Southern Polytechnic State University, Marietta, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2008

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
I
SOUTHERN POLYTECHNIC STATE UNIVERSITY MARIETTA, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2008
Russell W. Hinton State Auditor

SOUTHERN POLYTECHNIC STATE UNIVERSITY - TABLE OF CONTENTS -

Page

SECTION I

FINANCIAL

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

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENT'S DISCUSSION AND ANALYSIS

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

3

C STATEMENT OF CASH FLOWS

4

D NOTES TO THE FINANCIAL STATEMENTS

5

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

24

2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

25

3 STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING

SOURCE COMPARED TO BUDGET

(NON-GAAP BASIS) BUDGET FUND

26

4 RECONCILIATION OF SALARIES AND TRAVEL

29

SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

Russell W. Hinton
STATE AUDITOR
(404) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 20, 2008

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the Board of Regents of the University System of Georgia
and Honorable Lisa A. Rossbacher, President Southern Polytechnic State University
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying basic financial statements (Exhibits A through D) of Southern Polytechnic State University, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2008. These financial statements are the responsibility ofthe Southern Polytechnic State University's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As discussed in Note 1, the financial statements of Southern Polytechnic State University are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions of Southern Polytechnic State University. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows ofthe State ofGeorgia, in conformity with accounting principles generally accepted in the United States of America.

08ARL-62

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Southern Polytechnic State University as ofJune 30, 2008, and its changes in financial position and cash flows for the year then ended 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 required supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally of inquiries ofmanagement regarding the methods ofmeasurement and presentation ofthis required supplementary information. However, we did not audit this information and express no opinion on it.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements of Southern Polytechnic State University taken as a whole. The accompanying supplementary information (Schedules 1 through 4) is presented for purposes of additional analysis and is not a required part ofthe basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Respectfully submitted,

RWH:as 08ARL-62

~~IA:)~
t~ell W. Hinton, CPA, CGFM State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

SOUTHERN POLYTECHNIC STATE UNIVERSITY
Management's Discussion and Analysis

Introduction

Southern Polytechnic State University is one of the 35 institutions of higher education of the University System of Georgia. The University, located in Marietta, Georgia, 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 of Georgia. The campus currently encompasses approximately 193 acres and contains 46 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 student body that has had the third highest SAT average amongst System institutions for several years. The University continues to grow as shown by the comparison numbers below.

Faculty

Students {Headcount)

Students {FTE)

Fiscal Year 2008 Fiscal Year 2007 Fiscal Year 2006

168

4,460

3,818

160

4,207

3,523

143

3,807

3,184

Overview ofthe Financial Statements and Financial Analysis

Southern Polytechnic State University is proud to present its financial statements for fiscal year 2008. 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 2008 and fiscal year 2007.

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.

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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

June 30. 2008

June 30. 2007

Assets Current Assets Capital Assets, Net Other Assets

$ 9,894,054 80,173,161 3,146,944

$ 6,468,154 80,039,928 3,457,154

Total Assets

$ 93,214,159

$ 89,965,236

Liabilities Current Liabilities Noncurrent Liabilities

$ 6,492,655 30,915.011

$ 5,231,275 31,764,719

Total Liabilities

$ 37,407,666

$ 36,995,994

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

$ 48,864,913 1,463,340 1,795,614 3,682,626

$ 47,860,915 1,674,222 1,984,046 1,450,059

Total Net Assets

$ 551806_493

$ 5219691242

The total assets of the institution increased by $3,248,923. A review of the Statement of Net Assets will reveal that the increase was primarily due to an increase of $3,425,900 in the category of Current Assets.

The total liabilities for the year increased by $411,672. The combination of the increase in total assets of $3,248,923 and the increase in total liabilities of $411,672 yields an increase in total net assets of $2,837,251.

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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

June 30. 2008

June 30. 2007

Operating Revenues Operating Expenses

$ 29,175,674 50,016.461

$ 25,074,127 45,527.864

Operating Loss

$ -20,840,787

$ -20,453,737

Nonoperating Revenues and Expenses

21,438.813

19,662.408

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

$

598,026

$ -791,329

Other Revenues, Expenses, Gains or Losses

2,239.225

683,435

Increase (Decrease) in Net Assets

$ 2,837,251

$ -107,894

Net Assets at Beginning of Year

52,969,242

53,077.136

Net Assets at End of Year

$ 55,806,493

$ 52,969,242

The Statement of Revenues, Expenses and Changes in Net Assets reflects a positive year with an increase in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows:

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Revenue By Source For The Years Ended June 30, 2008 and June 30, 2007

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

June 30, 2008
$ 15,657,682 3,872,684
1,220,377 7,971,764
453,167
$ 29,175,674
$ 22,497,075 249
463,045 146,461 -78.657
$ 23,028,173
$ 2,239,225
$ 54_443,072

