Middle Georgia Technical College, Warner Robins, Georgia, report on audit of the financial statements for the fiscal year ended June 30, 2002

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STATE OF~GEORGIA

'DEPARTMENT OF AUDITS AND.-ACCOUNTS

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MIDDLE GEORGIA"TECHNICAL COLLEGE

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WARNER ROBINS, GEORGIA

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REPO,RT ON AUDrr

OF THE FINANCIAL STATEMENTS .
.FOR tH~ FISCAL Y~AR ENDED, JUNE 30: 2002 .

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'Russell W. Hinton State, Auditor

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MIDDLE GEORGIA TECHNICAL COLLEGE - TABLE OF CONTENTS -

INDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

REQUIRED SUPPLEMENTARY INFORMATION

MANAGEMENTS DISCUSSION AND ANALYSIS

2

BASIC FINANCIAL STATEMENTS

EXHIBITS

A STATEMENT OF NET ASSETS

10

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

11

C STATEMENT OF CASH FLOWS

12

D NOTES TO THE FINANCIAL STATEMENTS

13

SUPPLEMENTARY INFORMATION

SCHEDULE

1 SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES

COMWARED TO BUDGET

BUDGET FUND

"A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION

29

RUSSELL \V. HINTOIlo
STATE AUDITOR
(4()4) 656-2174

DEPARTMENT OF AUDITS AND ACCOUNTS
254 Washington Street. S W.. Suite 214 Atlanta, Georgia 30334-8400
August 30, 2002

Honorable Roy E. Barnes, Governor Members of the General Assembly of Georgia Members of the State Board of Technical and Adult Education Members of the Local Board ofDirectors
and Honorable Billy G. Edenfield, President Middle Georgia Technical College
lNDEPENDENT AUDITOR'S COMBINED REPORT ON BASIC FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMAnON
Ladies and Gentlemen:
We have audited the accompanying basic fmancial statements (Exhibits A through D) of Middle Georgia Technical College, an organizational unit of the State of Georgia, as of and for the year ended June 30, 2002. 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As discussed in Note 1, the financial statements ofMiddle Georgia Technical College are intended to present the financial position and changes in fmancial position (including cash flows) of only that portion ofthe business-type activities ofthe State ofGeorgia that is attributable to the transactions of Middle Georgia Technical College. They do not purport to, and do not, present fairly the financial position and changes in financial position (including cash flows) of the State of Georgia, in conformity with accounting principles generally accepted in the United States of America.

02ARL-IT

In our opinion, the-basic financial statements referred to above present fairly, in all material respects, the financial position of Middle Georgia Technical College as of June 30, 2002, and its changes in financial position (including cash flows) for the year then ended in conformity with accounting principles generally accepted in the United States of America.
As described in Note 1, Middle Georgia Technical College adopted the provisions of Govemmental Accounting Standards Board (GASB) Statement No. 35, Basic Financial Statements - and Management's Discussion and Analysis - for Public Colleges and Universities, as amended by GASB Statement No. 37, Basic Financial Statements - and Management's Discussion andAnalysisfor State and Local Governments, and GASB Statement No. 38, Certain Financial Statements Note Disclosures, as of July 1,2001, to implement a new financial reporting model.
Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information (Schedule I) is presented for purposes ofadditional analysis and is not a required part ofthe basic financial statements ofMiddle Georgia Technical College. Such information has been subjected to the auditing procedures applied by us in the audit of the basic financial statements and, in our opinion, based on our audit, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
Management's Discussion and Analysis is not a required part ofthe basic financial statements but is supplementary information required by the GASB. We have applied certain limited procedures, which consisted principally ofinquiries ofmanagement regarding the methods ofmeasurement and presentation of this supplementary information. However, we did not audit this information and express no opinion on it.
Respectfully submitted,
~.. O9.~ Russell W. Hinton State Auditor
RWH:gp 02ARL-IT

