Southern Polytechnic State University, Marietta, Georgia, independent accountant's report on applying agreed-upon procedures for the fiscal year ended June 30, 2006

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
I
SOUTHERN POLYTECHNIC STATE UNIVERSITY MARIETTA, GEORGIA
INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED-UPON PROCEDURES
FOR THE FISCAL YEAR ENDED JUNE 30, 2006
Russell W. Hinton State Auditor

SOUTHERN POLYTECHNIC STATE UNIVERSITY - TABLE OF CONTENTS -
INDEPENDENT ACCOUNTANT'S REPORT ON APPLYING AGREED-UPON PROCEDURES EXHIBIT
A BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 2, 2006

Members of the State Board of Regents of the University System of Georgia Honorable Lisa A. Rossbacher, President Southern Polytechnic State University
Independent Accountant's Report on Applying Agreed-Upon Procedures
Ladies and Gentlemen:
We have performed the procedures enumerated below, which were agreed to by the University and the University System Office (Oversight Unit) ofthe Board ofRegents ofthe University System of Georgia, solely to assist you in assessing the accuracy of the financial information reported to the University System Office in the University's 2006 Annual Financial Report and Budget Comparison and Surplus Analysis Report. The Budget Comparison and Surplus Analysis Report is attached as Exhibit A. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute ofCertified Public Accountants. The sufficiency of these procedures is solely the responsibility ofthe parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.
1. Review selected balance sheet items reported on the Annual Financial Report (cash, accounts receivable, accounts payable, deferred revenues, net assets). Confirm that these items have adequate supporting documentation and are properly reconciled to the University's general ledger.
We did not note any exceptions as a result of our procedures.
2. Obtain the University's GAAP basis Statement of Net Assets and Statement of Revenues Expenses and Changes in Net Assets (SRECNA) submitted for inclusion in the State's CAFR and Single Audit. Utilizing test scripts, confirm that financial information presented in these statements properly supports activity reported in the University's accounting records.
On the Statement of Net Assets the following exceptions were noted:
Capital Assets, Net was understated by $488,593.15.

The capital lease obligations were understated by $1,671,712.16.
Invested in Capital Assets, Net of Related Debt, was understated by $1,157,940.01.
- - Net Assets Restricted for Expendable Purposes, was understated by $23,812.21.
Also, revenue and expense activity was incorrectly reported on the SRECNA. The Operating Expenses, Supplies and Other Services were understated by $1,671,712.20. Nonoperating Expenses and Capital Grants and Gifts - State were understated by $588,593.15. Also, Nonoperating Expenses and Capital Grants and Gifts - Other were overstated by $1,047,000.00.
3. Obtain the University's Statement ofCash Flows submitted for inclusion in the State's CAFR and Single Audit. Utilizing cash flow worksheets, confirm information reported on Statement of Cash Flows.
Cash Flows from Operating Activities and Cash Flows from Capital and Related Financing Activities were not properly reflected on the Statement of Cash Flows. Cash Flows from Operating Activities, Payments to Suppliers, was overstated by $1,671,712.20. The Cash Flows from Capital and Related Financing Activities, Purchases of Capital Assets, was understated by $1,671,712.20. The Noncash Investing, Noncapital Financing and Capital and Related Financing Transactions had to be adjusted by $33,792,317.80 for Fixed Assets acquired by incurring capital lease obligations, and by $2,455,520.52 for Gift of Capital Assets reducing proceeds of capital grants and gifts. Also, the Capital and Related Financing Activities, Purchases of Capital Assets could not be reconciled to the Capital Asset additions in the Notes to the Financial Statements by $1,850,051.92.
4. Obtain the University's Notes to the Financial Statements submitted for inclusion in the State's CAFR and Single Audit. Utilizing notes worksheets and other supporting documentation confirm that note disclosures related to Cash, Investments, Accounts Receivable, Capital Assets, Long-Term Debt, Lease Obligations and Retirement Plans have been properly reported.
The Net Assets note disclosure information was not properly reported. Note 1 of the Annual Financial Report (AFR) reported June 30, 2006, ending balances for Expendable Restricted Net Assets of $2,096,163.46; however, ending Expendable Restricted Net Assets reported on the University's Statement ofNet Assets was $2,119,975.67, resulting in an improper variance of $23,812.21. Note 1 of the AFR also reported June 30, 2006, ending balances for the Unrestricted Net Assets of$3,019,345.85; however, ending Unrestricted Net Assets reported on the University's Statement of Net Assets was $654,474.62, resulting in an improper variance of $2,364,871.23.

