Georgia Aviation and Technical College, Eastman, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2007

STATE OF GEORGIA DEPARTMENT OF AUDITS AND ACCOUNTS
I
GEORGIA AVIATION AND TECHNICAL COLLEGE EASTMAN, GEORGIA REPORT ON AUDIT
OF THE FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED JUNE 30, 2007
Russell W. Hinton State Auditor

GEORGIA AVIATION AND 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

2

B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

3

C STATEMENT OF CASH FLOWS

5

D NOTES TO THE FINANCIAL STATEMENTS

6

SUPPLEMENTARY INFORMATION

SCHEDULES

1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND

20

2 BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT

(NON-GAAP BASIS) BUDGET FUND

21

3 RECONCILIATION OF SALARIES AND TRAVEL

23

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

GEORGIA AVIATION AND TECHNICAL COLLEGE - TABLE OF CONTENTS -
SECTION III FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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

DEPARTMENT OF AUDITS AND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
October 10, 2007

Honorable Sonny Perdue, Governor Members of the General Assembly of Georgia Members of the State Board of Technical and Adult Education Members ofthe Local Board of Directors
and Honorable Ronald Jackson, Interim Commissioner Georgia Department of Technical and Adult Education
INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying basic financial statements (Exhibits A through D) of Georgia Aviation and Technical College, an organizational unit ofthe State ofGeorgia, as ofand for the year ended June 30, 2007. 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 Georgia Aviation and Technical College are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-type activities of the State of Georgia that is attributable to the transactions ofGeorgia Aviation and 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.

07ARL-2TC

In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Georgia Aviation and Technical College as of June 30, 2007, and its changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
Management's Discussion and Analysis is not a required part ofthe basic financial statements but is 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 Georgia Aviation and Technical College taken as a whole. The accompanying supplementary information (Schedules 1 through 3) 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,
w.~_-
ell W. Hinton, CPA, CGFM State Auditor
RWH:gp 07ARL-2TC

REQUIRED SUPPLEMENTARY INFORMATION

Georgia Aviation and Technical College Management's Discussion and Analysis
The following is management's discussion and analysis of Georgia Aviation and Technical College's financial performance for the fiscal year ending June 30, 2007 with comparative data from fiscal year ending June 30, 2006. 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.
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
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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 ofNet Assets (Thousands of Dollars)

June 30, 2007

June 30, 2006

Assets Current Assets Capital Assets, Net

$

638

17,110

$

835

17,115

Total Assets

$_---=-17.,_..7_,_4;..;::;.8

$_ ____,;1..:..,72.:;.:95:..=.0

Liabilities Current Liabilities Noncurrent Liabilities

$

284

$

355

81

74

Total Liabilities

$_ _----""-'36c=-5

$_ _--=42=-9

Net Assets Invested in Capital Assets, Net of Debt Unrestricted

$

17,110

273

$

17,115

406

Total Net Assets

$==1-7,.3..8.==3

$==1-7,"""52==1

The total assets of the College decreased by approximately $202,000 from the prior year. Several factors contribute to this variance. First, the College's cash balances were significantly less than the previous year by approximately $199,000 while accounts receivable increased by approximately $47,000. Next, the College's inventories were down from last year by approximately $44,000 due to the fact that inventory levels were drastically reduced in anticipation of the upcoming merger with Middle Georgia College on July 1, 2007.

Total liabilities for the fiscal year decreased by approximately $64,000. The primary reason for the decrease was in current liabilities, a result of variances within the following: Accrued salaries increased by approximately $24,000 over last year; Accounts Payable decreased by approximately $74,000; Deferred Revenue decreased by approximately $36,000 due to a policy change regarding customer deposits; Funds Held for Others increased by approximately $3,000; and the current portion of Compensated Absences increased by approximately $11,000. This decrease in current liabilities was offset by an increase of approximately $8,000 in the noncurrent portion of compensated absences.

The combination of the decrease in total assets of approximately $202,000 and the decrease in total liabilities of approximately $64,000 yields a decrease in total net assets of approximately $138,000. The decrease in total net assets is split between the category of invested in capital assets, net of debt which decreased approximately $5,000 and unrestricted net assets which decreased by approximately $133,000.