June 30, 2007
$ 13,712,299 2,941,159 967,610 7,102,092 350,967
$ 25,074,127
$ 19,987,862 669,606 381,397 255,190
$ 21,294,055
$ 683.435 $ 47,051,617

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Expenses (By Functional Classification) For The Years Ended June 30, 2008 and June 30, 2007

June 30. 2008

June 30. 2007

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

$ 20,148,440 597,065 1,599
3,741,031 3,453,071 7,249,736 6,416,402 2,385,149 6,023,968

$ 19,365,144 228,354 -7,819
3,441,709 3,501,590 6,417,848 4,758,754 2,065,254 5,232,099
524.931

Total Operating Expenses

$ 50,016,461

$ 45,527,864

Nonoperating Expenses Interest Expense (Capital Assets)

1,589,360

1,631,647

Total Expenses

$ 51,605,821

$ 47,159,511

Operating revenues increased by $4,101,547 in fiscal 2008. Tuition and Fees increased by 14 percent and Grants and Contracts, Sales and Services, Auxiliary and Other revenues increased by 19 percent.

The Auxiliary revenue increase of $869,672 1s a result of the changing environment of residential life on the University's campus.

Nonoperating revenues increased by $1,734,118 for the year primarily due to an increase of $2,509,213 in State Appropriations.

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.

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Cash Flows for the Years Ended June 30, 2008 and June 30, 2007, Condensed

June 30. 2008

June 30. 2007

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

$ -16,769,820 23,288,668 -4,942,089 84.350

$ -17,449,024 20,892,153 -2,987,250 381.397

Net Change in Cash Cash, Beginning of Year

$ 1,661,109 3,455.676

$

837,276

2,618,400

Cash, End of Year

$ 5,116,785

$ 3,455.676

Capital Assets

Southern Polytechnic State University expended $2,239,225 in capital projects utilizing funding from the Georgia State Financing and Investment Commission (GSFIC).

For additional information concerning Capital Assets, see Notes 1, 6, 8, 9, and 10 in the Notes to the Financial Statements.

Long-Term Liabilities

Southern Polytechnic State University had Long-Term Liabilities of $32,572,972 of which $1,657,961 was reflected as current liability at June 30, 2008.

For additional information concerning Long-Term Liabilities, see Notes 1 and 8 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

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BASIC FINANCIAL STATEMENTS -I-

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF NET ASSETS JUNE 30, 2008
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Prepaid Items
Total Current Assets
Noncurrent Assets Investments Notes Receivable, Net Capital Assets, Net (Note 6)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Deferred Revenue (Note 7) Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Compensated Absences
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Assets
The notes to the financial statements are an integral part of this statement. -2-

EXHIBIT "A"

$

5,116,785

282,644 3,742,069
752 556

$

9,894,054

$

2,837,392

309,552

80,173,161

$ 83,320,105

$ 93,214,159

$

1,113,489

173,016

2,981,667

566,522

915,315

742,646

$

6,492,655

$ 30,392,933 522,078
$ 30,915,011
$ 37,407,666

$ 48,864,913
1,463,340 1,795,614 3,682,626

$ 55,806,493

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2008
OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal State Local
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 Grants and Contracts
Other Gifts Interest and Other Investment Income Interest Expense Other Nonoperating Revenues/Expenses
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement.
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EXHIBIT"B"

$ 17,879,720 -2,222,038
3,585,729 215,723 71,232
1,220,377
5,303,873 112,615 957,164 284,304 233,080
1,005,135 75,593
453167
$ 29,175,674

$

11,366,802

14,095,372

6,788,898

92,558

348,234

2,623,727

1,432,242

10,223,843

3,044,785

$ 50,016,461

$ -20,840,787

$ 22,497,075

249 463,045 146,461 -1,589,360 -78 657

$ 21,438,813

$

598,026

2,239,225

$

2,837,251

52,969,242

$-=====5,..5,,..80=6=,4=9=3

SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2008
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 Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services Parking/Transportation 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 Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts
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 Principal Paid on Capital Debt and Leases Interest Paid on Capital Debt and Leases
Net Cash Provided (Used) by Capital and Related Financing Activities
CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments Purchase of Investments
Net Cash Provided (Used) by Investing Activities
Net Increase (Decrease) in Cash
Cash and Cash Equivalents - Beginning of Year
Cash and Cash Equivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash
Provided (Used) by Operating Activities Depreciation Change in Assets and Liabilities: Receivables, Net Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Activities
The notes to the financial statements are an integral part of this statement.
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EXHIBIT "C"

$

15,938,750

3,813,639

1,220,377

-18,959, 157

-25,328,283

-2,623,727

28,658

6,274,648 114,331 994,244 355,207 47,368
1,205,377 279,660 -130 912

$ -16,769,820

$

22,497,075

59,179

463,294

269,120

$

23,288,668

$

700,169

-4, 113

-3, 178,020

-870,765

-1,589,360

$

-4 942 089

$

146,461

-62 111

$

84 350

$

1,661,109

3455 676

$

5116785

$ -20,840,787
3,044,785
-332,430 106,695
28,658 -3,534 230,726 859,545 136,522
$ -16?69,820

