Management report, Valdosta State University, Valdosta, Georgia, an organizational unit of the State of Georgia, year ended June 30, 2007

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
MANAGEMENT REPORT VALDOSTA STATE UNIVERSITY
VALDOSTA, GEORGIA
AN ORGANIZATIONAL UNIT OF THE STATE OF GEORGIA
YEAR ENDED JUNE 30, 2007
Russell W. Hinton State Auditor

VALDOSTA STATE UNIVERSITY - TABLE OF CONTENTS -

SECTION I

FINANCIAL

LETTER OF TRANSMITTAL

SELECTED FINANCIAL INFORMATION

EXHIBITS

A STATEMENT OF NET ASSETS -(GAAP BASIS)

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS -

(GAAP BASIS)

3

C STATEMENT OF CASH FLOWS-(GAAP BASIS)

4

D SELECTED FINANCIAL NOTES

7

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET-(STATUTORY BASIS) BUDGET FUND

20

2 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(STATUTORY BASIS) BUDGET FUND

21

3 RECONCILIATION OF SALARIES AND TRAVEL

23

SECTION II FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

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
November 5, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members ofthe Board of Regents of the University System of Georgia
and Honorable Ronald M. Zaccari, President Valdosta State University
Ladies and Gentlemen:
As part ofour audit ofthe basic financial statements ofthe State ofGeorgia presented in the State of Georgia Comprehensive Annual Financial Report and the issuance of a State of Georgia Single Audit Report pursuant to the Single Audit Act Amendments, as of and for the year ended June 30, 2007, we have performed certain audit procedures at Valdosta State University. Accordingly, the financial statements and compliance activities of Valdosta State University were examined to the extent considered necessary in order to express an opinion as to the fair presentation ofthe financial statements contained in the foregoing documents and to issue reports on compliance and internal control as required by the Single Audit Act Amendments of 1996.
This Management Report contains information pertinent to the financial and compliance activities of Valdosta State University as of and for the year ended June 30, 2007. Information contained in this report is a by-product ofour audit ofthe basic financial statements ofthe State ofGeorgia and is the representation of management. Accordingly, we do not express an opinion or any other form of assurance on it. The particular information provided which includes a section on findings and other items reported in accordance with Commission on Colleges regulation 2.11.1 is enumerated in the Table of Contents.

This report is intended solely for the information and use of the management of Valdosta State University, members ofthe Board ofRegents ofthe University System ofGeorgia and the Southern Association ofColleges and Schools - Commission on Colleges and is not intended to be and should not be used by anyone other than these specified parties.
Respectfully submitted,
r~~~nt~Cd~ State Auditor
RWH:as

SELECTED FINANCIAL INFORMATION - 1-

VALDOSTA STATE UNIVERSITY STATEMENT OF NET ASSETS - (GAAP BASIS)
JUNE 30, 2007
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net (Note 3) Federal Financial Assistance Other Inventories Prepaid Items
Total Current Assets
Noncurrent Assets Noncurrent Cash Investments Notes Receivable Capital Assets, Net (Note 4)
Total Noncurrent Assets
Total Assets
LIABILITIES
Current Liabilities Accounts Payable Salaries Payable Contracts Payable Deposits Deferred Revenue (Note 5) Other Liabilities Deposits Held for Other Organizations Lease Purchase Obligations Compensated Absences Current Portion of Other Long-Term Liabilities
Total Current Liabilities
Noncurrent Liabilities Lease Purchase Obligations Deferred Revenue (Note 5) Compensated Absences Other Long-Term Liabilities
Total Noncurrent Liabilities
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted for:
Nonexpendable Expendable Unrestricted
Total Net Assets
-2 -

EXHIBIT"A"

$ 6,343,632
1,128,621 3,052,490 1,377,822
91154
$ 11,993,719

$

28,023

12,577,901

48,377

139,805,559

$ 152,459,860

$ 164,453,579

$ 2,321,931 1,114,219 678,510 632,500 408,906 26,948 1,575,225 467,368 1,627,908 37 894
$ 8,891,409
$ 35,927,248 3,273,357 1,286,569 107 439
$ 40,594,613
$ 49,486,022
$ 99,992,255
2,902,355 3,923,829 8,149,118
$ 114,967,557

VALDOSTA STATE UNIVERSITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2007

EXHIBIT "B"

OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal State Other
Sales and Services 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
Federal State Other Gifts Interest and Other Investment Income Interest Expense Other Nonoperating Revenues
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State Other
Total Other Revenues, Expenses, Gains, or Losses
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year
Net Assets - End of Year

$

38,331,341

-7,626,117

9,975,956 1,708,146
694,933 711,261

7,974,939 5,710,797 7,060,911 1,144,838 1,726,986 3,285,831
711,971 512,556

$

71,924,349

$

30,683,075

27,138,639

17,177,573

312,156

1,001,815

7,009,888

4,559,563

26,622,269

6,912,538

$ 121,417,516

$ -49,493,167

$

49,500,769

1,213,204 106,166 6,811
1,269,225 1,913,839 -2,524,259
21 886

$

51,507,641

$

2 014 474

$

130,874

67660

$

198 534

$

2,213,008

112,754,549

$ 114,9671557

-3-

VALDOSTA STATE UNIVERSITY STATEMENT OF CASH FLOWS- (GAAP BASIS)
YEAR ENDED JUNE 30, 2007
CASH FLOWS FROM OPERATING ACTIVITIES Tuition and Fees Grants and Contracts Sales and Services Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowships Loans Issued to Students and Employees Collection of Loans to Students and Employees Auxiliary Enterprise Charges: Residence Halls Bookstore Food Services 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
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES 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 Proceeds from Sales and Maturities of Investments 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

EXHIBIT"C"

$

30,742,850

12,138,045

711,262

-50,096,868

-57,438,160

-7,009,888

-309,614

316,912

7,922,262 5,781,354 10,865,361 1,151,976 1,732,711 3,202,544
635,805 -349,170

$ -40,002,618

$

49,500,769

582,132

2,624,343

$

52,707,244

$ -10,227,389
-407,952 -2,524,259
$ -13,159,600

$

220,271

1,434,902

-731 026

$

924,147

$

469,173

5,902,482

$ ===6'=37=1=,6=5=5

-4-

VALDOSTA STATE UNIVERSITY STATEMENT OF CASH FLOWS - (GAAP BASIS)
YEAR ENDED JUNE 30, 2007
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 Expense Change in Assets and Liabilities: Receivables, Net Inventories Prepaid Items Notes Receivable, Net Accounts Payable Deferred Revenue Other Liabilities Compensated Absences
Net Cash Provided (Used) by Operating Activities
NONCASH ACTIVITY Fixed Assets Acquired by Incurring Capital Lease Obligations Change in Fair Value of Investments Recognized as a Component of Interest Income Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts

EXHIBIT"C"
$ -49,493, 167
6,912,538 -753,961
-13,718 5,844 7,298
440,900 2,822,107 -154, 197
223,738
$ -40.002,618
s=====1o=,4,,061_1..2...,.4
$=====47,.,,8~9~3=7 $ ====19=8=,5=3=4

-5-

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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY Valdosta 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 Valdosta 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. Valdosta State University does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Valdosta 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.
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.
Restricted net assets - nonexpendable: Nonexpendable restricted net assets consist of endowment and similar type funds in which donors or other outside sources have stipulated, as a condition of the gift instrument, that the principal is to be maintained inviolate and in perpetuity, and invested for the purpose of producing present and future income, which may either be expended or added to principal. The University may accumulate as much of the annual net income of an institutional fund as is prudent under the standard established by Code Section 4415-7 of Annotated Code of Georgia.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the University is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties.

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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS Unrestricted net assets: Unrestricted net assets represent resources derived from student tuition and fees, state appropriations, and sales and services of educational departments and auxiliary enterprises. These resources are used for transactions relating to the educational and general operations of the University and may be used at the discretion of the governing board to meet current expenses for those purposes, except for unexpended state appropriations (surplus) of $44,275.82. 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. These resources also include auxiliary enterprises, which are substantially self-supporting activities that provide services for students, faculty and staff.
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 of the State of Georgia.
2. Bonds, bills, notes, certificates of indebtedness or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the State of Georgia.
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.
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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT"D"

NOTE 2: DEPOSITS AND INVESTMENTS

DEPOSITS 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, 2007, the carrying value of deposits was $6,339,380 and the bank balance was $8,701,309. Of the University's deposits, $8,600,660 were uninsured and uncollaterized.