The Capital Assets note disclosure information was not properly reported. Note 6 of the AFR reported June 30, 2006, ending balances for Capital Assets (Net) as $81,369,421.11; however, ending Capital Assets (Net) reported on the University's Statement of Net Assets was $81,858,014.26, resulting in an improper variance of $488,593.15 in financial statement disclosure.
The Long-Term Liabilities note disclosure information was not properly reported. Note 8 of the AFR reported June 30, 2006, ending balances for Lease Obligations of $31,332,192.90; however, ending Lease Obligations reported on the University's Statement of Net Assets was $33,003,905.06, resulting in an improper variance of $1,671,712.16 in financial statement disclosure. Note 8 of the AFR also reported June 30, 2006, current portion of Lease Obligation of $2,460,124.90; however, the current portion of the Lease Obligation reported on the University's Statement of Net Assets was $828,749.48, resulting in an improper variance of $1,631,375.42 in financial statement disclosure.
The Lease Obligations note disclosure information was not properly reported. Note 10 of the AFR reported June 30, 2006, Principal Outstanding of $33,792,317.80; however, ending Lease Obligations reported on the University's Statement of Net Assets was $33,003,905.06, resulting in an improper variance of $788,412.74 in financial statement disclosure.
The Operating Expenses note disclosure information was not properly reported. Note 15 of the AFR reported June 30, 2006, operating expenses of $40,914,669.42; however, ending Operating Expenses reported on the University's Statement of Revenues, Expenses and Changes in Net Assets was $42,586,381.62, resulting in an improper variance of $1,671,712.20.
5. Review the University's year end GAAP basis journal entries. Obtain documentation for GAAP journal entries and confirm that the entries were posted to the University's Annual Financial Report.
Year end GAAP entries related to GSFIC gifts were not made correctly. GSFIC gift revenues of$100,000.00 were recorded as Capital Grants and GiftsOther instead of Capital Grants and Gifts - State as required for correct presentation.
Year end GAAP entries related to Construction Work in Progress were not made correctly. GSFIC Construction Work in Progress of $488,593.15 and related Capital Grants and Gifts - State was not posted as required for correct presentation.
Year end GAAP entries related to Lease Obligations were not posted correctly. Lease Obligations at June 30, 2006 were reduced by total fiscal year 2006 interest payments of $1,671,712.16, resulting in an understated lease liability at June 30, 2006.

6. Confirm that State Appropriation revenues, receivables and remittances ofprior year surplus balances have been properly recorded in the University's financial records. Prior year surplus balances should be netted against State Appropriation revenues in the GAAP basis financial statements; however, prior year surplus balances should be reflected as fund balance adjustments on the Budget basis financial statements.
We did not note any exceptions as a result of our procedures.
7. Obtain listing ofwrite-offrequests for accounts receivable less than $3,000.00 for fiscal year 2006. Confirm that these write-off requests have been approved by the State Accounting Officer and have been posted to the University's financial statements.
We did not note any exceptions as a result of our procedures.
8. Verify that the listing ofsalaries, travel, and per diem and fees reported to the Department of Audits is in accordance with O.C.G.A. 50-6-27 reconciles to amounts recorded in the University's financial statements.
We did not note any exceptions as a result of our procedures.
9. Review year end Budget Comparison and Surplus Analysis Report (Exhibit A). Confirm that budget information presented in this report supports activity reported in the University's accounting records and determine if any budget overexpenditures exist.
The College's budget comparison reflected an overexpenditure of$750,178.76 in Teaching. See Exhibit A.
10. Obtain documentation for Budget basis reserves reported by University on the Budget Comparison and Surplus Analysis Report (Exhibit A). Confirm that the reserves are properly documented, valid and appropriate.
The University's Year End Budget Entries were incorrectly posted. Adjustments by auditors increased the calculated surplus from $31,125.83 to $97,363.91. The significant portion of the adjustments posted by auditors is for the adjustment of receivables posted as uncollectible in fiscal year 2006, totaling $76,858.63.
The University's reserves for capital outlay and technology fees were improperly calculated. The Balance Sheet reported Capital Outlay Reserves of $25,703.62; however, the amount of Capital Outlay Reserves per the general ledger totaled $12,602.58, resulting in a variance of $13,101.04.

11. Review the H.O.P.E. Scholarship Program reconciliation between the University and the Georgia Student Finance Commission. Confirm that information reported to the Georgia Student Finance Commission has been reconciled with H.O.P.E. Scholarship activity reported on the University's financial records.
We did not note any exceptioos as a result of our procedures.
These agreed-upon procedures do not constitute an audit of the financial statements or any part thereof, the objective ofwhich is to express an opinion on the financial statements or a part thereof. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.
This report is intended solely for the information and use of the specified users listed above and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,

RWH:as

R ssell W. Hinton, CPA, CGFM State Auditor

EXHIBIT

SOUTHERN POLYTECHNIC STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT
YEAR ENDED JUNE 30, 2006

EXHIBIT"A"

REVENUES
State Appropriation State General Funds
Federal Funds Other Funds
Total Revenues
EXPENDITURES
Public Service/Special Funding Initiatives 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, 2005
Non-Mandatory Transfers
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 19,874,616.00 $ 19,874,616.00 $

3,200,000.00

2,729,041.68

13,730,676.00

15,021,637.94

$ 36,805,292.00 $ 37,625,295.62 $

0.00 -470,958.32 1,290,961.94
820,003.62

$

10,613.00 $

10,613.00 $

187,039.00

182,337.24

36,607,640.00

37,357,818.76

$ 36,805,292.00 $ 37,550,769.00 $

$

0.00 $

74,526.62 $

0.00 4,701.76 -750 178.76
-745 477.00
74,526.62

1,679,046.38 55,008.70

89,375.54 -209,750.04

-55,008.70 269,120.00

$

1,902,318.50

SUMMARY OF FUND BALANCE
Reserved Capital Outlay Departmental Sales and Services Indirect Cost Recoveries Technology Fees Restricted Funds Uncollectible Accounts Receivable
Total Reserved
Unreserved Surplus
Total Fund Balance

$

12,602.58

37,609.20

99,331.02

6,223.47

1,313,014.55

336 173.77

$

1,804,954.59

97,363.91

$ =====1"'=9,=0='2,=3=18=.5=0==