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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.

Operating revenues are received for providing goods and/or services to various customers and constituencies of the 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 the 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. This change may result in an operating deficit that is offset by a nonoperating surplus.

Statement of Revenues, Expenses and Changes in Net Assets, Condensed (Thousands of Dollars)

June 30, 2007

June 30, 2006

Operating Revenues Operating Expenses

$

1,193

$

1,285

5 771

5,810

Operating Gain/Loss

$

-4,578

$

-4,525

Nonoperating Revenues and Expenses

3,858

3,672

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

$

-720

$

-853

Other Revenues, Expenses, Gains or Losses

424

10,531

Increase (Decrease) in Net Assets
Net Assets at Beginning of Year, as Originally Reported

$

-296

----="---"-

$

17,521

$_ _.a.,9.""-67a..;a.8

$

7,843

Cumulative Effect of Changes in

Capital Assets

158

Net Assets at Beginning of Year Restated

$_ _1_7,_67_9

$_ _~7~84_3

Net Assets at End of Year

$==1==7-,3===8==3

$==1==7=.5==2==1

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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:

Revenue By Source (Thousands of Dollars) For The Years Ended June 30, 2007 and June 30, 2006

June 30, 2007

June 30. 2006

Operating Revenue Tuition and Fees Grants and Contracts Sales and Services of Educational Departments Rents and Royalties Other

$

1,060

$

935

132

153

-19

184

19

13

1

Total Operating Revenue

$

1 193

$

1,285

Nonoperating Revenue State Appropriations Gifts Investment Income Other

$

3,639

$

3,590

263

871

22

13

1

Total Nonoperating Revenue

$

3 924

$

4475

Capital Grants and Gifts State

$

536

$

10,531

Total Revenues

$

5,653

$

16,291

Expenses (By Functional Classification) (Thousands of Dollars) For The Years Ended June 30, 2007 and June 30, 2006

June 30, 2007

June 30, 2006

Operating Expenses Instruction

$

5,771

$

5,810

Nonoperating Expenses Other

65

803

Capital Grants and Gifts

Loss on Disposal of Capital Assets

113

Total Expenses

$==="6Sc6"="1='=3

- iv -

The sources of operating revenue for the College are tuition and fees, grants and contracts, auxiliary services, and educational activities. In aggregate, operating revenues decreased from last year by approximately $92,000. A reduction in specialized certification classes offered led to a decrease of approximately $50,000 in operating revenues. In addition, bookstore revenues were down by approximately $60,000, due to numerous sales to liquidate merchandise prior to the merger with Middle Georgia College.
Personal Services expenses increased by approximately $236,000. This increase reflects an annual pay raise for College employees of approximately 3%. In addition, new staff were hired within Air Traffic Control programs.
Corresponding with new staff, supplies, travel expenses, and utilities increased by approximately $65,000, $9,000, and $14,000, respectively.
Depreciation expense decreased by approximately $342,000 due to several items fully depreciating during the year.
The amount of scholarships decreased during the year by approximately $21,000 due to fewer Federal Pell and SEOG awards.
Under nonoperating revenues (expenses) state appropriations increased by approximately $49,000.
Statement ofCash 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.
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Statement of Cash Flows (Thousands of Dollars)

June 30, 2007

June 30, 2006

Cash Provided (Used) By:

Operating Activities

$

-4,012

Noncapital Financing Activities

3,839

Capital and Related Financing Activities

-48

Investing Activities

22

$

-3,622

3,637

-27

13

Net Change in Cash Cash, Beginning of Year

$

-199

$

1

700

699

Cash, End of Year

$

501

$

700

Capital Assets

The College had no significant capital asset additions during fiscal year 2007.

Long-Term Liability

Georgia Aviation and Technical College had a total Long-Term Liability of $213,285.08 of which $131,656.28 was reflected as a current liability at June 30, 2006.

For additional information on Long-Term Liability, see Notes 1 and 7 in the Notes to the Financial Statements.

