Heart of Georgia Technical College, Dublin, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2011

HEART OF GEL-GIA
TECHNICAL COLLEGE
DUBLIN, GEORGIA
REPORT ON AUDIT OF THE FINANCIAL STATEMENTS
FOR THE FISCAL YEAR ENDED JUNE 30,0011
Georgia D e w e l a t of Andits anid &cc~unts
State Audik~r

HEART OF GEORGIA 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 EXHIBlTS A STATEMENT OF NET ASSETS B STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS C STATEMENT OF CASH FLOWS D NOTES TO THE FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION SCHEDULES 1 BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND 2 SUMMARY BUDGET COMPARISON AND SURPLUS ANALYSIS REPORT (NON-GAAP BASIS) BUDGET FUND 3 STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND 4 STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE (NON-GAAP BASIS) BUDGET FUND 5 RECONCILIATIONOF SALARIES AND TRAVEL
SECTION II FINDINGS AND QUESTIONED COSTS SCHEDULE OF FINDINGS AND QUESTIONED COSTS

SECTION I FINANCIAL

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

DEPARTMENOTF AUDITSAND ACCOUNTS
270 Washington Street, S.W., Suite 1-156 Atlanta, Georgia 30334-8400
November 2 1 , 2 0 1 1

Honorable Nathan Deal, Governor Members of the General Assembly of Georgia Members of the State Board of the Technical College System of Georgia Members of the Local Board of Directors
and Honorable Lloyd D. Horadan, President Heart of Georgia Technical College
INDEPENDENTAUDITOR'S COMBlNED REPORT ON BASIC FINANCIAL STATEMENTS --
AND SUPPLEMENTARY INFORMATION
Ladies and Gentlemen:
We have audited the accompanying basic financial statements (Exhibits A through D) of Heart of Georgia Technical College, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2011. 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 of America. 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 consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the College's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Heart of Georgia Technical College are intended to present the financial position and changes in financial position and cash flows of only that portion of the business-typeactivities of the State of Georgia that is attributable to the transactions of Heart of Georgia Technical College. They do not purport to, and do not, present fairly the financial position and changes in financial position and cash flows of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America.
In our opinion, the basic financial statements referred to above present fairly, in all material respects, the financial position of Heart of Georgia Technical College as of June 30, 2011, 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 part of the basic financial statements but is required supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries 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 Heart of Georgia Technical College taken as a whole. The accompanying supplementary information (Schedules 1through 5) is presented for purposes of additional analysis and is not a required part of the 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,
~us)ell W. Hinton, CPA, CGFM State Auditor

REQUIRED SUPPLEMENTARY INFORMATION

HEART OF GEORGIA TECHNICAL COLLEGE
Management's Discussion and Analysis
The following is management's discussion and analysis of Heart of Georgia Technical College's financial performance for the fiscal year ending June 30, 2011, with comparative data from fiscal year ending June 30, 2010. This discussion has been prepared by and is the responsibility of management.
Overview of 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 GovernmentalAccounting 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 Technical College's finances and activities as a whole and assists with providing an answer to the question "Is the Technical 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 Technical College to meet financial obligations as they mature. This statement presents information related t o cash inflows and outflows summarized by operating, noncapital financing, capital and related financing and investing activities.
This discussion and analysis of the Technical College's financial statements provides an overview of its financial activities for the year.
Statement of Net 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 Technical 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 three major categories. The first category, invested in capital assets, net of debt, provides information concerning the Technical College's equity in property plant and equipment owned by the Technical College. The second category is restricted net assets, which is expendable. Expendable restricted net assets are available for expenditure by the Technical College but must be spent for purposes as determined by donors and/or external entities that have placed time or purpose restrictions on the use of the assets. The final category is unrestricted net assets, which are available for expenditure by the Technical College for any lawful purpose deemed necessary to operate the Technical College.

Statement of Net Assets
Assets Current Assets Capital Assets, Net
Total Assets
Liabilities Current Liabilities Noncurrent Liabilities
Total Liabilities
Net Assets Invested in Capital Assets. Net of Debt Restricted - Expendable Unrestricted
Total Net Assets

June 30,2011
$ 21,470,892 6,843
-38,410

June 30,2010
$ 22,245,912 1,409 -513

Total Net Assets decreased by $807,483. This is mostly related to the increase in accumulated depreciation of capital assets.
Statement of Revenues, 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 Technical College, both operating and nonoperating, and any other revenues, expenses, gains, and losses received or spent by the Technical 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 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 the 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. This change may result in an operating deficit that is offset by a nonoperatingsurplus.

Statement of Revenues, Expenses and Changes in Net Assets

June 3 0 , 2 0 1 1

Operating Revenues Operating Expenses

Operating Loss

$ -12,258,924

Nonoperating Revenues and Expenses

11,158,737

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

$ -1,100,187

Other Revenues, Expenses, Gains or Losses

292,704

Increase (Decrease)in Net Assets

$

-807,483

Net Assets at Beginningof Year

22,246,808

Net Assets at End of Year

June 30,2010

$ -10,677,566 9,863,955

$

-813,611

882,952

$

69,341

22,177,467

The Statement of Revenues, Expenses and Changes in Net Assets reflects a decline in Net Assets. Some highlights of the information presented on the Statement of Revenues, Expenses and Changes in Net Assets are as follows:

Revenue by Source For the Years Ended June 30, 2011, and June 30, 2010

June 3 0 , 2 0 1 1

June 30,2010

Operating Revenue

Tuition and Fees

$

Grants and Contracts

Sales and Services of Educational Departments

Rents and Royalties

Other

3,250,633 53,406
1,163,598 138,460 6,747

$

2,550,998

60,924

1,027,041

187,624

3,858

Total Operating Revenue

Nonoperating Revenue State Appropriations Federal Grants and Contracts Nonoperating State Grants and Contracts Nonoperating Gifts Other

Total Nonoperating Revenue

Capital Grants and Gifts

State

$

275,677

Other

17,882

Gain/Loss on Disposal of Capital Assets

-856

$

878,021

53,258

-48,327

Total Capital Grants and Gifts

Total Revenues

Expenses For the Years Ended June 30,2011, and June 30,2010

June 3 0 , 2 0 1 1

June 30,2010

Operating Expenses Instruction

Nonoperating Expenses Nonoperating Expenses

Total Expenses

Operating Revenue increased by $782,399. Factors that relate to the increase are discussed below:
Tuition and fees increased $699,635. This can be attributed to an increase in enrollment over the previous fiscal year and an increase in the tuition fee per credit hour rate across the board.
Sales and services revenue increased by $136,557. The majority of this increase can be attributed to additional sales generated by the Bookstore.
Facility Rental revenue decreased by $49,164. This decline can be attributed to fewer external customers utilizing the Conference Center.
State Appropriation revenue increased by $854,062. This is the result of Federal stimulus funds that were received in fiscal year 2010 being replaced by State funds in fiscal year 2011.
Nonoperating Revenue Grants and Contracts increased $202,215. A significant portion of this increase can be attributed to the increased amount of financial aid that was awarded to students during the fiscal year in the form of Pell, SEOG, and ACCG.
Nonoperating Revenue Gifts decreased $201,958 due to a decrease in bond purchases of items that did not meet the capitalization threshold.
Capital Grants and Gifts revenue declined $637.720. The reason for the decline is that the Technical College received capital bond funds in fiscal year 2010 to help renovate the General Studies building. This level of funding was not continued in fiscal year 2011.
Total Expense increased $1,926,136 from fiscal year 2010 to fiscal year 2011. Factors that relate to the significant increase are discussed below:
Operating expense increased $2,363,757. The majority of the increase can be attributed to the increase in Scholarship/Fellowship expense which increased due to a growth in enrollment and the amount of financial aid that was awarded students.
Nonoperating expense decreased $437,621. This is due to the decrease in the purchase of items that did not meet the capitalization threshold with bond funds.
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 Technical College during the year. It also provides information concerning the Technical 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 Technical 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.

Statement of Cash Flows

Cash Flows for the Years Ended June 30,2011and June 30,2010,Condensed

June 30,2011

June 30,2010

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

$ -10,948,393 11,051,583 -37,177 479

$ -9,596,360 9,951,048 -365,232 779

Net Change in Cash Cash, Beginning of Year

Cash. End of Year
Capital Assets
The Technical College completed the renovation of the General Studies building during the fiscal year.
Long-Term Liabilities
Heart of Georgia Technical College had total Long-Term Liabilities of $660,076.59 as of June 30, 2011, of which $360,100.47 was reflected as a current liability.
For additional information on Long-Term Liabilities, see Notes 1and 7 in the Notes to the Financial Statements.
Economic Outlook
Effective July 1, 2011, Heart of Georgia Technical College merged with Sandersville Technical College to form Oconee Fall Line Technical College. Education will continue to be the primary focus of the newly formed school; hence, enrollment growth and delivery of quality instruction will continue to be our primary objective. The Technical College will maintain a close watch over resources to sustain the ability to offer a means of higher education to the community that it serves.

Lloyd D. Horadan, President Heart of Georgia Technical College

BASIC FINANCIAL STATEMENTS

HEART OF GEORGIA TECHNICAL COLLEGE STATEMENT OF NET ASSETS JUNE 30,2011
Current Assets Cash and Cash Equivalents Accounts Receivable Federal Financial Assistance Other 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 Restricted
Expendable Unrestricted (Deficit)
Total Net Assets

EXHIBIT "A"

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

HEART OF GEORGIA TECHNICAL COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDEDJUNE 30,2011
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)
NQNQPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal State Gifts Interest and Other Investment Income Other Nonoperating Revenues Other Nonoperating Expenses
Net Nonoperating Revenues
Income (Loss) Before Other Revenues, Expenses, Gains, or Losses
Capital Grants and Gifts Federal State Nongovernmental Loss on Disposalof Capital Assets
Total Other Revenues, Expenses, Gains, or Losses
Increase(Decrease) in Net Assets
Net Assets - Beginningof Year
Net Assets - End of Year
The notes to the financial statements are an integral part of this statement.
- 3-