REQUIRED SUPPLEMENTARY INFORMAnON - 1-

Middle Georgia Technical College Management's Discussion and Analysis
The following is a discussion and analysis of Middle Georgia Technical College's financial performance for the fiscal year ending June 30, 2002. Please read it in conjunction with the College's financial statements, which follow this section. Due to the fact that the State of Georgia, including Middle Georgia Technical College, implemented the provisions of Governmental Accounting Standards Board (GASB) Statements No. 34 and 35 for the fiscal year 2002, only limited fiscal year 2001 data will be presented for comparative purposes. This comparative information will be required in future reports.
Overview ofthe Financial Statements and Financial Analysis
This annual report consists of a series of financial statements prepared in accordance with the rules and regulations established by the Governmental Accounting Standards Board. These financial statements differ, in both form and the accounting principle used, from the presentation of prior fmancial statements.
The Statement of Net Assets used in conjunction with the Statement of Revenues, Expenses and Changes in Net Assets contains information concerning the College's finances and activities as a whole and assists with providing an answer to the question "Is the College as a whole better or worse off as a result of the year's activities?" These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting method used by corporations and other private sector companies. All revenues and assets are recognized when the service is provided and expenses and liabilities are recognized when others provide the goods or service, regardless of when cash is exchanged.
The Statement of Cash Flows is a valuable tool when evaluating the ability of the College to meet financial obligations as they mature. This statement presents information related to cash inflows and outflows summarized by operating, non-capital financing, capital and related financing and investing activities.
This discussion and analysis of the College's financial statements provides an overview of its financial activities for the year.
Statement ofNet Assets
The purpose of the Statement of Net Assets is to present to the users of the financial statements a fiscal snapshot of the Technical College at a specific point in time. The statement presents the assets, liabilities and net assets of the College as of the end of the fiscal year. Assets and liabilities are reported as current and non-current and the
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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 non-financial 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 College's equity in property, plant and equipment owned by the College. The next asset category is restricted net assets, which is divided into two categories, nonexpendable and expendable. The majority of nonexpendable restricted net assets are only available for investment purposes. Expendable restricted net assets are available for expenditure by the 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 College for any lawful purpose deemed necessary to operate the College.

Statement of Net Assets (thousands of dollars)

Assets: Current Assets Capital Assets, Net

$ 2,978 17,295

Total Assets

$ 20.273

Liabilities Current Liabilities Non-Current Liabilities

$ 832
166

Total Liabilities

$ 998

Net Assets Invested in Capital Assets, Net of Debt Restricted - Expendable Umestricted

$ 17,295 3
1,977

Total Net Assets

$ 19,275

Statement ofRevenues, Expenses and Changes in Net Assets
The purpose of the Statement of Revenues, Expenses and Changes in Net Assets is to present the revenues received by the College, both operating and nonoperating, and the expenses incurred by the College, operating and nonoperating, and any other revenues, expenses, gains and losses received or spent by the College during the fiscal year.

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Changes in total net assets as presented on the Statement of Net Assets are based on the information presented in the Statement of Revenues, Expenses and Changes in Net Assets.

Operating revenues are received for providing goods and/or services to various customers and constituencies of the College. Operating expenses are those expenses paid to acquire or produce the goods and/or services provided in return for the operating revenues, and to carry out the mission of the College. Therefore, nonoperating revenue is received when no goods or services are provided in exchange for the revenue. State appropriations and gifts were classified as operating revenues in previous reports. With the issuance of Statement No. 35, new guidelines have been established by the Governmental Accounting Standards Board (GASB) changing the classifications of state appropriations and gifts from operating to nonoperating revenue. This change may result in an operating deficit that is offset by a nonoperating surplus.

Statement of Revenues, Expenses and Changes in Net Assets (thousands of dollars)

Operating Revenues Operating Expenses

$ 5,987 15,813

Operating GainlLoss

$ -9,826

Nonoperating Revenues and Expenses

9,027

Increase in Net Assets

$ -799

Net Assets at Beginning of Year, as Originally Reported

$ 7,926

Cumulative Effect of Changes in Accounting Principle

12,148

Net Assets. at Beginning of Year Restated

$ 20,074

Net Assets at End of Year

$ 19,275

The Statement of Revenues, Expenses, and Changes in Net Assets reflects a negative year with a decrease in the net assets at the end of the year. Some highlights of the information presented on the Statement of Revenues, Expenses, and Changes in Net Assets are as follows:

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Revenue by Source (thousands of dollars)

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

$ 2,510 886
2,531 59

Total Operating Revenue

$ 5,986

Nonoperating Revenue State Appropriations Federal Grants and Contracts - Nonoperating Gifts Investment Income Other

$ 7,335 1,579 225 29 -142

Total Nonoperating Revenue

$ 9,026

Total Revenues

$ 15,012

Operating Expenses (thousands of dollars)

Operating Expenses Instruction

$ 15,812

Total Operating Expenses

$ 15,812

The sources of operating revenue for the College are tuItIon and fees, grants and contracts, auxiliary services, and educational activities. The operating loss is directly related to the exclusion of the State of Georgia appropriation in the amount of$7,335,327 from operating revenues per GASB 35.

Tuition increased by $438,378. This is directly related to the increased enrollment of 11 % from FY 01,

Personal Services expenses increased by approximately $1,596,000. This increase reflects an annual pay raise for College employees of approximately 4,5% with the associated fringe benefits. It also reflects an increased cost to the College for approximately 36 additional employees needed as a result of increased enrollment.

The cumulative effects of changes in accounting principle are the result of a change from the budgetary basis to the GAAP basis of accounting and the College adopting depreciation on capital assets.

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Under nonoperating revenues (expenses) state appropriations decreased by approximately $400,000. The College, as well as all other state agencies, incurred a 2.5% budget reduction in FY 02 due to a national economic slowdown following the tragedy of September 11, 2001.