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

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-five (35) 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.
Legally separate, tax exempt organizations whose activities primarily support units of the University System of Georgia, which are organizational units of the State of Georgia, are considered potential component units of the State. See Note 16, Affiliated Organizations, for additional information.
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 implemented 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 was also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) as prescribed by the GASB and are presented as required by these standards to provide a comprehensive, entitywide 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.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION 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 predominant activity takes place.
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.
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.
SHORT-TERM INVESTMENTS Short-Term Investments consist of investments of 90 days - 13 months. This would include certificates of deposits or other time restricted investments with original maturities of six months or more when purchased. Funds are not readily available and there is a penalty for early withdrawal.
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 reported as a component of investment income in the Statement 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 fees charged 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 includes amounts due from the Federal government, state and local governments, or private sources, in connection with reimbursement of allowable
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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTS RECEIVABLE expenditures made pursuant to the University's grants and contracts. Accounts receivable are recorded net of estimated uncollectible amounts.
NONCURRENTINVESTMENTS 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 or more, and an estimated useful life of greater than one year. Renovations to buildings, infrastructure, and land improvements that exceed $100,000 and/or 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 20 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.
For projects managed by GSFIC, the GSFIC retains construction in progress on its books throughout the construction period and transfers the entire project to the University when complete. For projects managed by the University, the University retains construction in progress on its books and is reimbursed by GSFIC. For the year ended June 30, 2008, GSFIC did not transfer any capital additions to Southern Polytechnic State University.
DEPOSITS Deposits represent good faith deposits from students to reserve housing assignments m a University residence hall.
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.
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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 compensated absences 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 $1,128,203 as of July 1, 2007. For fiscal year 2008, $936,116 was earned in compensated absences and employees were paid $799,595, for a net increase of $136,521. The ending balance as of June 30, 2008 in accrued liability for compensated absences was $1,264,724.
NONCURRENT LIABILITIES Noncurrent liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as noncurrent assets.
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 44-15-7 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.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NET ASSETS Expendable Restricted Net Assets include the following:

June 30, 2008

Restricted - E & G and Other Organized Activities Federal Loans Institutional Loans

$ 1,377,957 274,358 143,299

Total Restricted Expendable

$ 1,795.614

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). Unexpended state appropriations must be refunded to the Board of Regents of the University System of Georgia, University System Office for remittance to the Office of Treasury and Fiscal Services. At June 30, 2008, there was a surplus balance of $41,446.06 to be refunded. 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, 2008

R&RReserve Reserve for Encumbrances Other Unrestricted

$ 2,833,026 8,908,867 -8,059,267

Total Unrestricted Net Assets

$ 3,682.626

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.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, net of scholarship allowances, (3) most Federal, state and local grants and contracts, and (4) interest on institutional student loans.
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: DEPOSITS AND INVESTMENTS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the University's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the 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, bills, notes, certificates of indebtedness, or other direct obligations of the United States or ofthe State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

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

4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.

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

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

The Treasurer of the Board of Regents is responsible for all details relative to furnishing the required depository protection for all units of the University System of Georgia.

At June 30, 2008, the carrying value of deposits was $4,662,950 and the bank balance was $5,942,840. Of the University's deposits, $5,942,840 were uninsured. Of these uninsured deposits, $5,942,840 were uncollateralized.

INVESTMENTS Southern Polytechnic State University maintains an investment policy which fosters sound and prudent judgment in the management of assets to ensure safety of capital consistent with the fiduciary responsibility each institution has to the citizens of Georgia and which conforms to Board of Regents investment policy. All investments are consistent with donor intent, Board of Regents policy, and applicable Federal and state laws.

The University's investments as of June 30, 2008 are presented below. All investments are presented by investment type and debt securities are presented by maturity.

Investments
Equity Securities - Domestic
Investment Pools Board of Regents Short-Term Fund Balanced Income Fund Total Return Fund
Total Investments

- 11 -

$

3,404

448,235 491,374 2,342,614
$ 3,285.627

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTE 2: DEPOSITS AND INVESTMENTS

INVESTMENTS

The Board of Regents Investment Pool is not registered with the Securities and Exchange

Commission as an investment company. The fair value of investments is determined daily. The

pool does not issue shares. Each participant is allocated a pro rata share of each investment at

fair value along with a pro rata share of the interest that it earns. Participation in the Board of

Regents Investment Pool is voluntary. The Board of Regents Investment Pool is not rated.

Additional information on the Board of Regents Investment Pool is disclosed in the audited

Financial Statements of the Board of Regents of the University System of Georgia -

Administrative Central Office (oversight unit). This audit can be obtained from the Georgia

Department of Audits

Education Audit Division or on their web site at

http://www.audits.state.ga. us/internet/searchRpts.html.