EXHIBIT "En

HEART OF GEORGIA TECHNICAL COLLEGE STATEMENT OF CASH FLOWS YEAR ENDEDJUNE 30.2011
CASH FLOWS FROM OPERATING ACTIVITIES Tuit~onand Fees Grants and Contracts Sales and Services of Educatlonal Departments Payments to Suppliers Payments to Employees Payments for Scholarships and Fellowsh~ps Other Receipts (Payments)
Net Cash Prov~ded(Used) by Operating Act~vit~es
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropriations Agency Funds Transactions Gifts and Grants Received for Other than Capltal Purposes Other Nonoperating Receipts
Net Cash Flows Provided (Used) by Noncapital Flnanclng Activities
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Capital Grants and Gifts Received Purchases of Capital Assets
Net Cash Prov~ded(Used) by Capital and Related FinancingActlvlt~es
CASH FLOWS FROM INVESTING ACTIVITIES Earnings on Investments
Net Increase (Decrease) in Cash
Cash and Cash Equ~valents- Beginnlngof Year
Cash and Cash Equ~valents- End of Year
RECONCILIATIONOF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:
Operatlng Income (Loss) Adjustments to Reconc~leOperatlng Income to Net Cash
Prov~ded(Used) by Operating Actlvbes Deprec~at~oEnxpense Change In Assets and L ~ a b ~ l ~ t ~ e s . Accounts Receivable lnventorles Prepa~dItems Salar~esPayable Accounts Payable Deferred Revenue Compensated Absences
Net Cash Provtded (Used) by Operating Actlvitles
NONCASH ACTIVITY Gift of Capital Assets Reducing Proceeds of Capital Gifts and Grants Gift Reduclng Proceeds of Gifts and Grants Received for Other Than Capital Purposes
The notes to the flnanc~asl tatements are an Integral part of this statement

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY
Heart of Georgia Technical College is one of twenty-six (26) State supported member colleges of postsecondary education in Georgia which comprise the Technical College System of Georgia, an organizational unit of the State of Georgia. The accompanying financial statements reflect the operations of Heart of Georgia Technical College as a separate reporting entity.
The Technical College's Local Board of Directors is composed of nine (9) members serving staggered three-year terms who are appointed by the State Board of the Technical College System of Georgia. Appropriation of State funds is made to the Technical College System of Georgia by the General Assembly of Georgia. The System Office of the Technical College System of Georgia determines the amount of State appropriations to be received by Heart of Georgia Technical College. The Technical College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Heart of Georgia Technical College is considered an organizational unit of the Technical College System of Georgia for financial reporting purposes because of the significance of its legal, operational, and financial relationships as defined in Section 2100 of the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Re~ortinES! tandards.
Legally separate, tax exempt organizations whose activities primarily support member colleges of postsecondary education in Georgia which comprise the Technical College System of Georgia (an organizational unit of the State of Georgia), are considered potential component units of the State. See Note (16) 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 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 of materiality, the Technical Colleges of the Technical College System of Georgia 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. 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.

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

CASH AND CASH EQUIVALENTS
Cash and Cash Equivalents include petty cash, demand deposits and time deposits in authorized financial institutions.
F.hCCOUNTS RECEPVAGLIE
Accounts receivable consist of tuition and fee charges to students, allotments due from the Technical College System of Georgia -System 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.

Resale inventories are valued at cost usingthe first-in, first-out (FIFO) method.
C&P?;TAkASSETS
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, Easements, Rights, Patents, Trademarks, Copyrights 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 and software, 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 of the assets, generally 1 0 to 4 0 years for buildings, 1 5 to 25 years for infrastructure, 1 5 years for improvements other than buildings, 1 0 years for library books, 3 to 1 0 years for equipment and software, and 1 0 to 2 0 years for intangibles.
To fully portray capital assets acquired by the Technical Colleges of the Technical College System of Georgia, 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 Technical College System of Georgia. 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 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 Heart of Georgia Technical College to be recorded as an asset on the Technical College's books. For the year ended June 30, 2 0 1 1 GSFIC did not transfer any capital additions to Heart of Georgia 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,

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Expenses and Changes in Net Assets. Heart of Georgia Technical College had an accrued liability for compensated absences in the amount of $713,849.95 as of July 1,2010. For fiscal year 2011, $385,138.49 was earned in compensated absences and employees were paid $432,911.85, for a net decrease of $47,773.36. The ending balance as of June 30, 2 0 1 1 in accrued liability for compensated absences was $666,076.59.

Noncurrent liabilities include liabilities that will not be paid within the next fiscal year.
el.:! -y irkc;~~u'rs
The Technical College's net assets are classified as follows:
Invested in capital assets, net of related 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.
Restricted net assets - expendable: Restricted expendable net assets include resources in which the Technical College is legally or contractually obligated to spend resources in accordance with restrictions imposed by external third parties, except for unexpended grant funds of $6,842.69 due to grantor agencies.
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 $1,527.32. Unexpended state appropriations must be refunded to the Technical College System of Georgia for remittance to the Office of the State Treasurer.
When an expense is incurred that can be paid using either restricted or unrestricted resources, the Technical College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
;s::,'rp$E 7"&4PI,X45
Heart of Georgia 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.
C:LAS$IFPCAT%ONOF REVENUES AND EXPENSES
The Statement of Revenues, Expenses and Changes in Net Assets classifies the Technical College's fiscal year activity as operating and nonoperating according to the following criteria:
Operating Revenues: Operating revenues include activities that have the characteristics of exchange transactions, such as (1)student tuition and fees, net of scholarship allowances, (2) 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, Repotiing a s h Flows of Proprietary and Nonexpendable Trust Funds and GovernmentalEntities That Use Pmprietaty Fund Accounting, and GASB No. 34, such as state appropriations and investment income.

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Operating Expenses: Operating expenses include activities that have the characteristics of exchange transactions.
Nonoperating Expenses: Nonoperating expenses include activities that have the characteristics of nonexchange transactions, such as capital financing costs related to investment activity.

