STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS I ALTAMAHA TECHNICAL COLLEGE JESUP, GEORGIA REPORT ON AUDIT OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2004 Russell W. Hinton State Auditor ALTAMAHA TECHNICAL COLLEGE - TABLE OF CONTENTS - 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 3 B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS 4 C STATEMENT OF CASH FLOWS 5 D NOTES TO THE FINANCIAL STATEMENTS 7 SUPPLEMENTARY INFORMATION SCHEDULES 1 SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET - (NON-GAAP BASIS) BUDGET FUND "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION 23 2 RECONCILIATION OF SALARIES AND TRAVEL 25 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 254 Washington Street, S.W., Suite 214 Atlanta, Georgia 30334-8400 November 18, 2004 Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the State Board of Technical and Adult Education Members of the Local Board of Directors and Honorable Paul Scott, President Altamaha Technical College 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) ofAltamaha Technical College, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2004. These financial statements are the responsibility of the Technical College'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 Altamaha Technical College are intended to present the financial position and changes in financial position and cash flows ofonly that portion of the business-type activities ofthe State of Georgia that is attributable to the transactions ofAltamaha Technical College. 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. 04ARL-2TC In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Altamaha Technical College as of June 30, 2004, 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. As discussed in Note 1, the Technical College adopted the provisions of the Governmental Accounting Standards Board, Statement Number 39, Determining Whether Certain Organizations are Component Units during the year ended June 30, 2004. Management's Discussion and Analysis is not a required part ofthe basic financial statements but is supplementary information required by accounting principles generally accepted in the United States ofAmerica. We have applied certain limited procedures, which consisted principally ofinquiries of management regarding the methods of measurement and presentation of this supplementary information. 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 Altamaha Technical College taken as a whole. The accompanying supplementary information (Schedules 1 and 2) 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, ~~~ Russell W. Hinton State Auditor RWH:as 04ARL-2TC REQUIRED SUPPLEMENTARY INFORMATION Altamaha Technical College Management's Discussion and Analysis The following is management's discussion and analysis of Altamaha Technical College's financial performance for the fiscal year ending June 30, 2004 with comparative data from fiscal year ending June 30, 2003. This discussion has been prepared by and is the responsibility of management. Overview ofthe Financial Statements and Financial Analysis This annual report consists of a series of financial statements prepared in accordance with the rules and regulations established by the Governmental Accounting Standards Board. 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. The Statement of Net Assets used in conjunction with the Statement of Revenues, Expenses and Changes in Net Assets contains information concerning the College's finances and activities as a whole and assists with providing an answer to the question "Is the College as a whole better or worse off as a result of the year's activities?" These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting method used by corporations and other private sector companies. All revenues and assets are recognized when the service is provided and expenses and liabilities are recognized when others provide the goods or service, regardless of when cash is exchanged. The Statement of Cash Flows is a valuable tool when evaluating the ability of the College to meet financial obligations as they mature. This statement presents information related to cash inflows and outflows summarized by operating, noncapital financing, capital and related financing and investing activities. This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year. Statement ofNet Assets The purpose of the Statement of Net Assets is to present to the users of the financial statements a fiscal snapshot of the Technical College at a specific point in time. The statement presents the assets, liabilities and net assets of the College as of the end of the fiscal year. Assets and liabilities are reported as current and noncurrent and the difference between assets and liabilities is reported as net assets. Over a period of time the increases and decreases reflected in the Statement of Net Assets, when considered with other nonfinancial facts such as