Economic Outlook

Effective July 1, 2007, the Georgia Aviation Technical College merged with Middle Georgia College, an institution within the University System of Georgia. Obviously, this will usher in changes within operations within the College. The College is looking forward to the changes that will take place, and the College does anticipate growth within the upcoming year, particularly within Air Traffic Control and Flight programs of study. As in prior years, the College's overall financial position is strong. The College will maintain a close watch over resources to maintain the ability to react to unknown internal and external issues.

Ronald Jackson, Interim Commissioner Georgia Department of Technical and Adult Education

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BASIC FINANCIAL STATEMENTS - 1-

GEORGIA AVIATION AND TECHNICAL COLLEGE STATEMENT OF NET ASSETS JUNE 30, 2007
ASSETS
Current Assets Cash and Cash Equivalents Accounts Receivable, Net Other Inventories
Total Current Assets
Noncurrent Assets Capital Assets, Net
Total Assets
LIABILITIES
Current Liabilities Salaries Payable Accounts 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"

$

500,688.15

127,677.84 9,959.26

$

638,325.25

17,109,795.16 $ 17,748,120.41

$

23,900.61

1,085.68

122,866.34

4,259.56

131,656.28

$

283,768.47

81,628.80

$

365,397.27

$ 17,109,795.16 272,927.98

$ 17,382,723.14

The notes to the financial statements are an integral part of this statement. -2-

GEORGIA AVIATION AND TECHNICAL COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2007

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 Gifts Interest and Other Investment Income Other Nonoperating Expenses
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts State Loss on Disposal of Capital Assets
Total Other Revenues, Expenses, Gains, or Losses
Increase (Decrease) in Net Assets
Net Assets - Beginning of Year (Restated)
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement. -3-

$ 1,074,134.03 -13,396.84
131,563.84 19,310.97 -19,324.53 905.60
$ 11193,193.07

$ 2,476,411.96
704,500.29 38,607.35
118,167.00 262,113.92 1,584,409.73 587,241.23
$ 5,771,451.48
$ -4,578,258.41

$ 3,638,992.29
262,926.15 21,633.21 -65,425.80
$ 3,858,125.85
$ -7201132.56

$

536,377.59

-113,000.00

$

423,377.59

$ -296,754.97

171679,478.11

$ 17,382,723.14

(This page left intentionally blank)

GEORGIA AVIATION AND TECHNICAL COLLEGE STATEMENT OF CASH FLOWS 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 Other Receipts (Payments)
Net Cash Provided (Used) by Operating Activities
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capital Purposes Other Nonoperating Receipts
Net Cash Flows Provided (Used) by Noncapital Financing Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received
CASH FLOWS FROM INVESTING ACTIVITIES Earnings 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 Inventories Accounts Payable Accrued Payroll 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.
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EXHIBIT"C"

$ 1,054,360.82 139,155.98 -54,972.07
-2,619, 126.48 -2,433,804.29
-118,167.00 20,216.57
$ -4,012,336.47

$ 3,638,992.29 2,820.02
262,926.15 -65,425.80
$ 3,839,312.66

$

-47,840.63

$

21,633.21

$ -199,231.23

699,919.38

$ 500,688.15

$ -4,578,258.41
587,241.23 1,215.77
44,158.12 -73,653.31 23,900.61 -35,647.54 18,707.06
$ -4,012,336.47
$ -536,377.59

GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY Georgia Aviation and Technical College is one ofthirty-four (34) State supported member colleges of postsecondary education in Georgia which comprise the Georgia Department of Technical and Adult Education, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Georgia Aviation Technical College as a separate reporting entity.
The Technical College's Local Board of Directors is composed of eleven ( 11) 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 Georgia Aviation and Technical College. The Technical College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Georgia Aviation and Technical College is considered an organizational unit of the Georgia Department of Technical and Adult Education for financial reporting purposes because ofthe significance ofits legal, operational, and financial relationships as defined in Section 2100 ofthe Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
Legally separate, tax exempt organizations whose activities primarily support member colleges of postsecondary education in Georgia which comprise the Georgia Department ofTechnical and Adult Education (an organizational unit ofthe State ofGeorgia), are considered potential component units of the State. See Note 13 for additional information.
FINANCIAL STATEMENT PRESENTATION 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 ofthe 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 of materiality, the Technical Colleges of the Georgia Department ofTechnical and Adult Education will continue to report summer revenues and expenses in the year in which the predominate activity takes place.
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

