Regents of the University System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003.
NOTE 11: POST-EMPLOYMENT BENEFITS OTHER THAN PENSION BENEFITS
Pursuant to the general powers conferred by the Official Code of Georgia Annotated Section 203-31, the Board of Regents of the University System of Georgia has established group health and life insurance programs for regular employees of the University System of Georgia. It is the policy of the Board of Regents to permit employees of the University System of Georgia eligible for retirement or that become permanently and totally disabled to continue as members of the group health and life insurance programs. The policies of the Board of Regents of the University System of Georgia define and delineate who is eligible for these post-employment health and life insurance benefits. Organizational units of the Board of Regents of the University System of Georgia pay the employer portion for group insurance for affected individuals.
As of June 30, 2003, there were 152 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2003, Southern Polytechnic State University recognized as incurred $576,096.79 of expenses, which was net of $224,087.24 of participant contributions.

- 20-

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2003

EXHIBIT "D"

NOTE 12: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The University's operating expenses by functional classification are shown below:

Statement of Operating Expenses - Natural vs Functional Classifications For the Fiscal Year Ended June 30, 2003

Functional Classification

Natural Classification

Instruction

Research

Public Service

Academic Suimort

Student Services

Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and
Fellowships Utilities Supplies and Other
Services Depreciation
Total Operating Expenses

$ 9,971,180.57 1,912,318.11 2,520,542.01
22,927.02
21,719.86 114,388.61
1,090,066.16 1,982,800.13
$1763594247

$ 171,400.30 85,624.00 24,135.04 13,323.67
32,031.22
$ 326 514 23

$ 383,289.12 83,396.43 15,375.42
4,903.78 5,483.47
$ 492448 22

$ 1,804,704.89 388,407.07 101,872.26
65,345.36 728,119.94
$ 3 088449 52

$ 12,918.00 1,736,255.45 383,872.63
34,304.31
7,848.95 38,031.43
723,405.61 8,556.72
$ 2 945 193 10

Natural Classification
Salaries Faculty Staff
Employee Benefits Other Personal Services Travel Scholarships and
Fellowships Utilities Supplies and Other
Services Depreciation
Total Operating Expenses

Institutional Support

Functional Classification

Plant

Operations and Scholarships

Auxiliary

Maintenance and Fellowships

Entemrises

Total Operating Expenses

$ 2,788,831.99 1,354,771.77 2,418.00 16,753.62
34,365.39
488,627.97 6,108.32
$ 469187706

$ 1,623,688.58 418,073.72 -387,934.82 2,254.49
995,511.90
1,689,762.37 286,488.64
$ 4 627 844 88

$ 1,764,326.62 $ 1764326 62

$ 699,562.31 164,419.23 387,934.82 14,246.69
182,882.00 94,406.64
1,550,019.28
$ 3 093 470 97

$10,155,498.87 11,034,274.45 5,337,617.90 2,418.00 221,057.48
1,976,777.43 1,346,953.11
6,307,516.02 2,283,953.81
$38 666 067 07

- 21 -

SUPPLEMENTARY INFORMATION - 23 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUDGET - (NON-GAAP BASIS} RESIDENT INSTRUCTION
YEAR ENDED JUNE 30. 2003

SCHEDULE "1"

REVENUES
State Appropriations Other Revenues Retained

BUDGET

ACTUAL (1)

VARIANCEFAVORABLE (UNFAVORABLE)

$ 19,592,373.00 $ 19,592,373.00 $

20, 117,220.00

12,410,323.04

0.00 -7,706,896.96

$ 39,709,593.00 $ 32,002,696.04 $ _ _-_7._,7_06....:..,8_9_6_.9_6

EXPENDITURES
Personal Services: Education, General and Departmental Services Sponsored Operations
Operating Expenses: Education, General and Departmental Services Sponsored Operations
Special Funding Initiative Research Consortium