enrollment levels and the condition of the facilities, can provide a measure to aid in determining whether the Technical College's financial position is improving or deteriorating. - 1- Net assets are divided into two major categories. The first category, invested in capital assets, net of debt, provides information concerning the College's equity in property, plant and equipment owned by the College. The final category is unrestricted net assets, which are available for expenditure by the College for any lawful purpose deemed necessary to operate the College. Statement of Net Assets (thousands of dollars) June 30, 2004 June 30, 2003 Assets Current Assets Capital Assets, Net $ 1,003 11,236 $ 872 11 899 Total Assets $_--=-1=.a2,=.c23~9 $_--=-1=2,..:....a77-=-1 Liabilities Current Liabilities Noncurrent Liabilities $ 560 $ 362 135 134 Total Liabilities $_ _~69~5 $_ _~49~6 Net Assets Invested in Capital Assets, Net of Debt Unrestricted $ 11,236 308 $ 11,899 376 Total Net Assets $==1-1>.5=4=4 $==1="2.2==7===5 The total net assets of the College decreased by approximately $731,000 from the prior year. This is attributed to a decrease of approximately $532,000 in total assets and an increase of approximately $199,000 in total liabilities. The decrease in assets is primarily in the category of invested in capital assets, net of debt which decreased approximately $663,000 due to the increases in depreciation expense in fiscal year 2004. The primary reason for the increase in total liabilities was in current liabilities. Statement ofRevenues, Expenses and Changes in Net Assets The purpose of the Statement of Revenues, Expenses and Changes in Net Assets is to present the revenues received by the College, both operating and nonoperating, and the expenses incurred by the College, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the College during the fiscal year. Changes in total net assets as presented on the Statement of Net Assets are based on the information presented in the Statement of Revenues, Expenses and Changes in Net Assets. - 11 - Operating revenues are received for providing goods and/or services to various customers and constituencies of Altamaha Technical College. Operating expenses are those expenses paid to acquire or produce the goods and/or services provided in return for the operating revenues, and to carry out the mission of Altamaha Technical College. Therefore, nonoperating revenue is received when no goods or services are provided in exchange for the revenue. With the issuance of Statement No. 35, new guidelines were established by the Governmental Accounting Standards Board (GASB), which changed the classifications of state appropriations and gifts from operating to nonoperating revenue. Statement of Revenues, Expenses and Changes in Net Assets (Thousands of dollars) June 30, 2004 June 30, 2003 Operating Revenues Operating Expenses $ 2,559 9 913 $ 2,539 9 574 Operating Gain/Loss $ -7,354 $ -7,035 Nonoperating Revenues and Expenses 6,500 6,726 Income (Loss) Before Other Revenues, Expenses, Gains or Losses $ -854 $ -309 Other Revenues, Expenses, Gains or Losses Increase (Decrease) in Net Assets 123 $_ _ _-.:..:73:..:.1 443 $_ _ _13_4 Net Assets at Beginning of Year, as Originally Reported $_ _1~2,_27_5 $_ _1~2,~14_1 Net Assets at End of Year $===='1"="1="'5'==4==4 $_===1=='2,e=:27"""'5 The Statement of Revenues, Expenses and Changes in Net Assets reflects a negative year with a decrease 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: -111- Revenue By Source (thousands of dollars) June 30, 2004 June 30, 2003 Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Other $ 1,461 $ 1,518 866 826 223 186 9 9 Total Operating Revenue $ 2,559 $ 2,539 Nonoperating Revenue State Appropriations Federal Grants and Contracts N onoperating Gifts Investment Income $ 5,500 922 107 $ 5,310 1,242 172 1 Total Nonoperating Revenue $ 6,529 $ 6,725 Capital Grants and Gifts State Other $ 83 $ 444 40 Total Capital Grants and Gifts $ 123 $ 444 Total Revenues $ 9,211 $ 9 708 Expenses (thousands of dollars) June 30, 2004 June 30, 2003 Operating Expenses Instruction $ 9,913 $ 9,574 Nonoperating Expenses Other 29 Total Expenses $ 9 942 $ 9 574 The sources of operating revenue for the College are tuition and fees, grants and contracts, auxiliary services, and educational activities. The increase in operating revenue of approximately $20,000 is directly related to an increase in Federal grants for fiscal year 2004. - lV - Although current year operating revenue increased approximately $20,000 from the prior year, nonoperating revenue decreased approximately $196,000 and operating expenses increased approximately $339,000 from the prior year. The decrease in nonoperating revenue can mainly be attributed to a decrease of Federal grants and gifts of approximately $320,000 from the prior year. The net decrease of approximately $321,000 for capital grants and gifts is due to the decrease of Georgia