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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING 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.
RESTATEMENT OF NET ASSETS - BEGINNING OF YEAR In the prior years, the Technical College failed to properly record all ofits equipment and associated accumulated depreciation in accordance with the Technical College's asset capitalization policies in the amounts of $2,276,377.00 and $2,118,177.00 respectively. Net assets at July 1, 2006 were increased by $158,200.00 for the cumulative effect of these changes.
CASH AND CASH EQUIVALENTS Cash and Cash Equivalents include petty cash and demand deposits in authorized financial institutions.
ACCOUNTS RECEIVABLE Accounts receivable consist of tuition and fee charges to students 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.

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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS 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 of the Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to both the Technical College and the Georgia Department of Technical 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 of the 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 Georgia Aviation and Technical College to be recorded as an asset on the Technical College's books. For the year ended June 30, 2007, GSFIC did not transfer any capital additions to Georgia Aviation and 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.
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. Georgia Aviation and Technical College had an accrued liability for compensated absences in the amount of$194,578.02 as ofJuly 1, 2006. For fiscal year 2007, $177,781.19 was earned in compensated absences and employees were paid $159,074.13, for a net increase of $18,707.06. The ending balance as of June 30, 2007 in accrued liability for compensated absences was $213,285.08.
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 of outstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component of invested in capital assets, net of related debt. (The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.)
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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NET ASSETS 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 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 $44,250.50. 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 Georgia Aviation and 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 of Proprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary FundAccounting, 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.
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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 2: DEPOSITS
DEPOSITS The custodial credit risk for deposits is the risk that in the event of a bank failure, the Technical College's deposits may not be recovered. Funds belonging to the State of Georgia (and thus the Technical College) cannot be placed in a depository paying interest longer than ten days without the depository providing a surety bond to the State. In lieu ofa 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, certificates of indebtedness, notes, or other direct obligations of the United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds ofany public authority created by the laws ofthe State ofGeorgia, 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 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 allows agencies of the State of Georgia (and thus Georgia Aviation and Technical College), the option of exempting demand deposits from the collateral requirements.
At June 30, 2007, Georgia Aviation and Technical College's bank balance was $661,598.56. Ofthis balance $561,598.56 was collateralized with securities held by the financial institution's trust department or agency in the Technical College's name.

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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable at June 30, 2007, consists of the following:

Student Tuition and Fees GSFIC Other

$ 8,521.64 94,851.36 26,450.11

$ 129,823.11

Less: Allowance for Doubtful Accounts

2,145.27

Net Accounts Receivable

$ 127,677.84

NOTE 4: INVENTORIES

Inventories at June 30, 2007, consists of the following:

Bookstore NOTE 5: CAPITAL ASSETS

$==9'=!="95==9==.2==6

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

Balance July 1, 2006 (Restated)

Additions

Reductions

Balance June 30, 2007

Capital Assets, Not Being Depreciated:

Land and Land Improvements

$

25,994.00 $

0.00 $

0.00 $ 25,994.00

Capital Assets, Being Depreciated: Building and Building Improvements Improvements Other Than Buildings Equipment

$ 17,736,330.69 279,920.00
9,032,893.91 $

$ 17,736,330.69 279,920.00
536,377.59 $ 5,061,992.00 4,507,279.50

$ 27,049,144.60 $ 536,377.59 $ 5,061,992.00 $ 22,523,530.19

Less: Accumulated Depreciation:

Building and Building Improvements $ 1,752,657.10 $

Improvements Other Than Buildings

279,920.00

Equipment

7,768,902.70

399,067.44

$ 2,151,724.54

279,920.00

188,173.79 $ 4,948,992.00 3,008,084.49

$ 9,801,479.80 $ 587,241.23 $ 4,948,992.00 $ 5,439,729.03

Total Capital Assets, Being Depreciated,

Net

$ 17,247,664.80 $

-50,863.64 $

113,000.00 $ 17,083,801.16

Capital Assets, Net

$ 11,213,658.80 $ -50,863.64 $ 113,QQ0.00 $ 11,1Q2,125.16

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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"D"