Statement ofCash Flows

The purpose of the Statement of Cash Flows is to provide relevant information

concerning the cash receipts and payments of the College during the year. It also provides

information concerning the College's ability to generate future cash flows and to meet its

obligations as they come due. The statement is divided into three sections. The first

section reports on the operating cash flows and shows the net cash used by the operating

activities of the College. The second section shows the cash flows from the nonoperating

activities of the College. 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 (thousands of dollars)

Cash Provided (Used) By: Operating Activities Non-Capital Financing Activities Investing Activities Capital and Related Financing Activities
Net Change in Cash Cash, Beginning of Year Cash, End of Year

$ -8,898 9,025 29 -117 39 1,591 1,630

Capital Assets
The College did not complete any significant capital asset additions for facilities in the fiscal year under review. The Georgia State Financing and Investment Commission (GSFIC) funded $318,396 to be used for the purchase of equipment. Projected funding by the GSFIC for FY 2003 will be approximately the same.

Economic Outlook
The College is unaware of any currently known fact, decision, or condition that is expected to have a significant effect on the financial position or change how the College operates for the next fiscal year. As in prior years, the College's overall financial position is strong. Enrollment has increased by approximately 10% annually for the past 10 years and although this growth is expected to continue in the future, we expect enrollment to increase at a slightly lower rate than in previous years. As a result, the College

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anticipates the next fiscal year will be much like the last and the College will maintain a close watch over resources to maintain the ability to react to unknown internal and external issues. Billy Edenfield, President Middle Georgia Technical College
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BASIC FINANCIAL STATEMENTS -9-

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MIDDLE GEORGIA TECHNICAL COLLEGE STATEMENT OF NET ASSETS JUNE 3D, 2002
ASSETS
Current Assets Cash and Cash Equivalents Short-term Investments Accounts Receivable, Net State Appropriations Federal Financial Assistance Other Inventories
Total Current Assets
Noncurrent Assets Capital Assets, Net
Total Assets
LIABILITIES
Current Liabilities Payroll Withholdings Accounts Payable Deferred Revenue Funds Held for Others Capital Leases Compensated Absences
Total Current Liabilities
Noncurrent Liabilities Compensated Absences
Total Liabilities
NET ASSETS
Invested in Capital Assets, Net of Related Debt Restricted - Expendable Unrestricted
Total Net Assets

EXHIBIT "A"

$ 1,629,545.28 145,000.00
93.274.31 154,433.94 603.772.07 352,186.69
$ 2.978.212.29
17,294,732.33
$ 20.272,944.62

$

24,557.04

212,900.88

93.394.33

221,053.57

9,306.33

270,723.43

$

831,935.58

$

166,437.49

$

998.373.07

$ 17.294,732.33 3,249.89
1,976,589.33

$ 19,274,571.55

The notes to the financial statements are an integral part of this statement. -10-

MIDDLE GEORGIA TECHNICAL COLLEGE STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2002

EXHIBITMBM

OPERATING REVENUES
Student Tuition and Fees Less: Scholarship Allowances
Grants and Contracts Federal
Sales and Services Other Operating Revenues
Total Operating Revenues
OPERATING EXPENSES
Salaries Benefits Travel ScholarshIps and Fellowships Ublities Supplies and Other Services Depreciation
Total Operating Expenses
Operating Income (Loss)
NONOPERATING REVENUES (EXPENSES)
State Appropriations Grants and Contracts
Federal Gifts Interest and Other Investment Income Other Nonoperating Revenues
Net Nonoperating Revenues
Increase In Net Assets
Net Assets Net Assets - Beginning of Year, as Originally Reported Cumulative Effect of Changes in Accounting Principle
Net Assets - Beginning of Year, Restated
Net Assets - End of Year

$ 2,563,984.56 -53,972.13
886,475.50 2,530,894.10
59,211.17
$ 5,986,593.20

$ 8,023,363.92 1,695,728.26 50,537.74 832,503.37 339,649.14 3,729,n3.21 1,140,934.23
$ 15,812,489.87
$ -9,825,896.67

$ 7,335,327.00

1,579,143.11 225,346.47 29,226.06 -142,582.74

$ 9,026.459.90

$

-799,436.77

$ 7,925,n7.14 12,148,231.18
$ 20,074,008.32

$ 19,274,571.55

The notes to the financial statements are an integral part of this statement. - 11 -

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MIPDLE GEORGIA TECHNICAL COLLEGE STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30. 2002

EXHIBIT"C"

CASH FLOWS FROM OPERATING ACTIVITIES TUition and Fees Grants and Contracts Sales and Services Payments for Scholarships and Fellowships Payments to Suppliers Payments to Employees Other ReceIpts (Payments)
Net Cash ProVided (Used) by Operating ActivrtJes
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES State Appropnations Agency Funds Transactions (Net) Gifts and Grants Received for Other than Caprtal Purposes
Net Cash Flows Provided by Noncaprtal Frnancing AetMties
CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Caprtal Grants and Gifts Received Purchases of Capital Assets PnncipaJ PaId on Capital Debt
Net Cash Used by Caprtal and Related Frnancmg ActiVities
CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from Sales and Maturities of Investments Interest on Investments Purchase of Investments
Net Cash ProVided (Used) by Investmg ActiVItIes
Net Inaease In Cash
Cash and Cash EqUivalents - Beginning of Year
Cash and Cash EqUivalents - End of Year
RECONCILIATION OF OPERATING LOSS TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES'
Operating Income (Loss) Adjustments to Reconcile Operating Income to Net Cash
Provided (Used) by Operating Activities DepreCIation Expense Change m Assets and liabilities' Receivables, Net Inventones Payroll Withholdmgs and Employer Benefits Accounts Payable Deferred Revenue Compensated Absences
Net Cash ProVIded (Used) by Operating Actlvlbes
The notes to the finanCIal statements are an mtegral part of thiS statement - 12-