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.
NOTE 2: DEPOSITS
26- P9;SXTS
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 of a surety bond, the depository may pledge as collateral any one or more of the following securities as enumerated in the Official Code of Georgia Annotated Section 50-17-59:
1. Bonds, bills, 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 of any public authority created by the laws of the State of Georgia, providing that the statute that created the authority authorized the use of the bonds for this purpose.
4. Industrial revenue bonds and bonds of development authorities created by the laws of the
State of Georgia.
5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation of the United States government, which are fully guaranteed by the United States government both as to principal and interest, 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 MortgageAssociation.
6. Guarantee or insurance of accounts provided by the Federal Deposit Insurance Corporation.
At June 30, 2011, the carrying value of deposits was $203,103.82 and the bank balance was $408,400.81. Of the Technical College's deposits, $139,293.76 were uninsured. Of these uninsured deposits, $139,293.76 were collateralized with securities held by the financial institution's trust department or agency, but not in the Technical College's name.

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

NOTE 3: ACCOUNTS RECEIVABLE

Accounts receivable at June 30, 2011, consists of the following:

Student Tuition and Fees

$

Federal, State and Private Funds

Georgia State Financingand Investment Commission

Other

143,151.59 101,876.91 103,418.53 274,920.96

Total Accounts Receivable

$

623.367.99

NOTE 4: INVENTORIES

Inventories at June 30, 2011, consist of the following:
Bookstore

NOTE 5: CAPITAL ASSETS

Following are the changes in capital assets for the year ended June 30, 2011:

Capital Assets, Not Being Depreciated: Land and Land lmprovements Construction Work In Progress

Beginning Balance
July 1. 2010

Additions

Reductions

Ending Balance June 30,2011

$

333,822.00

$ 333,822.00

556,592.26 $ 44.136.92 $ 600.729.18

0.00

Total Capital Assets. Not Being Depreciated

$ 890,414.26 $ 44,136.92 $ 600,729.18 $ 333,822.00

Qpital Assets, Being Depreciated: Building and Building Improvements Improvements Other Than Buildings Equipment Library Collections

$ 25,069,810.15$ 639,843.22

600,729.18

Total Assets Being Depreciated

Less: Accumulated Depreciation: Building and Building Improvements Improvements Other Than Buildings Equipment Library Collections

$ 5,233,162.30$ 733.465.01

613,693.22

6,973.33

$ 5.966.627.31 620,666.55

Total Accumulated Depreciation

Total Capital Assets, Being Depreciated, Net

$ 2l,355,497.37$ -217,57184$

855.55 $ 21,137.069.98

Capital Assets. Net

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

NOTE 6: DEFERRED REVENUE

Deferred revenue at June 30, 2011, consists of the following: Other Deferred R e ~ n u e

NOTE 7 : LONG-TERM LIABILITIES

Long-Term liability activity for the year ended June 30, 2011 was as follows:

Beginning Balance July 1.2010

Additions

Reductions

Ending Balance June 30,2011

Current Portion

Other Liabilities Compensated Absences $

713.849.95 $ 385.138.49 $ 432.9ll.85 $

666,076.59 $ 360,100.47

NOTE 8: NET ASSETS

Changes in Net Asset activity for the year ended June 30, 2 0 1 1 was as follows:

Invested i n Capital Assets Net of Related Debt $

Beginning Balance
July 1. 2010

Additions

Reductions

Ending Balance June 30, 2011

22,245,911.63 $

-173,434.92 $

601584.73 $ 21470,891.98

Restricted Net Assets

2409.20

1,002,205.74

996,772.25

6,842.69

Unrestricted Net Assets

-512.97

15,913,072.77

15,950,969.68

-38,409.88

Total Net Assets

$ 22,246,807.86 $ 16,741,843.59 $ 27,549,326.66 $ 21,439,324.79

NOTE 9: LEASE OBLIGATIONS
ilTJf<KA'TZP~GLEASES
Heart of Georgia Technical College has entered into certain agreements to lease postage meters 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 cancelable leases for which an option to renew for the subsequent fiscal year has been exercised.
Expenses for rental of postage meters under operating leases for the year ended June 30, 2011, totaled $1,776.00.
Operating Leases
Year EndingJune 30: 2012

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30,2011

EXHIBIT "D"