Interest Rate Risk Interest rate risk is the risk that changes in interest rates of debt investments will adversely affect the fair value of an investment. The University does not have a formal policy for managing interest rate risk

The Weighted Average Maturity of the Short-Term Fund is 1.99 years. Of the University's total investment of $448,235 in the Short-Term Fund, $446,442 is invested in debt securities.

The Weighted Average Maturity of the Total Return Fund is 7.84 years. Of the University's total investment of $2,342,614 in the Total Return Fund, $740,266 is invested in debt securities.

The Weighted Average Maturity of the Balanced Income Fund is 7.84 years. Of the University's total investment of $491,374 in the Balanced Income Fund, $315,953 is invested in debt securities.

Custodial Credit Risk Custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the University will not be able to recover the value of the investment or collateral securities that are in the possession of an outside party. The University does not have a formal policy for managing custodial credit risk for investments.

At June 30, 2008, $3,404 of the University's applicable investments were uninsured and held by the investment's counterparty in the University's name.

Credit Quality Risk Credit quality risk is the risk that an issuer or other counterparty to an investment will not fulfill its obligations. The University does not have a formal policy for managing credit quality risk.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"D"

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2008:

Student Tuition and Fees Auxiliary Enterprises and Other Operating Activities Federal Financial Assistance Georgia State Financing and Investment Commission Other

$ 980,520 831,502 282,644
1,539,056 2,044,293

Less Allowance for Doubtful Accounts

$ 5,678,015 1,653,302

Net Accounts Receivable

$ 4,024,713

NOTE 4: INVENTORIES

Southern Polytechnic State University had no inventories at June 30, 2008.

NOTE 5: NOTES/LOANS RECEIVABLE

The Federal Perkins Loan Program (the Program) comprises substantially all of the loans receivable at June 30, 2008. 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.

As of June 30, 2008 the University had no balance in the allowance for uncollectible notes receivable.

NOTE 6: CAPITAL ASSETS

Following are the changes in capital assets for the year ended June 30, 2008:

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTE 6: CAPITAL ASSETS

Capital Assets, Not Being Depreciated: Land Construction Work-In-Progress
Total Capital Assets Not Being Depreciated
Capital Assets, Being Depreciated: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections
Total Assets Being Depreciated
Less: Accumulated Depreciation: Infrastructure Building and Building Improvements Facilities and Other Improvements Equipment Capital Leases Library Collections Capitalized Collections
Total Accumulated Depreciation
Total Capital Assets, Being Depreciated, Net
Capital Assets, Net

Beginning Balance Julx 1, 2007

Additions

$ 1,700,397 2,261,213 $ 2,206,750

$ 3,961,610 $ 2,206,750

$ 1,623,504 56,644,304 575,631 $ 9,085,479 33,792,318 6,114,634 30 500
$ 107,866,370 $

7,842 629,498 333,930
971 270

$ 843,139 $

58,446

16,490,766

1,387,538

511,043

871

7,486,810

482,688

1,619,215

844,808

4,822,417

269,671

14 662

763

$ 31,788,052 $ 3 044 785

$ 76,078,318 $ -2,073,515 $ 80.039 928 $ 133.235

Reductions

$

0

$

0

$

8,700

7,542

$

16,242

$

9,074

7,166

$

16 240

$

2

$

2

Ending Balance June 30, 2008
$ 1,700,397 4,467,963
$ 6,168,360
$ 1,623,504 56,644,304 583,473 9,706,277 33,792,318 6,441,022 30,500
$ 108,821,398
$ 901,585 17,878,304 511,914 7,960,424 2,464,023 5,084,922 15 425
$ 34,816,597
$ 74,004,801
$ 80,173.161

NOTE 7: DEFERRED REVENUE

Deferred revenue consisted of the following at June 30, 2008:

Prepaid Tuition and Fees Other Deferred Revenue

$ 2,300,579 681,088

Totals

$ 2,981,667

NOTE 8: LONG-TERM LIABILITIES

Long-Term liability activity for the year ended June 30, 2008 was as follows:

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTES: LONG-TERM LIABILITIES

Leases Lease Obligations
Other Liabilities Compensated Absences
Total Long-Term Obligations

Beginning Balance
July I. 2007
$ 32,179,013
I, 128,203 $ 33,307,216

Additions
$ 936 I 16 $ 936 116

Reductions $ 870,765
799 595 $ l,67Q,36Q

Ending Balance June 30, 2008
$ 31,308,248
1,264,724 $ 32,572,272

Current Portion
$ 915,315
742 646 $ 1,657,261

NOTE 9: SIGNIFICANT COMMITMENTS

The University had no significant unearned, outstanding, construction or renovation contracts as of June 30, 2008.