$

2,473.564 53

886.47550

2.178.377.73

-832.503.37

-5.688,722.70

-7.974,605.06

59,211 17

$ -8,898,202.20

$

7,242.052.69

78.944.81

1,704,34245

$

9.025,339 95

$

93,049.53

-195,918.00

-14.980.33

$

-117,848.80

$

145.00000

29.226.06

-145,000.00

$

29,22606

$

38.51501

1,591,030 27

$

1.,6.2.9,...5.4.5..2..8..

$ -9.825,896.67
1,140,934 23 -352,516.37 -104,901.47
23,56603 208.301.09 -36,447.90
48,758.86
$ -8.898,202.20

MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REPORTING ENTITY Middle Georgia Technical College is one of thirty-three (33) State supported member colleges of postsecondary education in Georgia which comprise the Georgia Department ofTechnical and Adult Education, an organizational unit ofthe State of Georgia The accompanying financial statements reflect the operations of Middle 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 ofTechnical and Adult Education. Appropriation of State funds is made to the Georgia Department ofTechnical and Adult Education by the General Assembly of Georgia. The Department's Administrative Central Office determines the amount of State appropriations to be received by Middle Georgia Technical College. The Technical College does not have authority to retain unexpended State appropriations (surplus) for any given fiscal year. Accordingly, Middle Georgia Technical College is considered an organizational unit of the Georgia Department of Technical and Adult Education for financial reporting purposes because ofthe significance ofits legal, operational, and financial relationships as defined in Section 2100 ofthe Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards.
FINANCIAL STATEMENT PRESENTATION In June 1999, the GASB issued Statement No. 34, Basic Financial Statements and Management Discussion and Analysisfor State and Local Governments. This was followed in November 1999 by GASB Statement No. 35, Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities. The State of Georgia is required to implement GASB No. 34 as of and for the year ended June 30, 2002. As an organizational unit of the State of Georgia, the Technical College is also required to adopt GASB Statements No. 34 and No. 35 as amended by GASB Statements No. 37 and No. 38. The financial statement presentation required by these standards 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 fundgroup perspective previously required.
The Technical College has elected to not restate its 2001 financial statements to conform with the new financial statement presentation, therefore comparative financial information will not be presented for fiscal year 2002. Significant accounting changes made in order to comply with the new requirements include (1) adoption of depreciation on capital assets; and (2) recognition of compensated absences. Also, generally accepted accounting principles (GAAP) requires that the reporting of summer school revenues and expenses be split between fiscal years rather than in one fiscal year. However, because the effect ofthis change is not material, the Technical Colleges ofthe Georgia Department ofTechnical and Adult Education will continue to report summer revenues and expenses in the year in which the predominate activity takes place.

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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING For financial reporting purposes, the Technical College is considered a special-purpose government engaged only in business-type activities. Accordingly, the Technical College's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting, except as noted in the preceding paragraph. Under the accrual basis, revenues are recognized when earned, and expenses are recorded when an obligation has been incurred. All significant intra-college transactions have been eliminated.
The Technical College has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Technical College has elected to not apply FASB pronouncements issued after the applicable data.
RESTATEMENT OF NET ASSETS - BEGINNING OF YEAR As a result of the adoption ofGASB Statement No. 34, the Technical College was also required to make certain changes in accounting principles, specifically (1) adoption of depreciation on capital assets, and (2) recording of compensated absences. Net assets at July 1, 2001 were increased by $12,148,231.18 for the cumulative effect of these chang~s.
CASH AND CASH EQillVALENTS Cash and Cash Equivalents include currency on hand and demand deposits with banks and other authorized financial institutions.
INVESTMENTS Investments are defined as those financial instruments with terms in excess ofthree months from the date of purchase and certain other securities held for the production of revenue. Investments are stated at fair value.
ACCOUNTS RECEIVABLE Accounts receivable consist ofallotments due from the Georgia Department ofTechnical and Adult Education - Administrative Central Office, reimbursements due from Federal, State, local, and private grants and contracts, and other receivables disclosed from information available.
Accounts receivable (Other) arising from operations are reported at gross value. Based on management's evaluation that amounts uncollectible are not material, no provision has been made for such amounts.
INVENTORIES Inventories of goods for resale are recorded as assets at cost at the time ofpurchase. The Technical College uses the weighted average method in costing-out inventories based on sales.