NOTE 10: RETIREMENT PLANS
Heart of Georgia Technical College participates in various retirement plans administered by the State of Georgia under two major retirement systems: Employees' Retirement System of Georgia (ERS System) and Teachers Retirement System of Georgia. These two systems issue separate publicly available financial reports that include the applicable financial statements and required supplementary information. The reports may be obtained from the respective system offices. The significant retirement plans that Heart of Georgia Technical College participates in are described below. More detailed information can be found in the plan agreements and related legislation. Each plan, including benefit and contribution provisions, was established and can be amended by State law.
EMPhO"l'EES"R[$%IREMENT SYSTEM OF GEORGIA
The ERS System is comprised of individual retirement systems and plans covering substantially all employees of the State of Georgia except for teachers and other employees covered by the Teachers Retirement System of Georgia. One of the ERS System plans, the Employees' Retirement System of Georgia (ERS), is a cost-sharing multiple-employer defined benefit pension plan that was established by the Georgia General Assembly during the 1949 Legislative Session for the purpose of providing retirement allowances for employees of the State of Georgia and its political subdivisions. ERS is directed by a Board of Trustees and has the powers and privileges of a corporation. ERS acts pursuant to statutory direction and guidelines, which may be amended prospectively for new hires but for existing members and beneficiaries may be amended in some aspects only subject to potential application of certain constitutional restraints against impairment of contract.
On November 20, 1997, the Board created the Supplemental Retirement Benefit Plan (SRBP-ERS)of ERS. SRBP-ERS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of ERS. The purpose of the SRBP-ERS is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC Section 415. Beginning January 1,1998, all members and retired former members in ERS are eligible to participate in the SRBP-ERS whenever their benefits under ERS exceed the limitation on benefits imposed by IRC Section 415.
The benefit structure of ERS is established by the Board of Trustees under statutory guidelines. Unless the employee elects 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. Members hired on or after July 1,1982 but prior to January 1,2009 are "new plan" members subject to the modified plan provisions. Effective January 1,2009, newly hired State employees, as well as rehired State employees who did not
maintain eligibility for the "old" or "new"plan, are members of the Georgia State Employees' Pension
and Savings Plan (GSEPS). ERS members hired prior to January 1,2009 also have the option to change their membership to the GSEPS plan.
Under the old plan, new plan, and GSEPS, a member may retire and receive normal retirement benefits after completion of 1 0 years of creditable service and attainment of age 6 0 or 3 0 years of creditable service regardless of age. Additionally, there are some provisions allowing for early retirement after 25 years of creditable service for members under age 60.
Retirement benefits paid to members are based upon a formula adopted by the Board of Trustees for such purpose. The formula considers the monthly average of the member's highest 2 4 consecutive calendar months of salary, the number of years of creditable service, and the member's

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

age at retirement. Post-retirement cost-of-living adjustments may be made to members' benefits provided the members were hired prior to July 1,2009. The normal retirement pension is payable monthly for life; however, options are available for distribution of the member's monthly pension, at reduced rates, to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
Member contribution rates are set by law. Member contributions under the old plan are 4% of annual compensation up to $4,200.00 plus 6% of annual compensation in excess of $4,200.00. Under the old plan, Heart of Georgia Technical College pays member contributions in excess of 1.25% of annual compensation. Under the old plan, these Heart of Georgia Technical College contributions are included in the members' accounts for refund purposes and are used in the computation of the members' earnable compensation for the purpose of computing retirement benefits. Member contributions under the new plan and GSEPS are 1.25% of annual compensation. Heart of Georgia Technical College is required to contribute at a specified percentage of active member payroll established by the Board of Trustees determined annually in accordance with actuarial valuation and minimum funding standards as provided by law. These Heart of Georgia Technical College contributions are not at any time refundable to the member or his/her beneficiary.
Employer contributions required for fiscal year 2 0 1 1 were based on the June 30, 2008 actuarial valuation for the old and new plans and were set by the Board of Trustees on September 18, 2008 for GSEPS as follows:
Old Plan* New Plan
GSEPS
* 5.66%exclusive of contributionspaid by the employer on behalf of old plan members
Members become vested after 10 years of service. Upon termination of employment, member contributions with accumulated interest are refundable upon request by the member. However, if an otherwise vested member terminates and withdraws his/her member contributions, the member forfeits all rights to retirement benefits.
fFPtl'"XERS RETIREMENT SYSTEM OF GEORGIA
The Teachers Retirement System of Georgia (TRS) is a cost-sharing multiple-employer defined benefit plan created in 1943 by an act of the Georgia General Assembly to provide retirement benefits for qualifying employees in educational service. A Board of Trustees comprised of active and retired members and ex-officio State employees is ultimately responsible for the administration of TRS.
On October 25, 1996, the Board created the Supplemental Retirement Benefit Plan of the Georgia Teachers Retirement System (SRBP-TRS). SRBP-TRS was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion of TRS. The purpose of SRBP-TRS is to provide retirement benefits to employees covered by TRS whose benefits are otherwise limited by IRC Section 415. Beginning July 1,1997, all members and retired former members in TRS are eligible to participate in the SRBP-TRS whenever their benefits under TRS exceed the IRC Section 415 imposed limitation on benefits.
TRS provides service retirement, disability retirement, and survivor's benefits. The benefit structure of TRS is defined and may be amended by State statute. A member is eligible for normal service retirement after 3 0 years of creditable service, regardless of age, or after 1 0 years of service and attainment of age 60. A member is eligible for early retirement after 25 years of creditable service.

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "D"

Normal retirement (pension) benefits paid to members are equal to 2% of the average of the member's two highest paid consecutive years of service, multiplied by the number of years of creditable service up to 4 0 years. Early retirement benefits are reduced by the lesser of one-twelfth of 7% for each month the member is below age 60 or by 7% for each year or fraction thereof by which the member has less than 3 0 years of service. It is also assumed that certain cost-of-living adjustments, based on the Consumer Price Index, will be made in future years. Retirement benefits are payable monthly for life. A member may elect to receive a partial lump-sum distribution in addition to a reduced monthly retirement benefit. Death, disability and spousal benefits are also available.

TRS is funded by member and employer contributions as adopted and amended by the Board of Trustees. Members become fully vested after 1 0 years of service. If a member terminates with less than 1 0 years of service, no vesting of employer contributions occurs, but the member's contributions may be refunded with interest. Member contributions are limited by State law to not less than 5% or more than 6% of a member's earnable compensation. Member contributions as adopted by the Board of Trustees for the fiscal year ended June 30, 2 0 1 1 were 5.53% of annual salary. Employer contributions required for fiscal year 2 0 1 1 were 10.28% of annual salary as required by the June 30, 2008 actuarial valuation.