NOTE 6: DEFERRED REVENUE

Deferred revenue at June 30, 2007, consists of the following:

Other Deferred Revenue

$ 122,866.34

NOTE 7: LONG-TERM LIABILITIES

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

Other Liabilities Compensated Absences

Balance July 1, 2006

Additions

Reductions

Balance June 30, 2007

Current Portion

$ 194 578,02 $ 177.781.19 $ 159.074,13 $ 213 285,08 $ 131.656 28

NOTE 8: NET ASSETS

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

Invested in Capital Assets Net of Related Debt
Unrestricted Net Assets
Total Net Assets

Balance July 1, 2006 (Restated)

Additions

Reductions

Balance June 30, 2007

$ 17,273,658.80 $ -50,863.64 $ 113,000.00 $17,109,795.16

405,819.31

5,116,744.72

5,249,636.05

272,927.98

$ 17 679.478.11 $ 5,065.881,08 $ 5.362.636 05 $ ] 7,382,723,14

NOTE 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Plan Description Georgia Aviation and Technical College participates in the Teachers Retirement System ofGeorgia (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 from the Georgia Department of Audits and Accounts.

Funding Policy Employees of Georgia Aviation and Technical College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Georgia Aviation and Technical College 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

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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"D"

NOTE 9: RETIREMENT PLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

Funding Policy 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:

Fiscal Year

Percentage Contributed

Required Contribution

2007 2006 2005

100% 100% 100%

$ 142,344.44 $ 141,805.81 $ 132,349.06

EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA

Plan Description Georgia Aviation and Technical College participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly ofGeorgia for the purpose ofproviding retirement allowances for employees ofthe State ofGeorgia.

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 ofcreditable 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 ofthe 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.

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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"D"

NOTE 9: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description In addition, the ERS Board ofTrustees 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 ofthe Internal Revenue Code (IRC) as a portion ofERS. The purpose ofSRBP 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 ofother 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, 2007, for employees covered by ERS was $645,099.83. The Technical College's total payroll for all employees was $2,476,411.96.
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 behalfofthe 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, 2007, the ERS employer contribution rate for the Technical College amounted to 10.42% ofcovered payroll and included the amounts contributed on behalfof the employee 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 $76,910.43, of which $67,228.85 was made by the Technical College and $9,681.58 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.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Georgia Aviation and Technical College participates in the Georgia Defined Contribution Plan (GDCP) which is a single-employer defined contribution plan established by the General Assembly ofGeorgia for the purpose ofproviding retirement coverage for State employees who are temporary,
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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 9: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500.00 credited to his/her account, the Board ofTrustees has the option ofrequiring 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.
The Employees' Retirement System ofGeorgia 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, 2007, for employees covered by GDCP was $132,973.85. The Technical College's total payroll for all employees was $2,476,411.96.
Total contributions made by employees during fiscal year 2007 amounted to $10,018.39 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
NOTE 10: 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 ofGeorgia. 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 contracted with United Healthcare 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.

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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT"D"

NOTE 10: RISK MANAGEMENT
Other Risk Management The Department ofAdministrative Services (DOAS) has the responsibility for the State ofGeorgia ofmaking 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 and certain other risks. The Technical College, as an organizational unit ofthe 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 11: 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 Georgia Aviation and Technical College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Georgia Aviation and Technical College (an organizational unit of the Department of Technical and Adult Education), if any, are generally considered to be actions against the State ofGeorgia. 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 12: 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.
NOTE 13: AFFILIATED ORGANIZATIONS
In accordance with GASB Statement No. 39, Determining Whether Certain Organizations are Component Units, an amendment ofGASB Statement No. 14, The Reporting Entity, which became effective for the year ended June 30, 2004, Georgia Aviation and Technical College Foundation has been determined to be a legally separate, tax exempt organization whose activities primarily support Georgia Aviation and Technical College, a member college ofpostsecondary education in Georgia