NOTE 10: LEASE OBLIGATIONS

Southern Polytechnic State University is obligated under capital leases and installment purchase agreements for the acquisition of real property.

CAPITAL LEASES Capital leases are generally payable in installments ranging from monthly to annually and have terms expiring in various years between 2027 and 2029. Expenditures for fiscal year 2008 were $2,460,125 of which $1,589,360 represented interest. Total principal paid on capital leases was $870,765 for the fiscal year ended June 30, 2008 with an interest rate of 5 percent. The following is a summary of the carrying values of assets held under capital lease at June 30, 2008:

Buildings

$ 31,328,295

Certain capital leases provide for renewal and/or purchase options. Generally purchase options at bargain prices of one dollar are exercisable at the expiration of the lease terms.

Southern Polytechnic State University had two capital leases with related entities in the current fiscal year. In July 2005, Southern Polytechnic State University entered into a capital lease of $11,643,862 at 5 percent with the Southern Polytechnic State University Foundation, Inc., an affiliated organization, whereby the University leases a building for a twenty two year period that began July 2005 and expires June 2027. Also in July 2005, Southern Polytechnic State University entered into a capital lease of $22,148,456 at 5 percent with the Southern Polytechnic State University Foundation, Inc., whereby the University leases a building for a twenty four year period that began July 2005 and expires June 2029. The outstanding liability at June 30, 2008 on these capital leases is $31,308,248. The University at its option may terminate the lease and purchase the Foundation's interest for the unamortized principal balance and the payment of $1.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT D 11 11

NOTE 10: LEASE OBLIGATIONS
FUTURE COMMITMENTS Future commitments for capital leases (which here and on the Statement of Net Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2008, were as follows:

Real Property and
EguiQment Capital Leases

Year Ending June 30: 2009 2010 2011 2012 2013 2014 - 2018 2019 - 2023 2024-2028 2029

Year 1 2 3 4 5
6-10 11-15 16-20
21

$ 2,460,140 2,460,140 2,460,140 2,460,140 2,460,140 12,300,700 12,300,700 11,426,943 1,604,333

Total Minimum Lease Payments

$ 49,933,376

Less: Interest

18,625,128

Principal Outstanding

$ 31,308,248

Southern Polytechnic State University had no expense for rental of real property and equipment under operating leases in fiscal year 2008.

NOTE 11: 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 Georgia General Assembly. TRS provides retirement allowances and other benefits for plan participants. 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 TRS offices or from the Georgia Department of Audits and Accounts.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"D"

NOTE 11: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

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 2008, the employer contribution rate was 9.28% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2008

100%

$ 1,130,521

2007

100%

$ 1,072,920

2006

100%

$ 1,016,840

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. O.C.G.A. 47-3-68(a) defines who may participate in the Regents Retirement Plan. An "eligible university system employee" is a faculty member or a principal administrator, as designated by the regulations of the Board of Regents. Under the Regents Retirement Plan, a plan participant may purchase annuity contracts from four approved vendors (AIG-VALIC, American Century, Fidelity, and TIAA-CREF) for the purpose of receiving retirement and death benefits. Benefits depend solely on amounts contributed to the plan plus investment earnings. Benefits are payable to participating employees or their beneficiaries in accordance with the terms of the annuity contracts.
Funding Policy 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. For fiscal year 2008, the employer contribution was 8.13% for the first six months and 8.15% for the last six months of the participating employee's earnable compensation. Employees contribute 5% of their earnable compensation. Amounts attributable to all plan contributions are fully vested and non-forfeitable at all times.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTE 11: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Funding Policy Southern Polytechnic State University and the covered employees made the required contributions of$788,585 (8.13% or 8.15%) and $484,377 (5%), respectively.
AIG-VALIC, American Century, Fidelity, and TIAA-CREF have separately issued financial reports which may be obtained through their respective corporate offices.
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 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.
Contributions 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 2008 amounted to $101,137 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
The Georgia Defined Contribution Plan issues a financial report each fiscal year, which may be obtained from the ERS offices.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTE 12: RISK MANAGEMENT
The University System of Georgia offers its employees and retirees access to two different selfinsured healthcare plan options - a PPO/PPO Consumer healthcare plan, and an indemnity healthcare plan. Southern Polytechnic State University and participating employees and retirees pay premiums to either of the self-insured healthcare plan options to access benefits coverage. The respective self-insured healthcare plan options are included in the financial statements of the Board of Regents of the University System of Georgia - University System Office. All units of the University System of Georgia share the risk of loss for claims associated with these plans. The reserves for these two plans are considered to be a self-sustaining risk fund. Both selfinsured healthcare plan options provide a maximum lifetime benefit of $2,000,000 per person. The Board of Regents has contracted with Blue Cross Blue Shield of Georgia, a wholly owned subsidiary of WellPoint, to serve as the claims administrator for the two self-insured healthcare plan products. In addition to the two different, self-insured healthcare plan options offered to the employees of the University System of Georgia, a fully insured HSA/High Deductible PPO healthcare plan and two fully insured HMO healthcare plan options are also offered to System employees.
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.
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 13: 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 that are disallowed under grant terms. The amount of expenditures which may be disallowed by the
- 19 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT "D"