The following table summarizes Heart of Georgia Technical College contributions by defined benefit plan for the years ending June 30, 2011, June 30, 2010, and June 30,2009:

ERS Required Contribution

Percent Contributed

TRS

Required

Percent

Contribution

Contributed

eyfF$GPW K3FFINED CONTRIBUTION PLAN
Plan Description Heart of Georgia 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 of providing retirement coverage for State employees who are temporary, seasonal, and part-time and are not members of a public retirement or pension system. GDCP is administered by the Board of Trustees of the Employees' Retirement System of Georgia.
Benefits A member may retire and elect to receive periodic payments after attainment of age 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board of Trustees. If a member has less than $3,500.00 credited to his/her account, the Board of Trustees has the option of requiring a lump sum distribution to the member in lieu of making periodic payments. Upon the death of a member, a lump sum distribution equaling the amount credited to his/her account will be paid to the member's designated beneficiary. Benefit provisions are established by State statute.
The Employees' Retirement System of Georgia issues a financial report each fiscal year which may be obtained through ERS.

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "Dl'

Contributions and Vesting Member contributions are seven and one-half percent (7.5%) of gross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member. The Technical College's payroll for the year ended June 30, 2011, for employees covered by GDCP was $1,494,412.86. The Technical College's total payroll for all employees was $7,074,363.93.
Total contributions made by employees during fiscal year 2 0 1 1 amounted to $111,895.16 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
NOTE 11: RISK MANAGEMENT
PtlECIC 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 of government participating in the plan, and appropriations made by the General Assembly of Georgia. The Department of Community Health contracted with United Healthcare to process medical claims and Medco 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 of Georgia of making and carrying out decisions that will minimize the adverse effects of accidental losses that involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The Technical College, as an organizational unit of the Technical College System of Georgia, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.
NOTE 12: POST-EMPLOYMENT BENEFITS
Heart of Georgia Technical College participates in the following State of Georgia post-employment benefit plans: the Georgia State Employees Post-employment Health Benefit Fund (administered by the Department of Community Health) and the State Employees' Assurance Department - OPEB (administered by the ERS System). Separate financial reports that include the applicable financial statements and required supplementary information for these plans are publicly available and may be obtained from the respective system offices.
Retiree health benefits were previously funded through the Georgia Retiree Health Benefit Fund (GRHBF). In 2009, the General Assembly revisited the GRHBF and enacted legislation that, effective August 31, 2009, separated the GRHBF into two new funds: the Georgia School Personnel Postemployment Health Benefit Fund and the Georgia State Employees Post-employment Health Benefit

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "DM

Fund. The purpose of this change was to assure employers responsible for planning and funding future retiree health costs that their contributions will be dedicated to their respective retiree populations. Funds in the GRHBF were transferred to the Georgia State Employees Post-employment Health Benefit Fund or the Georgia School Personnel Postemployment Health Benefit Fund as described in the plan financial statements. The statute that created the GRHBF is repealed effective September 1,2010.
"32. i2Q'b<I&STATE EMPL.OYEES POST-EMPLOYMENT HEALTH BENEFIT FUND
The Georgia State Employees Post-employment Health Benefit Fund (State OPEB Fund) is a costsharing multiple-employer defined benefit post-employment healthcare plan that covers eligible former employees of State organizations (including technical colleges) and other entities authorized by law to contract with the Department of Community Health for inclusion in the plan. The State OPEB Fund provides health insurance benefits to eligible former employees and their qualified beneficiaries through the health insurance plan for State employees. The Official Code of Georgia Annotated (OCGA) assigns the authority to establish and amend the benefit provisions of the group health plans, including benefits for retirees, to the Board of Community Health (Board).

The contribution requirements of plan members and participating employers are established by the Board in accordance with the current Appropriations Act and may be amended by the Board. Contributions of plan members or beneficiaries receiving benefits vary based on plan election, dependent coverage, and Medicare eligibility and election. On average, plan members pay approximately 25 percent of the cost of the health insurance coverage.

Participating employers are statutorily required to contribute in accordance with the employer contribution rates established by the Board. The contribution rates are established to fund all benefits due under the health insurance plans for both active and retired employees based on projected "pay-as-you-go" financing requirements. Contributions are not based on the actuarially calculated annual required contribution (ARC) which represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years.

The combined active and retiree contribution rates established by the Board for employers participating in the State OPEB Fund were as follows for the fiscal year ended June 30, 2011:

June 2010 July 2010 -April 2011 May 2011-June2011

22.165% of covered payroll for July coverage 25.586% of covered payroll for August - May coverage 22.667% of covered payrollfor June -Julycoverage

No additional contribution was required by the Board for fiscal year 2011 nor contributed to the State OPEB Fund to prefund retiree benefits. Such additional contribution amounts are determined annually by the Board in accordance with the State plan for other post-employment benefits and are subject to appropriation.