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GEORGIA AVIATION AND TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS JUNE 30, 2007

EXHIBIT "D"

NOTE 13: AFFILIATED ORGANIZATIONS
whose units comprise the Department ofTechnical and Adult Education (an organizational unit of the State ofGeorgia). The State Accounting Office has determined Component Units ofthe State of Georgia, as required by GASB Statement No. 39, should be assessed in relation to their significance to the State of Georgia. Accordingly, Georgia Aviation and Technical College has not included financial activity for Georgia Aviation and Technical College Foundation in these financial statements.
NOTE 14: SUBSEQUENT EVENTS
On July 1, 2007, Georgia Aviation and Technical College merged with Middle Georgia College. Middle Georgia College is a Georgia Board of Regents institution located in Cochran, Georgia.

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SUPPLEMENTARY INFORMATION - 19 -

GEORGIA AVIATION AND TECHNICAL COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND JUNE 30, 2007

SCHEDULE "1"

ASSETS
Cash and Cash Equivalents Accounts Receivable
Other Inventories
Total Assets
LIABILITIES AND FUND EQUITY
Liabilities Salaries Payable Accounts Payable Deferred Revenue
Total Liabilities
Fund Balances Reserved Continuing Education Sales and Services Technology Fees Uncollectible Accounts Receivable Inventories Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

$

591,263.30

34,330.25 10,259.06

$ ====63=5,=85=2.=61=

$

23,900.61

204,372.85

122,866.34

$

351,139.80

$

168,539.68

12,689.79

36,789.50

2,145.27

20,298.07

44,250.50

$

284,712.81

$ ===63=5,=852=.61=

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.
- 20 -

GEORGIA AVIATION AND TECHNICAL COLLEGE BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS)
BUDGET FUND YEAR ENDED JUNE 30, 2007

SCHEDULE "2"

REVENUES

State Appropriation

State General Funds

$

Other Funds

Total Revenues

$

CARRY-OVER FROM PRIOR YEAR

Transfer from Reserved Fund Balance

Total Funds Available

$

EXPENDITURES

Technical Education

$

Excess of Funds Available over Expenditures

$

FUND BALANCE JULY 1

Reserved Unreserved

ADJUSTMENTS

Prior Year Payables/Expenditures Unreserved Fund Balance (Surplus) Returned
to Georgia Department of Technical and Adult Education Year Ended June 30, 2006
Prior Year Reserved Fund Balance Included in Funds Available

FUND BALANCE JUNE 30

BUDGET 3,694,690.00 $ 1,065,223.00 4,759,913.00 $
0.00 4,759,913.00 $ 4 759 913.00 $
0.00 $
$

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

3,694,690.00 $ 1,096,667.90
4,791,357.90 $

0.00 31 444.90
31,444.90

183,739.83 4,975,097.73 $

183 739.83 215 184.73

4 737 640.60 $ 237,457.13 $

22 272.40 237 457.13

206,183.17 55,697.71

24,812.34
-55,697.71 -183 739.83 284 712.81

SUMMARY OF FUND BALANCE
Reserved Continuing Education Sales and Services Technology Fees Uncollectible Accounts Receivable Inventories
Total Reserved
Unreserved Surplus

$

168,539.68

12,689.79

36,789.50

2,145.27

20 298.07

$

240,462.31

44 250.50

Total Fund Balance

$ =====2=8=4=7=1=2-,..8==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.
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GEORGIA AVIATION AND TECHNICAL COLLEGE RECONCILIATION OF SALARIES AND TRAVEL YEAR ENDED JUNE 30, 2007

SCHEDULE "3"

Totals per Annual Supplement
Accruals June 30, 2007
Compensated Absences June 30, 2006 June 30, 2007
Agency Funds Mullis, Lawton Jay
Unidentified Variance

SALARIES $ 2,462,708.90 $

TRAVEL 39,511.35

23,900.61

-191,796.96 180,500.73

1,098.68

-904.00

$ 2,476,411.96 $ ===38=,6=0=7=.3=5

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

GEORGIA AVIATION AND TECHNICAL COLLEGE AUDITEE'S RESPONSE
SUMMARY SCHEDULE OF PRIOR YEAR FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2007