NOTE 13: CONTINGENCIES
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, 2008.
NOTE 14: 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. With regard to life insurance, the employer covers the total cost for $25,000 of basic life insurance. If an individual elects to have supplemental, and/or, dependent life insurance coverage, such costs are borne entirely by the employee.
The Board of Regents Retiree Health Benefit Plan is a single employer defined benefit plan. Financial statements and required supplementary information for the Plan are included in the publicly available Consolidated Annual Financial Report of the University System of Georgia. The University pays the employer portion of health insurance for its eligible retirees based on rates that are established annually by the Board of Regents for the upcoming plan year. For 2007 and 2008 plan years, the employer rate was approximately 75% of the total health insurance cost for eligible retirees and the retiree rate was approximately 25%.
As of June 30, 2008, there were 183 employees who had retired or were disabled that were receiving these post-employment health and life insurance benefits. For the year ended June 30, 2008, Southern Polytechnic State University recognized as incurred $994,437 of expenditures, which was net of $336,960 of participant contributions.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2008

EXHIBIT"D"

NOTE 15: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS

The University's operating expenses by functional classification for fiscal year 2008 are shown below:

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

Instruction

Functional Classification

Research

Public Service

Academic Su1;mort

Student Services

$ 11,289,987 $ 3,244,363 3,280,336
152,552
6,278 41,232
1,908,287 225,405
$ 20 148 440 $

40,213 368,454
24,464
12,840
15,780 16
135,298 $
597 065 $

I 599 I 599

$

35,216

2,395,960

520,337

72,664

10,146
688,340 18,368
$ 3 741 031

$ 1,971,702 465,351
46,807
200 14,231
944,849 9 931
$ 3 453 071

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

Institutional Su1;mort

Functional Classification

Plant

Operations and Scholarships

Auxiliary

Maintenance and Fellowshi11s Entemrises

Total Operating Ex11ense

$

1,386

3,558,646

1,769,477

48,556

39,597

-13,019
1,711,248 133,845
$ 7 249 736

$ 1,751,584 542,021 -435,785 4,607
1,269,787
1,486,551 1,797,637
$ 6 416.402

$

23

44,002

2,341,124

$ 2 385 149

$ 804,663 186,889 435,785 19,167
260,345 109,849
3,349,270 858,000
$ 6 023 968

$ 11,366,802 14,095,372 6,788,898 92,558 348,234
2,623,727 1,432,242
10,223,843 3,044,785
$ 5001646)

NOTE 16: AFFILIATED ORGANIZATION

In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment of GASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, Southern Polytechnic State University Foundation is a legally separate, tax exempt organization whose activities primarily support Southern Polytechnic State University, a unit of the University System of Georgia (an organizational unit of the State of Georgia). The State Accounting Office determined Component Units of the State of Georgia, as required by GASB Statement No. 39, should not be assessed in relation to their significance to Southern Polytechnic State University, but instead based on their significance to the State of Georgia. Accordingly, Southern Polytechnic State University has not included financial activity for these affiliated organizations in these financial statements.

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SUPPLEMENTARY INFORMATION - 23 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY BALANCE SHEET (NON-GMP BASIS) BUDGET FUND JUNE 30, 2008

SCHEDULE "1"

ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Salaries Payable Encumbrance Payable Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

$

2,479,128.55

282,644.30 9,555,519.61
680,286.91

$ 12,997,579.37

$

215,967.03

8,661,629.92

50,442.73

2,521,141.85

$ 11,449,181.53

$

182,201.71

185,874.55

17,998.76

7,308.08

807,016.06

306,552.62

41,446.06

$

1,548,397.84

$ 12,997,579.37

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.
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SOUTHERN POLYTECHNIC STATE UNIVERSITY SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2008

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Other Funds
Total Revenues
CARRY-OVER FROM PRIOR YEAR
Transfer from Reserved Fund Balance
Total Funds Available
EXPENDITURES
Special Funding Initiative Research Consortium Teaching
Total Expenditures
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prior Year Payables/Expenditures Prior Year Receivables/Revenues Unreserved Fund Balance (Surplus) Returned
to Board of Regents - University System Office Year Ended June 30, 2007
Prior Year Reserved Fund Balance Included in Funds Available
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE}