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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CAPITAL ASSETS Capital assets are recorded at cost at date of acquisition, or fair market value at the date of capital contribution. The Technical College capitalizes all land and land improvements. For equipment, the Technical College's capitalization policy includes all items with a unit cost of$5,000.00 or more, and an estimated useful life of greater than one year. Buildings and Building Improvements, Improvements Other Than Buildings and Library Collections that exceed $100,000.00 or significantly increase the value or extend the useful life of the asset are capitalized. For infrastructure, the Technical College's capitalization threshold is $1,000,000.00. Routine repairs and maintenance are charged to operating expense in the year in which the expense was incurred. Depreciation is computed using the straight-line method over the estimated useful lives ofthe assets, generally 10 to 40 years for buildings, 15 to 25 years for infrastructure, 15 years for improvements other than buildings, 10 years for library books, and 3 to 10 years for equipment.
To obtain full disclosure of capital assets acquired by the Technical Colleges of the Georgia Department ofTechnical and Adult Education, it is necessary to look at the activities ofthe Georgia State Financing and Investment Commission (GSFIC) - an organization that is external to both the Technical College and the Georgia Department of Technical and Adult Education. The GSFIC issues bonds for and on behalf of the State of Georgia, pursuant to powers granted to it in the Constitution ofthe State ofGeorgia and the Act creating the GSFIC. The bonds so issued constitute direct and general obligations of the State of Georgia, to the payment ofwhich the full faith, credit and taxing power of the State are pledged.
GSFIC records construction in progress on their books throughout the construction period and at completion transfers the entire project cost to Middle Georgia Technical College to be recorded as an asset on the College's books.
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 Statements of Revenues, Expenses, and Changes in Net Assets. Middle Georgia Technical College had an accrued liability for compensated absences in the amount of $388,402.06 as of July I, 2001. For FY2002, $414,459.96 was earned in compensated absences and employees were paid $365,701.10, for a net increase of$48,758.86. The ending balance as ofJune 30, 2002 in accrued liability for compensated absences is $437,160.92.

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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NON-CURRENT LIABILITIES Non-current liabilities include (1) liabilities that will not be paid within the next fiscal year; (2) capital lease obligations with contractual maturities greater than one year; and (3) other liabilities that, although payable within one year, are to be paid from funds that are classified as non-current assets.
NET ASSETS The Technical College's net assets are classified as follows:
Invested in capital assets, net afrelated debt: This amount represents the Technical College's total investment in capital assets, net ofoutstanding debt obligations related to those capital assets. To the extent debt has been incurred but not yet expended for capital assets, such amounts are not included as a component ofinvested in capital assets, net ofrelated debt. (The term "debt obligations" as used in this definition does not include debt of the GSFIC as discussed above.)
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.
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.
When an expense is incurred that can be paid using either restricted or unrestricted resources, the Technical College's policy is to first apply the expense towards unrestricted resources, and then towards restricted resources.
INCOME TAXES Middle 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.
CLASSIFICATION OF REVENUES The Technical College has classified its revenues as either operating or nonoperating revenues in the Statement of Revenues, Expenses, and Changes in Net Assets according to the following criteria:
Operating revenues: Operating revenues include activities that have the characteristics ofexchange transactions, such as (1) student tuition and fees, net of scholarship allowances, and (2) sales and services.

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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CLASSIFICATION OF REVENUES Nonoperating revenues: Nonoperating revenues include activities that have the characteristics of non-exchange transactions, such as gifts and contributions, and other revenue sources that are defined as nonoperating revenues by GASB No. 34, such as state appropriations and investment income and GASB No.9, Reporting Cash Flows ofProprietary and Nonexpendable Trust Funds and Governmental Entities That Use Proprietary Fund Accounting.
Scholarship Allowances: Student tuition and fee revenues, and certain other revenues from students, are reported at gross with a contra revenue account of scholarship allowances in the Statement of Revenues, Expenses, and Changes in Net Assets. 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: CASH AND CASH EOUIVALENTS AND OTHER DEPOSITS
STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES Funds belongipg to Middle Georgia Technical College (and thus the State of Georgia) 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 anyone or more ofthe following securities as enumerated in the Official Code ofGeorgia Annotated Section 50-1759:
1. Bonds, bill, certificates of indebtedness, notes, or other direct obligations ofthe United States or of the State of Georgia.
2. Bonds, bills, certificates of indebtedness, notes, or other obligations of the counties or municipalities of the State of Georgia.
3. Bonds of any public authority created by the laws 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.

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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE 2: CASH AND CASH EOUNALENTS AND OTHER DEPOSITS

STATE OF GEORGIA COLLATERALIZATION STATUTES AND POLICIES 5. Bonds, bills, certificates of indebtedness, notes, or other obligations of a subsidiary corporation ofthe United States government, which are fully guaranteed by the United States government both as to principal and interest, or debt obligations issued by the Federal Land Bank, the Federal Home Loan Bank, the Federal Intermediate Credit Bank, the Central Bank for Cooperatives, the Farm Credit Banks, the Federal Home Loan Mortgage Association, and the Federal National Mortgage Association.

