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