State Financing and Investment Commission capital gifts for fiscal year 2004. Building Maintenance expenses increased by approximately $61,000 due to several minor renovation projects that were completed in fiscal year 2004. Library book expenses increased by approximately $39,000 during the past year. Additional library reference material was purchased in order to prepare for obtaining accreditation by the Southern Association of Colleges and Schools Commission on Colleges. Personal Services expense decreased by approximately $243,000. Several positions that were vacated during the fiscal year were not refilled due to the uncertainty concerning budget reductions and state appropriations. Under nonoperating revenues (expenses) state appropriations increased by approximately $190,000. While it appears that the College received additional money from the state, given the mandatory cost increases of various expense categories, the College actually had a relatively flat funding year when all things are considered. Statement of Cash Flows The purpose of the Statement of Cash Flows is to provide relevant information concerning the cash receipts and payments of the College during the year. It also provides information concerning the College's ability to generate future cash flows and to meet its obligations as they come due. The statement is divided into five sections. The first section reports on the operating cash flows and shows the net cash used by the operating activities of the College. The second section reflects cash flows from noncapital financing activities. The third section deals with cash flows from capital and related financing activities, which reflects the cash used for the acquisition and construction of capital related items. The fourth section reflects the cash flows from investing activities and shows the purchases, proceeds, and interest received from investing activities. The final section reconciles the net cash used to the operating income or loss reflected on the Statement of Revenues, Expenses and Changes in Net Assets. - V- Statement of Cash Flows (thousands of dollars) Cash Provided (Used) By: Operating Activities Noncapital Financing Activities Capital and Related Financing Activities Investing Activities Net Change in Cash Cash, Beginning of Year Cash, End of Year June 30, 2004 $ -6,221 6,506 -283 $ 2 396 $ 398 June 30, 2003 $ -6,220 6,571 -45 1 $ 307 89 $ 396 Capital Assets The College had no significant capital asset additions for facilities in the fiscal year under review. Projects funded by the Georgia State Financing and Investment Commission (GSFIC) included $70,163 for expendable equipment and $94,447 for major repairs and renovations. Projected funding by GSFIC for fiscal year 2005 is projected to be approximately the same as the funding received for fiscal year 2004. Long-Term Debt Altamaha Technical College had a total Long-Term Debt of $332,476.38 of which $197,442.76 was reflected as a current liability at June 30, 2004. For additional information on Long-Term Debt see Notes 1 and 7 in the Notes to the Financial Statements. Economic Outlook The College is unaware of any currently known fact, decision, or condition that is expected to have a significant effect on the financial position or change how the College operates for the next fiscal year. As in prior years, the College's overall financial position is strong. As a result, the College anticipates the next fiscal year will be much like fiscal year 2004 and the College will maintain a close watch over resources to maintain the ability to react to unknown internal and external factors. Paul Scott, President Altamaha Technical College - Vl - BASIC FINANCIAL STATEMENTS - 1- ALTAMAHA TECHNICAL COLLEGE STATEMENT OF NET ASSETS JUNE 30. 2004 ASSETS Current Assets Cash and Cash Equivalents Accounts Receivable, Net Federal Financial Assistance Other Prepaid Items Inventories Total Current Assets Noncurrent Assets Capital Assets, Net Total Assets LIABILITIES Current Liabilities Accounts Payable Salaries Payable Deferred Revenue Funds Held for Others Compensated Absences Total Current Liabilities Noncurrent Liabilities Compensated Absences Total Liabilities NET ASSETS Invested in Capital Assets, Net of Related Debt Unrestricted Total Net Assets EXHIBIT"A" $ 398,590.13 70,690.44 263,643.16 13,540.89 255,817.04 $ 1,002,281.66 11,236,327.85 $ 12,238,609.51 $ 87,207.04 25,055.29 197,829.20 52,198.53 197,442.76 $ 559,732.82 135,033.62 $ 694,766.44 $ 11,236,327.85 307,515.22 $ 11,543,843.07 The notes to the financial statements are an integral part of this statement. -3- ALTAMAHA TECHNICAL COLLEGE STATEMENT OF REVENUES. EXPENSES AND CHANGES IN NET ASSETS YEAR ENDED JUNE 30. 