HEART OF GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2011

EXHIBIT "DM

The following table summarizes Heart of Georgia Technical College combined active and retiree

contributions to the health insurance plans for the years ending June 30, 2011, June 30, 2010 and

June 30, 2009:

Percentage

Required

Fiscal Year

Contributed

Contribution

5"B(r;'!"EE1IPCSYEES1ASSURANCE DEPARTMENT - QPEB
State Employees' Assurance Department - OPEB (SEAD-OPEB) is a cost-sharing multiple-employer defined benefit post-employment plan that was created in fiscal year 2007 by the Georgia General Assembly to provide term life insurance to retired and vested inactive members of Employees', Judicial (JRS), and Legislative (LRS) Retirement Systems, amended to exclude members of JRS and LRS hired on or after July 1,2009. Pursuant to Title 47 of the OCGA, the authority to establish and amend the benefit provisions of the plan is assigned to the Boards of Trustees of the Employees' and Judicial Retirement Systems.
Contributions by plan members are established by the Boards of Trustees, up to the maximum allowed by statute (not to exceed 0.5% of earnable compensation). The Boards of Trustees of the Employees' and Judicial Retirement Systems establish employer contribution rates, such rates which, when added to members' contributions, shall not exceed 1% of earnable compensation. For the fiscal year ended June 30, 2011, contributions of ERS "old plan" members were 0.45% of earnable compensation, 0.22% of which was paid by the employer. Contributions of ERS "new plan" members and of members of the Judicial and Legislative Retirement Systems were 0.23% of earnable compensation. There were no employer annual required contributions (ARC) for the fiscal years ended June 30,2011, June 30,2010 and June 30,2009.
NOTE 13: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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 Heart of Georgia Technical College expects such amounts, if any, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Heart of Georgia Technical College (an organizational unit of the Technical College System of Georgia), if any, are generally considered to be actions against the State of Georgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2011.
NOTE 14: SUBSEOUENT EVENTS
As of July 1,2011, Heart of Georgia Technical College and Sandersville Technical College merged to become the Oconee Fall Line Technical College.

HEART OF GEORGIA TECHNICAL COLLEGE NOTESTO THE FINANCIAL STATEMENTS
JUNE 30, 2011
NOTE 15: 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 16: AFFILIATED ORGANIZATIONS
The Heart of Georgia Technical College Foundation is a legally separate, tax exempt organization whose activities primarily support Heart of Georgia Technical College. This affiliated organization is considered a potential component unit of the State of Georgia in accordance with GASB Statement No. 39, Determining Whether Certain Organkations are Component Unik Therefore, the financial statements of the affiliated organization are not included in these financial statements. Copies of the financial statements for the affiliated organization may be obtained from Heart of Georgia Technical College Foundation.

(This page left intentionally blank)

SUPPLEMENTARY INFORMATION

HEART OF GEORGIA TECHNICAL COLLEGE BALANCE SHEET (NON-GAAP BASIS) BUDGET FUND JUNE 30.2011
ASSETS
Cash and Cash Equivalents Accounts Receivable
Federal Financial Assistance Other Inventories
Total Assets
LIABILITIESAND FUND EOUlrY
Liabilities Accrued Payroll Payroll Withholdings Accounts Payable Encumbrances Payable
Total Liabilities
Fund Balances Resewed Federal Financial Assistance Sales and Sewices Live Work Projects Technology Fees Inventories Bookstore Tuition Unreserved Surplus
Total Fund Balances
Total Liabilities and Fund Balances

SCHEDULE "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.

HEART OF GEORGIA TECHNICAL COLLEGE SUMMARY BUDGETCOMPARISONAND SURPLUSANALYSIS REPORT (NONGAAPBASIS)
BUDGET FUND YEAR ENDED JUNE 30.2011

BUDGET
State Appropr~ation State General Funds
Federal Funds Other Funds
Total Revenues
CARRY-QVER FROM PRIOR YEARS
Transfers from Reserved Fund Balance
Total Funds Ava~lable
EXPENDITURES
Adult Literacy Economic Development Technical Education
Total Expenditures
Excess of Funds Available over Expenditures
FUND BALANCE JULY 1
Reserved Unreserved
ADJUSTMENTS
Prlor Year Payables/Expendltures Unresewed Fund Balance (Surplus) Returned
From the Technlcal Colleges Year EndedJune 30.2010
Refunds to Grantors Federal F~nanclaAl ssistance Returned to Technlcal College System of Georgla Year EndedJune 30.2010
Prlor Year Reserved Fund Balance Included In FundsAvailable
FUND BALANCF JUNE 3Q
SUMMARY OF F W D BALANCE
Reserved Federal Financial Assistance Sales and Services Live Work Projects Technology Fees lnventor~es Bookstore Tuition
Total Resewed
Unreserved Surplus
Total Fund Balance
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 ather than generally accepted accounting principles.

ACTUAL

SCHEDULE "2"
VARIANCE -
FAVORABLE (UNFAVORABLE)

HEART OF GEORGIA TECHNICAL COLLEGE STATEMENT OF FUNDS AVAILABLE AND EXPENDITURES COMPARED TO BUDGET BY PROGRAM AND FUNDING SOURCE
(NONGAAP BASIS) BUDGET FUND YEAR ENDEDJUNE 30,2011

Adult Literacy State Appropriation State General Funds Federal Funds Other Funds
Total Adult Ltteracy
Economic Development Other Funds
Technical Education State Appropriation State General Funds Federal Funds American Recovery and RetnvestmentAct of 2009 Other Federal Stimulus Other Federal Funds Other Funds
Total Technical Educatton
Total By Program

Ortginal Appropriation

Amended Appropriation

Final Budget

Current Year Revenues

Actual amounts were prepared on a prescribed basts of accounting that demonstrates compliance with budgetarystatutes and regulations of the State of Georgia. which is a comprehensive basts of accounting other than generally accepted accounting princtples.