INVESTMENTS At June 30, 2007, the carrying value of the University's investment was $12,577,901, which is materially the same as fair value. These investments were comprised entirely of funds invested in the Board of Regents and/or Office of Treasury and Fiscal Services investment pools as follows:

Investment Pool

Board ofRegents Diversified Fund

$ 6,715,375

Office of Treasury and Fiscal Services Georgia Extended Asset Pool

5,862,526

Total Investments

$ 12,577,901

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 Georgia Extended Asset Pool, managed by the Office of Treasury and Fiscal Services, is not registered with the Securities and Exchange Commission as an investment company. Net Asset Value (NAV) is calculated daily to determine current share price, which was $1.99 at June 30, 2007.

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following at June 30, 2007.

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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT "D"

NOTE 3: ACCOUNTS RECEIVABLE

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

$

43,012

704,353

1,545,847

1,944,771

Less Allowance for Doubtful Accounts

$ 4,237,983 56,872

Net Accounts Receivable

$ 4,181,111

NOTE 4: CAPITAL ASSETS

Following are the changes in the University's capital assets for the year ended June 30, 2007:

Beginning Balance July I, 2006

Additions

Reductions

Ending Balance June 30, 2007

Capital Assets, Not Being Depreciated: Land Construction Work-In-Progress Capitalized Collections

$ 2,489,754 $ 196,902

$ 2,686,656

3,225,224

6,785,099 $ 3,225,224

6,785,099

26,817

26,817

Total Capital Assets Not Being Depreciated

$ 5,741,795 $ 6,982,001 $ 3,225,224 $ 9,498,572

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

$ ll 8,080,203 $ 1,859,666

6,060,815

3,026,824

14,674,715

I, 168,188 $

27,666,836

I0,406,124

19,414,549

1,292,978

355,352 78
31,126

$ 119,939,869 9,087,639 15,487,551
38,072,882 20,676,401

Total Assets Being Depreciated

$ l85,897,ll8 $ 17,753,780 $ 386,556 $ 203,264,342

Less: Accumulated Depreciation:

Buildings and Building Improvements $ 35,961,779 $ 2,995,546

Facilities and Other Improvements

2,882,072

270,315

Equipment

10,743,354

I, 173,448 $

Capital Leases

1,762,271

1,493,262

Library Collections

15,045,271

979 967

318,804 31,126

$ 38,957,325 3,152,387 11,597,998 3,255,533 15,994,112

Total Accumulated Depreciation

$ 66,394,747 $ 6,912,538 $ 349,930 $ 72,957,355

Total Capital Assets, Being Depreciated,

Net

$ 119,502,371 $ 10,841,242 $

36,626 $ 130,306,987

Capital Assets, Net

$ 125,244,166 $ 17,823,243 $ 3 261 850 $ 132,805 552

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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT"D"

NOTE 5: DEFERRED REVENUE

In fiscal year 2006, the University entered into a "Financial Commitment Agreement" with SODEXHO Operations, LLC, in which SODEXHO Operations, LLC, made a financial commitment of $4,119,900 to the University's Campus Food Service program "in equipment and/or physical renovations to the Premises". In exchange, the University will allow SODEXHO Operations, LLC, to operate on the University's campus. The Financial Commitment made by SODEXHO Operations, LLC, to the University's Campus Food Service program will be amortized by the University over the life of the agreement.

Deferred revenue consisted of the following at June 30, 2007.

Financial Commitment Agreement Prepaid Tuition and Fees Other Deferred Revenue

$ 3,273,357 77,036
331,870

Totals NOTE 6: LONG-TERM LIABILITIES

$ 3,682.263

The University's Long-Term liability activity for the year ended June 30, 2007 was as follows:

Beginning Balance July 1, 2006

Leases Lease Obligations

$ 26,351,778

Other Liabilities

Compensated Absences

$ 2,690,739

Other Long-Term Liabilities

189,999

Total

$ 2,880,738

Total Long-Term Obligations $ 29 232.516

Additions $ 10,406,124 $ 2,372,700 $ 2,372,700 $ 12.778.824

Reductions
$ 363,286
$ 2,148,962 44,666
$ 2,193,628 $ 2.556.914

Ending Balance June 30, 2007
$ 36,394,616
$ 2,914,477 145,333
$ 3,059,810 $ 39.454.426

Current Portion
$ 467.368
$ 1,627,908 37,894
$ 1,665,802 $ 2.133 170

NOTE 7: NET ASSETS

Changes in Net Asset activity for the year ended June 30, 2007 are as follows:

Invested in Capital Assets Net ofRelated Debt
Restricted Net Assets
Unrestricted Net Assets
Total Net Assets