2004 EXHIBIT"B" OPERATING REVENUES Student Tuition and Fees Less: Scholarship Allowances Grants and Contracts Federal Rents and Royalties Sales and Services Other Operating Revenues Total Operating Revenues OPERATING EXPENSES Salaries Benefits 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 Gifts Interest and Other Investment Income Other Nonoperating Expenses Net Nonoperating Revenues Income (Loss) Before Other Revenues, Expenses, Gains, or Loss Capital Grants and Gifts State Nongovernmental Total Other Revenues Increase (Decrease) in Net Assets Net Assets - Beginning of Year Net Assets - End of Year $ 1.466.713.02 -5.548.00 866,325.65 3,900.00 223,489.98 4,597.83 $ 2,559,478.48 $ 4,711,589.41 1,029,291.75 56,174.77 828,243.00 365,378.14 1,854,027.41 1.068.631.34 $ 9.913,335.82 $ -7,353,857.34 $ 5,499,914.36 922,293.94 106,855.68 493.62 -29,624.59 $ 6,499,933.01 $ -853,924.33 $ 83,167.30 39,476.94 $ 122,644.24 $ -731,280.09 $ 12,275,123.16 $ 11,543,843.07 The notes to the financial statements are an integral part of this statement. -4- ALTAMAHA TECHNICAL COLLEGE STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30. 2004 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 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 CASH FLOWS FROM INVESTING ACTIVITIES Interest on Investments 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 Expense Change in Assets and Liabilities: Receivables, Net Prepaid Items Inventories Salaries Payable Accounts Payable Deferred Revenue Compensated Absences Net Cash Provided (Used) by Operating Activities NONCASH ACTIVITY Gift of Capital Assets Reducing Proceeds of Capital Grants and Gifts The notes to the financial statements are an integral part of this statement. -5- EXHIBIT"C" $ 1,420,888.83 866,325.65 233,796.42 -3,208,730.58 -4, 713,578.93 -828,243.00 8,497.83 $ -6,221,043. 78 $ 5,499,914.36 33,478.57 972,219.06 $ 6,505,611.99 $ -283,034.72 $ 493.62 $ 2,027.11 396,563.02 $ 398,590.13 $ -7,353,857.34 1,068,631.34 -182,407.75 11,837.51 45,015.27 -18,408.74 44,504.29 152,438.00 11,203.64 $ -6,221,043.78 $ -122,644.24 ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REPORTING ENTITY Altamaha Technical College is one of thirty-three (33) State supported member colleges of postsecondary education in Georgia which comprise the Georgia Department ofTechnical and Adult Education, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Altamaha Technical College as a separate reporting entity. The Technical College's Local Board of Directors is composed of seven (7) members serving staggered three-year terms who are appointed by the State Board ofTechnical and Adult Education. Appropriation of State funds is made to the Georgia Department of Technical and Adult Education by the General Assembly of Georgia. The Department's Administrative Central Office determines the amount of State appropriations to be received by Altamaha Technical College. The Technical College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Altamaha Technical College is considered an organizational unit of the Georgia Department of Technical and Adult Education for financial reporting purposes because of the significance ofits legal, operational, and financial relationships as defined in Section 2100 ofthe Governmental Accounting Standards Board (GASB) Codification ofGovernmental Accounting and Financial Reporting Standards. The Department of Technical and Adult Education (and thus Altamaha Technical College) is required to implement GASB Statement No. 39 Determining Whether Certain Organizations are Component Units - an amendment of Statement No. 14, for fiscal year 2004. This statement requires the inclusion of the financial statements for foundations and affiliated organizations that qualify as component units ofthe Technical College. For fiscal year 2004, Altamaha Technical College does not have any foundations or affiliated organizations that qualify as component units. FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion andAnalysisfor 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 No. 34 as ofand for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the Technical College also adopted 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, entity-wide perspective of the Technical College's assets, liabilities, net assets, revenues, expenses, changes in net assets, cash flows, and replaces the fund group perspective previously required. GAAP requires that the reporting of summer school revenues and expenses be split between fiscal years rather than in one fiscal year. Due to lack ofmateriality, the Technical Colleges ofthe Georgia Department ofTechnical and Adult Education will continue to report summer revenues and expenses in the year in which the predominate activity takes place. -7- ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING For financial reporting purposes, the Technical College is considered a special-purpose government engaged only in business-type activities. Accordingly, the Technical College'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-college transactions have been eliminated. The Technical College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Technical