6. Guarantee or insurance ofaccounts provided by the Federal Deposit Insurance Corporation.

As authorized in the Official Code of Georgia Annotated Section 50-17-53, the State Depository Board has adopted policies, which allow agencies ofthe State ofGeorgia (and thus Middle Georgia Technical College), the option of exempting demand deposits from the collateral requirements.

CATEGORIZATION OF DEPOSITS The Technical College's cash deposits are categorized by risk as follows:

Category 1 - Amounts covered by depository insurance or collateralized with securities (at fair value) held by the Technical College or by its agent in the Technical College's name.

Category 2 - Amounts collateralized with securities (at fair value) held by the pledging fmancial institution's trust department or agent in the Technical College's name.

Category 3 - Amounts collateralized with securities (at fair value) held by the pledging financial institution, or by its trust department or agent but not in the Technical College's name, and amounts uncollateralized.

At June 30, 2002, the Technical College's investments consisted of the following:

Cash Deposits

Carrying Amount

Bank Balances

RIsk Categones

2

3

S J 77401611 $ 2452664.36 S 33000000 $ 2122664 36 $,===="o~o~o

NOTE 3: INVENTORIES

Inventories at June 30, 2002, consisted of the following:

Bookstore

$ 352.186.69

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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 4: CAPITAL ASSETS

The balance of capital assets at June 30, 2001 was adjusted for accounting changes required in implementing GASB Statements 34 and 35 as disclosed in Note 1. Following are the changes in capital assets for the year ended June 30, 2002:

Adjusted Balance July I. 2001

Addluons

Reductions

Balance June 30, 2002

Capital Assets, Not Bemg Depreciated:

Land and Land Improvements

$ 336.141.00 S

0.00 $

0.00 $ 336.141.00

Capital Assets, Being Depreciated: BUlldmg and Buildmg Improvements Improvements Other Than BUlldmgs Equipment Library Collecnons

$ 17,150,695.00 1,398,354.00 4,303,061.26 $ 114.437.28

195,918.00 $

$ 17,150,695.00 1,398,354.00
269,72070 4,229,258.56 114.437.28

$ 22.966.547.54 $ 195.91800 $ 269.720.70 $ 22,892.744.84

Less: Accumulated Depreciation: Buildmg and Buildmg Improvements Improvements Other Than Bulldmgs Equipment Library Collections

$ 2,078,308.60 S 540,612.55
2,278,548.64 22.887.45

397,560.64 139,835.40 592,094.46 $
11.443.73

$ 2,475,869.24 680,447.95
127,137.96 2,743,505.14 34,331.18

$ 4.920,357.24 $ 1.140,934.23 $ 127,13796 S 5,934.153.51

Total Capital Assets, Bemg DepreCiated,

Net

$ 18,046.190.30 $ -945,016.23 $ 142.58274 $ 16.958.591.33

Capital Assets, Net

S 1838233130 $ -94501623 $ 14258274 S 17294 732 33

NOTE 5: DEFERRED REVENUE

Deferred revenue at June 30, 2002, consists of the following:

Prepaid Tuition and Fees Gifts - GSFIC

$

344.80

93,049.53

Totals

$ 93.394.33

NOTE 6: LONG-TERM LIABllJTIES

Long-tenn liability activity for the year ended June 30, 2002 was as follows:

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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT "D"

NOTE 6: LONG-TERM LIABILITIES

Leases Lease Obhgatlons
Other Liabilities Compensated Absences
Total Long-Term LIabilities

Balance July I. 2001

AdditIons

Reductions

Balance June 30, 2002

Current Ponlon

$ 24,286.66

$ 14,980.33 S 9,306.33 S

9,306.33

388.402.06 $ 414,459.96

365,701.10

437.160.92

270,723.43

$ 412 688 72 $ 41445996 $ 380681 43 S 446467.25 $ 28002976

NOTE 7: LEASE OBLIGATIONS

CAPITAL LEASES Middle Georgia Technical College acquires certain equipment through multi-year capital leases with varying terms and options, These agreements contain fiscal funding clauses in accordance with Official Code of Georgia Annotated Section 50-5-64 which prohibits the creation of a debt to the State of Georgia for the payment of any sums under such agreements beyond the fiscal year of execution if appropriated funds are not available, If renewal of such agreements is reasonably assured, however, capital leases requiring appropriation by the General Assembly of Georgia are considered noncancellable for financial reporting purposes.

OPERATING LEASES Middle Georgia Technical College has entered into certain agreements to lease equipment which are classified as operating leases (leases on assets not recorded on the balance sheet). These leases generally contain provisions that, at the expiration date of the original term of the lease, the Technical College has the option of renewing the lease on a year-to-year basis. Amounts are included only for multi-year leases and for cancellable leases for which an option to renew for the subsequent fiscal year has been exercised.