Balance July I, 2006

Additions

Reductions

Balance June 30. 2007

$ 98,702,389 $ 17,823,243 $ 16,533,377

6,192,719

14,421,974

13,788,509

7,859,441 111,534,275 111,244,598

$ 112.754.549 $ 143 779 492 $ 141 566.484

$ 99,992,255 6,826,184 8,149,118
$ 114.967.557

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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT"D"

NOTE 8: LEASE OBLIGATIONS
Valdosta State University is obligated under various operating leases for the use of real property (land, buildings, and office facilities) and equipment, and also 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 2008 and 2032. Expenses for fiscal year 2007 were $2,887,545 of which $2,524,259 represented interest. Total principal paid on capital leases was $363,286 for the fiscal year ended June 30, 2007. Interest rates range from 4.25 percent to 10 percent.
OPERATING LEASES Valdosta State University's noncancellable operating leases having remaining terms of more than one year expire in various fiscal years from 2008 through 2015. Certain operating leases provide for renewal options. All agreements are cancelable if the State of Georgia does not provide adequate funding, but that is considered a remote possibility. In the normal course of business, operating leases are generally renewed or replaced by other leases. Operating leases are generally payable on a monthly basis. Examples of property under operating leases are noncapital property leases, copiers and other small business equipment.
Noncancellable operating lease rental expenses in 2007 were $333,588 for real property and/or equipment.
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, 2007, were as follows:

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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT"D"

NOTE 8: LEASE OBLIGATIONS

FUTURE COMMITMENTS

Capital Leases

Operating Leases

Year Ending June 30: 2008 2009 2010 2011 2012 2013 - 2017 2018 - 2022 2023 - 2027 2028 - 2032

$ 3,028,243 $ 3,097,427 3,163,928 3,016,904 3,093,468 15,886,512 16,260,576 16,709,424 11,565.740

191,822 188,216 187,440 187,440 187,440 496,080

Total Minimum Lease Payments

$ 75,822,222 $ 1,438.438

Less: Interest

39,427.606

Principal Outstanding

$ 36,394,616

NOTE 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Valdosta State University participates in the Teachers Retirement System of Georgia (TRS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances and other benefits for teachers of the State of Georgia. TRS provides service retirement, disability retirement, and survivor's benefits for its members in accordance with State statute. The Teachers Retirement System of Georgia issues a separate stand alone financial audit report and a copy can be obtained from the TRS offices or the Georgia Department of Audits and Accounts.

Funding Policy Employees of Valdosta State University who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Valdosta 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 2007, 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:

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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Funding Policy

Fiscal Year

Percentage Contributed

Required Contribution

2007

100%

$ 2,947,248

2006

100%

$ 2,878,309

2005

100%

$ 2,805,356

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Plan Description Valdosta State University participates in the Employees' Retirement System of Georgia (ERS), a cost-sharing multiple-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia.

The benefit structure of ERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions.

Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 60. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.

Retirement benefits paid to members are based upon a formula which considers the monthly average of the member's highest twenty-four consecutive calendar months of salary, the number of years of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.

In addition, the ERS Board of Trustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.

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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT"D"

NOTE 9: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description The ERS issues a financial report each fiscal year, which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members of other state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The University's payroll for the year ended June 30, 2007, for employees covered by ERS was $28,054. The University's total payroll for all employees was $57,821,714.
For the year ended June 30, 2007 under the old plan, member contributions consist of 6.5% of annual compensation minus $7.00. Of these member contributions, the employee pays the first 1.5% and the University pays the remainder on behalf of the employee.
Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The University also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation for both old and new plans. For the year ended June 30, 2007, the ERS employer contribution rate for the University amounted to 10.41% of covered payroll and included the amounts contributed on behalf of the employees under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees.
Total contributions to the plan made during fiscal year 2007 amounted to $3,341, of which $2,920 was made by the University and $421 was made by employees. These contributions met the requirements of the plan.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2007 financial report, which may be obtained through ERS.
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,
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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS
REGENTS RETIREMENT PLAN
Plan Description 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 Valdosta 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 2007, the employer contribution was 9.66% for the first six months and 8.13% for the last six months of the participating employee's eamable compensation. Employees contribute 5% of their eamable compensation. Amounts attributable to all plan contributions are fully vested and nonforfeitable at all times.
Valdosta State University and the covered employees made the required contributions of $1,795,981 (9.66% or 8.13%) and $1,013,542 (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 Valdosta 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.