College has elected to not apply FASB pronouncements issued after the applicable date. CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include petty cash and demand deposits in authorized financial institutions. ACCOUNTS RECEIVABLE Accounts receivable consist oftuition and fee charges to students, allotments due from the Georgia Department of Technical and Adult Education - Administrative Central Office, reimbursements due from Federal, State, local, and private grants and contracts, and other receivables disclosed from information available. Accounts receivable are recorded net of estimated uncollectible amounts. INVENTORIES Resale inventories are valued at cost using the consumption method. CAPITAL ASSETS Capital assets are recorded at cost at date of acquisition, or fair market value at the date of capital contribution. The Technical College capitalizes all land and land improvements. For equipment, the Technical College's capitalization policy includes all items with a unit cost of$5,000.00 or more, and an estimated useful life of greater than one year. Buildings and Building Improvements, Improvements Other Than Buildings and Library Collections that exceed $100,000.00 or significantly increase the value or extend the useful life of the asset are capitalized. For infrastructure, the Technical College's capitalization threshold is $1,000,000.00. 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 ofthe assets, generally 10 to 40 years for buildings, 15 to 25 years for infrastructure, 15 years for improvements other than buildings, 10 years for library books, and 3 to 10 years for equipment. To fully portray capital assets acquired by the Technical Colleges of the Georgia Department of Technical and Adult Education, it is necessary to look at the activities ofthe Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to both the Technical College -8- ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CAPITAL ASSETS and the Georgia Department ofTechnical and Adult Education. The 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 are issued for the purpose of acquiring capital assets and this debt constitutes direct and general obligations ofthe State of Georgia, to the payment of which the full faith, credit and taxing power of the State are pledged. For major construction projects, GSFIC records construction in progress on its books throughout the construction period and at project completion transfers the entire project costs to Altamaha Technical College to be recorded as an asset on the Technical College's books. For the year ended June 30, 2004, GSFIC did not transfer any capital additions to Altamaha Technical College. DEFERRED REVENUES Deferred revenues include amounts received for tuition and fees and other activities prior to the end of the fiscal year but related to the subsequent accounting period. Deferred revenues also include amounts received from grant and contract sponsors that have not yet been earned. COMPENSATED ABSENCES Employee vacation pay is accrued for financial statement purposes when vested. The liability and expense incurred are recorded at year-end as accrued vacation payable in the Statement of Net Assets, and as a component of compensation and benefit expense in the Statement of Revenues, Expenses and Changes in Net Assets. Altamaha Technical College had an accrued liability for compensated absences in the amount of $321,272.74 as of July 1, 2003. For fiscal year 2004, $292,991.70 was earned in compensated absences and employees were paid $281,788.06, for a net increase of$11,203.64. The ending balance as ofJune 30, 2004 in accrued liability for compensated absences was $332,476.38. NONCURRENT LIABILITIES Noncurrent liabilities include liabilities that will not be paid within the next fiscal year. NET ASSETS The Technical College's net assets are classified as follows: Invested in capital assets, net ofrelated debt: This amount represents the Technical College's total investment in capital assets, net ofoutstanding 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 ofinvested in capital assets, net ofrelated debt. (The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.) Unrestricted net assets: Unrestricted net assets represent available resources derived from student tuition and fees, state appropriations, and sales and services of educational departments. These resources will be used for transactions relating to the educational and general operations of the -9- ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NET ASSETS Technical College, and may be used at the discretion of the governing board to meet subsequent fiscal year expenses for those purposes, except for unexpended state appropriations (surplus) of $17,445.38. Unexpended state appropriations must be refunded to the Department ofTechnical and Adult Education for remittance to the Office of Treasury and Fiscal Services. When an expense is incurred that can be paid using either restricted or unrestricted resources, the Technical College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources. INCOME TAXES Altamaha Technical College, as a political subdivision of the State of Georgia, is excluded from Federal income taxes under Section 115(1) of the Internal Revenue Code, as amended. CLASSIFICATION OF REVENUES The Technical College 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 ofexchange transactions, such as (1) student tuition and fees, net of scholarship allowances, (2) certain Federal, state and local grants and contracts, and (3) sales and services. 