$ 23,973,068.00 $ 23,679,961.58 $

1,211,041.00

1,046,204.51

5,010,710.00 8,982,906.00
273,761.00 258,107.00

5,127,844.60 1,866,384.60
296,109.16 257,646.92

293,106.42 164,836.49
-117, 134.60 7,116,521.40
-22,348.16 460.08

$ 39,709,593.00 $ 32,274,151.37 $ _ _ _7._,4_35....:..,4_4_1_.6_3

Excess of Revenues over Expenditures

$

-271,455.33 $ =====-27=1=,45=5=.3=3

(1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

See accompanying notes and Independent Accountant's Combined Report on Review of Basic Financial Statements and Supplementary Information.
- 25 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF REVENUES AND EXPENDITURES COMPARED TO
BUDGET - (NON-GAAP BASIS) LOTTERY FOR EDUCATION YEAR ENDED JUNE 30, 2003

SCHEDULE "2"

REVENUES State Appropriations
EXPENDITURES Equipment, Technology and Construction
Trust Fund

BUDGET

ACTUAL (1)

VARIANCEFAVORABLE (UNFAVORABLE)

$

142,780.00 $

142,780.00 $ - - - - -0.0-0

$

142,780.00 $

142,366.54 $ _ _ _ _4_1_3._46_

Excess of Revenues over Expenditures

$

413.46 $ ====4=1=3.,...46,,.,

(1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

See accompanying notes and Independent Accountant's Combined Report on Review of Basic Financial Statements and Supplementary Information.
-26-

SOUTHERN POLYTECHNIC STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2003

SCHEDULE "3"

Totals per Annual Supplement

Accruals June 30, 2003 June 30, 2002

Compensated Absences June 30, 2003 June 30, 2002

Prepaids June 30, 2003 June 30, 2002

Adjustments

Shared Services on Jointly Staffed Personnel

Kennesaw State University

Dennison, Wayne

Middle Georgia College

Tutterow, Laura

Other

Crawford,

Fran

Hammonds, John

SALARIES
$ 21,161,705.06 $

TRAVEL 221,319.53

92,986.27 -75,282.77

803,863.45 -746,226.90

-694,602.96 688,612.54

12,918.00 -56,537.37
2,338.00

-262.05

$ 21,189,773.32 $ =====2=2:!1'=05=7=.4=8

See accompanying notes and Independent Accountant's Combined Report on Review of Basic Financial Statements and Supplementary Information.
- 27-

SOUTHERN POLYTECHNIC STATE UNIVERSITY RECONCILIATION OF PER DIEM AND FEES YEAR ENDED JUNE 30, 2003

SCHEDULE 411 11

Totals per Annual Supplement
Adjustments Guarnieri, Damien A.

FEE AMOUNT

EXPENSE AMOUNT

$

691,815.86 $

10,028.83 $

TOTAL 701,844.69

-25.00

25.00

0.00

$

691,790.86 $

10,053.83 $ ===70=1=,8=4=4=.6=9

See accompanying notes and Independent Accountant's Combined Report on Review of Basic Financial Statements and Supplementary Information.
-28-

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

SOUTHERN POLYTECHNIC STATE UNIVERSITY AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2003

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FS-550-02-01 FS-550-02-02

Previously Reported Corrective Action Implemented Previously Reported Corrective Action Implemented

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER AND STATUS

FA-550-00-04

Partially Resolved - See Corrective Action/Responses

CORRECTIVE ACTION/RESPONSES

SPECIAL TESTS AND PROVISIONS Failure to Reconcile Program Reports William D. Ford Federal Direct Loan Program (CFDA 84.286) Finding Control Number: FA-550-00-04

The University has reconciled the open program years for the William D. Ford Federal Direct Loan Program as follows:

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

Closed by the LOC (Loan Origination Center) $26,189.44, remaining loans to be booked by the LOC $110,329.75, remaining loans to be booked by the LOC $23,323.00, remaining loans to be booked by the LOC

All borrower's additions, adjustments and/or corrections have been identified and reported to the Loan Origination Center (LOC) since February 2002; therefore there is no further action to be taken by the University at this time.

In June 2002, the Department ofEducation suspended electronic transfer ofdata for prior years; thus requiring the LOC to manually process each borrower's records. This manual process is both labor intensive and time consuming. Once all transactions have been recorded by the LOC, the University will then receive permission from the Department of Education to request reimbursement in the amount of$159,842.19 as noted above.