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VALDOSTA STATE UNIVERSITY SELECTED FINANCIAL NOTES
JUNE 30, 2007

EXHIBIT"D"

NOTE 9: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member.
Total contributions made by employees during fiscal year 2007 amounted to $79,021 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.
NOTE 10: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any expenditures which are disallowed under grant terms. The amount of expenditures which may be disallowed by the grantor cannot be determined at this time although Valdosta State University expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Valdosta 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, 2007.
NOTE 11: AFFILIATED ORGANIZATIONS
The Valdosta State University Foundation, Inc. is a legally separate, tax exempt organization whose activities primarily support Valdosta State University. This affiliated organization is considered a potential component unit of the State of Georgia in accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units. Therefore, the financial statements of this affiliated organization is not included in these financial statements. Copies of the financial statements for the affiliated organization may be obtained from Valdosta State University.

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SUPPLEMENTARY INFORMATION - 19 -

VALDOSTA STATE UNIVERSITY BALANCE SHEET (STATUTORY BASIS)
BUDGET FUND JUNE 30, 2007
ASSETS
Investments Accounts Receivable
Federal Financial Assistance Other Prepaid Expenditures Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Cash Overdraft Accrued Payroll Accounts Payable
Total Liabilities
Fund Balances Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted Funds/Sponsored Funds Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "1"

$ 8,486,429.19 546,882.22
1,415,210.00 84,501.62
392,846.93
$ 10,925,869.96

$ 1,564,232.41 1,045,304.44 5,064,047.94
$ 7,673,584.79

$

99,140.72

183,184.28

49,182.36

2,491,854.43

46,516.33

338,131.23

44,275.82

$ 3,252,285.17

$ 10,925,869.96

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrated 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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VALDOSTA STATE UNIVERSITY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (STATUTORY BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2007

SCHEDULE "2"

REVENUES
State Appropriation State General Funds
Federal Funds Other Funds
Total Revenues
EXPENDITURES
Special Funding Initiatives 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, 2006
Non-Mandatory Transfers
FUND BALANCE JUNE 30

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 49,650,283.00 $ 49,650,283.00 $

16,870,682.00

13,713,022.78

34,608,622.00

33,783,047.07

$ 101.129,587.00 $ 97,146,352.85 $

0.00 -3, 157,659.22
-825,574.93
-3,983,234.15

$

52,630.00 $

37,725.96 $

101,076,957.00

98,056,951.82

$ 101,129,587.00 $ 98,094,677.78 $

$

0.00 $ -948,324.93 $

14,904.04 3,020,005.18
3,034,909.22
-948,324.93

3,441,244.03 149,513.91

33,864.02 618.05
-149,513.91 724,884.00 $ 3,252,285.17

SUMMARY OF FUND BALANCE
Reserved Department Sales and Services Indirect Cost Recoveries Technology Fees Restricted Funds/Sponsored Funds Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

99,140.72

183,184.28

49,182.36

2,491,854.43

46,516.33

338,131.23

$ 3,208,009.35

44,275.82

Total Fund Balance

$ 3,252,285.17

Statutory Basis financial information was prepared on a prescribed basis of accounting that demonstrated 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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VALDOSTA STATE UNIVERSITY RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 30, 2007

SCHEDULE "3"

Totals per Annual Supplement
Accruals June 30, 2007 June 30, 2006
Compensated Absences June 30, 2007 June 30, 2006
Unidentifed Variance

SALARIES

$

57,657,493 $

TRAVEL 1,001,815

1,114,219 -1,157,736

2,707,364 -2,499,526
-100

$

51,a21,114 $=====i1..0.0.=1a=1=5

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SECTION II FINDINGS, QUESTIONED COSTS AND OTHER ITEMS

VALDOSTA STATE UNIVERSITY SCHEDULE OF FINDINGS, QUESTIONED COSTS AND OTHER ITEMS
YEAR ENDED JUNE 30, 2007
FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS
No findings were reported.
FEDERAL AWARD FINDINGS AND QUESTIONED COSTS
No findings were reported.
OTHER ITEMS {NOTED FOR MANAGEMENT'S CONSIDERATION)
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
The University failed to report non-monetary activity in the amount of$6,707,321.89 for the Federal Family Education Loan Program (CFDA No. 84.032). Management should enhance procedures to ensure that all Federal activity is properly reflected within the Schedule of Expenditures ofFederal Awards information submitted to the State Accounting Office for inclusion in the State ofGeorgia Single Audit Report.