$ 22,506,649.00 $ 22,506,649.00 $

34,805,236.00

29,642,768.67

$ 57,311,885.00 $ 52,149,417.67 $

0.00 -5, 162,467.33
-5,162,467.33

0.00

1,425,615.40

$ 57,311,885.00 $ 53,575,033.07 $

1,425,615.40 -3,736,851.93

$

10,613.00 $

10,603.38 $

105,945.00

105,944.14

57 I195,327.00

52,526,423.50

$ 57,311,885.00 $ 52,642,971.02 $

$

0.00 $ 932,062.05 $

9.62 0.86 4,668,903.50
4,668,913.98
932,062.05

2,041,372.93 9,573.44

25,952.83 -25,374.57
-9,573.44 -1,425,615.40 $ 1,548,397.84

SUMMARY OF FUND BALANCE
Reserved Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted/Sponsored Funds Uncollectible Accounts Receivable Tuition Carry-Over
Total Reserved
Unreserved Surplus
Total Fund Balance

$

182,201.71

185,874.55

17,998.76

7,308.08

807,016.06

306,552.62

$ 1,506,951.78

41446.06

$ 1,548,397.84

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.
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SOUTHERN POLYTECHNIC STATE UNIVERSITY STATEMENT OF PROGRAM REVENUES AND EXPENDITURES BY FUNDING SOURCE COMPARED TO BUDGET
(NON-GAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30, 2008

Special Funding Initiatives
State Appropriation State General Funds

Original Appropriation

Final Budget

Current Year Revenues

Funds Available Compared to Budget

Prior Year Carry-Over

Total Funds Available

Variance Positive (Negative)

$

10,613.00 $

10,613.00 $

10,613.00 $

0.00 $

10 613.00 $

0.00

Research Consortium
State Appropriation State General Funds

$

105 945.00 $

105 945.00 $

105 945.00 $

0.00 $

105 945.00 $

0.00

Teaching State Appropriation State General Funds Other Funds
Total Teaching
Grand Totals - All Programs

$ 21,930,769.00 $ 22,390,091.00 $ 22,390,091.00 $

0.00 $ 22,390,091.00 $

0.00

20,244.432.00

34 805 236.00

29 642 768.67

1 425 615.40

31 068 384.07

-3 736 851.93

$ 42,175,201.00 $ 57,195,327.00 $ 52,032,859.67 $ 1425615.40 $ 53458475.07 $ -3736851.93

$ 42,291,759.00 $ 57,311,885.00 $ 52,149,417.67 $ 1,425,615.40 $ 53,575,033.07 $ -3,736,851.93

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.
- 26 -

SCHEDULE "3"

Exeenditures Comeared to Budget

Variance

Positive

Actual

(Negative)

Actual Funds Available
Over/(Under) Expenditures

Prior Period Adjustments

Other Adjustments

Total Program
Fund Balances

Transfers

Program Fund Balances

Reserve

Surplus

Total

$

10,603.38 $

9.62 $

9.62 $

0.00 $

0.00 $

9.62 $ ~ $

0.00 $

9.62 $

9.62

$

105 944.14 $

0.86 $

0.86 $

0.00 $

o.oo $===0...8..6= $

o.oo $

0.00 $

o.86 $====0=.8=6=

$ 22,390,669.26 $

-578.26 $

30,135,754.24

4,669,481.76

$ 52,526 423.50 $ 4,668,903.50 $

-578.26 $

578.26 $

0.00 $

0.00 $ 578.26 $

0.00 $ 578.26 $

932 629.83 ---~o=.o=o~ -191 258.53

741 371.30

-578.26

699,935.72

40 857.32

932051.57 $====57,a8;,;;.2a,6.. $ -191258.53 $ 741371.30 $

0.00 $ 699935.72 $ 41,435.58 $

578.26 740 793.04
741 371.30

$ 52,642,971.02 $ 4,668,913.98 $

932,062.05 $===5=78=.2=6= $ -191,258.53 $ 741,381.78 $ ~ $ 699,935.72 $ 41,446.06 $ 741,381.78

Unexpendable Reserves Uncollectible Accounts Receivable

807,016.06

$ 1 548 397.84

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SOUTHERN POLYTECHNIC STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2008

SCHEDULE "4"

Totals per Annual Supplement
Accruals June 30, 2008 June 30, 2007
Compensated Absences June 30, 2008 June 30, 2007
Prepaid Salaries June 30, 2008 June 30, 2007
Adjustments Shared Services on Jointly Staffed Personnel Dalton State College Petty, Jamie Gainsville State College Weaver, Melissa
Unidentified Variance

SALARIES
$ 25,368,987.28 $

TRAVEL 348,233.63

-149,566.34 173,015.61

-1,048,028.20 1,174,848.64

595,437.44 -660,806.95

1,385.88

6,900.00

0.64

0.37

$ 25,462,174.00 $ ===3=48=,2=3=4.=00=

- 29 -

SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CONTROL DEFICIENCIES

The auditor is required to communicate to management and those charged with governance control deficiencies identified during the course of the financial statement audit that, in the auditor's judgment, constitute significant deficiencies or material weakness.