Expenses for rental of equipment under operating leases for the year ended June 30, 2002, totaled $6,138,00,

Future commitments for capital leases (which here and on the Statement ofNet Assets include other installment purchase agreements) and for noncancellable operating leases having remaining terms in excess of one year as of June 30, 2002, were as follows:

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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHIBIT"D"

NOTE 7: LEASE OBLIGATIONS

Capital Leases

Operating Leases

Year Ending June 30: 2003 2004 2005

$ 9,556.13 $ 8,835.00 7,812.00 2,790.00

Total Minimum Lease Payments

$ 9,556.13 $ 19,437.00

Less: Interest

249.80

Principal Outstanding

$ 9.306.33

NOTE 8: RETmEMENTPLANS

TEACHERS RETIREMENT SYSTEM OF GEORGIA

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

Funding Policy Employees of Middle Georgia Technical College who are covered by TRS are required by State statute to contribute 5% of their gross earnings to TRS. Middle Georgia Technical College makes monthly employer contributions to TRS at rates adopted by the TRS Board ofTrustees in accordance with State statute and as advised by their independent actuary. For fiscal year 2002, the employer contribution rate was 9.24% for covered employees. Employer contributions for the current fiscal year and the preceding two fiscal years are as follows:

Fiscal Year

Percentage Contributed

Required Contribution

2002 2001 2000

100% 100% 100%

$ 514,508.13 $ 504,055.77 $ 446,578.80

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- - - - - - - - - - - - - - - - - - - - -- - - - - - - - - -
MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE 8: RETIREMENT PLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Plan Description Middle Georgia Technical College participates in the Employees' Retirement System of Georgia (ERS), a single-employer defined benefit pension plan established by the General Assembly of Georgia for the purpose of providing retirement allowances for employees of the State of Georgia.
The benefit structure ofERS is defined by State statute and was significantly modified on July 1, 1982. Unless elected otherwise, an employee who currently maintains membership with ERS based upon State employment that started prior to July 1, 1982, is an "old plan" member subject to the plan provisions in effect prior to July 1, 1982. All other members are "new plan" members subject to the modified plan provisions.
Under both the old plan and new plan, members become vested after 10 years of creditable service. A member may retire and receive normal retirement benefits after completion of 10 years of creditable service and attainment of age 65. If 10 years of service is completed and age 60 is reached, the member may retire with a reduced benefit. Additionally, there are certain provisions allowing for retirement after 25 years of service regardless of age.
Retirement benefits paid to members are based upon a formula which considers the monthly average ofthe member's highest twenty-four consecutive calendar months of salary, the number ofyears of creditable service, and the member's age at retirement. Postretirement cost-of-living adjustments are also made to member's benefits. The normal retirement pension is payable monthly for life; however, options are available for distribution ofthe member's monthly pension at reduced rates to a designated beneficiary upon the member's death. Death and disability benefits are also available through ERS.
In addition, the ERS Board ofTrustees created the Supplemental Retirement Benefit Plan (SRBP) effective January 1, 1998. The SRBP was established as a qualified governmental excess benefit plan in accordance with Section 415 of the Internal Revenue Code (IRC) as a portion ofERS. The purpose ofSRBP is to provide retirement benefits to employees covered by ERS whose benefits are otherwise limited by IRC 415.
The ERS issues a financial report each fiscal year which may be obtained through ERS.
Funding Policy As established by State statute, all full-time employees of the State of Georgia and its political subdivisions, who are not members ofother state retirement systems, are eligible to participate in the ERS. Both employer and employee contributions are established by State statute. The Technical College's payroll for the year ended June 30, 2002, for employees covered by ERS was $1,045,624.86. The Technical College's total payroll for all employees was $8,023,363.92.
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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2002

EXHffiIT"D"

NOTE 8: RETmEMffiNTPLANS
EMPLOYEES' RETIREMENT SYSTEM OF GEORGIA
Funding Policy Under the old plan, member contributions consist of 6.25% of annual compensation. Of these member contributions, the employee pays the first 1.5% and the Technical College pays the remainder on behalf of the employee. Under the new plan, member contributions consist solely of 1.5% of annual compensation paid by employee. The Technical College also is required to contribute at a specified percentage of active member payroll determined annually by actuarial valuation. For the year ended June 30, 2002, the ERS employer contribution rate for the Technical College amounted to 10.51 % ofcovered p"ayroll and included the amounts contributed on behalfof the employee under the old plan referred to above. Employer contributions are also made on amounts paid for accumulated leave to retiring employees.
Total contributions to the plan made during fiscal year 2002 amounted to $122,914.13, of which $109,843.50 was made by the Technical College and $13,070.63 was made by employees. These contributions met the requirements of the plan.
Actuarial and Trend Information Actuarial and historical trend information is presented in the ERS June 30, 2002, financial report which may be obtained through ERS.
GEORGIA DEFINED CONTRIBUTION PLAN
Plan Description Middle 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 ofage 65. The payment will be based upon mortality tables and interest assumptions to be adopted by the Board ofTrustees. Ifa member has less than $ 3,500.00 credited to hislher account, the Board ofTrustees has the option of requiring a lump sum distribution to the member in lieu ofmaking 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.