SCHEDULE "3"

Funds Available Compared to Budget

Prior Year

Adjustments and

Total

Carry-Over

Program Transfers Funds Available

Variance Positive (Negative)

ExpendtturesCompared to Budget

Variance

Actual

Posltlve (Negative)

Excess (Deficiency) of Funds Ava~lable
Over/(Under) Expenditures

HEART OF GEORGIA TECHNICAL COLLEGE STATEMENT OF CHANGES TO FUND BALANCE BY PROGRAM AND FUNDING SOURCE
(NONCAAP BASIS) BUDGET FUND YEAR ENDED JUNE 30,2011

Adult Literacy State Appropriatlon State General Funds Federal Funds Other Funds
Total Adult Literacy
Economic Development Other Funds
Technlcai Education State Appropriatlon State General Funds Federal Funds Amer~canRecovery and Re~nvestmenAt ct of 2009 Other Federal Stimulus Other Federal Funds Other Funds
Total Technical Education
Total Operating Activity
Prior Year Reserves Not Available for Expenditure Inventories Refund to Grantors

Beginning Fund Balance/(Deficit)
July 1

Fund Balance Carried Over from
Prior Period as Funds Available

Return of Fiscal Year 2010
Surplus

Prior Perlod Adjustments

Budget Unit Totals

Actual amounts were prepared on a prescribed basis of accountingthat demonstrates compliance with budgetarystatutes and regulations of the State of Georgia, which is a comprehensive basis of accounting other than generally accepted accounting principles.

SCHEDULE '4"

Other Adjustments

Early Return Fiscal Year 2 0 1 1
Surplus

Excess (Dehc~ency) of Funds Available
Over/(Under) Expenditures

Ending Fund Balance/(Deficit)
June 3 0

Analysis of Ending Fund Balance

Reserved

Surplus/(Deficit)

Total

Summary of Ending Fund Balance Reserved
Federal Financ~aAl ssstance Sales and Services Live Work Projects Technology Fees Inventories Bookstore Tuition Unrese~ed Surplus
Total Ending Fund Balance - June 30

$ 534,996.33 $

1,527.32 $ 536,523.65

(This page left intentionally blank)

Totals per Annual Supplement
Lag Salaries June 3 0 . 2 0 1 0
Compensated Absences June 3 0 , 2 0 1 1 June 3 0 , 2 0 1 0
Agency Funds
Cancelled PY Encumbrance
Unidentified Variance

HEART OF GEORGIA TECHNICAL COLLEGE RECONCILIATION OF SALARIES AND TRAVEL
YEAR ENDED JUNE 3 0 . 2 0 1 1

SCHEDULE "5"

SALARIES

$

7,067,518.15 $

TRAVEL 94,896.40

SECTION II FINDINGS AND QUESTIONED COSTS

HEART OF GEORGIA TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 3 0 , 2 0 1 1

FINANCIAL STATEMENT FINDINGS AND OUESTIONED COSTS

COMMUNICATION OF INTERNAL CONTROL DEFICIENCIES

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

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

A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Heart of Georgia Technical College's internal control.

Any identified deficiencies in internal controls that we did not consider to be significant deficiencies and/or material weaknesses have been communicated to management and those charged with governance within a separate management letter dated November 21, 2011. Internal control deficiencies identified during the course of this engagement that were considered to be significant deficiencies and/or material weaknesses are presented below:

INVENTORIES Inadequate Internal Controls over Bookstore Inventories Significant Deficiency Finding Control Number: FS-833-11-01

Condition:

The accounting procedures of the Technical College were insufficient to provide adequate controls over resale inventories.

Criteria:

AlCPA Professional Standards provide that internal control is a process placed into operations to achieve management's objectives related to "(a) reliability of financial reporting, (b) effectiveness and efficiency of operations, and (c) compliance with applicable laws and regulations." The Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control - Integrated Framework states that management should design policies and procedures to reduce the risk that financial reporting objectives are not being met. A key element to the objective of reliable financial statement reporting is ensuring the completeness of financial data.

Questioned Cost:

N/A

HEART OF GEORGIA TECHNICAL COLLEGE SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 3 0 , 2 0 1 1

FINANCIAL STATEMENT FINDINGS AND QUESTIONED COSTS

INVENTORIES Inadequate Internal Controls over Bookstore Inventories Significant Deficiency Finding Control Number: FS-833-11-01

Information:

The Technical College did not ensure that inventory on hand was correctly reported on the financial statements. Variances existed between the inventory listing and the physical inventory on hand. In addition, investigation of variances between the physical inventory counts and the inventory system did not result in correction of the errors. Documentation of the physical inventory was not maintained.

Cause:

The Technical College did not have effective procedures in place to ensure that the bookstore inventory listing reflected the correct number of items on hand and thus resulted in the incorrect balance being reported on the general ledger. In addition, the Technical College did not have effective reconciliation procedures to ensure that variances identified between the physical inventory and the inventory records were properly investigated before adjustments were made.

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 operations.

Recommendation:

The Technical College should establish policies and procedures sufficient to ensure that bookstore inventory system reflects the actual physical inventory and thus the inventory value is properly reflected in the financial statements. In addition, the Technical College should evaluate and modify existing procedures to ensure that all variances between the hand count and the inventory system are fully investigated and approved before adjustments to the system are made. Documentation of the physical inventory count should be maintained for reference.

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS

No matters were reported.