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 ofProprietary andNonexpendable 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 Technical College, 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 Technical College's financial statements. To the extent that revenues from such programs are used to satisfy tuition and fees and other student charges, the Technical College has recorded contra revenue for scholarship allowances. - 10 - ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 2: CASH AND CASH EQUIVALENTS AND OTHER DEPOSITS STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belonging to Altamaha Technical College (and thus the State ofGeorgia) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59: 1. Bonds, bill, certificates ofindebtedness, notes, or other direct obligations ofthe United States or of the State of Georgia. 2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia. 3. Bonds of any public authority created by the laws ofthe State of Georgia, providing that the statute that created the authority authorized the use ofthe 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 ofthe United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association. 6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation. As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies, which allow agencies of the State of Georgia (and thus Altamaha Technical College), the option of exempting demand deposits from the collateral requirements. CATEGORIZATION OF DEPOSITS Cash deposits are categorized by risk as follows: Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the entity or by its agent in the entity's name. Category 2 - Amounts collateralized with securities (at fair value) held by the pledging financial institution's trust department or agent in the entity's name. Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the entity's name, and amounts uncollateralized. - 11 - ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 2: CASH AND CASH EQUIVALENTS AND OTHER DEPOSITS CATEGORIZATION OF DEPOSITS At June 30, 2004, the Technical College's cash deposits were as follows: Cash Deposits Carrying Amount Bank Balances Risk Categories 2 3 $ 396,780.61 $ 642 285.16 $ 100,000.00 $ 542,285.16 $===So~.o~o NOTE 3: ACCOUNTS RECEIVABLE Accounts receivable at June 30, 2004, consists of the following: Student Tuition and Fees Federal, State and Private Funds GSFIC Other $ 179,325.88 70,690.44 38,872.36 61,346.80 $ 350,235.48 Less: Allowance for Doubtful Accounts 15,901.88 Net Accounts Receivable $ 334,333.60 NOTE 4: INVENTORIES Inventories at June 30, 2004, consists of the following: Bookstore $ 255,817.04 NOTE 5: CAPITAL ASSETS Following are the changes in capital assets for the year ended June 30, 2004: - 12 - ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTES: CAPITAL ASSETS Balance July I, 2003 Additions Reductions Balance June 30, 2004 Capital Assets, Not Being Depreciated: Land and Land Improvements $ 188,129.00 Construction Work-In-Progress 0.00 $ 68,767.30 $ 188,129.00 68,767.30 Total Capital Assets Not Being Depreciated $ 188,129.00 $ 68,767.30 $ 256,896.30 Capital Assets, Being Depreciated: Building and Building Improvements Improvements Other Than Buildings Equipment Library Collections $ 11,843,600.30 1,240,250.00 $ 4,307,306.20 197,371.35 39,403.43 193,033.01 $ 104,475.22 $ 11,843,600.30 1,279,653.43 103,598.12 4,396,741.09 26,491.55 275,355.02 $ 17,588,527.85 $ 336,911.66 $ 130,089.67 $ 17,795,349.84 Less: Accumulated Depreciation: Buildings and Building Improvements $ 2,156,540.49 $ Improvements Other Than Buildings 683,798.55 Equipment 2,930,663.36 Library Collections 106,374.22 276,403.67 82,134.06 679,908.95 $ 30,184.66 $ 2,432,944.16 765,932.61 103,598.12 3,506,974.19 26,491.55 110,067.33 $ 5,877,376.62 $ 1,068,631.34 $ 130,089.67 $ 6,815,918.29 Total Capital Assets, Being Depreciated, Net $11,711,151.23 $ -731,719.68 $ 0.00 $ 10,979,431.55 Capital Assets, Net $ 11 899 280 23 $ -662.952.38 $ 0.00 $ 11.236.327.85 NOTE 6: DEFERRED REVENUE Deferred revenue at June 30, 2004, consists of the following: Prepaid Tuition and Fees Other $ 167,637.00 30,192.20 Totals $ 197,829.20 NOTE 7: LONG-TERM LIABILITIES Long-Term liability activity for the year ended June 30, 2004, was as follows: Other Liabilities Compensated Absences Balance July 1, 2003 Additions