A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies, that adversely affect the Southern Polytechnic State University's ability to initiate, authorize, record, process, or report financial data reliability in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement ofthe Southern Polytechnic State University's financial statements that is more than inconsequential will not be prevented or detected by the Southern Polytechnic State University's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement ofthe financial statements will not be prevented or detected by the Southern Polytechnic State University's internal control.

CAPITAL ASSETS Inadequate Capital Asset Records Significant Deficiency Finding Control Number: FS-550-08-01

Condition:

Accounting procedures of the University were insufficient to provide adequate controls over Capital Assets.

Criteria:

The University should maintain capital asset records in accordance with inventory guidelines and instructions provided in Chapter 11 ofthe Board of Regents' Business Procedures Manual.

Questioned Cost: NIA

Information:

The following deficiencies were noted relating to Capital Assets:

1) Two additions totaling $32,475 were not included as additions in the Financial Statements.

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SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

CAPITAL ASSETS Inadequate Capital Asset Records Significant Deficiency Finding Control Number: FS-550-08-01

2) A sample of thirty-six (36) capital assets revealed the following:

o Fifteen ( 15) assets included on the capital asset listing were surplused in prior years.
o Five (5) assets included on the capital asset listing could not be located.
o One (I) asset included on the asset listing had been transferred to another College.

3) A variance was noted between the Capital Asset Listing, the Capitals Ledger, and the Notes to the Financial Statements which totaled $169,142.

Cause:

University's management failed to implement appropriate internal controls and procedures necessary to properly record, maintain and track capital assets.

Effect:

The failure of the University to maintain a complete and accurate capital asset listing can lead to inaccurate internal and external reporting, as well as noncompliance with generally accepted accounting principles.

Recommendation:

The University should review its capital asset records and make appropriate adjustments to ensure that the capital asset records are accurate. In addition, policies and procedures should be established to ensure that an accurate physical inventory ofcapital assets is performed to ensure the accuracy ofthe inventory listing.

REVENUES/RECEIVABLES/RECEIPTS Inadequate Controls over Continuing Education Significant Deficiency Finding Control Number: FS-550-08-02

Condition:

The accounting procedures ofthe University were insufficient to provide for adequate controls over Revenues/Receivables/Receipts.

-2 -

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

REVENUES/RECEIVABLES/RECEIPTS Inadequate Controls over Continuing Education Significant Deficiency Finding Control Number: FS-550-08-02

Criteria:

The University's management is responsible for designing and maintaining internal controls that provide reasonable assurance that receipts are properly documented, processed and reported within its accounting records.

Questioned Cost: NIA

Information:

Internal controls over the receipting process at the Continuing Education Office were lacking. In addition, funds received by the Continuing Education Department are not submitted to the University's Business Office in a timely manner.

Cause:

University's management failed to implement satisfactory controls to: (1) ensure revenues, receivables, and receipts were properly recorded in the accounting records in a timely manner, (2) ensure amounts posted to the general ledger were accurate and (3) deposits were made in a timely manner.

Effect:

Failure to implement satisfactory accounting controls and procedures could cause information generated from the general ledger to be inaccurate or misleading which could impact the University's reporting of its financial position and results of operation.

Recommendation:

The University should implement and monitor controls to provide reasonable assurance that transactions are processed according to the established Board of Regents Procedures.

FINANCIAL REPORTING Deficiencies in Financial Statement Presentation Material Weakness Finding Control Number: FS-550-08-03

Condition:

The University's accounting procedures were insufficient to provide for adequate controls over the financial statements preparation process.

-3-

SOUTHERN POLYTECHNIC STATE UNIVERSITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2008

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINANCIAL REPORTING Deficiencies in Financial Statement Presentation Material Weakness Finding Control Number: FS-550-08-03

Criteria:

A system of internal control over financial reporting does not stop at the general ledger. Management is responsible for implementing a system of internal control over the preparation of financial statements prepared in accordance with generally accepted accounting principles (GAAP). Additionally, the University is required to annually submit GAAP financial statements for inclusion in the State of Georgia Comprehensive Annual Financial Report (CAFR), and the State of Georgia Single Audit Report.

Questioned Cost: NIA

Information:

Capital Grants and Gifts on the Statement of Revenues, Expenses and Changes in Net Assets and Accounts Receivable - Other on the Statement of Net Assets were both overstated by $1,949,959.

Cause:

University's management failed to adequately review the year end journal entries and financial statements to ensure that financial statements as presented for audit were accurate and properly supported by underlying accounting records.

Effect:

A material misstatement was included in the financial statements presented for audit. An adjusting entry was proposed by the auditors and approved by management to correct this misstatement. Additionally, the lack of controls and failure to adhere to Board of Regents policies could impact reporting of the University's financial position and results of operation.

Recommendation:

The University should review the accounting controls and procedures currently in place, identify weaknesses, and design and implement procedures necessary to strengthen controls over the preparation of the financial statements.

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No findings were reported.

-4 -