PRIOR YEAR FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

FINDING CONTROL NUMBER

AUDITEE'S RESPONSE/STATUS

SEE AUDITOR'S COMMENTS

FS-816-06-01

Further Action Not Warranted

(1)

FS-816-06-02

Further Action Not Warranted

(1)

FS-816-06-03

Further Action Not Warranted

(1)

FS-816-06-04 Further Action Not Warranted

(1)

AUDITOR'S COMMENTS

(1) Due to the merge with Middle Georgia College effective July 1, 2007, these findings will be followed up by their new management.

PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

SECTION III FINDINGS AND QUESTIONED COSTS

GEORGIA AVIATION AND TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

EMPLOYEE COMPENSATION Inadequate Internal Controls Significant Deficiency Finding Control Number: FS-816-07-01

Condition:

The accounting procedures of the Technical College were insufficient to provide for adequate controls over Employee Compensation.

Criteria:

The Technical College's management is responsible for designing and maintaining internal controls that provide reasonable assurance that employee compensation activity is properly approved, documented, processed and reported.

Questioned Cost: NIA

Information:

While conducting test of controls over employee compensation, the following deficiency was noted:
Each final monthly payroll spreadsheet that was prepared by the Payroll department and submitted to the President for approval was reviewed by current year auditors. Only six out of twelve final payroll summaries that were approved by the President could be provided for review. The auditors also found that three out of twelve months did not have final payroll summary sheets prepared.

Cause:

Technical College management failed to implement satisfactory controls over proper approval and documentation ofpayroll summaries before checks are issued.

Effect:

Without satisfactory accounting controls and procedures in place, the Technical College could place itself in a position where potential misappropriation of assets could occur. In addition, the lack of controls could impact the reporting of its financial position and results of operation.

Recommendation:

The Technical College should review its internal control policies to ensure that these policies are adequate. Additionally, management should determine whether or not these policies and procedures have been placed in operation and operating effectively. In areas where deficiencies exist, the Technical College should redesign and/or implement additional control procedures over Employee Compensation.

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GEORGIA AVIATION AND TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER CAPITAL ASSETS Deficiencies in Recording Capital Assets Significant Deficiency Finding Control Number: FS-816-07-02

Condition:

The Technical College's financial statements prepared for inclusion in the State ofGeorgia Comprehensive Annual Financial Report (CAFR) and the State of Georgia Single Audit Report included numerous errors related to Capital Asset presentation.

Criteria:

Each of the thirty-four (34) Technical Colleges which are units of the Department ofTechnical and Adult Education, an organizational unit ofthe State of Georgia, is required to submit to the State Accounting Office, financial statements prepared in accordance with generally accepted accounting principles (GAAP) for inclusion in the State's CAFR and Single Audit Report.

Questioned Cost: NIA

Information:

While reviewing the financial statements ofGeorgia Aviation and Technical College, the following deficiencies were noted: (1) Two current year equipment additions below the $5,000.00 threshold
were improperly capitalized by the Technical College. (2) Six airplanes were incorrectly recorded within current year additions
due to an input error related to in-service dates within the asset management module. An audit adjustment was proposed and made to properly reflect these capital assets as a restatement of net assets. (3) Twenty airplanes were surplused by the Technical College during the year but were not properly removed from the capital assets records. An audit adjustment was proposed and made to eliminate these capital assets. (4) During testing of accumulated depreciation, it was noted that seven out of twelve assets tested did not utilize the half year convention method during their in-service year in accordance with the Technical College's capitalization policy.

Cause:

The Technical College failed to properly maintain its capital assets records in accordance with the Technical College's approved capitalization policy.

-2 -

GEORGIA AVIATION AND TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2007

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

GENERAL LEDGER CAPITAL ASSETS Deficiencies in Recording Capital Assets Significant Deficiency Finding Control Number: FS-816-07-02

Effect:

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

Recommendation:

The Technical College should review its capital asset records and make appropriate adjustments to ensure that the capital asset records conform to the Technical College's approved capitalization policy and generally accepted accounting principles.

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.

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