Reductions Balance June 30, 2004 Current Portion $ 321.272 74 $ 292,991.70 $ 281 788 06 $ 332 476.38 $ 197 442.76 NOTE 8: NET ASSETS Changes in Net Asset activity for the year ended June 30, 2004 was as follows: - 13 - ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 8: NET ASSETS Invested in Capital Assets Net of Related Debt Restricted Net Assets - Expendable Unrestricted Net Assets Total Net Assets NOTE 9: LEASE OBLIGATIONS Balance July l, 2003 Additions Reductions Balance June 30, 2004 $ 11,899,280.23 $ -662,952.38 $ 11,236,327.85 0.00 1,788,619.59 $ 1,788,619.59 0.00 375,842.93 7,300,416.49 7,368,744.20 307,515.22 $12,275,123.16 $ 8,426,Q83.70 $ 2,157,363.72 $ 11,543,843.07 OPERATING LEASES Altamaha Technical College has entered into certain agreements to lease equipment which are classified as operating leases (leases on assets not recorded on the balance sheet). These leases generally contain provisions that, at the expiration date of the original term of the lease, the Technical College has the option of renewing the lease on a year-to-year basis. Amounts are included only for multi-year leases and for cancellable leases for which an option to renew for the subsequent fiscal year has been exercised. Expenses for rental of equipment under operating leases for the year ended June 30, 2004, totaled $11,786.61. SUMMARY OF LEASE OBLIGATIONS Future commitments for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2004, were as follows: Operating Leases Year Ending June 30: 2005 2006 2007 2008 2009 $ 15,091.32 15,091.32 15,091.32 9,826.82 2,251.81 Total Minimum Lease Payments $ 57,352.59 - 14 - ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 10: RETIREMENT PLANS TEACHERS RETIREMENT SYSTEM OF GEORGIA Plan Description Altamaha Technical College 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 ofGeorgia. 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. Funding Policy Employees of Altamaha Technical College who are covered by TRS are required by State statute to contribute 5% oftheir gross earnings to TRS. Altamaha Technical College makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2004, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows: Fiscal Year Percentage Contributed Required Contribution 2004 2003 2002 100% 100% 100% $ 292,672.44 $ 315,894.28 $ 295,780.60 EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description Altamaha Technical College participates in the Employees' Retirement System ofGeorgia (ERS), a single-employer defined benefit pension plan established by the General Assembly ofGeorgia 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. - 15 - ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 10: RETIREMENT PLANS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Plan Description 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 65. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. 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 ofyears 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 ofthe 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 ofERS. The purpose of SRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415. 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 Technical College's payroll for the year ended June 30, 2004, for employees covered by ERS was $619,643.34. The Technical College's total payroll for all employees was $4,711,589.41. Under the old plan, member contributions consist of 7.16% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the Technical College 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 Technical College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2004, the ERS employer contribution rate for the Technical College amounted to 10.41% of covered payroll and included the amounts contributed on behalf of the employee under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees. - 16 - ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 10: RETIREMENT PLANS EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA Funding Policy Total contributions to the plan made during fiscal year 2004 amounted to $72,221.65, of which $64,506.57 was made by the Technical College and $7,715.08 was made by employees. These contributions met the requirements of the plan. Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2004, financial report which may be obtained through ERS. GEORGIA DEFINED CONTRIBUTION PLAN Plan Description Altamaha Technical College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly of Georgia for the purpose ofproviding retirement coverage for State employees who are temporary, seasonal, and parttime and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia. Benefits A member may retire and elect to receive periodic payments after attainment ofage 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board ofTrustees. Ifa member has less than$ 3,500.00 credited to his/her account, the Board ofTrustees has the option ofrequiring a lump sum distribution to the member in lieu ofmaking periodic payments. Upon the death ofa 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. The Employees' Retirement System of Georgia issues a financial report each fiscal year which may be obtained through ERS. Contributions and Vesting Member contributions are seven and one-halfpercent (7.5%) ofgross 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. The Technical College's payroll for the year ended June 30, 2004, for employees covered by GDCP was $393,379.08. The Technical College's total payroll for all employees was $4,711,589.41. Total contributions made by employees during fiscal year 2004 amounted to $29,503.78 which represents 7.5% of covered payroll. These contributions met the requirements of the plan. - 17 - ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 11: RISK MANAGEMENT Public Entity Risk Pool The Department of Community Health administers for the State of Georgia a program of health benefits for the employees of units of government of the State of Georgia, units of county governments, and local education agencies located with the State of Georgia. This plan is funded by participants covered in the plan, by employers' contributions paid by the various units ofgovernment participating in the plan, and appropriations made by the General Assembly of Georgia. The Department ofCommunity Health has contracted with Blue Cross Blue Shield ofGeorgia to process medical claims and Express Scripts, Incorporated to process prescription drug claims in accordance with the State Employees' Health Benefit Plan as established by the Department of Community Health. Other Risk Management The Department of Administrative Services (DOAS) has the responsibility for the State ofGeorgia of making and carrying out decisions that will minimize the adverse effects ofaccidental 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. The Technical College, as an organizational unit of the Georgia Department of Technical and Adult Education, 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. NOTE 12: 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 expenses which are disallowed under grant terms. The amount of expenses which may be disallowed by the grantor cannot be determined at this time although Altamaha Technical College expects such amounts, if any, to be immaterial to its overall financial position. Litigation, claims and assessments filed against Altamaha Technical College (an organizational unit ofthe Department of Technical and Adult Education), 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, 2004. - 18 - ALTAMAHA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2004 EXHIBIT "D" NOTE 13: NATURAL CLASSIFICATIONS WITH FUNCTIONAL CLASSIFICATIONS The Technical College's operating expenses shown at the natural classification on the "Statement of Revenues, Expenses and Changes in Net Assets" are all classified as Instruction at the functional classification. - 19 - SUPPLEMENTARY INFORMATION - 21 - ALTAMAHA TECHNICAL COLLEGE SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET - (NON-GAAP BASIS) BUDGET FUND "A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION YEAR ENDED JUNE 30. 2004 SCHEDULE "1" FUNDS AVAILABLE REVENUES State Appropriation Federal Revenues Other Revenues Retained CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance EXPENDITURES Personal Services - Institutions Operating Expenses - Institutions Adult Literacy Grants Excess of Funds Available over Expenditures BUDGET ACTUAL (1) VARIANCEFAVORABLE (UNFAVORABLE) $ 5.508.282.00 $ 5.508.096.69 $ 1.027.783.17 986.283.10 1.836.586.95 1.724.008.88 $ 8.372,652.12 $ 8.218.388.67 $ -185.31 -41.500.07 -112.578.07 -154.263.45 0.00 8.180.38 8.180.38 $ 8.372.652.12 $ 8.226.569.05 $ _ _ _-1_4....:.6.:....:,0...:..8.:..3..:..07_ $ 5.418.983.12 $ 5.384.861.64 $ 2.476.352.50 2.356.680.87 477.316.50 475.393.72 34.121.48 119.671.63 1.922.78 $ 8.372.652.12 $ 8.216.936.23 $ _ _ _15_:5...:....7_1..:..5....:..8..:_9 $ 9.632.82 $ ====9;.,,;.6=3=2=.8=2 (1) Actual amounts were prepared on a prescribed basis of accounting that demonstrates compliance with budgetary statutes and regulations of the State of Georgia. which is a comprehensive basis of accounting other than generally accepted accounting principles. - 23 - ALTAMAHA TECHNICAL COLLEGE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2004 SCHEDULE "2" Totals per Annual Supplement Accruals June 30, 2003 June 30, 2004 Compensated Absences June 30, 2003 June 30, 2004 Lag Salaries June 30, 2003 June 30, 2004 SALARIES TRAVEL $ 4,743,029.94 $ 56,174.77 -38,248.45 25,055.29 -310,947.66 291,993.49 11,584.23 -10,877.43 $ 4,711,589.41 $ 56,174.77 - 25- SECTION II CURRENT YEAR FINDINGS AND QUESTIONED COSTS ALTAMAHA TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2004 FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS No matters were reported. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reported.