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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT "D"

NOTE 8: RETIREMENT PLANS
GEORGIA DEFINED CONTRIBUTION PLAN
Contributions and Vesting Member contributions are seven and one-halfpercent (7.5%) ofgross salary. There are no employer contributions. Contribution rates are established by State statute. Earnings are credited to each member's account in a manner established by the Board of Trustees. Upon termination of employment, the amount of the member's account is refundable upon request by the member. The Technical College's payroll for the year ended June 30, 2002, for employees covered by GDCP was $1,021,356.06. The Technical College's total payroll for all employees was $8,023,363.92.
Total contributions made by employees during fiscal year 2002 amounted to $76,611.83 which represents 7.5% of covered payroll. These contributions met the requirements of the plan.
NOTE 9: RISK MANAGEMENT
Public Entity Risk Pool The Department of Community Health administers for the State of Georgia a program of health benefits for the employees of units of government of the State of Georgia, units of county governments, and local education agencies located with the State ofGeorgia. This plan is funded by participants covered in the plan, by employers' contributions paid by the various units ofgovernment participating in the plan, and appropriations made by the General Assembly of Georgia. The Department ofCommunity Health has contracted with Blue Cross Blue Shield ofGeorgia to process medical claims and Express Scripts, Incorporated to process prescription drug claims in accordance with the State Employees' Health Benefit Plan as established by the Department of Community Health.
Other Risk Management The Department of Administrative Services (DOAS) has the responsibility for the State ofGeorgia ofmaking and carrying out decisions that will minimize the adverse effects ofaccidental losses that ." involve State government assets. The State believes it is more economical to manage its risks internally and set aside assets for claim settlement. Accordingly, DOAS processes claims for risk of loss to which the State is exposed, including general liability, property and casualty, workers' compensation, unemployment compensation, and law enforcement officers' indemnification. Limited amounts of commercial insurance are purchased applicable to property, employee and automobile liability, fidelity and certain other risks. The Technical College, as an organizational unit of the Georgia Department of Technical and Adult Education, is part of the State of Georgia reporting entity, and as such, is covered by the State of Georgia risk management program administered by DOAS. Premiums for the risk management program are charged to the various state organizations by DOAS to provide claims servicing and claims payment.

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MIDDLE GEORGIA TECHNICAL COLLEGE NOTES TO THE FINANCIAL STATEMENTS
JUNE 30. 2002

EXHIBIT"D"

NOTE 10: CONTINGENCIES
Amounts received or receivable from grantor agencies are subject to audit and adjustment by grantor agencies. This could result in refunds to the grantor agency for any 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 Middle Georgia Technical College expects such amounts, ifany, to be immaterial to its overall financial position.
Litigation, claims and assessments filed against Middle Georgia Technical College (an organizational unit of the Department of Technical and Adult Education), if any, are generally considered to be actions against the State ofGeorgia. Accordingly, significant litigation, claims and assessments pending against the State of Georgia are disclosed in the State of Georgia Comprehensive Annual Financial Report for the fiscal year ended June 30, 2002.
NOTE 11 : 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.

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SUPPLEMENTARY INFORMAnON - 27-

MIDDLE GEORGIA TECHNICAL COLLEGE SCHEDULE OF FUNDS AVAILABLE AND EXPENDITURES
COMPARED TO BUDGET BUDGET FUND
"A" DEPARTMENT OF TECHNICAL AND ADULT EDUCATION YEAR ENDED JUNE 30, 2002

SCHEDULE "1"

FUNpS AVAILABLE REVENUES
State Appropriation Federal Revenues Other Revenues Retained
CARRY-OVER FROM PRIOR YEAR Transfer from Reserved Fund Balance

BUDGET

ACTUAL

VARIANCEFAVORABLE (UNFAVORABLE)

$ 7.335,327.00 $ 7,335.327.00 $

2.001.539.68

1,579.143.11

5,440.356.00

5,1n,316.64

$ 14,777,222.68 $ 14.091,786.75 $

0.00 -422,396.57 -263,039.36
-685,435.93

0.00

213,379.50

213,379.50

$ 14,n7,222.-68 $ 14,305,166.25 $

-4~72;;;.:.,0;;.;56;..;;";,,,,;.4~3

EXPENDITURES
Capital Outlay Personal Services - Institutions Operating Expenses - Institutions Adult Literacy Grants

$

142,303.00 $

142.303.00 $

8,912,995.00

8,826,088.72

4,592,026.00

4,022,399.28

1,129,898.68

1,078,850.98

0.00 86,906.28 569,626.72 51,047.70

$ 14,n7,222.68 $ 14,069,641.98 $ _ _--.;..7..;;,.07;..:.,58=0~.7-=-0

Excess of Funds Available over Expenditures

$ 235,524.27 $ .......= ....2.=:35=.5.2;",;4,;;;;.2==7

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